Trams have high capital costs but due to their long life times and the fact they are effectively a monopoly (like railways and water) they can borrow money at very low rates, and have very low running costs. This means they actually make a profit. Since typically 25% of the people in tram cities use them, compared to only 5% of people in Bath using the buses, this means the profit is substantially higher than the present bus companies make and this larger subsidy can be used to subsidise both rural bus services and local feeder buses to a far greater extent than now.
The more important point is how well a new tram system in Bath will attract trips from cars, and so reduce traffic (volumes, congestion and pollution) (Croydon trams reduced car traffic by 20%), and will that be enough to cover both the operating costs, and retire/depreciate the capital investment. This will be the crux of a Feasibility Study. Fortunately travel behaviour of a population is known and can be deduced for trip transfer to tram, for a wide range of competitive choice scenarios, including travel cost, journey time, convenience etc.
We have had transport consultants make initial assessments of likely installation costs, passenger numbers and returns and for two sample routes the numbers look like this:
These rates of return are good enough for long term investors e.g.pension funds.
Preliminary Report on Bathtrams.org Proposal. Professor Lewis Lesley