>If you structure it so that the city paid a royalty to the entity which established the line for a few years, they could probably do a fair amount of good.
This is very much how the UK's rail franchising system fails to work.
Rail is complex because you have obvious economies of scale when you have the same entity managing rolling stock, tracks, other resources, and R&D.
The UK's rail franchising is the worst of all possible worlds. Economies of scale are impossible because separate companies own the rolling stock, run the rolling stock, and maintain the track. And no R&D happens at all now.
Worse, companies regularly scam the gov by collecting subsidies while they can and giving up franchises early when they're expected to start repaying some of their profits.
So this is not necessarily a good model.
>I think it would indicate that the city isn't making enough of an effort on the mass transit side of things.
Why should public transport be profitable? It provides a valuable economic service, in that it moves employees to and from work.
Demanding that it should make a profit is like demanding that pedestrian walkways or the freeway system should make a profit.
Infrastructure is a public and corporate good. You can certainly debate who benefits from it the most, and who should pay for it on the basis of the economic value of those benefits.
You can also debate if perhaps it's not as innovative as it could be - something which is often true of both public and private transport systems.
But there's no obvious non-ideological need for it to be run on a for-profit basis.