It's an interesting experiment. If it succeeds, it would be ironic that the solution to America's public transportation is coming from Detroit: after all, GM & co are the guys who bought America's trolleys in the 1950's and disassembled them to boost sales of cars.
If it succeeds, it doesn't automatically mean it's a "solution" to something as geographically varied, respectively massive, and fiscally complicated and regimented as subsidized public transit.
If it succeeds, it does mean it succeeded in the conditions of Detroit, as mass-transit is something so delicate it inherently must be optimized for the city in which it operates. That said, I do absolutely wish them luck living in a city with what I consider absolutely horrible public transit[1]
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[1] This is subjective, highly of course. And given the population boom taking place in Austin, Texas it's somewhat hard to fault CapMetro entirely for the woes of riding the bus. I will say though many will find themselves in agreement living here seeing CapMetro time and time again implement projects that utterly fail because they made no sense to begin with. Yep, I'm looking right at you Red line.
Except in the rust belt cities, the situation in other cities isn't like in Detroit. The current problem is the movement of poor people to the suburbs and exurbs. This is caused by middle class people moving into the cities.
I've heard that NYC had an incredible trolley system where you could get anywhere in manhattan in about 10 minutes. Such a shame that cars displaced true public transit solutions.
That isn't right. NYC's trolleys/buses were more efficient in the pre-automobile era when there was much less other traffic to block them, but Manhattan is about two miles wide and about 15 miles long; covering even 10 miles in 10 minutes would mean travelling at 60mph on city streets without stopping, and mass transit obviously needs to stop at least every couple miles. The express subway lines still take you up & down the island as quickly as ever (about 25 minutes from 125th St. to the Battery, apparently).
Manhattan's mass transit system is largely intact from its peak (except for the incomplete Second Avenue Subway, to replace the demolished Second Avenue Elevated the East Side), and has become better integrated from the private era when there were three competing systems. The trolley lines were more significant in the outer boroughs, and could reach speeds & frequencies similar to their best years with proper implementation of modern light rail or bus rapid transit. That would require the political will to take away surface right-of-way from the (boisterous, wealthier) car-driving minority.
EDIT: related story on SF's private lines http://stamen.com/zero1/