Urban transit is the major United States example of a private industry that failed and was taken over by the public sector. The recent re-emergence of the private sector in urban transit, and private sector-like behavior in the public sector, raise a number of interesting theoretical and historical issues and policy questions. This report develops a conceptual model to explain this recent history and outlines likely paths of transit service and institutional innovation. The model has three components: 1) the political and economic roles of urban transport facilities in the land development process; 2) the nature of the political process through which transit became a public sector activity; and 3) the political aspects of an industry whose prospects are the joint product of national, state and local actions.