About PT funding and financing

Transcription

1 Metropolis Mobility Week About PT funding and financing Seoul, André Niemegeers, 15 June 2007 KMS Director, U.I.T.P. Brussels Public transport coverage rate Data from the Mobility in Cities Database collected in 50 cities for the year 2001 show that: - The coverage rate of operating costs by traffic revenue is on average 60%; - The dispersion around this average is very significant, reflecting different fare policies; - Comparisons with 1995 data show that the coverage rate tended to increase slightly (cost per passenger stable, revenue per passenger increased slightly). 1

2 Funding public transport? Primary funding source is fare collection, but: - profitability is not the only objective of fare policy; - operators have to fulfil public service requirements; - private road transport does not support the external costs it generates. Æ Need for additional (public) funding for public transport. To dynamically and all together look for financing alternatives to complete public money - Funding from the general public budget. - «The beneficiary pays»: earmark taxes imposed on the beneficiaries of public transport (employers, retailers, real estate owners). - «The polluter pays»: earmark revenue through congestion charging, parking charges, fuel taxes. + mix of these 2

3 Authorities to find alternative financing flows from public or private sources From other public utilities From private modes (external cost principle) -fuel tax -Environmental tax -Parking revenues -Congestion charging From PT beneficiaries -Employers -Shopping centres and big shops -Land promoters and real estate (value capture) Operators to find alternative sources to increasing their operational revenues From other commercial sources -Advertisement -Bus shelters - On demand PT services (leisure, charters) - Maintenance services - free newspapers - video screens - technical assistance and consulting From tax exemptions -VAT - Fuel purchase -import From gains in efficiency and management 3

4 Fiscal tools to combat for externalities Congestion: distance based tax, differentiated in time and space CO2: tax on CO2 consumption Local pollution (PM, VOC, NO2, CO): tax on fuel consumption, differentiated according to fuel type and engine technology Externalities linked to vehicle possession: tax on sales or on vehicle ownership With current technologies, difficult to install distance based tax in urban environment; zone (London) or cordon (Stockholm, Singapore) scheme may be acceptable alternative (Land) Value Capture (LVC) LVC: why and what? 3 main models: the company buys the land beforehand property taxes to recoup part of the whole investment in PT VIF & TIF: encourages property development close to stations (loans) Increasing importance as a source of PT funding for future (close ties between PT and land development planning) 4

5 Commercial activities : Consulted networks inventory A.Flausch (STIB Brussels, with RATP) STIB Brussels Lisbon Metro Hong Kong KCR Metro Lonon Underground Téhéran Metro Glasgow Metro Hambourg Metro Paris Metro Madrid Metro Hong Kong MTR Metro Percentage of stations including at least 1 commercial activity 43,70% 54,00% 100,00% 100,00% 65,00% 30,00% 83,00% 36,00% 2,00% 100,00% Number of Vending machines per station 6,5 6,8 12,2 7,9 1,3 1,06 2,5 11,8 1,4 10,4 Commercial activities : Consulted networks inventory A.Flausch (STIB Brussels, with RATP) STIB Brussels Lisbon Metro Hong Kong KCR Metro London Underground Teheran Metro Glasgow Underground Hamburg Metro Paris Metro Madrid Metro Hong Kong MTR Metro 1- Catering and Food 54.68% 14.00% 30.00% 15,00% 7.00% 0.00% 32.00% 14.00% 23.00% 20.00% 2- Press / book shops 13.28% 7.00% 5.00% 30.00% 1.9% 0.00% 36.00% 26.00% 30.00% 15.00% 3- Local grocery 0.00% 6.00% 59.00% 10.00% 2.4% % 0.00% 1.00% 0.00% 50.00% 4- Services (telephony, shoerepairs...) 5- Clothing & fashion (leather goods, textiles,...) 17.9% 4.00% 0.00% 15.00% 0.00% 0.00% 5.00% 26.00% 10.00% 12.00% 7.81% 27.00% 6.00% 10.00% 0.00% 0.00% 5.00% 25.00% 37.00% 3.00% 6. Miscellaneous 6.25% 42.00% 0.00% 20.00% 88.7% 0.00% 22.00% 8.00% 0.00% 0,00% 5

6 Commercial activities : Conclusion: Virtuous circle A.Flausch (STIB Brussels, with RATP) More services and shops = More services provided to travellers = Mass transit becomes more attractive = More customers = More safety = More profitability Focus on Congestion Charging > Focus Paper The financing of Public Transport operations is based on a combination of: - the fares collected - other commercial revenues - specific compensation for concessionary fares and social/regional obligations - any further remuneration required from the public authority to enable the required levels of service to be achieved. Governments, local authorities and other bodies, including the private sector, make finance available to public transport for economic, social, transport and environmental reasons. 6

7 Recommendations Measures to ensure that maximum value for money is obtained from the external funding provided: - the contractualisation/formalisation of relations between operators and authorities, - provisions for incentivising operators and for adjustements to contracts to meet changes in costs outside the control of the operator, - measures (e.g. benchmarking) to demonstrate that value for money is being obtained Price mechanism > Focus Paper Per kilometre road charging -Cordon charge - Area charge - Parking charges - Public transport fares A per kilometre road pricing scheme will be more effective per monetary unit raised than a cordon charge, which is in turn more effective than a parking charge. 7

8 Congestion charging =most effective tool for demand management. It will improve sustainable economic development -Ensure quality of life -Improve Public Transport and lead to -More fluent and cleaner traffic UITP recommends - Establish a sound transport policy - Use strong leadership to convince the public - Raise awareness - Involve a wide set of stakeholders - Be transparent - Build a sense of fairness (strong commitments) - Mitigate the impacts on road users - Keep it simple - Improve public transport and promote other transport means - Allocate at least a part of the income 8

9 Public Transport Infrastructure funding The financing of public transport systems is not fully covered by the revenue from fares, which are usually set with specific policy and social objectives in mind. public transport needs to: Find alternative ways to finance investment and operation, Increase incomes and diversify sources of revenue, and Reduce costs of investment, operation and maintenance. the funding of PT infrastructure investment differs from the funding of PT operation by its discontinuity, its large scale and its long term. The provision of infrastructure as a loop Replace or close Agree Policy Renew or run down Legislate Enhance Plan Maintain Design Operate Build Finance 9

10 Definitions and types of finance Funding: the provision of new funds who pays for transport scheme in the long term can be balance of fare payer, taxpayer and property developers Financing: the organisation of how the supply of funds is arranged how are peaks of capital expenditure financed in the short term can be public finance or private finance Types of finance re-investment of profits, cross subsidies: public funding, which may include the right to levy a local tax or precept specific infrastructure or mobility funds capital may be raised in the form of loans or through the issue of shares or bonds access charges levied on infrastructure users, the holders of operating franchises, who purchase the right to operate on the infrastructure of a network provider. First comments The advantage between fully private, fully public and PPPs is finely balanced. public sector involvement is necessary to ensure that new public transport links conform to local planning guidelines and transportation policies. a private approach in building, financing and operating infrastructure and operation may become an efficient alternative. advantages in terms of its technical and business capabilities If the right balance can be achieved, PPPs can be expected to have a role in the mixed public-private economy of public transport infrastructure funding for the foreseeable future. 10

11 Public private partnership - Adequate for funding of large infrastructure works. - Involves comprehensive cooperation between public and private partners. - Public partner concentrates on definition of targets and monitoring. What is PPP? (1) > G. Bruggeman (EBRD) Public-Private Partnership A long-term contractual agreement between a public agency and a private sector party to secure funding, construction or refurbishment, operation and maintenance of an (infrastructure) project and delivery of a service that traditionally was provided by the public sector. 11

12 What is PPP? (2) Public-Private Partnership PPP is any medium-to-long term relationship between the public and private sectors, involving the sharing of risks and rewards, multisector skills, expertise and finance to deliver desired policy outcomes. Source: Standard and Poor What is PPP (3) Public-Private Partnership is a method of procurement and assumes a greater role of the private sector in the design, building, finance and/or operations of public facilities and services. 12

13 PPP components D -design B - build F - finance O -operate M - maintain PPP and financing PPPs may include financing but this is not always the case Private sector financing is not a necessary condition for a PPP PPP is not a financing model per se but a procurement strategy with or without private financing 13

14 Typical PPP structure Shareholders/ Investors Banks Shareholders Agreement Loan Agreement(s) Government PPP Project Company Users PPP Concession & Agreement on Public Support Construction & Supply Contract Fare Revenues O&M Contract Turnkey Contractor Operator Carve-out structure Civil works E&M works Sub-Contractor(s) Maintenance Sub-Contract(s) Examples of PPP public transport Manchester, Croydon, Nottingham LRTs Strasbourg, Rouen Florence Barcelona Jerusalem Kuala Lumpur, Bangkok New Jersey Transit (USA) London Transport (various projects) Copenhagen Metro Sao Paulo Metro BRT South America St. Petersburg Nadzemniy Express (Russia) Astana Light Rail (Kazakhstan) 14

15 Why PPP? to make (additional) projects affordable when the public authority does not want to, or cannot, increase its levels of borrowing off-balance sheet financing call upon private sector know-how, expertise and human resources to share or transfer risks to focus on life cycle cost but in the end the key point is.. to ensure Value for Money! Allocation of risks Risk examples Construction risk System Integration risk Cost risk Operating risk Revenue risk Balanced transfer of risk between contracting authority and private partner Risk components allocated to party best able to manage them Each PPP agreement differs in allocation of risks and responsibilities, ownership of assets and duration 15

16 Payments Payments for services can take may forms: availability payments revenues from fares (private customers) private sector to authority (concession fee) combination incentives (and penalties) Traditional Government Procurement Payment profile can be depicted as follows: Cost Overruns Estimated Time Capital Cost Overruns Running Cost Overruns Estimated Running Costs Years Construction Phase Operation and Maintenance Source: PricewaterhouseCoopers 16

17 PPP Procurement Payment profile for the public sector No payments until facilities ready Payment based on usage Payment based on availability Years Construction Phase Operation and Maintenance Source: PricewaterhouseCoopers Key advantages PPP procurement (1) PPPs make projects affordable today PPPs maximise use of private sector skills Under PPPs, the private sector takes life cycle cost risk With PPPs, risks are allocated to the party best able to manage each particular risk PPPs deliver budgetary predictability PPPs force the public sector to focus on outputs and benefits from the start 17

18 Key advantages PPP procurement (2) With PPPs, the quality of service has to be maintained for the life of the PPP The public sector only pays when services are delivered PPPs encourage development of specialist skills, such as life cycle costing PPP transactions can be off balance sheet Key challenges using PPP procurement (1) The private sector has (in general) a higher cost of finance than the public sector PPP procurement can be complicated, lengthy and costly Does sufficient private sector expertise exist to warrant the PPP approach? Does the public sector have sufficient capacity and skills to adopt the PPP approach It is not always possible to transfer life cycle cost risk 18

19 Key challenges using PPP procurement (2) PPPs do not achieve absolute risk transfer PPP imply a loss of management control by the public sector PPPs are long-term relatively inflexible structures Conclusions (1) Is PPP an attractive model for financing public transport? yes, as it can ease the pressure on public finances and deficits. yes, as it can offer Value for Money for public transport projects and services 19

20 Conclusions (2)...provided that it is proven PPP delivers Value for Money (added value) PPP fits into the legal framework Political support and commitment for PPP is present Transaction costs are under control and size of the project can justify these costs The project is attractive for the private sector Public sector has (commercial) skills to structure and manage a PPP Risks are well defined and allocated (e.g. revenue risks) UITP MCD: Results so far UITP developed Mobility in Cities Database. 120 urban mobility indicators in 50 cities, collected by UITP. Development of set of arguments in favour of public transport: Cost of transport for the community and energy consumption lower in cities with higher modal shares of public transport. Identification of factors which increase attractiveness of public transport. Comparison of performance of public transport and private cars. 20

21 UITP MCD : Higher use of public transport means lower cost of transport for the community Cost of transport for the community (% of GDP) R²=0, Proportion of trips made on foot, by bicycle and on public transport UITP MCD: Parking supply and public transport Public transport market share (mechanised & motorised trips) 100 R²=0, Number of parking spaces per 1000 jobs in the CBD 21

22 UITP MCD Towards a club of cities Establishment of a club of cities interested in comparing their performance. Identification of fields of comparison. Development of methodology and identification of indicators by UITP. Collection of data by club members with technical support of UITP. Analysis of data by UITP, confidentiality of data, dissemination of policy conclusions. Practicalities Project duration: September 2007 March 2009 Objective: minimum 20 cities. Two meetings per year (definition of objectives, technical issues, comparison of results). Entrance fee to cover UITP support. Participants have to commit to provide sufficient resources to collect data. 22

23 Singapore s Electronic Road Pricing Sept 1998 (Chin, Kian-Keong) Cordon-based - once inside the zone, road pricing no longer applies. Costly gantry required for each new charge point - not easy to expand. Careful study required as gantry cannot be easily re-located. Impact - Traffic Volume (CBD) % % -8% Before After end Morning (2 hours) Off-Peak (7.5 hours) Evening (2hours) 23

24 The Singapore Road Pricing Scheme: Lessons Learnt Simplicity and Convenience Preparation and Publicity Public transport alternative Pre and post-erp traffic rush. Traffic diverted to unpriced alternative roads. Motorists waiting upstream of gantries at fee change-over times. The Singapore Road Pricing Scheme: Lessons Learnt Shortage of taxis in CBD in the evenings. Motorists forgetting to insert smart-card. Traffic monitoring for continuous scheme enhancement 24

25 Congestion Charging London: Impacts - Michèle Dix- Director - Transport for London Traffic entering charging zone: Reduced by 21% (4+ wheels) Chargeable vehicles down 31% Environmental changes NOx down 13% PM10 down 15% CO2 down 16% Bus patronage up, reliability and journey time improved Little or no change in number of trips to central area: 50 60% moved to public transport Business impacts broadly neutral Reason for Western Extension The Mayor wanted to extend benefits to a wider area Western Extension area experiences high levels of traffic congestion through the working day Second most congested area of London after the central zone Important business and tourist sites in the area which would benefit from congestion relief Part of re-election manifesto in May

26 Western Extension Consultation Mayor s Transport Strategy Discussions with key stakeholders (July/Sep 03) Formal public and stakeholder consultation (Feb-April 04) Publication of revised Strategy (Aug 04) Detailed Scheme Order Informal engagement with key boroughs (Autumn 04) Preliminary consultation with key stakeholders (Jan-Feb 05) Full consultation on preferred scheme with public, businesses and stakeholder groups (May-July 05) Mayor s decision to proceed: September 2005 Impacts 10 to 14% reduction in traffic volumes within extension 15 to 20% reduction in congestion in western zone Knock on benefits to bus journey times and reliability Traffic on boundary routes will be largely unchanged Small increase in public transport passengers 30-50m net revenue Reduced accidents and emissions 26

27 Key Lessons Learned Political commitment of Mayor Effective research and clear policy objectives Extensive public consultation and stakeholder engagement Strong project management Need for effective contract management Adequate public transport alternatives Effective traffic management Strong public information campaign Need for ongoing customer and impacts monitoring, stakeholder engagement and scheme improvements Tackling climate change and air quality Emissions Influenced Congestion Charging Mayor aims to take forward policy of reducing CO 2 emissions by introducing emissions influenced charging within London Congestion Charging Scheme Proposed that: Cars with lowest emissions (up to 120g/km) obtain 100% discount Cars with highest emissions (over 225g/km) would pay 25 90% residents discount withdrawn for VED band G equivalent cars TfL currently developing proposals and undertaking analysis work. Proposals will be subject to public consultation later this year. London Low Emission Zone Purpose is to discourage the most individually polluting heavy vehicles from being driven in London Daily charge of 100 for LGVs or 200 for HGVs Expected benefits: 15% reduction in PM 10 emissions by 2012, exceeding annual objective. Similar reduction in NO x 27

28 Further developments Other areas where congestion is currently a problem and which will get worse with increasing travel demands New technologies to improve the way in which we charge; not only in the existing area, but for application elsewhere Working with the DfT in looking at the possibilities for a national distance-base charging scheme using satellite tracking technology The Stockholm road pricing model The Stockholm Trial- I.Ziegler Congestion tax and extended public transport August 22, July An initiative 31, 2006 for reduced car traffic improved environmental conditions by congestion tax improved and extended public transport new park-and-ride spaces 28

29 The Stockholm road pricing model Result: 6 % increase in trips to the inner city (spring 2006 compared to spring 2005) Underground + 5% Buses +14% Commuter trains 0% Local trains + 9% Underground Buses Com. trains Local trains Half of the SL increase related to the trial 30-50% of the SL increase can be related to the trial The other half was explained by - a better economical climate - a better labour market - a higher petrol cost % less driving over the toll zone - half of the decrease was work related journeys, the other half was shopping and leisure journeys SL got the job journeys - other car journeys were better planned, got other targets or disappeared 29

30 SL express buses a true success trips with 18 new express buses on a weekday Improved accessibility and shorter driving-times 87% customer satisfaction SL costs for extended services The Government compensates SL for all costs related to the trial SEK 500 million for operational costs incl. leasing of buses SEK 200 million for investments in park-and-ride systems, depots and technical equipment SEK 180 million to be refunded to SL in real-time information systems surveillance systems 30

31 Conclusions by the Stockholm Trial analysis group Goals mainly fullfilled More decrease in car traffic to and from city than expected (20-25% instead of expected 10-15) Accessibility: queing times reduced by % Pollution reduced by 14 % in city The extended supply of public transport did not in itself decrease car traffic Difficulties in analysis due to other factors (tax system change, price of petrol) Referendum and elections on September 17, 2006 Stockholm citizens voted YES (52%) to congestion charges Surrounding communities voted NO (14 of 25 communites voted, 60% neg) New political right-wing majority in Sweden and in Stockholm April: New government proposes to introduce a permanent congestion tax summer

32 New congestion tax in August 2007 Same charge levels and time of intervals Tax deduction of charges New pricing policy for SL tickets - May 2006, flat rate - April 2007, zone based prices All incomes go to road investments 32