ENHANCING FUNDING IN PUBLIC TRANSPORT

Beat Mueller Director International Markets, PostAuto Schweiz, Switzerland

Chair of the UITP Transport Economics Commission International Association of Public Transport (UITP)

20 November 2015 TBLI Conference, Zurich (Switzerland)

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OVERVIEW OF PUBLIC TRANSPORT

Market organizations: 1. Local public monopoly: historical model 2. Open market: open entry market found mostly in UK and developing

countries or for commercial services 3. Concessions through competitive tendering or direct award:

upcoming current trend applicable in most EU cities

Europe works under the PSO 1370/2007 regulation which provides the framework where service provision, tendering procedures and public contributions are well defined, notably:

• Separation between planning authority and operator • Transparent contract between both • Public contributions for clearly defined services • Multi-year certainty, but maximum up 10 years contracts allowed

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State and politics

Authorities Operator Users Citizens

Provide regulation, framework and strategy

Define mobility strategies

Delivers services

End users of mobility services

Provides acceptability of strategies and direct beneficiaries of

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OVERVIEW OF OPEX AND CAPEX

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Taxes / Budget

Earmarking

Commercial revenues

Administrative

TechnologySoft loans, grants, tax

credits

Debt

Maintenance

Operations

Capital expenditures (CAPEX)

Operating expenditure (OPEX)

User fees

Infrastructure (greenfield

and brownfield)

EquityDebt Service

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FARES AND COMMERCIAL REVENUES

Fare revenues: ➢ Reconciling commercial

and social objectives ➢ Fare regulation and

adjustment ➢ Revenue Management

Commercial Revenues: ➢ Covers between 5-7% of

revenues (EU) and 20-25% in Asia

➢ Commercialisation of assets and know-how

➢ Emerging branding and commercial strategies

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THE LIFESTYLE BUSSINESS IN PT

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Life-style business for 17m daily passengers:

➢ Advertising ➢ Retail: ‘Ekinaka’ (in-station)

shopping zone ✓ 25 Locals ✓ Luxury or every day products

➢ Shopping centers, office buildings, Hotels

➢ Regional revitalisation: creating links with local communities (childcare facilities and local products)

Ratio of non-transportation revenues is 40%

JR East seeks to ensure that capital investments target transport service and station quality harnessing synergies between transport and non-transport activities.

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TRANSPORT FOR LONDON COMMERCIAL STRATEGY

Identified opportunities to grow non-fare incomes from 1.9bn GBP to 4.5bn GBP (2.6bn EUR to 6.2bn EUR) over the next 10 years.

Objective: reinvesting commercial assets while reducing public public funding (grants and loans).

Activities envisioned: ❖ Property partnership to generate 2.7bn GBP creating

9,000 residential units next 10y ❖ Enhance commercial and retail activities ❖ Develop digital hub (Old street)

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ENHANCING LOCAL REVENUES FOR PUBLIC TRANSPORT

Raising funding tools at the local level is becoming increasingly paramount for the (re)investment of infrastructures.

1. Increased calls for devolution enabling the active participation of direct or indirect beneficiaries (Europe and US)

2. New trends focusing on parking policies and payroll taxes have become of increasing interest

3. Interest in including indirect beneficiaries in the contributions for transport infrastructure

4. Much attention is now given to the synergies between land development and transport

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TOLL RING IN OSLO

The new financing projects in greater Oslo are designed to improve road and public transport investments.

Oslo Package III (2008-2030): the toll ring will be the main source of financing: ❖ Total costs are estimated at 7bn EUR,

with 5.3bn EUR generated by the road toll.

❖ In 2011 around 255 million EUR were collected to transport projects in the region.

❖ Around 60% of the income from the road toll is reserved for improving infrastructure rolling stock, operating public transport.

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WORKPLACE PARKING LEVY

Workplace Parking Levies originated in Australia (Sydney, Perth and Melbourne).

In Nottingham it was passed ‘with the aim to offer realistic alternatives to the use of private cars by delivering high quality sustainable public transport’

Benefiters:

❖ 2 Nottingham Tram Routes, totalling 17km and extending the existing tram network, with WPL meeting 34% of the cost.

❖ the Nottingham railway station hub redevelopment project – due for completion 2014,

❖ Acquisition of the 'Link' bus network (60 City Council owned buses)and 'green' bus trials using ethanol, hybrid, electric power.

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LAND VALUE FOR PUBLIC TRANSPORT

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“London has the densest network of stations and services, with 94% of properties within 1.5km of a station, compared with 72% in Greater Glasgow and 69% in Greater Manchester.” (Nationwide 2014)

Land value capture consist of an aggregation of tools, where the most popular are:

! Betterment taxes (London) à Tax Increment Finance (Chicago) à Joint Development (Copenhagen)

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BUSINESS CONTRIBUTION IN LONDON

Crossrail 1: A special increase in business property tax levied since 2011 for the next 24 years on all businesses in Greater London. This is projected to create a fresh revenue stream of £4.1bn of a total of £16bn for the new line.

The estimated supplement is 2p per £1of rateable value, exempting the businesses with a rateable value of £50,000 or less.

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A betterment tax is a tax on the land value added by public investments. It targets beneficiaries of improved accessibility, lower congestion and lower transport costs due to public investments.

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TORONTO’S INVESTMENT STRATEGY

The 2013 Big Move strategy, is 25 year integrated mobility plan. The infrastructure changes expected have been estimated at $16 billion CAD worth of transit expansion.

4 revenue potential tools, were selected which are expected to raise 2bn CAD annually:

1. Harmonized sales tax, 2. Fuel tax, 3. Business parking levy and 4. Development charges levies,

The selected sample of tools would provide GTHA with a stable funding package.

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WHAT IS RESILIENCE?

There is no silver bullet, in a context of constrained available public funding, it is required:

➢ Cost effective service delivery ➢ Fares which reflect the quality expected by customers ➢ Development of other commercial revenue ➢ Creation of earmarking funding sources from indirect

beneficiaries

Ensuring a financially sound system enabling the longevity of the system and its capacity to resist to external shocks.