Innovative Funding and Financing of Public Transport Part...

SPUTNIC – Strategies for Public Transport in Citieshttp://www.sputnicproject.eu/

Strategies for Public Transport in Cities

Funded by the EU

WG 3 Market Organisation

17-18 April, Leipzig, Germany3rd Working Group Meeting on

Innovative Funding and Financing of Public Transport

Part 1: Introduction

Martin Ruesch, Rapp Trans AG Zurich, Switzerland



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Contents

• SPUTNIC Partners in MO• Scope of the workshop / topics addressed • Self-introduction of participants• Objectives / expectations for the meeting• Questions to be discussed• Programme for the WG Meeting• “Communication Rules”• Validation of problems/challenges



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Profile Rapp Trans AG, Switzerland• Consulting company in traffic

and transport

• Established in 1896

• Private limited company basedin Switzerland

• Subsidiaries in France (Paris), UK (London) and theNetherlands (Amsterdam)

• Around 70 transport and trafficconsultants

• More Information: www.rapp.ch

• Services in public transport– Public transport network and

service planning– Planning of tariff and fare systems– Planning and design of tariff and

transportation associations– Development of revenue distribution

systems– Development of financing models– Tendering projects– Organisation models– Monitoring/Controlling projects– Institutional consulting (regulation,

etc.)



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Profile VTI, Stockholm, Sweden

www.vti.se• VTI, Statens väg- och transportforskningsinstitut, carries outapplied research in the fields of infrastructure, traffic and transport.

• State owned, 170 staff in four towns, turnover 20 M €,• Public Transport and its links to urban planning, retail patterns and regional

development• Several Light Rail projects for instance costs compared to other forms of

guided transport and buses • Competition and Tendering in the Transport Sector• New contract forms in the PT sector

http://www.vti.se/



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Profile VVO – Public Transport Authority of Upper Elbe Region

Halle

BautzenGörlitz

Dresden

Leipzig

Plauen

Zwickau

Chemnitz

•established in 1998•4.800 m²•1,2 Mio. inhabitants•194 Mio. passengers per year•16 PT operators

Halle

BautzenGörlitz

Dresden

Leipzig

Plauen

Zwickau

Chemnitz

•established in 1998•4.800 m²•1,2 Mio. inhabitants•194 Mio. passengers per year•16 PT operators

• One of 5 PTA´s in the State of Saxony

• Main tasks of VVO:– Integration of

several Public Transport modes

– Timetable integration

– Integration of tariff and fare system



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Challenges relating to Market Organisation

• Low integration between local and regional(and national) transport networks and services, in overall mobility and transport planning

• Missing integrated tariff and fare systems• Decreasing public ressources for public transport and

lack of funds to finance investments and operation• Low contribution of revenues to cost coverage• Low co-operation between PT companies• Unstable or unclear regulatory setting• Unclear division of responsiblities between actors in PT• Frequent political interference• Low implementation of quality and performance

monitoring• Few incentives for PT operators to cut costs and

increase revenues



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Adressed topics within Market Organisation

• Topic 1: Integration and Tariff Systems

• Topic 2: Institutional Framework and Cooperation

• Topic 3: Innovative Funding and Financing of Public Transport

• Topic 4: Incentive Contracts and Monitoring Systems



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Self Introduction of Participants

• Institution / Company• Position• Experiences relating to funding and financing• Interests / Expectations relating to funding and financing



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Scope: Terms Funding and Financing

• Financing of investments if the necessary funds are not available at the time needed, namely by recourse to “other people’s money” (loans etc.)

• Funding the setting-up and operation of the PT system on the whole

The workshop will deal with funding and financing of infrastructure and equipment (rolling stock, ticketing system etc.) as well as operation of urban public transport.



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Funding Sources: Direct Commercial Revenues

direct commercial revenues

fares other business

advertising

services

sale of products

premises & facilities

freight transport

• Fares from PT users (adressedin Barcelona Workshop)

• Other businesses– Advertising– Additionnal Services – Sale of products– Premises and facilities– Freight transport



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Funding Sources: Indirect Non-Commercial Revenuesindirect non-commercial revenues

generalbudgetary resources tax exemptions cross utility fiunding specific taxes and levies

earmarked for PT

compensationfor publicservice obligation

subsidies

fuel tax rebate

car users employers propertyowners

shopkeeperstrade

other industries

fuel tax

vehicle taxes

parking fees

road pricing

Employeestax Value capture supplement to

sales tax

tourism tax

etc.

Tax IncrementFinancing

general land value taxes

etc.

etc.corporate taxes

etc.



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Financing Infrastructure and Equipment

• Special purpose infrastructure funds providingextrafunds

• EU-funding: Structural and cohesion funds• Loans connected to guarantees and conditions from

– International Finance Institutions– European Bank for Reconstruction and Development (EBRD)– European Investment Bank (EIB)– World Bank

• Private Sources– Private bank loans– PPP– Private finance initiatives



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Objectives for the meeting

• To identify and validate main problems/challenges, trends and challenges in CEEC related to funding and financing of PT

• To exchange information, experiences and know how on funding and financing between CEEC and other European cities/urban areas

• To present and discuss good practices examplesfrom operators and authorities from CEEC and other European Countries

• To derive conclusions on challenges and need for action



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Important questions to be discussed• What are the most pressing problems with respect to funding and

financing PT?• What are the most promising alternative funding and financing

solutions in urban areas?• How to devise operators’ internal strategies for generating additional

revenues by offering additional services creating new market potential?

• How to tap additional sources of funds for PT?• How to lobby towards the government for more resources or indirect

support?• How to make use of all available financing possibilities?• What are the possibilities and risks of relying on International

Finance Institutions?• How to access EU funding?



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Programme: Day 1 14:15 – 15:00 Working Group Session Part 1: Introduction

Rapp Trans

Introduction by cluster leader - scope of the workshop / topics addressed - self-introduction of participants - Objectives / expectations for the meeting - Questions to be discussed - Programme for the WG Meeting - “Communication Rules” - main trends and challenges in CEEC / other countries - validation incl. statements from experts & discussion

15:00 – 18:00 Working Group Session Part 2: Opportunities and risks of creating additional commercial revenues

Rapp Trans

Introduction by VVO incl. results from inquiry

Presentation: The case of the Verkehrsbetriebe Zurich (VBZ) by Dieter Egger, Rapp Trans (to be confirmed)

Presentation: Creating additional commercial revenues - a bouquet of possibilities - some German cases by Arne Beck, BSL Management Consultants

Structured group discussion addressing the key questions

16:30 – 17:00 Coffee break

Presentation: Experiences from an international operator by Michel Quidort, Veolia


Conclusions

20:00 Dinner

Target17:30!

Moderation: Martin Ruesch



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Programme: Day 2 (morning)9:30 – 12:30 Working Group Session Part 3: Financing issues

VTI

Introduction by VTI incl. results from inquiry

Presentation: Financing PT projects by the EBRD by Guido Bruggeman, independent transport consultant (former EBRD transport specialist)

Presentation: Financing by International Finance Institutions - the Sofia case by Metodi Avramov, Public Transport Company Sofia

Presentation: Financing PT projects by the EIB by Krzysztof Szyszko, European Investment Bank (EIB)

Structured group discussion

11:00 – 11:15 Coffee break

Presentation: Funding and financing solutions for urban PT in Madrid by Angeles Echevarria, Equipo de Técnicos en Transporte y Territorio S.A. (ETT)

Presentation: Equity finance and risk sharing via PPP - the Pforzheim case by Arne Beck, Metropolitan Consulting Group

Structured group discussion

Conclusions

12:30 – 13:30 Lunch

Moderation: Bertil Hylén



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Programme: Day 2 (afternoon)

Moderation: Dieter Egger

13:30 – 15:15 Working Group Session Part 4: alternative (non-commercial) sources for funding PT

Rapp Trans

Introduction by Rapp Trans incl. results from inquiry

Presentation: Land value capture in Copenhagen by Bertil Hylen, VTI

Presentation: PT funding examples from Switzerland - tourism tax and infrastructure funds by Martin Ruesch, Rapp Trans

Presentation: EU funding of PT by Sebastian Emig, UITP


Conclusions

15:15 – 16:00 Working Group Session Part 5: Main findings & outlook

Rapp Trans

Conclusions and main findings

16:00 – 16:30 Coffee Break

16:30 – 17:30 Closing session (Plenary)

20:00 Dinner

Moderation: Martin Ruesch



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„Communication Rules“

• Discussions are the main part of the working meeting

• Presentations feed the discussions: Keep to the maximum of 15 minutes for the presentation

• Try to keep the focus on the topic innovative funding and financing

• Statements and inputs from your experiences are very welcome

• Please do not use your mobile, blackberry or labtop during themeeting!



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Results of Questionnaire: Main Problems for Funding

• low fare revenues / cost coverage (6)– difficult to increase fares– declining patronage– demand for salary increase (costs)

• municipal budget (4)• no/little state aid (3)• little funds from region• no long term investment plan• lack of PT legislation (responsibilities)



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Results of Questionnaire: Main Problems for Financing

• lack of public resources (6)• limited possibilities for bank loans (4)

– duration of PSC too short– credit rating

• lack of operator’s reserves (2)• missing legal framework for PPP on local level• slow procedures with EU financing• lack of political support



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Main Trends and Problems• Growing welfare, car ownership, urban sprawl and individualisation

with complex patterns of activity tend to decrease PT patronage and thus the degree of cost coverage by passenger fares

• Public funds for PT are being cut back due to general budget restrictions in most European countries and cities. However, at present some local authorities in some MS experience a budget surplus thanks to the thriving economy in general.

• Indirect (external) beneficiaries (employers, landowners etc.) of PT will be growingly integrated into PT funding, thus internalising their external profits and relieving public budgets

• Growing liberalisation and competition might help to reduce costs and deficits

• Concern about the environment, policies of supporting PT and modal shift may increase acceptance of subsidies for PT



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Main Challenges• To create acceptance for the fact that in most cases fare revenues alone

cannot fund a PT system• To establish reliable and sustainable funding mechanisms for urban PT

enabling PT operators to work within fair framework conditions• The increasing constraints on public budgets have to be offset by innovative

financing models and alternative sources of revenues• To identify alternative ways to fund infrastructure and operation, e.g. by

identifying external beneficiaries of PT and by internalising their windfall profits

• To identify measures and options to generate additional revenues, e.g. by commercialising stations or other real estate assets or by applying new business models (advertising, freight transport etc.)

• To simplify funding structures (too many different PT funds hinder an efficient and integrating PT financing)

• To find ways and means to finance the urgent renewal of neglected infrastructure, equipment and creation of new services

• To identify alternative ways to finance infrastructure and equipment, such as Public Private Partnerships or loans by International Finance Institutions



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WG 3 Market Organisation17-18 April, Leipzig, Germany

3rd Working meetingInnovative funding and financing of Public Transport

Part 2: Opportunities and risks of

creating additional commercial revenues

Martin Ruesch, Rapp Trans AG, Zurich, Switzerland



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Programme Part 2 (15:00 – 18:00)

• Introduction/Overview• Results from the Inquiry• Presentation by Mr. Dieter Egger, Rapp Trans• Presentation by Mr. Arne Beck, BSL Management

Consultants• Structured group discussion

Coffee break• Presentation by Mr. Michel Quidort, Veolia• Structured group discussion• Conclusions



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Introduction/Overview

Main challenges regarding additional commercial revenues:

• offsetting the increasing constraints of public budgets byalternative sources of revenues

• identifying measures and options to generate additional commercial revenues



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Introduction / Overview



Funded by the EU

Introduction / Overview

direct commercial revenues

other businessFares

services

advertising

sale of products

freight transport

premises & facilities



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Advertising

• main supplementary source of income for PT operators in most European cities

• although the significance of this business varies largely:Paris 11% of totalrevenuesDublin it is only 1%

• “design” or “style” in line with the political correctnessof the PTO



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Renting/selling of premises and facilities

• use of premises and facilities by renting:– shops and offices– spaces for vending machines (e.g. at bus stops)– car parks

• leasing the right of way to use the infrastructure• leasing the right to communication companies in order to lay any

kind of transmission wires• Dublin: buildings are hosting telecommunication masts, fibre optic

cables are installed into railway track beds and overhead-lines are used to carry voice and data signals



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Providing additional servicesStockholm: • underground metro equipped with a

mobile phone network• access is rented to telecommunication

service • expanded to offer WiFi-Internet-access

in all bus-stop weather sheltersBucharest:• PT operators offer car services to third

parties (mechanic, electric, tin, dye work and vulcanisation)

Dresden:• DVB (PTO) offers Sightseeing-Tours by

bus



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Sale of products• use of the extensive distribution

network by selling additional goods• London underground ticket offices

also sell tickets for major tourist attractions

• merchandising using the image of public transport

• London underground name and symbol have a very strong brand association with London and many people choose to buy these items as a souvenir

• Sold items also include scrapped vehicles and station signs or old train seats that have been used for recycling into cushions

• Berlin’s PTO sells underwear bearing the names of metro stations



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Freight transport• Matkahuolto Group in Finland offers

freight services in connection with PT• making use of the company’s

comprehensive scheduled bus network

• on certain lines bus operators get more money from freight than from passenger transport

• removement of passenger seats to have more space for freight transport –in addition to the usual 10m³ luggage room

• some cities have also investigated freight transport to city centre stores by means of metro/light rail tunnels

http://www.matkahuolto.fi/en



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Results from the Inquiry

What kind of supplementary revenues are common in PT?

• Supplementary revenues range from 2 Mio. – 22 Mio. € per year (1 – 13 % of operational costs).

• Most common (5 out of 7 people) is advertising range from 0,6 Mio. – 12 Mio. € per year.

• Quite common (3-4 out of 7 people) are– Additional services (maintenance, building, energy)– Renting of premises/vehicles.

• Rare (1 out of 7 people) is selling of products.



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Results from the Inquiry

Supplementary revenues are contribute to the PT financing?• “Yes, it can contribute.” 57 %• “Yes, it should contribute.” 71 %

What are the main barriers for supplementary revenues?• Strategic reasons 86 %• Missing entrepreneurship 71 %• Legal obstacles 43 %• No market 14 %



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Structure of group discussion

Most of the experts think, that supplementary – also commercial - revenues can contribute to PT financing.

• In which fields do you see still opportunities?• What are the strengths of PT with respect to additionnalservices?

• Where are the limits of commercial revenues?• Which risks are linked with the generation of commercial revenues?

• If the frame is optimal – Which maximum contribution commercial revenues could/should have?

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