1. Case study Oslo: PT optimisation under different rules for revenue use REVENUE final conference Brussels 29th - 30th November 2005 Jon-Terje Bekken Institute of Transport Economics, Oslo

2. Based on 3 different analyses Process evaluation –The context of toll roads in Norway –The political compromises behind them Acceptability analysis –Attitudes among citizens –SP analysis of politicians and planners Model scenarios –Optimal packages –Restrictions on revenue use

3. Process evaluation What are the characteristics of the contents and the organisation of the packages? What are the impacts of the organisation of the packages on the political goals and priorities in the region?

4. Summary of process evaluation The most important findings from the process evaluation: There are strong restrictions on Revenue use: –Modes –Regions Earmarking of revenue necessary for a political compromise All participants have a right to veto the proposed schemes –focus is kept on positive measures –“fair” regional distribution of the revenue

5. Acceptability Acceptability among the voters –No case for a referendum Preferences among decision makers –Politicians focus on acceptability and compromises –Administration propose schemes with focus on efficiency?

6. Acceptability of the Oslo packages - population

7. Attitudes towards the toll ring depending on revenue use (2003)

8. The probability to recommend different measures Average score 3.9 3.8 3.4 3.3 3.4 6.6 6.1 5.8 5.4 5.2 4.10 6.8 6.1 0123456789 Increased road tolls Increased tolls in rush hour Reduced parking in city centre Increased parking fees in city centre Car free city centre Increased frequency Reduced fare Politicians Administration

9. Preferences among politicians and administration General findings: –Support for the package approach –Important with central Government funds –Inconsistency between expected effect of measures and recommendations –Politicians sceptical towards restrictive measures – opposite with administration How to find a political acceptable package

10. Summary acceptability The most important findings from the acceptability surveys were: The attitude towards the toll ring increasingly positive over time. The public acceptance of a prolongation of the toll ring is strongly dependent on the revenue use (earmarking) The administrative level is more likely to recommend restrictive measures compared to the political level. Both the political level and the administrative levels are more positive towards packages compared to the public. It is important that the central Government also contributes to the packages for the actors to agree.

11. Model scenarios Scenario A/Oslopackage 1: Low toll fare (1 euro) Fixed subsidy level for public transport and fixed capacity constraints in the peak period. Scenario B/Oslo package 2: Additional toll fare (+0,25 Euro) and PT fare (+0,1 euro) targeted on capacity increase in peak period. Fixed subsidy level but flexible capacity in the peak period. Scenario C/Oslo package 3: SMCP (around 4 Euro) and optimal subsidy level for PT in the region.

12. Revenue use ScenarioPricingRevenue useInvestment A1 Oslo package 1 : Low toll fare (€1) Fixed subsidy level for public transport and fixed PT capacity constraints in the peak period. RU 1: Fixed subsidy level in each market segments Road investments only B1 Oslo package 2 : Additional toll fare (+€0.25) and PT fare (+€0.1) targeted on capacity increase in peak period. Fixed subsidy level but flexible PT capacity in the peak period. RU 1: Fixed subsidy level in each market segments Revenue earmarked to public transport, but not including operational cost B2 As B1 RU 2: Fixed total subsidy level for all market segments, but possible regional redistribution Revenues earmarked to public transport, but not including operational cost C1 Oslo package 3 : SMCP (around €4) and optimal subsidy level for PT in the region. RU 1: Fixed subsidy level in each market segments Revenues earmarked to public transport with the possibility to use the revenue for operational costs C2RU 2: Fixed total subsidy level for all market segments, but possible regional redistribution Revenues earmarked to public transport with the possibility to use the revenue for operational costs C3RU 3: Welfare optimal subsidy level without financial constraints Revenues earmarked to public transport with the possibility to use the revenue for operational costs

13. The relationship is based on a UITP database with additional cities FINMOD External conditions for the transport market Population/demography Costs of car use and parking PT fares and service provision Income level Urban sprawl/density PT Trips Initial Exogenous framework conditions Car journeys Initial Car ownership Initial Optimization OPTIMIZATION MODEL: Socio-economics Business economics Max W= (ticket revenue-operating costs) + user benefits - external costs Production effectiveness Market effective Socially effective Optimized factors: Service provision and fares Level of subsidy Demand for PT and car traffic Framework for optimization Degrees of freedom for optimization Restrictions on revenue use

14. SMCP for PT – change in fare level -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 % 50 % 60 % MC car 4,26 25%mcpf MC car 0 25%mcpf MC car 0 15%mcpf Relative differences in fares from Oslo package 1 Capacity peaknon-capacity peakOff peak No constraints on revenue use

15. SMCP for PT – optimal revenue use -100 % -50 % 0 % 50 % 100 % 150 % 200 % MC car 4,26 25%mcpf MC car 0 25%mcpfMC car 0 15%mcpf Relative differences from Oslo package 1 off peak frequencypeak frequency Off peak vehicle sizeAdditional peak vehicle size No constraints on revenue use

16. SMCP for PT – costs and benefits -115 -16 -101 173 123 157 -150 -100 -50 0 50 100 150 200 250 MC car 4,26 25%mcpfMC car 0 25%mcpfMC car 0 15%mcpf Changes from Oslo package 1 ( mill €) ProfitPassenger benefit External benefitTotal social benefit No constraints on revenue use

17. SMCP for PT - with restrictions on revenue use 21 % 57 % 44 % 43 % 13 % 27 % 145 % 146 % 134 % -20 % 0 % 20 % 40 % 60 % 80 % 100 % 120 % 140 % 160 % No transfers between modes Transfers between modes allowed Transfers between modes, Internal optimisation Fixed total subsidy Relative differences from Oslo package 1 Fare level Capacity peak(euro/trips) Off peak Network km (1000/hour) off peakNetwork km (1000/hour) peak

18. SMCP for PT – Optimal allocation of revenue on different modes -100 % -50 % 0 % 50 % 100 % 150 % 200 % 250 % BusTramMetroBusTrainAverage Oslo cityAkershus regionAll modes fare level capacity peakfare level off peak frequency peakTotal number of trips

19. Summary of optimisations Oslo package 2 – a total social benefit of 211 mill euro compared to Oslo package 1 and –10 percent more PT passengers Oslo package 3 –a total social benefit of 322 mill euro compared to Oslo package 1 and –33 percent more PT passengers The SMCP of PT –should reduce the capacity peak fare level under the toll fare regimes of Oslo package 1 and 2, –should increase if road pricing were introduced in the toll fare regime of Oslo package 3. The optimised subsidy level –is 115 mill euro higher in the Oslo package 1 scenario –Is 103 mill euro higher under the Oslo package 2 scenarios, due to the increased toll fare. –If road pricing is introduced (Oslo package 3), there will be no need to increase PT subsidies.

20. Summary of optimisations (2) The main points to draw from the model scenarios of Oslo in terms of welfare are: There are social benefits from increased subsidies for PT (Oslo package 2) There are only small benefits from allowing transfers of revenue between the different modes and regions Oslo package 2 is a step in the right direction, but only a small improvement compared to Oslo package 1. A road-pricing scheme is superior to the other scenarios The result from the scenarios is very sensitive to the level of MCPF (marginal cost of public funds). The result is also sensitive to the internalisation and the level of external costs associated with car traffic.

21. Overall key points Oslo The current fare setting regimes of Oslo package 1 and 2 are not based on any first-best pricing rules The estimations are sensible of the marginal cost of public funds Oslo package 2 is a small step in the right direction – compared to Oslo package 1 There are positive cost benefit ratio from increased subsidies for PT and reallocation between modes. The road pricing scheme is a “superior scheme” Earmarking up front necessary to make Oslo package 2 viable Focus on efficiency after the scheme has been politically accepted

22. Time frame for the evolution towards the current Norwegian urban toll packages Nord-Jæren package Bergen programme Oslo package 2 3. Generation 4. Generation ????? 2. Generation Trondheim toll ring Oslo toll ring 1.Generation Bergen toll ring External conditions for the Norwegian urban toll packages JuridicalProcedural Economic The “original” toll road scheme

23. Acceptability of Oslo package 2 Reasons for a positive attitude towards the toll ring Source: PROSAM rapport nr 10

24. FINMOD

25. Hva er et optimalt tilbud?