Non-conventional Financing in Public Transport Francis Cheung AVV Transport Research Centre Ministry of Transport, Public Works and Water Management The Netherlands Urban Transport Benchmarking Initiative Berlin, March 2006

2 Issues to Discuss How to define non-conventional methods How does it work: process, mechanism Pros and cons of the technique What are the results - Revenue, costs, net financial outcomes - Effects on passengers and staff - Acceptability by the public (non-users) Who bear the risk? Who benefit?

3 Terms of Reference Goals & objectives of the exercise - Financing Infrastructure - Subsidy payment for operation Internal or external sources of empowerment Time frame & ease of implementation Earmarked or General Fund

4 Alternative Ways and Means (Operation) Within the realm of Operators - Changes in Fares system or structure - Advertising - Property, Estate Management Responsibilities of Authority - Out sourcing of service, Management contract - Concession, tendering & performance contract - Franchising & leasing of material

5 Ways and Means (Capital project) Public Financing by Government - Capital Grants - Infrastructure Funds Private Financing - Bond, equity/share issue - Loans, PFI, Profit sharing Public Private Partnership

6 Short History of Financing in the Netherlands Full compensation for operating deficits Subsidy linked to performance - Passenger kilometre - Euro for euro Open market tendering for concession Programme of Demand (net cost contract) Decentralisation & delegation of responsibilities Freedom to fix fares & determine level of services

7 Examples in the Netherlands Paying for investment in infrastructure - MIT (Multi-years Transport Programme) - Infrastructure Fund Financial support for operating deficits - Annual Budget (Chapter XII) €1.1 billion BDU (Brede Doeluitkering)

8 Innovative Techniques - Examples Versement Transport (France) Value Capturing & TOD (U.S.A.) Air rights & profit sharing (HK) Fuel tax, income tax, sale tax (Austin, Texas) Congestion charges (London, Stockholm)

9 Websites Chapter 6 on transit financing New up-date expected in August Innovative financing techniques

10 Versement Transport A tax in French cities & regions Levied on employers in urban agglomeration More than 9 employees Expressed as % of gross salary bill of employer Between 1% to 1.75% (?) Used exclusively for public transport Effect on location of firms

11 Value Capturing Based on concept of sharing planning gains TOD Transit Oriented Development Depends on potentials & expected growth Rely heavily on terms, conditions in agreement Marketing strategy & flair in negotiation Risk analysis, uncertainty & guarantor

12 Air Right & Profit Sharing (Separate) ownership of land & air right Joint venture or project partnership Reimbursement in kind: provision of facilities Payment of right to develop or rental values Political climate & public acceptance Require legislation & institutional changes

13 Fiscal Measures: Fuel, Income or Sales tax Need Government approval (Treasury) Formally incorporated into legislation Ear-marked post or General Fund SIB State Infrastructure Banks

14 Congestion Charges Conscientious political choice (Champion needed?) Public acceptance & PR exercises (communication) Scheme design, enforcement measures Transparency, accountability, fairness, equity Decision rules: allocation of risk, sharing of revenue