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Non-conventional Financing in Public Transport

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, 13-14 March 2006. Issues to Discuss. How to define non-conventional methods

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Non-conventional Financing in Public Transport

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  1. 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, 13-14 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 http://www.fhwa.dot.gov/policy/2002cpr/ch6c.htm Chapter 6 on transit financing New up-date expected in August 2006 http://www.fta.dot.gov/1263_ENG_HTML.htm 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

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