Public Transport Organisation and Policy: summary of year three findings

1. Public Transport Organisation and Policy: summary of year three findings Laurent Franckx UTBI, Final conference, 16 June 2006

2. Launch workshop year three • Working group decided to pursue three topics: • Diversification of revenue sources • Fare Policy • Strategies to reduce costs of operations • Approach: • less important to focus upon the collection of the data and the comparability of quantitative indicators • pursue exchange of good practices • use each site visit to focus upon one of the three issues • include information about good practices from outside the group

3. 1st meeting (Rotterdam, 5-6 January 2006): Fares policy and ticketing system • Decision making process regarding fare policy? • Objectives of fare policy? • Criteria used for the fixation of fares (with distinction by mode if applicable)? • What is the fare structure (geographical, modal, by operators)? • What is the level of integration or differentiation between modes? • (How) are revenues shared between modes and operators? • Plans concerning the use of smart cards?

4. Decision making process • Completely free, but with some supported routes • Operator proposes, authority has final say : • Local • Both local and central • Central government only

5. Objectives • Mostly vague (“increase market share for PT”, “preserve balance revenues/costs”) • Germany: PT is both economic service and service of general interest • Northern Ireland: move from maximising of revenue to maximising of patronage

6. Fare integration • Full integration across modes and operators (Brussels) • Gradual move to fare integration (Bucharest) • Germany: • most organizing authorities have integrated fares for all modes of PT • objective: nationwide system • Why not full integration: • Dublin: cost issues… who pays (operators, Gov, fare increases) • Northern Ireland: differing fare structure policy of 3 companies • Merseyside: competition law (Single/return tickets) but fully integrated season tickets

7. Fare structure • Zonal systems (most German systems/Merseyside season tickets) • Flat fare, limited in time (Brussels) • Flat fares with zones (Belfast) • Distance traveled (Ulsterbus, Dublin, single/return tickets in Merseyside) • Different systems according to operator (Northern Ireland, Merseyside)

8. Smart cards • Advantages: • Possible solution to the problem of revenue allocation • Important input to management information • Fare dodging • allows for a differentiated fare policy • Security reasons • Most cities have implemented system or have concrete plans • Nationwide system is being implemented in Netherlands • Germany and UK: discussion on nationwide system

9. 2nd meeting (Berlin, 13-14 March 2006): alternative sources of revenue • Revenue sources (subsidies, compensation for public service obligation, tax exemptions, earmarked taxes, land value capture, advertising, supply of services) • Funding of exploitation versus funding of investment • Public-Private Partnership • Government funding: • conditionality • rationale • Coherence with regulatory responsibilities? • Debt finance

10. Public subsidies • In all networks discussed: • For PSO requirements • Compensations for concessionary fares (in Germany: not considered to be subsidy) • In some networks: capital grants • Can be implicit: • Fuel tax rebate • Government guarantee for borrowing • Particularity in Germany: only for new investment, not maintenance

11. Earmarked taxes • No earmarking of taxes at all • Several operators and OA are in favor • Congestion charging: Even if not earmarked, leads to increase of speed of PT (and thus improved attractiveness)

12. PPP • Not widely used • Possible advantages: • Technical efficiency • Avoids annual budgeting • Risk transfer • Disadvantages: • Higher cost of borrowing • Binding long run contracts

13. Other sources of revenues • Land value capture: Used in UK (very limited –section 106) and Ireland (but not Northern Ireland) • Cross-subsidies: important in Germany • Advertising • Services: car parking, hire of busses, car maintenance, use of PT infrastructure by telecom firms • European Regional Development Fund (Merseyside) • Borrowing (very limited): • Bucharest: EIB • Translink: no bank loans/bond issues but overdraft facility • Merseyside: prudential borrowing can be used

14. 3rd meeting (Brussels, June 6): cost reduction strategies • For organising authorities : • How to provide incentives for cost reduction without affecting other desirable objectives (environmental performance, public service obligations, quality, safety,...) • main obstacles to innovation • How to measure cost efficiency • Use of incentives based on comparative performance • For operators: impact of costs of: • human resources management • fleet management, and in particular maintenance • energy costs • Information technology • main regulatory obstacles

15. Authority’s viewpoint • Commercial network relies on competitive pressure to drive down costs • BUT: problems with market imperfections: high barriers to entry • Contract can provide quality incentives and leave revenue risks to operator • With vertical disintegration: track, signalling not controlled by operator • Authority could impose technological innovation (smart cards, light rail material on heavy rail infrastructure, BRT)

16. Issues in tendering • Open market tendering for concessions should improve cost efficiency • BUT: • High cost of tendering; few candidates • Cost accounting: measurements methods, definitions, • Information sharing with decentralisation and tendering

17. Sources for cost reduction • Transport Operator factors • Minimise staff levels without adverse affect on quality • Sub-contracting • Performance Monitoring Drivers' training (quality) • Reduce Absenteeism • Multi Tasking (especially in engineering) • Keep average fleet age low (6 years?) • Warranty policy • Focus on accident and third party claim reductions • Budget meeting and strict policy on price comparisons • Benchmark to other Operators • Operator and Authority Factors • Improve bus speeds (Quality Bus Corridors and BRT) • Faster Passenger Boarding • Seasonal schedules to reflect changing speeds, demand

18. General conclusion • Wide variety of approaches, highly dependent on regulatory context • There is no single best approach • Best practices should suit local requirements • However: • some potential has remained untapped • Ongoing informal dialogues between practitioners is essential for dissemination of experience • Change is a long-term issue