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Funding WP 1.2 Survey of Experience in the EU

Funding WP 1.2 Survey of Experience in the EU. A. G ühnemann, P. Mackie, N. Smith, A. Whiteing December 2005. WP 1. Survey of Experience in the EU. Aim & Methodology Review institutional setup and fund raising methods of infrastructure funding in Europe For European funds and

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Funding WP 1.2 Survey of Experience in the EU

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  1. Funding WP 1.2Survey of Experience in the EU A. Gühnemann, P. Mackie, N. Smith, A. Whiteing December 2005

  2. WP 1. Survey of Experience in the EU • Aim & Methodology • Review institutional setup and fund raising methods of infrastructure funding in Europe • For European funds and • for selected case studies (national systems + projects) • Use resources from • European research projects, • European + national transport (funding) bodies • Interviews with key representatives • Assess performance • along WP 1.1 questions and criteria

  3. Status Quo of WP 1.2 • Work in Progress • Review of EU / International funding • Case study descriptions • Selection of case studies • Infrastructure funding in a cooperative federal system (Germany) • Infrastructure funding in a centrally organised system (UK / England) • Privately financed motorway in New Member State (M1/M15 Hungary) • Infrastructure fund public / private (Asfinag, A)

  4. Case Study Questions • Planning and financing framework, institutional aspects • political bodies / authorities / agencies • modal responsibilities (air, ports, road, rail, public, local transport) • companies (state owned and private) • external influences (lobby groups, planning culture / hidden rules) • Fund raising methods • type of funding: mark-ups on transport activities, mark-ups on user costs, earmarked taxes, general budgets (taxes / debts) • costing methods (average, marginal, mix) • How money is spent • type of projects / modes • subsidies loans • Performance issues • accountability / transparency • multi-agent / shared responsibilities (cross-border etc.) • efficiency (under-investment, targeted) • cost recovery + rules for cost overruns

  5. Germany • Institutions: tiered responsibilities • subsidiarity + cooperative federalism

  6. German Road Infrastructure Financing • Federal roads • Fund raising • Public budgets (e.g. fuel tax, vehicle tax) • User charges (Heavy Vehicle Toll) • PPP models • Transport Infrastructure Financing Society • State roads • public budgets (tax transfers, e.g. vehicle tax) • Local roads • public budgets (tax transfers, fixed budget 1.67 bill. €) (Gemeindeverkehrsfinanzierungsgesetz)

  7. Public budgets construction costs financial grants (subject to negotiation) part of reinvestment Track charges annual depreciation Rail Infrastructure • National: • Federal Government↔ DB Netz AG • Regional • Federal Government ↔ Federal States • Regionalisierungsgesetz (regionalisation law) • tax transfers, budget line with growth rates

  8. Lessons Learnt Issues for Consideration • high coordination efforts • problems in cross-border coordination (states + national) • different state of roads • tendency to manifest current status • inflexibility in investment decisions in accounting system, • no horizontal transfer of funds possible (exception: new fund) • funding levels vary strongly between budget years; subject to change if political situation changes • responsibility of federal level goes too far • funding of predominantly regional and local roads • cost overruns in major railway projects led to delay of necessary reinvestment to the future ( risk allocation) • debate on mode specific earmarking of user charges for infrastructure maintenance and extension; • discussion about creditability of funding agency

  9. Asfinag (Austria) • Responsibility: • plans, finances, constructs, maintains and operates the Austrian motorway and highway network • Strategic planning in federal master plan • Refunding by • National investments • Tolls • Distance dependent heavy vehicles’ toll • Time dependent cars and light vehicles • Funds raising on financial markets

  10. Road financing in the UK • Central planning (England: DfT) • Phases of financing • Earmarked taxes (until 1920s) • General budgets (road user taxation) (until 1990s) • PPP according to Ryrie Rules • no additional but replacement of public funds • genuine risk transfer to private sector • PPP according to PFI (first road scheme 1994) • additional, if better than public “comparator” • DBFO contracts • refunding by shadow tolls • Binary model (since 2000)

  11. PFI for Roads in the UK • Department for Transport (1.10.2005): • 37 projects (out of ~ 300) • capital spent ~ £ 20 billion (54% of total ) • Lessons learnt from PPP models • Benefits • Reduction of Construction and Operating Costs • Efficiency Gains • Risks • Higher costs of financing (>= 5%) • Transaction costs • Fiscal effects • Postponement of costs to future taxpayers • Risk (+ benefit) allocation

  12. Case Study M1/M15 Vienna-Budapest • Privately financed toll motorway • Motivation: Insufficient funds from public budgets (road user taxation) • Finance, build, own, operate contract • Awarding Process • Prequalification (1991) • Tendering Phase (1992)  Final Decision • Concession Company SPV Elmka created (1993) • Operation • less traffic growth • high toll rates  court ruling • Re-Nationalisation

  13. Case Study M1/M15 Vienna-Budapest • Lessons learnt • Financing and building of motorway in short time with virtually no cost overruns(despite economically difficult situation) • Traffic substantially below expectations • Relatively robust financial structure • Conflict of interests • revenue oriented vs. public interest • Success factor: Commitment and full and sustained support of the Client/Principal

  14. European & International Funding Bodies • Review of various multinational agency publications • Questions to key representatives • political and legal differences between Fund and budget line in the EU • key rules of the Fund • autonomy • rules and principles • flexibility • Lessons learnt for Transport Fund • e.g. appraisal criteria

  15. Summary & Outlook • Lessons learnt from four representative types of financing • responsibilities / problems in federal and central funding system • PPP and private funding experiences • setups of infrastructure funds • Question for discussion • Are they representative? • Are there other lessons learnt from other countries?

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