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Public Transport Organisation and Policy: summary of year three findings. Laurent Franckx UTBI, Final conference, 16 June 2006. Launch workshop year three . Working group decided to pursue three topics: Diversification of revenue sources Fare Policy Strategies to reduce costs of operations

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Public transport organisation and policy summary of year three findings l.jpg

Public Transport Organisation and Policy: summary of year three findings

Laurent Franckx

UTBI, Final conference, 16 June 2006


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Launch workshop year three three findings

  • 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


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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?


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Decision making process ticketing system

  • Completely free, but with some supported routes

  • Operator proposes, authority has final say :

    • Local

    • Both local and central

    • Central government only


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Objectives ticketing system

  • 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


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Fare integration ticketing system

  • 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


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Fare structure ticketing system

  • 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)


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Smart cards ticketing system

  • 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


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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


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Public subsidies of revenue

  • 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


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Earmarked taxes of revenue

  • 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)


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PPP of revenue

  • Not widely used

  • Possible advantages:

    • Technical efficiency

    • Avoids annual budgeting

    • Risk transfer

  • Disadvantages:

    • Higher cost of borrowing

    • Binding long run contracts


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Other sources of revenues of revenue

  • 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


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3rd meeting (Brussels, June 6): cost reduction strategies of revenue

  • 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


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Authority’s viewpoint of revenue

  • 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)


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Issues in tendering of revenue

  • 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


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Sources for cost reduction of revenue

  • 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


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General conclusion of revenue

  • 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