Follow the authors on Twitter: @danpulido and @IrenePortabales
A branded metro station in Madrid
Most metro systems around the world are unable to cover their operating costs with fare box revenues, let alone fund capital expenditures.
According to data from international benchmarking programs CoMET and Nova, tariff revenues cover an average 75% of operating costs, while other commercial revenues provide about 15%, resulting in an operating deficit of 10%. Similarly, a back of the envelope exercise that we conducted for Latin American metro companies showed that these had an average operating deficit of 10% in 2012. When including capital expenditures, this deficit grew to 30%. There are of course examples of metro systems that do recoup their operating costs, such as Santiago de Chile and Hong Kong, but others like the Mexico City Metro only cover half of their operating expenses with fare revenues
. We should all mind this funding gap as it is a significant impediment to maintaining service quality and addressing growing urban mobility needs.
Unfortunately, the underfunding of transit systems can become chronic as public budgets are under growing pressure and the most direct solutions for increasing revenues are hard to implement:
increasing fares, for instance, has proved to be politically difficult and disproportionately affects the poor, who use public transport the most; and charging a price
that fully covers the social cost of private vehicle usage (i.e., congestion charges) as a way to fund transit is also politically sensitive.
In that context, transit operators are increasingly looking at new ways to tap additional sources of commercial revenue and make up for funding shortfalls, often through agreements with the private sector
. Although most examples are concentrated in developed countries, some metro systems in Latin America and the developing world are looking at ways to increase non-tariff revenues: