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Public Sector and Governance

Próxima Parada: El Centro Comercial

Daniel Pulido's picture
Also available in: English
Sigue a los autores en Twitter: @danpulido y @IrenePortabales
 

Estación de Metro de Madrid esponsorizada
Muchos de los sistemas de metro del mundo no consiguen cubrir sus costos de operación con los ingresos tarifarios, mucho menos sus costos de capital. Una comparativa internacional llevada a cabo por las asociaciones de metros CoMET y Nova indica que, en promedio, los ingresos tarifarios de un sistema de metro cubren el 75% de sus costes de operación, mientras que los ingresos comerciales cubren aproximadamente un 15%, lo que supone un déficit del 10%. De igual modo, hemos hecho un cálculo de “números gordos” basado en los estados financieros de diversas empresas de metro de América Latina, corroborando que en promedio éstas presentaron un déficit en operación del 10% en el 2012, el cual asciende al 30% si se incluyen los costes de capital. Por supuesto existen ejemplos de metros que sí cubren sus gastos operacionales como son Santiago de Chile o Hong-Kong, pero otros como México DF necesitan subvención de la mitad de sus gastos de operación. Esta brecha de fondeo es un gran impedimento para mantener la calidad de los servicios y para ampliarlos para poder responder adecuadamente a las crecientes necesidades de desplazamiento.

Lamentablemente, el desfinanciamiento de los sistemas de transporte urbano es un problema generalizado, difícil de remediar con presupuestos públicos sobrecargados y/o soluciones inmediatas que aunque efectivas en teoría son difíciles de implementar en la práctica: el aumento de tarifas, por ejemplo, es una medida políticamente difícil y además genera mayor presión sobre los pobres, quienes más usan el transporte público; cobrar una tarifa que realmente cubra los costes socioeconómicos del uso del vehículo particular (tales como cargos por congestión) como instrumento de financiación del transporte público es también una medida impopular y difícil de implementar.

Dada esta situación, los operadores de transporte están continuamente buscando nuevas formas de recaudar fuentes adicionales de ingresos y así disminuir el déficit de financiación,  en muchos casos a través de asociaciones con el sector privado. A pesar de que muchos de los ejemplos se concentran en países desarrollados, algunos metros en América Latina y en otras regiones en vías de desarrollo están buscando aumentar sus ingresos no tarifarios:

Mind the (funding) gap, next stop: Making some extra money

Daniel Pulido's picture
Also available in: Español
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:

Seize the space! Reclaiming streets for people

Verónica Raffo's picture

Increasing numbers of citizens all over the world are demanding that urban planners and political authorities in their cities “get it right” when designing public urban spaces. People living in cities, both in developed and developing countries are reclaiming streets as public spaces, demanding urban planners to re-design streets to ensure a more equitable distribution of these public spaces, and prioritizing the allocation of streets for people to walk, cycle and socialize. This was the central topic discussed last week at the “Future of Places” conference in Buenos Aires, Argentina.
 
How do we contribute to a more equitable society by building more equitable cities?  In an increasingly urbanized world, urban mobility is central to citizens’ social and economic wellbeing. However, current urban transportation systems – based primarily on the movement of private motorized vehicles – have prioritized road space and operational design of streets for automobiles over other modes of transport, which has caused many social, environmental and economic consequences, therefore reducing urban livability and equitable access.
 
The values of urbanity and mobility are being rethought all over the world, and Latin American cities are no exception to this questioning of how cities are to be developed today. One of the answers to sustainability issues lies in the concept of proximity, which combines different dimensions of the urban proposals that the 21st century requires. These dimensions include public health – particularly the fight against sedentary habits – as well as density, compactness, closeness, resilience, and livability of the public space. These all point to a new urban paradigm that all creative cities wish to adopt in order to attract the knowledge economy and guarantee social cohesion.

What can we learn from public-private partnerships in the transport sector in Europe and Central Asia?

Vickram Cuttaree's picture
Private sector investment in Europe and Central Asia (ECA) is quite small, even accounting for the size of the individual countries’ economies. Despite integration within the European Union (EU), ECA countries have not attracted much private sector investment in the transport sector compared to other regions, such as Latin America or South Asia (four times more during 2009-13).
 
Mid-day traffic in Istanbul, Turkey
Mid-day traffic in Istanbul, Turkey

While public-private partnership (PPP) transport investment has been initially driven by countries (such as Poland, Croatia and Hungary) that implemented reforms to join the EU, most of them have not been able to close on transport PPP transactions in the past five years. Now Russia and Turkey are the leaders in the region, as explained below.

What can explain this situation?
A focus on off-balance sheet accounting of PPP projects has dominated transport PPP in EU-member ECA countries in recent years. Off-balance sheet accounting means PPP projects are structured in a way that only annual government payments are accounted for, instead of the total commitment (the assets and liabilities associated with the project). This means that PPP projects end up being large and greenfield (multi-billion dollar investment, typically in new highways), and tend to follow a separate path than for budget-financed projects, based on the assumption that the associated liabilities won’t be accounted for.

Risk allocation between the public and private sectors is driven by accounting treatment. This also results in limited support from governments and very rigid negotiations. It also means that projects are often not able to close or, as a former Minister of Transport said, “We do PPP to build off-balance sheet assets but, in order to reach financial close, assets has to be on our books.”

São Paulo and Mumbai: Improving Mass Transit in Two BRIC Megacities

Jorge Rebelo's picture
Mumbai and São Paulo are two mega metropolitan regions (MMR and SPMR) in the BRICs with about 20 million inhabitants each. They are the economic engines of their respective countries and act as a magnet for rural, low-income populations seeking employment opportunities, growing at a rate that puts tremendous pressure on their transport infrastructure and other public utilities.

As population and income rise, car and motorcycle ownership quickly increased in both megacities while mass transit is not developing fast enough, with serious consequences on traffic congestion, accidents and pollution. São Paulo has 150km+ traffic queues daily and losses of productivity, wasted fuel, health impacts and accidents estimated at around 2% of Brazil’s GDP in 2013, with three fatal deaths daily in motorcycle accidents alone. Mumbai, in addition to all-day road traffic jams, have an astounding six deaths daily from riders hanging and falling from packed trains which circulate with open doors to avoid reducing carrying capacity. The city comes to a standstill when the rail right-of-way is flooded by heavy monsoon rains. 

Access to jobs and basic services in both mega-cities is extremely difficult – particularly for the poor, who often live far from major employment centers. The two cities need to act quickly and take drastic measures to improve mobility and access... But this is easier said than done: expanding the transport infrastructure in these megacities requires careful planning, massive investment,  and may also involve relocating large numbers of people and businesses.

How should a city administration respond to the shared cab phenomenon?

Shomik Mehndiratta's picture
Follow the authors on Twitter: @shomik_raj and @cataochoa
 
Smartphone apps are bringing massive changes to the taxi industry in ways that urban transport has not seen in a long while. From the US to China and Latin America (Bogota, Mexico), taxi alternative services have attained an impressive level of penetration in a short amount of time, often with great controversy. Indeed, many cities across the world are struggling with what to make of these services and how to regulate them.

While we have not been significantly involved with such services thus far, a recently appointed mobility secretary in a big Latin American city has asked us for support on developing an approach to the shared taxi industry, as part of a "Smart Mobility" strategy for the city. In that context, we wanted to start a conversation on optimal strategies for cities to be able to welcome and foster such innovations, while still capitalizing on the opportunity to create value for its citizens.

Transit-oriented development — What does it take to get it right?

Chyi-Yun Huang's picture
Follow the authors on Twitter: @chyiyunhuang and @shomik_raj
 
A recent trip to Addis Ababa really brought the imperatives of transit-oriented development as a complement to mass transit investments home to us. As a strategic response to rapid urbanization and growing motorization rates, Addis is one of several African cities currently developing public mass transit systems such as light rail and bus-rapid transit. Similar initiatives are budding in Dar es Salaam, Nairobi, and other cities in South Africa.

It is well known that transit-oriented development, or ToD, is a high-value complement to mass transit development. Compact, mixed-use, high density development around key mass transit stations can have the dual benefits of creating a ridership base that enhances the economic and financial viability of the mass transit investment and compounding the accessibility benefits a mass transit system can bring to a city’s residents. This is not to mention the intrinsic value in creating vibrant social gathering places for communities at strategic locations.

Transport networks: Where there is a Will, There is a Way

Marc Juhel's picture
The transport sector contributes between 5 and 10% of gross domestic product in most countries, so the question of how to integrate transport networks for sustainable and inclusive growth is a crucial one.

And that is precisely one of the main topics that we discussed at the International Transport Forum in Leipzig during a session on Integrating Transport Networks for Sustainable Growth and Development. The panel also included Morocco’s Vice-Minister of Transport; the Head of Transport from the Latin America Development Bank (CAF), and the CEO and Chairman of the Management Board of Deutsche Bahn AG.

The first unexpected development happened when the moderator showed up with a fifteen-minute delay, having been trapped… in a Deutsche Bahn train stopped on the tracks between Berlin and Leipzig following an unfortunate encounter between a bulldozer and a catenary cable. To be fair, the incident had little to do with the quality of the railway service and was quickly resolved. That is what resilient transport is about.

Is Public Transport Affordable?

Julie Babinard's picture
When planning transport systems in developing countries, one of the main challenges is to evaluate the proportion of income spent by poorer households on transport as well as in understanding transport patterns in relation to residential location, travel distance and travel mode. High real estate prices in urban centers often force low-income households in developing countries to live farther out in the periphery, with consequences on the way urban agglomerations develop and with subsequent effects on the levels of motorization, congestion, local air pollution, physical activity and the expansion of urban poverty.

Replacing the car with a smartphone… Mobility in the shared economy

Shomik Mehndiratta's picture
Follow the author on Twitter: @shomik_raj
 

Photo: Sam Kittner / Capital Bikeshare
The sharing economy has been around for a long time. But recent technological advances like the development of real-time transactions through smartphones and credit cards have taken the potential of the shared economy to a whole new level, and opened the door for substantial changes in the way we think about urban mobility.

Recently, I was invited to join a panel on the sharing economy moderated by Prof. Susan Shaheen at UC Berkeley, focusing more specifically on shared mobility.

The panel acknowledged that shared mobility is already transforming the mobility landscape globally, but could go a lot further in increasing the sustainability of urban mobility systems. The panel identified a number of key research gaps that we need to pay close attention to if we want to create a policy environment that is conducive to mobility innovations. Three that I want to highlight are:
 
  • Supporting open data and open-source ecosystems is critical considering the tremendous potential of open-source software and data-sharing for improving transport planning, facilitating management and providing a better experience for transport users (for more detail, please see my previous blog on how the transport sector in Mexico is being transformed by open data)
  • Looking into shared-economy solutions for those at the bottom of the pyramid – solutions that don’t require credit cards and smartphones as prerequisites (see this blog on the bike-share system in Buenos Aires for a good example)
  • The world of driverless cars is coming – which, depending on how policy responds to it, could spell really good or really bad news for the environment: if such technology is used primarily in shared mobility scenarios, it could greatly reduce the environmental cost of motorized transport; on the other hand, the possibility of “empty trips” with zero-occupancy cars could exacerbate the worst elements of automobility (see Robin Chase’s blog in The Atlantic Cities for a great discussion on this). That is why it is critical to create a policy environment that appropriately prices the ‘bads’ of congestion, accidents and emissions while steering the world of driverless cars towards sharing and resource conservation.

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