About the International Transport Forum

The International Transport Forum at the OECD is an intergovernmental organisation with54 member countries. It acts as a strategic think tank with the objective of helping shape

the transport policy agenda on a global level and ensuring that it contributes to economicgrowth, environmental protection, social inclusion and the preservation of human life and well-being.

The International Transport Forum’s Research Centre gathers statistics and conducts co-operative research programmes addressing all modes of transport. Its findings are widelydisseminated and support policymaking in Member countries.

This research also contributes to the International Transport Forum’s annual summit, whichbrings together Ministers and leading representatives from industry, civil society and academiato engage in focused debate about strategies for transport in the 21st century.

The Presidency of the International Transport Forum rotates among member countries. Norwayholds the presidency in 2012/13. At the 2013 Summit, the Presidency will pass to France for2013/14. Past presidencies have been held by Finland (2008), Turkey (2009), Canada (2010),Spain (2011), Japan (2012).

The International Transport Forum was created under a Declaration issued by the Council ofMinisters of the European Conference of Ministers of Transport (ECMT) at its Ministerial Sessionin May 2006 under the legal authority of the Protocol of the ECMT (signed in Brussels on 17October 1953), and legal instruments of the OECD.

Further information at www.internationaltransportforum.org

About this CompendiumThis compendium of case studies on urban public transport funding was developped as an inputto the 2013 International Transport Forum Summit on Funding Transport (May 22-24, Leipzig).It serves to illustrate a variety of urban contexts, public transport service services and fundingmechanisms in a selection of International Transport Forum countries. It was jointly developedalong with the International Association of Public Transport (UITP). The compendium wasresearched and written by Haoran CHU (Ministry of Transport, China), Philippe CRIST (ITF),Sangjin HAN (Korea Transport Institute), Jérome POURBAIX (UITP) and Yuichiro KAWASHIMA(Ministry for Land, Infrastructure, Transport and Tourism, Japan).

Funding Public Transport for the Urban Century

Cities are tremendously and enduringly popular – at present more than half of theworld’s population lives in urban areas, many of them in very large urban conurbations thoughmedium-sized cities are growing rapidly as well. Despite, and possibly because of, crowding,more and more people are expected to move to cities in the years to come. The reasons forthis popularity are multiple and they generally involve reaping the benefits of agglomeration –e.g. wide access to jobs, opportunities, people and ideas. However, crowding can grow to thepoint where the benefits of cities are eroded by their dysfunctions – and nowhere is this clearerthan in urban transport systems. Congestion on roads and in public transport systems can growto intolerable levels reducing the ability for cities to deliver on their promise. No single modecan handle the mass of trips required for a city to function – especially at peak hours. However,because they can efficiently handle large masses of travelers, public transport systems, are afundamental component of successful cities. Providing these services comes at a cost and in thefollowing pages we review how a selection of urban areas meet this financing challenge.

What is clear is that no single financing model emerges, reflecting the great diversity oflocal situations and needs. It also appears that there is no silver bullet for the funding of publictransport and that combining funding from different sources increases the resilience of thesystem. These urban areas do face different tensions but nearly all find that ensuring the long-term financial stability of public transport operations remains challenging –which is true for alltransport modes. The particular challenges faced by public transport operators and authoritieslargely rest on the cost structure of providing public transport services and infrastructure andthe nature of the various mechanisms that ensure revenues, namely relying on taxpayers,users and beneficiaries. The economic outlook highlights a paradox: public transport plays avital role in keeping the economy running and supporting its recovery, but the funding of publictransport is affected by current economic circumstances.

Some urban regions, especially in large ones Europe and North America, have relativelymature public transport networks whose operation and upkeep requires significant revenue.Large, dense cities like London and Paris have been able to more-or-less keep up with costsand have deployed significant new services – but they have done so because of a large andgrowing customer base. This customer base is somewhat guaranteed via demographicdynamics, active land-use planning policies and other measures such as the London congestioncharge that ensure a sustained public transport market. Other cities like Chicago experiencemore difficulty and financial sustainability remains tenuous and has come in part at the cost ofasset-value sapping maintenance deferral.

The Asian cities covered in these case studies have had to, in the case of Tokyo, or arepresently in the process of building extensive regional rail-based public transport systems inorder to handle a huge influx of population. Early build-out of these systems in less-developedor developing urban zones ensures that land, labour and construction costs are kept relativelylow but even so, costs remain significant and are often much higher than projected. Early build-out also ensures that land development is channeled in corridors that can be supported byhigh-capacity rail services but achieving financial equilibrium may be elusive, especially untildemand grows. In some cases, cities are deploying high-volume bus rapid transport systems

Funding Public Transport for the Urban Century

and protected bus lanes to more rapidly and flexibly handle strong growth in some corridors,this is the case for Shenzhen and Beijing.

Fares generally do not cover the cost of providing high quality public transport servicesin the cities examined here. In some cases, fares are regulated in order to allow lower incomehouseholds to benefit from access to public transport and are not set at cost-recovering levels.For instance, social considerations played a key role in the setting of fare levels in Madridduring the last decade. This leads to a system of compensation payments made by authoritiesto operators which may be vulnerable to changes in scale and scope with the vagaries of publicfinances change over time. Public transport is a service to all travelers and one that thetravelling public generally is willing to pay for in return for quality – keeping fares artificially lowto meet equity goals may not be the best way to ensure the long-term financial performance ofpublic transport or to achieve social objectives as there are other more suited mechanisms todo so.

There seems to be a shared view that public transport services provide value to theurban region as a whole and this is reflected in several operational and capital fundingapproaches. On the assumption that employers benefit from efficient access to a large and widelabour pool, Paris and Portland have put in place a “benefiter-pays” approach that levies apublic transport tax on employers (and the self-employed in the case of Portland) on the basisof payroll mass. The allocation of the income of congestion charging to public transportimprovements, as it is the case in London, is also a way to acknowledge that car users benefitsfrom better traffic conditions thanks to public transport. The benefiter-pays approach is also(indirectly) evident in Chicago where a regional sales-tax increment helps to pay for publictransport operations. Paris and London derive revenue directly from employers via businessand office real estate taxes in order to cover the capital costs of system expansion. Thisapproach has been relatively successful but has the downside risk of being tied to regionaleconomic performance and in times of crisis, revenue shortfalls can be significant even thoughthe costs of public transport service provision remain nearly the same.

Tokyo is a special case where the largely private public transport operators areprofitable and only require grants from the government in exceptional capital investmentprojects. Nonetheless, fare revenues fall far short of covering the costs of service provision andTokyo-region public transport operators derive the lion’s share of their revenue frommaximising the return on their extensive real-estate asset base. In this business model, it isalmost as if the public transport network’s main purpose (from the operator’s perspective) is toensure an elevated and steady flow of customers to the operators’ shops, hotels, health clubsand other commercial undertakings. The funding model of large bus interchanges in Madrid isbased on similar assumptions. This of course has the added benefit of ensuring efficient andrapid public transport-based mobility throughout the urban region. Value-capture approachessuch as this one should be an integral part of the public transport financing equation.

None of the models presented here are universally applicable. Many are most successfulin very large and dense urban regions – the Paris model is not as successful in other cities inFrance and the same is true for the Tokyo model in other Japanese cities. However, many

aspects of these models can be implemented in other regions and, crucially, in fast-growingmedium sized cities. Successfully providing effective urban-wide public transport services willrequire cost-containment on the side of operators – this may mean focusing on improving thestandard and quality of bus services before investing in high-prestige but high cost railnetworks. It will also require developing a diversified and sustainable revenue base that allowsfor less-constrained fare-setting and reduces vulnerability to sudden and unpredictable changesin income.

National governments may play an important role in supporting resilient funding architecturesfor public transport by:

• Giving high priority and support to urban public transport investment programmes,(including well defined eligibility criteria and solid economic appraisal procedures);

• Strengthening institutional arrangements to improve urban mobility: empower localgovernments (notably by matching competences with resources) and enhance privatesector participation;

• Mainstreaming urban mobility in national economic and social policies and programmes – tooptimize mutual benefits;

• Integrating public transport into territorial planning and development policies - to reconcileconnectivity and sustainability;

• Supporting innovation in policy and technology – to support new public transport businessmodels, increase efficiency and attractiveness.

Note on Sources and data:

All land area, population and gross regional product were sourced from the OECD Territorial Development database on

Functional Urban Areas with the exception of Beijing and Shenzhen.

Sources:

• Beijing: Beijing Municipal Government and the Ministry of Transport, China.

• Chicago: FTA Transit database and CTA, Metra and Pace publications and annual reports.

• London: Transport for London publications and annual reports, UITP

• Madrid: Consorio de Transportes de Madrid, UITP

• Oslo:

• Paris: Syndicat des Transports Région Ile-de-France, RATP, SNCF, and French Ministry of Transport.

• Portland: FTA transit database and TriMet publications and annual reports.

• Seoul: Seoul Metropolitan Government and KOTI.

• Shenzhen: Ministry of Transport China and Shenzhen Municipal Government

• Tokyo: Ministry for Land, Infrastructure, Transport and Tourism, Tokyo Metrpolitan Government.

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and Natural Earth Modis 500 data

BeijingKeyNumbers

Beijing has grown tremendously in recent years now reaching apopulation of more than 20M people. At the same time, increasedwealth has led to higher car-ownership rates which have severelystrained the region's road networks with an estimated 5 million (andgrowing) cars. Every day more than 29M trips take place withinBeijing's 6th ring road (not accounting for walking)

To meet the challenges brought on by growth of travel demand, thecity has built about 240km of new metro lines since 2008. It has alsosought to develop multi-level bus services to match new travelpatterns. Crucially, the city has, like other large cities in China, soughtto relieve traffic congestion by actively managing car ownership via alicense plate lottery and implementing zone-based parking charges.

Dynamic growth and ambitious responses

Beijing capital region, China

BeijingModeshare(alltrips,2011)

Key ActorsGovernment

The national government is responsiblefor guiding the strategic development of

public transport including establishing publictransport laws, policies and standards,developing national public transportdevelopment strategies and planning andmonitoring the road transport market. Therehas been a general effort to prioritise publictransport in response to the rapiddevelopment of major urban centres. InDecember, 2012, the national governmentissued a position statement emphasisingpriority to be given to public transportdevelopment. Though authority for operatingurban public transport resides largely at themunicipal level, several National Ministries

and bodies of the central government play arole in public transport development. Theseinclude the National Reform andDevelopment Commission (NRDC) which hasa role in setting strategic priorities, theMinistry of Transport (MOT) which hasresponsibility for overseeing public transportoperations and the Ministry of Housing andUrban Development (MoHURD) which hassome responsibilities for building urbanpublic transport infrastructure. Actionsinclude the exoneration of purchase taxes fornew buses through 2015 and theimplementation of the National TransitMetropolis plan under the oversight of MOTthrough which 30 cities will receive grantsto develop public transport hubs, intelligenttransport systems and deploy low-carbon

excluding walking

public transport systems. The nationalgovernment has also approved theconstruction of multiple subway systemsthroughout China and the country boastsmore subway kilometres than North Americaand Europe together. However, severalsystems, especially in relatively smallercities, have struggled to achieve financialsustainability.

Municipal governments have overallresponsibility for the supply of transportservices throughout local administrativeareas. Specific responsibilities relating tourban railway or bus transport are allocatedto different departments such as theMunicipal Commissions of Development andReform, State-owned Assets Supervision andAdministration, Transport, Planning, financeetc. Though many municipal governmentshave sought to develop high-prestige (andhigh-cost) subway networks as noted above,several are now turning to bus rapidtransportation corridors as a lower-cost,high-volume public transport option wheredemand is insufficient to warrant subwaysystems.

Municipal Transport Authority

Beijing Municipal Commission ofTransport (BMCT) organises and

coordinates the supply of public transport inthe Beijing region. It sets priorities for anddevelops the overall plan regarding transportinfrastructure construction. It proposes theannual programme of transport expenditureand has responsibilities for management andsupervision. BMCT is also responsible for theimplementation and supervision of urban railand bus concession projects and proposestariff rates to the Beijing MunicipalCommissions of Development and Reform(BMCDR) which has responsibility for settingpublic transport fares.

Operators

There are two bus operators and twourban railway operators in Beijing.

Beijing Public Transport Holdings, Ltd. (BPT)is a state-owned enterprise responsible forbus system construction, operation andmaintenance. BPT operates more than 700lines and accounts for more than 13M tripsper day (95% share of all bus passengers).Beijing Xianglong Bus co., Ltd is also a state-owned company operating 25 lines andcarrying 630 thousand passengers per day.Overall, 68% of all public transport trips inBeijing are by bus.

Regarding urban railway transport, there arethree kinds of companies which respectivelytake charge of investment, construction andoperation, and these companies give rise tomoderate competition in construction andoperation. Beijing Subway Operation co., Ltdis a state-owned company that operates

Urbanrailstructure

Beijing

+63%growth in number of public transporttrips, 2006-2012

Funding

Beijing

391.5km of routes and 14 lines. Thisoperator carried 85% of urban railwaypassengers in Beijing in 2012.

The second urban rail operator, Beijing MTRCorporation (BJMTR), is a public-privatepartnership whose shareholders include BeijingInfrastructure Investment Co. Ltd (BII, 2%),Beijing Capital Group (BCG, 49%) and MTRCorporation (MTR, 49%). BJMTR isresponsible for investment in (and operationof) signal control systems, rolling stock, andother support systems. BJMTR will leaseaccess to subway tracks, tunnels andstructures from the municipal government.The private company will operate Beijing Metro

Line 4 and the Daxing Line whose combineddistance is 50.5km – these lines are expectedto carry about 15% of urban railwaypassengers. BJMTR also plans to develop non-rail sources of revenue from real estatedevelopment and commercial concessions instations. BJMTR’s initial concession for line 4and the Daxing line is for 30 years.

The only regional commuter rail line is line S2operated by the Beijing Railway Bureau. It hasa length of 77 km with 7 stations from citycentre to suburb and carried about 10 thousandpassengers per day in 2012 – including manyvisitors to the Great Wall in Badaling.

Operations

Limited information is available on thecost and revenue structure of urban

public transport in Beijing. Fares are not setaccording to market conditions andoperators incur substantial revenue-expenditure shortfalls for which they arecompensated from the government.

Beijing Subway Operation co., Ltd’s 14 linesall receive a subsidy except for the airportline. Payments are made by the municipalgovernment and are split into three partscovering operational losses, depreciation andgrants for equipment purchase.

Loss-covering payments also feature heavilyfor bus operations – in 2011, BPT’s totalfarebox revenue accounted amounted toonly 22% of total costs with the municipalgovernment making up the nearly USD2100M difference.

These payments are significant and are inpart due to low regulated fares. Municipal

governments have no dedicated transporttaxes and make these payments out ofgeneral revenues whose source is largelybased on land sales and other local sourcesof revenue. Sourcing general revenue fromland development rights poses a challengesince the release of new land fordevelopment will also ultimately increase thecost of providing public transport service atthe urban boundary.

Capital Investment

The region's total urban railway capitalinvestment budget was USD 30200M in

2008-2012. Urban rail investment projectsare implemented by the BeijingInfrastructure Investment Co., Ltd.According to municipal governmentguidelines, 40% of urban rail-related capitalexpenditures are to be covered by localgovernment sources with the remaining 60%covered via external financing, often throughspecial-purpose investment vehicles.

directly by the BMCT. BPT is responsible forthe actual construction and maintenance ofbus facilities.

Beijing

For bus facilities, the Beijing Finance Bureaufunds projects planned for by the BMCDR.Maintenance of bus facilities is paid for

Governance

Beijing has experienced tremendouspopulation growth in recent years which

has strained the road traffic system despiterelatively low (but rapidly rising)motorisation rates. In response, themunicipal government has set out anambitious congestion reduction plan whichoutlines 28 specific measures in four broadareas. These are the accelerated deploymentof new transport infrastructure, astrengthened priority for public transport inmunicipal plans and investments, a car platelottery system and improved trafficmanagement. Specific actions include theconstruction of three new subway linesextending the regional network by 36km,managing car ownership via a licence platelottery and putting in place a zone-basedparking price system. In 2011, the increasein car ownership had slowed to 4% and, forthe first time, the share of cars in all tripsdropped (by - 1.2%). Public transport nowaccounts for 42% of all trips in Beijing.These and other policies have had asignificant impact on congestion levels.Beijing recorded a 50% year-on-year drop inaverage daily congestion from 2010 levelsresulting in an daily average of 75 minutesless congested. Workday peak hour travelspeeds have also increased by 10% and13%, respectively in the morning andafternoon.

Public transport service

Whereas total travel (excluding walking)within the 6th ring road dropped by

1.1% in 2011, combined bus and subway

trips increased by 4.6% over the sameperiod – led by growth in subway travel(+18%). Most public transport trips inBeijing are by bus and and bus routecoverage is extensive -- 97.6% of the citycenter within the 3rd ring road was within500 meters of the closest bus station and85.2% of the city within the 5th ring roadhad the same level of coverage. Theextension of the separated bus lane network(324.5 km in 2011) has also contributed toincreasing average peak hour bus speed to9.9km/h. Bus operators have introducedseveral new bus services for commutingpassengers. Examples include rapid bussystems connected large residential areaswith busy business or financial districts andneighbourhood mini-buses feeding subwaystations in order to resolve the transportproblem of the last kilometre.

High levels of peak hour subway travel havelead to increasing congestion – the busiestline registered 50 000 passengers per hourat peak or a load factor of approximately150%.

Practice and Expansion of PPPs

Faced with significant new plannedinvestments, the Beijing region will likely

see new public-private partnershipagreements beyond BJMTR’s operatingconcession for subway line 4 and the Daxingline. In 2012, the Beijing municipalgovernment created a dedicated PPP-negotiating team which includesrepresentatives of relevant localadministrations including BMCT, BMCDR,Beijing Financial Bureau and the Office of

Opportunities & Challenges

Beijing

Legislative Affairs. This team completed itsfirst negotiation with an additional PPPagreement with BJMTR who will invest USD2,426M and in return will obtain part ofconstruction permission for subway line 14and its total operation concession for 30years.

Nonetheless, reaching the municipalgovernment target of a 664km subwaynetwork by 2015 will place considerablefinancial burdens on public transport actorsin the region -- even if this burden is shared

via PPP agreements. The overall cost ofmeeting the target has been estimated to beUSD 39,600M for the years 2012-2015 – oran average of USD 9,900M per year. In theperiod of 2010-2015, the government mayconsider greater involvement of equitysourced in open markets. Two existing linesmay be concessioned via PPPs (lines 6 and8) and three new lines (7, 16,Haidianshanhou) will involve some form ofconcession and private capital. The projectedamount of equity financing for future Beijingurban rail projects is USD 8,088M.

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org, CTA and Metra

ChicagoGreater Chicago region, USA

KeyNumbers

The Chicago region boasts an extensive rail and bus network that isone of the largest in the United States. This has helped mitigate thechallenges posed by lower density growth at the periphery of theregion by providing a strong backbone on which core regional officeand residential developments can be based. The rail network,especially the elevated metro, is ageing however and the region facesa considerable backlog in maintenance and infrastructure spending thatcompromises existing and future services. Financial sustainability hasbeen allusive as well and the current system based largely on fare andsales tax revenue will struggle to keep up with growing expenses.Regional authorities recognise these issues and are seeking strategiesto ensure long-term, high-quality public transport services in theregion.

Channelling development and managing anageing network

Key StatisticsChicagoModeshare(alltrips,2008)

Key ActorsGovernment

The State of Illinois provides somematching funds for public transport in

the greater Chicago region via the PublicTransit Fund (PTF) as well as compensationfor fare discounts mandated by State laws.Various levels of government are present inthe governing boards of operators and theRTA, whose board must be approved byeither the Governor or the Mayor of Chicago.

Regional Transport Authority(RTA)

The RTA is a planning, funding and oversightgovernment agency set up in 1974 in orderto oversee, coordinate and partially fund

public transport services in the greaterChicago area. RTA reviews, approves andadopts the annual budgets for the threeprincipal public transport operators in theregion. It also reviews the financial andoperational performance of these carrierswho have an obligation under Illinois Statelaw to collectively recover at least 50% ofoperating costs from farebox and othersystem revenues. RTA centralises anddistributes earmarked sales tax revenue tothe three regional carriers and operatessome grant programmes. RTA is governedby a board appointed from the six-countyregion.

Chicago

Chicago Metropolitan Agency forPlanning (CMAP)

CMAP, is the official regional planningorganization responsible for guiding

long-term transportation, housing, economicdevelopment, open space, environmentaland other quality-of-life issues. It does sovia the comprehensive regional plan -- GOTO 2040. CMAP also houses the regionaltransport metropolitan planning organisation– the MPO Policy Committee – thatestablishes regional project andprogrammatic priorities for federal transportfunds.

Operators

Operators have responsibility for the day-to-day operation of their respective

networks, including setting fares, andundertaking capital improvements under thecoordination of the RTA with input from theMPO policy committee.

The Chicago Transit Authority (CTA)

CTA is an independent government agencyand is the principal public transport operatorin the greater Chicago area. CTA accounts82% of all regional public transport trips(74% of all rail and 91% of all bus trips).The CTA service area covers the urban coreof Chicago and suburban Cook county.Compared to other regional operators, CTA’strips are shorter but include many non-worktrips. CTA is governed by a 7-member board,four of whom are nominated by the Mayor ofChicago and the remaining 3 by theGovernor of Illinois.

Metra

Metra was formed in 1983 to operate andcoordinate regional commuter rail servicesunder the oversight of the RTA. Metra’s 11suburban rail lines account for 11% of allregional public transport trips and 24% of illregional rail-based public transport trips.Metra owns tracks and operates trains on 4lines, operates trains on freight railroadoperators’ tracks for another 3 lines andcoordinates commuter rail services for anadditional 4 lines operated by freightrailroads on their own tracks.

Pace

Pace is the third-largest regional publictransport operator providing fixed-route bus,demand-responsive and van-pool serviceswithin and between the outlying counties inthe region and the urban core. Pace isgoverned by a 13-member board drawn frommunicipal government representatives.Other bus-based public transport operatorsalso provide some services within theneighbouring counties of northern Indiana.

$18.5billionestimated capital investment andmaintenance backlog

FundingThe financial viability of the Chicago

region's public transport networks hasremained fragile despite a relatively high (forNorth American cities) level of use. Publictransport governance and ownershipstructures have undergone several reformsand the financing framework has beenmodified several times (most recently in2008) in order to ensure a more sustainablefunding base.

For the region as a whole, farebox and otherself-generated funds account for the largestsingle category of revenue though thecombined revenue from local, state andfederal governments accounts for themajority of operational revenue. At present,the three main operators (CTA, Metra andPace) have four principal operationalrevenue streams. The first consists offarebox and other network-generatedrevenues which according to RTA rules mustaccount for at least 50% of the operators’collective operational revenue. The secondlargest source of funding is a regional salestax increment dedicated to public transport.This tax is allocated to operators by the RTAlargely according to formula. The State ofIllinois matches 30% of regional sales taxrevenue via the State Public TransportationFund (PTF). PTF funds are budgeted on anannual basis from general revenue which, inturn, is largely based on sales and incometaxes. The State of Illinois also directlycompensates operators for losses due tomandated reduced or free fare programmes.CTA benefits from a tax increment for realestate transactions levied in Cook Countywhich is also matched at 30% by the Statevia the PTF. Finally, operators receivefunding from the Federal government viaFederal Transit Administration (FTA)operational grant programmes, the largest of

which is the Urbanized Area Formulaallocation. FTA funds are set according to thenational transportation funding law –currently “Moving Ahead for Progress in the21st Century” (MAP-21) – which isprovisioned largely from a national trust fundthat centralises federal fuel tax revenue.

Key StatisticsChicago

Chicago

Nearly half of all 2011 capital funds forpublic transport development in the regioncame from FTA-managed capital grantprogrammes mandated under MAP-21.These funds are largely defined by formulaand ultimately come from federal fuel taxrevenues. Locally-raised capital (via taxes,bonds and other instruments) accounted for

the second largest source of capital fundingin the region. Nearly half of all capitalexpenditure went to purchase and upgraderolling stock in the region though there is asignificant and growing backlog of unfundedinfrastructure-related capital requirementsrelated to the old age of rail-based publictransport networks in the region.

Opportunities & ChallengesPublic transport service

CMAP’s regional development planforesees a nearly 30% increase in

population by 2040 which, under presenttrends, will considerably strain the region’salready congested roads. Public transportdevelopment, both in quantity and in quality,is seen as essential in order for the region togrow and retain its competitiveness with theregion’s US and global peers. In addition,present demographic trends towards anageing society highlight the need for anaccessible public transport network thatallows older citizens to remain mobile. CMAPdevelopment goals, though not mandatory,call for channelling future urbandevelopment into zones more easily coveredby public transport services. Operators,especially those under RTA authority, plan toincrease use of the existing system bydeveloping off-peak travel for leisure useand by enhancing customer experience viabetter service performance, technologyenhancements and customer information.Critically, however, no major new capitalinvestment projects are planned and muchof the focus will be on enhancing theservices provided by the existing but ageingnetwork.

Governance

The greater Chicago region does not havea single authority governing public

transport though the three main publictransport operators, CTA, Metra and Pace,are under the authority of the RTA. DespiteRTA oversight, the three main operatorsretain considerable autonomy which hasstymied operational and fare coordination todate. There is a recognition that customerswould benefit from a united public transportfront (in terms of fare structure and identity)and efforts are underway to improve thesituation. The Illinois State Assembly hasmandated that a universal fare collectionsystem be put into place for RTA operatorsby 2015. Already in 2013, CTA and Pace willintroduce a single fare payment card(“Ventra”) though fares themselves remaindifferentiated. Regional and public transportgovernance seems to be improving in theIllinois portion of the Chicago region butcoordination with public transport authoritiesand operators in the Northwestern Indianacounties abutting Chicago remains lessstrong, especially on a strategic level.

Financing continued services andexpansion

The Chicago area public transport railnetwork is among the oldest in the

country and has suffered from considerableunderinvestment in maintenance andupkeep. Furthermore, many of the region’srail and bus rolling stock are old, subject tobreakdowns and in need of replacement.Current capital expenditure falls short ofcovering normal maintenance andreplacement needs and does not evencontribute to reducing the RTA operators’estimated $18.5 billion capital investmentbacklog. New sources of federal funding inMAP-21 such as the “State of Good Repair”capital investment programme fall short ofneeds, especially as general transportationfunds allocated by the State of Illinois havebeen falling and sales tax revenue (a majorsource of operational funding at the Stateand local levels) has been under pressure

due to the economic crisis. It is not at allclear that the current funding model willallow the region to meet its public transportaspirations. Indeed, even under the mostoptimistic scenario (inflationary fareincreases, high ridership and sales taxgrowth), RTA operators will not avoid afunding shortfall by 2021 and under the basecase (no fare increases, business as usualsales tax and ridership growth), and RTAoperators will collectively face a $1.3 billionshortfall.

Innovative funding

There is considerable interest regardingthe potential for new funding

instruments to become a durable source offunding for regional public transport (e.g.road pricing, land value capture) but there isno mandate at present to put these intoplace and planning has not much advancedbeyond the discussion phase.

Key StatisticsChicago

Chicago

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and Natural Earth Modis 500 data

LondonKeyNumbers

London transformed the challenge represented by the expected fastgrowth in population and jobs in the next 20 years into an opportunityfor establishing public transport as key driver of economic developmentand attractiveness of the city. This opened the way to ambitiousprogrammes of development and modernization of public transport inLondon. This is supported by a combination of funding sources,involving not only users and different levels of government, but alsothe beneficiaries of improved public transport in London, as well asinnovative third-party funding arrangements.

Dynamic growth delivered by a leading authority

Greater London area, United Kingdom

LondonModeshare(alltrips,2011)

Key ActorsTransport for London

Transport for London (TfL) is theintegrated statutory body responsible for

London’s transport system. It came intoexistence in July 2000 as a result of theGreater London Authority Act 1999. It is afunctional body of the Greater LondonAuthority and reports to the Mayor ofLondon. Its role is to implement the Mayor’sTransport Strategy and manage servicesacross London, for which the Mayor hasultimate responsibility. It is directed by aBoard whose members are appointed by theMayor of London, who chairs it.

TfL is responsible for the planning, deliveryand day-to-day operation of the London’s

public transport system. It managesLondon’s buses, London Underground, theDocklands Light Railway, London Overgroundand London Tramlink. It also runs LondonRiver Services, Victoria Coach Station, andthe Emirates Air Line.

In addition, TfL regulates taxis and theprivate hire trade, runs London’s CongestionCharging scheme, manages a 580kmnetwork of main roads including all ofLondon’s 6,000 traffic signals, and promotescycling and walking initiatives. It also worksto improve road safety and encouragepeople to make sustainable travel choices.

London boroughs

The London boroughs are the highwayand traffic authorities for 95 per cent of

roads in London. They work in partnershipwith the Mayor to deliver the aspects oftransport strategy relevant to theirresponsibilities. They are required to developand implement Local Implementation Plansdetailing their proposals for carrying out thetransport strategy in their borough. TheBorough councils receive funding from TfLfor local transport schemes.

Note: The UK Department for Transport(DfT) has responsibility for national railroutes in London (except London Overgroundservices).

TfL operates some of the public transportservices under its responsibility throughsubsidiaries (e.g. London UndergroundLimited). The operation of other services isdelegated to private sector companies.

London

FundingTransport for London’s BusinessPlan

TfL’s Business Plan describes how it willimplement the Mayor’s Transport

Strategy and sets out sources of revenue tocover operating expenditure and financialcharges for the financial years 2012/13 to2014/15. The business plan also identifiessources of revenue to cover its capitalexpenditure over the same period. Thecurrent business plan is a departure fromprior ones and so we describe the currentplan and not previous ones here. Under theBusiness plan, Transport for London’sactivities are funded from six main sources.

Central government grants

The Transport Grant comprises aninvestment grant, which supports delivery ofthe investment programme, and a generalgrant, to support operating activities.Additional grants are also received from theDepartment for Transport, notably tosupport London Overground services.

Business taxes

TfL will receive a proportion of its fundingthrough a locally-retained share of London’sbusiness rates.

In particular, most bus services in Londonare run by private operators who have beenawarded a contract by TfL. All applicantshave to tender for any service they wouldlike to run. A small number of bus services inLondon are run commercially and are notpart of TfL's competitive tender process.

Serco Docklands operates and maintains theDLR network as part of a franchiseagreement.

Rail operations on national rail lines are alsorun by private train operating companies.

1millionnumbeer of jobs a Londoner canaccess in 45 minutes

London

Fares and congestion chargingscheme

The actual fares decision foreach year is taken by theMayor based on a number ofconsiderations, including theneed to ensure that fares makean appropriate contributiontowards the cost of operatingand investing in London’stransport services. The Mayorkeeps the level of theCongestion charge underreview, with changes beingsubject to consultation.

Prudential borrowing

TfL borrows from a variety ofsources, based onconsiderations such as the costof borrowing, marketconditions and the level offlexibility offered.

Commercial developments

TfL seeks to maximize incomefrom advertising and propertyrental and development, aswell as innovative new retaildevelopments. It also seekscommercial sponsorshipopportunities, building on thesuccess of existingarrangements such as BarclaysCycle Hire and the Emirates AirLine. TfL can also sell propertythat is no longer required foroperation.

TfL makes also use of thirdparty contributions for a variety of specificprojects.

London

Opportunities & ChallengesPublic Transport Service

London’s transport network is very busy,particularly during peak times, with

growth in population and employmentmaking conditions worse. Over the next 20years the city’s population is expected toincrease by almost one million people andemployment by more than 600,000 jobs.

Transport for London has many schemesunder way to address this challenge,including:

• Crossrail, which will deliver a 10 per centincrease in rail-based network capacityin London;

• A rolling programme of Tube upgradeswhich will provide more than 30 per centadditional capacity;

• The investment in cycling and walkingmaking alternatives to motorised travelmore desirable;

• Maintaining London’s bus services andintroducing the New Bus for London tomake boarding and alighting faster ;

• Addressing London’s road congestionthrough initiatives including the LondonPermit scheme, the Lane Rental schemeand traffic-light optimisation schemes.

In synthesis, Transport for London’sBusiness Plan addresses three broadrequirements for the city:

• Driving London’s employment andpopulation growth

It identifies the investment required toensure the city can reliably support theexpected increase in residents and jobsover the next 20 years.

• Putting customers at the heart of thebusiness

It ensuring that TfL’s investment is builtaround the requirements of itscustomers by providing a safe, secure,reliable service where personalised andconsistent customer service isparamount.

• Making life in London better for all

It creates an environment in London thatmaintains its position as the world citywhere people want to live, work andvisit.

Risks

Transport for London’s operations andongoing investment programme are subjectto a number of risks, including:

• The future performance of the economyand its effect on fares and secondaryincome. Weaker economic growth couldhave an impact on passenger demand. Afurther risk would be a sustained periodof high inflation or a marked increase inthe cost of borrowing.

• The need for continued grant beyond thecurrent Government settlement to2014/15.

• The £7.6bn of efficiencies and other costsavings up to 2017/18 that are assumedin the Business Plan. This includessignificant underlying initiatives involvingorganisational change and restructuring.

• Delivery of milestones set out in TfL’sSpending Review settlement to cost andtime.

• TfL’s plans to sell property and otherassets. These are dependent on marketconditions.

The Mayor introduced a Business RateSupplement in 2010/11 of two pence onevery pound. This tax increment will supportthe cost of servicing £3.5bn of debt raised bythe GLA, as well as providing a directcontribution to the project during theconstruction period.

The Mayor is also expecting to raise almost£600m in contributions from propertydevelopment, through a new Section 106policy implemented during 2010, as well asfrom the Community Infrastructure Levy tobe applied to developments across theCapital, primarily in central London andDocklands.

A total of £445m is expected to be raisedthrough sale of surplus land and propertydevelopments on top of the new stations.

• Unexpected events or acts of terrorismthat could have a larger impact that thereserves included in the Business Plan tocover such attacks.

Funding for Crossrail

Crossrail is the responsibility of CrossrailLtd, a wholly owned subsidiary of TfL,

and is jointly sponsored by TfL and the DfT.Crossrail is fully funded within TfL’s BusinessPlan. The remainder of the construction costwill be met by third-party finance, includingfrom Network Rail.

As part of the Spending Review, more than£1bn in project savings was identifiedthrough station and engineeringimprovements and the adoption of a moreefficient construction timetable.

London

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and Comunidad de Madrid

MadridKeyNumbers

After 15 years of fast development, which provided Madrid with a worldclass public transport network, new challenges lie ahead. The economiccrisis has called for adjustments in the funding mix – in particular farepolicy - and the close examination of alternative funding sources.Mobility management and the application of new technologies are partof the priorities of the Regional Government – both areas representopportunities for strengthening Madrid’s public transport businessmodel.

Delivering on ambitions despite austerity

Comunidad de Madrid, Spain

MadridModeshare(alltrips,2008)

Key ActorsConsorcio Regional deTransportes de Madrid

The Consorcio Regional de Transportes deMadrid (CRTM) was founded by the

Madrid Regional Government in 1986. As anautonomous body of the RegionalGovernment, the responsibilities of the CRTMcover the provision of public transportservices to the inhabitants of the entireMadrid Region and associated municipalities.Its board is made up of members from anumber of public and private bodies,including representatives from the Region ofMadrid, associated towns and municipalities,the Spanish government, private transportoperators, trade unions, and user andconsumer associations.

The CRTM has authority over bus, metro,and light rail services. It has no authorityover suburban train services, although thereis an agreement over the use of the TravelPass.

The functions of the CRTM include:

The planning of the public transportinfrastructures (metro extensions,interchanges, bus lanes, etc.)

The planning and coordination ofservices and programmes for theoperation of all transport modes.

The establishment of an integrated fareframework for the system.

The creation of a global image of thetransport system in which the CRTMleads the relation with users.

CRTM’s position as a regulating andcoordinating body helps create a stableframework for financing the Region ofMadrid’s transport services. It enters intoagreements and commitments withauthorities at different levels in order tomeet investment and operation fundingneeds which are not covered by farerevenues. In particular the “ContractProgramme”, signed between the GeneralAdministration of the State and the CRTM,determines the respective contribution of thenational government, the regionalgovernment and the local governments tothe funding of public transport operation andinvestment.

For its part, the CRTM must cover:

operating expenses and, as the casemay be, investment expenses of thepublic companies that are part of it;

railway concessions;

compensations to private suburban buscompanies;

travel on suburban railway lines madeusing Travel Passes.

Operators

The public transport system has variousoperating companies, both public andprivately-owned:

Metro de Madrid, S.A., which operatesthe underground system, is a publiccompany owned by the Region ofMadrid.

EMT, which operates bus services in thecity of Madrid, is wholly owned byMadrid City Council.

30 private companies operate thesuburban bus services.

Cercanías-Renfe, a public companydependent on the Spanish Ministry ofPublic Works, operates suburban railservices.

Transportes Ferroviarios de Madrid (TFM)is the company awarded the tender forthe extension of Metro line 9.

The company MetroBarajas, S.A.,concessionaire of the connection withinthe airport.

3 light rail concessionaires: Metro LigeroOeste S.A., Metros Ligeros de MadridS.A. and Tranvía de Parla S.A.

Madrid

100%number of bus and light rail stationsaccessible to all

FundingThe total costs of operating public

transport services placed under theresponsibility of CRTM were about 2,200million EUR in 2011. These costs were splitas follows (in 2010):

Bus, Madrid (EMT) 428M€ 19%Metro 944M€ 43%Suburban and regionalservices (bus, light railand commuter rail) 729M€ 33%CRTM operation 46M€ 2%Other 65M€ 3%

Required funding for public transportoperation in 2011 was covered by publictransport fare revenue (978M€ - 44%) andcontributions from public authorities(1,246M€ - 56%). The respectivecontribution of each level of government wasas follows:

City of Madrid 10%Region of Madrid 39%Central State 7%

The sources of funding for public transportinfrastructure development have includedthe Region of Madrid, the CentralGovernment, and the private sector throughinnovative funding schemes. Fundingarrangements are set out in successiveInfrastructure Plans.

The Metro and Light Rail Extension Plan2003-2007 included administrativeconcessions for the construction andoperation of some transport infrastructures,conferred to a successful bidder, for instancefor new Light Rail lines and an extension ofthe metro network. The Plan also included aprivate contribution from the land valuecapture generated by a new urban

development affected by the new transportinfrastructure, for example for the Parlatramway.

The Public Transport Infrastructure Plan2007-2011 aimed to keep the RegionalGovernment’s commitment to publictransport and to improve the integration ofMetro and Railway networks. The Planinitially included investments of 708 millionEUR for Metro extensions and 519 millionEUR for Railway developments.

The Madrid Suburban Railway InfrastructuresPlan 2009-2015 is a joint initiative of CentralState and Region of Madrid to upgrade railnetwork for Madrid with an initially expectedinvestment of 5,000 million EUR includinginfrastructure construction programmes (network extension by 115km, capacityenlargement, building of new stations) andprogrammes to modernize the networkbroken down as follows:

Network enlargement 2,950M€Capacity enlargement 620M€Stations and interchanges 650M€Network modernization andimprovement programmes 780M€Total 5,000M€

Finally, the Madrid Interchange Bus StationsPlan relied on an innovative approach for thefunding of the interchanges (cf. infra).

Public transport in Madrid is funded fromdifferent sources:

• Fares: most of the fare revenues arecollected by CRTM. Fares were kept at arelatively low level for most of the lastdecade. Some increases wereimplemented in the last years.

• The Region of Madrid covers a share of

Madrid

public transport operation expenditureand multiannual public transportinvestment plans.

• The Central State also covers a share ofpublic transport operation expenditureand supports investment, mainly insuburban railways.

• The City of Madrid, and to a lesserextent, other cities in the region cover ashare of public transport operationexpenditure.

• Private investors through concessionagreements.

• Revenue from land value capture.

• Collaboration with private companies,which support part of the infrastructurewhich connects to their activities’ area.

Private funding channels include:

• Administrative concessions forconstruction and operation of thetransport infrastructure conferred to asuccessful bidder, for instance for the

light rail lines in Sanchinarro, Pozuelo deAlarcón and Boadilla del Monte, themetro extension of line 8 to the newairport Terminal T4, and previously, theTFM concession of metro line 9 to Rivasand Arganda del Rey.

• a private contribution from the landvalue capture generated by a new urbandevelopment affected by the newtransport infrastructure. As examples,the Parla tramway or the extension ofmetro line 1 to a new residential areacalled PAU de Vallecas.

• Collaboration with private companies,supporting part of the infrastructurewhich connects their activities areas. Forinstance, Telefónica funded one stationof Metronorte, called Ronda de laComunicación.

Funds for rolling stock renewal come directlyfrom public operators.

Madrid

Opportunities & ChallengesInnovative funding :MadridInterchange Bus Stations Plan

Madrid has developed aninnovative model of public-

private partnership for the financingof large interchange stations, buildingon the successful experience of theAvenida de America interchange in2000. Under the Interchange stationsplan 2004-2008, four newinterchange stations were built with atotal budget of 369 million EUR.

These are 30 year concessions forthe construction and operation ofinfrastructures, which occasionallyinclude adjoining car parks, where

private partners recover theirinvestment by means of collecting afare from each regular bus passengerthat on or off at the interchange. Thisalso includes the operation of retailoutlets, advertising areas, vendingmachines, etc.

Madrid interchanges receivednumerous awards including the jointITF-UITP award for best innovation inpublic transport in 2010.

Mobility management and IT

After more than a decade of fast publictransport infrastructure development,

the Madrid Regional Government is now

issues. Another challenge is the introduction,by the end of 2013, of new public transportcontactless cards. Given constraints onpublic budgets, securing a sound financialframework for the whole system, seekingnew funding sources and partnership, arealso part of the challenges identified by theRegional Government.

Madrid

focusing on mobility management andapplication of new technologies to improvepublic transport provision. In this new stage,one of the main challenges identified by theRegional Government is the ModernizationPlan of suburban buses, involving more than2,000 buses in the Region, which wouldprovide high technological solutions forinformation, operation and coordination

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and MLIT, Japan

OsloKeyNumbers

Oslo has successfully taken up the challenge of increasing the modalshare of public transport in a fast growing region. The allocation of asignificant share of the revenues of the road toll to public transport,supporting both capital investment and operations, played animportant role in the rapid delivery of the public transport developmentagenda.

Commitment to public transport-led growth

Greater Oslo area, Norway

OsloModeshare(alltrips,2008)

Key ActorsThe responsibility for providing local

public transport services in Norway liesat the county level. Ruter AS is theresponsible public transport authority for theRegion of Oslo, made of the City of Oslo andthe surrounding County of Akershus. It isowned by the City of Oslo (60%) and theCounty of Akershus (40%).

Ruter AS is in charge of strategic planning,tendering, and awarding public transportservices, a well as coordinating the variouspublic transport services, includingscheduling.

Bus and ferry services have beencompetitively tendered since 1994. Local andregional bus services were provided by five

companies in 2009: Unibuss (privatelyowned) with 40% of the market, ConcordiaBuss (privately owned), Veolia in Akershus(privately owned), Norgesbuss (privatelyowned) and Netbus (state-owned companyowned by Norway’s national railway, NSB).Ferries are operated by the privately-ownedTide Sjø AS.

The metro and tram operations are awardeddirectly. The operator Oslotrikken (tram) andOslo T-banedrift (metro) are independentunits of the Kollektivtransportproduksjon AScompany which is owned by the City of Oslo.

Norwegian State Railway (NSB) isresponsible for the heavy rail network.

Oslo

FundingExpenditure on the operation of public

transport services under theresponsibility of the Ruter AS amounted toabout 710 million EUR in 2011. Thisexpenditure was split as follows:

Bus 276M€ 39%Metro (T-Bane) 146M€ 21%Tram (Trikke) 79M€ 11%Others costs (incl.RUTER AS operation) 210M€ 29%

Revenue sources to cover public transportoperation expenditure include:

Fare revenue 380M€ (54%)Olso City/Akershus reg. 236M€ (33%)Olsopakke 372M€ (10%)Others 19M€(3%)

Investment expenditure in local publictransport in the Oslo Region in 2012 was 184million EUR, including 127 million EUR fromthe Oslopakke 3 scheme (that is, about70%).

The funding of local public transport inNorway is the responsibility of the counties.Ruter AS coordinates the different sources offunding for public transport in the OsloRegion.

Public transport is funded through acombination of fare revenues, contributionsfrom public authorities at different levels,and support from the Oslopakke 3 scheme.

Fares are collected by RUTER AS. A commonelectronic ticketing system for the region,named Flexus, was introduced in 2009. Thefare zone system was simplified in 2011from 77 to 11 zones.

The City of Oslo and the County of Akershuscontribute to public transport operation andinvestment expenditure. The Central Stateprovides additional funding for infrastructureinvestment and as compensation forconcessionary fares.

The Oslopakke 3 scheme, based on the cartoll in Oslo, plays an important role in thefunding of public transport operation andinvestment in Oslo Region. The share of thecar toll revenues dedicated to publictransport has increased compared toprevious Oslopakke schemes. Anotherinnovation from previous Oslopakke schemesis that it contributes to cover part of publictransport operation expenditure. All in all,about 60% of the revenues of the Oslopakke3 scheme are allocated to public transport.

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and Natural Earth Modis 500 data

ParisKeyNumbers

The greater Paris region enjoys high levels of public transport services,especially for relations serving the core of the region. Networks arerelatively well maintained and a durable funding mechanism based onthe "benefiters-pays" principal -- the employers transport tax hasserved well to keep pace with increasing demand for services. Regionalgrowth patterns are changing and in response, efforts are being madeto better service periphery-to-periphery trips with a high qualitystandard of service. This will be challenging as the costs of developingthis new orbital network are significant..

High quality regional transport and newexpansion plans

Ile-de-France Region, France

ParisModeshare(alltrips,2010)

Key ActorsGovernment

No longer the dominant actor it once wasthe National government nonetheless

still sets national objectives for publictransport through the pluri-annualdevelopment framework contract itnegotiates with the region – the Contrat deProjet Etat-Region (CPER) which sets acommon programme for capital investmentand allocates funding responsibility betweenNational and Regional governments. TheNational government also remains the soleshareholder in the two main public transportoperators in the region – the RATP and theSNCF. In addition, framework laws governingor relating to public transport serviceprovision are set at the national level. Theseinclude the recent framework law on the

organisation and regulation of rail transport(ORTF) which sets out conditions forcompetition and ownership of rail-basedpublic transport in the Ile-de-France (IDF)region.

The Regional government has responsibilityfor coordinating the supply of transportservices throughout the region. Thisresponsibility has been delegated to theregional transport authority Syndicat desTransports d’Ile de France (STIF). Theregion negotiates the CPER with the Nationalgovernment thus establishing publictransport investment priorities and is alsoresponsible for the legally mandated regionaltransport planning document (Urban MobilityPlan – PDU) that guides land-use andtransport decision-making for subordinate

Paris

levels of government. Départmentalgovernments in the IDF region participate inthe governing board of the STIF and may set(and fund) public transport fare subsidies forlow income or other target populations.

Municipal governments elaborate local PDUswhich help define land use and transportconditions and establish goals relating topublic transport service provision. Localgovernments may also directly negotiatewith public transport operators to establishtarget service levels and coverage in theircommunity – especially as regards busservices. Paris is a special case as it hasbroader oversight powers and sits on thegoverning board of the STIF.

Regional Transport Authority (STIF)

STIF organises, coordinates and financesthe supply of public transport in the IDF

region. It defines general operational andservice level targets, sets fares andnegotiates performance-based contracts withpublic transport service providers. STIF alsocoordinates and helps set the regional publictransport infrastructure investment plan inconjunction with the national government. Inaddition to new infrastructure, STIF also co-finances with operators the purchase orrefurbishment of equipment, rolling stockand/or stations. In 2009, the ORTF law splitownership responsibilities for rolling stockand infrastructure between STIF and RATPwith STIF becoming owner the former. Thepresident of the IDF region sits at the headof STIF’s governing board which is composedof elected representatives of the Regionaland Départmental Councils, the Council ofParis, as well as from the regional chamberof commerce and a local grouping ofmunicipalities.

Operators

RATP (Régie Autonome des TransportsParisiens) is the historic public transport

operator for the city of Paris and is a state-owned commercial and industrial enterprise(EPIC). RATP carries 54% of all publictransport passenger kilometres in the region,principally via the underground metrosystem and RATP-operated regional rail.RATP enjoys a monopoly on existing Parisbus, metro, tramway and regional railservices though this is set to end in 2024(bus), 2029 (tramways) and 2039 (Metro).In line with the 2009 ORTF law, RATP ownsall of the infrastructure necessary to carryout its mission (rail lines, stations, buildings,etc.). Most, but not all, capital investmentprogrammes are coordinated with STIF andthe national government.

SNCF (Société Nationale des Chemins deFer), also a State-owned company, operatesmainly heavy rail-based public transportservices in IDF through its wholly-ownedsubsidiary Transilien. SNCF carries 40% ofpublic transport passenger kilometres in theregion. Also a monopoly, SNCF’s Transilienservices are set to be opened to competitionin 2039.

OPTILE is a grouping of 83 inter and intra-urban bus operators serving IDFcommunities outside of the city of Paris. TheOPTILE network accounts for 6% of all publictransport passenger kilometres in the regionbut 40% of total bus travel and 82% of thetotal bus network. Among the key busservice providers within OPTILE are bothVeolia and Keolis (a subsidiary of SNCF).

1/2public transport trip mode share insurrounding towns is one half that of Paris

FundingIn 2010, nearly 40% of the IDF region’spublic transport operating revenues came

from the “versement transport” – adedicated transport tax levied on employersand based on payroll mass. Fareboxrevenues accounted for another 40% -- thisincluded fares paid by passengers as well asrevenues from legally mandated travel cardreimbursements to employees by employers.It also includes social fare subsidies grantedby departmental governments. About halfof total public transport revenues are passedthrough the STIF. Local authoritiescontribute to STIF’s operational revenues onthe basis of statutorily set contributions,payments for covering non-profitable linesand contributions to cover fare subsidies forlow income and other vulnerable publictransport patrons. The national governmenttransfers some funds to STIF for schooltransport and, on an exceptional basis,covers some costs related to nationalmandates.

Disbursements are contractually set betweenSTIF and public transport operators -- RATPabsorbs half of STIF-disbursed operationalrevenues and SNCF another third leavingslightly more than 10% for bus operatorsoutside of the city of Paris. The IDF region’s2010 public transport investment budgetwas €2 188 M.

The IDF region’s 2010 public transportinvestment budget was €2 188 M. Nearly60% of the budget came from self-financingoperations/loans and an additional 14%came from the regional transport authority –this contribution largely sourced from non-recurrent reserves and the 50% share ofroad traffic fines the region receives.

Investment requirements are set to increaseas the region seeks to catch up for under-investment in past years and as it embarkson an ambitious capital investment plan. Theregion foresees an investment of €7 Billion

2010PTfunding,IDF

Paris

Opportunities & ChallengesPublic transport service

Ile-de-France generally enjoys a high levelof public transport accessibility. Thesupply and quality of service is mostelevated within the city of Paris and onroutes leading to the core of the region.Service quality drops off in the peripherywhere lower density and more dispersedsettlement patterns complicate the task ofproviding public transport. A result of historicurban and planning policies, the currentParis-centric model is currently being testedby rapid development at the periphery of theregion and a rise in new mobility patternsthat are centred on urban areas outside ofthe city of Paris. This gives rise to a dualneed to reinforce traditional radial links tothe centre to accommodate populationgrowth and answer the growing demand fortrips between and within peripheral urbanareas. Significant capital investments – morethan €34 billion by 2030 -- will be requiredto meet these dual challenges and ensurehigh service quality.

Governance

The IDF region has a single authorityresponsible for setting public transport

service objectives, negotiating servicecontracts with operators and setting tariffs ata regional scale. Authority and responsibilityfor delivering public transport services in theIDF region are clearly defined and

established within a robust regulatoryframework – at least in theory. Though thenational government has largely withdrawnfrom the direct management of publictransport in the region, it retains asignificant role as the sole shareholder in thetwo main historic operators (SNCF andRATP). Tensions between these operatorsand the STIF -- where regional and localauthorities preside -- remain as was seen inthe recent re-negotiations of public servicecontracts between STIF and SNCF and RATP.They are also evident in the development ofthe Grand Paris Express plan – especially asnational and regional governments weregoverned by different political parties.Advances have been made to better definethe responsibilities of all actors – e.g. as inthe recent allocation of rolling stock to theSTIF and infrastructure to operators -- andthe STIF and operators have ultimately beenable to achieve important compromises onrisk-sharing for new investments.

Financing continued services andexpansion

The ultimate burden for funding publictransport operations in the IDF region

has principally fallen on those that benefitfrom the supply of extensive and high qualitypublic transport services - e.g. employersand public transport users themselves. Thefunding set-up also has encourages publictransport use via mandated employer

Paris

from 2012 to 2017, much of it for tramways.An additional investment of €24.5 billion. hasbeen announced in the context of the “GrandParis Express” project which calls for theconstruction of 200km of extended or newrail and Metro lines linking 72 new stationsmeant to reinforce connections amongst

peripheral growth centres. Most of the newfunding will come from a re-allocation ofexisting tax-based revenue streams –principally tax on office space. A small shareis expected to come from increasedgovernment contributions.

reimbursement of travel cards. Sources ofoperational revenues are diversified whichreduces exposure of revenue streams tochanges in the priorities or fundingcapacities of public authorities. Revenuesare, however, vulnerable to a drop-off ineconomic activity (which impacts transporttax revenues via a drop in employment). Thetransport tax may also represent a burden toemployers in times of crisis.

The current funding model is at risk undernew demands for improving existing services(new rolling stock, frequencies, IT services,etc) and to make up for years ofunderinvestment. This has led STIF to seekfunding on equity markets for the first timein 2012. There is concern that the monopolyposition of RATP and SNCF will slow effortsto realise productivity gains that couldmoderate funding requirements. The capitalexpansion plan underpinning the Grand Parisis set to be met mainly via the re-allocationof the office space tax (ultimately paid byemployers). However, large-scaleinfrastructure projects such as the GrandParis often go over budget and it is not clear

what additional revenue sources could bemobilised should this happen here.Ultimately, National and Regionalgovernments may have to increase theirparticipation should this happen.

Innovative funding

The transport tax was an innovation whenit was first introduced in 1971 though it

remains largely unique to France. Aproposed project to establish a direct rail linkbetween Charles de Gaulle Airport and Parisis also an innovation, at least for Paris, inthat it is planned tobe built without anygovernment aid or subsidy. Finally, the Cityof Paris has developed several innovativefunding schemes for quasi-public transportservices – the first being the Velib publicbicycle sharing network financed largely viaadvertising spaces that complement usercharges. Another innovative funding schemeis the Auto’lib station-based electric car-sharing service established public serviceconcession and financed solely by theoperator on the basis of user charges.

Paris

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org, Natural Earth Modis 500 data and TriMet

PortlandKeyNumbers

Portland has built its reputation as one of the most liveable cities inNorth America. Innovative public transport funding and the creation ofa regional light rail system and an extensive bicycle network have beenthe hallmarks of sustainable transport in the Portland region. However,Portland is facing a challenge of how to overcome financial constraintslinked to the economic crisis to maintain this system. Ensuringcontinued cost recovery despite a downturn in the regional employer-generated tax revenue and escalating pension and labour costs willrequire renewed effots from the regional government in coming years ifPortland is to retain its lead position.

Renewed efforts required to maintain leadership

Greater Portland (OR) region, USA

Key StatisticsPortlandModeshare(alltrips,2011)

Key ActorsGovernment

The Federal Transit Administration (FTA)of the US Department of Transport

provides financial assistance, managesapproved grants, and provides technicalassistance, oversight and information forpublic transport. FTA programmes includethe New Start Program, which providesfunding for new rapid transit projects as wellas for rehabilitating existing lines, and theJob Access and Reverse Commutesprogramme which provides funding to assistthe poor in accessing jobs in underservedcommunities. FTA also provides operatingsubsidies to public transport agencies andoperators in areas with a population of fewerthan 200,000.

The Oregon State Department ofTransportation helps with state-wide publictransport planning via its Public TransitDivision (PTD). This division undertakesstate-wide coordination and planning forpublic transport services, provides educationand technical assistance to localcommunities regarding public transportservices and operations and helps coordinateaccess to various state and federal fundingstreams.

Metro

Metro is the elected regional governmentfor the greater Portland area and is

also the designated Metropolitan PlanningOrganisation (MPO) in charge of strategic

and capital investment planning for transportand is responsible for land use planning inthe region. It assists in the improvement ofpublic transport services via facilitatingintegrated land use and transport planning.MPO staff work with urban public transportoperators to provide planning and technicalassistance. In addition, Metro may uselocally-controlled Surface TransportationFunds (STP) to finance public transportcapital needs in the region. Metro prioritisesprojects and programmes to be funded withFTA funds via the regional MetropolitanTransportation Improvement Program.

Oregon Transit Association

The Oregon Transit Association (OTA) is anon-profit association whose membership ismade up of public, private for-profit andnon-profit public transport operators, andpublic transport industry providers such asequipment suppliers. The association’smission is to assist members in thedevelopment and improvement of efficient,safe, and convenient transportation services,techniques, methods, facilities, andequipment. The Oregon State Public TransitDivision Administrator is a voting member ofthe OTA Board.

Operators

TriMet

TriMet is a municipal corporation providingtramway, light rail, commuter rail and busservices in the urbanised areas of the tri-county Portland metro area. It has broadpowers to provide public transportation inthe district. It levies an employer payroll taxand as well as a tax based on net earningsfrom self-employment and can issue and sellgeneral obligation and revenue bonds.

Other regional operators

Several other operators provide publictransport services in the greater PortlandTri-county area;

C-Tran, Clark County Washington’spublic transit provider, has 26 busroutes, C-Van curb-to-curb service forpeople who cannot access regular routeservice, carpool and vanpool services, abike and bus program and more.

Canby CAT offers fareless, fixed routeservice six days a week, flag stops, ADA-accessible buses, bike racks on allbuses, and a lift available for qualifiedapplicants.

SMART provides bus service in theWilsonville area and passengers ride forfree! SMART Options program providesfree assistance to employers in settingup transportation programs.

Ride Connection is a non-profitorganization offering assistance topersons with disabilities and seniorcitizens in Clackamas, Clark, Multnomahand Washington counties.

Sandy Transit offers fareless fix routeservice six days a week, flag stops, ADA-accessible buses, bike racks on allbuses, and a lift available for qualifiedapplicants.

There are also some shuttle servicesproviding express connections betweenneighbouring communities and Portland.

Portland

+4.8%growth in public transport passengerkilometres of travel, 2005-2011

FundingOperation Funding 2011 (TriMet)

TriMet is both the principal publictransport operator in the region as well

as the regional government with taxationauthority. The TriMet operational budget islargely paid for via a payroll tax similar innature to that in place in the Paris region.Employers pay a portion of their employees’gross wages to TriMet (7.02USD per1,000USD). Self-employed workers mustalso pay this tax which is calculated on theirearnings. Farebox revenue accounts for25% of the total operation funds. Combinedpayroll tax earnings and farebox revenuesmake up TriMet's directly generatedrevenues which cover 86% of operationalexpenditures. The remainder issupplemented through FTA-administeredgrants and local sources.

Capital Funding 2011 (TriMet)

Three-fourths of TriMet’s USD 114.5million capital expenditures in 2011 were

paid for by the State of Oregon via specialpublic transport capital grants. These grantscovered the extension of light rail and tramroutes and the cost of new and refurbishedrolling stock. Remaining funds came fromFTA grants at the federal level (11%) andlocal governments (14%).

Key StatisticsPortland

Portland

Opportunities & ChallengesChallenges

Portland has been recognised as one ofthe leading cities in USA in terms of the

quality and use of its public transportnetwork. People in the Portland area usepublic transport more than in many largerUS cities and public transport ridership hasgrown faster than both population and carvehicle kilometres travelled.

Nonetheless, the recent economic crisis hasplaced burdens on regional public transportoperators – especially as the payroll taxwhich constitutes their principal source ofrevenue has been vulnerable to theslowdown in economic activity. This had ledto cutbacks including the cessation of a fare-less public transport service in the heart ofthe city – the “Fareless Square”programme. While the provision of freepublic transport in the epicentre of the citywas seen as innovative and arguablyboosted overall ridership, it was no longertenable in light of decreasing revenues andsustained costs. Monitoring the financialeffects of the discontinuity of this free-rideservice should provide useful lessonsregarding the impacts of fare-less publictransport services.

Pressure also stems from a reduction in theamount of formula disbursements given bythe FTA local public transport operators.TriMet is expecting a reduction of thisfunding by up to 4 million USD in fiscal year2013 which may require an increase in faresas well further internal cost-savingmeasures. Implementing the latter are seen

as a core part of the systems long-termfinancial viability, especially as regardslabour costs and pension which are set toincrease significantly in coming years.

Opportunities

The region will is expected to grow by afurther one million new residents in

coming years according to the Region 2040Growth Concept, a long-range plan in themetropolitan area adopted in 1995. TheRegional Transportation Plan sets out anaspirational goal of tripling the combinedpublic transport, walking and cycling modeshare by the end of the plan period. Thisobviously requires an increase in publictransport services, but the increase was lessthan half way to the goal from current levels.Achieving this mode share is also importantfor the region in order to meet thegreenhouse gas reduction target is imposedby the Metropolitan Greenhouse GasEmission Target Rule.

There is a call for housing development to belinked to public transport development andnew cycling and walking infrastructure inorder to ensure that the projected populationgrowth does not swamp the roads and erodePortland’s competitivity. TriMet’s 2012Transit Investment Plan calls for theexpansion of pedestrian and bikeinfrastructure to increase overall connectivitywithin the community. It also calls for zoningregulations that promote transit-orienteddevelopment (TOD) in the implementation ofregional development plans.

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org, Natural Earth Modis 500 data and Seoul Metropolitan Government

SeoulKeyNumbers

The Seoul Metropolitan Area accounts for approximately half of theRepublic of Korea's total population and produces half of the country'seconomic output. The city of Seoul itself is surrounded by several citiesof a million or more inhabitants, including Incheon, Suwon, andSeongnnam. Collectively, these cities make up the Seoul MetropolitanArea.

The Seoul Metropolitan Area is well served by public transport includingan extensive subway network, regional rail services and bus routes.The region has been particularly innovative with the latter and is wellknown for its pioneering bus services. These include median bus lanes,e-ticketing with credit card and a successful real-time bus informationplatform that allows, for example, customers to reserve bus seats orcall on-demand buses to their location.

A region meeting challenges with innovation

Seoul Metropolitan Area, South Korea

SeoulModeshare(alltrips,2010)

Key ActorsGovernment

The national government is responsiblefor developing a national public transport

master plan and monitors local publictransport policy. The central government canfund public transport infrastructure projectsincluding urban railways and Bus RapidTransit (BRT) at the local level. The nationalgovernment also plays a central role inimproving interchangeable public transportoperation through its funding support for thenational public transport card. However,most large-scale public transport projectsare initiated and managed by the SeoulMetropolitan government.

The Seoul region has a Metropolitan

Transport Association (MTA) consisting oflocal governments including tose of Seoul,Gyeonggi, and Incheon. This associationmainly coordinates conflicts between localgovernments related to public transportpolicy including conflicts regarding routelocation and fares. The association haslimited authority and not all conflicts aresatisfactorily resolved by the MTA leading tofrequent arbitration by the nationalgovernment.

The Seoul municipal government owns publictransport-related infrastructure includingurban railways BRT corridors and has ageneral responsibility for the constructionand management of public transportsystems. Management and operation of the

excluding walking

Seoul

Seoul metro and some urban railways arecarried out through special-purposecorporations that are wholly owned by themunicipal government. Bus services, on theother hand, are almost all operated byprivate companies under public servicecontracts with local governments. Thesecontracts set conditions for routes, frequencyand the number of buses. Local governmentscompensate private operators for operationallosses as determined by contractarrangements.

Both national and local governments haveprovided some assistance to private busoperators in order to purchase low-emissionand low-floor buses.

Operators

Seoul Metro (SM)

Seoul Metro operates subway lines 1, 2, 3,and 4 covering 137.9km with 120 stations. Itwas first established in 1981 and is whollyowned by the Seoul municipal government.Seoul Metro transports 4 million people dailyaccounting for 45% of total subway riders.

Seoul Metropolitan Rapid Transit (SMRT)

SMRT operates the most extensivemetropolitan subway system in Korea. Itruns subway lines 5, 6, 7, and 8 covering152km with 148 stations. It was firstestablished in 1990 as a separate entity fromthe then-sole operator, Seoul MetropolitanSubway Corporation (now Seoul Metro) inorder to introduce competition betweenmetro operators. SMRT is also wholly ownedby the Seoul municipal government. It nowserves for 2.7 million passengers daily.

Seoul Metro Line Number 9

The most recent Seoul subway line, linenumber 9, was developed as public-private

partnership in 2009. The private operator isresponsible for the management andoperation of this 25.5km metro line.

Other regional rail operators.

Other urban rail operators in the Seoulregion include the national rail company,Korail, which operates approximately 270 kmof regional rail services within and beyondthe larger Seoul area. Korail also is aprincipal shareholder in the 58km IncheonInternational Airport Express (AREX)connecting Incheon airport to central Seoul.Incheon city also has its own Metro lineoperated by municipally owned company.Three other operators – NeoTrans, YonginRapid Transit and Uijeongbu light rail areresponsible for another 60 kilometres ofroutes.

Association of Seoul Bus Operators

There are 66 private bus operators serving409 routes in the Seoul metropolitan area.These buses are divided into four categoriesaccording to the type of route they serve andthe service they provide. These categoriesare: Trunk Line Buses, Feeder Line Buses,Inter-City Rapid Buses, and Circular LineBuses. Operators share revenues by being amember of the Association of Seoul BusOperators. Bus operators can openly bid fornew routes. The Seoul bus system is ineffect a quasi-public service since, in returnfor carrying out public service contracts, busoperators are supervised by local authoritiesand may receive payments from theseauthorities to cover operational deficits.

42minutes

average commute time

Seoul

FundingSeoul Metro

Seoul Metro’s 2012 total operatingexpenditure was €851M whereas total

revenue was €735M, 83% of this comingdirectly from fares. To cover up the €116Mshortfall (14% of total expenditure), SeoulMetro issues public bonds and borrowsmoney from the public funds of SeoulMetropolitan government. Details of thebreakdown of these funds are not publiclyavailable.

Seoul Metropolitan Rapid Transit(SMRT)

SMRT’s 2012 revenues of €394M (97%coming from fares) generated an even

greater shortfall than Seoul Metro since 2012expenditures were €650M. To make up the€256M difference (39% of totalexpenditure), SMRT received subsidies of€38.4 from both national and metropolitangovernments and issued €47.8M worth ofpublic bonds. SMRT borrowed the remaining€169.7M.

Metro Line 9

Though Metro line 9 is operated by aprivate operator under a PPP agreement

with Seoul Metropolitan government, thereare some concerns over increasingcontractualy-stipulated loss-recoverypayments made by the municipality to theoperator to cover up the difference betweenthe expected fare revenues and the actualfare revenue in practice.

Bus Operating Costs

There is no official data regarding busoperating costs in the Seoul region.

According to some recent estimates though,total revenues of bus operators were around€754M in 2009. Direct farebox revenuesaccounted for €724M and an additional€17.5M came from advertisement. Localgovernments distributed about €8.8M ofcentral government revenue to help coverfuel costs. According to these figures,operator-generated revenues accounted forapproximately 97% of operating costs butthese data seem to lump together loss-covering subsidies from Seoul Municipalgovernment within fare revenues. Theseloss-covering payments made to operatorsare set according to standard guidelines.According to these, in 2009, SeoulMetropolitan government spent €193M tocover bus operator losses. These paymentsaccount for about 27% of fare revenues, andthus 26% of total revenues.

Capital Investment

Current plans call for the expansion of theSeoul metro. The construction of the 3rd

phase of Metro 9 (9.14km) is underway andis budgeted at €747.5M by 2016. Thesecosts are bourne by the private operator andinvestors as covered in the terms of thepublic-private partnership. Another public-private arrangement is helping to finance the€431M required for the construction of alight rail link between Ui and Sinseol(11.4km) which is set to be completed in2014.

According to the Seoul region’s PublicTransport Master Plan (2012-2016), theSeoul Metropolitan government is planningto invest €33.5M to subsidise the purchaseof low-floor buses, €3.5M for thedevelopment of a Public Transit Mall, and€29.8M for development of the IT-based BusInformation System.

Public Transport Service

Public transport in Seoul is well used asreflected in its high modal share.

Nonetheless, concern for system-wideefficiency and revenue-generation has led tosome calls to reorganise the overalloperational system --particularly for buses.One issue is that there is considerableoverlap between some bus and metro linesleading to revenue erosion for all operatorsconcerned. Additionally, the concessioningsystem for bus services seems not to favournew entrants or competition as it rare to seenew operators despite years of competitivebidding. Most long-distance bus operatorsare suffering from insufficient farebox-revenues due to fares being set too low bylocal governments. Changes in growthpatterns and a continuously-spreading urbanregion is leading to changes in publictransport service requirements. For instance,demand for long-distance bus serviceslinking central business districts in Seoul tosatellite cities is on the rise as populationincreasingly settles at the edge of the urbanarea. This trend has seen a rise in popularhigh-quality long-distance bus services, e.g.the ‘M bus’ which guarantees seats onceboarded and allows fast access to centralSeoul (maximum 6 stops for all routes).

Governance

Co-operation between different localgovernments in the Seoul Metropolitan

area has allowed the introduction of anintegrated fare-revenue sharing system. MTAhas worked to coordinate the establishmentof the system but some have pointed out

that its powers are too limited to effectivelycoordinate conflicts between different localgovernments. In effect, MTA does not havekey functions such as taxation powers,budget allocation oversight responsibility foroperators , direct route or servicecontracting with operators, etc. required tobe an effective co-ordinating organisationThese functions are the responsibility ofindividual local governments. As such, MTAhas largely been engaged in arbitratingconflicts between operators over fares,routes, and frequency. Even here, centralgovernment intervention has often beenrequired to reach agreement. The lack of astrong public transport organising authoritywill likely continue unless currentinstitutional arrangements are reformed.

Innovative Funding

Seoul Metropolitan government imposes acongestion charge in one tunnel which

connects the central business district withthe southern business district. It also leviesa traffic inducement charge to owners ofcertain large scale buildings, which are likelyto generate high volumes of traffic. Theserevenues are used to improve publictransport facilities and services.

Recently, on-demand bus services havebeen introduced in the region. This is aspecial service for commuters betweencertain satellite cities and Seoul which allowstravellers reserve their seats online. Thisnew service requires no further outlay fromoperators and may allow the latter to tapinto new high-value markets.

Seoul

Opportunities & Challenges

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org and Natural Earth Modis 500 data

ShenzhenKeyNumbers

The Pearl River delta, including Shenzhen, will eventually make up oneof the world's largest metropolitan areas harbouring over 40 millionpeople. Accommodating that growth while enabling a high level ofmobility and access requires early action on the part of authorities toensure that high-quality regional public transport is in place to helpchannel this growth. For this reason Shenzhen has, like many otherlarge Chinese cities, embarked on an accelerated subway developmentphase. This is expensive, requires new funding models and cost-recovery may be elusive in early phases but the potential pay-off maybe large. Shenzhen is also ensuring the continued development ofprotected bus lanes and regional bus systems to help orators delivercompetitive bus services though low fare mandates imply significantcost-recovery payments from the municipality to cover losses.

Managing fast growth in a mega-region

Beijing capital region, China

ShenzhenModeshare(alltrips,2008)

Key ActorsNational government

The national government is responsiblefor guiding the development of public

transport, including laying down publictransport laws, policies and standards,issuing national public transportdevelopment strategy and planning,monitoring road transport market etc. Manyefforts have been made on priorities ofurban public transport. The nationalgovernment issued guidance of urban publictransport priority in December 2012 andcarried out a policy of relieving purchasetaxes of bus by 2015. In addition, a big planwas proposed by Ministry of Transport tocreate National Transit Metropolis and it willselect thirty cities, given the subsidies on

transport hub, intelligent transport systemand low-carbon public transport.

Regional Government

Plans have been announced to merge thecities of the Pearl river delta –

Dongguan, Foshan, Guangzhou, Huizhou,Jiangmen, Shenzhen, Zhaoqing, Zhongshanand Zhuhai – into one mega-urban region.This conglomeration will cover 14,000 squarekilometres and have a population of 42million. It will cover much of China's dynamicmanufacturing zones in Guongdong Provinceand include several of the world's largestcontainer ports. Regional transport networksbased on 29 inter-city rail lines will help theurban hubs connect to each other and to

excluding walking

Hong Kong. Some cities, such as Shenzhen,are already anticipating regionaldevelopment plans by building out subwayand bus rapid transportation corridors tohelp channel future growth. At this stage, itis not clear what role the regional mega-citygovernment will play in the organisation andfunding of public transport networks andservices.

Municipal Government

The Shenzhen municipal government hasthe overall responsibility for the supply

of transport services throughout theadministrative areas. Specificresponsibilities relating to urban railway andbus transport have been allocated todifferent local commissions such as MunicipalCommissions of Development and Reform,State-owned Assets Supervision andAdministration, Transport, Planning, financeetc. In 2008, the municipal governmentissued guidance regarding the subsidies tobe made to concessioned bus operatorswhich clearly and transparently delineatesfinancial operating conditions for buscompanies, including the calculation of loss-covering payments to operators by theMunicipal government.

Municipal Transport Authority

The Shenzhen Municipal Commission ofTransport (SMCT) organises and coordinatesthe supply of public transport in theShenzhen region. It defines the generalplanning of public transport infrastructureconstruction, proposes the annual

programme of public transport expenditureand implements management andsupervision. SMCT is also responsible for theimplementation and supervision of urban railand bus concession projects.

Operators

There are three major Bus operators andtwo urban railway operators in Shenzhen.

Shenzhen Metro is a large state-ownedenterprise, responsible for urban railfinance, construction, operation andmaintenance, etc.

Shenzhen MTR Corporation is a privatepartnership which is grantedconstruction and operation rights for anurban railway system via a Build-Operate-Transfer (BOT) arrangement.

Shenzhen Bus Group is a large state-owned enterprise with a long historywhich is mainly responsible for theoperation of bus services It owns 318bus lines accounting for 5022 km ofroutes. It accounted for 50% of regionalbus transport in 2010.

The other two bus companies also arestate-owned enterprises in charge ofanother half of the passenger volume.

Shenzhen

33.5milliontrips per day, 2011

FundingLittle information is available regarding

the operational budget of Shenzhensubway operators. Shenzhen Metro mustreport on its financial performance –including operational losses to be covered bygovernment subsidy -- to the local State-owned Assets Supervision andAdministration Commission but these reportsare not publicly available. The same is thecase with Shenzhen MTR.

Rules regarding loss-covering payments bythe municipality to bus companies arerelatively more transparent. In 2010, SMCTalong with the Shenzhen MunicipalCommission of Finance issued rules relatingto the financial evaluation of concessionedbus operators. These rules include reportingrequirements for operators and set out theterms of government subsidies to the latter.These are set such that operators areguaranteed a 100% coverage of theiroperating costs plus an additional 6%operating profit (that is, if an operator'srevenues are below operating costs, thesubsidy will cover the total operating lossplus an additional 6%). If operators return aprofit on operations (e.g. if revenues are

greater than costs), then the governmentretains 70% of the operating profit abovethe aforementioned 6%. These profit-guarantee subsidies are in addition to othersubsidies relating to fuel, low farecompensation, etc.

In 2011, the total amount of total subsidyfrom the Municipal government to busoperators was 7 billions USD broken out asfollows:

Fuel USD2.1 billionFare compenation USD1.1 billionProfit garantee USD3.6 billionOther payments USD0.2 billion

The first five lines (178km) of the ShenzhenMetro network cost USD 139.4 billion tobuild, USD 9.7 billion which came fromShenzhen MTR Corporation to build theLonghua line (16km). The next stage ofconstruction of the urban railway networkwill include lines 6,7,8,9,11. The constructionof these lines along with two integratedtransport hubs is expected to cost USD 213billion.

Shenzhen

Regional Characteristic andchallenges

Integration of the Pearl River delta regionis improving spurred by regional andnational planning initiatives. Shenzhen'simmediate agglomeration will likely continueto expand strongly and the city's job andcommuting basin will soon coverneighbouring cities such as Dongguan andHuizhou. One potential outcome is anincrease in regional road traffic whichauthorities plan to mitigate with a dense andfar-reaching public transport network. Insome ways, early build-out of the currentmetro system is seen as an investment toboth channel and hedge against the trafficimpacts of future growth. This has been asuccessful strategy in other cities but comesat the cost of operational losses untildemand builds. Regional rail is also beingdeveloped and existing intercity busservices are being improved in terms ofquality and frequency.

Public transport service

At present, the bus system in Shenzhenis still the leading public transport

mode. This will likely change as new metrolines are completed – e.g. lines 6,7,8,9,11 ora total of 170km of new urban railway with95 stations that are planned for 2016.Expectations are these efforts will lead to anincrease of the mode share of publictransport to 56% by 2015. To facilitatearriving at this target, other measures are

also envisaged, including the construction ofbus terminals and stations, the proliferationof separated bus lanes, and the developmentof new bus services. These efforts aresignificant – for example, plans call for the780km of separated bus lanes allowing 85%of all bus lines to operate without beingsubject to congestion.

Financing

The Municipal government is concernedabout the subsidy framework for

compensating operators' losses. There areplans to revisit the terms of these paymentsand to set a more reasonable, fair andtransparent framework to cover the policy-related losses stemming from mandated lowfares and free tickets and low-return publicservice commitments. Bus operators whoinvest in efficiency, energy savings andpollution reduction will get additionalpayments from the municipal government.

The constructing line 7,9 and 11 (107km) ofthe Metro will adopt Build-Transfer (BT)financing for a USD 132 billion totalinvestment. The government is also activelyexploring potential funding models foradditional and accelerated metroconstruction in order to keep up with rapidpopulation growth. Another potential sourceof funding may be linked to the developmentof multi-modal transfer hubs that have thepotential to generate commercial profitsfrom ancillary station-based shops andactivities.

Shenzhen

Opportunities & Challenges

Map data: OpenStreetMap Open Database License (ODbL), www.openstreetmap.org, Natural Earth Modis 500 data and MLIT, Japan

TokyoKeyNumbers

Tokyo is a large city with high population density and a broadlyspreading urbanised area beyond core administrative boundaries. Thecondensed residential area widely extends toward suburbs with noclear boundary. The greater Tokyo region includes the city ofYokohama, Kawasaki, Chiba and Saitama, each of which have morethan 1 million inhabitants. Although the commuting area is generallydefined as a circle of 50 km, the residential area spreads beyond thecircle and even high speed rail is used as a commuting tool.

The rail network covers all the region and is heavily used by residents,carrying 40 million passengers a day. IT systems, including IC ticketsand mobile phones, are highly developed for public transport and makedaily mobility smooth and efficient. Public transport in Tokyo is reliablein terms of safety and frequency and serves as a fundamentalinfrastructure to support the economic development of Tokyo.Challenges will include adapting to lower demographic growth and anageing society.

A public transport mega-city

Greater Tokyo area, Japan

TokyoModeshare(alltrips,2008)

Government

Railway and bus operators are regulatedfrom a safety and consumer protection

point of view by the national government incompliance with the Railway Business Act orthe Road Transportation Business Act. Whenstarting operations, public transportoperators must seek approval from theauthorities and must adhere to relevantregulations during their operation. Theseregulations pertain to a number ofoperational issues including inspection andsafety checks of infrastructure, vehicles androlling stock.

Fares are regulated by the nationalgovernment which approves the maximumfare for rail and bus services. Approval of the

upper bound of public transport fares ismade with input from a standing fareregulation committee consisting of six expertmembers. The committee’s findings are notbinding but are typically respected by theregulatory authorities. Operators are notbound to seek approval for fare changeswithin the maximum statutory bounds butmust notify the government of thesechanges.

Ownership

Within the Tokyo region, some publictransport networks are owned by the

government. Tokyo Metro operates subwayand bus networks and is a is a publiccompany which is owned by both thenational government and the Tokyo

Key Actors

metropolitan government. Another subwayoperator, Toei Subway Company, is a publiccompany fully owned by the Tokyometropolitan government. Both companiesmust follow specific regulations, particularlywith regard to their finance andmanagement. There are a also a few publiccompanies operating surface railway or busservices that are owned by other localgovernments in the greater Tokyo region.

Monetary support

Although many of the rail and bus companiesin Tokyo are profitable and do not receiveany operating subsidies from thegovernment, there are several cases whenthe government may provide monetarysupport. These include cases whereoperators make major capital investments,e.g. renovation of stations, rearrangement ofrailway lines, capacity expansion.Government support may also be extendedto operators to help cover the costs ofdeveloping barrier-free facilities – e.g. byinstalling elevators and escalators. In somecases, operators owned by localgovernments may receive loss-coveringpayments.

Private PT operators

The principal public transport operators inthe Tokyo region are private companies.

These include JR-East, which used to be partof the national rail carrier Japan Rail, andseven major private carriers, whose railwaylines extend from central Tokyo to itssuburbs. These operators own land andinfrastructure – railroad tracks, stations, carsand other facilities. They also are fullyresponsible for maintenance and renovationof their asset base. Many of the major busoperators in the region are also privatelyowned – many of them by theaforementioned rail operators.

Business models and competition

There are 30 different rail companies and 48different bus companies in the greater Tokyoarea. Although their service areas generallydo not overlap they can be seen as indirectlycompeting against each other, especially asthe size of the public transport market isexpected to decline in line with lowerpopulation. Rail-based providers have avested strategic interest in retaining theattraction of their facilities which is anessential part of their business plan. Theymake efforts to ensure the convenience oftheir transport services, invest in makingtheir facilities and the surrounding areaattractive, refurbish or renew rolling stockand stations in order to guarantee a steadyflow of customers to their non-transportbusinesses and services. Passengers benefitas they are provided a wide choice ofservices and opportunities to shop, learn,and otherwise stay in the operators’ facilities– as well as travel.

Collaboration

Private companies also collaborate with eachother, especially in order to ensure region-wide system interoperability for travellers.Regional public transport cards and passesallow travellers to use buses, subway andregional rail irrespective of the carrier eventhough the cards themselves are issued andmanaged by different operators. Revenuefrom card and pass use is allocatedautomatically to each operator according tonegotiated region-wide agreements.

186billionrail passenger kilometres, 2008

Tokyo

Tokyo

Another form of collaboration involvessharing rail networks by different andcompeting operators. For instance, somecommuter trains from the suburbs run

directly on Metro lines allowing travellers toreach city centre destinations without havingto change trains.

FundingOperations

The underlying business model for publictransport companies in Tokyo is based

on a fundamental synergy between transportand non-transport operations. These privatecompanies own not only their entire trackinfrastructure, stations, rolling stock andfeeder bus services, but – crucially – theyown significant interests in surroundingareas including real estate, shoppingfacilities (including supermarkets,convenience stores, and department stores),as well as apartment complexes, hotels,sports clubs, child care facilities, storagespace, schools and resort facilities.Operators also seek to maximize commercial

revenue streams from services locatedwithin their stations – the so-called Ekinakaapproach where companies maximise use oftheir assets to generate more revenue.Transport and non-transport businessesbenefit each other; non-transport businessesattract more passengers while morepassengers bring more revenue to non-transport business.

On average, 70% of these operators’revenue comes from non-transport servicesand only 30% from ticket and pass sales.

This business model is found elsewhere inJapan as well but has been most successfulin the greater Tokyo region, in part due tovery high population density. Many urban

public transport operators outside ofthe largest cities in Japan face moredifficulty in ensuring the financialsustainability of their operations.

Capital investment

Many of the now-private urban railoperators acquired land and built

their networks at their own expense inthe post-World War II reconstructionperiod when land prices and labourrates were relatively low. Theacquisition and construction costs ofthese private networks is largelyamortised at present. Now, however,land, labour and construction costs areextremely high and new railinfrastructure often requiresgovernment support to alleviate high

Tokyo

Population decline and agingsociety

Japan faces two mega-trends regarding itsdemography – an ageing society and lowbirth rate. While Tokyo continues to be thelargest metropolitan area in Japan, andtherefore still attracts people and business ,itis expected that the region's will decrease byaround 3.5 million (9.3%) in the next 30 to40 years while the number of people aged65 years and older is expected to climb to 11million, or approximately 35% of the region’spopulation in the future.

Population decline in Tokyo will inevitablyaffect public transport in the region. Thoughoperators are currently profitable due tostrong demand in the metropolitan region,this may be less the case as the marketshrinks and changes structurally due to anageing population. Competition will increaseand some operators are already starting totake a strategic approach to adapt to thesedemographic trends by providing bettertransport and non-transport services andparticularly by promoting youngergenerations’ relocation to the area aroundtheir facilities.

On the government side, the primaryresponse to these demographic trends withregard to public transport policy has been toincrease accessibility and convenience of theurban public transport system, especially for

elderly people. “Barrier-free” is a key word inthis context, and in 2012, the nationalgovernment adopted a capital improvementplan seeks to render barrier-free publictransportation facilities used by more than3,000 passengers a day.

Disaster risks

Japan is exposed to many kinds of naturaldisasters – earthquakes, volcaniceruptions, typhoons, heavy snow falls, etc.

The Tokyo region is no exception and alarge-scale disaster striking the capitalregion will no doubt inflict severe damageand disruption. To minimise these risksoperators in Tokyo have designed theirfacilities to be earthquake-resistant withsupport from both national and localgovernments.

It is should also be noted that post-disasterrecovery of transport networks is anessential part of disaster response plans.Currently, the government and publictransport operators are working together toimprove continuity-of-service contingencyplanning in the event of a large-scaledisaster and to ensure rapid and extensivepost-disaster recovery. This planning alsoaddresses contingencies for widespreadpower shortages as experienced after theEast Japan Earthquake.

Opportunities & Challenges

investment costs. This support, covering upto two-thirds of total costs, is available inspecial cases e.g. when large station or linerenovation projects are undertaken. Also,

Tokyo Metro has a special funding schemeallowing national and local governments tocover up to 70 % of total construction costs.

Globalisation

The national government has made it apriority to boost Japan’s attractiveness

to overseas tourists. As part of this strategy,the government is seeking to ensure thattourists find public transport bothcomfortable and convenient. One of theimportant projects in this regard is toimprove accesses to and from internationalairports. Narita airport, located 60km east ofcentral Tokyo has both regional and expressrail access but travel times are still relativelyelevated. Haneda airport, located nearcentral Tokyo, has seen a return ofinternational flights – mainly at night – thusrequiring late public transport services.

Efforts have been made to ease thereadability and navigability for foreigntravellers of Tokyo’s extensive publictransport networks. Public transport

operators provide multilingual support fortheir services, including maps and signs.They also introduced a line-numberingsystem – each station has its own number,instead of Japanese station name -- so thatforeign visitors can easily and situatethemselves and recognise their destination inthe complex rail networks.

Congestion

Easing rail and bus congestion is arecurring and ever-challenging theme

for Tokyo’s public transport networks.Though the situation has improvedconsiderably, passengers on some railwaylines still suffer from extreme crowding atpeak periods. Operators take measures toincrease transport capacity at those timesand to carry out joint campaigns with thegovernment to encourage off-peakcommuting.