Financing urban transport projects

1. Financing urban transport projects NICHES+ findings

2. Questions to the CCs • Is there budget available to ensure the implementation of the measure envisaged in NICHES+? (how much financial resources are we discussing, and are they an issue?) Within your administration, or other public authorities. 2. Is there the need to involve external parties for the following aspects of the project implementation: Design, Build, Finance, Operate, Maintain, (Own) 3. Do you have access to experts on the financing issue? In-house, external? 4. Do you see the possibility to have revenue from the system, and do you see ways this could be enhanced? Fee, local taxes and charges, etc. 5. What kind of guidance is needed/useful? Inspiring examples, guidelines, information about EU funding sources…

3. What can we learn from • Large scale projects • Infrastructure projects • International setting • Information available geared towards • Internationally relevant infrastructures • Or domestic , playing a significant role in making a place globally more competitive • Not to domestic services/infrastructures that address local transportation needs • Road and PT investments, infrastructure, hardware and rolling stock

4. Objectives • Maximise socio-economic benefits through implementation of the most cost effective option for urban transportation • Capture value from direct benefits to project users and as well as value from significiant positive externalitieis that will accrue indirectly from the project • Ensure affordability to encourage usage and maximise consumer welfare To enable • Financial success (+/-) • Policy success (+) • Durability success (-)

5. Success factors • Project environment and turbulence • Political control and sponsorship • Role of national government • Effectiveness of planning • Organising for operations • Effectiveness of procurement and financing (most important!) • Good procurement and financing structure in place • At the appropriate time • Including a performance contract that incentivizes effective delivery • And good operations

6. Managing costs • Careful advance planning • Careful monitoring of expenditure • Flexibility – contingency plan • Reduce scale of the project • Divert funds internally • Increase total budget, by acquiring increased funds • If success of the project relies on behaviour change, remember to allow funds for promotion and campaigning • Different funding needs in different steps of the project

7. Managing costs: long term budget planning • Staff costs estimates should include salary increases which may be due during the project’s lifetime • Overheads need te be included in the estimates of staff costs • Allow for inflation when estimating the cost of materials • Include delivery or storage costs if applicable

8. Private capital Awareness of true costs and risks Efficiency gains: • reduced cost • less schedule overruns Private investments costs are recovered by future revenue streams or public support (one-off capital grant, or periodic payments, earmarked taxes (cross-subsidies)). End goal for public authority is to stay involved in the measure implementation (own the infrastructure, data rights, etc.)

9. Collaboration forms • DBFMOT (Design, Build, Finance, Maintain, Operate, Transfer) • Public procurement or Privatisation (Build Own Operate) • SPC (special purpose company): opportunity to set up transactions outside balance sheet • Alternative forms of procurement can be compared to derive the most advantageous for the public interest. • The procurement method should not be chosen too early, but after the developmetn of a robust business case and/or feasibility study

10. Risk sharing Losses (downside risks) or rewards (upside risks) • Risk allocation • Commercial risks vs non-commercial risks (political) • Risk sharing • Commercial risk shared: public sector intervenes directly (shadow payments) or indirectly (guarantees) • Mixed forms • DBFT, privately placed long term bonds • Private pre-financing of the construction (Bundmodell, D)

11. challenges • Asymmetry of information • Verification of contractor’s information by independent engineers • temporary and local monopoly of concessionaire • Detailed contracts • Based on clear public sector goals and requirements • Availability of private funds (financial crisis)

13. Instruments for financing Conventional • Public funding • Fare box revenues • Advertising revenu • License fee from business activities • Real estate development rights • Access rights (e.g. BRT lanes, parking) Proximity benefit value • Additional property tax • Employer contributions • Betterment levy Indirect benefits value • Congestion pricing

14. From the point of view of the investor Do the investmenst offer monopolistic or oligarchy opportunities? Do they provide sustainable revenues? Is the long term revenu generation of such investments both stable and predictable? Does the regulatory framework for investment provide adequate investment security? Ar there opportunities to go back and re-negotiate contracts?

15. Donors, funding instruments GEF EIB: ELENA - JESSICA EU ERDF CF TEN-T fund: LGTT EBRD: JASPERS CIP

16. Contact Info • Ivo Cré • icre@polis-online.org • phone: +32 2 5005676 • Karen Vancluysen • kvancluysen@polis-online.org • phone: +32 2 5005675 • absent from 19/05/08 – 05/10/2008