A Foreigners look at developments in urban public transport in the Russian Federation |
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1. The importance of urban public transport About 73% of the population of the Russian Federation lives in citiesand only a minority is the lucky owner of a private car. Thus, urban public transport is of great importance for both the efficiency of the economy and social functions. A reliable public transport system has always beenand continues to be a major factor for social-political stability. Bus transport serves more than 1,260 cities and urban settlements, while around 100 cities are also operating trolley bus and/or tram networks. In 1997, urban and sub-urban public transport carried between 35 and 40 billion passengers, representing more than 200 billion passenger-kilometres.
2. A history of problems State-owned and managed enterprises whichprior to 1991 used to provide public transport of passengers as well as goods transport, have mostly been split up. Responsibilities for urban public transport of passengers has been transferred from the State to Municipalities who thus became the owners of bus, trolley bus and tram companies. The handing overfrom State to Municipalityof such enterprises was unfortunately not accompanied by adequate investment-money transfers from the State to Municipalities. Therefore, municipalities could not replace ageing public transport vehicle fleets, as the State was doing in the past. This set in motion a deterioration of the level of services of supply.
The transition to the so-called market economy proves to be a very painful process, in particular for the privileged traveller categories with free transport rights. But also for the traditional customers with low cash income. As well as for the urban public transport providers who inherited a moral obligationto its new master, the Municipal Administrationto continue to serve the privileged (free) travellers. The transport operators are also expected to help keeping the cost-of-living index (which includes the public transport price level) as low as possible. Municipalities were not well prepared, as concerns their staffing and available expertise in the local Administration, to find quickly the right answers to these challenges of change. Due to an absence of uniform, central guidance, municipalities each wentor are undertaking their own experiments in the areas of solving urban transport management and financing problems. But more and more, municipal administrations are now comparing approaches and solutions, mostly with cities in the neighbourhood, and sometimes stimulated by externally financed, technical assistance projects. However, the main problem is persistent: It is the absence of a stable investment funding environment, in other words
Under such circumstances, (urban) public transport providers hadand have no other choice than to respond fare increases, as well as with route network reductions and reduction of frequencies. Fare increases have negatively affected the customers willingness to pay, whereas the absence of conductors and the moderate penalty for fare-dodging has further undermined the discipline of paying for urban transport. Tax payments required from public transport enterprisesoperating at a lossseems an injustice (taxation on gross income instead of on gross profits) which compounds the situation. But the most complicated problem seems the issue of privilegedfree or reduced faretravel. In the previous State-planned economy, the issue of compensation of public transport companies for free or reduced fare travel did not arise since the planned losses in the urban passenger transport sector were covered as a whole by the budget of the concerned Ministry or Department (various modes of transport used to belong to different Ministries). Due to mainly political tactics the number of privileged passenger categories has increased from some 22 in the year 1990 to about 47 (the exact number varies somewhat from place to place) in 1996. The laws or decrees that established such privileges called for unconditional free-of-charge services without any suggestion on who would pay for the costs. Court cases attempting to challenge these laws or decrees have so far resulted in confirmation of the established rights. It will be necessaryand urgentto redress such legislation and/or decrees. Last but not least, the limited fleet renewal activity seriously frustrated the development of Russias own bus, trolley bus and tram manufacturing industry which needs to be modernised in view of the competition of foreign import vehicles which have a different price-to-quality image than presently produced Russian vehicles.
3. Recommended measures: What needs to be done ison paperquite obvious. Two measures will help somewhat but not very much:
These measuresin the hands of the enterprises, and under instruction of the Municipalitymay reduce to some extent the costs of public transport supply, but it will not resolve the structural, financial problem. To tackle the structural, financial problem, true urban transportation reform calls for the following, main tasks, to be undertaken at the Municipal levelbut with dedicated Federal or State support:
It will take a great deal of political willif not courage to address these issues. The new generation of politicians cannot endlessly afford to continue with the populists generosity of their predecessors. Dishing out (new) privileges without taking responsibility for its consequences is not sustainable. Correcting the present historic situation is an even more demanding task. New legislation needs to be passed, ensuring that compensation to (sub)urban public transport providers for carrying privileged passengers shall be paid from:
Moreover, a normative level of compensation for privileged travel rights needs to be established. The Law or Decree needs to indicate the methodology of establishing such reasonable level of compensation, and specify the organisation(s) authorised to do this. At the same time, the mechanism of compensation from State, Subject and Local budgets respectivelythe actual money transfersneed to be specified and organised. A single Travel Document for privileged (free) travellers needs to be introducedas has been done in experiments such as in Nizhny Novgorod and Krasnodarto make the scheme practically manageable and controllable. Privileged travellers would have to come to and register at the municipal Transport Department or its appointed Agency managing urban public transport, in order to apply forand obtain their Travel Document. The nature and origin of the privilegeState, Subject of Localwould be established. These records would then form the basis for the distribution of the compensation to be paid by State, Subject and/or Municipality respectively. Whereas in todays practice the Municipality is dealing with most financial matters concerning the urban public transport enterprises, it seems logical to channel the (Federal) State and Subject compensation funds via the Municipality. The special-purpose character needs, however, to be emphasised, ensuring that the money arrives indeed at the public transport companies. The concerned transport companies must therefore have a guarantee of access to the privileged travellers registration (database). In case of non-transparent dealings, they must be enabled to base a court appeal on objectively verifiable facts. The Court, in turn, cannot function properly without the required, sound legal base. Therefore, appropriate legislationas has already been preparedneeds to be passed by the State Doema.
4. What are reasonable urban public transport fares? What happened in (urban) public transportis that the share of the cost of a normal quantity of monthly urban public transport trips, say 50 trips/months, increased significantly from up to 2% of the monthly average wage in 1993 to more than 7% in 1997. One could argue that urban public transportindeed transport in generalwas unrealistically low-priced in the past compared to its true costs, and that its present shareof the average monthly wageseems still reasonable. It should, generally speaking, not exceed 10%. For people at the minimum subsistence level incomewhich is less than 50% of the average monthly salarythe development was more serious. Whereas the defined (50) monthly trip package took around 5% of the monthly minimum subsistence level income in 1992/93, this percentage has increased to 17% in 1997. The historic figures (in old roubles) showing these trends are presented in Table-1. They underline the need for the urban transport sector to spread or enlarge the income base (get more people to pay for their trips), so that tariff increases will not need to be so large to bring in the same amount of income. Table-1 - Development of various Average Income Indicators & Urban Transport Fares
Source: State Statistics Committee of RF (income data) & MoT/NIIAT (UPT fare data - 1995-1997 estimated) Between the years 1992 and 1997, typical urban public transport prices increased with a factor which was almost 4 times the growth factor of the subsistence income level, and almost 10 times the growth factor of the average minimum wage level. The subsistence level income (row 2 in the Table) seems the most practical, formally defined budget indicator to be used as a reference for defining any financial supportprovision of social assistancein terms of free or reduced urban travel for individuals who really need it. This is called social targeting. Monthly urban transport needs werein 1997consuming around 17% of the subsistence level income. 5. Urban travel privileges Thirty to forty percent of those interviewed in Volgograd, Rybinsk and Novgorod had free travelling in municipal, public transport, and about 10-15% were travelling at reduced fare. As a consequence, only 50-60% of the public transport travellers in these cities are paying the full faresingle tickets or monthly passes. Most people (80%) attribute their travelling privilege to the Local authorities, about 13% thank their privilege to their employer (organisation), and only 2-3% ascribe their travel privilege to the State. Apparently, people have the notion that the State is doing not too much for them, and that the Municipality pays the bill for them. Social target groups may be distinguished in three categories:
This issue could probably be discussed with some objectivity when one attempts to quantify these groups. This has been tried for the case of the city of Cherepovets. In Cherepovets, in 1998, more than 85,000 (27%) of its 318,000 inhabitants were registered to belong to 32 (of totally 42) categories of privileged Federal/Oblast Legislation travel; possibly, a number of persons belong to more than one category. By far the largest category are the War and labour veterans of pensionable age (48,300). To this same group could be added 3 other categories: Veterans of the Great Patriotic War and persons of the similar status, Parents and widows of perished servicemen, Veterans of military conflicts (adding another 7,100). Altogether (55,400) they constitute group no. 2 on the following picture. Nine other, main categories could be formed from the other 28 categories, for example:
No one knows exactly how many timesper day, week or montheach of these categories actually make use of their free traveling rights. One category mighton averagemake significantly more trips per month than another. The War and labour veteransthe largest categorymight, for example, make less trips per week or month per person than any other category. Thus, their share in the amount of traveland in the costs to the transport enterpriseswould be less than their percentage of free travel permit holders. A comparison of the quantitative shares in free travel permit holders (Veterans, for example 65% in Cherepovets, in 1998) and in actual monthly trips (Veterans, for example 35% assumed!) is illustrated in the following picture. It is based purely on assumed monthly frequency of trip-making by different categories, not on any statistically justified investigations. Such investigations should be undertaken to describe the real situation, which will vary from city to city.
Another question is whether a limit should be set to the number of annual or monthly trips, that a pensioner or any other privileged traveller, is granted on the basis of the Travel Document supplied. Such a limitation seems to be controllable only using sophisticated technological applications, for example smart cards or, at least, some sort of automated control device as applied in Metro stations. This is believed to be commercially feasible only in case of introduction of such a system on a very large scale, in many cities. War veterans should, generally, receive any compensation not from the Municipality but from the Federal State, i.e. for their services or heroism given to the Nation. Alternatively, the State could give them a sufficient State pension which they could use either to buy public transport tickets or passes, or something else. (Why should the State give theminstead of an adequate pensionfree (urban) public transport and other free services? Only because of the historic reasons) In a new situation, they should for a start be provided with the suggested Travel Document. The Federal State may wish to delegate this task to the Municipality, but it should then pay the Municipality for this. Other (urban) public transport user groupsschoolchildren aged 7-16, students aged mostly 17-22who have typically cyclical travel patterns and frequencies, can be accommodated quite well with monthly or even annual passes with appropriate discounts (the system introduced in Novgorod provides a good example). As schoolchildren not normally have an own income, there is a general dependency on the parents or household income. Children belonging to lowest-income household who need temporary care, might be supplied with a Travel Document giving the privilege of a zero fare (pass), but an application procedure should be completed to obtain this document. Those generally considered the most needy of the needyhandicapped people, orphans, low income families with many childrencan be fairly easily identified; both categories, handicapped or young and poor child, are often not capable of travelling alone and need to be accompanied on (urban) public transport trips. Their qualification as a needy person must, anyhow, be verified before they would obtain their Travel Document, e.g. on an annual basis; someone, a member of family, or social worker would need to assist them in the procedure of obtaining the free-travel document. And the Municipality, most logically, should pay for these categories of its citizens to the public transport providers.
6. Financing of social services and Budgetary allocations The single ticket price is the logical key indicator or barometer of the (urban) public transport fare level. A monthly or two-week pass represents already a discounted fare rate, being based on between 30 to 50 single trip-fares, whereas most pass-holders make more trips a month. Various cities in the Russian Federation show a wide variation in, for example, single ticket rates for buses (the most widely spread mode of urban public transport)for example, between 700 and 2,500 (old) rouble per single trip in December 1997. The production costs of bus services are, however, unlikely to be that much different, although there are of course differences between cities. In case of subsidisation, there is a need to establish a norm for the production cost of the service provider. In the case of urban public transport supply, certain normsi.e. an average and a specified margin (plus/minus percentage)need to be established for the cost of production of bus-kilometres, trolley bus-kilometres or tram-kilometres which are ordered by the employer of the public transport provider.
This normative level of average production cost must be such that the public transport provider is challenged to beand remaineffective instead of becoming lazy. The marginplus or minusallowed in particular cases, must be related to a few, simple criteria. Criteria like (1) population density, related to gross build-up area in the city; (2) network density, that is network length divided by service-influence area, and where appropriate (3) exceptional topographical conditions. These objective criteria are clearly out of the span of control of the public transport operator/provider. An independent (research) Institute with the necessary survey- and research capacity, should be assigned to establish appropriate guidelines in this respect. These then need to be promoted nation-wide through (more) effective and efficient communications between the Federal level (Ministry of Transport) and the Subject/Local level (Oblast/Municipalities). Urban public transport providers deserve subsidisation, as long as they are providing (also) services for customers who are not able to provide the full cost price of production. As a commercial operator, the public transport entrepreneur is producing his productthe seat/standing-kilometres offered between origin- and destination stopsprimarily for those who are capable to pay the price. But in doing so he can offer part of the available spare capacity at lower costsso called marginal coststo marginal passengers (such as pensioners, invalids, etc.). When the Municipality has (1) designed its full fares (single tickets, monthly pass) and social fares structure, and (2) made a reasonable estimate of the number of customers in each user grouppossibly considering alternative optionsand (3) has agreed with the public transport providers on a reasonable yet competitive production-cost level, then it will able to assess properly the (financial) consequences of its considered (fare) policy alternatives. The question is then, from where and whomand howto get the financial means enabling the Municipality to indeed implement the desired fare policy. Circumstantial evidence collected in 1996 from 14 medium-sized cities indicated an overall average annual subsidy paid out by City Administrations of roughly 100,000 Rbl. per inhabitant (a value of US$ 20 at that time). Thus, the average financial burden of a city of 500,000 inhabitants, was in the order of US$ 10 million, and this was certainly not enough to develop the urban public transport system. Proposed legislation has been draftedbut not yet passedon Urban Surface Transport of Passengers with a Presidential (draft) Decree About Financing the development of the public transport systems in the RF. A three-tiered system of targeted Funds (Federal, Regional, Local) has been suggested to provide subsidies or compensation to public transport. Federal funding is supposed to provide 15-20%of the yet undetermined total, and the Regional and Local funds 80-85%. It is anticipated that subsidies would eventually be needed to cover 40-45% of actual public transport costsalso a yet undetermined totalwhereas 55-60% of the total costs would be recovered by public transport enterprises direct sales (tickets, passes, etc.). These funds would obtain the status of protected or extra-budgetary Fund, comparable with the Road Fund for Subject Areas. They are intended to be identifiable as a separate Budget line, instead of being hidden in a total Transfer sumfrom Federation to Subject, or from Subject to Municipality. It is certainly fair that the (Federal) State will contribute to this Fund in view of the following facts
The Federal State possesses the instruments to create the intended Fund. It could be fed by, for example, a surcharge on the price of petrolaffecting private passenger car travel costs mostly. One should be aware that a smoothly operating urban public transport sector is of greatest interest for the growing number of private passenger car owners and users, threatened by urban traffic congestion that is imminent in the larger cities. Whereas private car ownerswho predominantly belong to the higher income groupsdesire to ride their cars smoothly, others therefore need to make use of public transport services. Thus, it seems fair that private car drivers pay for the service of freeing road space for them thanks to the public transport users. Other (Federal) sources of income from the transport sectore.g. sales tax on automobiles, registration fee for automobilesmight be considered as well, but surely would need to be shared with other, general or road funding requirements and budgets. It seems more difficult to identify suitable sources ensuring the sustainability of the proposed 80-85% Regional and Local funding of public transport subsidies. The (urban) public transport enterprises are not likely to become an important source of tax-income, as long as they themselves are the subject of subsidisation. (Then what is the point of taxing them? They might rather be tax-exemptedfor specific itemsin order to reduce their need for subsidy.) Private or commercial passenger transport enterprises, operating in the higher income travel market, and therefore profitable, of course should be properly taxed. This may be a suitable sourceof yet unknown quantityfor feeding the Regional/Local funds. This contribution will, however, be limited, considering the size of this market segment. The use of urban traffic spaces, by private passenger car users in particular, seems the most promising, potential source of collecting additional (urban) transport charges to feed the Local (Municipal) fund. The fact that most (urban) decision-makers (administrators, politicians) or their alliesare likely to belong to the class of private passenger car owners/users, makes it often difficult to mobilise the political will to introduce such new, additional charges. The use of urban spaces by cars concerns primarily parking spaces, at various origins and destinations (both in/near housing complexes, city centres, shopping malls/markets, etc.) for which charges could be raised, to be dedicated (partly) to the Municipal public transport fund.
7. What do the Transport Enterprises contribute? Public transport enterprises and municipal Transport Departments (or their hired professional Agency) managing urban public transportmust make projections of expected ridership and ticket sales. The enterprises sell full-price as well as discount tickets and monthly passes. In addition, a certain number of passengers ride for free. The number of free travellers must also be projected in order to enable the enterprises to estimate their total performance or production needs, and establish their overall cost level. They must also have a sound basis for negotiating the subsidy requirements for free and discount riders from either Municipality, Subject or State administration, or from local organisations (e.g. large Employers).
The Municipalitys management must be equippedinternally or by hiring external expertise, for example a qualified Instituteto make forecasts of urban travel or ridership based on recently surveyed trends, demographic and socio-economic changes taking place, private car ownership trends and public transport network adaptations such as changes in routes and frequencies. 8. Who is interested in the Customers opinions? In the eyes of the population, according to the social survey mentioned earlier, there are a number of issues of much greater importance than urban (public) transport, notably
It is difficult to say what consequences this general attitude will have on (poorer) peoples reaction to changes in the urban public transport service level, experienced by customers as access to the service (the obligation to obtain a Travel Document) and price increases (paying an own contribution where there was a free travel privilege under previous legislation or decree). In any case, the Municipalityjointly with the public transport providersshould start to inform the public about the state of urban public transport, about simple principles of cost recovery, and about various options of the future of the city public transport services. All of this is related to more or less willingness to pay, either in the form of higher (municipal) taxes or higher fares for such services.
9. What social services/assistance shall the Administration deliver? The (3) major tasks of reform of municipal public transport are summarised here once more. They are
The delivery of social services or assistancein the case of urban public transport this concerns the offer of free-of-charge (urban) travel or travel at discounted farescannot be separated from the total management functions: Planning and forecasting, implementing policies once these have been adopted, monitoring and evaluation, reporting to the competent administrators/politiciansare all part of the urban (public) transport sector management. With regard to the tasks 1) and 3) mentioned above, the Municipal Transport Management Body must be adequately staffedincorporating, for example, also socio-economic expertise concerning lower income groups behaviour and coping strategies (survey techniques to be applied for clarifying controversial issues; and methods of communication with those groups). Specialised tasks may be carried out by specialised Institutes, but then the Municipality must budget for the payment for such advisory services. With regard to task 2), the most important issue is creating manageable forms of public-private partnership whereby the private sector offers a major share of the required financing, and then will be allowed to operatewithin rules and regulations set and enforced by the public sectorin a business-like mannerprofitable yet within the limits of the Law.
Prepared for Russki Jamshik by Mr. Klaus Broersma (DHV Consultants BV - The Netherlands) |
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