A Foreigner’s look at developments in urban public transport in the Russian Federation

 

1. The importance of urban public transport

About 73% of the population of the Russian Federation lives in cities—and 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 been—and 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.

Findings about urban travel in Volgograd, Novgorod and Rybinsk

Almost 3,000 individuals answered to the questions on urban transport in a Social Survey carried out in the cities of Volgograd, Novgorod and Rybinsk, early in the year 1998.

The results of such surveys must convince both the Administration and the Passenger Transport Enterprises that their planning and management decisions-and their investments must be based on recent, factual information about the travel patterns of their customers.

Very few persons-some 3.5% of those interviewed-do not at all use public, municipal transport.
About 41% use it every day, 23% use public transport several times a week, 15% several times a month, and 18% use it only once a month or less; these are overall averages. Of course there are significant differences between different cities.

On average-all over the Russian Federation-every day more than one public transport trip for each inhabitant. One urban trip will often use more than one municipal vehicle (metro, trolley bus, tram or bus), depending on the urban public transport system. The average trip distances range between 3 and 10 kilometre, largely depending on the size of the city; in contrast, the average commuter distance in Moscow is close to 12 km.

Almost 80% of the travellers spend up to 1 hour a day in municipal transport, approximately 17% spend 1-2 hours/day, and some 3% more than 2 hours/day in municipal, public transport.

Individuals were asked how they nowadays usually (1) go to work, (2) go to shops, and (3) go to 'cultural' events. About 60% use public transport or walk to work (31 - 48% in municipal transport vehicles, 11 - 29% are walking), whereas more than 1/3 (36%) of those interviewed did not work or did not go to work. Only about 3-5% travel to work in a private car (in the medium-sized cities), while the share of those using (route) taxi, motorbike or bicycle is negligible. Among the population with work, the shares of mode of transport is on average:

  • 64% municipal transport
  • 29% walking
  • 6% private car
  • 1% others

Private car use is slightly higher for shopping and 'cultural' trips than for travelling to work. For shopping purposes, almost as many are walking as using municipal public transport (40% and 48% respectively; 5-8% do not take part in shopping). Public transport is relatively intensively used for visiting cultural events: by 53-63% of those interviewed (18-27% are walking; and 11-13% do not at all make such trips).

Of those that are using a private car to go to work, about 75% do that in the car owned by the family, whereas 25% use a private car that either belongs to their employer (a firm or the municipality/state) or to the employer of one of their family members. As mentioned before, this 'group' is, however, still relatively small (6% of all home-work trips).

2. A history of problems

State-owned and managed enterprises which—prior 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 over—from State to Municipality—of 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 changes in urban public transport-after the transformation towards a market economy
  • Previously, renewal of public transport fleet took place according to strict, centrally planned schedules even if the demands from the enterprises were not always met. But since the market economy took over, State-supported fleet renewal was largely abolished.
  • In the past, public transport operators did also not need to worry a great deal about the costs of the services they provided. Supplies kept coming from the State, paid in money or kind. Today, the State does now not pay anymore-or only very little.
  • Travel patterns were much more fixed like a 'blue print' (e.g. home-to-work travel)-while nowadays people have to look for 'new destinations' themselves. Travel patterns are varying more frequently and are more 'dispersed'. The urban transport 'market' is changing all the time.
  • The users of publicly supplied services-and especially those of public transport services, are now-under market economy conditions-expected to pay the price that the services really costs. However, the passengers have little understanding of such costs. And the depressed state of the economy does not encourage the public's willingness and discipline to pay.

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 obligation—to its ‘new master’, the Municipal Administration—to 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 went—or 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

  • No dedicated, ‘secure’ funds for urban public transport
  • Budget planning and Expenditures approval at local level(s) often undertaken ‘haphazardly’
  • Target transfers from the Federal government rarely used for the intended purpose
  • A Presidential Decree that has cancelled the use of the federal transport tax for public passenger transport fleet renewal.

Under such circumstances, (urban) public transport providers had—and 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 enterprises—operating at a loss—seems an ‘injustice’ (taxation on gross income instead of on ‘gross profits’) which compounds the situation.

But the most complicated problem seems the issue of ‘privileged’—free or reduced fare—travel.

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 necessary—and urgent—to redress such legislation and/or decrees.

Last but not least, the limited fleet renewal activity seriously frustrated the development of Russia’s 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 is—on paper—quite obvious.

Two measures will help somewhat but not very much:

  1. Optimisation of public transport network—that is modification of routes or lines, and of time schedules or frequencies, and
  2. Increased company efficiency—that means a higher kilometre production per vehicle, and per staff member.

These measures—in the hands of the enterprises, and under ‘instruction’ of the Municipality—may 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 level—but with dedicated Federal or State support:

  1. Reform of the urban (public) transport management system. This includes an improved, more business-like interaction between municipal authorities—the managers overseeing the public transport system—and various public transport providers, the public or private enterprises;
  2. Modernisation or renewal of the urban public transport fleet, requiring appropriate financing mechanisms for the urban transport sector as a whole;
  3. Improvement of monitoring procedures of urban transport demand and supply, both for complying with public transport service Contracts (with various public transport providers) and for planning purposes.
(1) Income protection and (2) compensation of public transport providers for 'social' services

These two key issues need to be addressed to improve the income side of the public transport system, by accomplishing the following, three basic tasks:

  1. Resolve the issue of payment for 'privileged' travel : The operating companies are currently carrying large numbers of people for whom they are receiving no payment. This is clearly unfair for the operators (undermining the viability of the companies), and the system for concessionary or privileged travel needs to be revised. The basic principle should be that whoever authorises the person or category to travel free should both establish any restrictions on the travel, and make the reimbursement. The authorised person should use a standard transport pass which is compatible with the ticketing used in the area of the authorised travel. By making the responsible bodies pay for the concessionary travel persons, and by forcing the fare evaders to pay, there is less need for tariff increases. As the revenue base becomes enlarged, tariff increases will not need to be so large to bring in the same amount of revenue. At the local level, information is needed to identify the nature of the concessionary travel to ensure that reimbursement can be properly managed.
  2. Maintain transport efficiency: More and more operating companies use roving conductors to collect the revenue. This will be acceptable to them because the re-introduction of the conductors resulted in an overall financial benefit. There are no delays to the transport service caused by the current fare collection system. This approach is the most appropriate for the current environment. Attempting to collect fares at the point of entry to the vehicle will cause delay, require more vehicles to provide the same service level, and drive up the operating and investment costs. In addition, it will delay passengers and lead to dissatisfaction. Any project should look instead towards better tickets issuing capabilities for the conductors. Ticket issuing equipment must be easy for the conductor to use in busy conditions, any validation system must also be appropriate for the levels of crowding, tickets must be secure against fraud, and the revenue protection services well organised. There must be an effective deterrent against fare-evaders. This means that the control personnel must have the needed powers and authority, and that the value of the penalty significantly exceeds the overall benefit for a regular fare evader. In the future, it is possible that the level of pre-paid tickets will greatly increase so that the number of fares to be collected is relatively small. In that case, then driver-only operation could be considered.
  3. Increase knowledge of the travel patterns : Managers of the operating companies need more detailed knowledge of the travel demand. This will allow them to plan their services better and to allocate their resources in a more efficient way. The information can be achieved through surveys, as well as through the fare collection system.

It will take a great deal of political will—if 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:

  • the Federal budget for privileges provided by RF bodies of State Authority
  • the budget of the concerned Subject of the RF for privileges granted by bodies of State Authority of that Subject
  • the local budget for privileges established by bodies of Local Self-Management (Municipality).

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 respectively—the actual money transfers—need to be specified and organised.

A single Travel Document for privileged (free) travellers needs to be introduced—as has been done in experiments such as in Nizhny Novgorod and Krasnodar—to 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 for—and obtain their Travel Document. The nature and origin of the privilege—State, Subject of Local—would 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 today’s 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 legislation—as has already been prepared—needs to be passed by the State Doema.

 

4. What are reasonable urban public transport fares?

What happened in (urban) public transport—is 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 transport—indeed transport in general—was unrealistically low-priced in the past compared to its true costs, and that its present share—of the average monthly wage—seems still reasonable. It should, generally speaking, not exceed 10%.

For people at the minimum subsistence level income—which is less than 50% of the average monthly salary—the 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

Year

1992

1993

1994

1995

1996

1997

1.Average Monthly Salary (old Rb's)

5,995

58,863

220,351

472,392

790,200

964,717

2.Minimum Monthly Subsistence level

1,900

20,600

86,600

264,100

369,400

411,217

MinMonthSub as % of AvMonthSal

32%

35%

39%

56%

47%

43%

3.Average Minimum Month Wage-Q.4

900

11,180

20,500

57,750

75,900

83,490

Urban public transp Fare (Rb/trip)

1.7

23.2

211

600

1,050

1,400

4. Price of 50 trips/month

86

1,162

10,550

30,000

52,500

70,000

Monthly travel costs (4) as % of 1.

1.4%

2.0%

4.8%

6.4%

6.6%

7.3%

Monthly travel costs (4) as % of 2.

4.5%

5.6%

12.2%

11.4%

14.2%

17.0%

Monthly travel costs (4) as % of 3.

9.5%

10.4%

51.5%

51.9%

69.2%

83.8%

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 support—provision of social assistance—in terms of free or reduced urban travel for individuals who really need it. This is called ‘social targeting’. Monthly urban transport ‘needs’ were—in 1997—consuming 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 fare—single 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:

  1. People who cannot take care of themselves for ‘objective’ reasons, e.g. invalids or orphans
  2. People who are presently being taken care of according to state legal acts, e.g. pensioners or war veterans—and, in fact, many other categories being granted with privileges, following legal acts and decrees
  3. People who need temporary care, for example large families (with many children) or perhaps also single mothers with child(ren), due to family- and/or socio-economic conditions that are expected to turn for the better in some future (when the children get independent).

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:

  • Honored donors and citizens awarded with the badge "The USSR Honored Donor" residing on the territory of the Russian Federation, Citizens awarded with the orders and medals for dedicated labour and military service in the home front units, Citizens awarded with the medal "For the defence of Leningrad" and badge "Resident of Leningrad under siege" (altogether almost 7,200 - group no. 3 in the picture)
  • Disabled persons of the 1, 2, 3 categories, Disabled children, their parents, trustees, guardians and social officers (almost 6,800 - group no. 1 in the picture)
  • Children - orphans and children without parents' guardianship, School children from large families, Parents with 5 and more dependent children (some 3,600 - group no. 4 in the picture)
  • Military servicemen, Students of military schools (just over 3,100 - group no. 8)
  • Persons escorting a disabled child, A person escorting a disabled person of the 1st category, A person escorting a disabled solder of the Great Patriotic War of the 1st category (somewhat more than 2,500 -group no. 5)
  • Drivers of electric trams/trolleybuses, Bus operators and conductors working with the Avtokolonna 1456 company (some 2,150 - group no. 10)
  • Judges and marshals of the court, Procuracy officers, Tax Police+B43 officers, All-Russian Transport Inspection officers (when executing their services), Customs officials, Personnel of road construction bodies, Policemen, Tax Inspectorate officers, Personnel of the high risk units of the Ministry for Emergencies (altogether more than 2,000 - group no. 9)
  • Rehabilitated victims of political repression, Former underage prisoners of fascist concentration camps (some 1,060 - group no. 7), and
  • Persons suffered from radiation and got disabled in result of Chernobyl nuclear power station breakdown and during the works on its alleviation, Persons participated in alleviation of the consequences of Chernobyl catastrophe in 1986-1989 (some 600 - group no. 6).

No one knows exactly how many times—per day, week or month—each of these categories actually make use of their free traveling rights. One category might—on average—make significantly more trips per month than another. The War and labour veterans—the largest category—might, for example, make less trips per week or month per person than any other category. Thus, their share in the amount of travel—and in the costs to the transport enterprises—would 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.

Pensioners

Pensioners' situation depends largely on their household situation: Are they living alone?-Or together with a partner-who also has pension-income or not?-Or within a larger household, for example in the household of one of their children or with another family member? A distinction between personal income and household income-which covers the expenses of little or non-earning members of the household-would be useful for clarifying personal circumstances, to determine whether or not a person depends on social welfare.

A pensioner's personal income-classified according to 10 ('decile') income classes-could be usefully distinguished into three (3) main categories, for example:
1. Personal income lower than the official minimum (monthly) subsistence income level. This would have been less than 425 (new) roubles/month in May 1998
2. Personal income ranging between 1 and 2 times the minimum subsistence income. This would have been between 425 and 850 roubles/month in May 1998
3. Personal income higher than 2 times the minimum subsistence income. This would have been more than 850 roubles/month in May 1998.

The normative monthly (urban) public transport 'package', say 50 trips/months - the 'equivalent' of a Monthly pass, would have cost-about 85 (new) roubles in May 1998, and therefore would have represented 20% of the minimum subsistence income level (425 roubles) at that time. Whereas 10% was suggested as a 'reasonable' maximum share of personal income to be spend on transport, pensioners belonging to the 1st category, or even the 2nd category, may be considered to require social help, e.g. in the form of free or reduced-fare public transport.

If the (minimum) pension-income could be kept at least at the official minimum subsistence income level, any free travel rights for pensioners might just be abolished. Under such circumstances, pensioners might yet be granted reduced-fare travel opportunities in the form of monthly passes, single tickets or multi-trip-cards at reduced fare, on the basis of a Travel Document. To obtain such a Travel Document valid for the year, they should make an application, and a nominal (administration) fee might be charged for this.

With the pension-income at the official minimum subsistence income level ('legally pegged'), the monthly Pensioner Pass price-at the May 1998 value of the rouble-could, for example, have been established at 40-45 (new) roubles.

Although (State) pensioners' income was in May 1998 below the official monthly subsistence level-by some 35 roubles-on overall average, pensioners have, nevertheless, a regular income, and they should therefore contribute 'something' to the costs of transport provided to them.

As an indication of the population's reaction to urban public transport fare increases, one may consider the interviewed individuals' reactions to 50-100% higher payments for medical services
About 25-31% of the population would take less medical care in case of concerned price increases. Some 12-15% would economise on other goods, and approximately 10% would seek a more healthy mode of life. These (3) main 'coping' strategies thus account for (more than) half the population's reactions.
Other coping strategies-favoured by smaller groups-are:
? to earn more (a 'positive' attitude) or to take part in protest actions/write complaints to officials (which seems the more 'negative' attitude), altogether 15-18% of those interviewed
? to borrow money or to look for cheaper services, 7-9%
? and for 8-9% of those interviewed, the (medical) issue was not of importance.

'Coping' strategies for urban poor faced with public transport price increases seem to be limited mostly to economise on other purchases and take less public transport-i.e. walk longer distances and do that more frequently; and/or seek other (nearby) destinations for fulfilling one's basic needs.

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 them—instead of an adequate pension—free (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 groups—schoolchildren aged 7-16, students aged mostly 17-22—who 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 needy—handicapped people, orphans, low income families with many children—can 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 norms—i.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.

Normative costs of production of bus-kilometres (example)

At a bus operating cost level averaging US $ 0.50/Vehicle-kilometre-the bus operating an average 200 km/day or 60,000 km/year-daily operating cost were, in 1998, roughly 600 (new) roubles/day, equivalent to US $ 100/day.

To this amount should be added about 100% for proper 'capital cost' recovery (depreciation/fleet renewal), therefore daily production costs are actually US $ 200. An amount of 15,000 seat/standing-kilometres ('crush' capacity) produced daily, maybe occupied for 40% (overall average), therefore the 'norm' production would be 6,000 passenger-kilometres; and-when assuming an overall average urban travel distance of 3 km, some 2,000 passenger are carried per day, per bus.

Thus, the unit (norm) production cost price would be about 3.3 US-cents per passenger-kilometre (0.2 new rouble of mid '98 value; this figure is very close to an estimate made by NIIAT, of the cost-price of a bus passenger trip, an overall average for the RF of 599 old roubles/trip, say 200 old roubles/passenger-km in 1997).

Trolley bus and tram operations-production costs per passenger-kilometre or per passenger-are significantly higher (+ 30-50%), due to higher 'capital costs', particularly when the costs of the infrastructure (energy supply, free right-of-way) are included.

This normative level of average production cost must be such that the public transport provider is challenged to be—and remain—effective instead of becoming ‘lazy’. The margin—plus or minus—allowed 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 product’—the seat/standing-kilometres offered between origin- and destination stops—primarily for those who are capable to pay the price. But in doing so he can offer part of the available spare capacity at lower costs—so called ‘marginal’ costs—to ‘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 group—possibly considering alternative options—and (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 whom—and how—to 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 drafted—but not yet passed—on 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 costs—also a yet undetermined total—whereas 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 sum—from 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

  • Compensation for free or discounted (urban) public transport, based on privileges granted by Federal Decrees is a logical consequence of federal, political decision-making
  • The State has a guiding role in advocating and stimulating a common urban transport policy which attaches great importance to urban public transport provision at prices affordable for the great majority of its citizens (and this implies ‘stimulation funding’ from the State)
  • The State takes a significant share of locally collected taxes, therefore should give sufficient in return.

The Federal State possesses the instruments to create the intended Fund. It could be fed by, for example, a surcharge on the price of petrol—affecting 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 owners—who predominantly belong to the higher income groups—desire 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 sector—e.g. sales tax on automobiles, registration fee for automobiles—might 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-exempted—for specific items—in 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 source—of yet unknown quantity—for 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 ‘allies’—are 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 transport—must 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).

'Commercial' transport enterprises

Particularly on urban public transport routes or corridors where supply of bus services has lagged behind transport demand significantly, 'mini-bus' services have been allowed to develop with the following characteristics:
· Higher quality of service (greater speed and comfort)
· Fares 2-4 times as high as 'traditional' public transport fares, so that these can be afforded only by higher income groups
· Sale of formal tickets is rather the exception than the rule
· No transport of privileged (free-of-charge) travellers

These type of services could contribute to resolving urban public transport supply shortages, if they are integrated in a 'controlled business environment', checked by the Municipal Transport Management Body. As long as commercial operators are allowed to 'appear' on certain routes for some (profitable) time and then 'just disappear' again-because the market has changed-they are unlikely to offer a structurally sound solution. They must be made to obey basic legal regulations, related to traffic safety and professional competence, keep records and pay taxes on income and/or profit.

Their potential market share, in terms of urban passenger volume, might be estimated-under current income distribution characteristics-to be in the order of 10% (overall average). If properly taxed (on profits-not excessively), such tax-income should be contributed to the Municipality's urban public transport budget.

The city of Rostov-on-Don has introduced a interesting Tendering and Monitoring system for operation of urban routes by commercial enterprises with different vehicle-ownership characteristics, including leasing arrangements. The degree to which the commercial enterprises allow some privileged traveller categories to use their services, free-of-charge or at a discounted fare, is one of the criteria applied in granting a Route-License to the tendering commercial enterprises.

The Municipality’s management must be equipped—internally or by hiring external expertise, for example a qualified Institute—to 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

  • unemployment
  • declining industrial output, also related with unemployment
  • criminality
  • housing
  • health care

It is difficult to say what consequences this ‘general attitude’ will have on (poorer) people’s 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 Municipality—jointly with the public transport providers—should 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

  1. Reform of the urban (public) transport management system. This includes an improved, more business-like interaction between municipal authorities—the managers overseeing the public transport system—and various public transport providers, the public or private enterprises;
  2. Modernisation or renewal of the urban public transport fleet, requiring appropriate financing mechanisms for the urban transport sector as a whole;
  3. Improvement of monitoring procedures of urban transport demand and supply, both for complying with public transport service Contracts (with various public transport providers) and for planning purposes.

The delivery of social services or assistance—in the case of urban public transport this concerns the offer of free-of-charge (urban) travel or travel at discounted fares—cannot 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/politicians—are 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 staffed—incorporating, 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 operate—within rules and regulations set and enforced by the public sector—in a ‘business-like’ manner—profitable yet within the limits of the Law.

 

Prepared for “Russki Jamshik” by Mr. Klaus Broersma (DHV Consultants BV - The Netherlands)


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