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12
Predictable and targeted financing

Summary

The growth target entails a definite need for increased subsidies for investments and operations. At the same time, predictability is needed in investments and a holistic prioritisation based on measures that provide the best goal achievement. New financing schemes and pricing models should be considered. The state must prioritise to contribute to public transport solutions in the capital region.

12.1

Unclear targeting of spending in the region’s public transport

Annually, around 16 billion kroner is spent on public transport operations and investments in Oslo and Akershus, paid for by customers, toll road users, and by local and national authorities. Costs in terms of time, the environment and other external costs come in addition. Of the 16 billion kroner, 6.5 billion kroner is channelled through Ruter, and two billion kroner is dedicated to NSB’s train operations. About three billion kroner is spent on local and national public transport infrastructure on rail and road, and 1.5 billion kroner relates to other road measures. The Follo Line is included with three billion kroner annually.

The division in responsibility and organisation contributes to the fact that it can be complicated to gain a complete overview of the financial situation, and in particular to find a basis for any overall prioritisation. This makes it difficult to deploy resources where the utility is the greatest and to make sure that the different parts of the public transport service interact well with each other.

The goal that a growth in personal transport demand should be met by walking, cycling and public transport in the region requires financial priorities that support this goal. Operations in particular require a significant annual real increase in the budgets, or an increase in user payments.

12.1 Funding streams in the region's public transport system in 2015, about 16 billion kroner
NPRARegion East 1 769 NPRA RE NPRA 1 490 NNRA 4 206 Construction client 1 490 4 206 549 128 SporveienOslo 56 SporveienOslo 1 083 Agency for urban Environ- ment 92 Ruter 694 Agency for urban Environ- ment 10 SporveienOslo 78 Oslo Fergene 43 Norled 156 Commiss- ioners 65 Reward scheme Road measures Kolsås Line PTmeasures PTmeasures PTmeasures PTmeasures National and local roads Infrastructure Agency for Urban Environ- ment 549 NPRA 128 AC 56 1 036 Ruter 7 524 Min of transport 139 Prinsensgate Admin + misc PPA Measures Holmen- kollen+ Avløs Special-transport Boat contract Commission Oslo Package 3 Procure- ment of services School/ special transport Ticket revenues and penalty fare Min of transport 141 Oslo Package 3 City of Oslo 78 SporveienOslo 27 Construction client 92 Nobina 436 Norges-buss 605 Nettbuss 365 Unibuss 1 042 Smaller operators 19 Public sector funding 12 316 Million NOK Securitas 34 Various bus facilities 77 NSB 107 AC(Fund) 31 Various operators 19 SporveienTram 774 SporveienMetro 1 565 SporveienTram 9 SporveienMetro 77 NSB 1 885 Ticketcontrols Rental cost Perfor- mance based agree- ment Advertising Fare agree- ments Rental income bus facilities Finance NSB 1 885 Operations Service procurement Ticket revenues Sales of services Market based revenues 3 610 Million NOK Carriage rental Periodic mainten- ance Fund OsloVogn-selskap 528 OsloVogn-selskap 131 SporveienWorkshop 145 AC 8 Carriage rental Reward scheme Service procurement/ school tickets Public transport - infrastructure6 114 Public transport - operations8 322 Roads - infrastucture1 490 Clear ChannelAdvertising 22 Various operators 180 Service procurement/ school tickets Buscontract Min of transport 4 206 Sender Sum Manager Sum Recipient Sum Description 1 490 NPRA RE 729 Other counties 6 Municipa- lities in Akershus 96 Akershus county (AC) 872 City of Oslo 1 668 Customers 2 719 Bank 26 «Customers» 20 Operators 50 Customers 685 Min of transport 1 200 Sporveien Media 110 Constru- ction client Constru- ction client Constru- ction client
Funding flows in the region's public transport system based on budgets for 2015. The figure follows the money flow from the sender to the recipient. Many different stages and decision-makers provide limited transparency and make it complicated to get an overview of the economic situation.
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12.2

A need for a predictable and enhanced financial framework adapted to the goal

The plans for new public transport infrastructure must be supported by financing

Based on the market analysis, service development and associated needs for new capacity, new infrastructure for metro and tram, bus facilities, a bus terminal at Oslo S and measures to improve traffic flow for public transport must be constructed for about 60 billion kroner, or two to four billion a year, by 2030/2040.

In addition comes the costs of walking and cycling paths, public transport lanes, bus roads and a number of bus terminals for which investment needs have not been assessed. Thus far, none of the projects is fully financed. In the Oslo Package 3, three billion kroner are set aside as partial financing of the Fornebu Line.

The new city environment agreements will contribute a minimum of 50 per cent of financing of infrastructure projects of national interest, but this assumes local financing of the remainder of the required funds.

Maintenance and reinvestments ensure a reliable and attractive service

Maintenance and reinvestements in existing rail infrastructure are required each year to secure a reliable and attractive public transport service for customers. The total capital replacement value for the metro and tram is about 30 billion kroner, and it will increase when new infrastructure is added. To avoid increases in the upgrade requirements for the tram and metro in the years ahead, allocations must follow the need for upgrades in accordance with lifetime estimates, at about one billion kroner annually. The current framework for reinvestments in the Oslo Package 3 is at about 600 million kroner annually, and currently 70 million kroner a year from the reward scheme is spent for this purpose. The consequence of a lack of financing will be an inadequate retention of value and thus a growing maintenance backlog. Both the railway and the roads have significant maintenance backlogs.

Annual new investment of two to four billion kroner result in an increased need for reinvestments. This requires an escalation in investment and reinvestment subsidies, so that by 2030/40 about 2.5 billion kroner is available annually for maintenance and reinvestments.

12.2 Investments in infrastructure
20 000 0 40 000 60 000 2 500 10 000 2 500 16 000 700 850 400 120 1 500 2 200 700 5 000 1 600 1 600 1 000 650 1 800 3 300 58 320 25 000 1 500 1 500 2 900 36 000 24 000 Signalling and safety system Fornebu Line Majorstuen station New metro tunnel Powerful priority access measures Bases and adaptations new trams Bus terminal Oslo S Bus facilities Tram line Sinsen-Tonsenhagen Fjordtrikken East Tram line Skovveien Metro extension Visperud Tram line Ring 2 Majorstuen-Helsfyr Tram line Ljabru-Hauketo (1) Gjersrud/Stensrud (light rail/superbus/metro) Hovinbyen transversal light rail/superbus Tram Tonsenhagen-Veitvet/Linderud Total «Ruter projects» Follo Line (3) Other measures E18 West corridor IC Hamar-Lillehammer Tram city centre-Nydalen (2) Lørenskog/Skedsmo (light rail/superbus) (2) Sandvika-Rykkin (light rail/superbus) Tram line city centre-Bryn The investments for a few other projects illustrate the scope of total investment in «Ruter projects», which amounts to 60 billion kroner. 80 000 100 000 120 000 140 000 Million kroner
Overview of investments in increased capacity for the metro and tram, bus facilities, the Oslo S bus terminal and measures giving priority and securing unhindred flow of public transport, as well as the Follo Line and other measures, including the railway, where needs are not yet known. The development of E18 west corridor and intercity trains from Hamar to Lillehammer is estimated to total 60 billion kroner. (1) Cost estimate for the metro (2) Cost estimate for super bus (3) Walking and cycling measures, public transport lanes, bus roads, bus terminals, railway, etc.
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Accessibility for all requires increased subsidies

The requirement and goal of universal design demands attention, subsidies and effort on a different order of magnitude than provided until now. In a separate strategy document, Ruter has presented investment needs of 1.8 billion kroner, which is considered a minimum to achieve a standard that complies with legal requirements, goals and intentions. At the existing (state and local) subsidy level, it will take more than 100 years to reach the goal. Furthermore, a completely different operation and maintenance level than what we have today is required, especially during winter months. What this will require financially has not been assessed.

12.3

Spending must be targeted based on its effect on green mobility

Targeted investments in public transport are important and that the road related measures undertaken do not counteract the main target by facilitating a growth in car use.

Targeted investments in public transport are important and that the road related measures undertaken do not counteract the main target by facilitating a growth in car use.The Oslo Package 3 organisation has now established a good system for evaluating impact and goal achievement. Analyses of which measures result in the best goal achievement must form the basis for prioritisation in the action programmes, instead of priorities in which the counties’ ownerhip share is a central element.

Herein lies a significant potential for directing spending to measures that better contribute to reaching the goal of higher market shares for walking, cycling and public transport.

In addition to spending being less targeted than what ought to be possible, the main problem is the lack of predictability. A far too large share of investment funds are tied to annual budget processes in inadequately coordinated decision-making bodies, and this results in irrational planning, design, and procurement processes.This also entails that public transport is not as good a team player in urban and regional development as it could be.

At the same time, it is a significant point that investment funds should be made available in a manner that ensures effective implementation. In some years, the goal of making rational progress will therefore create an investment need that is higher than in an average year.

12.4

New financing and implementation models are necessary

A more rational and, not least, faster implementation can be achieved through international calls for tenders for the overall design, financing, construction and operation of large programmes for the development of public transport in the region.There are examples internationally of this approach having led to significant improvements for public transport in entire urban regions within a short time. One example of a measure that may be considered for such an approach is the new metro tunnel.

New models of earmarked private sector funding for the development and operation of public transport should be considered. This can possibly be considered independently of a call for tender. In London, models of cooperation with the private sector locally have been developed to secure financing for infrastructure that all parties agree contribute to increased value creation and economic growth in the region.

Moreover, a logical approach to securing financing contributions may be to reintroduce the models used by the then AS Holmenkollbanen and the AS Ekebergbanen. These companies secured large properties that were sectioned and sold after they increased in value because of the building of the metro. More recent examples of equivalent solutions include Ørestaden, with the metro construction in Copenhagen, and the metro and light rail construction in new urban development areas in Stockholm. Ruter would like a mandate to start exploring such a model, for possible use in both Oslo and Akershus.

12.5

A need for an annual real increase of four per cent in the financing of operations

Market needs and route design form the basis for the investment priorities and in the end, the available operating resources determine how good of a service we can offer the customers. Given the current model of split responsibilities, this link is not safeguarded to the degree that we would like. Furthermore, securing sufficient financing for operations represent the greatest challenge.

Public transport must be scaled for nearly 600 million journeys a year by 2060.The expectation is that public transport must be scaled for nearly 600 million journeys a year by 2060, an annual increase of four per cent for Oslo and Akershus combined in the next several years. The need for operational financing will increase accordingly, which means a doubling of today’s level.

12.6

Continued financing through a new package

Ruter recommends a continued financing model in which motorists, public transport users, and regional and national authorities contribute to strengthening the basis for the continued development and operation of public transport. A new financing package should include the use of pricing mechanisms that enhance the competitive advantage of public transport, contribute to the optimal utilisation of resources and provide predictable frameworks for reaching our goal.

There may be trade offs that indicate that some of the necessary additional income should be covered through a real fare increase for public transport customers and/or transfers from car users. A slight fare increase for public transport users will, if necessary, be preferable to a situation in which there are no funds with which to implement the quality and capacity improvements that are necessary to reach our goal.

Seamless, green mobility services, with for instance public transport, car sharing, city bikes, and park and rides forming parts of a combined payment solution, should also be a perspective when looking at the faresystem from new angles.

A real fare increase could possibly be introduced as part of the expanded usage of Ruter tickets, or may be done in combination with changes to the rebate rules. The model selected must ensure an annual real increase of the financial framework for public transport operations.