Cost Evaluation and Financing Schemes for Urban Transport Systems

FISCUS has produced a handbook giving practical guidelines on evaluating the costs of urban mobility and selecting ways to finance it. This is intended particularly for policy-makers, planners and the managers of operating companies. The handbook covers two main issues: who pays for what, and who puts up the money (e.g. for new investments).

Seven types of cost are addressed, i.e. those associated with infrastructure, vehicle-related operations, congestion, accidents, emissions, noise and other external effects. The reader is given a step-by-step method of estimating these costs for their own city, with worked examples. Given that the availability of data may vary from city to city, the handbook offers two levels of assessment with different data input requirements (light and full). The results show the extent to which users bear the costs they cause - whether full costs, external costs (such as environmental damage) or variable costs.

FISCUS reported evidence that existing pricing mechanisms and levels are failing to provide appropriate signals to influence behaviour. For example, prices need to show greater differentiation according to the time of day and current traffic levels. Also, existing financing mechanisms (which typically rely on user charges and public budgets) are often not providing sufficient funding for the infrastructure and services that would support an optimal mix of traffic. Therefore, the relative merits of new mechanisms such as private finance, value capture (such as taxing land values that benefit from transport infrastructure investment) and cross funding (e.g. from private to public transport) are explained.

FISCUS identified three financing packages for consideration, each combining various pricing mechanisms and sources of finance. The circumstances in which each package might work well are described.

• One is based on electronic road pricing, parking/cordon charges and public transport tariffs all being differentiated by time of day, with public budgets providing subsidies and capital as necessary.
• Another is again based on differentiated charges, but with private finance and value capture.
• The third is based on making each mode commercially viable, with no subsidies or cross financing.

The first two packages are given preference (against criteria of economic efficiency, acceptability and practical feasibility), with the choice depending primarily on the adequacy of funds for investing in the transport system.

Policy implications

The FISCUS handbook aims to provide practical support for both long-term mobility planning and short-term operational decisions. By promoting the harmonisation of the knowledge base for policy decisions across Europe, it should increase efficiency and fair competition between operators and modes.

Electronic road pricing is often seen as the most powerful way of implementing efficient pricing. However, this will not necessarily be the most cost-effective or practical solution in many situations. Therefore, FISCUS gives advice on simpler pricing solutions (such as parking and cordon charges), depending on city characteristics such as size, severity of environmental problems and the financial position of public transport.

FISCUS concluded that there would be many cases where marginal cost pricing leaves a need for additional funding. In most cases, a mix of financing measures will be required, and FISCUS gives advice on when each mechanism is most likely to be appropriate. Public funding is seen as having many attractions, but may not provide adequate resources for investment, in which case a mix of private sector funding and simple approaches to value capture are recommended.