Case study Oslo:PT optimisation under different rules for revenue

use

REVENUE final conferenceBrussels

29th - 30th November 2005

Jon-Terje BekkenInstitute of Transport Economics,

Oslo

Based on 3 different analyses• Process evaluation

– The context of toll roads in Norway– The political compromises behind them

• Acceptability analysis– Attitudes among citizens– SP analysis of politicians and planners

• Model scenarios– Optimal packages– Restrictions on revenue use

Process evaluation

• What are the characteristics of the contents and the organisation of the packages?

• What are the impacts of the organisation of the packages on the political goals and priorities in the region?

Summary of process evaluationThe most important findings from the

process evaluation:• There are strong restrictions on Revenue

use:– Modes– Regions

• Earmarking of revenue necessary for a political compromise

• All participants have a right to veto the proposed schemes– focus is kept on positive measures – “fair” regional distribution of the revenue

Acceptability

• Acceptability among the voters– No case for a referendum

• Preferences among decision makers– Politicians focus on acceptability and

compromises– Administration propose schemes with

focus on efficiency?

Acceptability of the Oslo packages - population

4544

40

36

4644

4648

454243

414138

36

30

3838

3432

414139

4542

34

393635

3334

24

0

10

20

30

40

50

60

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

Positive towards the toll ring Passing the ring to work and positive towards it

Before the toll ring started

Oslo Package 2

The probability to recommend different measures Average score

3.9

3.8

3.4

3.3

3.4

6.6

6.1

5.8

5.8

5.4

5.2

4.10

6.8

6.1

0 1 2 3 4 5 6 7 8 9

Increased road tolls

Increased tolls in rush hour

Reduced parking in city centre

Increased parking fees in city centre

Car free city centre

Increased frequency

Reduced fare

Politicians

Administration

Preferences among politicians and administrationGeneral findings:

– Support for the package approach– Important with central Government funds – Inconsistency between expected effect of

measures and recommendations– Politicians sceptical towards restrictive

measures – opposite with administration

How to find a political acceptable package

Summary acceptability

The most important findings from the acceptability surveys were:

• The attitude towards the toll ring increasingly positive over time.

• The public acceptance of a prolongation of the toll ring is strongly dependent on the revenue use (earmarking)

• The administrative level is more likely to recommend restrictive measures compared to the political level.

• Both the political level and the administrative levels are more positive towards packages compared to the public.

• It is important that the central Government also contributes to the packages for the actors to agree.

Model scenarios• Scenario A/Oslopackage 1:

Low toll fare (1 euro) Fixed subsidy level for public transport and fixed capacity constraints in the peak period.

• Scenario B/Oslo package 2: Additional toll fare (+0,25 Euro) and PT fare (+0,1

euro) targeted on capacity increase in peak period. Fixed subsidy level but flexible capacity in the peak period.

• Scenario C/Oslo package 3: SMCP (around 4 Euro) and optimal subsidy level for

PT in the region.

Revenue useScenarioPricing Revenue use Investment

A1 Oslo package 1: Low toll fare (€1) Fixed subsidy level for public transport and fixed PT capacity constraints in the peak period.

RU 1: Fixed subsidy level in each market segments

Road investments only

B1 Oslo package 2: Additional toll fare (+€0.25) and PT fare (+€0.1) targeted on capacity increase in peak period. Fixed subsidy level but flexible PT capacity in the peak period.

RU 1: Fixed subsidy level in each market segments

Revenue earmarked to public transport, but not including operational cost

B2 As B1 RU 2: Fixed total subsidy level for all market segments, but possible regional redistribution

Revenues earmarked to public transport, but not including operational cost

C1 Oslo package 3: SMCP (around €4) and optimal subsidy level for PT in the region.

RU 1: Fixed subsidy level in each market segments

Revenues earmarked to public transport with the possibility to use the revenue for operational costs

C2 RU 2: Fixed total subsidy level for all market segments, but possible regional redistribution

Revenues earmarked to public transport with the possibility to use the revenue for operational costs

C3 RU 3: Welfare optimal subsidy level without financial constraints

Revenues earmarked to public transport with the possibility to use the revenue for operational costs

The relationship is based on a UITP

database with additional cities

FINMODExternal conditions for the transport market•Population/demography•Costs of car use and parking•PT fares and service provision•Income level•Urban sprawl/density

PT TripsInitial

Exogenous framework conditions

Car journeysInitial

Car ownershipInitial

Optimization

OPTIMIZATION MODEL:•Socio-economics•Business economics

Max W= (ticket revenue-operating costs) + user benefits - external costs

Production effectiveness

Market effective

Socially effectiveOptimized factors:•Service provision and fares•Level of subsidy•Demand for PT and car traffic

Framework for optimization•Degrees of freedom for optimization•Restrictions on revenue use

SMCP for PT – change in fare level

-30 %

-20 %

-10 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

MC car 4,26

25%mcpf

MC car 0 25%mcpf MC car 0 15%mcpf

Rel

ativ

e d

iffer

ence

s in

far

es f

rom

Osl

o pa

ckag

e 1

Capacity peak non-capacity peak Off peak

No constraints on revenue use

SMCP for PT – optimal revenue use

-100 %

-50 %

0 %

50 %

100 %

150 %

200 %

MC car 4,26 25%mcpf

MC car 0 25%mcpf MC car 0 15%mcpf

Rel

ativ

e d

iffer

ence

s fr

om O

slo

pa

ckag

e 1

off peak frequency peak frequency

Off peak vehicle size Additional peak vehicle size

No constraints on revenue use

SMCP for PT – costs and benefits

-115

-16

-101

173

123

157

-150

-100

-50

0

50

100

150

200

250

MC car 4,26 25%mcpf MC car 0 25%mcpf MC car 0 15%mcpf

Ch

ang

es

fro

m O

slo

pac

kag

e 1

( m

ill

€)

Profit Passenger benefit

External benefit Total social benefit

No constraints on revenue use

SMCP for PT - with restrictions on revenue use

21 % 21 %

57 %44 % 43 %

13 % 13 %27 %

145 % 146 %134 %

-20 %0 %

20 %40 %60 %80 %

100 %120 %140 %160 %

No transfers betweenmodes

Transfers betweenmodes allowed

Transfers betweenmodes, Internal

optimisation

Fixed total subsidy

Rel

ativ

e di

ffere

nces

from

Osl

o pa

ckag

e 1

Fare level Capacity peak (euro/trips) Off peak

Network km (1000/hour) off peak Network km (1000/hour) peak

SMCP for PT – Optimal allocation of revenue on different modes

-100 %

-50 %

0 %

50 %

100 %

150 %

200 %

250 %

Bus Tram Metro Bus Train Average

Oslo city Akershus region All modes

fare level capacity peak fare level off peak

frequency peak Total number of trips

Summary of optimisations• Oslo package 2

– a total social benefit of 211 mill euro compared to Oslo package 1 and

– 10 percent more PT passengers• Oslo package 3

– a total social benefit of 322 mill euro compared to Oslo package 1 and

– 33 percent more PT passengers• The SMCP of PT

– should reduce the capacity peak fare level under the toll fare regimes of Oslo package 1 and 2,

– should increase if road pricing were introduced in the toll fare regime of Oslo package 3.

• The optimised subsidy level – is 115 mill euro higher in the Oslo package 1 scenario– Is 103 mill euro higher under the Oslo package 2 scenarios, due to

the increased toll fare. – If road pricing is introduced (Oslo package 3), there will be no need

to increase PT subsidies.

Summary of optimisations (2)The main points to draw from the model scenarios of Oslo

in terms of welfare are:• There are social benefits from increased subsidies for PT

(Oslo package 2)• There are only small benefits from allowing transfers of

revenue between the different modes and regions• Oslo package 2 is a step in the right direction, but only a

small improvement compared to Oslo package 1. • A road-pricing scheme is superior to the other scenarios • The result from the scenarios is very sensitive to the

level of MCPF (marginal cost of public funds). The result is also sensitive to the internalisation and the level of external costs associated with car traffic.

Overall key points Oslo• The current fare setting regimes of Oslo package 1

and 2 are not based on any first-best pricing rules• The estimations are sensible of the marginal cost

of public funds • Oslo package 2 is a small step in the right direction

– compared to Oslo package 1• There are positive cost benefit ratio from increased

subsidies for PT and reallocation between modes.• The road pricing scheme is a “superior scheme”• Earmarking up front necessary to make Oslo

package 2 viable• Focus on efficiency after the scheme has been

politically accepted