An actuary method for the estimation and comparison of urban bus transit cost of services

This paper presents a new cost allocation method developed for estimating the fully-allocated costs of the excess peak hour bus transit service provided by two public transit systems. The estimates were produced for the explicit purpose of carrying out a realistic comparison of these costs and the costs of the potential provision of the same service by private operators. The method utilizes the same service data for the analysis. The pragmatic estimation of the fully allocated costs of service by the public and private sectors enables a more accurate estimation of potential cost savings. Sensitivity analysis was also performed using the same costing procedure to determine the range of cost savings that are feasible in a competitive contract arrangement of private sector providers. The new method separates costs of the direct provision of service from other indirect costs and thus facilitates the identification of each cost item and its significance in comparative cost estimates.     

Policy analysis of third party electronic coupons for public transit fares

Mobile technologies are generating new business models for urban transport systems, as is evident from recent startups cropping up from the private sector. Public transport systems can make more use of mobile technologies than just for measuring system performance, improving boarding times, or for analyzing travel patterns. A new transaction model is proposed for public transport systems where travelers are allowed to pre-book their fares and trade that demand information to private firms. In this public-private partnership model, fare revenue management is outsourced to third party private firms such as big box retail or large planned events (such as sports stadiums and theme parks), who can issue electronic coupons to travelers to subsidize their fares. This e-coupon pricing model is analyzed using marginal cost theory for the transit service and shown to be quite effective for monopolistic coupon rights, particularly for demand responsive transit systems that feature high cost fares, non-commute travel purposes, and a closed access system with existing pre-booking requirements. However, oligopolistic scenarios analyzed using game theory and network economics suggest that public transport agencies need to take extreme care in planning and implementing such a policy. Otherwise, they risk pushing an equivalent tax on private firms or disrupting the urban economy and real estate values while increasing ridership.     

Effects of contracting on cost efficiency in US fixed-route bus transit service

Contracted service comprises a significant proportion of total operating expenses in the provision of fixed-route bus transit service in the US. Despite its importance, the literature on the economic effects of transit service contracting has been limited to only a few studies since the mid-1990s, and is inconclusive due to problems with the nature and methodology of the past studies.This paper examines how the cost efficiency of providing fixed-route bus transit service varies by the degree of contracting. I make several improvements to previous studies and conduct a regression analysis that: (1) addresses the endogeneity problem between the contracting decision and cost efficiency, (2) differentiates between agencies that contract out only a portion of service from those that contract out all service, (3) takes into account the moderating effects of several factors on the effect of contracting on cost efficiency, and (4) uses a relatively larger set of cross-sectional time-series data constructed from the National Transit Database from 1992 to 2000.The analysis results show that the combined effects of contracting lower operating costs by $4.09 and $2.89 per vehicle hour for partial and full-contracting agencies, respectively, in the average case. These average cost savings translate into 7.8% and 5.5%, using the average operating cost per vehicle hour of $53.06. However, this improvement is not universal, because the effects of contracting on cost efficiency vary by factors such as peak-to-base ratio, agency size, the wage gap between bus operators in the public and private sectors, and agency type.     

On the financial viability of mass transit development: the case of Hong Kong

Mass transit projects are often a top contender of many cities to meet their increasing demand for travel. Despite the global trend of privatization, mass transit services, as public goods, remain largely being provided and operated by the public sector. Hong Kong is one of the few exceptions that all mass transit services are commercially operated. Both rail and bus services in Hong Kong are reputable for their quality and profitability, often serving as benchmarks for new projects. In this study, we investigate the factors contributing to this success. In particular, we ascertain the quality of transit service provision by the private sector over the past two decades. Then, we conduct an in-depth analysis of the account books of leading railway and bus operators in Hong Kong so as to shed light on their financial viability. Through this study, we hope to present crucial factors for providing financially viable private transit services.     

Reducing the cost of peak hour transit service through contracting out service

Transit service contracting has responded to fiscal and financial woes of public transit agencies as the most uniquely attractive cost‐saving strategy at present. Most transit service contracting, however, has been in the traditional provision of entire fixed route bus service or commuter express bus service, and exclusive demand responsive service for the general public or for special disadvantaged population groups such as the elderly and/or the handicapped. This paper presents a new module in transit service contracting whereby the public and private operators jointly provide the peak service on the same route and at the same time. While the public agency provides the base demand of the service, the private provider provides the excess demand, both following the same schedules and similar service arrangements. In this paper, proposed service arrangements, costing and contracting procedures are discussed. It is also reported that substantial cost savings ranging from 32 to 57% with an average savings of 48% can be achieved if the excess peak hour bus transit service on highly peaked routes in public transit agencies is contracted to competing private operator(s).     

Managing with declining resources

Urban public transport has had broad political appeal and escalating financial support since the late 1960s. The preference has been for public ownership and operation of services with only limited private sector involvement in the provision of services in a highly regulated environment. The financial standing of public transport coupled with the likelihood of a sustained period of fiscal restraint, perhaps even a decline in available resources, has created an imperative for change. This paper argues that broad‐based acknowledgment of the financial realities, clear definition of quantifiable objectives and increased authority and control for public transport management is required if public transport agencies are to meet the challenge. A new balance between service, ridership and revenue is required. Managing with declining resources will require a financial planning approach, separation of policy and planning from operations, removal of restrictions on user choice and operator competition and increased involvement of the private sector. Substantial changes in internal organization, procedures and structures and a cost‐effectiveness orientation will be necessary.     

An analysis of public bus transit performance in Indian cities

Maintaining and enhancing public transit service in Indian cities is important, to meet rapidly growing mass mobility needs, and curb personal motor vehicle activity and its impacts at low cost. Indian cities rely predominantly on buses for public transport, and are likely to continue to do so for years. However, the public bus transit service is inadequate, and unaffordable for the urban poor. The paper explores the factors that contribute to and affect efforts to improve this situation, based on an analysis of the financial and operational performance of the public bus transit service in the four metropolitan centres and four secondary cities during the 1990s. Overall, there were persistent losses, owing to increasing input costs and declining productivity. The losses occurred despite rapidly increasing fares, and ridership declined. The situation, and the ability to address it, is worse in the secondary cities than the metropolitan centres. We suggest a disaggregated approach based on the needs and motivations of different groups in relation to public transit, along with improved operating conditions and policies to internalize costs of personal motor vehicle use, to address the challenge of providing financially viable and affordable public bus transit service.     

Managing public transport: Commercial profitability and social service

In the past 20 years emphasis on the social role of public transport has grown as transit has become more subject to the direct intervention and financial support of external authorities. It is rare for the social objectives to be specified in a way which translates clearly into quantifiable targets, and the transit operator is left to tread an ill-defined path between commercial objectives and the wider social requirements. This paper examines the range of objectives of public transport policy, and the difficulties of ensuring maximum efficiency and effectiveness when much of the revenue comes from subsidies and when the goals are poorly specified. It discusses management information and operating strategies in relation both to commercial considerations and to satisfying social objectives. Particular reference is made to the changes which will follow deregulation of stage bus services in the UK.     

A test of inter-modal performance measures for transit investment decisions

Choices among alternative transit capital investments are often complex and politically controversial. There is renewed interest in the use of performance indicators to assist in making rational and defensible choices for the investment of public funds. To improve the evaluation of rail and bus performance and provide more useful information for transit investment decision-makers, it is important to use performance indicators that fairly and efficiently compare different transit modes. This paper proposes a set of inter-modal performance indicators in which service input, service output, and service consumption are measured by total cost, revenue capacity miles/hours, and unlinked passenger trips/miles respectively based on economic principles and evaluation objectives. The proposed improvements involve the inclusion of capital as well as operating costs in such comparisons, and the recognition of the widely varying capacities of transit vehicles for seated and standing passengers. Two California cases, the Los Angeles – Long Beach Corridor and the Market/Judah Corridor in San Francisco, are used for testing their usefulness in the evaluation of the efficiency and effectiveness of rail and bus services. The results show substantial differences between performance indicators in current use and those proposed in this study. The enhanced inter-modal performance indicators are more appropriate for comparing the efficiency and effectiveness of different modes or a combination of transit modes at the corridor and system levels where most major investment decisions are made. This revised version was published online in June 2006 with corrections to the Cover Date.     

Appraisal of rail investment projects: recent British experience

There has long been conflict over the degree to which railways should follow commercial or social investment criteria. This paper outlines the components of a comprehensive social cost‐benefit analysis of railway investment, and then describes the current approach in Britain. British Rail investment proposals are subject to a purely financial appraisal, although in the subsidized sectors of the railway this is subject to the proviso that a ‘broadly comparable’ level of service should be maintained. Local authorities and private operators are able to apply for a central government grant towards the cost of schemes they sponsor. But grant is only payable in respect of external benefits—that is, benefits other than to public transport users. Sponsors are also expected to seek contributions from private developers wherever possible. The difficulties to which this approach leads are discussed, and illustrated with two case studies of actual schemes. In one, it appears that failing to consider disbenefits to bus operators (and in turn to users of bus services) could lead to investments being undertaken which are not justified. In the other, a scheme which yields a high Net Present Value could not go ahead, in the form that we evaluated, because there is no way of recouping enough of the user benefits as revenue. Both are examples of the sort of distorting effect on decision‐making the current regime may have.     

Risk pricing inefficiency in public–private partnerships*

There is a drive towards delivering and operating public infrastructure through public–private partnership (PPP) rather than traditional public procurement. The assessment of the value for money achieved by the two alternative approaches rests in the cost of financing and their efficiency in delivery and operation. This paper focuses on the cost of financing, in particular the cost associated with transferring risk from the public to private sphere. If capital markets were efficient and complete, the cost of public (government) and private financing should be the same, with the relative delivery and operational efficiency remaining as the primary determinant of value-for-money. Evidence suggests, however, that the risk transfer to a PPP entails an inefficient risk pricing premium which goes beyond the direct cost of financing. We argue that a high price for PPPs results from large risk transfers, risk treatment within the private sector, and uncertainty around the past and future performance of public–private consortia. The corollary is that the efficiency gains from a PPP must be much higher than commonly expected to deliver a greater value for the money than under a traditional approach.     

Analysis of the efficiency of local government services delivery. An application to urban public transport

In recent years in the European Union (EU), we have witnessed an externalization process of the provision of local government services, in order to separate the political responsibility and the direct delivery of the service. The reasons that justify this process are focused on the belief that the private sector is more efficient in carrying out economic activities, the pressure to reduce the public deficit and the public debt, the search for management systems that bypass public administration procedures, and the increase of control on local governments in auditing and accountability issues.The objective of this paper is to compare the efficiency of public and private sectors in the provision of urban transportation services. This paper shows the results of an empirical study commissioned by the Regional Audit Office of Catalonia (Spain), in order to evaluate the efficiency with which urban transportation services are delivered in the most important cities of this region. This efficiency study has been carried out using the Data Envelopment Analysis (DEA) model, multiple linear regression and logit and cluster analysis. The results allow us to conclude that, in the cities studied, exogenous factors are not relevant and the private management of urban transport service is not more efficient than public management.     

A comparison of the sustainability of public and private transportation systems: Study of the Greater Toronto Area

A macroscopic assessment of the impacts of private and public transportation systems on the sustainability of the Greater Toronto Area (GTA) is undertaken from economic, environmental and social perspectives. The methodology draws upon the urban metabolism and sustainability indicators approaches to assessing urban sustainability, but compares modes in terms of passenger-kms. In assessing the economic sustainability of a city, transportation should be recognized as a product, a driver and a cost. In 1993, the traded costs of automobile use in the GTA were approximately balanced by the value of the automobile parts and assembly industry. But local transit costs 1/3 to 1/6 of the auto costs per person-km, in traded dollars, mainly because local labour is the primary cost.Public transportation is more sustainable from an environmental perspective. Automobile emissions are a major contributor to air pollution, which is a serious contemporary environmental health problem in Toronto. Public transportation modes are less energy intensive (including indirect energy consumption) and produce CO₂ at an order of magnitude lower, although these benefits are partially undermined by under-utilization of transit capacity and the source of electricity generation.The social benefits of automobile use are likely more significant than costs in determining GTA residents' preferential mode choice. The speed and access of auto use provide important economic benefits, e.g. relating to employment and product choice. Nevertheless, offsetting the service attributes of private transportation are large social costs in terms of accidents. The costs of automobile insurance provide one tangible measure of such negative impacts.In order to improve the sustainability of the GTA, innovative approaches are required for improving the performance level of public transportation or substantially reducing the need for the service level provided by automobiles. Efforts such as greater integration of bicycles with public transit, or construction of light-rail systems in wide roadways, might be considered. But to be sustainable overall, a transportation system has to be flexible and adaptable and so must combine a mixture of modes.     

Planning of integrated transit network for bus and LRT

An integrated approach is suggested for the planning and evaluation of mass transport systems which includes a bus network and LRT/RTS in urban areas. This approach involves a simplified procedure for determining mass transit demand, bus route network generation and evaluation, light or rapid transit corridor identification and its patronage determination in the presence of bus networks. Scheduling of a mass transportation system based on marginal ridership concept is also suggested for a given fleet size. All the three major components (demand estimation, route network generation and scheduling) iterate and interact each other with a feedback mechanism for the desired optimal solution in terms of performance indicators. Necessary interactive software packages for all the above subsystems have been developed.     

Optimal transport strategies for European cities

A new procedure for generating optimal transport strategies has been applied in nine European cities. A public sector objective function which reflects concerns over efficiency, environmental impact, finance and sustainability is specified and a set of policy measures with acceptable ranges on each, identified. Optimal strategies based on combinations of these policy measures which generate the optimal value of the objective function, are identified, and compared between cities. Resulting policy recommendations are presented. The results demonstrate the importance of an integrated approach to transport strategy formulation. They emphasise the role of changes in public transport service levels and of fares, and of charges for car use. By contrast, new infrastructure projects are less frequently justified. In the majority of cities the revenues from car use charges are sufficient to finance other elements in the strategy. However, private sector involvement either in initial financing or in operation may be desirable. Revised objective functions to reflect private sector involvement are specified, and optimal strategies with private sector operation of public transport are also identified. The requirement to meet private sector rates of return for public transport operation typically results in lower frequencies and higher fares; charges for car use then need to be raised to satisfy public policy objectives, but system performance is reduced. This revised version was published online in June 2006 with corrections to the Cover Date.     

Special issue: Importance of public transport

The transport demand in most major cities around the world can only be met with a high‐quality public transport system. The requirements on bus, rail, underground and tram systems are manifold with reliability and efficiency as the key factors. The service operating hours and the size of the network are often extended in order to serve the needs better. Further, most metropolitan areas are trying to provide more incentives for citizens to leave the car at home and use the local transit systems instead. The reasons are well known. Not only does a public transport system only make economical sense if it is well used, but most urban areas with a high car‐dependency face at least three major problems; safety, congestion, and pollution (noise and air pollution, land separation, etc.). It is generally recognised that to decrease car usage and to increase public transport usage a stick & carrot approach is needed. The London congestion‐charging scheme is an example since all revenues collected by the scheme are put into the improvement of bus and underground services.     

Accounting for emissions in the measurement of transit agency efficiency: A directional distance function approach

This paper uses a directional distance function approach to demonstrate the importance of considering a transit agency’s goal of reducing vehicular emissions as well as production of passenger or vehicle-miles, when measuring agency efficiency. This is especially critical given the increased emphasis policymakers may place on efficiency in the allocation of scarce public resources. The analysis includes 43 single mode US bus transit agencies for the year 2000. Results show only five agencies performing efficiently when emission abatement is not included in the analysis, but 22 firms are identified as efficient once emission abatement is considered. Consistent with previous studies, public agencies are found to be less efficient than private agencies, regardless of the efficiency measure used.     

Experiences with Competitive Tendering of Bus Services in Germany

Abstract

After a long transition period with only a few isolated procedures for competitive tendering, the market for German public transport bus services has seen numerous such tenders in recent years. The results are complex. From the public transport authorities’ point of view, the main effects are a decrease in subsidy payments, with relatively low expenses relating to the tendering process (allocation, contract management). The overall level of competition is high, with five to seven bidders on average, although this has been declining in recent years. Entry barriers have been identified at significant levels for several parameters, especially with respect to the volume tendered and the revenue risk to be borne by the operator out of net‐cost contracts. Demonstrably small‐ and medium‐sized transport operators have been able to increase their market share in the starting phase of introducing tendering, with diminishing success rates in recent years. Due to the increased quality requirements in competitive tendering, the quality of public transport available has improved considerably, and environmental standards have been better implemented and sustained. As far as employees are concerned, a trend towards wages below the wage rate of private operators cannot be observed. However, their level is well below the level of public incumbent operators.     

An aggregate demand model for intercity passenger travel in Sri Lanka

Inspite of the inherent weaknesses in aggregate demand models, they continue to be used in everyday applications, especially in developing countries. The largely data intensive disaggregate model preclude its application in many cases. This paper attempts the formulation and calibration of an aggregate total demand model for estimating inter-district passenger travel by public transport in Sri Lanka. In its process, an investigation is made of the common problems in the aggregate approach while examining possible remedial measures to improve the accuracy and (hence) the usability of the aggregate model. It is argued that commonly used variables and functional forms are inappropriate for making accurate estimates in developing countries. Consequently, the model calibration is shown to incorporate variables representing urbanisation, under-development, transfers, a mode-abstract cost function and intrinsic features. The necessity for functional form for each variable to be based on behavioral assumptions that are tested using the Box-Cox transformation for ensuring the best fit of the data is also observed. Although, the model form was calibrated for Sri Lanka, the model is generalised in order for its applications to other countries as well as, both, inter-district and intercity travel demand estimation.     

Transit user perceptions of driverless buses

This paper reports the results of a stated preference survey of regular transit users’ willingness to ride and concerns about driverless buses in the Philadelphia region. As automated technologies advance, driverless buses may offer significant efficiency, safety, and operational improvements over traditional bus services. However, unfamiliarity with automated vehicle technology may challenge its acceptance among the general public and slow the adoption of new technologies. Using a mixed logit modeling framework, this research examines which types of transit users are most willing to ride in driverless buses and whether having a transit employee on board to monitor the vehicle operations and/or provide customer service matters. Of the 891 surveyed members of University of Pennsylvania’s transit pass benefit program, two-thirds express a willingness to ride in a driverless bus when a transit employee is on board to monitor vehicle operations and provide customer service. By contrast, only 13% would agree to ride a bus without an employee on board. Males and those in younger age groups (18–34) are more willing to ride in driverless buses than females and those in older age groups. Findings suggest that, so long as a transit employee is onboard, many transit passengers will willingly board early generation automated buses. An abrupt shift to buses without employees on board, by contrast, will likely alienate many transit users.