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At BVG in Berlin, investment priorities are set the city. Its counterpart, Ruter, is responsible for the mostly through negotiations. At a high level, the administration and funding of the system. transportation system has a list of programs and pro- jects it wants to advance. The public transport system FUNDING FOR PUBLIC TRANSPORT receives a fixed amount of funding from the city. BVG SYSTEMS IN EUROPE submits justifications for the projects that it wants to invest in. Through negotiations, the prioritized list of Funding for public transportation has always been projects is established. Although the system is funded a major challenge, whether here in the United States through an annual budgeting process, a 4-year plan or abroad. In the United States, funding for capital for capital improvements is established with the city and operating needs derives from various sources, (see Figure 7). with capital funding available at the state and fed- In Oslo, KTP undertakes a reinvestment assess- eral levels. Funds for operations derive from fare ment. Prioritization of projects is based primarily on revenues, but must be supplemented by other sources, inspections and, to some extent, politics. On the which include local sales taxes, property taxes, state methodical and technical end, a technical team devel- subsidies, parking fees, and other concession charges. ops standards for asset classes. At the political end, For the European systems visited by the ITSP KTP, working with its tram and metro operating con- study team, funding options are similar, but fare tractors, determines priorities for projects. receipts do play a larger role and pay for a larger pro- KTP is responsible for the strategic planning and, portion of these systems' operating costs than do fare thus, the prioritization for transportation services for receipts in the United States. For example, fares sup- port 50% of TfL's annual expenditures. In Notting- ham, more than 90% of the trips within the city are run privately, requiring no grant subsidies or public dollars. Only school trips and trips for persons with disabilities or above a certain age are subsidized and paid with government grants. Fare policies are gener- ally established by the oversight or managing agen- cies, even if the service is privately run. For BVG in Berlin, fare receipts generated are enough to cover more than h500 million of personnel costs, and in Oslo, fare revenues cover 55% of its operations. Due to the current worldwide economic down- turn, spending is being reduced at the national lev- els. In the United Kingdom, transit systems enter into multiyear "funding settlement" schedules with the central government, similar to full-funding grant agreements or the multiyear transportation autho- rization legislations in the United States. In light of austerity programs that are being considered across the European continent, reduction in spending has already begun for many programs and projects. The findings regarding funding and finance for state of good repair in the European transit systems can be summarized in four broad themes: 1. Funding for a state of good repair is a uni- versal challenge. Countering team members' pre- conceived notion that because European transit Figure 7 BVG evaluates and maintains its assets systems are more well developed and heavily used based on both technical and operational reliability. than their American counterparts, they must be well All assets are inspected annually. funded and in a state of good repair. Staff at the 12

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agencies that the mission team met with described Eighty percent of the profits are allocated to bus oper- backlogs of deferred maintenance and/or funding ations and maintenance. The city's 9,000 buses are shortfalls for their capital programs. operated and maintained by about 20 private compa- 2. A wide variety of funding sources and struc- nies that contract with TfL. The remaining 20% of the tures support transit capital programs. These congestion toll revenues are dedicated to "green ini- include national, regional, and local taxes; fares; tolls; tiatives" such as replacing diesel buses with hybrid and private capital investments in public-private part- models. nerships. Gas taxes are not a major funding source for In addition to providing a major source of funds public transportation in the countries visited by the for the transit system, the charge has reduced conges- study mission. tion in the center city by 30% and traffic by 22%. 3. National governments play varying roles Nonetheless, the current city administration is mov- in funding maintenance for a state of good repair. ing to reverse the 2007 expansion and to halve the size Despite the common perception that governments in of the district where the charge is imposed. The rev- Europe play a more active role in national life com- enue impact would be partially offset by increasing pared with the United States, the national govern- the charge from 8 per day to 10. ments in three of the four countries visited by the In Nottinghamshire, capital projects are largely mission (the United Kingdom being the exception) funded by central government grants. In order play very limited roles in funding transit services, to increase mobility for low-income and transit- particularly capital programs to achieve and main- dependent populations, Nottingham and the county tain a state of good repair. Most of the funding contract with private operators to provide services sources mentioned above resulted from local or that would not be provided by the free market. Under regional, rather than national, initiatives. the contracts, government subsidies pay for reduced 4. The results from privatization of transit fares for the target populations. The subsidies may capital programs are decidedly mixed. Public- take the form of providing government-owned buses private partnerships have been employed to finance, for use by the operator (who still maintains the buses). design, build, operate, and maintain transit systems Maintenance of buses is funded almost entirely in Europe, especially in the United Kingdom, but the by fares collected by the private bus operators that results have ranged from exemplary success to provide all bus services in the region. Under the calamitous failure. United Kingdom's deregulation law, any licensed operator can offer transit services. The high cost of In the United States, federal and state gas and driving in the country leads to a different calculus of diesel fuel taxes provide much of the funding for mode choice than that of U.S. commuters, allowing transit state-of-good-repair needs. In Europe, in con- operators to charge fares that cover all of their costs trast, gas taxes are typically treated as a general rev- for commuter services, including maintenance of enue source for national governments and are not a privately owned buses. major funding source for transit, even though gas In France, the versement transport, a payroll tax taxes in Europe are far higher than in the United paid by public- and private-sector employers with States. Instead, European transit agencies maintain more than 10 employees, provides roughly half of the their systems with a wide variety of funding sources funding for construction, operations, and mainte- and structures including national, regional, and local nance of transit systems. Started as a pilot in Paris taxes; fares; tolls; and private capital investments in in 1971, the tax was expanded to districts, called public-private partnerships. Public Transport Agencies, that encompass most London is well known for its congestion charge-- large- and medium-sized cities in the country. The a toll assessed on drivers who cross into a defined tax rates vary by region, ranging from 1% to 2.6% district in the central city. Introduced in 2003, the con- of payroll. Tax revenues totaled about h5.5 billion gestion charge was extended into West London in nationwide in 2007, but more recently, revenues 2007. The toll now generates approximately 140 mil- have declined due to the economic downturn while lion annually in net revenues. Certain vehicles are state-of-good-repair needs for transit systems have excluded from paying the fee including London continued to increase. Expanding the versement licensed taxis, motorcycles, and bicycles. Residents transport to additional regions would yield dimin- who live within the zone receive a 90% discount. ishing returns as 80% of the wages in the country 13