18 | Public-Private Partnerships in Urban Bus Systems
operations, and disrupting the status quo can be difficult. Finally, planning transportation operations—and a PPP—requires public sector capacity. Countries have had widely differing experiences with urban bus PPPs. Santiago de Chile’s Transantiago big-bang reform had a chaotic inauguration; services were gradually improved only after several renegotiation processes. Bogotá’s Integrated Public Transport System (SITP) resulted in bankrupt operators and a decline in service quality. In contrast, Seoul’s big-bang reform succeeded, as did São Paulo’s (where it was combined with a gradual reform of certain system elements). However, despite their very different contexts, approaches, and outcomes, all these recent interventions share a common element: the need for public subsidies.2 Many urban bus reformers have imposed conditions or included components in their projects that did not advance key project objectives. Sometimes with the aim of complying with the requirements of a PPP, sometimes for lack of planning, many projects have included elements that were not essential, or even proved detrimental, to project objectives. These elements included requirements such as the need to (a) operate with completely new assets, not taking advantage of existing assets in the system (including, for example, the existing bus fleet or yards); (b) incorporate expensive technological solutions; (c) modify the organization of incumbent operators or bring in a new operator; (d) design service levels according to demand levels, prioritizing financial sustainability over quality of service; and (e) include transportation infrastructure that was not justified by the context (such as segregated lanes for operating in a trunk feeder model). Box 1.2 presents the main reasons why governments pursue a PPP.
BOX 1.2
A public-private partnership: Three reasons why Many projects have embraced the public-private partnership (PPP) as a financing mechanism or an instrument to foster the reorganization of local industry. But a PPP is just a public sector strategy to deliver a good or service. Governments typically pursue a PPP in the hopes that it will allow them to accomplish the following: • Transfer up-front costs. PPPs allow public agencies to transfer a significant amount of their up-front costs to the private sector. This is only relevant where the public sector faces constraints on its liquidity or access to finance. It is important to distinguish liquidity shortages or financial constraints from fiscal constraints. Both private and public entities require fiscal space to fulfill the
financial obligations related to a project. PPPs can help generate funding or overcome issues related to short-term constraints in liquidity or access to finance when lack of access to finance is due to market or regulatory barriers, but the authority does have borrowing capacity. However, a private party will rarely enter into a long-term agreement with an authority that cannot borrow due to long-term solvency or fiscal space constraints. In all scenarios, the public agency needs the fiscal capacity to repay the loan or comply with obligations to the private concessionaire. • Improve the efficiency of a project’s design, implementation, or operations. A private entity may be in a better position to implement or operate continued
