Case study Oslo: PT optimisation under different rules for revenue use

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Case study OsloPT optimisation under different
rules for revenue use
REVENUE final conferenceBrussels29th - 30th
November 2005

• Jon-Terje Bekken
• Institute of Transport Economics, Oslo

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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

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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?

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Summary of process evaluation

• The 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

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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?

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Acceptability of the Oslo packages - population
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Attitudes towards the toll ring depending on
revenue use (2003)
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The probability to recommend different measures
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Preferences among politicians and administration

• General 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

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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.

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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.

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Revenue use
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FINMOD

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

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SMCP for PT change in fare level
No constraints on revenue use
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SMCP for PT optimal revenue use
No constraints on revenue use
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SMCP for PT costs and benefits
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SMCP for PT - with restrictions on revenue use
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SMCP for PT Optimal allocation of revenue on
different modes
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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.

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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.

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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

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Time frame for the evolution towards the current
Norwegian urban toll packages
4. Generation ?????
The original toll road scheme
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Acceptability of Oslo package 2
Reasons for a positive attitude towards the toll
ring
Source PROSAM rapport nr 10
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FINMOD
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Hva er et optimalt tilbud?