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Local public transport on the basis of social economic criteria
Research in Transportation Economics 29 (2010) 339e345
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Research in Transportation Economics journal homepage: www.elsevier.com/locate/retrec
Local public transport on the basis of social economic criteria Anders Ljungberg Swedish Transport Administration
a b s t r a c t Keywords: Local public transport CBA Straighter bus routes Staggered hours Peak-load pricing
Applying the welfare economic approach it is demonstrated what the effects of certain supply changes in the local public transport will be and the potential of innovative demand management measures are examined. Straighter bus routes would reduce the average travel time from door to door. The travel time on the buses decreases and the frequency increases, which reduces waiting times at bus stops. Using smaller buses and more of them would also increase the net benefit, but increase the need for subsidisation. The peak within the peak in the morning is hard to handle by price policy alone. Introducing a small variation of the start of the school-day for high-school pupils would make investment- and operation cost savings possible, and the inconvenience costs for the pupils could be limited. It is only during peak hours in the main direction of peak travel and in the critical section of the line that optimal price becomes high relative to the present level. Zero fares in off-peak will be social profitable, but an increase in subsidy is needed. An introduction of these policy changes would give rise to a net social benefit of 30 million SEK per year in Linköping. Ó 2010 Elsevier Ltd. All rights reserved.
1. Problem, purpose and outline of the paper Local public transport development in Sweden, as in many other European countries, has for a long time been on the decline, except in the very largest cities. This is seen as a problem by most politicians. Municipalities and County councils, the responsible political bodies in Sweden, have supported local public transport with some 10 billion Swedish crowns annually during many years. Is this justified from a welfare economic point of view? That the demand for a particular good or service is declining is not, per se, a sufficient reason for subsidisation. In large cities, traffic congestion and environmental problems constitute an obvious reason for a subsidy. In small and medium sized towns, which are the focus of this paper, congestion and environmental problems caused by car traffic are less severe than in large cities. However, there are other reasons for subsidising public transport (Parry & Small, 2009). Running bus services in small and medium sized towns on the basis of welfare economic criteria implies, among other things, a pricing policy which requires a subsidy level that approximately corresponds to the prevailing one of about 50%. It should, however, be pointed out that this coincidence does not prove that local public transport is actually run on the basis of welfare economic criteria. A survey of the county public transport authorities in Sweden found that most of the authorities (the principals) do not use Cost-
E-mail address: anders.n.ljungberg@trafikverket.se. 0739-8859/$ e see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.retrec.2010.07.043
benefit analysis (CBA) in the planning of the local public transport or require that the operators (agents) should use CBA as the basis for the design of bus services (Ljungberg 2003). The purpose of the paper is to show the possibilities for improvement of local public transport that a welfare economic approach can provide. For this reason the approach and some theoretical key questions will first be clarified, after the institutional setting is explained. Then the operationalisation of the basic theory is illustrated by some concrete examples in a case study of the town of Linköping, which demonstrates the potential of system analysis on the basis of welfare economic criteria. 2. Institutional setting Local public transport policy in Sweden is determined by politicians at the county level. Both the network design, including the frequency of service of each particular line, and the pricing policy are politically decided. The desirable quality of service and the current level of fares are not, by far, consistent with a self-financing regime. Therefore some 50% of the total costs of local public transport are financed by local (county) taxes. The subsidisation ranges from 28% to 74% among the 21 county public transport authorities. In order to counterbalance the ever-growing costs of local public transport services, competitive tendering for carrying out the specified services, given the fares, is nowadays quite common (SLTF, 2002 gives an overview of the organisation of local and regional public transport in Sweden). The problem is that
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although a subsidy is justified based on welfare economic criteria, its use today does not give full value for money. The population of the Linköping municipality is 140 000. Bus is the only mode of local public transport like in most medium-size cities, and all smaller towns in Sweden. At present, the public transport system in Linköping consists of biogas-fuelled buses on 18 different lines transporting 6 million passengers each year. It is tax-financed to 51%. Almost 70% of the passengers travel in peakhours (07.00e09.00 and 14.30e18.00). The average bus-riding time is 20 min and the average travel distance slightly less than 5 km. There is hardly any congestion on the roads in peak-time and there are plenty of bicycle roads between the suburbs and the city-centre. 57% of all trips in Linköping are made by car, 31% by bicycle and 12% by bus (RVU, 2001). 3. Approach and some basic assumptions of the underlying model The approach is based on received welfare economics and conventional cost benefit analysis (CBA). The proposed policy changes are founded on earlier research about existing departure from the optimum conditions, which indicates the direction of the reformation, and a few (obvious) possibilities exemplify the potential. By CBA the size of the welfare improvements are estimated. Besides changes in fares and service levels TRL (2004) also discuss, among other things, service information, fare payment technologies, land use changes, guided bus-ways, park and ride, work and school hours, car parking restrictions, and traffic restraints as factors influencing demand. However, the root cause of the divergence between current practices in public transport system design and the optimal design, is the underplay of user costs by the responsible authorities (the county principal) and the ill-considered financial constraints put on public transport in towns. From earlier studies it is indicated where the divergences are most detrimental (Jansson, 1980, 1984, 2005, Larsen, 1993, Jara-Diaz & Gschwender, 2005, chap. 26, 2008 and Ljungberg, 2009), so the cost-benefit analysis of which improvements would lead towards optimum builds on this foundation scratch. From the afore mentioned studies it is indicated that general deficiencies of local bus systems are that too large buses are run on too winding routes, and that well-considered peak-load pricing schemes are lacking. The potential of innovative demand management measures like staggered school hours is also not realized. However, before tackling these general problems in the case study of Linköping two special aspects of local public transport that justify some departure from the conventional CBA approach should be pointed out. 3.1. Incremental costs and benefits of merit goods The welfare economic approach aims at maximizing the sum of the welfare of all individuals and welfare is measured in terms of the willingness to pay (WTP). In many small and medium sized towns, the demand base for the public transport system is limited and the total WTP of the potential travellers can be insufficient, at least on some routes, to make any public transport service commercially viable. A basic level of public transport is still offered to deserving persons without an income (young and old persons) and/or without other means of transport. The benefit of this basic level is difficult to estimate in a conventional CBA based on the travellers’ WTP, and therefore the politically determined basic public transport services could be regarded as “merit goods”. This means that complete discontinuation of any existing bus lines in Linköping not is considered.
In most cases, the optimum level of service exceeds the basic level, and the determination of the level of service above the basic level should be based on CBA, where the benefits of all additional travellers are valued by their WTP in the same way as for ordinary goods and services. 3.2. The cost of public funds (CPF) is disregarded The system definition is crucial for the application of CBA to local public transport in other respects. Partial analysis of the travel market is recommended for both theoretical and practical reasons. Without abandoning the basic partial analytical model some important system-external effects can and should nevertheless be taken into consideration. For public transport investment the main system-internal effects are constituted by: (i) cost changes for the transport service operator; (ii) cost changes for the road or rail supplier; and (iii) changes in travel time and other real costs for existing travellers and the benefits of new trips. The external effects comprise environmental impacts like changes in air pollution and the noise level, changes in external accident costs and possibly also the impact on the labour market. The partial analysis can be complemented with the environmental impacts and the accident externalities without any large problems by the use of shadow prices. As regards the possible labour market impact, it is left out of consideration in this case study. To compensate for this neglect, the cost of public funds (CPF) is disregarded too. The main justification of CPF in CBA of public investments financed by taxes is that the labour market would be further distorted by the required taxation, which will lower the labour supply. However, when travel time and/or the fare for public transport will decrease as a result of an investment in improved local public transport, or a subsidy that makes marginal cost pricing possible in these travel markets, there is an opposite effect on the labour supply which should balance the tax wedge enlargement caused by the tax rise (see, for example Ballard & Fullerton, 1992 and Venables, 2007). 4. Proposed policy changes and estimated main effects With the welfare economic approach it is demonstrated, on one hand, what the effects of certain supply changes in the local public transport system in Linköping will be. On the other hand, the potential of innovative demand management measures like staggered school hours and extended peak-load pricing are examined, also in the case of Linköping. The following discussion is thus limited to bus routes, bus size, staggered school hours and peakload pricing. The existing financial constraints are relaxed in this exercise, that is, neither the level and structure of fares, which in the actual practice are fixed by the principal, nor the subsidy which also is part of the deal between the principal and agent (the single bus transport operator running the whole system of bus lines in Linköping) are given, but regarded as variables to adjust towards an optimal public transport system. The change in costs and benefits reported for the proposed policy changes are calculated using values recommended by the Swedish National Road Administration (2001) and the Swedish Institute for Transport and Communications Analysis (2002), as shown in Table 1. The used value of riding-time (42 SEK/hour) is higher compared to the value of bus riding-time as valued by bus users and lower compared to the value of bus riding-time as valued by car users found in a meta-analysis of British value of time studies (Wardman, 2004). The used weight for waiting-time below 10 min and walking-time respectively are 1.7 and 2.0, which for waiting time is less than found in Wardman (2004). The used weight for waiting time over 10 min is 0.5. When it comes to
A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345 Table 1 Recommended and used time values, environmental values and accident cost. Component
Value
Riding-time (regional trips) Waiting-time < 10 min Waiting-time > 10 min Walking-time CO2 SO2 NOx VOC Particles Accident cost, bus in city-traffic Accident cost, car in city-traffic
42 SEK/hour 71 SEK/hour 21 SEK/hour 84 SEK/hour 1,50 SEK/kg 159 SEK/kg 79 SEK/kg 59 SEK/kg 4707 SEK/kg 0.65 SEK/bus-km 0.06 SEK/car-km
1$ ¼ 7.5 SEK.
exhaust emissions and accident costs, it should be noted that the used emission cost for each kilogram of carbon dioxide is high. Since these external effects are small, they are only reported in one case, besides being included in the overall effects.
4.1. Welfare-raising supply changes: straighter bus routes and smaller bus size The public transport supply can be changed in many different ways. It is possible to change mode of transport, route network, number of vehicles and vehicle size. The changes in the bus transport system considered here are selected because they can be assumed to be in the direction of the system optimum in the town of Linköping. The changes and their effects are demonstrated in more detail in Ljungberg (2005, 2007b). 4.1.1. Straighter bus routes Treating the user costs on an equal footing with the producer costs, it would be profitable in CBA terms to straighten out the existing bus routes in Linköping quite considerably. The proposed bus-route system with straighter routes is showed to the right in Fig. 1. The proposed total route length is 96 km, of which 25 are main-line kilometres, and 161 bus-stops are proposed in this system. In comparison, the existing number of bus-stops is 196, and the existing total route length is 116 km, of which 32 are main-line kilometres carrying about half the total bus-trip volume. As can be seen in Fig. 1, the built up area of Linköping is spread from north-west to south-east. The cause of this is that a military training area in
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the south and an airfield (SAAB) in the north has limited the growth of the built up area. Straighter bus routes would reduce the average travel time from door to door. The time of a bus round would decrease on most lines, which means that the number of bus rounds can be increased, given the number of buses. The increase in the frequency of service would reduce waiting times at bus stops. The positive effects of shorter waiting time and riding time would more than compensate for the slight lengthening of the average walking distance in the system, which has been calculated on individual data using a geographical information system (GIS) application. The main costs and benefits are shown in Table 2, as calculated using the time-values reported in Table 1. Persons over 65 years of age are in a large extent staying within a reasonable walking distance from a bus-stop. In some cases where the new bus lines are drawn through residential areas, free of other through traffic, also walking time can be reduced by the line straightening. The encroachment cost that will arise in the residential areas which the new bus lines will cross rather than go around has not been possible to estimate. It is not certain that this is a cost. When a bus line is planned to be drawn through a residential area, some residents protest, while a planned redrawing of a bus line away from a residential area meets just as strong protest. A study to examine these reactions to the proposal has not been conducted. Neither has any study been conducted to verify the passenger reactions to the proposal as a whole. However, since the CBA in this case shows a large net benefit due to decreased travel time costs from door to door in average, the CBA result is important and should be used to balance the strong reactions by a few affected negatively. The increase in capacity (the number of bus round trips) that the line straightening brings about will be more than enough to carry the additional demand that will be a consequence of shorter travel time. 4.1.2. Smaller bus size In addition to overly windy bus routes, another failing from a welfare economic point of view is that too large buses are used in Linköping. The main-lines are operated with big articulate buses holding a maximum of 106 passengers, and the other routes are operated with normal-sized buses with a capacity of 77 passengers. This is mainly a consequence of the producer cost focus. The social optimal bus size however, is determined in a balance between the increase in operating costs as a consequence of using more buses of a smaller size and the decrease in waiting-time costs as a result of
Fig. 1. Existing (left) and proposed (right) bus-route system in Linköping.
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Table 2 Costs and benefits of bus-route straightening in Linköping, Million SEK per year. Effect
Benefit
Increased walking-time for existing passengers Shorter waiting-time for existing passengers Shorter riding-time for existing passengers Benefit of new passengers Investments in bus-ways and bus-stops Sum
Cost 5.5
7 13 6 26
2.5 8
1$ ¼ 7.5 SEK.
higher frequency. Since required capacity with the used large buses are reached with few departures every hour, the decrease in waiting time costs becomes larger than the increase in operating costs introducing somewhat smaller buses. The existing interval between the buses is between 12 min on the main lines in peak and 30 min on the other lines in off peak. The main effects of using more buses of a smaller size are shown in Table 3.
4.2. Welfare-raising demand management innovations: staggered school hours, peak-load pricing and zero fare The large variation in demand between peak and off-peak is a problem for capacity utilisation. This can be tackled by pricing policy reformation or by other kinds of demand management. The peak within the peak in the morning is hard to handle only by pricing policy. By introducing some variation in the start of the school-day for high-school pupils in Linköping substantial bus transport cost savings would be possible (Ljungberg, 2009). 4.2.1. Staggered school hours In Sweden school-trips of a certain length are financed by the municipalities. These trips are made by school-buses in the country-side and by the regular public-transport system in town. Pupils living further away than 6 km from their school receive a “school-card” financed by the municipality. School children in the nine-year compulsory school living in the built up area of the municipality of Linköping mainly attend schools nearby their homes and either walk or go by bicycle. High-school pupils on the other hand, have a longer way to school, and many of them go by bus even if they have to pay themselves. At present the majority of the high-school pupils in Linkoping’s five largest high schools located close to the city-centre, with 85% of the pupils, start almost at the same time every day. The start of the school-day generally also coincides with the start of the adult working day but the school-day is shorter, and the end of the school day is also spread over a couple of hours in the afternoon. The most busy peak period comprises only a few departures which therefore in many cases occur at the same time as high-school pupils travel to school in the morning. A staggered school start by only half an hour would therefore reduce demand considerably for the most demanded departures on several bus lines, which makes bus
transport cost savings possible. In fact, the bus-fleet size could be reduced since the fleet size is based on the morning peak. The reduced bus-fleet size will not significantly increase waiting-time costs since the bus frequency (more or less) will be unchanged. The fleet size can be reduced since there not will be the necessity for extra buses on one very crowded departure on many lines in the morning peak. The main disadvantage would be that the pupils would have to wake up earlier some mornings. The costs of this sacrifice have been estimated by the contingent valuation method (CVM). The CVM-study is based on a survey of pupils asking for their compensation requirements for accepting a change. Asking for their WTP for being spared this inconvenience would be pointless, since they have no income of their own. The estimated main effects are shown in Table 4. There are some pupils (15%) that would prefer a staggered school start, but the benefit for these pupils has not been estimated. Interviews with teachers and principals on the schools show mainly a positive attitude towards a staggered school start. It will cause problems only for some teachers, and put some more effort for the principals to schedule the classes. 4.2.2. Peak-load pricing An optimal price structure implies first price differentiation between peak and off-peak hours. Travel direction also matters, as well as where on the line the trip is made. The optimal fare is at its highest in peak-hours through “the critical section”, where the expected passenger flow is at a maximum. The critical section can be relatively short. The price-relevant cost has two components: the cost of occupying space on the bus, and the time cost caused by boarding/ alighting. Outside the critical section the optimal fare, even in peakhours, only includes a boarding/alighting charge. The tariff of optimal bus fares could for simplicity be confined to just three different fares as given in Table 5. The underlying assumptions for these results can be found in Jansson and Ljungberg (2007), and is based on the tradition started by Mohring (1972) and developed further by Turvey and Mohring (1975), Jansson (1979, 1984). Other works in this tradition are Larsen (1983), Jansson (1993), Jansson (1997), Pedersen (2003) and Jara-Diaz and Gschwender (2003, 2008). The peak fare in the critical section is the sum of the applicable occupancy charge and boarding/alighting charge. The two terms within the bracket of the expression for the occupancy charge are recognised as the cost of a peak-only bus (Cpeak) per bus round (n), and the Mohring effect of another bus round, which is a negative cost. The net of these two items is transformed to a cost per passenger through the critical section by the factor before the bracket. The composition of this factor is interesting in so far as it shows that the occupancy charge is quite sensitive to route distance (D) and the bus size (S), which both can vary in a wide range. The cruising speed (H) is of less consequence in this connection, since it is much less variable in practice where an already high level of buspriority at traffic-lights applies.
Table 3 Costs and benefits of reduced bus size in Linköping, Million SEK per year. Effect
Benefit
Shorter waiting-time for existing passengers Shorter riding-time for existing passengers Benefit of new passengers Increased cost for the operator Sum
6.3 0.2 1.8
1$ ¼ 7.5 SEK.
8
Cost
5.0 5
Table 4 Costs and benefits of a staggered high-school start, Million SEK per year. Effect
Benefit
Reduced cost for the operator Increased cost for the pupils Sum
8
1$ ¼ 7.5 SEK.
8
Cost 5.6 6
A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345 Table 5 Summary of the optimal tariff of bus fares. Peak fare through the critical section Peak fare outside the critical section Off-peak fare
Table 7 Costs and benefits of a zero off-peak fare in Linköping, Million SEK per year.
Cpeak Qpeak D Cpeak vACuser ð þ Qpeak Þ þ tð þ ACride Þ SH n vN n N Cpeak Qpeak þ ACride Þ tð n N tR ACuser Nbasic tR
D ¼ Distance (two legs) S ¼ Number of seats of a bus H ¼ Bus cruising speed (including time for stopping and starting) Qpeak ¼ Total number of passengers per peak hour R ¼ Total number of passengers per off-peak hour N ¼ Total number of buses in operation Cpeak ¼ Day cost of a peak-only bus n ¼ Number of bus rounds (per bus) in the peak periods t ¼ Average time per trip for boarding/alighting.
The first term within the second bracket in the expression for the peak fare in the critical section is again the cost of a peak-only bus per bus round. The second term stands for the time costs of the passengers on the bus per hour. The sum of these two costs is transformed to a cost per boarding passenger by the factor before that bracket, t, representing the boarding time per passenger (in hours). The peak fare outside the critical section includes just the lastmentioned boarding/alighting charge, and the off-peak fare is given by an expression for a similar cost, where the main difference is that the number of buses by definition does not include the peak-only buses, but only the basic supply of all-day buses (Nbasic). A numerical example of optimal fares is given in Table 6. The optimal peak fare in the critical section is positively related to the length of a bus line. It is only travel in the critical section which is crucial, irrespective of how long a particular trip is, but the longer the line is, the higher the optimal fare for traversing the critical section will be. Therefore, comparing trips on lines of different length, the optimal fare will on average be higher, the longer the line is. 4.2.3. Zero fare The off-peak fare is very low, so low in fact that fare collection does not seem worthwhile. Offering the off-peak service free of charge would halve, at least, the price-relevant cost e the boarding/ alighting time (t) would go down e and definitely take away the efficiency reason for pricing. In order to calculate the consequences of a zero off-peak fare, it is necessary to estimate the number of additional off-peak passengers that will be induced. The expected increase in passengers is based on a Stated Preference survey carried out in Linköping, combined with relevant demand elasticity studies found in the literature, and most decisively on results from real zero fare experiences. The results from Linköping indicate a very high expected increase in passengers as a result of a zero off-peak fare in combination with the required capacity improvements (Ljungberg, 2007a, 2007b). The number of off-peak passengers in Linköping can be expected to increase by 150% if free off-peak bus transport is offered. 20% of the new trips will be diverted from car, 21% from
Table 6 Example of optimal fares on a main bus line of 9 km (one leg) in Linköping, SEK per trip. When and where
Occupancy charge
Boarding/alighting charge
Total fare
Peak hours in the critical section Peak hours outside the critical section Off-peak
13
2
15
2
2
1
1
1$ ¼ 7.5 SEK.
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Effect Decreased waiting-time costs for existing passengers Net benefit for new passengers Increased cost for the operator Reduced exhaust emissions due to change from car Reduced accident costs due to change from car Sum
Benefit
Cost
0.5 9 3 0.5 0.1 10
3
1$ ¼ 7.5 SEK.
peak period bus, 33% from cycling and walking, and consequently 26% will be newly generated trips. This is in line with Swedish experiences of small towns where a 100% increase in passengers as a consequence of an all-day zero fare is reported. There are other examples of a very large increase in the number of passengers as a result of a zero fare in combination with a greatly improved public transport system (Hasselt in Belgium, reported in for example Goeverden, van, Rietveld, Koelemeijer, & Peeters, 2006). The large increase in the off-peak capacity requirement can be met simply by using all buses also in off-peak. Peak demand will decrease by 15%. The corresponding decrease in peak capacity is brought about by a slightly reduced number of buses used in the peak periods. Table 7 shows the benefits and costs of a zero off-peak fare in Linköping. The decrease in waiting-time costs is the net of the increase for the remaining passengers travelling in peak and the decrease for existing passengers travelling in off-peak. The net benefit for new passengers in off-peak is quite large as a result of the drastic decrease in the generalized cost, due to the zero fare and the increase in off-peak frequency of services. Besides the main components, Table 7 also includes the external benefit from the reduction in exhaust emissions and accident costs due to less car traffic. They are calculated using values recommended by the Swedish National Road Administration (2001) and the Swedish Institute for Transport and Communications Analysis (2002). These external benefits (and reduced road congestion) would be very important in large cities, but are relatively small in a town like Linköping without congestion problems on the roads. In this connection it should be mentioned that in particular in large US cities, problems of joy riders, inebriated adults and homeless people on the buses increased with zero fares, which repelled regular bus passengers (Perone, 2002). This has not happened in towns in Sweden. However, some problems of vandalism and joy riding do appear at night time, and consequently zero fare on night services is not recommended. 4.3. Total net benefits and the financial result of the proposal Table 8 gives the initial position for the public transport system of Linköping, as well as the predicted changes resulting from a reorientation of public transport policy towards net social benefit maximisation including all above mentioned policy changes. Changing from the present system to the proposed system will give rise to a net social benefit of 30 million SEK per year. Converted to US dollars it amounts to $4 million, or $30 annually per inhabitant in Linköping. The financial result, which has not been taken into account in the previous cost-benefit analysis, is an annual deficit of 17 million SEK. The main group of winners is the off-peak travellers, both the original 1.9 million off-peak passengers who get a GC reduction of 16.6 SEK per trip, and those 3.4 million new off-peak passengers, which valued by the rule of half gets a benefit of 8 SEK per trip. The
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Table 8 Main characteristics before and after the proposed reorientation of public transport policy in Linköping. Main characteristics
Present system
Proposed system
Total number of passengers Total number of peak pass (7e9, 14.30e18) Total number of off-peak passengers Total length of bus-lines Number of peak-only buses Max load ¼ 106 (45 seats) Max load ¼ 77 (36 seats) Number of all-day buses Max load ¼ 106 (45 seats) Max load ¼ 77 (36 seats) Max load ¼ 63 (30 seats) Total bus company cost per annum Total revenue per annum Producer cost per passenger Peak fare Off-peak fare Generalized cost components in Peak Fare Walk Wait Ride Total Generalized cost components in Off-Peak Fare Walk Wait Ride Total Average generalized cost (fare þ walk þ wait þ ride)
6 million 4.1 million (2820/hour) 1.9 million (685/hour) 116 km
8.5 million 3.2 million (2200/hour) 5.3 million (1910/hour) 96 km
10 10
0 0
18 18 0 124 million SEK 61 million SEK 20.7 SEK/passenger 10.2 SEK/passenger 10.2 SEK/passenger SEK/passenger 10.2 4.1 9.5 14 37.8 SEK/passenger 10.2 4.1 12.7 14 41.0 38.8 SEK/passenger (10.2 þ 4.1 þ 10.5 þ 14)
0 18 34 128 million SEK 47 million SEK 15.1 SEK/passenger 14.8 SEK/passenger 0 SEK/passenger SEK/pass. change 14.8 (45%) 5.1 (24%) 8.6 (10%) 10.8 (23%) 39.3 (4%) SEK/pass. change 0 (100%) 5.1 (24%) 8.6 (33%) 10.8 (23%) 24.4 (e40%) 30.0 SEK/pass (23%) (5.5 þ 5.1 þ 8.6 þ 10.8)
1$ ¼ 7.5 SEK.
losers will be all those who do not travel by bus in off-peak, but the loss per person will be minute. Peak travellers by bus will be worse off by 1.5 SEK per trip and tax payers not travelling by bus at all will be worse of by 0.75 SEK per day.
development and new virtuous circle would arise depends, however, on some other factors (Holmgren, Jansson, & Ljungberg 2008).
5. Conclusions
References
It has been shown in this study that there are possible welfare improving changes to be made in the local public transport system in Linköping. If the same approach were adopted by the public transport authorities in all counties of Sweden, the taxpayers would get better value for the money spent on local public transport. If, say, at least half of the 21 public transport authorities in Sweden could make similar improvements, the total net benefit would be 330 million SEK annually in total. Assuming constant net benefits during 40 years, the present value of the total net benefits would amount to 6.5 billion SEK (with 4% rate of discount) not including the positive impact on the labor market. To realize this total value, a net increase in public expenditures on local public transport of about 3.7 billion SEK would be required. Compared to the very large railway investments projects such as the tunnel through Hallandsås, the City-tunnel in Malmö, or the City-tunnel (Citybanan) in Stockholm, with investment costs from 10 to 20 billion SEK, and total benefits that hardly reach up to these costs, the introduction of a welfare economic approach to local public transport planning would be much better value for money. It will not have the same spectacular character as large infrastructure investments, but together with other transport policy measures in the same spirit, it could break the trend and increase patronage in local public transport in small and medium sized towns. As seen in Table 8 above, a one-off increase in total bus travel of 42% would occur as a result of the proposed policy changes. That could very well break the declining trend. Whether a sustained positive
Ballard, C., & Fullerton, D. (1992). Distortionary taxes and the provision of public goods. Journal of Economic Perspectives, 6(3), 117e131. Goeverden, C. D., vanRietveld, P., Koelemeijer, J., & Peeters, P. (2006). Subsidies in public transport. European Transportation Transport, 32, 5e25. Holmgren, J., Jansson, J. O., & Ljungberg, A. (2008). Public transport in towns e inevitably on the decline? Research in Transportation Economics, 23, 65e74. Jansson, J. O. (1979). Marginal cost pricing of scheduled transport services. Journal of Transport Economics and Policy, 13, 268e294. Jansson, J. O. (1980). A simple bus line model for optimisation of service frequency and bus size. Journal of Transport Economics and Policy, 14, 53e80. Jansson, J. O. (1984). Transport system optimization and pricing. John Wiley and Sons. Jansson, J. O. (1997). Theory and practice of transport infrastructure and public transport pricing. In C. Nash, & G. de Rus (Eds.), Recent developments in transport economics. Aldershot: Gower. Jansson, J. O. (2005). Bus transport system optimization and pricing. 9th Conference on Com-petition and Ownership in Land Transport (Thredbo9), Lisbon, Portugal. Jansson, J. O., & Ljungberg, A. (2007). Level and structure of optimal bus fares. In R. Macario, J. Viegas, & D. Hensher (Eds.), Competition and ownership in land passenger trans-port- selected papers from the 9th International Conference (Thredbo9), Lisbon, September 2005. Elsevier. Jansson, K. (1993). Optimal public transport price and service frequency. Journal of Transport Economics and Policy, 27, 33e50. Jara-Diaz, S. R., & Gschwender, A. (2003). Towards a general microeconomic model for the operation of public transport. Transport Review, 23, 453e469. Jara-Diaz, S. R., & Gschwender, A. (2005). Making pricing work in public transport provision. In K. J. Button, & D. A. Hensher (Eds.), Handbook of transport strategy, policy and institutions (pp. 447e459). Elsevier Ltd. Jara-Diaz, S. R., & Gschwender, A. (2008). The effect of financial constraints on the optimal design of public transport services. Transportation. Larsen, O. I. (1983). Marginal cost pricing of scheduled transport services: notes and comments. Journal of Transport Economics and Policy, 17, 315e317. Larsen, O. I. (1993). Samfunnsnytte av tiskudd til kollektivtrafikk. Oslo: Transportökonomisk Instit1utt. TÖI rapport 208/1993.
A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345 Ljungberg, A. (2003). Empirical evidence of the non-use of cost-benefit analysis in Swedish local/regional public transport. 8th Conference on Competition and Ownership in Land Transport (Thredbo8), Rio de Janeiro, Brazil. Ljungberg, A. (2005). Using Geographic Information System (GIS) doing CBA on new bus-route systems e an empirical example of the city of Linköping. 9th Conference on Competition and Ownership in Land Transport (Thredbo9), Lisbon, Portugal. Ljungberg, A. (2007a). Optimal bus transport financing e a cost -benefit analysis of zero fares policies in urban bus transport. In R. Macario, J. Viegas, & D. Hensher (Eds.), Competition and Ownership in land passenger transport- selected papers from the 9th International Conference (Thredbo9), Lisbon, September 2005. Elsevier. Ljungberg, A. (2007b). Lokal kollektivtrafik på samhällsekonomisk grundval. Diss. IEI. Linköping University. http://www.ep.liu.se/abstract.xsql?dbid¼10095. Ljungberg, A. (2009). Staggered school hours to spread peak demand for public transport e benefits and costs. International Journal of Transport Economics, XXXVI(1), 141e160. Mohring, H. (1972). Optimization and scale economies in urban bus transportation. American Economic Review, 62, 591e604. Parry, I. W., & Small, K. A. (2009). Should urban transit subsidies be reduced? American Economic Review, 99(3), 700e724.
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Pedersen, P. (2003). On the optimal fare policies in urban transportation. Transportation Research B, 37, 423e435. Perone, J. S. (2002). Advantages and disadvantages of fare-free transit policy. Tampa, Florida: National Centre for Transportation Research. RVU. (2001). Resvaneundersökning. Linköpings kommun. SLTF. (2002). Public transport in Sweden e Co-ordination and competition. Stockholm: SLTF. Swedish Institute for Transport and Communications Analysis. (2002). Översyn av samhällsekonomiska metoder och kalkylvärden på transportområdet. SIKA Rapport 2002:4, Stockholm. Swedish National Road Administration. (2001). Kollektivtrafik e Effektkatalog och handledning. Effektsamband 2000. Publikation. 2001:82, Borlänge. TRL, Balcombe, R., Mackett, R., Paully, N., Preston, J., Shires, J., et al. (2004). The demand for public transport: A practical guide. TRL report, TRL593. Turvey, R., & Mohring, H. (1975). Optimal bus fares. Journal of Transport Economics and Policy, 9, 280e286. Venables, A. J. (2007). Evaluating urban transport improvements, cost-benefit analysis in the presence of agglomeration and income taxation. Journal of Transport Economics and Policy, 41(2), 173e188. Wardman, M. (2004). Public transport values of time. Transport Policy, 11, 363e377.
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Research in Transportation Economics journal homepage: www.elsevier.com/locate/retrec
Local public transport on the basis of social economic criteria Anders Ljungberg Swedish Transport Administration
a b s t r a c t Keywords: Local public transport CBA Straighter bus routes Staggered hours Peak-load pricing
Applying the welfare economic approach it is demonstrated what the effects of certain supply changes in the local public transport will be and the potential of innovative demand management measures are examined. Straighter bus routes would reduce the average travel time from door to door. The travel time on the buses decreases and the frequency increases, which reduces waiting times at bus stops. Using smaller buses and more of them would also increase the net benefit, but increase the need for subsidisation. The peak within the peak in the morning is hard to handle by price policy alone. Introducing a small variation of the start of the school-day for high-school pupils would make investment- and operation cost savings possible, and the inconvenience costs for the pupils could be limited. It is only during peak hours in the main direction of peak travel and in the critical section of the line that optimal price becomes high relative to the present level. Zero fares in off-peak will be social profitable, but an increase in subsidy is needed. An introduction of these policy changes would give rise to a net social benefit of 30 million SEK per year in Linköping. Ó 2010 Elsevier Ltd. All rights reserved.
1. Problem, purpose and outline of the paper Local public transport development in Sweden, as in many other European countries, has for a long time been on the decline, except in the very largest cities. This is seen as a problem by most politicians. Municipalities and County councils, the responsible political bodies in Sweden, have supported local public transport with some 10 billion Swedish crowns annually during many years. Is this justified from a welfare economic point of view? That the demand for a particular good or service is declining is not, per se, a sufficient reason for subsidisation. In large cities, traffic congestion and environmental problems constitute an obvious reason for a subsidy. In small and medium sized towns, which are the focus of this paper, congestion and environmental problems caused by car traffic are less severe than in large cities. However, there are other reasons for subsidising public transport (Parry & Small, 2009). Running bus services in small and medium sized towns on the basis of welfare economic criteria implies, among other things, a pricing policy which requires a subsidy level that approximately corresponds to the prevailing one of about 50%. It should, however, be pointed out that this coincidence does not prove that local public transport is actually run on the basis of welfare economic criteria. A survey of the county public transport authorities in Sweden found that most of the authorities (the principals) do not use Cost-
E-mail address: anders.n.ljungberg@trafikverket.se. 0739-8859/$ e see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.retrec.2010.07.043
benefit analysis (CBA) in the planning of the local public transport or require that the operators (agents) should use CBA as the basis for the design of bus services (Ljungberg 2003). The purpose of the paper is to show the possibilities for improvement of local public transport that a welfare economic approach can provide. For this reason the approach and some theoretical key questions will first be clarified, after the institutional setting is explained. Then the operationalisation of the basic theory is illustrated by some concrete examples in a case study of the town of Linköping, which demonstrates the potential of system analysis on the basis of welfare economic criteria. 2. Institutional setting Local public transport policy in Sweden is determined by politicians at the county level. Both the network design, including the frequency of service of each particular line, and the pricing policy are politically decided. The desirable quality of service and the current level of fares are not, by far, consistent with a self-financing regime. Therefore some 50% of the total costs of local public transport are financed by local (county) taxes. The subsidisation ranges from 28% to 74% among the 21 county public transport authorities. In order to counterbalance the ever-growing costs of local public transport services, competitive tendering for carrying out the specified services, given the fares, is nowadays quite common (SLTF, 2002 gives an overview of the organisation of local and regional public transport in Sweden). The problem is that
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although a subsidy is justified based on welfare economic criteria, its use today does not give full value for money. The population of the Linköping municipality is 140 000. Bus is the only mode of local public transport like in most medium-size cities, and all smaller towns in Sweden. At present, the public transport system in Linköping consists of biogas-fuelled buses on 18 different lines transporting 6 million passengers each year. It is tax-financed to 51%. Almost 70% of the passengers travel in peakhours (07.00e09.00 and 14.30e18.00). The average bus-riding time is 20 min and the average travel distance slightly less than 5 km. There is hardly any congestion on the roads in peak-time and there are plenty of bicycle roads between the suburbs and the city-centre. 57% of all trips in Linköping are made by car, 31% by bicycle and 12% by bus (RVU, 2001). 3. Approach and some basic assumptions of the underlying model The approach is based on received welfare economics and conventional cost benefit analysis (CBA). The proposed policy changes are founded on earlier research about existing departure from the optimum conditions, which indicates the direction of the reformation, and a few (obvious) possibilities exemplify the potential. By CBA the size of the welfare improvements are estimated. Besides changes in fares and service levels TRL (2004) also discuss, among other things, service information, fare payment technologies, land use changes, guided bus-ways, park and ride, work and school hours, car parking restrictions, and traffic restraints as factors influencing demand. However, the root cause of the divergence between current practices in public transport system design and the optimal design, is the underplay of user costs by the responsible authorities (the county principal) and the ill-considered financial constraints put on public transport in towns. From earlier studies it is indicated where the divergences are most detrimental (Jansson, 1980, 1984, 2005, Larsen, 1993, Jara-Diaz & Gschwender, 2005, chap. 26, 2008 and Ljungberg, 2009), so the cost-benefit analysis of which improvements would lead towards optimum builds on this foundation scratch. From the afore mentioned studies it is indicated that general deficiencies of local bus systems are that too large buses are run on too winding routes, and that well-considered peak-load pricing schemes are lacking. The potential of innovative demand management measures like staggered school hours is also not realized. However, before tackling these general problems in the case study of Linköping two special aspects of local public transport that justify some departure from the conventional CBA approach should be pointed out. 3.1. Incremental costs and benefits of merit goods The welfare economic approach aims at maximizing the sum of the welfare of all individuals and welfare is measured in terms of the willingness to pay (WTP). In many small and medium sized towns, the demand base for the public transport system is limited and the total WTP of the potential travellers can be insufficient, at least on some routes, to make any public transport service commercially viable. A basic level of public transport is still offered to deserving persons without an income (young and old persons) and/or without other means of transport. The benefit of this basic level is difficult to estimate in a conventional CBA based on the travellers’ WTP, and therefore the politically determined basic public transport services could be regarded as “merit goods”. This means that complete discontinuation of any existing bus lines in Linköping not is considered.
In most cases, the optimum level of service exceeds the basic level, and the determination of the level of service above the basic level should be based on CBA, where the benefits of all additional travellers are valued by their WTP in the same way as for ordinary goods and services. 3.2. The cost of public funds (CPF) is disregarded The system definition is crucial for the application of CBA to local public transport in other respects. Partial analysis of the travel market is recommended for both theoretical and practical reasons. Without abandoning the basic partial analytical model some important system-external effects can and should nevertheless be taken into consideration. For public transport investment the main system-internal effects are constituted by: (i) cost changes for the transport service operator; (ii) cost changes for the road or rail supplier; and (iii) changes in travel time and other real costs for existing travellers and the benefits of new trips. The external effects comprise environmental impacts like changes in air pollution and the noise level, changes in external accident costs and possibly also the impact on the labour market. The partial analysis can be complemented with the environmental impacts and the accident externalities without any large problems by the use of shadow prices. As regards the possible labour market impact, it is left out of consideration in this case study. To compensate for this neglect, the cost of public funds (CPF) is disregarded too. The main justification of CPF in CBA of public investments financed by taxes is that the labour market would be further distorted by the required taxation, which will lower the labour supply. However, when travel time and/or the fare for public transport will decrease as a result of an investment in improved local public transport, or a subsidy that makes marginal cost pricing possible in these travel markets, there is an opposite effect on the labour supply which should balance the tax wedge enlargement caused by the tax rise (see, for example Ballard & Fullerton, 1992 and Venables, 2007). 4. Proposed policy changes and estimated main effects With the welfare economic approach it is demonstrated, on one hand, what the effects of certain supply changes in the local public transport system in Linköping will be. On the other hand, the potential of innovative demand management measures like staggered school hours and extended peak-load pricing are examined, also in the case of Linköping. The following discussion is thus limited to bus routes, bus size, staggered school hours and peakload pricing. The existing financial constraints are relaxed in this exercise, that is, neither the level and structure of fares, which in the actual practice are fixed by the principal, nor the subsidy which also is part of the deal between the principal and agent (the single bus transport operator running the whole system of bus lines in Linköping) are given, but regarded as variables to adjust towards an optimal public transport system. The change in costs and benefits reported for the proposed policy changes are calculated using values recommended by the Swedish National Road Administration (2001) and the Swedish Institute for Transport and Communications Analysis (2002), as shown in Table 1. The used value of riding-time (42 SEK/hour) is higher compared to the value of bus riding-time as valued by bus users and lower compared to the value of bus riding-time as valued by car users found in a meta-analysis of British value of time studies (Wardman, 2004). The used weight for waiting-time below 10 min and walking-time respectively are 1.7 and 2.0, which for waiting time is less than found in Wardman (2004). The used weight for waiting time over 10 min is 0.5. When it comes to
A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345 Table 1 Recommended and used time values, environmental values and accident cost. Component
Value
Riding-time (regional trips) Waiting-time < 10 min Waiting-time > 10 min Walking-time CO2 SO2 NOx VOC Particles Accident cost, bus in city-traffic Accident cost, car in city-traffic
42 SEK/hour 71 SEK/hour 21 SEK/hour 84 SEK/hour 1,50 SEK/kg 159 SEK/kg 79 SEK/kg 59 SEK/kg 4707 SEK/kg 0.65 SEK/bus-km 0.06 SEK/car-km
1$ ¼ 7.5 SEK.
exhaust emissions and accident costs, it should be noted that the used emission cost for each kilogram of carbon dioxide is high. Since these external effects are small, they are only reported in one case, besides being included in the overall effects.
4.1. Welfare-raising supply changes: straighter bus routes and smaller bus size The public transport supply can be changed in many different ways. It is possible to change mode of transport, route network, number of vehicles and vehicle size. The changes in the bus transport system considered here are selected because they can be assumed to be in the direction of the system optimum in the town of Linköping. The changes and their effects are demonstrated in more detail in Ljungberg (2005, 2007b). 4.1.1. Straighter bus routes Treating the user costs on an equal footing with the producer costs, it would be profitable in CBA terms to straighten out the existing bus routes in Linköping quite considerably. The proposed bus-route system with straighter routes is showed to the right in Fig. 1. The proposed total route length is 96 km, of which 25 are main-line kilometres, and 161 bus-stops are proposed in this system. In comparison, the existing number of bus-stops is 196, and the existing total route length is 116 km, of which 32 are main-line kilometres carrying about half the total bus-trip volume. As can be seen in Fig. 1, the built up area of Linköping is spread from north-west to south-east. The cause of this is that a military training area in
341
the south and an airfield (SAAB) in the north has limited the growth of the built up area. Straighter bus routes would reduce the average travel time from door to door. The time of a bus round would decrease on most lines, which means that the number of bus rounds can be increased, given the number of buses. The increase in the frequency of service would reduce waiting times at bus stops. The positive effects of shorter waiting time and riding time would more than compensate for the slight lengthening of the average walking distance in the system, which has been calculated on individual data using a geographical information system (GIS) application. The main costs and benefits are shown in Table 2, as calculated using the time-values reported in Table 1. Persons over 65 years of age are in a large extent staying within a reasonable walking distance from a bus-stop. In some cases where the new bus lines are drawn through residential areas, free of other through traffic, also walking time can be reduced by the line straightening. The encroachment cost that will arise in the residential areas which the new bus lines will cross rather than go around has not been possible to estimate. It is not certain that this is a cost. When a bus line is planned to be drawn through a residential area, some residents protest, while a planned redrawing of a bus line away from a residential area meets just as strong protest. A study to examine these reactions to the proposal has not been conducted. Neither has any study been conducted to verify the passenger reactions to the proposal as a whole. However, since the CBA in this case shows a large net benefit due to decreased travel time costs from door to door in average, the CBA result is important and should be used to balance the strong reactions by a few affected negatively. The increase in capacity (the number of bus round trips) that the line straightening brings about will be more than enough to carry the additional demand that will be a consequence of shorter travel time. 4.1.2. Smaller bus size In addition to overly windy bus routes, another failing from a welfare economic point of view is that too large buses are used in Linköping. The main-lines are operated with big articulate buses holding a maximum of 106 passengers, and the other routes are operated with normal-sized buses with a capacity of 77 passengers. This is mainly a consequence of the producer cost focus. The social optimal bus size however, is determined in a balance between the increase in operating costs as a consequence of using more buses of a smaller size and the decrease in waiting-time costs as a result of
Fig. 1. Existing (left) and proposed (right) bus-route system in Linköping.
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A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345
Table 2 Costs and benefits of bus-route straightening in Linköping, Million SEK per year. Effect
Benefit
Increased walking-time for existing passengers Shorter waiting-time for existing passengers Shorter riding-time for existing passengers Benefit of new passengers Investments in bus-ways and bus-stops Sum
Cost 5.5
7 13 6 26
2.5 8
1$ ¼ 7.5 SEK.
higher frequency. Since required capacity with the used large buses are reached with few departures every hour, the decrease in waiting time costs becomes larger than the increase in operating costs introducing somewhat smaller buses. The existing interval between the buses is between 12 min on the main lines in peak and 30 min on the other lines in off peak. The main effects of using more buses of a smaller size are shown in Table 3.
4.2. Welfare-raising demand management innovations: staggered school hours, peak-load pricing and zero fare The large variation in demand between peak and off-peak is a problem for capacity utilisation. This can be tackled by pricing policy reformation or by other kinds of demand management. The peak within the peak in the morning is hard to handle only by pricing policy. By introducing some variation in the start of the school-day for high-school pupils in Linköping substantial bus transport cost savings would be possible (Ljungberg, 2009). 4.2.1. Staggered school hours In Sweden school-trips of a certain length are financed by the municipalities. These trips are made by school-buses in the country-side and by the regular public-transport system in town. Pupils living further away than 6 km from their school receive a “school-card” financed by the municipality. School children in the nine-year compulsory school living in the built up area of the municipality of Linköping mainly attend schools nearby their homes and either walk or go by bicycle. High-school pupils on the other hand, have a longer way to school, and many of them go by bus even if they have to pay themselves. At present the majority of the high-school pupils in Linkoping’s five largest high schools located close to the city-centre, with 85% of the pupils, start almost at the same time every day. The start of the school-day generally also coincides with the start of the adult working day but the school-day is shorter, and the end of the school day is also spread over a couple of hours in the afternoon. The most busy peak period comprises only a few departures which therefore in many cases occur at the same time as high-school pupils travel to school in the morning. A staggered school start by only half an hour would therefore reduce demand considerably for the most demanded departures on several bus lines, which makes bus
transport cost savings possible. In fact, the bus-fleet size could be reduced since the fleet size is based on the morning peak. The reduced bus-fleet size will not significantly increase waiting-time costs since the bus frequency (more or less) will be unchanged. The fleet size can be reduced since there not will be the necessity for extra buses on one very crowded departure on many lines in the morning peak. The main disadvantage would be that the pupils would have to wake up earlier some mornings. The costs of this sacrifice have been estimated by the contingent valuation method (CVM). The CVM-study is based on a survey of pupils asking for their compensation requirements for accepting a change. Asking for their WTP for being spared this inconvenience would be pointless, since they have no income of their own. The estimated main effects are shown in Table 4. There are some pupils (15%) that would prefer a staggered school start, but the benefit for these pupils has not been estimated. Interviews with teachers and principals on the schools show mainly a positive attitude towards a staggered school start. It will cause problems only for some teachers, and put some more effort for the principals to schedule the classes. 4.2.2. Peak-load pricing An optimal price structure implies first price differentiation between peak and off-peak hours. Travel direction also matters, as well as where on the line the trip is made. The optimal fare is at its highest in peak-hours through “the critical section”, where the expected passenger flow is at a maximum. The critical section can be relatively short. The price-relevant cost has two components: the cost of occupying space on the bus, and the time cost caused by boarding/ alighting. Outside the critical section the optimal fare, even in peakhours, only includes a boarding/alighting charge. The tariff of optimal bus fares could for simplicity be confined to just three different fares as given in Table 5. The underlying assumptions for these results can be found in Jansson and Ljungberg (2007), and is based on the tradition started by Mohring (1972) and developed further by Turvey and Mohring (1975), Jansson (1979, 1984). Other works in this tradition are Larsen (1983), Jansson (1993), Jansson (1997), Pedersen (2003) and Jara-Diaz and Gschwender (2003, 2008). The peak fare in the critical section is the sum of the applicable occupancy charge and boarding/alighting charge. The two terms within the bracket of the expression for the occupancy charge are recognised as the cost of a peak-only bus (Cpeak) per bus round (n), and the Mohring effect of another bus round, which is a negative cost. The net of these two items is transformed to a cost per passenger through the critical section by the factor before the bracket. The composition of this factor is interesting in so far as it shows that the occupancy charge is quite sensitive to route distance (D) and the bus size (S), which both can vary in a wide range. The cruising speed (H) is of less consequence in this connection, since it is much less variable in practice where an already high level of buspriority at traffic-lights applies.
Table 3 Costs and benefits of reduced bus size in Linköping, Million SEK per year. Effect
Benefit
Shorter waiting-time for existing passengers Shorter riding-time for existing passengers Benefit of new passengers Increased cost for the operator Sum
6.3 0.2 1.8
1$ ¼ 7.5 SEK.
8
Cost
5.0 5
Table 4 Costs and benefits of a staggered high-school start, Million SEK per year. Effect
Benefit
Reduced cost for the operator Increased cost for the pupils Sum
8
1$ ¼ 7.5 SEK.
8
Cost 5.6 6
A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345 Table 5 Summary of the optimal tariff of bus fares. Peak fare through the critical section Peak fare outside the critical section Off-peak fare
Table 7 Costs and benefits of a zero off-peak fare in Linköping, Million SEK per year.
Cpeak Qpeak D Cpeak vACuser ð þ Qpeak Þ þ tð þ ACride Þ SH n vN n N Cpeak Qpeak þ ACride Þ tð n N tR ACuser Nbasic tR
D ¼ Distance (two legs) S ¼ Number of seats of a bus H ¼ Bus cruising speed (including time for stopping and starting) Qpeak ¼ Total number of passengers per peak hour R ¼ Total number of passengers per off-peak hour N ¼ Total number of buses in operation Cpeak ¼ Day cost of a peak-only bus n ¼ Number of bus rounds (per bus) in the peak periods t ¼ Average time per trip for boarding/alighting.
The first term within the second bracket in the expression for the peak fare in the critical section is again the cost of a peak-only bus per bus round. The second term stands for the time costs of the passengers on the bus per hour. The sum of these two costs is transformed to a cost per boarding passenger by the factor before that bracket, t, representing the boarding time per passenger (in hours). The peak fare outside the critical section includes just the lastmentioned boarding/alighting charge, and the off-peak fare is given by an expression for a similar cost, where the main difference is that the number of buses by definition does not include the peak-only buses, but only the basic supply of all-day buses (Nbasic). A numerical example of optimal fares is given in Table 6. The optimal peak fare in the critical section is positively related to the length of a bus line. It is only travel in the critical section which is crucial, irrespective of how long a particular trip is, but the longer the line is, the higher the optimal fare for traversing the critical section will be. Therefore, comparing trips on lines of different length, the optimal fare will on average be higher, the longer the line is. 4.2.3. Zero fare The off-peak fare is very low, so low in fact that fare collection does not seem worthwhile. Offering the off-peak service free of charge would halve, at least, the price-relevant cost e the boarding/ alighting time (t) would go down e and definitely take away the efficiency reason for pricing. In order to calculate the consequences of a zero off-peak fare, it is necessary to estimate the number of additional off-peak passengers that will be induced. The expected increase in passengers is based on a Stated Preference survey carried out in Linköping, combined with relevant demand elasticity studies found in the literature, and most decisively on results from real zero fare experiences. The results from Linköping indicate a very high expected increase in passengers as a result of a zero off-peak fare in combination with the required capacity improvements (Ljungberg, 2007a, 2007b). The number of off-peak passengers in Linköping can be expected to increase by 150% if free off-peak bus transport is offered. 20% of the new trips will be diverted from car, 21% from
Table 6 Example of optimal fares on a main bus line of 9 km (one leg) in Linköping, SEK per trip. When and where
Occupancy charge
Boarding/alighting charge
Total fare
Peak hours in the critical section Peak hours outside the critical section Off-peak
13
2
15
2
2
1
1
1$ ¼ 7.5 SEK.
343
Effect Decreased waiting-time costs for existing passengers Net benefit for new passengers Increased cost for the operator Reduced exhaust emissions due to change from car Reduced accident costs due to change from car Sum
Benefit
Cost
0.5 9 3 0.5 0.1 10
3
1$ ¼ 7.5 SEK.
peak period bus, 33% from cycling and walking, and consequently 26% will be newly generated trips. This is in line with Swedish experiences of small towns where a 100% increase in passengers as a consequence of an all-day zero fare is reported. There are other examples of a very large increase in the number of passengers as a result of a zero fare in combination with a greatly improved public transport system (Hasselt in Belgium, reported in for example Goeverden, van, Rietveld, Koelemeijer, & Peeters, 2006). The large increase in the off-peak capacity requirement can be met simply by using all buses also in off-peak. Peak demand will decrease by 15%. The corresponding decrease in peak capacity is brought about by a slightly reduced number of buses used in the peak periods. Table 7 shows the benefits and costs of a zero off-peak fare in Linköping. The decrease in waiting-time costs is the net of the increase for the remaining passengers travelling in peak and the decrease for existing passengers travelling in off-peak. The net benefit for new passengers in off-peak is quite large as a result of the drastic decrease in the generalized cost, due to the zero fare and the increase in off-peak frequency of services. Besides the main components, Table 7 also includes the external benefit from the reduction in exhaust emissions and accident costs due to less car traffic. They are calculated using values recommended by the Swedish National Road Administration (2001) and the Swedish Institute for Transport and Communications Analysis (2002). These external benefits (and reduced road congestion) would be very important in large cities, but are relatively small in a town like Linköping without congestion problems on the roads. In this connection it should be mentioned that in particular in large US cities, problems of joy riders, inebriated adults and homeless people on the buses increased with zero fares, which repelled regular bus passengers (Perone, 2002). This has not happened in towns in Sweden. However, some problems of vandalism and joy riding do appear at night time, and consequently zero fare on night services is not recommended. 4.3. Total net benefits and the financial result of the proposal Table 8 gives the initial position for the public transport system of Linköping, as well as the predicted changes resulting from a reorientation of public transport policy towards net social benefit maximisation including all above mentioned policy changes. Changing from the present system to the proposed system will give rise to a net social benefit of 30 million SEK per year. Converted to US dollars it amounts to $4 million, or $30 annually per inhabitant in Linköping. The financial result, which has not been taken into account in the previous cost-benefit analysis, is an annual deficit of 17 million SEK. The main group of winners is the off-peak travellers, both the original 1.9 million off-peak passengers who get a GC reduction of 16.6 SEK per trip, and those 3.4 million new off-peak passengers, which valued by the rule of half gets a benefit of 8 SEK per trip. The
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A. Ljungberg / Research in Transportation Economics 29 (2010) 339e345
Table 8 Main characteristics before and after the proposed reorientation of public transport policy in Linköping. Main characteristics
Present system
Proposed system
Total number of passengers Total number of peak pass (7e9, 14.30e18) Total number of off-peak passengers Total length of bus-lines Number of peak-only buses Max load ¼ 106 (45 seats) Max load ¼ 77 (36 seats) Number of all-day buses Max load ¼ 106 (45 seats) Max load ¼ 77 (36 seats) Max load ¼ 63 (30 seats) Total bus company cost per annum Total revenue per annum Producer cost per passenger Peak fare Off-peak fare Generalized cost components in Peak Fare Walk Wait Ride Total Generalized cost components in Off-Peak Fare Walk Wait Ride Total Average generalized cost (fare þ walk þ wait þ ride)
6 million 4.1 million (2820/hour) 1.9 million (685/hour) 116 km
8.5 million 3.2 million (2200/hour) 5.3 million (1910/hour) 96 km
10 10
0 0
18 18 0 124 million SEK 61 million SEK 20.7 SEK/passenger 10.2 SEK/passenger 10.2 SEK/passenger SEK/passenger 10.2 4.1 9.5 14 37.8 SEK/passenger 10.2 4.1 12.7 14 41.0 38.8 SEK/passenger (10.2 þ 4.1 þ 10.5 þ 14)
0 18 34 128 million SEK 47 million SEK 15.1 SEK/passenger 14.8 SEK/passenger 0 SEK/passenger SEK/pass. change 14.8 (45%) 5.1 (24%) 8.6 (10%) 10.8 (23%) 39.3 (4%) SEK/pass. change 0 (100%) 5.1 (24%) 8.6 (33%) 10.8 (23%) 24.4 (e40%) 30.0 SEK/pass (23%) (5.5 þ 5.1 þ 8.6 þ 10.8)
1$ ¼ 7.5 SEK.
losers will be all those who do not travel by bus in off-peak, but the loss per person will be minute. Peak travellers by bus will be worse off by 1.5 SEK per trip and tax payers not travelling by bus at all will be worse of by 0.75 SEK per day.
development and new virtuous circle would arise depends, however, on some other factors (Holmgren, Jansson, & Ljungberg 2008).
5. Conclusions
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