kaunas - a new framework for public transport kaunas a new framework for public transport a...

Kaunas - A new framework for public transport

KaunasA new framework for public transport

A practical example

Guido Bruggeman

Brussels 3 July 2009

Kaunas - A new framework for public transport Guido Bruggeman

2Content

City of Kaunas

Public transport in Kaunas

Difficult times in public transport

How a new framework was triggered

How the PSC was the starting point for a turn around

Best practice results in Kaunas

Quality improvement pays back

Lessons learnt : a practical framework


3Why Kaunas as an example ?

5 years ago public transport in Kaunas was nearly in a state of collapse

Nowadays public transport is well organised and modernised and passengers numbers growing

How did they manage this?

What were the key actions for success?

What were the conditions for success?

Kaunas– A new framework for public transport Guido Bruggeman

4


Introduction


5Kaunas is situated in the centre of Lithuania

Lithuania has joined the EU in 2004


6City of Kaunas

2nd largest city of Lithuania

400.000 inhabitants

Important industrial centre

Transport node (road and

railways)


7Public Transport in Kaunas nowadays

Kaunas public transport (2008) Municipal companies Private

Transport mode Bus Trolley Microbus

Companies 1 1 43

Routes 31 16 26

Vehicles 207 165 323

Passengers (in mln) 39.6 58.8 11.0


8


A difficult starting point


91995 – 2004 : public transport in decline (1)

Public transport in decline Loss of overall market share public transport since ’95 due to:

– lack of investment– low quality of services– poorly regulated competition minibuses– growing car ownership– passenger number municipal bus company down from

45 mln in 1995 to 18 mln in 2003

Muncipal companies Overstaffing companies and low cost coverage (< 50%) Product/technical oriented and not client oriented Outdated bus fleet Low motivation employees No co-operation No integrated ticketing system

Policy No vision and strategy on public transport No increase of fares allowed since 1998 (single €0.2) No regulatory framework (“out of control” and lack of transparency)


101995 – 2004 : public transport in decline (2)

Uncontrolled expansion of microbuses (60 operators)

Poorly regulated and unfair competition

Unsafe (lack of standards and control)

Municipal companies faced with unprofitable routes due competition on the road

Over 900 microbuses caused environmental pollution and congestion in city centre

Mode 1995 2004 2008

Bus 40% 19% 36%

Trolleybus

60% 30% 54%

Microbus 51% 10%

Market share public transport


11Poor service by outdated bus fleet (2004)

Municipal Bus Company

Average age buses 16 years

Fleet availability 65%

Low comfort

High maintenance costs

Second hand buses (10 different types)

Environmentally unfriendly (emissions/noise)

Municipal Trolleybus Company

Average age buses 19 years

Fleet availability 75%

Without new rolling stock ordinary public transport service would further decline.


12

Arranging financingfor public transport

A starting point for a full turn around


13Arranging financing for fleet renewal

Obstacles for financing

Limited borrowing capacity at the City (debt limits)

Public transport companies not creditworthy

Poorly regulated minibuses and unfair competition

Declining ridership and revenues

Low fares

Unclear long term vision

Lack of procurement experience

Non sustainable business

The City of Kaunas asked EBRD (European Bank for Reconstruction and Development for assisstance

Priority was renewal of buses and trolleybuses


14Towards a new framework for public transportThe City and EBRD agreed on the following framework

Framework Implementation

Introduction of PSCs Clear division between rights and obligations Transparent financial framework

Finanancing Compensation payments instead of subsidies Sustainable financing through fixed payments under a PSC Increase of fares (+40%)

Regulation of the sector Setting up Public Transport Authority Tendering and award of Public Service Contracts

Corporatisation Sound business principles; acting as corporate entity Business Plans and Corporate Development Plan Reducing political interference

Commercialisation Customer oriented approach Marketing plan Clear focus on cost reduction and revenue increase Customer satisfaction surveys Outsourcing

Policy Adoption of integrated public transport policy (city council)

Integration Merger bus and trolleybus company? Integrated ticketing system? Co-ordination through Public Transport Authority

Implementation measures reflected in Public Service Contract and Loan Agreement

Loan City

Transport Company

Investment Grant+ subsidy payments

Bank Passengers

Revenue from fares


15Traditional financing structure

Financing under Public Service Contract

Municipalityof Kaunas

KaunasTransport Company

Bank Passengers

Revenue from faresLoan


16




Payments linked toPublic Service Contract

Bank Passengers

Revenue from fares

Loan


17


Direct Support Agreement



Public Service Contract and Payments

Bank Passengers

Revenue from fares

Loan


18

A PSC enables transport operators access to financing for investments


19Basic elements PSC Kaunas

Compensation Fixed price per kilometre (gross contract) Annual indexation for labour, fuel and materials Bonus and penalties based on performance and customer satisfaction No exposure to tariff changes Duration 5 years with option for 5 years extensionLevel and price of service Defined by the City (routes and frequency) Quality standards with defined targets Tariffs set by the CityMonitoring Objective criteria (e.g. cancelled trips) Customer satisfaction surveys Complaints registrationObligations operator Deliver services in accordance with the PSC Business PlanObligations City Respecting the PSC Discourages “political interference” Promotion of public transport


20

Best practice results of a new framework for Kaunas

Many actions were driven by the PSC


21New rolling stock for Kaunas

Direct loans to bus and trolleybus companies : €10 and €15 million

NO municipal guarantee - Maturity 10 years

Procurement of 55 new diesel buses and 42 new trolleybuses

Improvement of workshops and maintenance equipment

Huge boost in perceived quality by passengers (and drivers)


22Business Plan and Marketing Plan

Business Plans were prepared for

both municipal companies with help

of Swedish consultant.

Including financial model for 10

years

TABLE OF CONTENTS0Statement of Commitment1.1 Highlights1.2 Objectives1.3 Mission1.4 Keys to Success2Company Summary2.1 Company Ownership2.2Start-up Summary2.3Company Locations and Facilities3 The future market of Public Transportation in Kaunas3.1The Market3.2The market players3.3 Competitor comparison3.4 The SWOT Analysis4The Services to be provided by UAB Kauno Autobusai4.1The present services4.2 Future Services4.2.1Distribution Strategy4.2.2Pricing Strategy4.2.3Marketing Strategy5The future structure of operations and organization5.1 Personnel5.2 Organisational Strategy5.3 Organisational Structure5.4Management Team5.5 Personnel Plan6External implications, restrictions and regulations6.1Environmental impact6.2IS and IT6.3External competition7The financial assumptions, efforts and effects7.1 General and Important Assumptions7.1.1 Macro assumptions7.1.2 Financial assumptions7.2 Revenue forecasts7.3 The Service Fee calculation7.3 Cost Forecasts7.4 Key Financial and Operational Indicators8 The Addendums8.1 Investment Plan8.2 Projected Profit and Loss8.3 Projected Cash Flow8.4 Projected Balance Sheet8.5 Financial and operational indicators and ratios8.6 Service Fee Formula Calculations and forecasted Service Fee amounts8.7 Graphs

STRATEGIC BUSINESS PLAN UAB KAUNO AUTOBUSAI, KAUNAS, LITHUANIA 2004 – 2013


23Basis calculation for Public Service Contract

A PSC forces transport companies to make a long term financial planning


24Customer statisfaction surveys

Annual customer satisfaction surveys

Carried out by independent company

Monitoring under PSC

Great source of marketing information

Discussion on company performance


25Creation of a Public Transport Department

A proposal for a specific transport department was developed

It was established in early 2007 (with logo sign).

The office co-ordinates public transport in Kaunas

www.transportas.kaunas.lt


26A popular website for communication with clients

One internet site for all public transport in Kaunas


27Question of the month

Which transport mode to you like the most?


28Introduction of unified ticketing system

Partly financed trough EU Structural Funds (75%)

Electronic ticketing system with chipcards

Marketing campaign at introduction

System started with passes, paper passes terminated 1 August 2009

Single tickets as of 1 January 2010

System was also introduced in Vilnius and Klaipeda (combined used foreseen)


29Passenger information

Introduction of passenger information

Route map of buses at stops (and leaflet)

Time tables at 367 stops (with new shelters)

Real-time passenger information at stops

Financed with help of EU funds


30Route network in Kaunas


31Outsourcing : an example - ticket inspection

A tender was organised for ticket inspection

The selection criteria was price per one bus/trolleybus inspection

140 in-house ticket inspectors were replaced by 28 employees of a private company

The inspection plans are prepared on weekly basis with exactly indicated stops and

number of inspections to be carried out.

Company is paid on the basis of number of actually delivered inspections

Malus/bonus system

8% increase in fare revenue collection

Increase in passenger control service culture


32Passenger numbers:

+122%+ 34%- 62%

Decline of ridership stopped and trend reversed

20% more passengers over 5 years (2008 : 110 million passengers)

12% more passengers between 2007-2008

282 public transport trips per inhabitant annually


33CIVITAS award

Best Environmental Practice in Baltic Cities Award” for “Modernisation of the

Public Transport Network in Kaunas City” (Union of Baltic Cities -2005)

CIVITAS Award (2005)

CIVITAS Award for a demonstration city - KaunasThe city of Kaunas has been working toward an ambitious sustainable transport policy that has been able to turn around the local urban environment. The effort is all the more remarkable if one considers the difficult post soviet conditions in which Kaunas was no longer than 10 years ago. Noteworthy accomplishments of the local strategic plan include the thorough modernisation of the public transport fleet, the introduction of electric vehicles, the development of a bicycle network, the involvement of citizens in service improvement and the promotion of public-private partnership for service provision.

A key success factor in Kaunas is the strong and continuously won political support, comprehensive evaluation and monitoring campaigns that have always backed policy implementation, and the increasing exposure of the city to European policies, programmes and experiences.


34

Political support (and a “champion” taking the lead)

Public Service Contracts that enable companies to operate professionally and deliver “value for money” to the society

Compensation instead of (“open end”) subsidies !

Sound regulatory framework at EU member state level, supporting sustainable development of public transport

Public transport strategy both as a political commitment and a framework for developments

Building blocks for a framework

Lessons learnt from the Kaunas case


35

Monitoring as a tool for performance evaluation and steering on results

Corporatisation PT companies with sound Business Plan and acting as corporate entity

Commercialisation (not necessarily privatisation) with strong focus on the Client

EU funds and projects to support ambitious turn-around programmes

Best international practice to learn from

Pillars for a framework (2)

Lessons learnt from the Kaunas case

Public Service Contracts – An overview Guido Bruggeman

36

Thank you for your attention !

Guido Bruggeman

Independent Urban Transport Consultant

Prinsengracht 464 hs1017 KG AmsterdamThe Netherlands

Phone: +31 20 624 64 82

Email: [email protected]


37

Appendix

Basic principles

Public Service Contract


38What is a PSC?

A Public Service Contract is signed between a

Transport Authority and a Transport Operator and defines:

rights and obligations of both parties (who is responsible for what?)

quantity and quality of services delivered under the contract

compensations payments to the operator for delivering of services under the contract

as well as

use and ownership of assets (infrastructure and rolling stock)

monitoring

management (execution) of the agreement (PSC)

Note: a common used alternative for ‘rights and obligations’ is ‘roles and tasks’.


39Why to have a PSC in place?

clear definition of public transport services to be delivered

clear defintion of compenpensation payments to be made to the operator

clear distintinction of tasks and responsiblities (‘who is doing what?’)

continuation of payments (long term fixed contract) to operator

fixing budgets for public transport

to ensure ‘value for money’

transparancy

minimise political interference in daily operations and management

access to financing (of investments) for Operator

Regardless national and EU legislationandRegardless of the operator is “in house operator” or a private operator,

a PSC should be always in place !


40

Contents of

A Public Service Contract


41Rights and obligations under a PSC

Transport Authority Transport OperatorRights • to define the quantity of services

• to define the quality of services• to set tariffs• to monitor services delivered

• to receive compensation payments for services delivered

• to submit proposals for improvement of services (in terms of demand and efficiency)

Obligations • to pay compensation to the transport operator for servcies delivered

• to provide and maintain infrastructure:˗ stops˗ bus lanes˗ priority traffic lights• to co-ordinate passenger

information and marketing• to implement policies and make

investments• not to interfere in daily operations of

the operators

• to deliver public transport services (quantity)• to comply with quality standards• to adhere to the tariff and ticketing system• to provide information about:

˗ passenger numbers˗ services delivered (quantity)˗ services delivered (quality)˗ complaints˗ turn-over (tickets-sold)˗ financials

An example of rights and obligations under a PSC:

There are many ways to devide rights and obligations among parties

A clear description of rights, obligations and taks of both parties is key to a PSC


42Basic elements of a PSC

Preamble

I.SCOPE

II.RIGHTS AND OBLIGATIONS OF THE TRANSPORT OPERATOR

III.OBLIGATIONS OF THE AUTHORITY

IV.EXECUTION OF AGREEMENT

APPENDICES

The main contract is in principle fixed for duration of the contract.Appendices are updated on a regular basis.


43Preamble PSC

PREAMBLE This Agreement for the provision of Public Transport Services is intended to foster improvement and further development of passenger transport in [name City] and the surrounding communities. It is designed to enhance service delivery and financial performance, and ensure value for money for the City and its citizens. The contracting Parties intend that this Agreement shall contribute to public transport in [name City] and the surrounding communities offering an attractive alternative to individual motorized traffic, and promote tourism, environmental protection, energy savings, traffic safety, and the quality of life.

A preamble is a nice way make statement about the intension of the PSC


44I. SCOPE OF AGREEMENT

• Scope

• Activities of the Company

• Subcontracting

• Financial Responsibilities

• Overall Transport Planning


45II. RIGHTS AND OBLIGATIONS OF THE TRANSPORT OPERATOR

• Public Transport Services

• Vehicles

• Safety

• Service Quality

• Tariffs

• Tickets Sales

• Information

• Marketing Activities

• Control of Passengers

• Customer complaints


46III. RIGHTS AND OBLIGATIONS OF THE TRANSPORT AUTHORITY

• Payments for Transport Services

• Control of Legal and Contractual Obligations

• Transport Infrastructure and Traffic Control Measures

• Customer Complaints


47IV. EXECUTION OF AGREEMENT

• Duration

• Management of the Agreement

• Information

• Control and Audit

• Invoicing and Payments

• Amendments to the Agreement

• Force Majeure

• Arbitration

• Termination


48Appendices PSC

Appendices

1.Public Transport Reference Service Plan (Template)

2.Public Transport Operational Plan (in force) - routes, intervals, operation times

3.Tariffs Public Transport

4.Measures and objectives to improve speed and punctuality (traffic flow quality)

5.Vehicle standard requirements

6.Service Quality Standards (direct performance)

7.Customer Satisfaction Index (survey)

8.Incentives and penalties

9.Calculation of compensation payments to be paid by the City to the Company

10.Price Indexation Formula

11.Assets made available to the Transport Operator


49Direct performance measures : example

Service indicator Penalty Paying/Receiver Reporting

Cancelled trips 200 EUR/Trip Company/City Company

Cancelled trips not reported to the City 500 EUR/Trip Company/City City(random inspections)

Deviations from the requirement for clean buses (interior and exterior)

200 EUR/bus and day Company/City City(random inspections)

98% of passengers traveling with valid ticket

50% of the lost revenues

Company City(random inspections)

Delays >3 minutes from departure provided the bus has arrived in time at terminus.

100 EUR/Trip Company/City City(random inspections)

Absence of line and/or destination sign on the front of the bus

100 EUR per bus per day

Company/City City(random inspections)

Absence of timetables and route maps on bus and trolleybus stops

100 EUR/ bus stop and day

City/Company City(random inspections)

Penalties for direct performance (examples)


50Customer satisfaction Index : example

Customer Satisfaction Contracted quality from 2008

Contracted quality from 2010

• Realiability 7.0 7.5

• Safety 7.0 7.5

• Information 7.0 7.5

• Conduct of driver (driving) 7.0 7.5

• Customer approach 7.0 7.5

• Cleanliness 7.0 7.5

• Complaints handling 7.0 7.5

Customer Satisfaction Survey

For each Quality Index Category of the Customer Satisfaction Index, the following incentives and/or penalties will apply: In case the value of a quality index category in higher than the contracted value of Appendix 5, the City will pay an incentive to the Company in the amount of EUR 25,000 for each 0.1 point difference;

In case the value of a quality index category is lower than the contracted value of Appendix 5, the Company will pay a penalty to the City in the amount of EUR 25,000 for each 0.1 point difference.

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