Addressing funding deficits

Under the circumstances where an urban transport system has insufficient internal and external resources to cover its total cost of service provision, some mechanism needs to be identified to close the gap in order to prevent its medium- to long-term collapse. Unfortunately it is often seen to be politically expedient to hold down fares even where such circumstances apply, and then the consequent damage is only realized over time.

Where such a situation applies, the operators then have a range of unpalatable alternatives: to withdraw from uneconomic routes and off-peak services; to defer vehicle maintenance; and to postpone capital expenditure. For a period, the operator may be able to survive on the direct cashflow generated by his operations, but his capital stock eventually deteriorates to the point where direct costs start to escalate and operations can no longer be sustained.

This inevitably results in a decline in both the quality and the quantity of formal service provision, and creates the opportunity for para-transit operations – typically with higher tariffs than for the displaced services. This serves neither the long-term interests of passengers nor of government.