Sector funding and cost recovery

Description / objective

Whether public transport is to be funded wholly by fares paid by its passengers, or partly by external sources, is a key political decision and should reflect the level of public benefit to the city of an effective system. Mitigation of the adverse externalities of private car use, such as traffic congestion, pollution and road safety, can provide the justification for public sector funding.

However the dangers of relying on that support are that it may provide a perverse incentive for service inefficiency, and that escalating costs may prove unsustainable for fragile municipal budgets. An effective compromise may be for public support to be limited to infrastructure investment, with all direct operating costs being carried by passengers.

ITS applications

None

Advantages and cautions

None