PART 1: Finance: Transport Strategy for Polish Cities

Abstract

A recent study requested by a group of mayors representing the largest Polish cities is summarized. The study was to be used as input into local and national debates about future directions of urban transport development in the country. The wider context is that of a major political and economic reform, begun in the late 1980s, involving no less than a rapidpaced transition from socialism to capitalism, featuring large-scale downsizing of the public sector, privatization, and a redistribution of political and resource powers from the state to local governments. Among the downstream effects of these changes has been an increase in private car ownership and use and a reduction in the market share of urban mass transit modes from between 80 and 90 percent of nonwalk daily trips to 70 percent or less. For transit operators, now owned by local governments, this has meant an added financial pressure coming after a decade of underinvestment in infrastructure, rolling stock, and other equipment. Large numbers of unemployed, retired, or otherwise low-income travelers, another consequence of restructuring the economy, have made it difficult to improve cost recovery by increasing fares. Traffic growth has generated congestion, since the structure and size of urban road networks were predicated on low car use. An urban transport strategy is proposed to respond to these problems. Its main short-term objective is to have an affordable and socially and environmentally acceptable modal split. In the longer term, the objective is to use the demand response to a much-reformed price system as the principal guide to how infrastructure and services should evolve. The key features of the strategy are as follows: (a) evolution toward market-supplied services by a mixed-ownership mass transport industry; (b) treatment of urban road networks as public utilities, focusing on cost recovery through pricing; (c) linkage of pricing policies for mass transport and individual transport modes, in line with second-best thinking, aiming to reduce and even eliminate subsidies for both modes; and (d) reliance on internally generated revenue leveraged by long-term borrowing to finance sectoral investments. It is therefore a counterpoint to a strategy wherein mass transport is a state-owned monopoly, the use of urban roads is subsidized as is mass transport, infrastructure investment is the instrument of preference as opposed to pricing, and sectoral investments and operating subsidies are financed from tax-generated budgets.