Regional Rail Transport in Germany: organization and financing

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1 Regional Rail Transport in Germany: organization and financing Transport Publics Paris 2016 Dipl.-Pol. Oliver Mietzsch BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

2 Content 1. Organization of regional rail transport in Germany 2. Funding operating costs in Germany 3. Infrastructure usage charges in Germany 4. Closing remarks 2 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

3 Organization of regional rail transport in Germany In 1996 West German Bundesbahn and East German Deutsche Reichsbahn merged into German Rail Inc. (DB AG) in parallel to reorganization of the legal base for rail transport in Germany. For regional rail operations (defined as travel time max. 1 hour or max. 50 km travel distance) the Federal states (Länder) became the competent authorities according to European regulations (EEC 1191/89 resp. EU 1370/07). DB AG as a fully integrated state owned company horizontally seperated into different companies, but remaining vertical integration between infrastructure and operations. According to German basic law, infrastructure must remain state owned, operations could be sold out attempt to bring DB AG to the stock exchange failed in BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

4 Organization of regional rail transport in Germany Some Länder further devolved competences for regional rail to local or regional authorities: North-Rhine Westphalia, Rhineland-Palatina, Hessia, Baden-Württemberg and Saxony altogether 27 Länder, regional and local competent authorities for regional rail in Germany, differing in size and realm of competence Competent authorities organize competition, negotiate and control public service contracts and finance operating costs (as well as infrastructure costs). 4 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

5 Funding operating costs in Germany Cost and contrubution of the German public transport sector indirect public subsidies for operations Farebox Revenues Direct public infrastructure funding Direct public subsidies for operations Source: steer davies gleave September 2015 Source: KCW BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

6 Funding operating costs in Germany Two Third of public transport costs in Germany (operations and infrastructure) are payed by tax payer, either directly via subsidies or indirectly (i.e. tax reductions as a result of cross subsidising, compensation payments for reduced fares for pupils and students aso.) In the EU more than half of the total income in the rail sector is paid by passengers 6 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

7 Funding operating costs in Germany Source: steer davies gleave September BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

8 Funding operating costs in Germany Germany has one of the lowest ratio of operating costs per train kilometer in the EU and is, correspondently, among those countries, where fare box revenues are above EU average Passengers high efficiency of German rail system as a result of consequent competition Traffic volume Federal fund for operating costs 8 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

9 Funding operating costs in Germany Market share in German rail sector Status quo and development in relation to passenger kilometer in relation to train kilometer Competitors Germain Rail Inc. 9 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

10 Funding operating costs in Germany In the context of changing the legal base for the German rail sector and the transfer of power for regional rail to the Länder, central government agreed to set up a Federal fund for operating costs of regional rail services to be financed by fuel tax. In 2014 the Länder insisted on a fundamental change: They asked for more money and a higher annual inflation rate as a prerequisite for changes in the horizontal distribution mechanism amongst them. Gesamthöhe (overall height) Dynamisierung (dynamization) Mindestfortschreibung (minimum extrapolation) Grundlagen 2014 Einigung Herbst ,5 Mrd. EUR 8,0 Mrd. EUR 2,0 % 1,8% 1,25% Keine In 2015 central government and the Länder came to an agreement that only partly matches the inital expectations of the Länder. As a result, the horizontal distribution amongst them remains to be approved. Laufzeit bis Zielschlüssel (life span till intended key) Verteilungsprinzip (distribution basis) 14 Jahre 14 Jahre 50% Einwohner 2012 und 50% bestellte Zugkilometer 2015 (50% inhabitants 2012 and 50% commissioned train km 2015) 10 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

11 Mio. Funding operating costs in Germany Federal Fund for regional rail services in Germany: Distribution among Länder until 2015 and new horizontal distribution mechanism after 2016 (not yet agreed) East German Länder pay back to the West Horizontal distribution of Federal fund for operating costs amongst Länder(per cent) until 2015 West German Länder after 2016 West German Länder until 2015 East German Länder until 2015 East German Länder after BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

12 Infrastructure usage charges in Germany In Germany, unlike other EU countries, rail track and station usage charges are calculated on a full cost base, i.e. they must be completely compensated by operators or regional rail authorities. As a result, Federal fund payment available for funding operating costs is declining at the expense of a steady increase in rail track and station usage charge. Moreover, price index development for car and train is widening in favour of car usage. total Federal Fund available station usage fees track usage fees investment public transport 12 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

13 Infrastructure usage charges in Germany Price index devlopment for car and train Price index for train Price index for car 13 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

14 Infrastructure usage charges in Germany Dividend 500 mio. German Rail Infrastructure monopoly: 941 mio. total profit in 2008 = 41% of DB EBIT Rail track quality payment contract LuFV II Federal fund for infrastucture investement Bund (BSWAG) Central government Holding share of profit Reinvestment of profit for rail track Federal fund for operating costs in 2014: 7, 3 bln. German Rail Infrastructure Inc. Rail track and station usage charges: 3,4 bln. in 2008 = 49% of Federal fund for operating costs Länder Local and regional rail authoritities Tendering and awarding of public service contacts Rail operating companies Source: kcw, as in 2008; own additions based on figures for 2010 and BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

15 Infrastructure usage charges in Germany Turnover Profit DB regional rail operator DB track operations DB regional rail operator DB long distance rail operator DB station operations DB urban transport services DB long distance rail opertor DB urban transport services DB station operations DB track operations With only 4% share of DB total turnover, 37% of its profit derives from infrastructure monopoly. Source: Alternativer Geschäftsbericht der DB AG BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

16 Infrastructure usage charges in Germany 135 Development of infrastructure usage charges Investment of Federal government for transport infrastructure development from 2006 to 2013 per cent ,4 102,7 109,6 101,0 110,6 110,2 104,1 102,6 113,3 112,0 108,0 106,2 117,5 114,7 109,7 108,3 125,6 116,2 110,0 109,6 126,3 Station usage Stationsentgelte 122,2 Trassenentgelte Track use 110,9 Consumer price index Verbraucherpreisindex Erzeugerpreisindex 108,5 Producer price index Motorway Railway Waterway Source: Bundesnetzagentur, Statistisches Bundesamt Source: Allianz pro Schiene on basis of BMVI , Deutscher Bundestag 16 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

17 Infrastructure usage charges in Germany Central government reimburse parts of its own Federal fund for operating costs of regional rail via disproportionate rail track and station usage charges profits of German Rail infrastructure monopoly, thereby reducing financial means available for regional rail operations, that are tendered out in competition. Despite or because of this peculiar funding mechanism of regional rail in Germany investment in rail infrastructure is far lacking behind when it comes to maintenance of already existing transport infrastructure. 17 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

18 Closing remarks With growing pressure on the financial markets for rolling stock investment regional rail authorities themselves have developed various funding mechanisms for rolling stock investment in order to upheld competition. Rolling stock pooling by competent authority Competent authority has secured recours to existing rolling stock Competent authorites give guarantees of reuse possibility Mixture of rolling stock pooling and guarantees of reuse possibility No rolling stock investment whatsoever Source: Wettbewerber-Report Eisenbahn 2013/ BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

19 Closing remarks New threat for regional rail economic sustainability: long distance busses Much lower infrastructure costs leads to distorted competition Long distance bus passengers: Where do they come from? PKW-Mitfahrten 23% Sonstige Eigener PKW 12% 13% 18% 22% Schienenpersonenfernverkehr Neuverkehre Long distance rail services 12% Schienenpersonennahverkehr Regional rail services Infrastructure Infrastruktur, Stationen 7,3 Analysis of cost structure of regional rail and long distance busses Kostenstrukturen SPNV (EUR-Cent je Pkm) Treibstoffe 1,9 Sonstiges 0,9 Marketing, Vertrieb 1,3 Operation Betrieb 1,9 5,4 Fahrzeuge Sonstiges Infrastructure 0,7 Infrastruktur, Stationen 0,1 Treibstoffe Kostenstrukturen Fernbus (EUR-Cent je Pkm) Marketing, Vertrieb 1,0 0,5 1,2 1,8 Fahrzeuge Betrieb 19 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

20 Closing remarks Train kilometer Until 2020 there will be intensified competition escpecially in the highly populated Western and Southern parts of Germany. The future will show if market forces are working well or even more government intervention is needed (eg. marketing and sales). > 90 Mio. Zugkm > 60 Mio. Zugkm > 30 Mio. Zugkm > 10 Mio. Zugkm > 5 Mio. Zugkm 5 Mio. Zugkm Source: BAG-SPNV Marktreport 2015/16 20 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de

21 Thank you very much for your attention! Dipl.-Pol. Oliver Mietzsch General Manager Greater Leipzig Areal Regional Rail Authority mailto: 21 BAG-SPNV Bundesarbeitsgemeinschaft der Aufgabenträger des SPNV e.v. bag-spnv.de