Sustainable Urbanization, Private Sector and People

By Oscar Quintanilla

Although the “Overall Framework for Sustainable Urbanization” seems comprehensive, class discussions have been mostly around how to influence structures. It is not a new shortfall; it reflects a broader problem in cities around the world. Of the three components in the center of the framework (people, structures and land), structures are the less contentious and where private sector involvement can generate more profits. It makes sense for a class in infrastructure finance to center around this component, but it doesn’t really make sense when what we are dealing with is sustainability.

Cities are complex organisms, without clear boundaries or static definitions, continuously changing and adapting. As such, talking about the structures without even mentioning people or land is an unexciting conversation. As we saw in one of the presentations, people behavior has the most impact in sustainable development. I might argue that land use patterns are even more important. Structures help support human activity, but land use patterns and human behavior are more critical components for understanding these activities. Continue reading

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A new way to fund infrastructure

By Alice Heathcote

In a recent class, it was noted that for all of our case studies on ‘new cities’ the developments were inevitably funded with a mixture of both public and private capital. The discussion seemed to conclude that you aren’t ever able to build new cities with the government or private sector alone.

I can think of an example which runs counter to that trend. In the western Pilbara desert of Australia, about 100km from anything that resembles civilization, there are the beginnings of construction for what will be one of the largest mining projects in the world, the Roy Hill Iron Ore mine. At an estimated value of $10 to 15billion, it’s worth more than the GDP of about 60 countries in the world. The mining project is majority owned by Australia’s Hancock Prospecting, with minority stakes held by a number of Asian industrials, including Marubeni Corporation and China Steel Corp. Continue reading

Saving money, space and clean air: the case for compulsory composting in sustainable cities

By Clémentine Contat

Landfills are a growing issue for most cities in the US. They take on a lot of space, a scare resource for most big cities, and cost an increasing amount of money to the municipalities, businesses and indirectly taxpayers. The average landfill tipping fee goes up to $105.40 in Massachusetts, the most expensive place to dump trash, followed by Maine and Vermont[1]. Indeed, the cost of land and lack of competition caused by the scarcity of new permits push the prices higher every year. The landfills are also a major source of greenhouse gases through the decomposition of organic waste.

Composting of organic waste in anaerobic digesters can largely decrease that burden on cities by saving scarce space, limiting greenhouse emissions from organic waste in landfills, but most importantly by reducing the average cost of trash to the taxpayer. Not only does composting require less space to operate, but it can also generate income through production of renewable energy, fertilizers for crops and issuance of carbon credits. Continue reading

Urban Transportation — Lessons learned from Colombia’s TransMilenio success vs. Germany’s Stuttgart 21 disaster

By Valerie Scheer

In 2012, Colombia’s infrastructure ranked #64 on World Bank’s Logistics Performance Index vs. #1 Germany [1]. However, this nation who prides itself on being highly disciplined and organized, failed miserably compared to the developing country. Columbia’s new BRT system (TransMilenio) and Germany’s Stuttgart 21 (remodeling of Stuttgart’s train station into an underground station) yielded different results.

Phase 1 of TransMilenio has been a huge success and became one of the most acclaimed and imitated transportation systems.

In contrast, Stuttgart 21 (construction period 2010 – 2021), is still highly controversial, sparking several large protests [2] and exploding budgets (from estimated €3 billion in 2009to €7 billion in 2012[3,4]) that might even lead to project cancellation [5].

So what are the key factors leading to success or failure?

 

1) Government Support

TransMilenio was built on the goodwill of politicians and strong leadership from the mayor, allowing for collaborative efforts and fast elimination of roadblocks.

Stuttgart 21 is challenged by financing from the EU, federal government, state government and German Railway — several parties with differing views and priorities. Unlike the former government, neither Stuttgart’s newly elected mayor (2012) nor the newly elected government of Baden-Württemberg (2011) is a big supporter of Stuttgart 21. Also recently, a report from the federal government leaked, calling continuation of the project into question [6].

2) Concept

TransMilenio has aspirations to expand substantially, yet has a sound economic business model (no operating subsidies, “modest” CAPEX of $240 million).

Stuttgart 21, in contrast, appears to be less about logistic or economic needs but more about building a legacy for key leaders. Several experts have argued for cheaper and equally efficient alternatives to Stuttgart 21.

A feasible, economic concept is not only important to ensuring project realization, but critical to creating public acceptance and reducing financial burden to the developer.

3) Stakeholders

TransMilenio involved key stakeholders (e.g., bus operators) early on in the planning and implemented large marketing campaigns.

Stuttgart 21 put the focus on obvious stakeholders (such as politicians and people living near the train station), completely neglecting the German population as a whole. The billions of tax Euros spent on this project in an era of high state debt gave way to strong opposition and public dissatisfaction was one strong reason why Baden-Württemberg’s former governing party of nearly 60 years has been deselected, leading to further decreased support of Stuttgart 21.

4) Project Structure/People

TransMilenio was realized within 36-month thanks to an appropriate project structure. Experts provided input and contractors were selected through a competitive bidding process [7].

While Stuttgart 21 also implemented competitive bidding and German Railway had extensive experience developing train stations, several issues prevented a more efficient project.

Given the number of financiers involved, the project took many years from idea (1994) to realization, resulting in compromises and increased costs. Also, as a state-owned company, German Railway’s board of directors comprises predominantly of politicians with lack of infrastructure expertise and potential conflict of interest (Baden-Württemberg’s Minister of Transport is also on the council of a RE-developer building a new mall on the old train station land [8]).

 

Summarizing these differences one could question whether Stuttgart 21 would have been more successful with a PPP (as for TransMilenio)?

 

 

[1] The World Bank, Logistics Performance Index 2012   http://lpisurvey.worldbank.org/international/global?sort=asc&order=Infrastructure#datatable

[2] Stuttgarter Zeitung, So viel Protest wie noch nie                                  http://www.stuttgarter-zeitung.de/inhalt.demonstration-gegen-s-21-so-viel-protest-wie-noch-nie.dedd248a-36a7-49ca-8a31-2b1cd57b0399.html

[3] State parliament of Baden-Württemberg, Finanzierungsverträge zum Bahnprojekt Stuttgart–Ulm                                                                                            http://www9.landtag-bw.de/WP14/Drucksachen/4000/14_4382_d.pdf

[4] Der Spiegel, Bahn-Prestigeprojekt: Ramsauer spielt Kritik an Stuttgart 21 herunter http://www.spiegel.de/politik/deutschland/regierung-spielt-zweifel-an-stuttgart-21-herunter-a-881593.html

[5] Der Spiegel, Prognosen der Bahn: Regierung bezweifelt Ausstiegskosten für Stuttgart 21                                                    http://www.spiegel.de/wirtschaft/soziales/stuttgart-21-aufsichtsraete-zweifeln-an-kosten-fuer-den-ausstieg-a-882243.html

[6] Stuttgarter Zeitung, Beim Bund mehren sich die Zweifel an Stuttgart 21 http://www.stuttgarter-zeitung.de/inhalt.vertrauliches-dossier-beim-bund-mehren-sich-die-zweifel-an-stuttgart-21.4b46aa2c-3c0a-47fc-9a97-e54480e542f4.html

[7] The National Council for Public-Private Partnerships , TransMilenio Case Study http://www.ncppp.org/undp/bogota.html

[8] Die Zeit, Ministerin Gönner sieht sich mit Filz-Vorwurf konfrontiert    http://www.zeit.de/wirtschaft/unternehmen/2010-10/stuttgart-goenner-einkaufszentrum

Picture_Stuttgart 21

Picture: Der Mobilitäts Manger, Stuttgart 21 vermutlich bis zu 1 Mrd. Euro teurer                                     http://dmm.travel/news/artikel/lesen/2012/12/stuttgart-21-bis-zu-1-mrd-euro-teurer-47051/

 

Congestion Pricing – An asset-light BRT?

By Anonymous

The two transportation schemes we discussed in class, BRT and MRT, both have very similar goals in mind: reduce congestion and pollution and increase safety while getting more people to their destination faster. The major constraints for both systems are the huge up-front capital costs and the lack of flexibility once the system’s major lines are in place. One interesting aspect, however, is that neither system deals with the other major source of congestion, pollution and accidents: cars. On the contrary, during our discussion the need to eliminate car lanes on behalf of BRT as the system expands to new areas was a major drawback.

If we take a step away from this car-centric perspective and examine ways to manage all transit options on existing roads, there is a transportation scheme that accomplishes the stated goals in a much more flexible and dynamic way with lower capital requirements upfront: congestion pricing.

In the case of Bogota, the system would charge cars and buses for accessing certain avenues and major traffic arteries according to the time of day and the level of congestion. The fees would keep cars off the road during rush-hour and encourage the use of buses, assuming the system establishes appropriate pricing tiers across time and between cars, buses and taxis. The increased fixed cost would discourage empty buses from running and encourage industry consolidation. In order to encourage the use of newer and greener busses, the pricing could be structured to give low-emission vehicles an edge. A less congested system with fewer competing bus lines would also make transit safer and decrease travel times for commuters.

Initial capital cost to establish the system would also be much lower because traffic control systems could be installed above the street at lower costs than digging tunnels or adding separate bus lanes and platforms. From an infrastructure standpoint the congestion pricing system is much more flexible to expansion as new routes can be added or eliminated in a matter of days not years. On the revenue side, this system starts collecting revenue very soon after installation and provides a safer return on investment to the city.

Of course, this system also has trade-offs. For example, the enforcement of violations is crucial to as successful launch. If the political system is unlikely to punish those who drive without paying, congestion pricing will not improve the current situation. In addition, the implementation of this system hurts a much bigger political constituency (not just bus drivers, but all drivers) which makes this implementation much harder from a political standpoint. Furthermore, it is uncertain whether such a system can support the anticipated growth in travelers and residents over time.

Compared to BRT and MRT, the congestion pricing system would be a much less capital intensive and dynamic solution to the traffic congestion problem. However, this alternative likely has a much higher political price.

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MRT vs. BRT. Which System makes sense for developing cities?

By Saad Islam

Given that up to 60% of the world’s output comes from just 600 cities, and this concentration of wealth will increasingly shift to emerging cities[1], the question of implementing effective urban mass transit systems is extremely important. Karachi is one of those emerging megacities and I would therefore, like to tackle this question in Karachi’s context. To give people some perspective, Karachi’s population is estimated to be around 21 million[2], making it the seventh largest urban area in the world and the third densest[3]. The current public transportation closely resembles the one in Bogota pre-BRT  – mainly private transporters with rickety, although beautifully adorned buses.

I believe that four major issues in particular need to be addressed in implementing a mass-transit system and I will try to address each one below:

  1. Capital costs and financing issues: As we saw in the Bogota case, MRT solutions are significantly more expensive than BRT. It is estimated that for Karachi an MRT system would cost around $2billion for 2 lines of 41km total length, while the BRT system’s cost is about $292 million for 6 lines totalling around 90km[4]. Hence, purely on capital cost basis a BRT system makes more sense. It should also be noted that the opportunity cost for cities like Karachi of spending $1.7 billon extra on mass-transit are not insignificant. Finally, the ability to raise such a large amount of capital should also be taken into account. An MRT system costing billions would require significant external financing from multiple sources, not necessarily achievable for most emerging cities.
  2. Operating costs and affordability: A mass transit system would be useless if fares are not priced correctly. GDP per capita in Karachi is around $3,500, hence ticket prices cannot be high. Rail-based systems generally need to be subsidized and this is not sustainable for cities that have budgetary strains. Hence, in such a scenario a less costly system such as BRT makes greater sense.
  3. Integration with the existing transportation infrastructure: Any new mass-transit system needs to complement the existing infrastructure. Large cities like Karachi already have a widespread network of roads. A BRT system can be built around the existing system as long as roads are large enough to accommodate extra lanes. On the other hand, an MRT system could be significantly disruptive while tunnels are being dug and tracks laid etc.
  4. Bringing various stakeholders on board: The bus operators in Karachi have a very strong trade union and do not hesitate to go on strike, grinding the city to a stop. As we have seen in the Bogota case, a BRT system can be structured so as to provide existing operators with a stake in the system. This can substantially mitigate any risk associated with existing operators trying to sabotage the new mass-transit system.

In summary, I believe that while an MRT system might be more scalable and work for wealthier cities, other cities need to be more realistic about the systems that can be put in place. For a city like Karachi, a BRT system provides a cost-effective mass transit solution that is also quicker and easier to implement.


[4] Karachi Transportation Improvement Study Project 2010 – 2012, Japan International Cooperation Agency (JICA) and Karachi Mass Transit Cell, Karachi Metropolitan Corporation