Transcript REFORMA FINANCIERA E INSTITUCIONAL DE LA …
International Road Federation (IRF) Economic Commission for Latin America (ECLAC) German Agency for Technical Cooperation (GTZ) Cooperation Program of the Federal Republic of Germany
Innovative Financing of Road Maintenance
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Presented by: Dr. Gunter Zietlow E-mail [email protected]
internet: http://www.zietlow.com
Innovative Financing of Transport Projects, Sept. 29 - Oct. 1, 1999
International Road Federation (IRF) Economic Commission for Latin America (ECLAC) German Agency for Technical Cooperation (GTZ) Cooperation Program of the Federal Republic of Germany
Innovative Financing of Road Maintenance
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Presented by: Dr. Gunter Zietlow E-mail [email protected]
internet: http://www.zietlow.com
Asian Development Bank, Manila, October 1999
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Overview of Presentation
Regional context and impact of poor road maintenance
Causes of poor road maintenance
Financing of road maintenance
Road Funds world wide
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Problem
In spite of their importance, roads in developing countries are underfinanced, poorly managed, and badly maintained.
Normally, only 30-50% of the amounts required is being spent on routine and periodic maintenance.
1/3 of the
main road networks
are in good, 1/3 in regular and 1/3 in poor condition.
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Example: Road Maintenance Spending in Venezuela Millions of US$ YEAR
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Percentage of Paved Roads in Good Condition ( 1984/8 ) SRI LAN.
BANGL.
PAKIST.
INDIA INDON.
PHILIP.
NEPAL THAIL.
W-EURO 10 15 18 20 30 31 40 0 SOURCE: WB 50 50 85 100 % GUA JAM MEX91 BOL92 BOL COS URU BRA ARG COL COL91 VEN CHI CHI94 HON DR W-EURO 7 10 8 10 21 22 26 30 35 42 44 40 42 52 50 52 0 50 85 100
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User Cost
200% 150% 100% GOOD REGULAR BAD VERY BAD TIME
9 Hhmt mkk dsq !?
Uneconomic
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When roads are in poor condition every US $ “saved” in road conservation will cost:
US $ 3 to road users in add. Vehicle operating costs and
US $ 3 to the road administration (or the tax payer) in reconstruction and rehabilitation costs.
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Impact of Poor Road Conservation on Economic Growth
Countries waste 1- 3 % of their GNP per year due to additional vehicle operating and road rehabilitation costs alone.
Taking into account other factors such as increased accidents, freight damages, time, etc. These losses will more than double .
Considering the poor growth rates of some of the countries in the region good road conservation can boost economic growth tremendously .
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Overview of Presentation
Regional context and impact of poor road maintenance
Causes of poor road maintenance
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Problems
Lack of planning
Deficient execution of works
Deficient maintenance of equipment
Bureaucratic and administrative obstacles
Low salaries
...a million others
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Main Cause # 1 : Deficient System of Financing Experiences reveal: In most of the countries an adequate flow of funds for road maintenance cannot be secured by general budget financing procedures, especially, if the allocation of these funds depends on the yearly political debates.
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DEFENCE SOCIAL PROGRAMS ROAD USER TAXES AND FEES PUBLIC ADMINISTRATION NEW CONSTRUCTION SUBSIDIES EDUCATION AND CULTURE ROAD MAINTENANCE
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Main Cause # 2: Deficient Management System Rules and regulations of the public administrative system do not allow for an effective and efficient management of road maintenance, in spite of the good will of a lot of public employees responsible for road conservation.
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Overview of Presentation
Regional context and impact of poor road maintenance
Causes of poor road maintenance
Financing of road maintenance
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Reform Elements
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Financial and Institutional Reform
To charge road users a fee exchange for road maintenance services.
in
To establish a Road Maintenance Fund controlled by a Board with road user participation.
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Road maintenance should be treated as a public service like telephones and electricity where the user pays for the services received.
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Sources of Funds for Road Maintenance
Tariffs collected together with the sale of motor vehicle fuels
Annual fees for motor vehicles
Fines for overloading
Transit fees
Why not Use Tolls to Collect Tariffs for Road Maintenance?
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Only for roads with more than 1500 vehicles per day do administrative costs stay in a reasonable range of 10 - 30 % of amounts collected. Therefore, this system would provide a partial solution only. This means that this system is viable for a small portion of the network ( <10%).
Collecting tariffs through the sale of motor fuels requires only 1 % administrative costs.
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Use of Funds Collected from Road Users ROAD CONSTRUCTION, REHABILITATION OTHER PURPOSES GENERAL BUDGET FLOW OF FUNDS ROAD MAINTENANCE LEGISLATIVE BODIES MINISTRY OF FINANCE ROAD MAINTENANCE FUND ANNUAL ROAD MAINTENANCE FEES FOR MOTOR VEHICLES FEE TAX PRODUCTION & DISTRIBUTION COST TOTAL PUMP PRICE OF MOTOR VEHICLE FUELS
Destination of Funds
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National roads
Regional roads
Local roads (including urban and rural roads)
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How much is needed
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Approximately US $ 0.08 per liter of diesel and gasoline is sufficient to cover routine and periodic road maintenance cost if roads are in maintainable conditions ( do not require rehabilitation !). Additional annual road maintenance fees for motor vehicles can reduce this amount.
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Fuel prices in US-cents per liter in 11/98 WORLD MP USA MONG CHINA THAI LAOS VIET BANG CAMB INDIA NZ JAP HK 0 20 19 23 30 32 22 23 25 28 27 30 24 31 26 35 26 47 28 47 21 56 39 64 69 40 60 80 85 100 102 120 136 140 160 DIESEL SUPER
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Road Users Save by Paying Road Maintenance Fees (Example Honduras) Vehicle operating cost Poor road condition Vehicle operating cost Good road condition Savings per 100 km FEE Overall savings per 100km Light Vehicle 14.0
10.5
3.5
-1.0
2.5
Heavy Vehicle 63.5
51.7
11.8
-3.6
8.2
Vehicle operating costs in US $ per 100 km on hilly roads ( Nov. 1994 )
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Road Maintenance Board Safeguarding public interest in road maintenance could be best achieved by creating a road conservation board, a public institution with complete financial, administrative and technical autonomy and private sector participation.
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Attributes of a Road Maintenance Board/Fund
Propose levels of road maintenance tariffs
Assign funds to roads under its jurisdiction and disburse funds to other entities in charge of roads
Contract consultants and contractors
Administer road maintenance contracts
Safeguard road assets
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Criteria for a
sustainable
road maintenance fund
Tariffs collected to be used exclusively for road
conservation
Tariffs should reflect usage of roads
Tariffs to be collected by the fund
Tariffs should be adjusted according to needs and objectively distributed between main, urban and rural roads
Fund should be autonomous with a sound legal
basis
Board of directors should well represent relevant interest groups, especially road users
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Overview of Presentation
Regional context and impact of poor road maintenance
Causes of poor road maintenance
Financing of road maintenance
Road Funds worldwide
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Financing and Management of the Road Sector (New Zealand) MINISTRY OF TRANSPORT ANNUAL AGREEMENTS TRANSIT NEW ZEALAND AGREEMENTS TRANSFUND NEW ZEALAND CONTRACTS COMPANIES NATIONAL ROADS LOCAL AUTHORITIES LOCAL ROADS
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New Zealand Road Fund
Dedicated tax on gasoline : 6,3 US cents/liter
Weight distance charges for vehicles using diesel fuel
Vehicle licensing and registration fees
Annual fee on machinery
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New Zealand Road Fund Allocation of funds based on benefit cost analysis
B/C ratio = benefits
÷
costs
Benefits comprise
Vehicle operating cost savings
Travel time savings
Accident savings
Increased comfort and less dust
Reduced noise, less community impact
Costs comprise
Capital
Maintenance
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Annual Report Transit New Zealand
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Transit New Zealand Annual road asset evaluation
Existing and Prospective Road Maintenance Funds in Latin American Countries Road Maintenance Funds Road Maintenance Funds under discussion
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8/98
Municipal Road Maintenance Fund Santo Antonio da Patrulha
> 50% probability for creating a Fund until 8/2000
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Guatemala
Road Maintenance Fund
Trust Fund for road maintenance and improvements of national roads financed by fuel taxes (US$ 0.16 per gallon)
Road Maintenance Board with 3 members of the public and 3 members of the private sector
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Honduras
Road Maintenance Fund Board of Directors
3 Ministers (Public Works, Finance, Economy)
1 Representative of the Association of Municipalities
3 Representatives of the private sector (Chamber of Commerce, Association of Transport Enterprises, Engineering College)
1 Director of Roads of the Ministry of Public Works
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Nicaragua
Road Maintenance Fund proposal
Public autonomous road maintenance fund, established by law. Board members are mainly from private sector representing direct and indirect road users.
Financing of maintenance of all public roads, including urban roads.
Principal source of financing: Service fee for road maintenance collected with the sale of fuels for road vehicles. External auditing.
Administration cost limited to 2.5 % of annual income.
Highway Trust Fund
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Created in the year 1952
Use of funds in 1992 :
Construction, rehabilitation, maintenance of the interstate and national highways (78 %)
Mass transit (8,3 %)
General funds (13,7 %)
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Highway Trust Fund
Tariff Structure 1998
Gasoline Diesel Gasohol 18.4 cents/gallon 24.4 cents/gallon 13 cents/gallon
Other taxes* on tires and trucks * 14% Of the income of the HTF
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State Taxation of Fuel
Example Maryland (1998)
Gasoline Diesel 23.4 cents/gallon 24.25 cents/gallon
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Lessons Learned
Design of reform process has to reflect political realities.
Minister of Transport/Public Works has to spearhead the initiative.
Strong support of Minister of Finance is essential.
Public relations to be handled with great care.
Road maintenance charges to be raised gradually in line with improvements of the road network.
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Win win strategy
m
Road users +++
m
Producers (farmers) +
m
Consumers +
m
Exporters +
m
National economy ++
m
Our children and grand children +++
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No Fund(s) no Future
I SEE POTHOLES
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Built Ownership
NO POTHOLES
JKKKKKMNN SDDFDERDK SAADSCC ZZZZZZZZ
DEAR ROAD USER THIS ROAD IS BEING MAINTAINED WITH YOUR CONTRIBUTIONS TO THE ROAD MAINTENANCE FUND YOUR OPINION IS IMPORTANT PLEASE CONTACT US TEL/FAX: (703) 556 4838 ROAD MAINTENANCE FUND
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Protect the heritage of our children !
Let us do everything in our power to protect our national road assets ,
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We owe this to our children and grandchildren !
“It is not our wealth, which has built our roads, but our roads, which built our wealth”
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John F. Kennedy