III Congreso "Las Mejores Prácticas SIBRT en America Latina" - Belo Horizonte - 2013 DOWNLOAD THE PRESENTATION: www.congresosibrt.org

1. Role of Financing
Institutions in Urban
Transport
Georges Darido
gdarido@worldbank.org
Sr. Transport Specialist
June 7, 2013

2. World Bank Group: a multilateral development
institution with a mission of reducing poverty
and promoting shared prosperity
• Financing
 Investment loans, grants, and guarantees
 Available resources vary by country according to
needs and lending limits
• Technical assistance
 Studies and analytical work
 Pilot projects to demonstrate concepts
• The “Knowledge Bank”
 Build capacity
 Disseminate good practices
• Convener and “honest broker”
 Align interests to promote reforms and innovation
 Independent advisor

3. Financing is necessary, but not a sufficient
condition for good projects
 At Rio+20 the development banks committed to
US$175B for sustainable transport over next decade
 But overall investment need is larger
o Backlog of transport investments in some cities is huge
o Assumes leveraging of counterpart funds
 Some cities and countries in Latin America do not lack
financing to implement urban transport interventions
(e.g. Brazil’s PACs)
 But lack good, ready projects or the capability to
prepare them

4. World Bank’s Sustainable Transport Strategy
A safe, clean, and
affordable means to
access to jobs, markets,
and other social or
economic opportunities.
• Supporting improvement
and reforms of public
transportation system
and institutions
• Focus on poor and
vulnerable users, as well
as emerging issues with
climate change, energy
efficiency, safety,
gender, and accessibility
Lima’s
Metropolitano
BRT

5. Typical Development Objectives for Urban Transport
Projects
Description Example Indicator(s)
Mobility Amount and type of travel (both
passenger and freight)
Number of trips by mode and change in total travel
time or cost
Accessibility Connectivity between desired origins
and destinations; proximity or ability to
reach desired goods, services and
socio-economic opportunities
Number of jobs within in a 1-hour radius, retail
area within a 10-minute walk of a station
Quality Characteristics of travel between origin
and destination
Reliability (e.g., travel time variability, failures),
comfort, convenience and equity
Efficiency How resources are used and the
environment impacted, including:
 Local and global emissions
 Energy consumption and efficiency
 Impact on land and water
 Emissions of NOx, SOx, CO, PM, or CO2
 Quantity of fuel consumed per unit of mobility
or economic welfare created
 Amount of noise, runoff, sediments, dust, and
other impacts to heath and welfare
Safety The safety and security of the transport
system
Minimizing intentional and unintentional incidents,
fatalities, injuries, property damage
Affordability Economic and financial sustainability
from various perspectives, including:
 Users (by income group)
 Government and general public
 Operators and others
 Travel expenditure in relation to income
 Implementation time and capital costs
 Operating, maintenance, and disposal costs
 Other social and economic impacts of the
investment (e.g. poverty reduction)

6. Four pillars of urban transport strategy in
Latin America
1. Establishing metropolitan transport coordination
 Forum for discussion and concensus building
 Institutions for joint decision-making or budget to execute
2. Integrated plans for transport, land use and air quality
 Alternative analysis
 Feasible projects (economic and financial)
3. Mechanisms to ensure long-term financial sustainability
 Fare and subsidy policy
 Non-fare revenue opportunities
 Land value capture from TOD
4. Progressive private sector participation, when
appropriate

7. Project feasibility study should include a
comprehensive analysis of viable alternatives
• Vertical alignment
 Surface, elevated, underground or mixed
• Horizontal alignment
 Locate stations according to travel desire lines
 Minimize adverse impact
• Technology
 Rail, bus, etc.
 Electric, diesel, CNG, etc.
• There may be more than one viable alternative for a
given corridor

8. Transport alternatives are typically evaluated
by cost-benefit analysis (with/without project)
• Costs:
 Capital (up-front investment costs)
 Operating (operational, maintenance, disposal costs)
• Typical Benefits, but not all are quantifiable:
 Travel time saving: quantified using transport models and value of time
 Vehicle operating cost savings including fuel.
 Road safety benefit: sometimes quantified in terms of avoided injury,
fatalities, and property damage using statistical values from local data.
 Air quality benefit: sometimes quantified to include the economic and
health impact of reduced emissions of local pollutants.
 Greenhouse gas emission savings: sometimes quantified for
evaluating the possibility of selling carbon credits.
 Other impacts of infrastructure spending on economic development
and employment may be considered but difficult account.
• Sensitivity analysis: scenarios to test the limits of the selected alternative
in terms of costs increase, delays, variation in revenue or demand.

9. Maximizing all potential revenues to achieve
long-term financial sustainability
• Conventional:
 Fares
 Advertisement
 Leasing of
commercial
space
• Other–
Value Capture:
 Sale of
development
rights
 Property/
betterment taxes

10. Transport and land value capture
• Large transport investments can significantly increase property
values, but how can some of the surplus value be captured to
compensate for the public investment?
• Benefits generated from:
 Increased mobility (reduced travel times or generalized costs)
 Increased accessibility (proximity to socio-economic opportunities)
 Reduced externalities (pollution, noise, etc.)
10
Folha de S. Paulo,
23/March/2011

11. Sale or Transfer of
Development Rights
OUTORGA ONEROSA DO
DIREITO DE CONSTRUIR
Public Authority
Construction
Potential (m²)
Property Owner
Urban Development FUND
Payment for the Right
to Upzone/Densify ($)
Public Authority
Property Owner
AREA INVESTMENTS
Contribution or
Counterpart
Payment ($)
Public Authority
Real Estate Market
AREA REDEVELOPMENT
Construction
Potential (m²)
Sale of CEPACs ($)
Simple UO
OPERAÇÃO URBANA
SIMPLIFICADA
UO with CEPAC
OPERAÇÃO URBANA
CONSORCIADA
Construction
Potential (m²)
Types of Urban Operations (UO) in Brazil

12. CEPAC, Certificates of Additional Construction Potential
(Certificados de Potencial Adicional de Construção)
• Tradable bonds for new land development rights (additional
building height, FAR, upzoning)
• Compensates City for the cost of public infrastructure needed for
new development
• Number of CEPACs determined by the City but capped by law
and regulated
• Revenues to be used in pre-defined area (Urban Operation)
• City issues a CEPAC Prospectus with boundaries and targeted
projects
• Tried in a handful of municipalities in Brazil:
 Sao Paulo: many active and planned Urban Operations
 Rio de Janeiro: Porto Maravilha, auctioning of CEPACs
 Belo Horizonte: at least 2 urban operations planned
12

13. Urban Operation
(for a predefined area)
=
• infrastructure
investment
+
• value capture
instrument (CEPAC)
+
• urban/social
development goals
13

14. Use of CEPAC revenues in São Paulo
• CEPAC sales since 2004 have generated >US$1 Billion
24%
63%
1% 0.2%
12%
CEPAC investments in the ÁguaEspraiada
Urban Operation
Affordable Housing
Transport
Drainage Works
Green Areas
Administrative Costs
and Other Expenses
9%
16%
60%
15%
CEPAC Investments in the FariaLimaUrban
Operation
Affordable housing
Urban Equipments
Transport
Administrative Costs
and Other Expenses
>US$300 million >US$700 million
Metro Faria Lima
(Line 4)
Agua Espraiada -
Bridge

15. CEPAC – advantages and disadvantages
+ Improves revenue generating capacity of cities without taxation
+ Tradable certificate can capture market price
+ Purchasers decide timing of development according to market
conditions
- Chicken or Egg Problem: government must investment to generate
interest in CEPACs
- Boundary problem: difficult to fund strategic investments beyond UO
boundary or crossing jurisdictions
- Complex: analysis of infrastructure
capacity/needs and considerable
financial expertise is required
- Secondary market for trading
certificates takes time to develop
- Economic cycle: viable in
cities/areas with booming
property markets
15

16. MAPA DAS OPERAÇÕES URBANAS
Areas of Urban Intervention in Belo Horizonte
along major transport corridors

17. In conclusion, the evolution of World Bank’s
long-standing engagement in Brazil
1. Decentralization of federal rail network
2. Modernizing existing network and building
new institutions
3. Expanding the networks by financing directly
4. Advisory and technical assistance to:
o Enhance the technical and financial viability of
potential PPP projects
o Accelerate planning and implementation process
o Leverage private sector involvement
o Balance long-term supply/demand

18. 1992-1999: Decentralization of federal rail
network to States
Photos credits: http://o-blogdotrem.blogspot.com
Sao Paulo 1993 Today

19. 1999-present: Modernization + physical,
operational and fare integration
Photos credits: CPTM, Author

20. 2001-present: Investing in network expansion
and capacity
Active Projects:
Rio Supervia,
Sao Paulo
Line 4 (Phase
2), Line 5, and
Trains and
Signaling
Projects
(Metro and
CPTM)
Metro Line 4 (Yellow)

21. São Paulo Metro Line 4 (Phase 1)
PPP Financial Structure
Graphic: ADF and
CODATU (2009)

22. Including Social and Cultural Aspects

23. Including Urban Development and Renewal

24. In the long-term, a better job-housing balance can
moderate transport demand and costly peaking

25. May not be enough to work on just supply issues, so
travel demand management is important
• How to create incentives and win-win through voluntary measures?

26. Point density plot of automobile trips in Sao Paulo
Historic CenterAv. PaulistaFaria Lima
Pinheiros
Morumbi/
Av. Berrini
Area around Berrini >53% of trips by SOV

27. “Corporate Mobility” Demand Management Pilot
http://www.empresas-pela-mobilidade.com
27

28. Thank you for your attention
Georges Darido
gdarido@worldbank.org