In the last decade, the Italian Parliament devised a number of interventions aimed at improving competition among local public transport (LPT) operators and at implementing a more efficient use of scarce public financial resources available for the LPT services. The reform requires that the main criterion of historical costs currently applied to allocate national public resources among Local Authorities (LAs) should be gradually overcome in favour of principles that encourage efficiency. In order to support suitable Authorities in taking formal decisions to pursue this goal, this research is intended to:
- develop an operative methodology, consistent with the Italian legal framework, in order to apply standard costs in the allocation of national public resources available for the LPT services to Regions and, in turn, to LAs.
- perform simulations to illustrate the impact of this methodology in terms of reallocation of national public resources available at 2016 among LAs.
The research will make use of a data set including information about costs and technical/environmental gathered by means of questionnaires sent to companies producing, in Italy, 100% of the production of tramway and subways services, 29% of the production of bus services and 97% of the production of rail services.
According to the proposed research, we will measure the difference, for each Region, between the factual amount of funds received from the State by firms and the expected resources at the expense of the State if allocation is made on the basis of the standard cost. The immediate result would be a shifting of national public resources from Regions where LPT services should be produced at a lower cost in favor of Regions where productivity efficiency is achieved.
In a dynamic context where the proposed methodology is applied on a yearly basis, LAs could be gradually induced to use more efficiently the scarce national public resources earmarked for LPT services.
A. CONTRIBUTION WITH RESPECT TO LITERATURE
All previous studies (cfr. [5]-[14]) mainly target the causes of inefficiencies and the cost structure of LPT firms in order to identify the proper configuration of a network, or else they enquire to what extent the standard-cost model and other subsidy policies affect cost and productivity of transport operators. Recent contributions regard the ex-ante definition of the standard cost of LPT service. To the best of our knowledge, this paper is a first attempt to define a formal procedure for the allocation of the national public fund among different (vertical) layers of the administration in the LPT sector.
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B. POTENTIAL APPLICATIONS, SCIENTIFIC AND/OR SOCIO-ECONOMIC IMPACT
The proposed methodology allows us to determine a realistic set of reallocation ratios of national public resources allotted in 2016 for LPT services among the 15 Regions with ordinary statute. The immediate result would be a shifting of national public resources from Regions where LPT services should be produced at a lower cost in favor of Regions where productivity efficiency is achieved.
In a dynamic context where the proposed methodology is applied on a yearly basis, Local Authorities could be gradually induced to use more efficiently the scarce national public resources earmarked for LPT services.
First, Regions which are supposed to receive less national public resources for LPT services on the basis of the described procedure will be forced to design competitive tenders where standard costs are used as reserve-prices, such that the allotment of the service is granted to more efficient operators. In so doing, these Regions could obtain the current level of service at lower cost.
Second, we can expect that our procedure will provide Regions with the incentive to take decisions aimed at offering LPT services with lower unit standard costs (e.g., investing in bus lanes in order to increase the commercial speed ). Indeed, possible savings could be used to raise the supply of LPT services characterized by high levels of demand (by taking into account that the Italian law discourage to provide LPT services with small load factors) or to increase the quality of those services which are currently provided (e.g., increasing frequency or adopting greener buses). In such a way, Regions will not reduce their net standard financial needs while they will increase the quality/the supply for their users.
According to the proposed methodology, the historical Regional financial needs of Regions should gradually align with the standard Regional financial needs and the goal of a more efficient use of the national public resources will be partially achieved.