IRPTN vehicle financing options and considerations

Abstract

The roll-out of comprehensive public transport networks in our major cities is requiring considerable up-front investment by government. The acquisition of the bus fleet presents the second largest component of capital expenditure by the implementing municipalities. Various fleet financing models have been adopted including the use of national grant funding and debt. This paper sets out to describe the various financing models that have been used to date and highlight their implications with respect to various criteria including cost, risk and complexity. The paper then moves on to discuss the concern of municipal treasuries surrounding the potential consolidation of the buses onto the books of the municipalities and evaluates the effectiveness of the move to finance the buses ?off-balance sheet?. The rationale for the National Department of Transport?s (?NDOT?) preference for the use of Export Credit Agency financing (?ECAs?) as the financing route of choice is also discussed. The paper then addresses the outcomes of an on- versus off-balance sheet financing structure, and the implications on both the financing model and the underlying institutional structure. An alternate model is then introduced which proposes a hybrid between the debt financing options used thus far in an attempt to mitigate the short comings present in the existing models.