Innovative funding mechanisms for public transport

Abstract

Public transport investment is expected to unlock economic benefits on the back of enhanced worker mobility and creating network capacity for urban development. However, the costs of these projects can be substantial and – in the context of South Africa – rely largely on national grant funding. This paper explores mechanisms for leveraging the benefits of public transport projects to unlock innovative funding sources and alleviate pressure on grant funding. Increased accessibility of land arising from public transport provision is capitalised into property value increments, which accrue to existing owners. Land value capture mechanisms seek to capture a share of this increment through partnership with the private sector. International and local examples demonstrate how land value capture instruments can offset some or all of the costs of public transport projects. Beyond land value capture, public transport is also eligible for climate change mitigation funding and financing on the grounds of its role in carbon emission reduction strategies. While the income from these funding initiatives is unlikely to replace the need for grant funding, it can alleviate pressure on the fiscus.