17Funding and Financing

Money never starts an idea; it is the idea that starts the money.W. J. Cameron, journalist, 1878–1955

This chapter reviews how the capital costs of many of the best BRT systems around the world were both funded and financed. Any BRT project must be funded in order to get built. Sometimes, if the funds are not available up front, debt financing can help ensure that a BRT project gets built, or gets built faster. Funding and debt financing, however, are different and will be discussed separately. While debt financing and private investment can often provide crucial investment capital for a BRT project, a private investment has to yield a return, and a loan has to be repaid, so the ultimate source of funding has to be either the system’s own revenue, primarily fare revenue, or some form of government funding. This chapter reviews how many of the world’s better BRT systems have secured the necessary funding and financing needed to become operational.

A BRT system should be designed to cover at least its basic operating costs from its own fare revenue. In lower-income economies where most people depend on public transport, this is usually possible. In higher-income economies, while public transit rarely covers its operating costs, the introduction of BRT should generally be profit-neutral or better. In other words, it should not impose significant additional operating costs that need to be funded, and in the best cases it can significantly reduce ongoing operating losses from traditional bus services. As such, the best way to fund operations is by designing the system to cover its operational costs from fare revenue. Other chapters provide guidance on how this can be done.

If a new BRT system is developed that will face ongoing operational losses, as has occurred in a few countries such as South Africa, it is best to have a sense of the scale of these losses in advance and to plan accordingly. This chapter provides limited guidance with respect to how to fund and finance the operating losses of a BRT system other than to say that they should not be debt financed, and the source of public revenue should be recurring (i.e., general taxation) rather than a onetime source of revenue (such as the proceeds from the privatization of a power plant or sale of public land).