Planning budget and financing 1 Budgeting fundamentals

The realistic scope and depth of the BRT planning process is largely determined by the available funding. However, the first step should be to determine the required

amount based upon the projected activities. An estimated budget for the plan can be developed from the activities outlined in the work plan. The budget will include staff salaries, consultant fees, travel and study tours, resource materials, telecommunications, and administrative support. Some of these costs may be covered by existing budgets and overheads while other line items will need newly dedicated funding. Since the planning horizon is likely to encompass 12 to 24 months of time, any cost escalations such as projected salary increases or inflationary trends should also be considered.

Budgets should be made as realistic as possible. Overly-optimistic projections will ultimately be compared unfavourably to actual results, which will be used by project opponents to undermine the project’s image. Unfortunately, projecting budgets is never an exact science. Unexpected and unforeseen events will undoubtedly arise which will create the need for budgetary adjustments. Thus, it is always wise to include a contingency amount that will help cover such unexpected costs. The contingency is often represented as a percentage of the projected total (e.g., 10% of the projected budget).

BRT planning costs have historically varied considerably, depending upon the scope and complexity of the project, as well as the degree to which in-house expertise is utilised in comparison to consultants. To plan the extensive TransMilenio system of Bogotá, a total of nearly US$ 3 million was spent in the planning process. By comparison, using principally in-house professionals, the municipality of Quito spent only approximately US$ 500,000 to plan its smaller system. In general, though, planning costs will likely range from US$ 400,000 to US$ 5 million. It is hoped that this BRT planning guide will help cities plan a BRT system at a lower cost and within a shorter time frame.

3.1.5.2 Local funding sources

In comparison to other transport projects, such as road networks and rail systems, the planning costs of BRT are typically much less. For this reason, the costs are often financed within existing municipal or provincial revenues without the need for alternative financing sources such as loans or bonds. This situation can even be true of low-income, developing cities. Local, provincial, and national resources should all be quite sufficient to readily complete the BRT planning process.

In some cases, the local private sector may actually take the lead in financing and conducting the BRT planning process. Private sector bus associations sometimes find it in their own interest to help encourage BRT development. Private sector interests have help to lead BRT efforts in such cities as San Salvador (El Salvador) and Dhaka (Bangladesh).

3.1.5.3 International funding sources

However, at the same time, several international sources stand ready to assist cities interested in BRT. The international resources often also bring the additional advantage of allowing greater access to consultants with international BRT experience. The disadvantage of many international funding sources is the amount

of effort required in the application process and the sometimes lengthy delay in receiving project acceptance.

a. Multi-lateral organisations

Multi-lateral organisations such as the World Bank, regional development banks, and agencies of the United Nations may be able to provide grants to support planning activities and initial demonstrations. Unlike loans, grant-type funding mechanisms do not require repayment. One such grant mechanism is the Global Environment Facility (GEF). The GEF was created in 1991 to assist governments and international organisations in their goals of overcoming global environmental threats. Thus, GEF funds are utilised to address such issues as the degradation of international waters, biodiversity, global climate change, ozone depletion, and persistent organic pollutants (POPS). Through the global c limate change programme and the GEF’s Operational Programme number 11, transport is an eligible sector for funding. BRT projects qualify under article 11.10(a) of Operational Programme 11: “Modal shifts to more efficient and less polluting forms of public and freight transport through measures such as traffic management and avoidance and increased use of cleaner fuels.”

To qualify for a GEF project, a municipality will need the support of its national GEF focal point, which is typically housed at either a national ministry of the environment or a national ministry of foreign relations. Additionally, the project will need one of the GEF’s implementing agencies to champion and support the project through the application process. Eligible implementing agencies include the World Bank, the United Nations Development Programme (UNDP), the United Nations Environment Programme (UNEP), and regional development banks (e.g., African Development Bank, Asian Development Bank, Inter-American Development Bank). To date the GEF, with World Bank support, has approved three projects that include BRT related elements. These project sites are Santiago, Chile; Lima, Peru; and Mexico City, Mexico.

The size of a GEF grant depends on the type of application and the nature of the project. GEF funding mechanisms include:

1. Small Grants Programme (funds of less than US$ 50,000) 2. Small and Medium Sized Enterprise Programme

3. Project Preparation and Development Facility (PDF)

o PDF Block A (up to US$ 25,000 for project preparation) o PDF Block B (up to US$ 350,000 for project preparation) o PDF Block C (up to US$ 1 million for project preparation) 4. Medium -Sized Projects (up to US$ 1 million for project)

5. Full-Sized Projects (large grants of sometimes over US$ 10 million) The GEF transport projects in Chile, Peru and Mexico are full-sized projects. GEF resources are unlikely to directly finance infrastructure, but are useful in assisting with the planning process. Additionally, GEF funding can also be an effective means to attra ct complementary financing from other sources.

Other international organisations may also support BRT planning activities. For example, the United Nations Development Programme (UNDP) has played a role in developing BRT projects in Pereira (Colombia) and Cartagena (Colombia) through technical assistance activities.

b. Bi-lateral agencies

Additionally, bi-lateral agencies such the German Overseas Technical Cooperation Agency (GTZ), the Swedish International Development Agency (Sida), and the United States Agency for International Development (USAID) may be approached to assist on the provision of support and technical resources. GTZ has played a role supporting BRT development in such cities as Bangkok (Thailand), Buenos Aires (Argentina), Cartagena (Colombia), and Surabaya (Indonesia). Sida has assisted BRT awareness in Bangalore (India) and Dhaka (Bangladesh). USAID has been active with BRT support in Accra (Ghana), Dar es Salaam (Tanzania), Dakar (Senegal), Cape Town (South Africa), Delhi (India), Hyderabad (India), and Jakarta (Indonesia).

c . Private foundations

Private foundations such as the Hewlett Foundation, the Shell Foundation and the former W. Alton Jones Foundation have also been supporters of BRT activities. The Hewlett Foundation is supporting BRT support activities in Beijing (China), Rio de Janeiro (Brazil), São Paulo (Brazil), and Mexico City (Mexico). The Shell Foundation, through the World Resources Institute, is assisting BRT development in Mexico City and Shanghai (China).