Germany

The most important regulations concerning LPT can be found in PBefG (Personenbeförderungsgesetz, Act for Transportation of Persons) and for financing the RegG (Regionalisierungsgesetz, Regionalisation Act) and GVFG (Gemeindeverkehrsfinanzierungsgesetz, Municipal Traffic Financing Act).

There was a change in the German legislation in 1993 in reaction to Reg. EC 1893/91. An important detail is a distinction in profitable and non-profitable services (depending on subsidies) that have been treated separately in the past.

Profitable services had no obligation to be exposed to competition, while it was mandatory to tender non-profitable services. The interesting thing about the definition is that the calculation for what is profitable was made by revenues, plus compensations for special obligations like reduced fares, plus cross subsidies such as reduced energy prices, plus financial support obligations to pay off deficits. By this calculation, any service was making a profit and did not require “subsidies” but instead “compensations” and “levelling of deficit” financial obligations. That meant the German market has been de facto inaccessible for competitors because profitable business could be provided without competition. Public companies were transferring money from one sector (e.g., energy) to another (e.g., transport) and were therefore able to offer their services for a price thatnever could be matched by the private sector. This practice was called “Querverbund” and was widespread in Germany. It does not work anymore for two reasons: First, the revenues from monopoles like energy were much lower after the liberalisation of these markets, and second, this cross-financing is now forbidden by the EU. After the grace period of some years (see Art. 88), German authorities started to challenge EU legislation and made an appeal, which had to be judged finally by the European Court. These legal proceedings influenced the new legislation on the European level. Consequently, the section of the transportation law § 13 PBefG has been cancelled from the books, but according to §68 PBefG, new contracts based on the old regulations could be made until December 2013 (cf. Barth, 2000).

Market initiative is the first choice for commercial services. If several operators apply for the same transport service through their own initiative, an authorisation competition will take place. The operator with the best application will then be awarded the authorisation (§ 13 PBefG). In relation to the local public transportation plan, the local authority can influence the decision. The transport operators are awarded an exclusive right, which has to be acquired through authorisation. The market entry procedure takes the form of competition for the market. There are two different ways in which an authorisation may be obtained.

For the second possibility, there is an authority initiative for non-commercial services. If no service provision consistent with the public interest arises out of the competition, the authority can initiate the competition for a public-service contract.

The procedure falls within the scope of the procurement legislation based on the utilities directive (Dir 92/50/EEC). For this purpose, the competent authority defines the desired service provision (including quality standards, fare level, competence, and risk allocation). Subsequently, it carries out a competitive tendering procedure. The bidder with the most economically advantageous offer will be awarded the public-service contract. The authority issuing the authorisation controls the tendering procedure in terms of non-discrimination and awards an authorisation (§ 13a PBefG) to the operator. This passage §13a PBefG has been cancelled.

Whenever possible, priority is given to the market initiative. Therefore, the tendering procedure must be revoked in case an operator applies for the authorisation without any requirement for public financing. In this case, market access follows the rules of the competition for authorisations. One important fact is that §13 (3) PBefG still regulates whether a company has satisfied the public needs in the past. This means nothing else other than an advantage for incumbent operators.

Financing

The reform sketched above did not include a complete reform of the financing instruments for public transport; in fact, the main regulations for services that still enjoy subsidies according to the new regulations have been unchanged.

For non-commercial (subsidied) bus services, the instruments according to the rules of Reg. (EEC) Nr. 1191/69 became mandatory. However, the compensation for fare reductions for school pupils, students, and the handicapped has not changed.

In fact, there is no need for change because the bus services follow the rules of valid

EU regulations. For the disabled, the municipalities are responsible, so they will pay their share of this. The “land” (county or federal state) is responsible for education, so they pay for the pupils and students.

In this area, the structure of the payments to the operators has not changed very much. None of the traditional pathways of public funding have been given up, with one major change. Until the 1990s, a large portion of the money to run the services came from monopoly profits; a lot of the money later came from the “Regionalising Fund,” which was meant for the regional heavy-rail transport but in fact was mainly used for LPT. The amount of money is as much as 12 billion DM, which is 6 billion

€ (Werner 1998). With the change of funding, there was a change in organisations as well. There is also the Regionalisierungsgesetz (RegG), which explicitly covers LPT with a defined maximum of 50 km or 1 hour of transportation distance.

However, it includes rail traffic. The second renewal of this law from 2007 defines that in the year 2008, 6,675 bill. Euros were dedicated to this law, payable to the federal states (Länder) according to a given distribution key. The subsidies have been raised by 1.5% per annum since 2009. The source for this money is the federal tax on fuel. At this moment, price reductions for students are subsidized by the state (§45 PeBefG). The state also sets up grants for investments, such as buying buses, according to §2(6) GVFG. The GVFG (Gemeindeverkehrsfinanzierungsgesetz) regulates state support for municipalities. Since 2007, 1,335 bill. Euros have been given by the state to the Länder. These grants are earmarked for general infrastructure improvements in a municipality. Article § 2 explains that the Länder can support local investments for a number of investive measurements, including local public bus transportation. For example, it names depots, maintenance and repair shops, bus stops, information systems, and signal processing. It also covers the purchase of buses if they are used, according to §42 PBefG, on regular buslines.

The usual way to count the balance—until today—has been to include all subsidies and even permanent payments from profitable sections of the city’s economy, such as energy or the water supply. This cross-financing has ensured the making of public transport “profitable” and has always been an object of criticism.

Cross-financing has become the main instrument to prevent market entry by private operators. Some also claim that it is incorrect to take any subsidies at all into account, and as a result of this, none of the local transport services would be profitable.

Organisation of LPT according to the German legislation

There are several institutions mentioned in the transportation law: the public authority, which is responsible for the authorizations (concessions), the responsible authority for carrying out the task and, finally, the operator. These organisations are supposed to work together and to coordinate lines, timetables, and fares (§8PBefG).

The task authority “Aufgabenträger” is decided by state law.

Following the alterations in the laws, the new planning and contracting responsibilities in public transport were assigned to competent authorities. For this purpose, most of them have created new bodies or administrative divisions as follows:

The federal states (“Länder”) being competent authorities for rail-passenger services have established rail transport planning agencies and have entrusted these entities with planning and with the award of public service contracts.

As mentioned above, an important law for the LPT context is the so-called Regionalisation Act. It involves all public transportation within one hour of travel time, including trains. The municipalities of a region form a task-responsible authority “Zweckverband,” which acts as a purchaser and plans the service. The federal states, where the competence for planning and contracting rail-passenger services has been allocated at the city and district levels, have formed Zweckverbände (unions of public transport authorities) or common-transport-planning associations (Verkehrsverbund). Sometimes, these unions exceed the borders of the federal states and include up to four states, such as the one in the Rhein-Neckar area VRN. In order to avoid unnecessary complications, in this study, only cases where the corresponding planning association is exclusively within one federal state were chosen.

These planning authorities have been awarded the competence for regional bus (and rail) services. As a reflection of the new legal situation requiring the award of public-service contracts, most of the existing transport associations that were subsidiaries of the operators have been transformed into authority-owned transport planning and contracting agencies (e.g., Hamburg, Frankfurt, Munich). That means planning and responsibility are in one place.

In the federal state of Hessen, which is connected to the Frankfurt case, most of the competent authorities for local transport services have formed Lokale Nahverkehrsgesellschaften (local transport planning and contracting agencies) co-

operating with the respective Verkehrsverbund, being responsible for regional bus and heavy rail services in their respective area. The competent authorities, which are only responsible for bus services in peripheral and rural regions, have mostly entrusted an administrative division. Hessen is a special case for the state and declared to apply 1893/91 strictly and tender all services.

Change has occurred in relation to the markets for bus services. Existing private and public operators are preparing themselves for the forthcoming competition to a greater degree. A uniform move forward is not apparent.

Amongst other forms of re-structuring into integrated operators (e.g., Berlin, Hamburg, Bonn), the sale (e.g., Bad Kreuznach, Zweibrücken, Görlitz) or partial sale (e.g., Leipzig) of various forms of cooperation (e.g., further joint ventures of several local transport operators with the group Taeter), further joint ventures of private- transport operators, and expansion attempts (e.g., positioning of DB AG as a

"European player" in the competition for the municipal transport operators) are being observed and prepared.