Lyon’s Rhônexpress Project Pioneers a New Way of Thinking About Public-Private Partnerships

» France’s southeastern metropolis readies a downtown-airport connection with help from the private sector.

After the collapse of the massive London Underground PPP scheme early this month, the future of major private involvement in the maintenance and operation of public transit systems was put on the skids. There, the city took back full control of a system whose maintenance and reconstruction had been signed off to private entities less than ten years before, claiming that municipal entities would be able to do the job keeping up the network more easily than had the PPP partners. Though there is no technical reason why such cooperation between the public and private sector had to fall apart, the recession underlined the vulnerability of having corporations assume risk over vital public resources.

The signing of a contract to operate two new transit lines between the Denver transit system and the private Denver Transit Partners, however, suggests that there may still be some merit to the idea of getting corporate involvement in public projects. Just finalized a few weeks ago, this agreement is too young to be evaluated on its merits.

But a new airport connection almost ready for operation in Lyon, France, provides an example of how such a cooperation might be structured efficiently and reasonably.

The Rhônexpress program will bring the Lyon Saint Exupéry Airport within 25 minutes of downtown’s Part-Dieu station every fifteen minutes. The line will operate using six Stadler tram-trains running on tracks partially shared with the T3 tramway line completed in December 2006.

The contract, signed in 2007 between the département (the French version of the county) and the Rhônexpress group, commits local entities to €31.35 million in expenses for the construction of a train maintenance center and a maximum of €3.5 million in annual subsidies for thirty years, increased at a standard 2% yearly rate. The French government also contributed €10 million. The private entity, operating under European Union rules for public service provision, has paid the majority of the corridor’s estimated €110 million construction costs and will be liable for any operational losses.

The Rhônexpress group is a cooperative between several French entities; it is controlled 36.6% by the Caisse des Dépôts et Consignations (a semi-public investment bank), 28.2% by Vinci (a contractor), and 28.2% by Veolia (a transit operator). Each has on its own been closely involved in other French public transportation programs.

Their willingness to commit to an initial investment in the line’s construction suggests that they expect it to be operationally profitable, at least above the €3.5 million subsidy they’ll be receiving every year to operate trains. Though the local and national governments have committed a total of €146.6 million to the project’s construction in 2007 dollars, that money is to be distributed over a course of 30 years. It will almost certainly be less than overall infrastructure and operations spending on the corridor.

Also, by agreeing to distribute most payments year-by-year rather than alone in the construction program, the local governments are minimizing the hit on any one annual budget. This could be a lesson for U.S. systems considering similar deals: Rather than pay for all of the infrastructure upfront and then assume that the operator can simply pay for operations, the local governments have ensured that the private group has a steady source of income throughout the 30-year contract — this may, in turn, have lowered the needed commitment to the initial infrastructure program. This could in turn be a relatively good deal for the governments.

Of course, whether the Rhônexpress program was worth any public investment at all is a matter that certainly merits debate. The new trains will replace the Satobus with a new service that is only five minutes quicker and almost 50% more expensive. Even if the project is profitable, it won’t improve service much for the region’s inhabitants. (Passengers are guaranteed a 50% discount if trains are ten minutes late and a full payback if they’re more than 20 minutes late.)

Nonetheless, Lyon proceeded quite reasonably in the implementation of this infrastructure project; a €146.6 million total commitment isn’t bad for a new airport rail link. But the city and its regional transit authority were smart: they have been planning since 2001 for this line and made a number of provisions in other transit projects to ensure lowered costs.

The region committed first to the T3 tram, which runs east from the Part-Dieu station in downtown Lyon to an industrial district. As part of that 9-mile project, the line included from the beginning bypass tracks at many of the stations — a minimal expense for a big payoff. Once the Rhônexpress project is up and running in August, the airport-bound trains, stopping at only two stops between downtown and the terminals, will be able to bypass local trams. On most of the tracks, the Rhônexpress will share tracks with trams and run at urban speeds. The only construction necessary for the new link, then, was a 4.3-mile track on a new alignment. There, the tram-trains will be able to reach 60 mph, not bad at all.

Lyon’s airport project suggests a reasonable way for private involvement in public infrastructure. Long-term payments, a commitment from corporate entities for initial infrastructure costs, and a reduction of costs through shared tracks with another transit program has likely saved the region money over the long-term.

Image above: Rhônexpress photomontage, from Rhônexpress

9 Comments | Leave a Reply »
  • Sean

    A large portion of public transit in Japan is run by private companies. Although it’s success it probably contingent of Japan’s high population density and high mass transit usage. But it is also special because the private transit companies are very diverse. Many rail companies own large tracts of land around stations and develop them into homes, malls, department stores, etc. Some even own baseball teams and run other businesses unrelated to their transit operations. They are very diversified businesses and they’ve turned transit stations into lifestyle centers. Sometimes you hear of Japanese people entering stations for the soul purpose of just shopping or entertainment. They also cooperate with each other at an unheard of level; for instance, a private rail line starting in the Tokyo suburbs may run through on a subway line in central Tokyo (the majority of subway lines being run by a private company btw) and emerge on the opposite end of the line and run through on a different private railway’s line. So you can ride on a private rail/subway line and potentially see trains from 3 different companies at once on the same line. This does wonders for their businesses, as it increases riders, station patronage and is most convenient for riders as well. In other words, a win-win for everyone involved. I don’t know if the Japanese model would work in the West, but it very successful in Japan and has been for over 100 years.

    • danny

      Okay, now how much of that comment did you make up? Im willing to guess that at least 50% of the facts you cite are complete fabrications.

      • Actually, the facts he cites are all correct. Japan does in fact have plenty of competing private operators, has extensive through-running from different companies’ commuter lines to the subway, etc.

        The only fact that’s incorrect in the comment is “the majority of subway lines being run by a private company btw.” This is not completely true: while Tokyo Metro is run and pays taxes as a private business, it is still owned entirely by the city and national governments, pending full privatization.

        However, some of the analysis in the comment is off-base. Yes, the way the railroads develop their stations helps profitability – but that includes not just retail but also massive office space construction, to turn those stations into employment hubs and increase ridership.

        Honestly, give me Sean’s comment over the “Trains in Japan are just a loss leader for real estate” myth any day.

  • Chris

    I think the problem with PPPs is that the private company is only ever pretending to take on the risk. I can guarantee that when it goes bad they just end up walking away and the taxpayer gets screwed. Bit like with the London tube in other words.

    • Mike

      Well, this is a important issue that deserves more attention and discussion. There certainly are examples of private PPP firms being bailed out by government, and if this is an inevitable outcome of PPP failure, then PPP have little future. At minimum, avoiding a PPP bailout requires a well structured contract and strong political leadership that will not cave to a whining private firm. These aren’t gimmes, but it seems to me that these are quite achievable.

      As for the idea that if the private partner walks away that the public is left holding the bag, I just don’t get that. Anyone who loaned money to the private partner is hosed, but that group should not include government. If the bankrupt private firm hands over a decrepit system in need of massive reinvestment then the public is hosed, but a well structured contract and diligent oversight should be able to avoid this problem. What if the private partner promised to improve an outdated system but then only gets partway through the project? Then the public is stuck completing the project on its own dime, but this doesn’t mean that the public is necessarily worse off … as long as they actually want the planned improvements.

      The london underground example keeps coming up; did that PPP fail in a different manner that left the public holding the bag?

      • Mike

        Okay, just read Yonah’s writeup on the london tube PPP … it clearly did not pass the basic test of a well structured contract.

  • Yonah, is Lyon building Rhonexpress instead of or in addition to REAL?

    • Yes, REAL is still in the process of being implemented, at least according to French Wikipedia. I think Rhônexpress is actually a part of the REAL project, which involves a whole series of programs to improve regional transportation.

      • Max Wyss

        The way I do understand that Wikipedia article, Rhônexpess is not part of REAL (although, at the time the REAL concept was developed, nobody way talking Rhônexpress yet).

        REAL is essentially bringing the commuter lines around Lyon up to what one normally expects from commuter lines (fixed interval schedules, integrated consolidated zone fare systems, connection with local buses and coordinated scheduling). In order to achieve that, infrastructure and rolling stock need to be updated.

        So, Rhônexpress may be participating in the fare system and scheduling.

Leave a Reply

 

 

 

Comment preview below as you type. You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>


three + 9 =

For help if you have trouble posting or your comment is marked as spam, please email:
info (at) thetransportpolitic.com | Comment Rules

The Site / The Fight

by Yonah Freemark

yfreemark (at) thetransportpolitic (dot) com

  • Le progrès ne vaut que s'il est partagé par tous.

Email newsletter

Network

rss feed
comments feed
twitter feed
email update