Lea Bosch, Ludwig Maximilian University of Munich
Relevance of the Practice
In the 1970s, the regionalization of local public transport began. The transfer of responsibility for regional and local public transport to the Länder accompanied the privatization of the German Federal Railways.
Following the different laws on local public transport (ÖPNV-Gesetze, e.g. Article 8(1) Law on Local Public Transport in Bavaria (BayÖPNVG)) the planning, organization and provision of general local public transport is a voluntary task of the counties and independent municipalities within their own sphere of activity. ‘At first glance, these organizations appear to be well-known regional associations of local governments, if not the Land government has kept responsibility. However, they have to co-operate with suppliers of transport, from which they have to buy services. Thus, regionalization led to complicated structures of public-private co-ordination and contracting, which correspond to the concept of regional governance.’[1]
In general, local public transport includes only transportation via buses, not via tracks. The accountable authorities differ according to type of transport: for transportation via buses the local governments, for transportation via tracks the Land-government is responsible. For this reason, the declining financial capacity of the municipalities and counties, especially in rural areas, also jeopardizes the provision of local public transport. Youths and elderly in rural areas in particular, who are especially dependent on local public transport, thus suffer from this lack of functioning infrastructure. However, even in the urban areas, the needs of growing cities for a high performing local public transport exceeds capability. Demographic change is thus leading to new – varied – challenges in both urban and rural areas with regard to public transport planning, coordination and notably financing.[2]
Description of the Practice
The statutory commissioning authorities (gesetzliche Aufgabenträger) for local transport are competent to merge with other such authorities.[3] Thus, local transport companies are often run or owned not only by one single authority, but mostly in close collaboration of neighboring municipalities, counties and the Land. Sometimes they even exist across the borders of different Länder (e.g. Berlin-Brandenburg Transport Association).[4] Therefore, these authorities usually hold a joint venture.[5] Many municipalities – especially in metropolitan regions – have a high interest in cross-border traffic[6]: Firstly cross border in its geographic meaning, to cross the municipalities’ borders. Secondly in a personnel meaning, as municipalities guarantee the use of local transportation not only for inhabitants of the own municipality but for everyone. This organizational form of local public transport is called inter-connected transport service or transport association (Verkehrsverbund). In the respect of financing an inter-connected transport service, the population figures of the respective municipalities, the use of the offer by the respective municipalities’ inhabitants, the financial capacity of the respective municipality and many more factors are of decisive importance. Even though the urban local governments (ULGs) usually have a larger budget, and thus a better negotiating position, they depend on the rural local governments (RLGs). Due to urban employment but limited urban space for housing[7], ULGs are dependent on cooperation with the RLGs for the provision of housing and for infrastructural connection to the city. It results in a fruitful collaboration of RGLs and UGLs in these linked transport associations, a combination of all means of transportation in one provider and a shared distribution of the cost burden among all authorities involved. Nevertheless, the transport associations are under great financial pressure.
The primary financing of the local inter-connected transport service is provided by ring-fenced financial allocations (zweckgebundene Finanzzuweisung) from the Länder.[8] These kind of allocations must be used for the purpose for which they are provided by the state. The financial allocations are generally based on the fiscal equalization law (e.g., Bayerisches Finanzausgleichsgesetz, BayFAG) of the respective Land and the fiscal constitutional provisions of the respective Länder-constitutions. First sentence of Article 106(7) of the Basic Law (BL) obliges the Länder to pass on a certain proportion of their total share of community taxes to the municipalities. In addition, the Land-legislature determines whether and to what extent the revenue from Land-taxes accrues to the municipalities (Article 106(7) BL, second sentence). The ring-fenced allocations, like in the case of public transport, must be distinguished from the general financial allocations. Since the general financial allocations are not earmarked, they are freely at the disposal of the municipality.
Additionally and obviously a user charge is levied, which is therefore also a source of income, but usually not sufficient to cover costs. The source of revenue varies therefore with individual and specific organization of the linked transport association. It depends on collaboration of different authorities. Thus, this part of the financing is based on individual agreements between the authorities involved and therefore varies considerably. In this respect, however, the following should be added: In particular, mere profit-making intentions never constitute a public purpose, which municipal undertakings ultimately pursue. Nevertheless, a municipal enterprise must operate economically, i.e. also with the intention of making a profit.[9]
The financially stronger a municipality is, the more it can also invest out of its own general budget on top in its own local public transport. This may of course raise questions and problems under State aid law, and thus, questions concerning EU law. This type of financing is however possible in principle. According to the case law of the European Court of Justice (ECJ), the criterion of State aid is not met if specific parameters are fulfilled, e.g. the recipient undertaking has actually been entrusted with clearly defined public service obligations.[10]
Assessment of the Practice
The linked transport associations around a large city are only partially prepared for current challenges, notably due to lack of budget. There are in particular financial issues and tough negotiations between the authorities involved. The need for punctual, cheap, safe, flexible and fast local transport is growing rapidly, especially in cities and metropolitan regions. The frequency must be increased and services must be further adapted to the needs of the users. In this way, the rural areas surrounding large cities can also be integrated into the metropolitan area. The authorities and LGs must invest more and more money. To do this, the municipalities are dependent on the help of the Länder. On the other hand, there is a great danger that local transport in rural areas, which are not close to a large city, will almost come to a standstill. Concepts for individualized transport are being developed for this purpose. Key considerations in this regard will be transport on demand, involving artificial intelligence and autonomous driving. However, this entails comparatively equally high costs. The RLGs will therefore be required to continue into the future by connecting and coordinating (transport) more deeply among each other. However, the RLGs are far from being able to achieve it – especially financially – by themselves. Hence, here too, major investments will have to be made, particularly by the Länder.
References to Scientific and Non-Scientific Publications
Benz A and Meineck A, ‘Sub-National Government and Regional Governance in Germany’ in Vincent Hoffmann-Martinot and Hellmut Wollmann (eds), State and Local Government Reforms in France and Germany (Springer 2016)
Burgi M, Kommunalrecht (CH Beck 2018)
Jarass H, ‘Aktivitäten kommunaler Unternehmen außerhalb des Gemeindegebiets, insbesondere im öffentlichen Personennahverkehr‘ (2006) Deutsches Verwaltungsblatt 1
Jung C and Deuster J, ‘Europäische Kommission genehmigt ÖPNV-Finanzierungssystem des Verkehrsverbunds Rhein-Ruhr‘ (2011) IR 148
— — and Michaels S, ‘Fusionskontrolle in einem sich wandelnden ÖPNV-Markt’ (2005) 3 IR 55
Kersten J, ‘Demographie als Verwaltungsaufgabe‘ (2007) 38 Die Verwaltung 309.
Oebbecke J, ‘Der öffentliche Dienstleistungsauftrag nach der VO (EG) 1370/2007‘ (2019) Neue Zeitschrift für Verwaltungsrecht 1724 Runge D and Werner J, ‘Der “Berliner Verkehrsvertrag“: Verkehrsvertrag zwischen dem Land Berlin und den Berliner Verkehrsbetrieben (BVG) AöR‘(2009) IR 268.
[1] Arthur Benz and Anna Meineck, ‘Sub-National Government and Regional Governance in Germany’ in Vincent Hoffmann-Martinot and Hellmut Wollmann (eds), State and Local Government Reforms in France and Germany (Springer 2016) 69f.
[2] Martin Burgi, Kommunalrecht (CH Beck 2018) para 6 Rn 19; Jens Kersten, ‘Demographie als Verwaltungsaufgabe‘ (2007) 38 Die Verwaltung 309.
[3] Antitrust problems may occur due to the merger of various companies, see Christian Jung and Sascha Michaels, ‘Fusionskontrolle in einem sich wandelnden ÖPNV-Markt’ (2005) 3 IR 55.
[4] See: Burgi, Kommunalrecht, above, para17 Rn 24ff for more detailed descriptions of the establishment of municipal undertakings and the prohibition of their economic viability and public service obligations. For more details on the Berlin-Brandenburg Transport Association, see Diana Runge and Jan Werner, ‘Der “Berliner Verkehrsvertrag“: Verkehrsvertrag zwischen dem Land Berlin und den Berliner Verkehrsbetrieben (BVG) AöR‘(2009) IR 268.
[5] With regard to the establishment of municipal undertakings and the prohibition of economic efficiency or their obligation to serve the public good, see: Burgi, Kommunalrecht, above, 17 Rn 24ff.
[6] Janbernd Oebbecke, ‘Der öffentliche Dienstleistungsauftrag nach der VO (EG) 1370/2007‘ (2019) Neue Zeitschrift für Verwaltungsrecht 1724.
[7] See therefor also report section 2.2. on Municipal Housing Companies.
[8] Burgi, Kommunalrecht, above, para 18 Rn 17.
[9] Regarding this point, see Hans Jarass, ‘Aktivitäten kommunaler Unternehmen außerhalb des Gemeindegebiets, insbesondere im öffentlichen Personennahverkehr‘ (2006) Deutsches Verwaltungsblatt 1, 4ff.
[10] ECLI:EU:C:2003:415 (Altmark Trans). For all parameters, see Burgi, Kommunalrecht, above, para 17 Rn 29ff; Christian Jung, and Jan Deuster, ‘Europäische Kommission genehmigt ÖPNV-Finanzierungssystem des Verkehrsverbunds Rhein-Ruhr‘ (2011) IR 148; Oebbecke, ‘Der öffentliche Dienstleistungsauftrag nach der VO (EG) 1370/2007‘, above.