Route Contract: Net Cost / Financial Aspects / Costs / Capital Costs

Capital Costs
Capital costs are bus operator and authority expenditures incurred to purchase the assets required to provide bus services. These include vehicles, maintenance workshops and bus garage facilities, and supporting infrastructure requirements.

In route and area contracts, the private contractor usually has the responsibility to purchase the buses and supply the workshop and garage facilities required for the route or area operations. The authority usually supplies other infrastructure requirements such as terminals and bus stops to the private contractor.

The financial model’s capital planning capability
The financial model gives the authority a tool to determine whether it can afford to invest in infrastructure improvements within a given time frame.

It will have separate bus company and authority capital cost categories and corresponding sources of funding that also link to operating costs, farebox and other revenues.

This will allow the authority to assess the impact of new bus purchases and infrastructure investments on fare levels. In addition, it will demonstrate whether there are sufficient funds for its capital investment program from other revenues.

This analytical capability is especially important to assist the authority in preparing the terms of the route and area contracts.

Evaluate alternative infrastructure investments
The financial model’s capital planning module allows the authority to test alternative infrastructure construction schedules based on:

Network operating requirements
Quality of service objectives
Availability of farebox and other revenues

This capability will also assist the authority to prepare, evaluate and monitor route and area contracts.

Especially significant for the authority is its ability to make annual debt service payments to creditors for any loans required to make infrastructure improvements. The financial model must show the origin of the funding source used for annual debt service payments, such as local and or national government budget transfers or other revenue sources. On occasion, the authority may use farebox revenues to guarantee loan payments.