By Walter Hook and Annie Weinstock
Until March 2020, Bogotá’s TransMilenio, perhaps the most well-known BRT in the world, was regularly carrying 2.4 million daily passengers, more than most European subways. It had been so popular that its main problem for years was persistent overcrowding on several corridors.
The system opened in 2000 and was very much associated with Mayor Enrique Peñalosa, who brought the system from concept to operations during his first three-year term. Peñalosa is also known for having built the first network of segregated bikeways in Bogotá. The next two Mayors — Antanas Mockus and, to a lesser extent Luis Garzon — continued expanding and improving both TransMilenio (TM) and the bike network.
TransMilenio, under these three mayors, consistently reached full cost recovery. And despite a major downturn in the system’s finances under the subsequent mayors who served between 2008 and 2016, the TM BRT had nearly returned to full cost recovery just before the pandemic, at the end of Peñalosa’s second term.
Peñalosa used the BRT to formalize the informal transit industry
In implementing TransMilenio, the Peñalosa administration also pioneered a now famous development initiative: successfully formalizing a segment of Bogotá’s informal public transport industry. The TM operators were selected through a competitive bid, and the tender required the bidders to have good corporate governance and to include original bus owners as shareholders. It worked. Companies were formed by former bus ‘enterprise’ owners who owned previous route licenses. They brought in the small bus owners as shareholders, they found outside investors, and hired good managers.
The bus companies formed were robust and provided good service. Working conditions improved for thousands of bus drivers, and the former bus owners now earned a much steadier income as shareholders, receiving monthly ‘pre-profit’ distributions. Bus services began operating on a schedule for the first time, vehicle safety became the norm, and the dangerous ‘penny war’ of buses jockeying curbside for passengers which had killed so many pedestrians was over. Some of the new companies that were created were so successful that they won contracts all over Latin America. This successful transformation has since been imitated all over Colombia and throughout the world, including, to some extent, in South Africa which we wrote about last week.
But BRT trunk infrastructure cannot serve every corner of a major city all at once, and TransMilenio is no exception. Lower quality informal public transport operations continued to dominate in the large swaths of Bogotá not served by TransMilenio.
Moreno brought most of the informal industry under contract, but made critical errors
In 2010, Mayor Samuel Moreno decided to formalize the remaining bus services throughout the city. He divided the informal transit market into 13 zones and offered a bus operating contract for each zone. Due to an oversupply of buses in each zone, bidders needed to agree to either buy or rent the old buses from their current owners to use in the new system until the end of their lives, and then scrap and replace them.
Nine operators in total won the tender, with several winning more than one zone. TransMilenio, the BRT system manager, was also tasked with managing these non-BRT contracts. The winners owned fleets of buses they brought into the new system, but they didn’t own all the buses in any zone, so they needed to agree buy or rent a lot of old buses from their original owners.
In order for passengers to use the new system, they had to have a smart card. All the fare revenue went to a Trust Fund. TM then paid the bus operators based on kilometers operated (known as a ‘gross-cost contract’).
These new operations were called Sistema Integrado de Transporte Público (SITP).
It was a good idea, but doing the whole city at once proved too much, and mistakes were made:
- Poor integration with BRT routes. The SITP routes were not changed, so some of them operated in direct competition with TM routes, and some were simply very inefficient. These inefficiencies led to higher operating costs and lower revenue for the system as a whole.
- Problems with the smart card. The SITP fare collection system was tendered with an entirely new smart card, different from the one used on the BRT, so passengers had to carry two different cards, and there was no discounted transfer. The smart card top-up network was very weak in the poor neighborhoods, so passengers had a hard time using the system. Fare evasion skyrocketed.
- Weak negotiations. The small owner operators were reluctant to sell/rent their buses to the winning bidders at the ToR interest rate/rental price. During the public review period on the draft tender they held a strike. Their demand was to increase the ‘rent’ (or interest on the purchase) that winning bidders must pay them. Mayor Moreno agreed. However, this would significantly increase the SITP operators’ costs. To compensate them, Moreno changed the original SITP contract terms from 12 to 24 years. Not only did this tie the government’s hands with very long term, poorly negotiated contracts, it imposed very high costs on the new companies which to a large extent got passed on to TM.
- Some companies were under-capitalized. Some of the winning bidders were companies fully composed of former informal bus owner/operators. These companies were very weak and lacked sufficient operating capital to purchase new buses and start a new business. Others were TM trunk operators that also had buses operating outside TM in the informal system. These were much stronger companies with more working capital. When the system opened, two of the under-capitalized companies failed immediately and reverted to informal operations. Legally, the administration had to terminate those contracts to tender the zones again, but this never happened under either Moreno or Mayor Petro (2012–2015). Instead, they reverted to the old, informal service, which came to be called the ‘provisional services.’ These were supposed to operate according to their route licenses, but they were weakly regulated, and often changed routes to compete with SITP routes.
Thus, the SITP services became a bad business for the bus operators, despite costing TransMilenio about $300 million in annual operating subsidies.
TM trunk services also began to deteriorate
Despite ballooning costs to the city, Mayor Petro cut fares by 20%. This meant that even the trunk BRT services began to require subsidies. Meanwhile, the original TM contracts were supposed to expire after the fleet had completed an average of 850,000 km so that a new tender could include new buses. But Petro extended the contracts by increasing the number of kilometers to 1 million and then to 1.2 million which, in turn, extended operations of the aging buses. As a result, TM buses were starting to fall apart, adversely affecting service.
Meanwhile, overcrowding on the BRT system was becoming severe, angering the public. TM hired experts to address these problems. The best solution was to build the planned parallel BRT corridor on Avenida 68, which would have pulled demand off the most congested lines. The simplest solution was to buy new bi-articulated buses, but this required reconstructing many of the stations. No progress was made on any of these issues until Peñalosa returned to office in 2016.
Peñalosa eased the financial problems and expanded transit in his second term
In Peñalosa’s second term, more than fifteen years after his first, he inherited a far different system than he had left behind. TM was overcrowded, the buses were falling apart, the SITP integration was in big trouble, fare evasion was between 11%-15%, and the whole system was near financial insolvency.
Other mayors had neglected TM while planning to build a metro, which appeared necessary because of the unaddressed overcrowding. Three planned TM trunk routes were shown to be critical to achieving the metro’s ridership targets. Approximately 400,000 of the projected 1 million daily passengers on the metro line are expected to transfer from these three planned corridors included in the same financial package: Avenida Boyacá, Avenida Ciudad de Cali and Avenida 68.
Peñalosa signed an agreement with Colombian President Santos in which the national government would fund about 65% of the infrastructure cost for both the metro and these new BRT corridors, and the city would pay its share. The new project was sufficiently well planned to secure the financial backing of the World Bank, the EIB, and the Inter-American Development Bank.
By this time, the oldest part of the TM fleet was almost 15 years old and badly deteriorated. Introducing new cleaner bi-articulated buses, and rebuilding certain stations, was critical to reducing overcrowding and pollution and generally improving the service.
Because the major bus operators all had bad credit due to their loss-making SITP contracts, the banks were not willing to provide them loans to renew the fleet. The solution was to separate bus procurement from the operator. Purchasers were companies with good credit who then gave the buses to the bus operators under a separate contract. This made possible the procurement of 1,441 new articulated and bi-articulated buses, most of them EURO VI CNG buses.
At the same time, most of the companies continued to be trapped in the unprofitable SITP contracts. Peñalosa brought the companies and the banks to the table to agree to a new contract that was financially sustainable. Once the new terms of the contract were signed, Peñalosa said, “an atomic bomb has been dismantled.” Had this new deal not been reached, there was a significant risk that additional bankruptcies would have decimated the SITP system.
Peñalosa took the unpopular decision to increase the fare on TransMilenio to help reduce the amount of subsidy, and by 2018 the cost recovery ratio on the BRT system was back over 90%. The subsidy increased again somewhat in 2019 to cover the cost of the new bi-articulated fleet which successfully increased the capacity of TransMilenio by 41%.
Peñalosa also managed to tender the remaining ‘provisional’ contracts and bring them back into the SITP system, while introducing the city’s first fleet of 483 new 12-meter electric buses. He also began a process of integrating the SITP and TM routes into a single, more rational network (a process we were involved in), which has, unfortunately, not yet been implemented.
During this period, Peñalosa also got another 120 km of new bike lanes built. He also got the new TransMiCable gondola system built, helping 25,000 lower income people commute every day from their homes on the steep hillsides, while also creating new parks and facilities around the gondola. His Vision Zero program oversaw a drop in roadway fatalities by 20%. He also tried to extend TM down Avenida Septima, which is home to Bogotá’s most prestigious downtown addresses, but was blocked by legal actions.
TransMilenio routes are stuck in mixed traffic on Ave. Septima because wealthy communities have resisted extending the BRT trunk infrastructure through their neighborhood.
Ironically, Peñalosa, known for speaking about the benefits of BRT systems over metros, ended up successfully bringing the metro project forward to the point of signing construction contracts. Now, the metro will be part of an integrated rapid transit system.
López in the Time of Covid
Claudia López, who became mayor in 2020, campaigned against expanding TM and opposed it on Ave. Septima. Once Mayor, she scaled down Peñalosa’s plans on Septima and re-branded it a ‘green corridor.’ With the rebranding, the plan is moving forward. However, as she is finding constructing a second metro corridor prohibitively expensive, she is reconsidering her position against expanding TM. Being unable to stop its construction, the mayor went ahead with expanding TM onto Avenida 68, which is critical to easing overcrowding on the other trunks and feeding the metro. The planned TM trunk on Avenida Ciudad de Cali is also moving forward.
Then Covid struck. It took a huge toll on Colombia. GDP has plunged by more than 6%, and poverty has increased by 42%. Public transport has been hit particularly hard. After the first lockdown in 2020, the Ministry of Transport only allowed 35% occupancy in the system’s buses, later increased to 50% and again to 70%. However, demand has not yet recovered, and TM and the SITP local services are currently running at about 40% capacity.
In 2020 TM’s deficit increased by 135% percent compared to 2019, for a total of USD 610 million. Fare revenue dropped by around 50%.
Mayor López requested the national government’s help to finance the deficit. The Ministry of Finance had announced that the national government would provide a line of credit; however, no decision has been made. The national government currently faces the additional competing needs of buying more vaccines and providing relief to the people and businesses most hurt by the pandemic. To make matters worse, the income from its two leading exports — oil and coal — dropped by 39.5% compared to 2019.
To finance the deficit created by the skyrocketing expenses of the pandemic, President Ivan Duque’s government presented a tax package to the Congress in mid-April which would have raised $6 billion. According to the BBC, “The proposed reforms would have lowered the threshold at which salaries are taxed, affecting anyone with a monthly income of $656 or more.” This angered the left as well as other groups of young people including artists and indigenous groups. Mostly peaceful protests have turned violent, however, leading to ongoing bloodshed and damage to public and private property, including 40% of TM stations, and many TM and SITP buses. With Covid still raging, the President and the Mayor have attempted to stop the protests. The Finance Minister has been replaced, but there is no clarity on how the government will finance the increasing deficit and mounting social needs of pandemic-stricken Colombia.
All of this may derail some of the planned investments. Right now, bogotanos and the government are mostly concerned about how to stop the ongoing violence. When the smoke dissipates, hopefully Bogotá will get an affordable world class BRT on much-needed trunk corridors integrated with a high-capacity metro through part of the urban core. Perhaps Bogotá will again become an example of informal industry transition, but this time, with BRT, metro, and non-BRT services integrated into a seamless whole.