According to her demographic characteristics, Sofía is an example of a typical Rosario. She is between 25 and 45 years old, and still lives in her parents' house, where she plays the role of daughter and not head of the household. Her house has connection to the running water network, natural gas network and sewer network services. Regarding her training and insertion into the labor market, Sofía has been able to complete her secondary studies, and fortunately she has a job.

While the last news we have of Sofía dates back to mid-2015, we cannot currently confirm whether her situation remains the same, or even if her circumstances were indeed those (pending review by INDEC). What we can surmise, however, is that Sofía is one of the 10 million users who use urban passenger transport (TUP) in the city of Rosario each month.

The report addresses a topic that sparks controversy among Rosario residents at least once a year: the public transportation system and bus fares. In other words, it focuses on what appears to be the typical way to get around the city. The report is structured as follows: the first part describes the characteristics of public transportation in Rosario.

In the second, reference is made to the cost structure, and the process that led to the current tariff scheme. Finally, reference will be made to the characteristics that the new document presents with respect to the organization of the system, and that its intention is to reorder the routes of the bus lines into three types of networks.

For now, in this entry we will show a brief summary of the main topic of debate: the financing of the system, and its relationship with the cost of the ticket.

Pay out of pocket or pay with taxes (or not pay)

In general terms, the title summarizes the ways of financing the transportation system. Perhaps the distance that is established between the payment of a generic tax, until its application in basically any public service, makes the user lose the perspective that the transportation system is not only sustained by the cost that each user assumes per ticket, but also by multiple forms of taxation.

Indeed, the following table shows that, in recent years, there has been a systematic difference between the cost study prepared by the Rosario Mobility Authority (EMR) and the final ticket price. It is worth clarifying that the price derived from the cost study already incorporates the contributions that the different levels of government (national, provincial, and municipal) make to the public transportation system.

Even so, as can be seen in the last column, the difference between what is actually paid out of pocket and what should be paid always shows a negative difference against the financing of the system. All of the above, under the quality parameters that the municipal regulations themselves propose.

Thus, the guiding principle of our report revolves around the following question : what are the consequences of maintaining this discrepancy over time? Before proceeding with the analysis, it is clear that two extreme options arise: either the cost study overestimates the resources needed to keep the public transportation system (TUP) functioning, or the lack of resources ultimately harms service provision in some way (or a combination of both). In this regard, our work assumes that the cost study prepared by the EMR is correct.

In that sense, the table shown below is the result of estimating the differences in resources that would be occurring if prices were multiplied by quantities. The first column shows the result of multiplying each passenger per fare segment by its corresponding out-of-pocket cost of the ticket, also according to fare segment. While in the second column, the same procedure is replicated, but multiplying by the ticket derived from the cost study.

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For this table to make sense, we must assume that transportation demand is perfectly inelastic. That is, it is insensitive to price variations. Thus, the difference between the first two columns is reflected in the third; which shows a theoretical deficit expressed in nominal terms, for all the years under study.

In this regard, the existence of a line item in the municipal budget that functions as a kind of direct subsidy to the companies providing transportation services suggests that the lack of resources for the system is more than just a hypothesis. Indeed, between 2013 and 2016, the nominal amounts allocated to this line item increased by 90%. However, it should be kept in mind that accumulated inflation for the same period was approximately 190%.

Thus, the last column shows that the TUP (Public Transportation System) incurred a theoretical deficit before VAT in the last three years. Given that the amounts shown there are expressed in nominal terms, it is not meaningful to establish an intertemporal comparison between them. However, when calculating the ratio between the theoretical deficit and the actual revenues to the system, it can be observed that the percentage of theoretical debt to revenues climbs from 2,11% in 2014 to 5,45% in 2015, culminating at 8,28% in the 2016 estimate.

To have a greater perspective on this problem and delve into other aspects of the financing of the transportation system, we invite you to read the full report. Enjoy it!