Cash strapped
By : Chris Rivituso
A four-car train pulled into the Centrum metro station on Saturday afternoon and opened its doors. Out spilled several hundred passengers, making their way toward exits leading to the heart of Warsaw.
This is a typical scene for the Warsaw metro, the 12.7 kilometer line that runs from the Centrum station, located at the intersection of Aleje Jerozolimskie and ulica Marszalkowska in downtown Warsaw, to the bedroom community of Kabaty in the south. The line, whose first part opened in 1995, carries up to 160,000 passengers per work day, according to Warsaw metro's 1999 report.
"I live in Ursynow and the metro is awesome" because it allows a quick connection to the center of town, said 22-year-old Pawel, a student who works in downtown Warsaw.
No doubt the Warsaw metro has proven itself a major convenience for residents of certain parts of the city, but Poland's only metro system has much work ahead of it, including completion of the first line to northern Warsaw as well as a second, east-west line.
"Now is really the time to build it, but the problem is a lack of money," said Andrzej Brzezinski, an assistant professor at the Institute of Roads and Bridges at the Warsaw Polytechnical Institute.
Warsaw Mayor Pawel Piskorski agreed.
"This is one of the most important priorities, but one of the most expensive ones," he said.
Funding for the metro's Line I is a joint venture involving both the city and the state. According to Bohdan Zun, director of Metro Warszawskie, about zl. 239 million ($56.9 million) is earmarked for metro construction in 2000, out of which zl. 100 million ($23.8 million) will come from the state budget, which Piskorski described "as dramatically not enough." The remainder will come from the city.
The money that the city received from the national government was only a fraction of what it was looking for in a project called "Kontrakt dla Warszawy." The project saw the government giving zl. 700 million-zl. 800 million ($166 million-$190 million) each year for about seven years. Money would go to two major projects: further extension of the metro to northern Warsaw and a ring road around the city.
"We are not able to fund that from our small budget," Piskorski said.
While current funds will be enough to complete stations Swietokrzyska and Ratusz, expected to be opened by the end of this year, the emphasis is on getting the funding to complete construction of the section of Line I to Dworzec Gdanski by 2002. This will allow the line to connect with Polish State Railways (PKP), and eventually to northern Mlociny. The emphasis will then be to have a guarantee from the state for 2002 and 2003 that funding will be available for further construction northward, otherwise the city could face a dramatic lack of funds for the continued development of Line I. While the ideal situation would be to have the extension to Mlociny finished by 2006, Piskorski gave the worst case scenario of Line I being completed as late as 2024.
Allocations for the metro in the national budget for 2001 also do not appear to be too promising. "The budget for 2001 will be very difficult," Piskorski said. He predicted that the city will get slightly more than it received in 2000.
Total costs for the extension from the Centrum station northward are projected to come to zl. 2 billion ($476 million). Of that cost, about zl. 566 million ($134.7 million) will go for 108 new rail cars from Alsthom-Konstal. The new cars will employ newer technology and the trains will be longer, consisting of six cars. Now, Warsaw has 60 Russian-made metro cars, which are maintenance intensive and require inspections every 12-15 hours. The increase in the number of rail cars will also eventually allow for headways of about 11/2 minutes during certain times of the day. Zun forecast that the new cars will be in service by the fourth quarter of this year.
From a technical point of view, building the metro won't be difficult and a comprehensive network could be quickly developed.
"No problem, only money," Piskorski said.
Patiently waiting
Warsaw's affair with the metro system stretches back to the 1920s when city authorities approved plans to build an underground line, according to Metro Warszawskie's web site. Research and projections were conducted in the 1930s, but World War II, geological problems in the 1950s and subsequent financial difficulties left the city without a subway system.
Finally, in 1982 the Council of Ministers approved plans for the construction of a Warsaw metro, a project that was to be financed from the central budget. In 1983, the Metro Warszawskie administration office was created and construction started. But in the late 1980s, the central government told Warsaw that it could no longer be the only source of financing for metro construction.
Because Warsaw and the state have not always been able or willing to be forthcoming with funds, Zun warned of the negative consequences if the metro is built too quickly, costs are too high. But if it is built too slowly, then costs are also high.
"We are building (at) slower than optimal speed," he said.
Teresa Kuzminska, press spokeswoman for Metro Warszawskie, could not say what the optimal speed was, but said that funds must actually exist for construction to begin.
"Money must be guaranteed for about four kilometers," she said. However, she could not say how much more it would cost if construction or funds are delayed.
Former Vice Mayor Olgierd Dziekonski also said that legislation must be in place that would guarantee a certain amount of funding for the Warsaw metro.
"The government has to realize that the metropolis is playing a very significant role in the country's growth," he said.
Piskorski agreed. "They should treat it as an investment," he said. "Warsaw is one of the biggest revenue sources for the country."
Digging for change
Construction of the metro will not always be able to rely on public budgets for financing. Where the money will come from is an unanswered question. On the drawing board is Line II, projected to run primarily from east to west, crossing the Wisla River as well, as a part of Line III. So far, it is unclear where the end points of Line II will be one suggestion has been for the line to start in Bemowo in the west, while options for the line's east end have included Tarchomin, Brodno or Targowek. Another question in financing and building Line II is how it will traverse the Wisla River via a tube or a bridge, the latter being cheaper. But the line is certain to run from Rondo Daszynskiego to Dworzec Wilenski, said Zun, who estimated the cost for that section, without new rolling stock, to be about zl. 1 billion-zl. 1.5 billion ($238 million- $357 million). While the city has put out a tender for a third party to research the costs of building the second line, Metro Warszawskie has estimated the cost of the entire line, along with new rolling stock, to be about zl. 5 billion ($1.56 billion). However, this estimate dates from the end of 1997 and an updated estimate is not expected until the end of 2000, when research is complete. The metro's annual report listed private funding as a "basic issue," but metro officials have acknowledged that some sort of public involvement will also be necessary for a project of this magnitude.
One source of private funding could come through project financing. Yet both bankers and metro officials expressed reservations about whether project financing would be feasible. A payback period of 20 years might be acceptable for such a project, but banks will want to know who is guaranteeing it. And getting the city to sign a guarantee for a project of this scale would be a difficult undertaking.
"The city is not able to do it," Piskorski said. He also said that a guarantee would be looked upon as a credit and Warsaw is already coming close to its limit of credits for the budget, which is about 60%.
But even then, a municipal guarantee will not carry the same kind of value that a state guarantee would. The ideal way to make a project more attractive would be to obtain a state guarantee.
"If it has a state guarantee definitely," an industry source said. But under the present circumstances it is unlikely that the state will be willing to give such a guarantee, particularly when it has been difficult for it to give guarantees for constructing motorway projects.
"I don't know that politicians would like to have the suspicion that they favor the capital city too much," the source said. "I think it (metro construction) will go on as slowly as it does now."
Fare trade
Currently, the Warsaw metro uses a fare collection system called proof of payment (POP), which means passenger's tickets are checked when a controller steps on board. The city has ordered electronic gates from French company Monetel, but delivery is still delayed even though the barriers were to be in place last autumn. The gates, which are equipped to take both magnetic strip cards and fare cards with stored information, could be in place at the beginning of 2001, Zun said.
Brzezinski noted that after both lines are completed, passenger flow at the Swietokrzyska station, projected to be a transfer point between the two lines, will be 40,000 passengers per hour on Line I and 30,000 passengers per hour on Line II. It would be hard, however, to determine if that would bring in much more revenue.
"It depends on the transport policy of the city," Brzezinski said.
But although raising the price of tickets could be necessary for funding metro construction, the end result could drive away passengers.
"It's very important to maintain low ticket prices," Brzezinski said. "When you raise the price of the ticket you are not going to have 30,000 passengers."
Creating a different fare structure and making metro tickets three times more expensive than other forms of city transport could also create "social problems," Piskorski warned.
According to the 1999 Warsaw metro financial report, the metro is financed about 88% from the City Transportation Board (ZTM), with the rest coming from the metro itself. Operating costs were about zl. 60.84 million ($15.6 million). The city's costs for transport in 1999, according to Dziekonski, is zl. 800 million ($195.12 million) 40% of which is granted by the city, and the remainder from the fare box. But it was unclear how much goes to the metro.
The cost of a ticket may be zl. 2.40 now, but ZTM controls the price. "We are estimating that the real cost is zl. 8," Brzezinski said.
Zun also spoke about receiving financing for the Line II project from European financial institutions and mentioned that the Portuguese government was given a guarantee for the further financing of the Lisbon metro from the European Bank for Reconstruction and Development (EBRD). Another way the metro could raise funds would be by becoming involved in real estate, as the metro administration has been in Madrid, Spain. Because of its involvement in leasing, selling and buying real estate, Madrid's metro is developing the fastest in all of Europe, Zun said.
"That is one of the things we are checking," Piskorski said. But the question that arises is how much it would bring to fund construction of the metro.
"It may help, but it is not enough," he said.
