My financial balance is insufficient… Docked city bus

Last year, the blood tax applied to city buses in seven cities nationwide reached a record high of 1.67 trillion won. This is the result of an increase in operating costs such as labor costs, a long-term freeze of bus fares, and a sharp drop in users due to the novel coronavirus infection (Corona 19). It is pointed out that the fare system reform and the restructuring of the bus market are inevitable in order to prevent the’pour water into the bottomless dock’ type of fiscal input.

According to each local government on the 28th, a total of KRW 1.673.8 trillion was invested in city buses last year in seven regions that introduced the semi-public bus system, including Seoul, Busan, Daegu, Incheon, Daejeon, Gwangju, and Jeju. It is a record high, an increase of 84% from 2019 (909.3 billion won). Compared to the fiscal input of 6288 billion won in 2015 (excluding Jeju Island), it has increased to 2.6 times in the new five years.

The cities of Seoul and Busan, which have a large number of city buses, were unable to compensate for the shortfall in cost only with the established budget, resulting in large-scale bank debt. Last year, Seoul City and Busan City loaned 468 billion won and 150 billion won respectively under the name of the bus transportation association. It must be paid off in finances within the year with an annual interest rate of 2%. However, it is not enough to pay off all of the loans with the budget secured so far, so it is time to’turn around’ the debt.

A high-ranking local government official said, “It is true that transportation welfare has improved with the successive introduction of the bus semi-public system since 2004, and the accident rate has decreased, but a pricing structure that cannot but be driven politically has been formed.” Even after pouring in the blood of the citizens, the vicious circle of holes will repeat.”

Local government city bus subsidy’punk’… The’citizen’s feet’ are festering
Monthly labor cost of 4.5 million won per driver… Experts “When to change the rate structure”

Local governments are struggling with the operation of city buses, which are the’foot of citizens’. The amount of financial information invested in city buses in seven cities nationwide reached a record high of 1.67 trillion won last year, and the situation that local governments could not handle is increasing. The Seoul Metropolitan Government and other local governments have come up with countermeasures, but they are concerned that they will have no choice but to continue to provide financial support in the form of “perhaps” after taking a look at public opinion ahead of the by-election in April, the next presidential and local elections.

“Need to rationalize bus company management”

According to the Seoul Metropolitan Government on the 28th, it was confirmed that the city recently ordered an external service to improve the bus completion system and is pursuing a reorganization within the year. A senior city official said, “We plan to find and improve the irrational part of the semi-public system this year. We need to establish a sustainable fare decision structure and rationalize bus company management.”

The city of Seoul introduced the city bus semi-public system for the first time in the country in 2004, when former President Lee Myung-bak served as mayor. The semi-public management system combines private management and public management, and is a system that compensates for the appropriate profits and shortfalls in transportation costs to private bus companies instead of having the authority to manage routes and fares. After the introduction of the semi-public system, the number of traffic accidents decreased by 64% and the number of stops increased by about 1,000, enhancing the convenience and welfare of citizens.

However, side effects from the semi-communist system also increased. Under the semi-public system, the incentive for private companies to voluntarily pursue business efficiency, such as cost reduction, declines. The labor cost for bus drivers, which accounts for the largest proportion of transportation costs that Seoul should preserve, rose to an average of 4.5 million won per person last year. As of October last year surveyed by the Ministry of Employment and Labor, it is 1.2 million won more than the average monthly wage per full-time worker in Korea (3,330,000 won).

An official from the bus industry said, “It is true that the labor union put pressure on strikes every year, and the introduction of the 52-hour work system has greatly improved the treatment. “It’s not difficult”, he said.

Some voices say that the bus industry, where small and medium-sized companies are scattered, needs restructuring. The number of bus companies in seven cities that have introduced the semi-public system reaches 180, including 65 in Seoul. An official from the investment banking (IB) industry analyzed, “To increase the efficiency of the bus industry, it is necessary to expand the size through mergers and acquisitions (M&A) and transparently disclose the governance structure and management status.”

“Strengthening supervision to prevent moral hazard”

There are still many concerns over moral hazards between local governments and bus companies. According to a report released last year by the Board of Audit and Inspection, Incheon City calculated standard transportation costs without a feasibility analysis, and when the bus association demanded an increase in labor costs, it raised it without going through a deliberation by the Policy Committee. That is, the financial burden increased. It was also pointed out that the representative of the bus company is earning enormous annual salary after registering his family as executives by owning multiple companies.

There are also opinions that the profit margin (appropriate profit) of bus companies guaranteed by local governments should be reduced according to the trend of market interest rates. The city of Seoul calculates 3.61% of transportation income as an appropriate profit from the standard transportation cost. It is pointed out that it is high compared to the market interest rate. Lee Young-soo, director of the Institute for Social Public Works, said, “A management and supervision system is needed to check whether standard transportation costs have been properly calculated and whether subsidies have been properly executed without being converted.”

“If you do not increase the rate, pour the poison water from the bottom”

Local governments are in the position that bus fares need to be raised. Ordering cost savings from bus companies can reduce maintenance costs, threatening citizens’ safety, and lowering the quality of service. Seoul and Busan City, which had insufficient budget last year, borrowed bank loans of 468 billion won and 150 billion won respectively under the name of the bus transportation association. . I have to pay my debt again this year. A local government official said, “It is desirable for bus users to pay more fees according to the beneficiary burden, and to expand direct support to the vulnerable.”

The general fare for city buses in Seoul has been frozen for six years after rising from 1050 won to 1200 won in 2015. Since last year, Seoul has been considering increasing the basic fare for buses and subways by 200 won. However, there is no progress in consultations with the Seoul City Council. Eventually, the public hearing to adjust public transportation fares, which was planned to be held at the end of last year, was also eliminated.

Experts say, “Since Seoul and Busan are not mayors from politicians, they are acting as authorities, so it is the right time to change the structure of public transportation rates.” Shinhae Lee, head of the transportation system research center at Seoul Research Institute, said, “It is not a fundamental solution to raise the fare one time only when the financial limit is reached. We have to build a system.”

Reporter Sujeong Ha [email protected]