The Roads and Transport Authority’s Public Finance

Budget Request

The Roads and Transport Authority (RTA) in Dubai works to provide different types of transportation services for the citizens of Dubai, including bus transportation services, metro, taxi, and marine transportation services (“Roads and Transport Authority”). During the 2013-2014 fiscal year, the RTA announced the participation in Dubai’s programme oriented to creating the green economy environment and to supporting the sustainable development in the United Arab Emirates. One of the programme’s goals is the decrease in the carbon dioxide emissions in Dubai. In order to contribute to decreasing the carbon dioxide emissions in Dubai, it is necessary to initiate the development the project that is oriented to using electric buses in Dubai as the alternative to vehicles operated by fuel. To improve the activities of the RTA with the focus on increasing the transportation capacity, it is necessary to guarantee the provision of such new services as electric buses in addition to the existing fuel-based vehicles. Electric buses are expected to be powered by electricity as well as by specific rechargeable batteries.

The Current Situation

Currently, the RTA operates and regulates 90 bus routes in Dubai. 500 buses that are used in the transportation system of Dubai are operated by fuel. The problem is in the fact that the necessity to transport thousands of passengers monthly makes authorities the launch new bus routes regularly, but fuel-based buses are not appropriate to address the needs in decreasing the level of carbon dioxide emissions and increasing productivity of bus transportation services in Dubai.

Workload. The current workload of buses operated by fuel is significant, where the main focus is on 70% of transit and city passengers who used buses in FY2014. The correlation between the number of passengers carried and the number of buses proposed during the period of 2013-2014 is not adequate because the disproportional increase in the number of passengers is observed. There is a need in increasing the number of buses and routes with the focus on the eco-friendly concept.

Staffing. The number of bus drivers regularly changes depending on the season and on opening new routes. The lack of drivers specialising in operating electric buses is observed in Dubai.

Funding. The current funding is enough to cover the expenses associated with launching new fuel-based routes in Dubai. The annual regular spending is about $35 million.

Productivity. Currently, productivity in the sphere of bus transportation depends on the time spent by buses for covering the prescribed routes, and the main challenge is the speed of buses. There is a need in increasing the current productivity of bus transportation services with references to the possibility to cover more kilometres by buses while using electricity of rechargeable batteries. The capacity of one electric bus is 40 passengers; the number of operated hours is 18 hours per day; the maximal speed in 100km/hour. The projected increases in productivity are more than 55%, depending on the number of vehicles operated as electric buses in Dubai during the second year after the project’s implementation.

Additional Needs

The implementation of the project oriented to the use of electric buses in Dubai depends on determining additional funds for launching the project, on determining the number of personnel necessary to participate in the project, and on determining the resources and materials that are required for the provision of new services by the RTA.

Additional funds. The annual government’s spending that covers the transportation services needs in Dubai is not enough to cover the expenses associated with implementing the eco-friendly transportation project. The additional funding necessary for covering the costs associated with launching electric buses in Dubai is projected to be $160 million during the first year of the project, $20 million during the second year of the project, and $10 million during the third year of the project.

Personnel. The lack of drivers of electric buses, engineers and specialists in power and energy technologies explains the necessity for attracting and hiring 32 drivers and specialists and 84 workers for completing the building and construction tasks.

Needed Resources. The additional materials are required to purchase transport vehicles; to purchase batteries and electricity equipment; to construct bus stations, bus stop storages, and maintenance depots; to provide the administration and maintenance of the project.

Expected Results

The beneficial results associated with implementing the project and providing new services for the citizens of Dubai include the following ones:

1. Decreases in carbon dioxide emissions in about 45% during the first six months of using electric buses.
2. Decreases in costs associated with operating the public transport in Dubai in more than 35% during the first year of using electric buses.
3. The possibility to address transport problems and negative changes in the traffic flow in Dubai.
4. The development of the low carbon strategy within the complex eco programme in Dubai and creation of the transportation system in Dubai as a role model for overcoming the problem of carbon dioxide emissions and increases in consumption.

Capital Facility Plan

The process of planning for capital facilities can be discussed as a complex task for the project developers or authorities because this project’s effectiveness can be discussed as based on the necessity to take into account all the facilities important for the efficient implementation of the project in Dubai during 2015-2018 years. In this context, the process of launching powered electric buses in Dubai is associated with the construction of bus stations, the construction of bus stop energy storages for powering electric buses, and the building of maintenance depots for new electric buses. These facilities are necessary to be constructed as the part of the project that is oriented to implementing electric buses in Dubai as the new alternative transportation mode in the Emirate.

The basic construction and capital costs include the following points that are necessary to be reflected in the cash and flow analysis for the proposed RTA’s project:

1. The costs associated with purchasing and using materials for constructing bus stations, bus stop energy storages for powering electric buses. The main costs are associated with supporting the infrastructure of electric vehicles.
2. The costs associated with purchasing 5 new electric buses during the first quarter of the first year for testing and 15 electric buses purchased during the third quarter of the first year. The purchase of more electric buses is planned for the third year of the project development, depending on the RTA’s plan and programme of the transportation improvement in Dubai (Table 1).
3. The basic equipment for bus station energy storages and maintenance depots will be purchased during the first year of the project’s implementation.
4. The costs associated with purchasing batteries and specific technologies. These costs are also expected to come during the further two years to support the maintenance of launched electric buses (Table 1).

The other group of costs includes operating fixed and variable costs that are planned for the next three years of the project’s implementation.

1. During the first year of the project implementation, it is necessary to spend resources for engineering and to cover costs associated with testing new vehicles and the effectiveness of the electric transportation chain in Dubai.
2. The complex replacement costs and the purchase of vehicle replacement parts are planned for the second year of the project’s implementation.
3. Electricity and maintenance or workshops costs are planned for three years with the focus on projected annual changes in costs and inflation (Table 1).

The determined construction costs depend on the general number of purchased electric buses, number of determined routes, number of stations, and number of maintenance depots. The project is expected to be funded with references to Capital Project Funds implemented by the Emirate’s authorities for developing the complex ecological and transportation project in Dubai (“Roads and Transport Authority”).

The proposed cash flow statement demonstrates the liquidity associated with the provision of such new services in Dubai as electric buses powered with the help of electricity and batteries. The appropriate discount rate for discussing the project is no more than 3%. The project can be discussed as beneficial for the authorities of Dubai because its benefits increase disproportionally to the expenses and government’s spending. It is planned to refer to the discount rate in 3% and to the expected duration of the project in three years with the significant decreases in government’s spending during the second and the third years of the project’s implementation. Referring to the Net Present Value (NPV), it is important to state that during the first year the present value is expected to be $155.34 million, during the second year, it is $18.85 million because of the significant reductions in the government’s spending, and during the third year, the present value is $9.15 million because of the further reductions in funding. In this context, the NPV is $23.34 million, and this result is rather beneficial while focusing on the fact that the government intentionally decreases the spending during the second and third years.

The main benefits of constructing the discussed facilities are the savings of about $5 million that are associated with using efficient transport vehicles that do not depend on fuel and use electricity and economical batteries. The other type of benefits is a result of decreasing the costs associated with solving the problem of carbon dioxide emissions in the Emirate (“Roads and Transport Authority”). The expected savings associated with the environmental programmes and waste management are about 12%. Decreases in the fuel consumption associated with using fuel-based buses are expected to lead to reductions in the carbon dioxide emissions in 45% in comparison with the data typical for FY 2013 (“Roads and Transport Authority”). In this context, the projected benefits seem to explain and support the necessity associated with developing the project as the authorities’ response to the need of addressing the ecological and transportation challenges in Dubai that were observed by authorities during the period of 2010-2012 years.

Table 1. Cash Flow Analysis

Revenue Sources

The RTA’s project is aimed to address the problems of the transport’s low speed and long travel times. The shift to the use of electric buses is also effective to decrease the bus transportation costs and prices. The effective completion of the RTA’s project can be discussed as significantly dependent on the process of launching electric buses in Dubai during determined three fiscal years. The completion of the announced project is influenced by the type of revenue sources that are selected for the project’s funding. The necessity to implement such new services in Dubai as electric buses powered with electricity and batteries explains the focus on the Capital Projects Funds as the basic source for funding.

The proposed project depends on the construction of a chain of capital facilities that are important to guarantee the provision of the new services by the RTA. These capital facilities include bus stations, bus stop power storages, and maintenance depots for electric buses. Capital Projects Funds as financial resources planned by the authorities of Dubai to finance the project are important to be used because the proposed funds are spent directly for completing the concrete project (Mikesell 112). The use of the separate capital project fund is important in case of launching electric buses as the new services provided by the RTA in Dubai during the period of 2015-2018 years.

In government accounting, the Capital Projects Funds are important to guarantee that the project will be based and developed according to the certain set amount of money and proposed material and financial resources that are determined referring to the cost-benefits analysis as the part of the projection and planning stage. It is also necessary to state that the Capital Projects Funds among different governmental fund types are most efficient to accumulate all the necessary resources in only one fund. In spite of the fact that these resources are restricted, that are usually relevantly assigned to the concrete planned project, as it is in case of the RTA’s transportation and eco-friendly development project associated with launching new types of progressive vehicles in Dubai.

The authorities of the RTA announced the focus on implementing a series of transportation projects that will be funded with references to the principle of the capital project funding (“Roads and Transport Authority”). The focus on the Capital Projects Funds is important because the RTA improves the transportation system of Dubai while launching separate projects that are oriented to completing different goals and that are supported with different financial and material resources. In order to cover the expenses associated with developing the new chain of the public transportation systems, with supporting the new infrastructure, purchasing and using vehicles, and providing training and compensation for operators, it is necessary refer to different options of the Capital Projects Funds. The reason to refer to the Capital Projects Funds is also associated with the idea that the authorities of Dubai are ready to provide the full funding because of the significant increases in tax revenues for FY2013-2014 in comparison with the previous fiscal years. The RTA spent several years for collecting the money necessary to be used for such a specific project as the implementation of electric eco-friendly buses in Dubai. Furthermore, it is possible to refer to the increased accountability and transparency levels associated with the announcement and declaration of all spending associated with the new project realization in Dubai.

The second type of revenue sources that are important to be used while implementing the RTA’s project is Proprietary Funds, and Internal service funds in particular. The reason for using these funds is the necessity to attract more private sector partners. In spite of the fact that the main costs associated with implementing the project are planned to be covered with the focus on the Governmental Funds, the Proprietary Funds are also important in order to continue investments in the project after the end of the three-year period during which electric buses are planned to be implemented in Dubai.

In order to guarantee the diversity of the services provided by the RTA, it is necessary to refer to the combination of the financial resources of the Capital Projects Funds and Proprietary Funds that are important to maintain the balance in those spheres of the public sector of Dubai where the main focus is on the semi-private concept. The Emirate’s economic growth significantly depends on combining the principles of the public and private funding.

The main goal of referring to two different sources of funding is the necessity to address the main challenges associated with the ecological and transportation issues identified in Dubai. From this point, the effectively funded project developed and supported by the RTA can be discussed as the appropriate possibility to avoid poor service provisions in Dubai during the period of 2015-2018 years because of the implementation of the alternative public transport and such vehicles as electric buses that are more cost-effective than fuelled buses.

Works Cited

Mikesell, John. Fiscal Administration. New York: Cengage Learning, 2010. Print.

Roads and Transport Authority. 2015. Web.