Private Financing or Not, That is the Question: Lessons from the Light Rail Systems in Spain

Abstract

The objective of this paper is to analyze if there is any difference between the light rail systems in Spain according to whether they have been carried out through public financing or private financing (totally or partially). The importance of this study lies in the fact that, for decades, the public–private partnership has been proposed as an alternative to public financing of public transport projects in order to obtain additional financial resources, reduce the public deficit, and increase efficiency. However, there are hardly any detailed studies describing how these initiatives have turned out. Therefore, the present study analyzes if there is any difference in the main variables explaining the performance of light rail projects in Spain depending on their source of funding can be found. For this, the relationship between variables related to design, operation and costs of the projects, and the percentage of private financing were statistically analyzed. As the most relevant conclusion, we underline the fact that the investment per passenger increases when financing is completely private. This would indicate that the most cost-effective lines, from a social standpoint, were financed totally or partially by the public administrations, whereas the least beneficial ones for society were assigned to private enterprises. This finding provides an advance in the knowledge of the consequences of private participation in the financing of public transport projects, indicating, moreover, that the biggest beneficiaries of this type of projects might be the construction companies and the politicians involved.