Where does Bogota think it can obtain $7.5B for its metro plans?

October 14, 2014

The $7.5 billion price tag put on Bogota’s planned first metro line has spurred criticism as it is double the original expenditure and neither Colombia capital’s or national government know how exactly they plan to pay for the megaproject.

Bogota, the capital of the world’s third fastest growing economy, is the only major city in the region without a metro – Mexican, Brazilian, Chilean, Peruvian, Argentinian and Venezuelan capitals are all equipped with metro systems.

When Spanish firm Euroestudios Idom and Colombian firm Cano Jimenez disclosed the results of a 15-month investigation into the engineering and costs of the metro, they estimated the total at $7.5 billion to have the first metro line operational in 2021, an amount that would equal city’s entire annual budget and be the biggest state investment into a public work in the country’s history.

MORE: Bogota presents $7.5B plan for Colombian capital’s 1st metro line

Such a mammoth sized project has obviously raised questions about the ability of the city to finance it. In an interview with Colombian newspaper El Tiempo, William Camargo, director of the Institute for Urban Development, said that bringing the project to completion “will require every effort of financial gymnastics to ensure its implementation and sustainability.”

Those financial gymnastics are precisely what has caused so much uncertainty over what the future of a Bogota metro might look like. Using a mix of debt financing, increases on gas taxes, goodwill charges for government properties, traffic congestion taxes and pre-planned metro user fees have all been proposed. There has also been support for using Public Private Partnerships (PPP’s) to finance the proposed 27 metro stations, which together make up over 40% of the total cost.

And its not just the city of Bogota that will be putting on a gymnastic performance, but the Colombian national government, who has promised to provide 70% of the funding for the total cost of the project, will also have to find a way to distribute additional resources after it has just implemented a host of new increases to national tax rates and gone through a highly controversial budget spending procedure.

According to Ricardo Bonillo, finance minister of Bogota, the central government will have to contribute roughly $200 million more per year in order to finance the project.

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But the sheer size and investment of introducing the metro has the potential to crowd out smaller, incremental investments towards increasing the efficiency and scope of the city’s already highly operational TransMilennial (TM) transportation system and other public transport works already moving people around.

With over 32% of current public transportation flowing through the TM, ignoring improvements to its infrastructure in favor of larger, longer term investments in the metro could have seriously negative effects on public transportation before the metro comes online.

However, that doesn’t take away from the city’s need to overhaul its public transportation system. In the last three years, the number of passengers using the TM system jumped from 1.7 million to 2.4 million while the system’s infrastructure has remained the same, without any improvements or additions. Colombian statistics agency DANE predicts that by 2020, Bogota’s population will grow by 1 million people and, according to the city’s mobility secretary, the number of cars in the city will double by the same year.

In statement by Colombian President Juan Manuel Santos, he said “the metro is a must for Bogotá, and sooner or later have to do it. We are one of the three cities in the world with more than 7 million people that has no metro. ”