Entrepreneurship: You don’t have to be afraid to stop BKV

In a few days, there were quite a few interpretations that “public transport in the capital was stopping”. Initially, based on statements by Deputy Mayor Kiss Ambrus. “Public transport in the capital before the shutdown” – this was the title given by Népszava 23 November, which was adopted by a significant part of the press in a more or less similar form. Kiss Ambrus told the paper that after November 25, the coffers would be “emptied”. And if the capital does not receive the statutory subsidy of HUF 12 billion from the government, “there will be a restriction on public transport”. “In order to send an effective message, the city management considered the complete cessation of public transport in the entire territory of Budapest,” he said, not wanting to comment on the date and duration of the cessation. He later told atv.hu that if the government does not give the money on time, they can finance BKV with an overdraft.

The government did not give the money on time.

Mayor Gergely Christmas did not say anything clearly when supplemented Viktor Orbán for the fact that the government still did not pay the HUF 12 billion to the local government. Speaking about the shutdown, he said that the city administration will do everything to ensure that the people of Budapest do not notice the financing problems.

There will be a point when we may be forced to do the same

– put into view something that could be a temporary or partial stop of public transport.

Christmas Gergely

© Tours Gergely

When it comes to thriving money, it doesn’t thrive

The first question regarding the financing of BKV is whether it is possible for the company to stop operating at all due to lack of money. There is no easy answer to this.

BKV currently has the most pressing financial problem in existence: liquidity. In other words, the company simply does not have as much money as it could cover its current expenses. It is not enough if the accounting of a company (or any business organization from a family to the Hungarian state) is in balance on an annual basis, as the expenses are constantly incurred, so there must be as many freely available resources from which they can be covered.

According to BKV’s business plan for 2021, the company has a monthly expenditure of HUF 12.9-15.8 billion, ie this amount of money must be available month by month.

HUF 13.4 billion is planned for November and HUF 14.2 billion for December. If the worst case scenario were to occur, management would have to decide what they would not pay out. Expenditures account for nearly half of wages, with the other big slice being operating supplier payments. In November, out of the total expenditure of HUF 13.4 billion, operating supplier payments accounted for 7.1 billion, and wages and salaries (including wage-type expenses including taxes).

Not to mention, hospitals also regularly slip through paying supplier bills, so that sort of thing is inconvenient (especially for a supplier who doesn’t get their money on time), but it does happen.

The means of bridging liquidity problems is the borrowing already mentioned by Kiss Ambrus. The problem with borrowing is that it is only a temporary solution, as you have to repay it once. Plus, it has a cost, so it’s an extra burden. Furthermore, the situation of BKV as a special municipal company allows it to use loans only to a very limited extent without the permission of the government.

Not just the owner

BKV is in a special position as a municipal company in that it is owned by a municipality and provides an essential public service to its owner – or technically to another municipal company, BKK, which orders the service from BKV as a transport manager on behalf of the municipality. , but this is incidental now.

At the same time, BKV has an owner whose interest and ability, if not unlimited, to finance its operations, even to help with any liquidity problems that may arise.

Of course, the municipality is in much the same shoes as BKV itself. It is struggling financially due to the epidemic crisis and government layoffs, and has as limited access to credit as its companies. Plus, of course, the capital’s local government is not only concerned with public transport and its companies, BKK and BKV. When Christmas Orbán was reimbursed, he said the municipality could not and did not want to squander that money and withdraw it from elsewhere. They demand that the government pay for it. According to the temporary solution, BKV’s liquidity problems are managed with an overdraft facility.

However, according to the current situation, it is unrealistic for the day-to-day operations of BKV to be placed in a critical situation due to liquidity problems.

You can always save, but there are times when it’s no longer worth it

Not really in the long run. As mentioned, the management of a municipality is not fundamentally different from that of a family. Not enough revenue? Then the family starts to cut spending, they don’t buy a new car or even a new TV, and after a while the old one isn’t repaired if it breaks down. They don’t buy new shoes, after all, the old one is just a little holey. The meat is removed from the diet, the sausage is replaced by the poultry rod, and then it is not. Finally, the buttered bread remains. Then the bread. Literally, day-to-day operations are impossible completely without even running on empty bread.

The same is true for public transport. Not enough revenue? There will be no new tram line, no new bus, just used. Then it will no longer be used, and in the end the old ramaty will not be serviced properly. But until it somehow leaves, daily operation is assured.

The situation of BKK / BKV is more complicated in that certain investments cannot be released, for example because they are ongoing. It is also not possible to save on wages indefinitely, because Volán is waiting for the bus driver with open arms not only in Vienna, but in Hungary. Furthermore, the quality of service cannot be allowed to fall indefinitely, as below a certain level it is as if the service has collapsed. It’s not enough for the bus to roll out of the garage in the morning, you have to do it all day, preferably so that it doesn’t rain on the passengers ’wrists.

So, in the absence of money, in the long run, a situation may arise where, although the day-to-day operation is formally ensured, the passenger experience falls to a level that the traveling public already sees as a system crash.

Public transport is around the corner

Here, too, political considerations come into play, as it is ultimately up to the politician exercising property rights to strike a balance between the various aspects of what kind of service public transport should provide.

In Budapest, public transport is slowly becoming a checkmate. In fact, there was very little state support, very little in the time of István Tarlós, and since then the amounts have not increased, while, say, petrol has not become cheaper. The local government has pretty much reached the limit of how long and ready it is to increase funding – at least that was said by Mayor Gergely Karácsony. Raising ticket and season ticket prices would not be from the devil, as there has been no increase for many years as earnings have risen. But the government banned local governments from raising their own taxes and fees. Regardless, it is not clear whether the city government would take such a step.

The city administration would not tolerate any further drastic restrictions, at least the fact that BKK’s business plan for 2021 was planned with the 2019 fare revenues is clear, the presentation attached to the plan shows. According to the optimistic scenario of BKK, the decrease in the number of passengers due to the epidemic also means a loss of HUF 19 billion, which was obviously an unrealistic assumption. (The most pessimistic scenario was a loss of 25 billion.) If the revenue side were to be cut, the expenditure side would have had to be cut as well – the capital was more willing to make up the money, and BKK and BKV’s accounts would probably bear some losses.

Christmas was cornered

The government should make more contributions, but it is clearly unwilling to do so. The mayor occasionally hopes that this will be a consequence of the city administration and the mayor Gergely Karácsony in person. However, it has never had any consequences so far and is unlikely to be before the April parliamentary elections. After all, the opposition hardly misses that

the government media (including the public media) should be full of pictures and videos of Budapesters snapping to their workplaces on foot in the snow in the middle of a pandemic.

At the same time, in Budapest, opposition voters need to be convinced not only that the opposition is capable of governing, but also that it is able to fight and act decisively. After all, this will be much needed in the parliamentary campaign and even in the government, because the NER will not disintegrate on its own. And there will be few to dismantle the system cautious near-threat and cheerful political performance.

The Gregorians of Christmas obviously know this, and in the Carmelite they know that the Christmass know it. At the same time, the situation is still unsustainable, BKV’s business plan for 2022 was dropped by the company’s supervisory board, as it did not consider it covered to cover the planned (otherwise thoroughly cut) expenses.

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