Cuenca’s tram system has been grappling with reducing operating losses since its debut on September 22, 2019.
In 2022, Cuenca’s tram collected $2.7 million in fares, covering less than half of the annual operating cost of $5.5 million. The Municipality of Cuenca subsidizes the remaining operating cost. The tram also carries a debt of $50 million from the construction and an additional debt of $10 million with suppliers for losing arbitrations.
To reach economic equilibrium, the system needs to carry at least 40,000 passengers per day, but currently only carries an average of 20,000 passengers daily. The incoming mayor, Cristian Zamora says he knows it is critical that the municipality find a formula to reduce the system’s losses.
Jorge Moscoso, the director of the tram, acknowledges that transport services throughout the city will always require a subsidy, but he aims to reduce the gap as much as possible. According to Moscoso, achieving an average of 20,000 daily passengers as of March 2023 exceeded expectations.
Moscoso said that the key to achieving the 40,000-passenger goal is integrating the tram with urban buses, a model that has worked successfully in other cities such as Medellín, Colombia.
Studies commissioned by the Municipality of Cuenca have identified that the system requires five integration lines to be fully integrated with the urban bus system. However, neither the administration of Marcelo Cabrera, who completed the construction of the tram, nor that of Pedro Palacios, who launched the system, have successfully achieved this integration.
Palacios’ administration did develop a plan that it said would cover 90% of the tram’s operating costs by 2024, a percentage that Moscoso says is “sustainable.”
Bus integration has failed
In September 2020, the tram began operating with two feeder bus lines, but that was short-lived. There is even a bus line that competes with the tram because it covers almost the same route.
Incoming mayor Cristian Zamora has proposed several ideas to achieve the sustainability of the tram, such as integrating the payment of buses and trams into a single card, creating a trust to manage and distribute the resources collected by the tram and the Chamber of Transportation, and implementing an urban tourist plan to increase the number of passengers. However, Zamora has not yet detailed his plan to achieve the sustainability of the tram.
Zamora believes that the official figures do not reflect the reality of the tram and that the resources that the Municipality allocates to the subsidy are greater than those published. To resolve the issue of the operating deficit, Zamora says he will seek to have discussions with the Chamber of Transportation. However, reaching an agreement may prove difficult, starting with the value of the ticket, which is different on buses and trams.
The urban carriers have already requested a review of the rate, which is currently $0.30, plus a subsidy of four cents (which is covered by the Municipality). The tram operates with a fee of $0.30 or $0.35 with a multi-trip card, and $1 for a single ticket. If the talks with the carriers fail, the outgoing administration proposed a “plan B,” which is to create a transportation system managed entirely by the Municipality of Cuenca. This includes the tram, electric buses, and electric bicycles.
According to outgoing mayor Palacios, the new administration is being left financing to acquire 34 electric buses, from which two feeder routes and a trunk line can be launched.
Solutions remain out of reach
The Cuenca tram is a public system, and its operation requires a subsidy. However, to reduce the gap between the operating cost and the revenue generated, the system needs to increase its ridership. Integrating the tram with urban buses, creating an urban tourist plan, and offering a single payment card for both systems are potential solutions to increase ridership. However, reaching an agreement with the Chamber of Transportation regarding the value of the ticket is a significant challenge.
The Municipality of Cuenca also needs to explore alternative sources of revenue, such as advertising or real estate development along the tram route. The tram could also consider introducing value-added services, such as on-board Wi-Fi or entertainment, to attract more passengers.