Legal and Administrative Framework for a Complementary Transit Operating Subsidy

I. Question Presented

May the Regional Government of Coquimbo (the “Regional Government”) use resources from the Public Transportation and Regional Connectivity Support Fund (the “Fund”) to provide Electromovilidad Serena Coquimbo SpA (“ESERCO”), the private operator of a regulated electric bus service, with a complementary operating subsidy?

II. Short Answer

The Fourth Transitional Article of Law No. 20.378, as amended by Law No. 21.692 (the “Transit Funding Law”), expressly authorizes regional governments to designate public transportation services for operating subsidies from the Fund when those services are regulated under Article 5 of Law No. 20.378 or the regulatory mechanisms established by Law No. 18.696. ESERCO's electric bus service falls within the former category. The Transit Funding Law requires prior technical approval by MTT and implementation through a convenio mandato with MTT as the implementing agency.

Supreme Decree No. 112 of 2025 (“Decree 112”) establishes the procedure for exercising that authority and incorporates the convenio mandato mechanism established by Article 16 of Law No. 18.091. Article 16 requires the recipient of the relevant public contract to have been selected through the “respective procurement.” That requirement is satisfied here. MTT previously conducted a competitive procurement for the electric bus services, awarded the procurement to Liserco, and subsequently approved Liserco's assignment of its rights and obligations to ESERCO. Nothing in Article 16 or the Transit Funding Law requires a second procurement solely because the Regional Government proposes to provide an additional operating subsidy to the operator already selected to provide the underlying service.

III. Facts

MTT created the Special Electromobility Promotion Program through Exempt Resolution No. 2657 of 2020. The program was established under Article 5 of Law No. 20.378 and the residual authority in Article 1(iv) of Supreme Decree No. 4 of 2010 for programs that promote public transportation. One component of the program provides incentives for incorporating electric buses into existing public transportation fleets.

MTT Decree No. 8 of 2022, as amended by Decree No. 44 of 2023, approved the technical and administrative specifications for a competitive procurement of subsidized electric bus service in the Coquimbo-La Serena metropolitan area. MTT awarded that procurement to the La Serena-Coquimbo Microbus Owners Trade Association (“Liserco”) through Decree No. 112 of November 16, 2023.

On January 29, 2024, MTT and Liserco executed the Contract of Enrollment and Grant of Subsidy for Services E01 and E02 (the “Contract”). The Contract requires a minimum fleet of 42 electric buses, provides a maximum monthly subsidy of CLP 233 million, and establishes an initial 96-month term, extendable for an additional 24 months. DTPR approved the Contract through Exempt Decree No. 650/2024.

Section 10 of the Contract permits assignment of contractual rights with MTT's prior approval but prohibits subcontracting the service in its entirety. In May 2024, Liserco sought MTT's approval to assign its rights under the Contract to ESERCO. MTT approved the assignment through DTPR Exempt Resolution No. 2801/2024. ESERCO therefore succeeded to Liserco's rights and obligations under the Contract.

The statutory framework governing regional transportation funding changed later in 2024. Law No. 21.692 amended the Fourth Transitional Article of Law No. 20.378, created the Fund as the legal successor to the former Regional Support Fund, and expressly authorized regional governments to use Fund resources for operating subsidies to qualifying regulated public transportation services.

The amended statute requires MTT to validate the proposed service technically before Fund resources are used for an operating subsidy. It also requires the subsidy to be implemented through a convenio mandato between the regional government and MTT, with MTT acting as the implementing agency.

Decree 112 subsequently established the administrative procedure for implementing these provisions. Article 5 requires prior technical validation by DTPR. Article 6 requires the Regional Government and MTT to execute a convenio mandato pursuant to Article 16 of Law No. 18.091.

The Office of the Comptroller General reviewed Decree 112 in Official Letter No. E207989/2025. The Comptroller General approved the regulation subject to the qualification that the convenios mandato authorized by Article 6 may be used only for purposes contemplated by the statutory provision that Decree 112 implements.

The Regional Government is now considering whether Fund resources may be used to provide ESERCO with a complementary operating subsidy, payable in monthly installments during the remaining term of the Contract and in addition to the subsidy already payable under the Contract.

IV. Analysis

A. The Transit Funding Law Authorizes the Regional Government to Fund Operating Subsidies for Services Regulated Under Article 5 of Law No. 20.378

The Regional Government has statutory authority to use Fund resources for the proposed operating subsidy. The Fourth Transitional Article of Law No. 20.378, as amended by Law No. 21.692, establishes the Fund and identifies the purposes for which its resources may be used. Numeral 1 authorizes funding for fleet replacement, public transportation infrastructure and modernization, operating expenditures associated with public transportation, and enabling infrastructure.

More specifically, the paragraph following subsection (c) of numeral 1 authorizes the use of Fund resources for operating subsidies in public transportation systems regulated under Law No. 18.696 or for services regulated pursuant to Article 5 of Law No. 20.378. It provides:

Where a portion of the Fund is allocated to operating subsidies implemented in public transportation systems under the regulatory mechanisms established by Law No. 18.696 or in services regulated pursuant to Article 5 of this law, the Regional Governments shall determine the services that may be financed from the Fund allocation, subject to prior technical validation by the Ministry of Transport and Telecommunications. Implementation of those services shall be carried out through interagency mandate agreements between the respective Regional Government and the Ministry of Transport and Telecommunications, which shall act as the implementing agency in order to ensure the necessary coordination in the use of those resources.

ESERCO's service falls within the second category. The electric bus service was established through the Special Electromobility Promotion Program, which derives its authority from Article 5 of Law No. 20.378. It is therefore a service “regulated pursuant to Article 5” within the meaning of the operating-subsidy provision.

The service does not depend on the separate road-use procurement mechanisms established by Law No. 18.696. That statute governs a different regulatory mechanism involving the competitive allocation of road use for route concessions. Because ESERCO's service derives from Article 5 of Law No. 20.378, it independently satisfies the alternative statutory condition for Fund-financed operating subsidies.

The Regional Government's authority to provide the subsidy derives from the Transit Funding Law itself, not from Decree 112. The statute authorizes regional governments to identify qualifying services for operating subsidies and establishes the required convenio mandato with MTT. Decree 112 governs the procedure for exercising that authority. The distinction matters because the legal basis for the proposed expenditure does not depend on an expansive interpretation of the implementing regulation.

B. Decree 112 Requires DTPR Approval and a Convenio Mandato with MTT

Decree 112 establishes the administrative steps the Regional Government must complete before Fund resources may be used for the proposed subsidy. Although the decree formally regulates public transportation operating programs identified in subsection (b) of numeral 1 of the Fourth Transitional Article, Article 1 expressly extends its procedural framework to services regulated under Article 5 of Law No. 20.378 and to transportation projects implemented under Law No. 18.696.

The Comptroller General's review of Decree 112 confirms that the decree implements numeral 1 of the Fourth Transitional Article. Read together with the operating-subsidy paragraph of that same numeral, Decree 112 provides the procedure for implementing the authority applicable to ESERCO.

Three requirements are relevant here. First, Article 3 recognizes operating programs involving major public transportation services as eligible uses of Fund resources. ESERCO's electric bus service falls within that category and is consistent with the electromobility objective identified in Article 1.

Second, Article 5 requires DTPR to provide favorable technical validation before the subsidy is implemented. DTPR has a maximum of 45 business days after receiving the Regional Government's submission to issue that determination.

Third, Article 6 provides that, after favorable technical validation, the Regional Government and MTT must execute the agreements necessary to implement the service pursuant to Article 16 of Law No. 18.091. For the proposed subsidy, that instrument is the convenio mandato required independently by the Transit Funding Law.

The Comptroller General imposed one relevant limitation when reviewing Decree 112. A convenio mandato executed under Article 6 may not be extended to purposes outside those authorized by the governing statutory provision. The proposed subsidy does not present that problem. An operating subsidy for a service regulated under Article 5 of Law No. 20.378 is expressly contemplated by numeral 1 of the Fourth Transitional Article.

C. Article 16's Public-Works Origins Do Not Prevent Use of the Convenio Mandato for an Operating Subsidy

Article 16 of Law No. 18.091 presents an apparent textual issue because it was enacted to govern public works rather than recurring operating subsidies for existing transportation services. Its second paragraph addresses contracts for the study, design, construction, and maintenance of works and provides that the relevant public entity shall contract directly with the person or entity that “has been awarded the respective procurement.” Its third paragraph permits the public entity to entrust a State technical agency, through a complete and irrevocable mandate, with the procurement, award, and execution of the corresponding work.

Applying the Article 16 mechanism to an operating subsidy does not require a conclusion that an operating subsidy is itself a public work. The Legislature subsequently incorporated Article 16's mandate mechanism expressly into the transportation funding framework. The Transit Funding Law requires operating subsidies of the type at issue here to be implemented through convenios mandato between regional governments and MTT, and Decree 112 expressly directs the parties to use the Article 16 mechanism.

The authority to use that mechanism for operating subsidies therefore derives from the later transportation legislation's express cross-reference to Article 16. It does not depend on construing the original public-works language of Article 16 to encompass operating subsidies.

The Comptroller General's review of Decree 112 is consistent with this reading. The Comptroller General did not object to the use of Article 16's convenio mandato mechanism for the purposes identified in Decree 112. Instead, the Comptroller General required that the agreements remain confined to purposes authorized by the statute. Because the proposed ESERCO subsidy falls within the operating-subsidy authority of the Transit Funding Law, that limitation is satisfied.

D. Article 16's Omission of Regional Governments Does Not Preclude Their Use of the Mandate Mechanism

Article 16 does not expressly identify regional governments among the public entities authorized to use its mandate mechanism. That omission is explained by the statute's institutional history. Law No. 18.091 predates the current regional-government structure. Chile's present regional governments were established under Law No. 19.175 in 1992, eleven years after Law No. 18.091 was enacted.

Later law resolves the issue. The Regional Government has public-law legal personality and its own assets as a territorially decentralized body of the State Administration under Article 13 of D.F.L. No. 1-19.175. More importantly for the present analysis, the Transit Funding Law expressly requires a convenio mandato between the “respective Regional Government” and MTT for the operating subsidies it authorizes. Article 6 of Decree 112 likewise identifies the Regional Government as a party to the Article 16 agreement.

The absence of regional governments from the original text of Article 16 therefore does not exclude them from the mechanism. The later transportation legislation expressly incorporates them for the specific purpose at issue here.

E. The Existing Transit Procurement Satisfies Article 16, and a Second Procurement Is Not Required

Article 16's requirement that the contracting party “has been awarded the respective procurement” does not require a new procurement for the complementary subsidy. The statute does not require the procurement to occur after the decision to provide the additional funding. Its language is satisfied by a prior procurement that selected the entity legally responsible for providing the service to which the additional funding relates.

That condition is satisfied here. MTT competitively procured the electric bus services and awarded the procurement to Liserco through Decree No. 112/2023. MTT and Liserco then executed the Contract, which DTPR approved through Exempt Decree No. 650/2024. Pursuant to Section 10 of the Contract, MTT later approved Liserco's assignment of its contractual rights and obligations to ESERCO through DTPR Exempt Resolution No. 2801/2024. ESERCO is therefore the current operator under the Contract that resulted from the competitively awarded procurement.

For purposes of Article 16, that procurement is the “respective procurement.” The proposed regional subsidy would provide additional operating support for the same service already awarded through that process. It would not select a new operator, create a separate service, or substitute another provider for the entity currently responsible for performance under the Contract.

Requiring a second procurement directed solely to the complementary subsidy would therefore duplicate the competitive process already used to select the provider of the underlying service. Neither Article 16, the Transit Funding Law, nor Decree 112 imposes such a requirement.

V. Conclusion and Recommendation

The Regional Government may use Fund resources to provide ESERCO with a complementary operating subsidy for the electric bus services in the Coquimbo-La Serena metropolitan area. The Transit Funding Law expressly authorizes regional governments to finance operating subsidies for qualifying services regulated under Article 5 of Law No. 20.378, and ESERCO's service falls within that category.

Before disbursement, DTPR must issue favorable technical validation and the Regional Government and MTT must execute a convenio mandato pursuant to the Transit Funding Law, Decree 112, and the mechanism incorporated from Article 16 of Law No. 18.091. No additional procurement is required. The competitive procurement that resulted in the Contract, together with MTT's subsequent approval of the assignment to ESERCO, satisfies Article 16's requirement that the recipient have been selected through the relevant procurement.