Draft NZTA Farebox Recovery Policy – my submission

Following on from my post on NZTA’s Draft Farebox Recovery Policy, here’s the submission I have put together. Details on how to submit your submission are here (basically just email it off to chad.barker@nzta.govt.nz). Submissions close on Monday, so be quick! Anyway, here’s my submission – feel free to use as much as you like in yours, remember the more people who say the same thing the more likeliness it will be listened to!

Draft NZTA farebox recovery policy: consultation document

Complete list of consultation questions

Question 1
Are the objectives and principles appropriate? If not, why not?

Answer:
In my opinion the current two objectives are appropriate. I also consider the two policies to be appropriate.
I would make the comment that this section makes it sound like regional politicians make unwise choices (judgement calls) on the contribution users and non-users make to funding public transport. As these politicians are accountable to the people of the area they serve, it is reasonable to expect that they have made these decisions in the best interests of those people. It may well be appropriate for regional politicians to make a particular choice about the level of user and non-user contribution to public transport funding, as there might be wider issues that a particular funding policy seeks to address or promote.

Question 2
Are there any objectives or principles that should be added, amended or deleted? If so, what are your suggested changes?

Answer:
In my opinion it is important for the objectives and principles to reflect the Regional Land Transport Strategies of the regions. If a particular region is attempting to significantly alter its transportation system (for example, a shift away from automobile dependency) then there should be significant leeway for the farebox recovery policy to be flexible and reflect this.

Question 3
Is the content required for the policies appropriate? If not, why not?

Answer:
In my opinion there should be a much stronger link between the farebox recovery policy and the Regional Land Transport Strategy for a region. As the farebox recovery policy could potentially have a significant effect on what public transport services can and cannot be provided, it is critical that there is integration between this policy and the Regional Land Transport Strategies. Otherwise, what is the point of going to so much effort creating highly detailed, 30 year transport strategies if they are to be hamstrung by an incompatible farebox recovery policy?

Question 4
What should be included or excluded?

Answer:
See answer to question three, in that a far stronger link between the farebox recovery policy and the Regional Land Transport Strategy is required. Ideally, the farebox recovery policy should be required to give effect to the RLTS. It should also be required to take into account other transport planning documents, such as Regional Transport Plans and Regional Transport Programmes.

It seems nonsensical that the farebox recovery policy would have to give effect to the Government Policy Statement, but not to far more highly developed and specific regional strategies.

I am very sceptical of the value of retaining point 1(b) within the farebox recovery policy. The Government Policy Statement took a lot of money away from public transport investment and directed it towards state highway building. For the farebox recovery policy to have to give effect to the GPS would be effectively forcing it to reduce the funding of public transport, which in many cases may be completely inappropriate (such as in Auckland where patronage is at a 25 year high).

Ideally I would like to see point 1(b) removed, or altered to ensure that it is not (mis)interpreted in the way I have mentioned above.

Question 5
What of the two suggested options should be included in section 3, and why?

Answer:
Option 1 is far preferable to Option 2.

Option 1 retains flexibility for regions when setting target farebox recoveries that reflects the different situations regions find themselves in. For example, Auckland is in the process of shifting away from transport policies that have led it to becoming one of the most automobile dependent cities in the world, and it is obvious for such a shift to happen investment in public transport will need to lead demand for public transport services. This will mean lower farebox recovery levels in the short-term, to ensure that Auckland has a more balanced transportation system in the longer-term.

In my opinion, Option 1 should also include reference to the Regional Land Transport Strategy – and the farebox recovery level should reflect the goals and objectives of the RLTS of the various regions. Option 1 allows some discretion for regions who may wish to, with the blessing of their populations (through voting for such regional politicians), place particular emphasis on providing low-cost public transport for social, economic, cultural or environmental reasons – as per the requirements of the Local Government Act 2002. An inflexible farebox recovery policy would unfairly limit this option, and potentially be contradictory to the purposes of the Local Government Act.

In my opinion Option 2 should absolutely not be chosen. This option is inflexible, there has been no adequate justification for the choosing of 50% as an appropriate farebox recovery level, and it does not reflect the difference between the systems of Auckland, Wellington and Christchurch. Finally, it potentially runs counter to the Regional Land Transport Strategies that each region has developed, and may unduly limit regional councils from providing public transport services that their constituents want to see provided.

Option 2 would have disastrous results for public transport services in Auckland, Wellington and Christchurch – driving up prices, reducing patronage (leading to further cutbacks in services) and forcing people back into their cars, creating congestion and causing significant adverse environmental effects. It is essential that farebox recovery levels are flexible.

Question 6
Is a 50 percent farebox recovery ratio target for Auckland, Wellington and Canterbury appropriate? Why?

Answer:
This level is completely inappropriate, because there has been no justification for why it has been chosen – other than it is close to what Wellington currently achieves. While in the longer-run it might be appropriate to anticipate something in the region of a 50% farebox recovery level, the inflexibility of imposing it – as is proposed in ‘option 2’ effectively render all other public transport strategies and policies pointless.

Question 7
Is it appropriate for all regional authorities to set a farebox recovery ratio target? Why?

Answer:
Yes it is appropriate. It is necessary to ensure that there is proper accountability and tracking of the mix between user and non-user contributions to funding public transport. However, there should be flexibility in the level of the target, for reasons outlined in my submission above.

Question 8
Are the proposed operating principles appropriate? Why?

Answer:
Yes they are appropriate. At the moment, due to the public transport contract tendering system that existed prior to the Public Transport Management Act 2008 there is little co-ordination between public transport routes – as the best routes could always be “cherry picked” by commercial operators. This leads to expensive duplication of routes, or the running of long-haul bus services next to train services, when in reality the bus services would be far more efficient if they were feeder services to train stations (this requires integrated ticketing of course).

Eliminating this sort of unnecessary duplication of services is likely to save a lot of non-user expenditure on the public transport system, but requires the provisions of the Public Transport Management Act 2008 to be fully retained so that co-ordination is possible.

Question 9
Are there any principles missing that should be included?

Answer:
While it might fit within the term ‘operating efficiency’, I think that plenty of money could be saved by providing a ‘better co-ordinated system’ of public transport routes – which removes route duplication and removes unnecessary long-haul bus services which are expensive to provide. This should be mentioned somewhere too.

Another aspect that should be included relates to the type of ticketing system provided. Encouraging more people to use weekly or monthly passes would encourage growth in patronage levels, while it is also essential that ticketing systems are fully integrated across operators.

Much of Auckland’s currently public transport inefficiencies are likely to be the result of poor co-ordination of routes, poor integrated ticketing and un-necessary duplication of services. It should also be examined whether public transport operators are extracting appropriate profit levels or not before raising fares.

Question 10
Given the information available to regional councils, is the proposed formula for calculating the farebox recovery ratio appropriate? If not, how would you calculate it?

Answer:
I assume that this formula simply shows how a farebox recovery ratio is calculated, rather than setting a level for what that ratio is. If that is the case, then yes this is appropriate.

Question 11
Does your regional council currently receive revenue data from commercial services? The Public Transport Management Act 2008 provides for regional authorities to obtain this data, but if you do not, what are the barriers that prevent you from doing so?

Answer:
I do not know exactly, but my understanding is that for many years prior to the Public Transport Management Act 2008 being passed there very little information passed from operators to Regional Councils, which meant when commercial services were no longer deemed to be profitable and had to be switched to contracted services, the Councils had not way of verifying whether this was correct.

This is another reason (along with the cherry-picking of routes by commercial operators) why the Public Transport Management Act 2008’s ability to prohibit commercial services from operating is so critical.

Question 12
In the absence of commercial service farebox revenue data, is the alternative method for calculating commercial services’ farebox revenue appropriate (commercial services patronage × average fare on contracted services)? If not, how should it be calculated?

Answer:
No comment.

Question 13
Do you think SuperGold card revenue should be treated as fare revenue? Why?

Answer:
Yes. If services are being provided to cater for Super GoldCard holders then the revenue generated by those services should be measured. These services make an important contribution to the social wellbeing of our communities.

Question 14
Please identify any difficulties in calculating operating subsidies across regions, including rail contract payments.

Answer:
No comment.

Question 15
In future iterations of the policy, should other system operations and maintenance costs and administration costs be included in the farebox recovery ratio formula? Why?

Answer:
In my opinion they should not be included. It is likely that including these costs would only make it more difficult to meet the demanded farebox recovery level, leading to higher fares and reduced services – which benefits nobody in the longer-term.

Question 16
In future iterations of the policy, should public transport capital expenditure associated with the long-run replacement of assets be included in the farebox recovery ratio formula?

For ARTA and Greater Wellington Regional Council: Please comment regarding rail specifically. This is particularly important for rail.

Answer:
In my opinion capital expenditure should not be included, as much of this is investment that will be enjoyed for decades to come. With regards to rail systems, if capital investment was to be measured then for there to be a fair comparison between Auckland and Wellington’s systems we would need to take into account the electrification of Wellington’s system, which took place over 50 years ago. This appears nonsensical.

In terms of setting an appropriate farebox recovery ratio, I think that the state of a region’s infrastructure needs to be taken into account as areas with poorer infrastructure (such as Auckland’s rail system) are likely to have higher operating costs than areas with better infrastructure (such as Wellington’s electrified rail system). As Auckland’s rail system is electrified, this will have an impact on the operating costs of that system.

Question 17
Are the proposed fare review requirements appropriate? Why?

Answer:
Yes I think they are appropriate. They encourage regular reviewing of fares, which makes sense to ensure that inflation is taken into regard, while also providing flexibility for regions.

Question 18
Are the proposed reporting requirements appropriate? Why?

Answer:
In general, yes. I do not think it is necessarily critical to highlight each service with under 25% farebox recovery. Many of these services (such as those running late at night) will have broader benefits – such as giving people an alternative to drink-driving or providing a safer way of getting home than walking. It may be appropriate to have a checklist of wider benefits against which services with under 25% are measured.

Question 19
Should the NZTA monitor services that are not achieving a farebox recovery ratio of 25 percent? Why?

Answer:
To some extent, yes. Because these services are being heavily subsidised and the wider benefits of providing them should be analysed. However, this should not necessarily be done with an eye to cutting these services, but just providing some follow-up on why they are being provided.

Question 20
Should the NZTA research optimal fare and subsidy settings for public transport systems in New Zealand? Why?

Answer:
Yes I think there should be research into optimal fare and subsidy settings. I also think that this research should be extended internationally to look at levels of fares and subsidies in overseas cities – particularly those in the Pacific Rim such as Sydney, Melbourne, Brisbane, Vancouver, Portland and San Francisco.

Question 21
Are there any other issues with the draft policy?

Answer:
My main issue with the policy is that it comes across as a document that is intended to provide justification for cutting back funding to public transport. At a time when public transport use in Auckland is at a 25 year high, when there is a growing consensus among local and regional politicians that Auckland cannot continue to be one of the most automobile dependent cities in the world, when there is great uncertainty about the long-term effects of rising oil prices and there is a need to cut transport sector CO2 emissions it seems crazy to be taking steps to cut back expenditure on public transport.

I do not have a problem with finding ways to improve the efficiency and effectiveness of the public transport system in Auckland, but this should be done with the goal of improving the system to boost patronage, rather than just to save money by running the system down.

Question 22
Does the draft policy enable regional councils to fulfil their obligations under the Local Government Act 2002?

Answer:
I believe that the draft policy has the potential to significantly and unacceptably limit councils’ ability to fulfil their obligations under the Local Government Act 2002 – especially if Option 2 is chosen. The Local Government Act provides council with broad powers to provide for the social, economic, environmental and cultural wellbeing of their communities. The provision of public transport is a key part of this, and if the ability to provide public transport services is limited by the farebox recovery policy then it councils will be unable to ‘do their job’.

Question 23
How will regional councils and ARTA implement this policy? How long will this take? (See section 1.12.)

Answer:
No comment.

Question 24
What do you consider to be the relationship between developing commercial services, where possible, and farebox recovery? (See section 1.6.2.)

Answer:
I think that commercial services are very problematic for attempts to improve levels of farebox recovery. Commercial services tend to “cherry pick” the best available routes, and make profit out of them – leaving the less profitable and popular routes to be subsidies by the regional council and NZTA. In a fully gross-contracted system without commercial services, the profits from highly popular routes can be used to subsidise the less profitable routes – and the result will be a lower level of non-user contribution and a better farebox recovery ratio.

The system which operated prior to the Public Transport Management Act 2008 clearly was not economically efficient nor provided good public transport outcomes – as ridership generally declined during this period, and took huge amounts of non-user spending to turn that trend around over the past few years. In my opinion it would be nonsensical to return to such a situation.

Question 25
Do you think increasing the number of commercial services would help improve your farebox recovery ratio? If not, why not?

Answer:
No, I think it will have the opposite effect for the reasons outlined above.

Question 26
Please comment on:
• the Guideline’s relevance, practicality and usefulness, and
• whether you think anything should be amended, omitted or inserted into the Guideline.

Answer:
The guideline is useful, although I think that there should be greater mention of the Regional Land Transport Strategies, and also the requirements under the Local Government Act 2002 for councils to provide for their area’s wellbeing.

Question 27
Please identify any other feedback you may have on the draft Guideline.

Answer:
As outlined above, it is difficult to not view this process with suspicion as a justification for cutting funding for public transport. Public transport requires subsidisation because it provides wider benefits, such as reducing road congestion, encouraging more efficient land-use patterns, reducing pollution from the transport sector, improving social equity, reducing reliance upon owning a car and generally improving the structure and function of our cities. At the same time, public transport does not enjoy many of the hidden subsidies that are enjoyed by private vehicle users, such as minimum parking requirements and safety effects.

For appropriate levels of public transport subsidies to be fully discussed it is also necessary to analyse the levels of hidden subsidies for all road users. It is also necessary to analyse the wider benefits provided by public transport and the wider costs created by an over-dependence on automobiles. Only once the full picture has been explored can appropriate and informed decisions be made on what a fair division between users and non-users is, in terms of funding public transport.

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