A few months ago NZTA released its “Draft Farebox Recovery Policy” for comment and submissions. Naturally enough I made a submission, pointing out the stupidity of having a set 50% farebox recovery ratio while accepting the need for better control over the quality of public transport spending. This feeling seemed to be echoed by a number of submitters, in particular the Auckland Regional Council who pointed out that having a “set in concrete” farebox recovery ratio would effectively become the public transport policy.

NZTA certainly took their time over analysing these submissions, and now around six months later they’ve come out with their “National Farebox Recovery Policy”. Somewhat surprisingly, given the submissions, the final policy is actually even worse than the Draft Policy. There’s a lot of fancy fluff talk in the final policy, about how many many things will have to be ‘taken into account when setting farebox policies, but ultimately this is what they have decided upon to be the policy:

The part of the originally proposed policy that had everyone ‘up in arms’ was the requirement that Auckland, Wellington and Christchurch have 50 percent ratios. Instead of that, the requirement is now that the whole damn country, on average, have a 50 percent ratio.

Now there’s nothing inherently wrong with the 50 percent idea. Perhaps it is possible and desirable for that to be our farebox recovery level. The point I think many submitters made is that having an arbitrarily set level, based on absolutely no research (for example, most Australian, American and Canadian cities have recovery ratios of well below 50 percent but we hardly say they have terrible public transport because of that), is just stupid. What if a 45% ratio in Auckland, for example, is the level that has the most benefits for public transport users, road users, residents and so forth? Shouldn’t the actual outcome be improving economic efficiency, environmental benefits and improving quality of life (or even something more easy to measure like enhancing accessibility)?

What the new policy does is pretty much say that Auckland, Wellington and Christchurch are going to have to go even higher than 50%, but that we don’t really know what that level is yet, because it’ll depend on what Invercargill does. The reason I say that what happens in Auckland will depend on what Invercargill does, it because of this graph – which comes from supporting information to the Farebox Recovery Ratio:

As you can see, many areas with smaller towns and cities served with public transport (like Bay of Plenty, Waikato, Manawatu-Wanganui, Marlborough and especially Southland) have pretty damn low farebox recovery ratios. This is not surprising, as generally in smaller towns and cities public transport is provided at a very basic level so that people without cars can get around. When that’s your over-riding goal it’s pretty hard to provide it in an efficient way – because you simply don’t get the huge peak hour rush to help subsidise the off-peak times.

So the really stupid thing about this most recent change is not only will the big cities have to up their farebox recovery ratios (potentially by raising fares or cutting services) even higher than 50% to counter-balance the low ratios in smaller towns & cities, but the extent to which the big cities have to do this is dependent upon the extent to which those smaller areas accept fare rises or services cuts. In short, quite absurdly, whatever Auckland’s farebox recovery ratio turns out to have to be, will depend on what happens in Invercargill.

Looking a bit deeper into why NZTA are rolling out this policy shows up some pretty scary stuff. Here’s a bit from the supplementary information:

In short, stuff public transport while we go build all our Roads of National (party) significance.

Argh. Looks like the Government Policy Statement is starting to have an impact.

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  1. This is actually the resurrection of a policy which was in place under the old Urban Transport Council in the late 1980s. The way it worked in practice – and this may guide how the NZTA put it into practice – is that the UTC put in its share, up to 50 percent of the gross costs (40 percent of 50 percent, with the 60 percent of the fifty percent coming from the council – hope people can follow this logic). But if the farebox did not cover 50 percent of the gross costs, then the council picked up the difference without any additional UTC subsidy. The policy was abandoned after 1989 in the general shift to net cost contracts, which were not reported with respect to what cash was coming in from users.

    Imagine a contract which costs $1,000/day to run in gross costs. If fares pick up 50 percent of the gross costs come from fares ($500), NZTA will pick up 40 percent of the remaining 50 percent ($200) and the council will pay the 60 percent of the remaining 50 percent (that is, $300). But if fares only cover 40 percent of gross costs, NZTA will still only pay $200 (40 percent of the fifty percent) and the council gets the $400 remaining bill. Under current arrangements, NZTA would pay $240 (40% of 60%), and the council $360.

    The other thing complicating the algebra is that regions with more commercial services would have lower farebox recovery rates, as the totals for the commercial services would aid the picture overall (as they have, by definition, 100 percent cost recovery).

  2. I don’t know whether commercial services are counted or not. One of the main reasons why I support the PTMA enabling regional councils (or ARTA) to get rid of commercial services is to get rid of the “cherry picking” outcomes your otherwise get, which reduce the cost-effectiveness of public transport.

    It seems odd that Joyce wants to make PT less cost effective through his proposed changes to the PTMA, yet through this farebox recovery policy he wanys PT to be more cost effective…..

  3. Actually, to correct something I wrote above, AFAIK the regional farebox calculations will allow for revenues on commercial services, and Supergold payments will be included as ‘fare revenue’ as well. This is in the policy document on the NZTA website.

  4. Hmmm… including commercial services skews things actually, because you lose the opportunity to cross-subsidise from your better performing services to ones that can’t be profitable. Privatising the profits, socialising the losses.

  5. Argh the only saving grace is that will be brought in over few years and fully in place by 2018. Hopefully by 2015 we will have a change in government and this policy can be dumped….however, let’s see whether we have anything worth saving by then.

  6. Yeah RTC it seems as though NZTA may be thinking along similar lines, going “well we’ve been forced into this stupid 50% idea, perhaps if we make the ‘phasing in’ of it take long enough, someone will be smart enough to eventually change it”.

  7. “It seems odd that Joyce wants to make PT less cost effective through his proposed changes to the PTMA, yet through this farebox recovery policy he wanys PT to be more cost effective…..”

    Seems logical to me, what better way to stuff up the whole system….

  8. I agree, rtc – NZTA isn’t stuffed full with people who think that public transport should be fucked over at every point. Sadly, the ones who do are calling the shots.

  9. This is about NZTA wanting to save money (refer the Admin’s 9 Dec post, quoting the ARC). It is not that councils could not pay for public transport services if the cost-recovery ratio wasn’t strong enough. It’s that past a certain point, they won’t get any help from NZTA to do so. This happens to an extent in local road funding; every so often, councils will do work and not get any assistance from NZTA, but this is not very common.

    However, this situation is also about the attitude of much of the local government sector. In my time with NZTA’s predecessor (the part of Transit which became Transfund), what I saw was a lot of attempts by local councils, trying to find ways for Wellington to foot the bill for something!

    What could happen in practice if this policy did come into play is that a lot of truly marginal services, ones with very low cost-recovery but which are kept for other reasons, would be placed at most risk. These would generally be the ‘social inclusion’ services.

  10. It’s a starting point, and one thing that does have to be addressed is the operation of unprofitable services and this policy will weed those out, clearly NZTA wants to address the amount of money being put into subsidising routes.

    For example I hear in Christchurch that a service to Governor’s Bay is being considered, anyone who could check the history would know there are previous bus services there that were withdrawn due to lack of passengers so why are they bothering with one now.

    In the main centres there are routes that are operated fully commercially (no subsidy) and do achieve profitability and in these centres all they would have to do is weed out the routes which are not carrying many passengers and look fairly hard at them.

  11. Well the problem is that public transport is provided for a number of reasons, including as a basic service for those without a car. So some low patronage services might actually be quite important.

    That’s not to say I don’t think it’s possible to increase the efficiency of the public transport system – far from it. I think that simplifying the system, reducing the number of different services, making transfers easier and at the same time increasing the frequency of services could achieve that magical balance of a more popular system for little additional investment.

  12. Here is a press release I put out this morning:

    Government Attack On Public Transport Continues
    Sunday, 30 May 2010, 11:07 am
    Press Release: Green Party

    Government Attack On Public Transport Continues

    A short-sighted funding policy for public transport quietly released by the New Zealand Transport Agency on Friday afternoon will mean more expensive bus and rail fares throughout the country, said the Green Party today.

    “The goal of the farebox recovery policy, which the Minister of Transport pushed NZTA to develop, is simply to get more money out of bus and rail passengers,” said Green Party Transport spokesperson Gareth Hughes.
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    “This is a damaging short-sighted approach that fails to recognize the wider economic, health and environmental benefits that buses and trains bring to our communities – like less congestion on our roads, cleaner air, and lower greenhouse emissions,” said Mr Hughes.

    “Central Government introducing a target for regional councils means they will have to raise fares.

    “Higher fares will mean fewer people use public transport. This creates a vicious downward spiral where regional councils have to cut services with low patronage,” said Mr Hughes.

    The policy sets a goal for 50 percent of the cost of rail and bus services to be recouped from passengers around the country within 3 years of regional councils developing their Regional Public Transport Plan or by 2015.

    However, an arbitrary target would not be the best way to improve the effectiveness of public transport services, Mr Hughes said.

    “Right now our public transport services are suffering from decades of under-investment and privatisation, which led to many services being cut.

    “The average age of a train on the Auckland network is 45 years. Is it any wonder then that many people do not have the option to take reliable, modern trains and buses?” said Mr Hughes.

    There are only a few, exceptional cities around the world with farebox recovery ratios set at 50 percent or above. The average ratio for US cities with basic transit systems is 21 percent. In US cities with modern, high quality buses and trains, the ratio is 39 percent.

    “To ask that our current buses and trains get 50 percent of costs back from users is unrealistic, particularly after decades of government policies that have reduced the effectiveness of public transport networks,” said Mr Hughes.

    “Jon Key’s Government continues to repeat the mistakes of the past 50 years, which have led to congestion, a high road toll, and households paying heaps to get around in often old and dirty cars.

    “We need smarter transport solutions, that will support a clean, green and prosperous economy,” said Mr Hughes.

  13. Thanks for the comment Gareth. The USA stats are particularly interesting. I wonder what farebox recovery levels in European cities is?

    Having an arbitrary level across the whole country is particularly stupid. I have no problem with each region setting their own farebox recovery ratio is fine, we should have some mechanisms to ensure value for money, but that level should be determined from research as to what is appropriate, not something plucked out of thin air.

  14. What the f**k happened to democracy..?

    Every submitter I’ve talked to absolutely panned the proposal and it is forced through anyway..! I’m pissed…

  15. Hmmm, that’s an interesting question Jeremy. I wonder what proportion of submissions were opposed to the 50% recovery rate. Let’s find out!

  16. Who cares right? This won’t cost anyone votes. Only 6% of people take public transport with any regularity, and of those how many care about things like farebox recovery ratios?

  17. While a fairly low percentage of people use public transport, a much greater percentage of people think improving it is very important (usually over 50% in surveys) and might not be happy about policies that they think will ruin it.

  18. I sadly agree with Nick though that they won’t care re farebox policies. 90% will never get far enough into hearing about this matter to get to the point of realising that 50% farebox recovery is internationally extremely rare.

    At the same time, the anti-PT people can scoff and say “50%? Try running a business on that! They should raise it to 100%” and have lots of uninformed people in the room nod in agreement.

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