As I noted in a post recently, NZTA have released a “National Farebox Recovery Policy“, which in some respects makes sense: to create some sort of mechanism that can help ensure we get value for money from our public transport investment. As Auckland’s ratepayer/NZTA contribution to public transport funding has increased hugely over the past decade, while patronage has barely kept up with population growth, clearly something doesn’t add up and steps should be taken to ensure we can get better value for money out of public transport – the very reason why we needed the Public Transport Management Act.
Most of the National Farebox Recovery Policy is actually quite fine. It talks about the need to consider a wide range of factors when setting the recovery ratio, the need to recognise the wider benefits public transport provides, the need to recognise the social benefits of public transport and so on. However, amidst all this fairly reasonable talk is the clanger: a requirement that the farebox recovery ratio averages 50% across the whole country in “the medium term”. There’s something truly strange about this requirement as it doesn’t fit in with pretty much everything else that is said in the farebox recovery policy, but because of its potential impact it actually drowns out everything else in the policy. It is the policy, and potentially it will become the public transport policy throughout New Zealand, possibly leading to high fares, services cuts and the “death spiral” for public transport that I described a few days back.
Being somewhat curious about this “mis-match” between the 50% figure and the rest of the policy, I was pretty happy when a recent Official Information Act request I put to NZTA for some of their board papers ended up capturing a lot of the work NZTA has done to inform the final farebox recovery policy. And there’s some really interesting stuff in there. Of particular interest is what NZTA say about the 50% idea for Auckland, Wellington and Christchurch (which was one of the options in the proposed policy, what we’ve actually ended up with was quite outrageously not even one of the two options consulted on). I find this bit particularly insightful. Basically, what this means is that while raising the farebox recovery level to 50% in Auckland would save around $8.4 million of public subsidies per year, the loss of patronage that would result from the increased fares would result in a $64 million negative outcome. Effectively for each dollar “saved”, we lose $8 in wider economic costs as people get back in their cars and clog up the roads.
Of course that is stupid. NZTA know it’s stupid and have said so. So why on earth are they proceeding with this crazy policy? What this table shows is that we should actually be looking the other way, to reduce the farebox recovery ratio because it seems to pay back extremely well in terms of economic benefits if patronage is increased: for example in Wellington it would cost $4.3 million extra to lower the farebox recovery down to 50%, but that would “pay off” with $22.14 million of benefits – a cost-benefit ratio of $5.14 returned for every dollar invested (translation: extremely high.)