How do Auckland’s Bus Subsidies Work?

The process by which Auckland’s bus system is organised seems very very complicated, with strange relationships between ARTA and the different bus companies, which seems to vary according to route, and even down to particular services.

This is my understanding of how bus subsidies work in Auckland:

– Routes and services are identified by ARTA via documents like the Regional Public Transport Plan (RPTP).

– If a company wants to run the service and doesn’t think they’ll need a subsidy for that route/service, then they can register it and operate it as a commercial service. Up until relatively recently, ARTA had pretty much zilch control over how these services operated and pretty much zilch knowledge of whether the routes were profitable or not, which became problematic when bus companies started abandoning the commercial services saying they were unprofitable a few years back.

– If no company thinks they can run the service commercially, then ARTA has a choice to ‘contract’ the service via ‘net contracting’ or ‘gross contracting’. Net contracting means that the bus company keeps the fares and gets “topped up” by ARTA, while gross contracting means that ARTA keeps the fares and pays the bus company a set amount to operate the service. The Northern Express service is ‘gross-contract’, but I think that most other services in Auckland are ‘net-contract’.

– The companies won’t release the profitability information (i.e. how profitable it is) to ARTA under commercial sensitivity rules. If a run that is profitable suddenly becomes unprofitable the private bus company will make a claim for a subsidy and ARTA essentially takes the companies word on this.

While gross contracting has always been possible, the Public Transport Management Act (PTMA) has made it easier for gross contracting to actually work. This is because the PTMA (as it currently stands) can prohibit commercial services where ARTA doesn’t want them to operate. After all, there’s no point in operating a ‘gross contract’ on a whole route when the most profitable peak hour runs can be commercialised. This is the ‘privatise the profits, socialise the losses’ issue that the PTMA needed to resolve.

The current situation is messy, but that’s largely because most current contracts existed before the PTMA came into effects. As this legislation currently stands, ARTA could end up gross-contracting everything in the future: which is quite typical internationally. However, unfortunately the PTMA is under attack from the government. So the mess may unfortunately continue in the future.

It’s not just me who thinks the current (well, old pre-PTMA) system is a mess, right?

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