One of the strongest arguments public transport sceptics like Steven Joyce have, when trying to justify the pitiful amount of funding dished out to PT compared to that lavished on new motorways, is that the level of subsidy to PT is growing faster than patronage – particularly over the past 10 years. This is illustrated in a presentation Auckland Transport gave to the Council Transport Committee earlier this year:
The key things to compare are the blue line of patronage and the two black boxes – indicating the level of net subsidy. Between 2006 and 2011 patronage grew from just over 50 million trips to over 65 million, but the level of subsidy increased from what looks like around $70 million a year to nearly $150 million. As you can see, Auckland Transport anticipates the amount of subsidy required to continue to increase – especially if a “double patronage target” (as aspired to by Mayor Len Brown) is to be achieved.
However, it’s worth noting that just because subsidies are increasing, that does not mean that public transport isn’t a cost-effective investment – even in the form of subsidies. According to NZTA’s data, public transport brings huge peak-time congestion relief benefits (around $17 per peak time rail passenger, for example).Remember this table:
If we make an assumption that around half of PT trips are at peak times and half are off peak (which is approximately correct) then we see some pretty massive road traffic reduction benefits from the “investment” in public transport:
So what kind of investment do road-users (through NZTA) make in public transport subsidies to get this $443 million return? Well according to the graph above, the net subsidy for public transport in Auckland is just under $150 million. So that’s a 3:1 return – pretty good.
However, that’s assuming that NZTA pay the entirety of PT subsidies in Auckland, when in actual fact they pay 50% of subsidies for buses and ferries, and (currently) 60% of train subsidies. So NZTA fund let’s say around 55% of Auckland, PT cost – around $81 million out of the (approximately) $147 million total. So a “return on investment” of around $5.40 for each dollar spent. Pretty damn good compared to basically every large transport infrastructure project around.
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useful. thanks 🙂
While I accept the need for transfer payments to cover congestion, the reality is both road and rail are overdemanded and undersupplied because of the low prices caused by subsidies. Same in any market.
Too many people are travelling around making needless trips, and living too far from work, school and entertainment, because it’s too cheap.
It comes out in land values anyway.
If the market ruled there might be motorways, but only because motorists stumped the full costs of construction/maintenance, and then the congestion cost as well.
Ditto for rail, which would be more popular because the alternative would be more expensive. Less subsidies for rail operations might leave more for strategic capital investments like the CBD rail loop
There is a strong case for users paying the full marginal costs and a proportionate share of the fixed costs of OFF peak services, given they generate little external benefits (it is really about access for the uers), but for subsidies on urban public transport to be focused purely on the peak time deficit.
The problem with the peak being that two-thirds of capacity only exists for the short peaks, it sits idle and underutilised the rest of the time. It is incredibly wasteful as is only justifiable given the road user peak benefits, and if the users also pay for their benefits.
Peak fares should obviously be higher than off peak, because the user benefit is around 60% more (so should probably be higher by that margin), but as the costs are many times more, the rest of the cost difference should be carried, at present, by subsidies from road users.
It is curious that Wellington rail users offpeak gain a benefit that is higher than anywhere else, I presume because distances in Wellington are on average far longer. Notable also that outside Auckland and Wellington, the case for public transport on an externalities basis is very low.
From my experience a lot of off-peak PT users are those with few alternatives. In other words it’s being provided for social reasons.
Now I know that as a libertarian you have no problem with abandoning the poor/elderly, but they do need a way to get around the city that doesn’t cost a huge amount of money.
They may have few alternatives but don’t assume they are poor. Concession fares are better ways to target those groups than blanket subsidies that reward all regardless of means, indeed it is even better to let people with such needs make their own tradeoffs between transport, food, clothing and other expenses. Free bus travel for the elderly is a transfer towards many who are quite asset rich, for example. Bear in mind that for social purposes, it can be a lot cheaper to provide vouchers for taxis on routes with low patronage than to continue with a scheduled service.
It’s curious that in provincial towns with relatively limited service, few argue that people lack access. In most cases families and friends with cars offer lifts and the like. There is a huge amount of informal transport provided benevolently by people for their kids, elderly relatives and friends.
It is nonsense that libertarians have “no problem with abandoning the poor/elderly”, there is a world of difference between those who think people will assist the poor and needy, because people are inherently benevolent and willing to help people by choice, and those who think everyone should be forced to pay into a bureaucracy that dishes out transfers on the basis of politically determined criteria (whilst costing a fair bit in collection and distribution costs, plus induced fraud).
Benefit cost ratio of 3:1 is pretty good and I suspect it could be improved with some tweaks here and there. Liberty makes a good point about targeting subsidies to those who need it. We’d probably attract more passengers if we increased subsidies for price sensitive passengers (by way of concessions for students and beneficiaries etc) and reduced subsidies elsewhere (e.g. increased peak hour fares).
One other thing: It looks like subsidy growth in Auckland is running only slightly faster than patronage. It’s interesting that there’s no drop in subsidies around 2012, when I would have thought that the benefits of electrification would have started to filter through – I wonder why? Are they assuming that all those savings are reinvested in additional services?
That would seem a little strange, because in the long run I would have thought that Joyce was somewhat right to point out that scale economies should see per passenger subsidies decrease. Moving more people with the same operating funding is not a bad motto, if only the government was backing this up with capital investment that reduced operating costs, such as bus lanes.
The issue is that while electrification will lower operating costs, added into the mix are increased track access costs and loan payments to pay for the new trains.
I see, fair enough. Then we just have to do better – parking reforms and road pricing are really the only way for Auckland’s PT system to become financially sustainable in the long run.
Well one could say that getting $5.40 return on every dollar spent, in terms of NZTA’s subsidy contribution, is quite financially sustainable.
There are tonnes of ways to make the system more efficient. Feeder buses to trains, rather than long-haul routes competing against the rail system, is the most obvious.
Come to think of it calling it a “subsidy” actually misses the point a little. It’s a cross-subsidy from road users to public transport users, because the marginal economic benefits of the latter are higher. That’s actually very similar to what may businesses do: E.g. supermarkets cross-subsidise low-margin products (such as milk) with high margin products (such as fresh produce).
This discussion parallels a similar post at Humantransit:
http://www.humantransit.org/2011/08/transit-and-a-shrinking-us-government.html
You’re right in saying Labour do seem to lack the killer instinct over challenging National on this. It should be an easier knock down on how National is holding up Auckland’s economic development by not making Britomart a through station like it was intended. National is acting counter to big public support. If National had this opportunity Labour would be wimpering.
If cycling is considered to be a form of public transport based on its implied result of reducing car numbers the argument can be made that certain trips justify a subsidy.
This could be done via number plate recocnition or a swipe card.
Yes this means displaying a “plate” at the negative tolling point.
The HOP card would probably work as well.
A level road has a maximum carrying capacity of about 20,000 bikes per lane per hour, about the same as 5 lanes of motorway.
The average public transport trip taken of about 8 k’s is well within the range of E bikes and commuter bikes.
The 2 Portage Roads at the ends of Auckland are areas of particular interest!
(This includes cycle access to the harbour bridge).
If the usage is low the cost is low.
If the usage is high the benefits ARE HUGE.
Dave