While it’s certainly essential for Auckland to have a well functioning rail system, as we’re a growing city with little ability to squeeze more out of our roads particularly easily, the ‘turning around’ of Auckland rail system over the past decade has undoubtedly been an expensive – but necessary – task. I won’t go into the capital costs of the projects in this post, because I don’t have much of an issue with them – all the money we’ve spent so far on upgrading the rail system has been on projects that make pretty good sense. What I’m particularly interested in is the ongoing operating cost of the rail system, and how we might be able to reduce that.

In the 2009/2010 financial year (recent data is probably available but this is easy to find), we spent around $69 million on operating the rail network, and got in around $20 million in fares – meaning a subsidy of just under $50 million was required: I’m not going to do the normal thing of dividing this amount by the number of trips to work out a “per trip” subsidy cost and then go and compare it to buses, because that’s silly as your average rail trip is much longer than your average bus trip – therefore generating much greater congestion relief benefits and also meaning that trains need to be operated much longer distances, adding to the cost.

However, overall I think it’s pretty clear that in the longer term we want the rail system to fund itself to a greater degree than the current 29% farebox recovery level the table above suggests.Fortunately, much of the recent capital expenditure, including ongoing projects like electrification and integrated ticketing, is aimed at improving the efficiency of the network. Integrated ticketing should do away with the need for so many on-board staff (as an aside, there were two people selling tickets on the platform at Henderson station around lunch-time earlier this week when I was catching a train, meaning that on-board staff were able to sit around not having to do much) while electrification should help save significantly on the $10 million a year currently spent on diesel, and the $15 million or so a year spent on maintenance.

In short, it seems logical to me that as these two projects in particular start to roll out, we should be able to run a much leaner rail system, reducing the cost of many aspects of providing rail service. Yes, we will have longer trains once electrification is completed, but we won’t have more peak time trains (thanks to the Britomart bottleneck) so it should be possible to significantly reduce the rail network’s operating cost. In fact, I’m pretty sure that the business cases for both integrated ticketing and electrification relied upon such savings.

I do wonder though whether this will happen. There doesn’t seem to be much competitive tension in getting a good contract price out of Veolia providing rail service, and we have learned from analysing PTOM that the bus market is pretty uncompetitive when it comes to tender prices. I think it’s essential that, over the next few years, Auckland Transport works really hard to show how investments in the rail network are helping it become much more efficient so we can get that farebox recovery rate up and start proving to a sceptical government that rail investment is good value for money.

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  1. First up I think that things like this are what AT should be regularly reporting on, a lot of public money is being spent and it should be easily available as to what that is being spent on and so we can track just how much things like fare box recovery are improving (or not). I would also like to see other things associated with this like the distance travelled by passengers etc. as well as information about how much it costs to run each service i.e. a running a train from Swanson to Britomart will cost $X.

    It terms of improving costs, Electrification and Integrated Ticketing should have a good impact but there are other things that could and are been done as well. One of these is the distributed stabling project that ARTA started some time ago, that saw stabling facilities spread out across the network so that not all trains had to travel half way across the city just to start their run but there is still more to do with that. Henderson has just been expanded but is yet to be fully used (perhaps that will come with the new timetable) and they seem to have gone quiet on the planned strand facility.

    As for subsidy levels, the latest information I saw that split it out by mode had both buses and rail virtually the same cost per passenger-km

    1. Yeah I would love to see a breakdown of the subsidy for different routes.

      You’re right about distributed stabling helping to save money. My question is whether these efficiency improvements are being passed onto those who have stumped up the money for the capital projects: that being the ratepayer. I suspect not.

    2. Just note my comment below on subsidy per pax-km. The numbers suggest rail/bus subsidies are the same, but when you dig deeper you realise that rail rolling stock is funded separately from operational subsidies, whereas the costs of bus rolling stock renewals are included.

      So it’s not an apples-apples comparison, when you include costs of rolling stock rail becomes a lot more expensive. But, with the difference in relative growth rates it *should* level out over time. So I think the relative investment levels, at least up until the City Rail Link, are about right.

      However, once we get past CRL (and start talking about Airport rail etc) then rail subsidies would just blow out to ridiculous levels, methinks.

      1. One other thing we should think about is the impact of a functioning rail system on the efficiency of the bus network. By that I mean the gains of not having to operate Papakura to CBD buses that take 2 hours to complete their run. Of course at the moment we are idiots and still run both the train and the bus. But that should change.

  2. Interesting to see that Auckland’s fare-box recovery ratio is closer to 10% rather than around 40% as usually stated. The bus contract is barely 5%! Time to put the public back in public transport I think.

    1. Only a very small proportion of buses are “gross contracted” (ie: the fares go straight to AT), so this is the only revenue from buses. That’s why it looks so low.

      The majority of bus services are a net contract where the operator keeps the revenue and AT “tops them up”.

  3. Completely agree; the more AT can reduce subsidies the less they need to rely on fickle and uninformed politicians in Wellington. And the more cash they have to invest in capital improvements.

    Note: If you do use these numbers to calculate average $-subsidy/pass-km for rail and bus then it works out about the same, i.e. $0.31 per pass-km for rail and $0.30 per pass-km for bus (assuming 16.6km average trip and 10 million trips/year for rail; 8km average trip and 50 million trips per year for bus). So rail seems to be doing quite well, especially when you consider its relative rate of growth.

    The big problem with this type of analysis is that the rail subsidies quoted here do not include the costs of rolling stock renewals, whereas the bus subsidies do, i.e. the latter include costs of depreciation. For the new trains this would work out about $500 million @ 5% p.a. = $25 million per year in additional rail subsidies that should be added onto these numbers to provide an apples-with-apples comparison.

    But current given growth rates and planned improvements, rail/bus subsidy levels will probably work out broadly the same. Also, the current historical system-wide average subsidy level is not really that useful when evaluating the value of new investment, which are – almost by definition – working at the margin.

    1. I think the loan repayments for the EMUs will be included in OPEX so will be captured once those trains start to operate. That puts an even greater requirement on us to improve the efficiency of the rail network so that farebox recovery rates don’t decrease even further (or if they do, to ensure they bounce back quickly).

      You would think that the operating cost per passenger of an EMU with driver-only operation should be pretty low. Especially as that one driver can shift around 700 passengers.

      1. Yes you are right, the loan repayments will be included in OPEX, so better comparisons will be possible in the near future! This is, perhaps, the one thing that Steven Joyce should be credited for – the financing arrangements will means that the costs of rail rolling stock is made more transparent.

        EMU OPEX will be much lower, just note that there are (not insubstantial) costs from maintaining overhead wires, which should be included in any analysis of OPEX. Electrification actually shifts a lot of operational costs from the trains to the network, but they are still “costs” to be factored into any analysis.

        Mind you, by the same token you should include costs of wear and tear on roads from buses. Thing is, buses are pretty light compared to HOVs, so the marginal impacts of the buses (over and beyond what is caused by trucks) is pretty small. But it starts to show how difficult/problematic these analyses are! Hence why consultants like me get paid :).

        1. Overhead maintenance costs are included in the track access fees paid to Kiwirail. They are/will be going up which is said to be in part about increased maintenance costs and to reflect the improved network so hopefully we shouldn’t see the network get into such a state of disrepair again (although I’m still dubious as to how it has been done and worry that Kiwirail will skimp on their side of things).

        2. That’s a good point Matt. Do you know if the TAC are incorporated into the rail contract line in the table above?

        3. Mind you, by the same token you should include costs of wear and tear on roads from buses.

          That should be picked up by the road user charges paid by buses?

  4. On apples-apples comparisons between rail and bus, while buses are counted in bus contracting costs wheread rail vehicles are not, how about the inclusion of rail network operating and upgrade costs (for trains) vs road network operating and upgrade costs (for buses)?

  5. Reading between the lines on another forum it seems that there may not be a train operating company for much longer so the cost of operation of the rail network should decrease.

  6. Excellent point about the train operating company. If AT don’t know the true running costs of the new EMU’s, they’ll get screwed by the next tender process, and the ratepayers will be the losers. Perth don’t outsource the operation of their trains, but I believe they do outsource their buses. The publicity information about the EMU’s claims a running cost half that of the current diesels. I expect that based on the 2 big components of running costs – fuel and labour, that the operating cost per kilometre of a 3-car electric train is probably similar to a bus, particularly if off-peak power is used*.

    Because of what I think are extremely low operating costs of 3-car electric trains, it means there should be large savings in overall system operating costs for off-peak and weekend operation by redeveloping the bus system into more of a rail feeder system rather than at present, where a large proportion of bus routes continue to Brittomart. One of the keys to this type of a feeder bus system is a high frequency of trains, so passengers don’t need to wait long at the station, and it provides more flexibility in designing bus timetables. The high frequency also attracts park-and-ride patronage. I think it is because of these low operating costs that Perth’s rail system can justify a 15 minute daytime frequency on weekends. Patronage surged when these frequencies were introduced. Melbourne also has high weekend patronage with a 20 minute service interval, and recently had to change from 3-car to 6-car trains on many lines because of overcrowding. This shows there should be plenty of scope to increase weekend ridership if an attractive service is offered.

    There are times when it is worthwhile continuing the outer suburb bus routes into downtown

    – if the buses are regularly close to full (above a certain breakeven passenger load)

    – if transfer to a train results in less than a 5 minute saving on total journey time

    – if the bus route is required to ensure minimum service frequencies for inner suburbs

    One of your posters quoted operating costs for a 6-car electric train from the Rail Tunnel case. These would be appropriate for peak conditions. However on weekends, costs could be substantially lower because of running 3-car trains, and use of off-peak electricity. When major events are scheduled, 6-car trains could be operated instead. However even a 3-car train can take a crush load of over 350 passengers if the scheduler underestimates patronage. It is more “elastic” than a bus, and able to take a greater ratio of standees to seated passengers. While not desirable for attracting further weekend patronage, it is better than leaving passengers behind, as occurs with buses.

    * Fuel efficiency data from Wikipedia article “Fuel efficiency in transportation”, diesel bus 39L/100km, electric train 20.6 MJ/car.km. Other information: Diesel price $1.47/km, electricity price $30/MWh. Bus costs $0.57/km, 3-car train costs $0.513/km. Mechanical maintenance costs for trains are often covered under the purchase cost for the first few years of the contract. Labour costs per km could be much lower for the train, because it achieves more than twice the average speed than the bus, whereas the wage rate would be only slightly higher. No allowance for access charges to KiwiRail, but a wise negotiator would have made these on a distance-mass basis rather than per service.

  7. Surely, it would save money for AT to run the rail network on their own directly,without a private operator (such as Veolia). After all, private means they must make a profit, so that must cost the public more in the long run. AT wouldn’t need to run at a profit (although they should be kept as efficient as possible like a private organisation), thus reducing farebox recovery rates.
    I would love to know what the subsidies here in Sydney are like. We have less staff on trains, but far more at train stations which must cost quite a bit. But for a system that carries 1million people a day, and over 300million a year this city would crash without the rail network.

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