This is the third in a series of six posts looking at a collection of articles written by Sir Dove-Myer Robinson in the mid 1970’s promoting and clearly trying to build support for his rapid transit plan. They come from a booklet I stumbled across while in the Takapuna Library one day. The first post is here and the second here
This was published in the NZ Herald on 25 June 1975
Question of Who Pays the Operating Costs
In his letter to the Auckland Regional Authority in July, 1973, the Rt. Hon. Hugh Watt, then Minister of Works and Development, set out details of the Government’s terms for financing the bus/rail plan.
He said in part.
“… the Government would make available the capital and meet capital service charges on any rail transit scheme that might ultimately be agreed between the Government and the ARA.
“… operating expenses and maintenance costs would be met by the local authorities through the ARA.
“… any expenditure by the Government on a rail system would not be undertaken at the expense of a curtailment of the motorway plan.”
There we have it: The Government has already agreed to provide the capital and be responsible for capital repayments and interest of the railway part of the plan. This leaves open only the question of who pays the Operating Costs, or, if any, the losses.
The government has said operating expenses should be met by the local authorities through the ARA, but agreement on this question was one of several points left over for further discussion when an accurate estimate of capital and operating costs had been made. These estimates were available to the ARA on May 15 which is why it was only possible to resume discussions on operating costs last Friday
However, the government policy statement was made in 1973. In the meantime, the plight of public transport throughout the country has deteriorated disastrously.
Now in 1974-75, every public transport bus operator in the country is showing greater and greater deficits every year. Our own ARA bus division expects a loss for 1975-76 of $6.4 million, even after raising fares by an average of 25 per cent.
If the fare increase had not been imposed, the expected burden on ratepayers for losses on the bus service for 1975-76 would have been $8.2 million.
Allowing only a low 8 per cent compounded rate of inflation to 1981, this means that without Government financial help, ratepayers in the Auckland urban area will have to pay at least $10 million to 1981 to meet the costs of running an all-bus system, with the same unsatisfactory service passengers have to put up with at present, and without the benefits to be expected from an improved combined bus and rail system.
Although the proposed bus/rail scheme will be, basically, a reorganised bus service, it will depend for its effectiveness on the backbone of feeder services of electrified railways, converting the system into a balanced, co-ordinated, bus/rail service.
The ARA is already providing and running bus services. For reasons beyond its control, ARA bus services cannot be made fully satisfactory until the electrified connecting railway lines and coaches are available.
In fact, since 1965, the regional plan has always been based on the assumption that the electrified railway would be available about 1980. This is the reason why, in this series of explanatory articles, the main emphasis is laid on the costs and benefits of the railway part of the plan.
POINTS TO NOTE
Before analysing the official estimates of operating costs and the benefits to be expected, there are several points to be noted:
All estimates used, unless otherwise mentioned, are 1974 base line costs.
Estimated deficits of bus/ rail operation in 1981 must be compared with the actual deficit – $6.4 million – budgeted for in 1975/76.
Included in the estimated cost of operation of stage one and the eastern loop of the bus/rail system is the arguable sum of $3.9 million for depreciation the railway and bus services in the plan, which has been included in operating costs.
The decision of who pays this debatable $3.9 million depreciation will greatly affect the annual balance sheet figures of profits and losses.
There is an increasing nationwide demand for subsidies for public transport whose operating costs cannot be met anywhere in New Zealand
The Government must agree to accept responsibility for the $3.9 million depreciation, or make an annual grant to the ARA as part of a Government subsidy to public passenger transport operators throughout the country.
Whichever method the Government agrees to, the result will be the same – a reduction of $3.9 million in estimated deficits of running costs.
Here are the official estimates of costs, passengers and revenue in 1981 (at 1974 prices):
- Yearly operating costs of stage one, plus the eastern loop in 1981 (including rail and bus depreciation $3.9 million) $15.1 million.
- Estimated number of passenger trips in 1981 — 27.1 million
- Revenue in 1981 — 27 million trips … $8.7 million
- Operating deficit (including debatable $3.9 million depreciation) $6.4 million.
On the face of it, it looks as though there could be a deficit of $6.4 million in 1981, the first year of operation. There are, however, several actual and potential financial and social credits that must be offset against the hypothetical figure of $6.4 million deficit on the bus-rail system in 1981 (compared with $6.4 million losses expected on the buses alone in 1975-76).
First, there is the $3.9 million depreciation it is assumed the ARA will get the Government to accept as its responsibility, or persuade the Government to pay to the ARA as an annual transport subsidy, as part of a national transport subsidy.
Second, the economic value of saving the accidents and deaths in the area referred to conservatively estimated by the Government economist, Dr Vautier, at (actual estimate over $7 million) $1 million yearly.
Third, there is the saving of the use of private cars in the corridor, estimated by Dr Vautier on a conservative basis at $9 million yearly.
Fourth, a conservative percentage of the savings, by commercial vehicles only, through being able to travel at an average speed of 15 miles an hour instead of the present average of 10 miles an hour — $3.1 million yearly.
The total of these potential and actual estimated savings is $17 million yearly, less the estimated gross deficit of $6.4 million yearly, leaving a net assessable financial surplus (or savings) of $10.6 million yearly.
The above are only some of the savings that can be evaluated in dollars and cents.
What the Government and the ARA are trying to do is to give Auckland an efficient and fully satisfying passenger transport service at the lowest possible cost. If at the same time it can show an actual financial saving as well as great social benefits, so much the better.
In addition to the $10.6 million yearly savings mentioned above, there must be added the real, but financially incalculable benefits to users and non-users throughout the metropolitan area.
Some of these benefits are:
- Reduction of traffic congestion on roads
- Reduction of noise and poisonous atmospheric pollution, through reduction of use of private cars on roads.
- Reduction of annual costs of road maintenance.
- Reduction in use of high-priced petrol by private cars.
- Reduction in amount of overseas funds required to pay for imported fuel
- Reduction in transport costs and parking fees, to private car owners through use of public transport.
- Greater convenience of transport for the old, the sick, the young, the disabled, the underprivileged and those who cannot afford, or do not wish to own a car (over 50 per cent of the population).
- Prevention of overcrowding of main traffic arteries on the isthmus and saving of economic losses.
Now, here is the anomaly the opponents of this plan have not realised: no mater how skilfully the ARA transport division reorganises the bus system, congestion on the roads from other traffic will prevent any real improvement in the bus service, until the railway service is available to knit the whole thing together.
No rail connection would mean not only perpetuation of present unsatisfactory bus services but also rapidly escalating losses on bus services which could easily reach $10 million or more by 1981.
On the other hand, by joining with the Government in making the bold decision to start work on the rapid transit scheme as soon as possible, by 1981 or thereabouts, Auckland will have the nucleus of a modern, comfortable, high-speed, silent, pollution-free and reliable railway service which will serve the modern buses the ARA will then have available.
All this will be accomplished, not at an annual cost of millions of dollars to the ratepayers. but with financial benefits to the community that can be assessed at at least $10 million yearly,
as well as real additional social benefits which cannot be assessed in dollars and cents, but which every year will be worth many times the monetary savings.
This is truly an example of how we can have our cake and eat it, if we have the courage, wisdom and foresight to grasp the opportunity before us.
It’s hard to tell just how accurate those figures would have been given the high levels of inflation in the late 70’s. From what I have found, in 1974 the operating subsidy needed for buses was around $1.3 million ($14.5 million today) and that by 1979 that had climbed to $7.9 million ($43.4 million today)
The next is titled Million Vehicles are Strong Argument for Rail