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.

IN 1981

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).

DEPRECIATION

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.

ANOMALY

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)

Robbie's Rail
Some of the styling envisaged for the system

The next is titled Million Vehicles are Strong Argument for Rail

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19 comments

  1. Whatever the subsidy level would have been or actually was in 1979 – had this scheme gone ahead the Government of the day (Muldoon’s as it happens) would have avoided the need to import a few tens of millions of dollars in then money (hundreds of millions of dollars when adjusted into todays money), worth of expensive oil and petrol each and every year, from then onwards to run the cars for all the drivers not using the PT system to its fullest.

    Think about that – we now have governments fingering the likes of Apple and Google as not paying local taxes and therefore schools and hospitals not getting funded properly as a result.
    As if this is a new fangled thing.
    It isn’t, as to these recent examples, overseas companies ripping the NZ public off is nothing new – NZ has been held hostage to a bigger, and much older “elephant in the room” since the 1970s – Oil.

    Time we actually realised that this is a massive cost, not just in indirect costs, but in direct costs, to the entire country’s continued detriment.

    And the “anomaly” Robbie refers to about how the bus system on its own can’t work without rail – yeah, we still have this argument today. Some naysayers still deny buses can ever work.
    or still think a single mode is the magic silver bullet to transport issues. The current silver bullet wannabe? Driverless cars of course.

    All along we’ve always needed a balanced system. But to the likes of NZCID, NZTA, MoT, a “balanced transport system” is, in their eyes, having the same number of motorway lanes in each direction

    And even now we have seemingly endless and on-going frustrating delays in getting the new bus system that will finally deliver Robbie’s vision, 35 years late, into effect.

    It seems some things never change – but as this shows, they just get more expensive to fix when left to fester.

    1. If only we did have the same number of motorway lanes in each direction a lot of our congestion would go our be seriously minimised. The 3 lane, 2 lane, run out lane, back to 3 then down to 2, and so on causes an amazing amount of congestion. The sooner motorways have uniform lane numbers from end to end the better. No brains required to understand that one.

  2. 27 million trips by 1981 seems a bit optimistic given we currently have 16 million and this plan didn’t include the Western Line!

      1. My understanding was that the initial proposal was just the southern line and what they called the eastern loop (eastern line I presume) to be built initially, with the others to be added later, I could be wrong though. 1981 was only eight years after this document was written as far as I can tell.

  3. The man was a fantasist. Hugh Watt said the Government would pay the capital costs of whatever they agreed with the ARA so Robbie claimed that was it they had agreed to pay for his scheme. Truth was his scheme was some plans and some totally unreliable cost estimates. No government made a budget allocation for it and even Auckland’s ARA didn’t support his plan.

      1. Yes you are right:
        British Dictionary definitions for visionary /ˈvɪʒənərɪ/ adjective

        3.
        (of people) characterized by idealistic or radical ideas, esp impractical ones

    1. A bit of both I suspect, I’m not sold on his patronage figures at all and building a parallel system with standard gauge would have been expensive. However, there is no doubt the late 70s was the time to begin the transformation of the rail network that finally began in the early 2000s.

  4. Rt Hon Hugh Watt: “… any expenditure by the Government on a rail system would not be undertaken at the expense of a curtailment of the motorway plan.”

    Well was this a wise or a stupid caveat? In the event the question became moot as the rail scheme was of course axed and no precious money was abstracted from the motorways by this pesky PT plan.

    So was the result of funnelling every available dollar into the motorway plan a resounding urban transport success? Hardly.

    More like a fiasco which set Auckland back decades and gave it the well-deserved reputation as the City of Snails. What should have been a simple task for a city, small by world standards, to follow the lead of similar cities which had successfully implemented rapid transit, instead became a car-congested joke. And the mindset that caused this mess is still prevalent out there, still failing to learn. Just look at Christchurch.

    OK. Needed to vent that.

    1. It does seem bizarre that electrified rail got rejected in favour of motorways in the middle of the first oil shock (1973-4).

  5. Rt Hon Hugh Watt: “… any expenditure by the Government on a rail system would not be undertaken at the expense of a curtailment of the motorway plan.”

    Isn’t that a telling comment! Years ago, I was at a transport forum in Wellington when I asked the-then head of the WRC’s Transport Department, Dave Watson, “If you had a choice between more rail investment and more roads investment” (this is the context of a discussion about Transmission Gully), “what would you have?” His reply, if I recall correctly, was, “we want both!” And that highlights a persistent flaw in our land transport policy; because for all the talk about wanting to promote the use of public transport, the politicians are not prepared to face the political wrath that would come from any serious clampdown on new road spending.

    1. I think that that idea may be historic. Certainly in Auckland there is a considerable constituency for more Rapid transit investment, including at the expense of further motorway development.

    2. The Clark Labour government managed to stave off pressure for massive road-spending and my impression was that many people accepted that this was a pragmatic path for the future. It is only when Steven Joyce came along that the current roading splurge started. Of course there are the ‘petrolheads’ who can’t or won’t see the bigger transport-picture, but I think the “political wrath” that politicians may fear from proposing to redirect road-spending to PT is overstated.
      The situation at the moment is that we have a government that has actively made spending on roads and cutting just about everything else the main plank of its policy.

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