The primary reason given for the increases is the need to boost farebox recovery, the percentage of costs covered by passenger fares. The target for this is 50% although AT mention a range of 47-50%. We did pass 51% in early 2016 however despite rapid growth in PT usage, it’s been declining since then. At the beginning of the financial year we were at 46.8% and as of December, after this paper was written, it was down to 45.9%. There are number of reasons for this and it includes cost increases along with comparatively less coming from fares due to the introduction of simplified fares and more people paying by HOP.
AT say there are a number of funding pressures. These include:
- Contract price indexation
- Bus New Network service increase aspirations
- Rail timetable increases
- Ferry service level increases
- Bus capacity increases
- NZTA rail financial assistance rate reduction
- Reduced NZTA concession funding
AT use the NZTAs indexation for contracted costs and they are up 2.4% for bus/train and 3.2% for ferries. As a result, they say that to “achieve growth and service level aspirations” there is an estimated $5.8 million funding gap for PT services for this financial year – although the paper also expresses it as a $5-7 million gap. It’s even worse for the 2018/19 year with an estimated $26-30 million gap for services. The big jump next year is due largely to the roll out of the Isthmus and North Shore new networks. The paper hints at some potential issues with those, noting:
As such, a number of projects have already been deferred or scaled back to account for this. A further review of service levels is underway.
Cutting back services on the New Network, some of which will includes having fewer all day frequent services, is only likely to exacerbate the issue as it will be less attractive users and therefore result in comparatively fewer people using PT – although probably still more than do now. We’ll be looking closely to compare what’s rolled out with what was confirmed following consultation.
How much will it raise?
All up, AT expect that the fare changes will bring in another $2.7 million in revenue. This is obviously less than the cost increase and the rest would be covered by funding from council and the NZTA. As a result, it is expected to increase farebox recovery up to 47.4%. The fare changes average out as a 2.4% increase for bus/train fares and 2.1% for ferry fares. The impact is shown in the table below.
One thing you can see in the image above is that AT expect the changes will result in 600k fewer journeys than they would otherwise have had. The increase is also higher than the increase in CPI of +1.7% but they say that “this reflects improving service levels and amenity, and better value for money perceptions“. They point to the improving customer satisfaction numbers as proof of this.
One interesting comment about the ferry increases is below.
The key driver for the ferry review was to ideally fully align inner-harbour ferry fares with 3-zone bus/train fares. This would complete the alignment of the three ferry “zones” of inner, mid and outer harbour services, to the 3-zone, 5-zone and 8-zone bus/rail fares respectively, in preparation for full integration of ferries into the Simpler Fares structure.
As far as I’m aware, integration of ferry fares into the Simpler Fares structure doesn’t mean they’ll be the same price as bus/train fares i.e. it won’t be a 2-zone fare to go from Devonport to the city, like it would be if done by bus. But it does mean that you can pay a single fare for your journey so you’re not paying a separate fare if you then jump on a bus/train to get somewhere. It’s unknown when ferry fares will be integrated with HOP.
How AT came up with the fare changes
In an attachment to the report, AT lists the below areas they consider when making fare changes.
It is good industry practice to review indexation of public transport fares annually. To derive a recommended fare schedule, AT undertakes an analysis of cost, revenue and patronage movements to estimate the net commercial impact. This provides an initial determination for fare schedule changes and is assessed against a range of variables/drivers. A summary of the relationship between the various inputs is illustrated below:
It will not be possible to achieve all targets, as some are mutually exclusive. Therefore, AT will need to balance any competing demands and trade-offs to derive a fare schedule that best meets the overarching objectives of the RPTP. Note the above list is not ranked in order of importance – all variables are considered equally (i.e. it’s not a weighting exercise).
And another attachment shows five different scenarios that the modelled the impact of. They went with option 4.
I think what some of this highlights is that we need to get smarter at a policy level with how fares are set. The 50% farebox target is probably a satisfactory goal if we had a mature and relatively stable network, but we’re not in that state yet. First, we need to get our PT network to a minimum viable standard. That includes having clear and logical routes and good all day frequencies on key routes (and with appropriate priority). This is what the new network was intended to deliver and is now being compromised by that farebox target. In my view, the farebox target needs to be lowered until the new network (including rail frequencies) are in place and have had sufficient time to bed in. This is a change the government should be able to make (and fund) relatively quickly and easily.
We should also consider longer term changes to how we fund PT. We fund most other transport projects, in large part, based on the estimated economic impact they’ll have. For example, we didn’t build the Waterview tunnels based on how much fuel tax will be collected from vehicles using it. We built it based on the expected economic impact it would have. If we were to consider PT services the same way my suspicion is we’d see quite a different result. That’s because as Auckland grows, the value of moving more and more Aucklanders free of congestion (if done right) only gets more valuable. Already more people enter the city centre by PT than by car and my hunch is the value of that to the city’s and country’s economic performance far exceeds the funding that’s provided.