Does AT misunderstand the government’s new PT targets?

by Matt Lowrie

A few weeks ago we revealed that a new policy from the NZTA is pushing for changes to the level of public transport costs covered by fares (and a few other things), which could potentially lead to fare hikes by as much as 70 percent or service cuts. While some public transport authorities (PTAs), like Greater Wellington Regional Council, have been very vocal about the impact this could have but Auckland Transport has been surprisingly quiet. However, a few comments from AT has me worried they don't actually understand some elements or impacts of what is proposed.

As a quick recap, NZTA have issued a discussion document focusing on increasing the “private share” of public transport costs and are looking to set targets around this. It is very similar to the old Farebox Recovery Ratio targets introduced under the last National led government and represents the proportion of public transport operating expenditure funded from private revenue sources such as passenger fares, private fare substitutes and commercial revenue.

There are some key differences to the old farebox recovery ratio policy though, first that each region will have different targets rather than just an overarching national target, which is a good thing. The second and more important one for this discussion, not everything able to be included in the old farebox recovery ratio policy is able to be included in the new private share metric. The most notable here is funding PTAs receive to cover free fares provided by the SuperGold scheme or the discounted Community Connect fares.

When I wrote the post two weeks ago, we didn't know what the exact targets were, with the NZTA document only showing that they're to be agreed with each PTA.

However, the media have since reported a few of the figures. For example, this Radio NZ article notes:

Environment Canterbury said its targets were 18 percent for the coming year, 25 percent from 2025-26, and 28 percent in 2026-27 - and it was currently at 13.9 percent.

The article also gives us our first cause for concern with AT's position.

In Auckland, Auckland Transport's director of public transport and active modes, Stacey van der Putten, said the proposed target set for them by NZTA was 30 percent for the current year, 34 percent for 2025-26, and 42 percent the year after that.

"So far this financial year Auckland's farebox recovery rate has been 32.9 percent. Following our annual fare review in February we're expecting Auckland's farebox recovery rate to increase to just under 35 percent."

The issue is that Auckland Transport seem to think that this new private share metric is the same as the old farebox recovery ratio and that was repeated again at the Council's Transport, Resilience and Infrastructure Committee. You can watch it here (time-stamped to when the discussion took place), however I've transcribed the text below.

Here's Stacey van der Putten again:

I know there's been some curious questions about what this means, and particularly to public transport fares in Auckland and last month we did bring you our fare update with increases this poses no change to that.

We feel that we're actually very well placed to achieve our target, so in terms of what we call farebox recovery, NZTA now term private share, is made up of what I call a very similar bucket of things, including any sort of revenue from leases across our public transport facilities for retail purposes, public transport fares, advertising, and there's a number of other costs such as to do with ferry wharf fees etc.

And right now we already have a statement of intent target of 35% or to be revised as 34% in terms of that. So we're well placed to achieve that.

In terms of barriers for us there isn't a lot in the first two years, the next year the target goes up to 42%, so that's FY26/27. That's going to be challenging because we're bringing in a whole lot of additional cost to do with City Rail Link to get that up and running and that will take some time to even out, but by all accounts we're much more commercially focused by default than a lot of the other PTAs, and that's largely due to our construct.

And so given that it's always a focus for us in every financial year. It has been compromised in previous years a lot of that has to do with policy decisions which have been made for the right reasons at the right time. But it takes time to change that back. And we've had a lot of cost increases relative to increasing bus driver wages, which was absolutely essential. And those types of things.

The other side of the conversation, actually the team are having a conversation with NZTA today, because it is a discussion document, it's not a final document, is in terms of what are the other sort of leavers for cost control but also in terms of commercialisation of assets, services etc, what can be done.

And there's a number of things we're collectively looking at, such as if you put too many restrictions about what you want, by default you can impede an operator to be price competitive. So if you say you can only purchase these two types of buses, that's a big part of where they get their cost advantage from and competitivity and we don't want to see those things eroded going forth because they're important for the conversation and competition of the market.

There were also some comments from AT CEO Dean Kimpton:

There's been a number of headlines about fare increases having to go up 70 percent, we do not see that as being the case in Auckland. What we have planned and forecast, and where our private share or farebox recovery percentage is, it's close to the targets, except further down the track, and that's what we need to negotiate. This is a discussion document. So somebody else's headline is not your headline for Auckland. It is not 70 percent, it is nothing different this year or the next couple of years, than what we have planned it to be.

[some off-mic comments from a councillor]

And I'm going to labour the point, thank you, I'm going to labour the point, the reason you're there is we saw this coming and we're also committed to getting the balance right. You've got a commercial organisation that delivers and thinks this through this commercially and we're doing our best to balance all of those unders and overs, recognising the impost of not getting it right on the taxpayer and ratepayer and Auckland is 60-65% of New Zealand's public transport system so you've actually got an entity that understands these things and is trying to balance them all the time.

It seems AT are convinced that this new private share metric is the same as the old Farebox Recovery Ratio but while two metrics are similar but they're not the same and those differences do make a crucial difference.

The exclusion from the private share metric of some aspects, like the SuperGold fare substitute is what AT don't seem to have appreciated. There were 7.44 million SuperGold boardings in Auckland during 2023/24 and the government paid Auckland Transport $20.2 million to cover that. It is counted towards the farebox recovery ratio AT uses above. That's about 10% of all the fare revenue AT gets.

For that same year, AT's annual report states we achieved a farebox ratio of 31%. Yet the table at the top of this post highlights that for the same year, with the private share methodology putting the city as 23.5 percent - though NZTA say that it's more like 27% once adjusted for the removal of the half-priced/free fares in July.

We get the same kind of difference if we go back to AT's 2019 annual report where AT report where AT report 43.4% but using the NZTA's new metric it would be 33.2%.

Even if they are right and AT is on track, as they note, a big challenge is coming in around 18 months as then the target goes up to 42%. That's at the same time the CRL will be opening which as they note above, will add a lot of cost but it will be before much of the growth the CRL will generate arrives.

It seems to me that Auckland Transport have confused themselves into just continuing to use the old metric and that's something that won't end well for Auckland.

One of us is wrong, I fear it's AT but hope that it's me.