Meeting the government's new PT fare revenue targets
By Matt Lowrie
It appears that Auckland Transport have finally realised the trouble the public transport system faces with the proposed requirements from the NZTA to hike how much public transport funding comes from users and other PT related revenue.
In November a discussion document was released that focused on setting new higher targets for the “private share” of funding for public transport. The private share is essentially the percentage of public transport costs covered by fares and is largely similar to the old Farebox Recovery Ratio, however does include a some changes to what is and isn't included.
The change is ostensibly because over the last six or so years there's been a major reduction in the private share due to the impacts of COVID, which is not just the reduction in usage but has also resulted in increased costs, such as from improving driver wages.
While other regions were publicly expressing concern for the proposed targets that, if fully passed on to passengers could require fare increases by up to 70%, Auckland Transport played down the impact, suggesting they were largely on track. For example, here's AT's director for Public Transport and Active Modes, Stacey van der Putten to the council's Transport, Resilience and Infrastructure Committee (TRIC).
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.
As I highlighted at the time, it appears that AT were actually misunderstanding the new policy and papers to the council's TRIC meeting on Thursday seem to suggest they've come to that realisation too.
The paper to the committee itself covers some key information about changes in PT costs and revenues but notes from workshops with councillors impacts the government's targets will have and some terrible options facing the council and AT.
Costs and Revenues
PT usage remains at around 86% of pre-COVID levels however, revenue from fares and other sources means that the total revenue collected is similar to what it was in 2019. However, costs have risen substantially, increasing by 46% over the same period from $510.1 million to $746.7 million. They seem to suggest that a large part of this is due to the high inflation NZ (and many other countries) experienced from 2022 onwards as that feeds into indexation metrics used in contracts.
They also break the costs down by mode
Bus costs are up 42%
Rail is up the least at 38%. They also note that two big components of the increase here are substantially increased in track access charges from Kiwirail and the new One Rail contract which also includes the operation of facilities.
Ferry costs have increased the most at 138%, however a decent chunk of that is the inclusion of Devonport services which were previously run commercially. Interestingly they note that if you exclude Devonport and Waiheke services "the remaining ferry network has a farebox recovery rate of approximately 9%".
AT also noted that our farebox recovery has been higher than any other Australasian city
The Workshop Notes
As noted, what I found more interesting were the notes from a workshop with councillors last week.
First up, this small table shows that unlike the quote above, AT have realised there is a difference and have recalculated their forecasts based on the new methodology, with current planned results much lower than the initially proposed targets.
Recovery result improves a lot over the decade and they say this is because they're expecting significant ridership gains from 2026 onwards from the CRL and additional bus services over the coming years. Their forecast sees nearly 180 million PT trips by mid 2034.
The note about initial proposed targets is important as they also say "NZTA initially proposed targets (see table), but have since stepped back from them, and now seeking an improved PRR over the next 3 years". That sounds like the various news articles highlighting the absurdity of the proposed targets has seen them back down a bit.
The expenditure and revenue forecasts the drive the results above are below.
The really concerning part is the options for operating expenditure savings which broadly falls into the categories of reducing services and increasing fares.
Option 1 is just to accept the forecasts above with no change.
Option 2 is a "significant shift"
Option 3 is a "major shift"
Both option 2 and 3 assume roughly a 50/50 ratio between cost savings and additional revenue
Option 2
This option would see the removal of up to 25 bus services over a couple of years along with frequent services being reduced to only every 30 minutes off-peak. In addition, most of the ferry network is shut and there would be additional fare increases.
Option 3
This takes the above even further with up to 50 bus services removed, stopping planned improvements to services in the west and south and further fare increases.
Both options 2 and 3 would be disastrous for PT in Auckland and it would happen exactly at a time when interest in the network would be high thanks to the opening of the CRL.
Not included in these options are options for increasing the efficiency of the PT network which is jarring given they also say:
Congestion affects bus services on our 20 key arterials, causing additional time and vehicle costs that AT pays the operator for
If arterials had reliable bus journey times with extensive bus priority all day, AT could save $10 million per year
Extensive all day bus priority would also drive a lot more usage meaning they'd have both lower costs and more revenue. Why aren't they rolling out bus priority with urgency.
Where's the Urbanist Minister?
While AT should have understood the impacts sooner, the real issue here is the arbitrary policy that's driving it and that comes from the government. As I highlighted last year, there's huge hypocrisy in pushing PT users to cover more of the costs of the network when at the same time the government are pushing roads that if calculated the same way would have a recovery ratio of about 3.4%.
Since then we've had a new Minister of Transport - Chris Bishop - and he's an self-proclaimed urbanist who spoke fantastically about the need for more housing and having more people living close to major public transport facilities. For example this on the CRL
We have to ask ourselves: are we doing all we can to fully take advantage of this multi-billion-dollar transport investment?
I believe that in order to properly unlock economic growth in Auckland, we must embrace the concept of transit-oriented development adopted by the world’s best and most liveable cities.
This approach promotes compact, mixed-use, pedestrian friendly cities, with development clustered around, and integrated with, mass transit. The idea is to have as many jobs, houses, services and amenities as possible around public transport stations.
Pricing people off public transport with fare hikes, or cutting services feels like the wrong way to get the most out of the investment. Maybe he should step in and stop this.