The arguments against increasing fares

by Paul Bruce
Raising fares is hardly the way to reward new customers, much less hold on to one’s existing customer base, reduce congestion, or address the obesity epidemic.

Fare increases on Wellington’s public transport again come at a time when the recession is squeezing those who rely on public transport the most — people of modest means whose incomes are at the low end of the scale.

And you don’t have to be a rocket scientist to realize that increased fares will push middle income commuters back into their cars.

The stated purpose of the increase does not stack up at all – it does not take into account at all our Public Transport Plan. In particular, the large rise in cash fares does not fit our intention to move to an integrated ticketing system and the new fare structure which we approved last year.

We have agreed that there should be no transfer penalty. We have also agreed to
cap daily fares, extend the youth discount and remove the anomaly between rail and bus.

A one zone penalty cash fare wouldn’t exist for many commuters with the new fare structure.

A VUW survey on the proportion of staff using public transport who work close to the railway station and Rutherford House, and staff who work at the Te Aro campus at the other end of town, showed that far fewer Te Aro staff arriving from northern suburbs use rail, because they are not willing to pay this penalty fare.

And we are about to increase the penalty by 25% for the adult cash fare.

Wellington fare payers contribute a much higher proportion of the farebox than other regions. Both Auckland and Christchurch have fare box recovery below the 50%, yet we insist on keeping Wellington’s at 55%.

Fares cannot just be raised constantly to try and reach some arbitrary target.
Fare elasticities come into play, whereby patronage decreases as fares increase.
There is an optimal point where fares and patronage are at a point where both are maximised. That optimal point is what regional council research should seek to ascertain.

What we have here is

• Confusion with our objectives
• Disregard for network integration and service linkages
• Lack of regard for the wishes of the community

And, according to Transport Agency modelling, we are missing out on the economic benefits that a modest reduction in the farebox return from 55% to 50% would bring to the region. These benefits amount to five times any loss in farebox recovery.

Fellow Councillors, don’t support the recommendation for fare increases. Instead, let fare box recovery increase through improved performance.

I am also recommending that we conduct “a leave the car at home” sustainable transport message directed at ratepayers.

Councillor Paul Bruce made this speech at last week’s Regional Council meeting where a majority of his fellow councillors voted to support the fare increase.

October 1: Increase in bus and train fares

February 14: Another increase in bus and train fares recommended

 

11 comments:

  1. Elaine Hampton, 25. February 2014, 13:40

    I wish to support the notion that public transport should be heavily subsidised, well below 50% fare box. Raising fares to above this level will not achieve the objectives of getting people out of cars, getting cars out of the city, and will affect the less well of disproportionately.

     
  2. Tony Randle, 25. February 2014, 16:00

    If bus commuters only had to pay 50 per cent of their fares they could have their fares cut, not increased.
    It is the Regional Council (no not the Transport Agency) voting that Wellington bus users must pay 60 per cent of their fares that I object to.

     
  3. Sridhar Ekambaram, 26. February 2014, 7:34

    What will increased bus fares achieve? Most likely keep Go Wellington’s profits intact. That brings us to the question – “was privatising public transport a good idea in the first place?”.

    New Zealand is the only country I can think of where public transport is privately owned with profits as the primary motive.

    It is time we, as rate payers, started discussing if it is worth buying back those assets, so we can then decide what services to be provided at what cost (without being at the mercy of private owners). We could even look at public-private partnership model. Let the rate payers own the assets, and hence be able to decide on services and fares, and operations can be outsourced to private operators just to operate the services.

     
  4. Elaine Hampton, 26. February 2014, 11:03

    Sridhar: Now that is exactly where the councils should be heading. Privatising public services is another failed 80s / 90s idea. With public control, maybe buses would run to time, when scheduled, and be affordable.

     
  5. CC, 26. February 2014, 14:00

    Don’t count on an improvement in service if the Regional Council does the logical thing Elaine – look at what is to happen when Wellington Waterfront Ltd is disbanded. The work will be taken over in-house by the WCC. The functionaries who lost more appeals than they won, continue to privatise the waterfront with what appear to be closed shop deals, lost a fortune with poor contracts and even managed to have a diving structure put in over a cesspit, are to be kept on. ‘Too skilled to lose’ was the explanation if one recalls correctly.

     
  6. Cr Paul Bruce, 27. February 2014, 11:48

    In response:

    We have the curious situation where we receive fare returns from rail, but not bus operators. Tony Randle is right that the present fare structure is weighted towards rail. The fare rise did nothing to address this issue, and is another reason why I opposed it.

    The new contracts, being negotiated over the next 18 months, will follow the new public transport operating model (PTOM), which will give more control over revenue, while maintaining some incentives for PT operators. We must ensure that we get a better deal for the public than we have at present.

    We do actually own the train fleet, and could choose to own and/or operate. NZBus have suddenly pulled out of two commercial Hutt Valley routes, and this gives us the opportunity to do exactly that!

    The fares we set still depend on the balance between public good, efficiency of service and user pays. Freiburg in Germany has a very similar population base, car ownership and route density as Wellington. Commuters leave their cars at home and willingly use the fast reliable public transport network with the result that fares are very reasonable and at the same time operate on a subsidy of less than 20%. They have resolved the inner city congestion problems by restricting vehicles in the CBD and moving to the network approach with feeder bus services and light rail along the main arterial routes. There is high customer satisfaction.

    The Regional Transport subcommittee has resolved to use Bus Rapid Transit (BRT) – large bendy or double decker buses to reduce bus congestion in the CBD. However, BRT will not deliver the amenity benefits of light rail, or the lower running costs that result from a defined route, steel on steel and lower maintenance. The final decision will be made at next week’s RTC meeting at 10am on Tuesday, and the public have an opportunity to comment at public participation – details http://www.gw.govt.nz/committee-meetings-calendar/detail/7147

     
  7. Sridhar Ekambaram, 28. February 2014, 20:07

    But one question needs to be addressed Paul. How much of the subsidy will go to prop up Go Wellington profits?

     
  8. Cr Paul Bruce, 4. March 2014, 16:03

    Response to Sridhar: The present contracts with Bus operators do not allow us to know how much subsidy is necessary to maintain the service. However, NZBUS return to shareholders would be one way of making an intelligent guess as to the level of profit made out of rate and taxpayers!

     
  9. The City is Ours Inc., 5. March 2014, 2:03

    I have a copy of the financials of Infratil from 2011/12;

    NZ Bus made $247million that financial year for Auckland and Wellington.

    $ 127 million passenger income
    $ 84 million contract income.

     
  10. Ellie, 5. March 2014, 13:16

    CC:
    “too skilled to lose?” Too expensive more like – do they know too much ?

     
  11. Tony Randle, 5. March 2014, 15:21

    Go Wellington will NOT be better off with the proposed fare increases. While I appreciate Paul Bruce’s ongoing opposition to fare increases, of all people he should have explained there is a well established process by which the bus subsidies are reduced by the amount of extra fare income the operators will receive. Quoting from the 2014 Fare Review Report (Report 2014.24):

    “3.3 Implementation
    In order for the benefits of the fare increase to flow to the Wellington Regional Council, the price of operator contracts needs to be reduced in recognition of the increase in revenue flowing to the operator. There is a NZTA approved process for this adjustment, the intention of which is that the operators should be in no better or worse situation after the increase than they were prior to the increase.”

    It is part of the GWRC fare process not to let any money from their fare increases go towards bus operators if they can possibly help it.

    The GWRC is nothing if not thorough in funneling every available cent towards their precious train set. This apparently includes the extra 50cents/trip from large numbers of Wellington children who will have to pay $2 instead of $1.50 to get on a bus.

     

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