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How do Auckland’s Bus Subsidies Work?

The process by which Auckland’s bus system is organised seems very very complicated, with strange relationships between ARTA and the different bus companies, which seems to vary according to route, and even down to particular services.

This is my understanding of how bus subsidies work in Auckland:

- Routes and services are identified by ARTA via documents like the Regional Public Transport Plan (RPTP).

- If a company wants to run the service and doesn’t think they’ll need a subsidy for that route/service, then they can register it and operate it as a commercial service. Up until relatively recently, ARTA had pretty much zilch control over how these services operated and pretty much zilch knowledge of whether the routes were profitable or not, which became problematic when bus companies started abandoning the commercial services saying they were unprofitable a few years back.

- If no company thinks they can run the service commercially, then ARTA has a choice to ‘contract’ the service via ‘net contracting’ or ‘gross contracting’. Net contracting means that the bus company keeps the fares and gets “topped up” by ARTA, while gross contracting means that ARTA keeps the fares and pays the bus company a set amount to operate the service. The Northern Express service is ‘gross-contract’, but I think that most other services in Auckland are ‘net-contract’.

- The companies won’t release the profitability information (i.e. how profitable it is) to ARTA under commercial sensitivity rules. If a run that is profitable suddenly becomes unprofitable the private bus company will make a claim for a subsidy and ARTA essentially takes the companies word on this.

While gross contracting has always been possible, the Public Transport Management Act (PTMA) has made it easier for gross contracting to actually work. This is because the PTMA (as it currently stands) can prohibit commercial services where ARTA doesn’t want them to operate. After all, there’s no point in operating a ‘gross contract’ on a whole route when the most profitable peak hour runs can be commercialised. This is the ‘privatise the profits, socialise the losses’ issue that the PTMA needed to resolve.

The current situation is messy, but that’s largely because most current contracts existed before the PTMA came into effects. As this legislation currently stands, ARTA could end up gross-contracting everything in the future: which is quite typical internationally. However, unfortunately the PTMA is under attack from the government. So the mess may unfortunately continue in the future.

It’s not just me who thinks the current (well, old pre-PTMA) system is a mess, right?

17 comments to How do Auckland’s Bus Subsidies Work?

  • One thing I haven’t explained very well is that, on say the Sandringham Rd route, the peak hour services are commercial and the bus company keeps all the profits while any runs don’t break even or lose money is topped up by ARTA to make sure the bus company breaks even (or even makes a profit if the gross contract payout is high enough)…

  • I think the solution is to gross-contract absolutely everything. If a company wants to operate a commercial service, then they should have to basically do what’s seen on the Airport Bus route at the moment: and that is run the whole thing as commercial (ie. the 11pm on a Sunday night service as well as the 8am on a weekday service).

  • That would be – by far – the cheapest option for the public… We would also get “free” (as ratepayers) extra services…

  • What a great way to improve the farebox recovery ratio!

    (Oh that’s right, sorry I forgot, we only want to consider ways to improve that ratio which help destroy public transport, not make it better).

  • We NEED the PTMA as it stands so the councils/AT can achieve the arbitary 50% farebox recovery ratio as imposed by Joyce. If he insists on the ratio AND takes away the PTMA’s “gross contract everything”strength, that pretty much proves he is setting out to damage/destroy passenger transport services.

  • Public transportation will not work if it is run by private companies period. Public and private just don’t go together. If we want a good public transport system it has to be run by the state.

    This can be seen in the history of many other cities as well. Take New York for example. There used to be three different companies to run the subway, and several companies to run the bus lines. Only when it was overtaken by the MTA (Metropolitan Transportation Authority) with funding from the state, was public transport actually able to improve. Everything was more in sync, fares were easier to manage, transfers were able to be made with a Metrocard.

    Basically, unless public transport is somehow controlled by the state, it won’t be able to provide the full service that the public would like.

    This blog expresses how more people in New Zealand should take public transport, and the comments express how public transport is a joke and infeasible:
    http://blog.heaps.co.nz/how-to/good-old-public-transport/

  • Scott M

    One danger is that the private company does all the leg work to get a certain run up and running and then when its successful the Council comes in and contracts the service, possibly giving it to another operator!

    I think the amendments to the PTMA also need to legislate that all public transport information is provided on a central source, whether private or public. This is because it should be about all the options on offer, not just those endorsed by the Council.

  • Jeremy Harris

    @heaps! – There are plenty examples of successful public transport systems around the world that have a central public planning body which contracts out services provided by private companies…

    Josh could list them from one of the early capters of Transport For Surburbia…

    The vehicles don’t have to operated by the state but they do have to be controlled by it to a certain extent…

    @Scott M – That is a very good point and if Joyce changes the PTMA we’ll get a chance to submit that at the select committee and if Labour changes it back and has a select committee process we’ll get another chance..!

  • I think Zurich is generally given by Mees as an excellent PT system, and from memory that is provided privately.

  • Scott M

    This article was interesting, particularly the statement “The only fully commercial bus route in NZ is the Auckland Airport route, run by AirBusExpress. In the WHOLE of NZ!

    http://blog.greens.org.nz/2010/04/23/stop-trying-to-privatise-our-public-transport-mr-joyce/#comment-132073

    Another question I have is: Why do contracted services HAVE to be run by private operators. Why can’t we go back to a Council owned company running the services?

  • Scott, I guess that generally the 10pm bus on a Sunday night will never be commercial – so that might explain why the Airport Bus is the only commercial one because it’s very different (and has very very high fares).

  • Scott M

    Surely the move to 24 hour service isn’t commercial Jarbury. Meaning we have NO fully commercial routes in NZ.

  • Jeremy Harris

    “Why do contracted services HAVE to be run by private operators. Why can’t we go back to a Council owned company running the services?”

    Up until recently the councils weren’t allowed to by legislation…

    The simple answer is: There is no reason why the council cannot own the buses, it usually can work very well and did in Auckland for generations… The main point is PT can work with private interests as long as a single public body controls; routes, fares, integration, network planning, etc…

    My personal viewpoint is, if the council controls PT why not let private money take the risk associated with bus ownership and save us, the ratepayer, some money (if the council also writes good contracts and the private bus companies operate more efficiently than public ones would)…

  • Scott, I think that move was commercial. A decent number of people have to be at the airport by 4am for 6-7am international flights, while also a decent number of flights arrive after midnight: meaning that people are wanting to get to the city at 1-2am. So not much of a “gap” between the two.

    Jeremy, as far as I know it was only regional councils who are/were banned from owning PT rolling stock. Christchurch City Council has owned and operated most of the bus fleet there for many years – and unsurprisingly as a result ChCh has probably NZ’s most effective bus system.

  • Scott M

    What legislation banned the ownership by regional councils, and when did it get removed?

  • I’m not sure Scott, and I’m not sure whether it has been repealed (the ARC skirted the rules with its train ownership which was officially by Infrastructure Auckland, and now officially by ARTA).

  • Jeremy Harris

    I don’t know either but I’d guess the ’89 LGA which was amended by Labour in 2002…

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