Herald columnist Brian Rudman wrote a good article yesterday, highlighting the need to get better value out of the amount of money we spend on public transport subsidies. This was an issue touched upon at Tuesday’s transport committee meeting, specifically in the presentation by Auckland Transport CEO David Warburton. Of particular note is this graph:
The two black boxes with crosses in them indicate the level of net subsidy in 2005 compared to that in 2011. At a rough guess (and the graph is slightly misleading by starting at $50 million rather than zero) it looks like the subsidy went up from around $80 million to $140 million in the course of the last six years. While we have seen patronage increases in the last few years particularly, the rate of increase of subsidy seems higher than that of patronage – particularly in the mid 2000s.
Rudman picks up on this issue:
The Auckland public transport subsidy totals around $140 million, and the bus operators take the lion’s share.
In September 2007, with the decline in bus patronage finally flattening out, Mr Lee despaired that providing subsidies was “like pumping blood into the patient and getting the odd twitch”.
That came after three years in which subsidies had increased 89 per cent with nothing to show for it in terms of passenger growth.
Earlier in his article, he also makes the point of wondering whether – unlike Dr Warburton’s assumption that subsidies would match patronage increase – higher patronage should actually mean lower subsidies (especially on a per user basis).
I’m not an accountant, but it seems simple arithmetic to me that if a bus two years ago carried a handful of fare-paying customers, and required a subsidy to help cover the costs, and now that bus has people hanging from the straps, then perhaps the operator no longer needs the public subsidy he once did.
It might also be worth investigating the level of profits flowing from “economic” services on traditional unsubsidised main route services. If they were commercially viable before the recent surge of customers back to public transport, what sort of margins are the operators pocketing now.
I can certainly understand, to some extent, why rising patronage would need increased investment: to get more buses and trains running. But if those buses and trains are fuller than ever, surely their farebox recoveries should improve and less net subsidy should be required on a per passenger basis? In other words, one would imagine that the gap between the red dotted line and the black dotted line should increase over time as the system is used more efficiently.
During the mid 2000s patronage dipped while subsidies skyrocketed – so one would imagine that the opposite should be happening now. Rudman provides a bit more detail on what happened a few years back:
In July 2008, then Auckland Regional Council chairman Mike Lee observed wryly in a letter to Transport Minister Annette King, that “it would appear that the private bus companies in Auckland are much more interested in increasing bus subsidies than increasing bus numbers”.
He noted that at the time of writing “overall bus patronage is down nearly 5 per cent compared to four years ago” even though public expenditure on bus services had increased by 90 per cent between 2004-05 and then.
It took the war in Iraq and rocketing fuel prices to reverse the trend, bringing passenger numbers back to the 2005 total of 43.1 million.
Mr Lee, now chairman of the Auckland Council’s transport committee, noted in that letter, that between 2005 and 2008, despite a blip downwards in passengers numbers, annual subsidies to private bus operators in Auckland nearly doubled from $45 million to $93.3 million – shared between ratepayers and the Government.
It has long been my opinion that Auckland gets a pretty poor deal out of the way we operate and fund the public transport network. The Cabinet Paper on the new public transport operating model noted that there seemed to be very poor competition for bus tenders in Auckland, while the old legislation that public transport operated under made it impossible to know whether a route that the operator said wasn’t commercially viable actually wasn’t.
At Tuesday’s meeting Dr Warburton seemed confident that the new public transport operating model, known as “PTOM”, will deliver better value for money for how we contact and operate the bus system. I certainly hope so, and I certainly hope we do see a big fall in the level of subsidy per passenger as patronage increases. Maybe we do need the Council to buy up a bus company and act in a similar manner as Kiwibank has done so in keeping the other guys honest.