For most of the last year we have found ourselves somewhat puzzled by the stalling and even declines experienced by rail patronage in particular – but more recently general public transport patronage. This can be seen in the dip in 12 month rolling patronage totals up to November last year:
Auckland Transport have provided a multitude of excuses for the patronage dip over the past few months – some more plausible than others (they blamed the World Cup for some of the declines in August and November, even though the World Cup was only in September & October 2011). Some of the decline may be due to higher rail fare evasion than we think (anecdotal evidence on this is pretty strong) but I wonder whether public transport fares are really starting to hurt some people and put them off catching the bus, train or ferry. With inflation at near-zero, wage growth stagnant seemingly forever and petrol prices still below the peaks of a few years back the fare increases for rail in particular over the past few years may be starting to bite.
A benchmarking study of public transport in Auckland and a number of comparator cities prepared a couple of years ago highlighted that Auckland’s PT fares – on a per kilometre basis – were higher than all other cities analysed:Yes, the graph does show that Auckland’s fares are on average around twice those of the Australian cities and much higher than Wellington’s. This is despite (or perhaps a cause of) Auckland generally having one of the poorest and least used systems when compared to these other cities.
There are lots of ways that we can improve our fare system, like the introduction of free transfers, zone-based fares, greater incentives for people to use the Hop Card, pricing differentials between peak and off-peak, better deals for monthly pass holders and so forth. Those are all great, but I wonder whether they miss the fundamental point of still assuming the same general level of contribution by users to the cost of public transport provision. Certainly Auckland’s farebox recovery rate (which has increased to about 43% from what’s shown below which was in the benchmarking study referred to above) is certainly higher than a lot of Australian cities:Fortunately a lot of work has gone into creating a more efficient PT network over the last while, with the new bus network likely to generate a lot more patronage without extra service requirements. Hopefully the PTOM contracting system will also generate cost efficiencies. This work should hopefully mean that the public money spent on public transport is being utilised far more efficiently than in the past – effectively we are getting more bang for our buck.
But the next question is around how to use those savings – to reinvest in extra service, to bank the savings or perhaps to lower some fares? I’ve wondered for a while whether the strategic lowering of certain fares would generate a big patronage gain and the benefits which arise from more patronage would easily outweigh the revenue foregone in the lower fares. There are a number of ways this could happen:
- The lower fares could end up with more passengers paying and theoretically this could mean more revenue overall. Generally patronage is seen to be relatively inelastic to price (though this varies hugely for different trips) so ending up with more overall revenue is relatively unlikely.
- The patronage gain could generate significant external benefits, such as in the form of decongestion benefits – which for rail are particularly significant at around $17 per peak time passenger.
- Lower fares could mean that some people end up ditching their family’s second car and shifting to the bus or train as it’s now clear that catching PT makes financial sense to them. As many of the costs of car ownership are relatively hidden (e.g. depreciation) they may end up in a much better financial position in the longer run.
There are lots of messy details to work through around the most effective way to target fares to maximise benefits created and that’s not really the intention of my post. I guess I’m just interested in understanding whether we’d be better off if PT fares were a bit lower generally – certainly a lot of other cities seem to think so.