What’s up with PTOM

Bus contracts might seem like a fairly boring topic to most people, but they can have a big impact on how our transport system operates – including, obviously, how much we as tax/ratepayers pay. In New Zealand we’re slowly moving towards a new contracting system known as the Public Transport Operating Model (PTOM). I’ll explain a bit more about what PTOM is shortly. According to the most recent Auckland Transport board reports, they are just awaiting approval on the contracts from the NZTA before they can start to tender routes using PTOM. However recent developments suggest a snag in those plans could be forming.

I spoke yesterday about Simon Bridges speech at Infratil’s latest investor day and other presentations suggest the company is no longer happy with PTOM. As they own one of the largest bus companies in NZ – as well as having a strong history of successful lobbying of the government – that could pose a significant risk to the whole process.

So what is PTOM? To understand it, you kind of need to understand the history of bus contracting in New Zealand.

Briefly, regulatory changes saw most of the public bus companies privatised in the early 90’s. The network was split up into commercial and contracted services, and a lot of the responsibility for planning was turned over to the various bus companies. Commercial services existed where the bus companies could provide a run commercially; however, where the local authorities wanted to run services that were not under a commercial agreement, they had to provide subsidies to do so. Because operators were able to cherry pick individual services on a route to be commercial it led to all sorts of issues, not least of which was some operators rorting the system to get extra subsidies. There were lots of other issues too such as explained in this cabinet paper on PTOM from October 2011.

As a comparison, some of the most common contracting methods used overseas are:

  • For the transit agency to own and run the buses themselves – this is something that not allowed in NZ. Christchurch gets around this because the bus company is owned by the city council while the routes are tendered by the regional council.
  • To gross contract out services – On a gross contract the operator charges the transit agency a set fee to run services with all revenue going to the transit agency. That means that the profits from the routes and services which are commercially viable can be used to help support the less viable services meaning less overall subsidies need to be paid. This is how the Northern Express and the rail network currently run.

The previous Labour government passed the PTMA in 2008 which would have allowed regional councils to take over and gross contract out all PT services. As you can imagine the PT companies didn’t like that idea and were successful in lobbying then-Transport Minister Stephen Joyce to scrap the PTMA. Fast forward a few years, and officials were obviously semi-successful in highlighting to the Minister the issues with the old system, and so from that PTOM was born in collaboration with bus industry.

In essence, PTOM is a bit of a hybrid between gross contracting and the current/old system. The Transit agencies divide up their networks into ‘Units’ which contains one or more routes along with a full timetable for them. Operators can still run commercial services but one slight improvement is they can only do so if they run all services on the timetable. There can still be commercial services but for that to happen an operator has to run all services in a unit – even if that’s 3 in the morning. If they don’t want to make a unit commercial then effectively the unit is gross contracted, however another feature of PTOM is that there is meant to be a partnership based approach where additional revenue is shared with the operators based on the councils.

After having been what is likely a key player in the involved in the formation of the PTOM, NZ Bus like other bus companies were very happy when the details of PTOM were formally announced:

Chief Executive of New Zealand Bus, Zane Fulljames says, “The new framework will drive a quantum leap in service provision and growth in public transport usage through an effective partnership model and performance based agreements. Certainty will enable operators to invest with confidence, recognising the requirement for value for money and an appropriate return on investment”.

And Infratil who own NZ Bus have been upbeat about the prospects of PTOM since then and in their most recent Operational report in December saw them singing Auckland Transport’s praises for patronage growth while noting the following about PTOM.

After a decade of gestation, the new Public Transport Operating Model is moving towards implementation. It is intended to define a new contracting arrangement between bus operators and regional transport agencies with the goals of reducing the cost on tax/rate payers and increasing the use of public transport.

The first offer of the new contracts is expected to occur in Auckland in mid-2015 and is widely recognised as an opportunity to develop partnering arrangements to capitalise on the positive development of the last three years.

Auckland’s public transport has massive upside if the contracts can encapsulate a positive and durable partnering relationship

However that seems to have changed. At the Infratil investor day their CEO talked briefly about it noting in particular (26:55):

I don’t see in the new model encouragement for public transport passenger growth, you know, which you would have thought was one of the key criteria for what’s called the PTOM structure, the new operating methodology. And so that might affect how we bid for these contracts. I don’t get that sense of engagement of what’s happening in Auckland, I don’t get it in Wellington. I think it’s probably one of the more disappointing aspects that you’ll probably hear about during the day.

There’s also bit more detail of some of their issues in this article from back in December.

I’ve heard some suggestions that some of the rewards in the contracts greatly favour the operators over AT while the operators are saying the opposite. As it’s all behind closed doors, it’s hard to know exactly what’s going on – however, given that the bus companies’ natural behaviour is to extract as much revenue as possible, I suspect that’s behind a lot of the issues. As an example, one of the complaints in the article above is that they don’t like the length of the contracts, however they’ve already been successful in getting PTOM contracts pushed out to up to 9 years on tendered routes.

Perhaps these companies are in a last ditch bid to delay the implementation of PTOM as they are the ones likely benefiting the most from the massive patronage growth we’ve been seeing.

While AT likely can’t run the buses themselves, perhaps it’s also time for a Christchurch type solution and have the council through one of its other CCO’s buy or set up a bus company that then goes and competes for routes commercially. If the existing operators don’t like the contracts then that might leave space for someone who does.

The Great Upgrade Timeline

Public transport patronage has been source of much concern for the last year and a half on the back of falling or flat numbers which followed about 6 years of almost constant growth. During that time the performance of the PT network has come under ever increasing scrutiny as public discussion and interest in transport has increased. For many of the PT figures there have actually been some fairly logical explanations as to why the numbers aren’t looking as good as they used to however unfortunately most people don’t look at the fine print and just look at the headline number.

Getting patronage growing is considered to be one of the key goals of Auckland transport and a lot of the expectation for future growth is being is being placed on a handful of key projects. Many of these projects have been going on for a long time however it is only over the next few years that we will really start to see them come to fruition and make an impact. This paper going to the AT board on Wednesday looks at these key projects and provides a timeline for when we will start to see the next batch of major changes. The key projects are:

  1. HOP integrated ticketing followed by progressive implementation of the initiatives within a strategic pricing and fares review for public transport including integrated and fares
  2. Service regulatory and procurement reform through the PT Operating Model (PTOM) following enactment of enabling legislative reform of the Land Transport Management Amendment Act 2013 in June
  3. New service network rollout of high frequency bus services and integrated and connected support services with associated facility and infrastructure upgrades
  4. Rail service enhancements and transition to the new EMU fleet
  5. Ferry service and facility enhancements
  6. On-time service performance and customer information
  7. Customer experience enhancement across all customer touch points

These projects are often what we refer to as “The Great Upgrade”. They represent Auckland Transport finally addressing the key issues of our current public transport network and putting in place the foundations for future expansion. Without these projects being successfully completed there is no City Rail Link and there is definitely no Congestion Free Network. Sadly they are all projects that should have happened at least decades ago and they help to show just how far behind we are. As far as I’m aware there isn’t a city in the world that is about to go through as much fundamental change as we are – but that is because most other cities have all, or at least a decent proportion of these things in place already.

The paper then goes on to show the most interesting part which how these projects will fit in on a timeline for the individual modes.


The next major event for the rail network will be later this year where AT are saying that we will finally get improved weekend frequencies which should mean at least half hour frequencies and services to Swanson on Sundays. One of the interesting things is that with no other changes on the rail network due till at least April when the EMU’s start running, it should give hopefully give AT some excellent data to see the impacts of the changes separate from anything else that is going on. Moving on to the end of the year and we are finally getting a new journey planner. This is long overdue as the current one is absolute rubbish and I simply won’t use it (I keep a copy of the timetable on my phone).

We have always known that the introduction of the EMUs will be spread out over a couple of years and I think I have seen a similar timeline before so it isn’t a surprise. What is a surprise though is the suggestion that we won’t be seeing integrated fares until the end of 2014. Of note the bus timeline has integrated fares happening slightly earlier and at the same time as the new bus network rolls out in South Auckland. Lastly we can see that in 2016 the current Transdev contract expires after having been extended a few times to avoid any possibility of a change in operator in the middle of the EMU roll out (we don’t want a labtests/Medlab situation happening and holding up the delivery of trains). I believe that the contract will be put out to tender so it will be interesting to see what comes out of that.

Timeline - Rail


On the bus side most of the timeline is similar to what we have seen previously in the likes of the Southern Network consultation documents. The next year and a half seems like it will be a particularly busy time in which most of the consultation, procurement will occur  and where the first areas will go live.

Timeline - Bus


There seems to be quite a bit less going on with ferries however I think the key thing will be the first light blue arrow below the timeline where there are meant to be on-going service improvements to existing routes. You can also note that there is no integrated fares note on the ferry timeline once again confirming that ferries will exist outside of the integrated fare structure.

Timeline - Ferry

Across the bottom of all of the images above there are a couple of very specific points. One relates to marketing PT and shows how AT are really going to be a bit limited to only targeting towards specific services or areas for some time however once the entire new bus network has been rolled out it will enable them to market the entire network as a single entity. The network concept is probably something that many Aucklanders haven’t thought about it in the past.. The other piece common across all modes is the Customer Experience Programme which is the one area we haven’t really heard much about. Below is an explanation from the report as to what is involved. It will certainly be interesting to see what a fresh pair of eyes and thoughts might come up with and we will be following it closely.

This is one of the seven strategic projects in the three-year programme. This is a five month project that began in July 2013. The aim of the project is to develop a set of design blueprints and standards for an enhanced experience that customers will receive on future bus, rail and ferry services and through multi-modal support services. One of the first implementation of a customer experience blueprint is targeted for the service revenue launch of the EMUs on the Onehunga Line in April 2014.

Thoughtful Design consultancy has been appointed to facilitate the work having recently completed similar blueprint and experience design remits for Auckland Council and Air New Zealand.

The first four weeks of the project has been an information gathering exercise across current and new public transport services and public transport traveller profiles have been developed, that visually articulate current travel journey scenarios across public transport modes identifying pleasure-points, pain-points and needs. The phase one report is being finalized.

For the next six weeks to mid-September, from the public transport traveller profiles created, a set of guiding service design blueprints will be developed – the basis for building public transport customer-oriented experiences and products across services, facilities, support services and staff-customer interactions.

The rest of the paper looks at how these projects then get modelled to estimate what patronage might be. I will look at that part of the paper in a separate post.

What is PTOM?

The term PTOM has started to be bandied about quite a bit as one of the major changes associated with PT that is happening over the next few years. However many people might not know what it s or why it is important, so with this post I wanted to look a little closer at it. In short it is a new way of planning and contracting out public transport services. The history of how we have got to this point can be a bit long so here is the short version.

In the early 90’s changes in regulation saw most of the public bus companies privatised. The network was split up into commercial and contracted services and a lot of the responsibility for planning was turned over to the various bus companies. Commercial services existed where the bus companies could provide a run commercially however where the local authorities wanted to run services that were not under a commercial agreement, they had to provide subsidies to do so. That might sound logical but it quickly became a problem as explained by this cabinet paper on PTOM from October 2011.

At the moment, public transport services are delivered through a mixture of commercial and contracted services. It is up to operators to identify what services they wish to provide on a commercial basis (ie without public subsidy). A commercial service can be a single timetabled service running from one point to another (for example the 10.48 am from Smithville to the city). Regional councils then determine what other services are necessary to the urban public transport network. These services are then ‘contracted around’ the commercial services to fill service gaps.

The practice of registering single timetabled services as commercial has hampered regional councils’ ability to provide an integrated public transport network and achieve network efficiencies, as these services are not under contract with the regional council and do not have to conform to service standards or fare standards. The presence of commercial registrations has also arguably contributed to poor tender outcomes (on average just over one bid per tender in Auckland and Wellington) and higher prices than in regions where competition is more robust. This has led to increased tensions between regional councils and operators.

Bus operators being able to cherry pick the best routes and times for commercial services while leave the rest to be subsidised was a recipe for disaster. It resulted in far more subsidies being paid than would have been needed otherwise and there have even be suggestions that some companies deliberately gamed the system for their own financial benefit. The 2008 PTMA legalisation sought to change this by giving the regional councils more control. However many of the operators complained about it and as a result the government reviewed the legislation before it came into effect. The result is PTOM which stands for the Public Transport Operating Model and it was developed between central and local government officials as well as representatives from various PT operators. But what does PTOM do.

Well firstly it recognises that to get the best out of our PT networks, they need to be planned centrally, in the case of Auckland that role falls to Auckland Transport. Perhaps the key part of it though is what are termed ‘units’ which can be one or more routes that are operated under a single contract. An operator can still choose to run services commercially but crucially they can only do so across an entire unit which is required to include a full timetable of all services that AT want to run. This prevents operators from cherry picking only the very best services while leaving the rest to be subsidised.

The PTOM contracts can be issued either by a tender process or directly negotiated with the operator and a mix of the two methods will be used in Auckland. Interestingly the length of the contract will vary depending on how the contract is issued with those issued via the tender process lasting for 9 years while directly negotiated contracts only for 6 years. Units registered as fully commercial will also have a contract length of 9 years. One aspect that will be interesting to see is that the contracts are likely to include revenue sharing between AT and the operator. The intention is to design the contracts so in such a way as to encourage and reward better performance of from the operators.

Monitoring of performance is a key aspect being introduced as part of PTOM. The regional council (AT) will monitor patronage growth, subsidy levels, customer satisfaction and a range of other criteria for each PTOM unit. From there a performance score will be determined and all units will be ranked in an annual league table that will make it easy to see which units are performing the best. Over time the league tables will serve another function in helping to determine which units can be renegotiated directly or which units need to be put out to tender. It is not clear whether the league tables will released publicly but if they aren’t, we will be doing our best to get hold of them.

There are a couple of areas that might cause some concern however. The first is in an area known as exempt services. These are services not considered as part of the core PT network and as such don’t come under the various PTOM requirements such as having their fares regulated. In Auckland this includes the Airbus and many of the ferry services. The second is that as we transition to PTOM there will be some units that will be subject to a special transition contract term of 12 years to compensate operators for giving up their existing commercial routes. Not all units will have this but it serves as a reminder that this transition will take some time to fully complete.

Here is a summary of the various aspects of PTOM

PTOM Summary

And here is a high level look at all of the proposed PTOM units in Auckland, a full list of each route and what unit it belongs to is included in the RPTP. The plan is to roll out the new PTOM contracts as the new network is rolled out.

PTOM Units

Lastly here are the registered exempt services.

  • Waiheke ferry
  • Devonport ferry
  • Stanley Bay ferry
  • Great Barrier Island ferry
  • Kawau Island ferry
  • Airbus Express

All up PTOM represents quite a big change in how we plan and manage our PT network. I know some people would like to see all services under a gross contract or even operated internally but given where we have come from, I think that this is a fairly decent compromise. Perhaps the most positive aspect is it should help to give us much better confidence that we are getting value for money out of our PT services.

What Next

By almost any measure, Aucklands public transport system leaves a lot to be desired. Among other things it is often seen as slow, expensive, difficult to use and pretty unreliable but thankfully things are starting to improve and that is already starting to show through in our patronage stats. Over about the last 10 years we have finally started to reinvest back into PT and while the results have been ok so far, I feel that it is the changes over the next 3 to 4 years that will have a far greater impact on the PT landscape than what has happened so far. The reason for this is that we will be finishing of a number of projects that address some of the fundamental issues with our system. Each project on its own is really good but it is the fact that they will all be happening at about the same time that will make the change so dramatic. These fundamental projects are:


This will change our rail network perhaps more than anything else that has happened so far. For the first time probably ever, we will have brand new, purpose built trains that will of course be electric and that will be running on a substantially upgraded network. The trains will faster, quieter, more reliable and have significantly more capacity. I suspect that they will be so popular that part of the problem will making it easy to get to them and that leads to …..

Redesigned bus network

The entire PT network is being rethought at the moment with the intention of getting better use out the same resources we have now. Perhaps the most visible part of this will be a redesigned bus network that will see a decent number of high frequency routes that run at frequencies of at least every 15 minutes for most of the day on every day of the week. These routes will be supported by other routes to form a network across the urban area and will among other things, be much better at feeding passengers to the rail network. Overall transfers are meant to be much more common and so we need to make them as easy as possible, one of the key ways to do that is …..

Integrated Ticketing and Fares

The ticketing systems on public transport in Auckland seem to have been around since the stone age, on trains we still have up to four staff members walking through the train collecting cash and clipping tickets while the buses have not been much better. We should hopefully be able to get this Snapper debacle sorted out within this time frame and and with the new PT network we should also a new fare structure that makes transfers easy. Of course this will significantly change things for operators, especially how they get paid their money which leads to …..


The Public Transport Operating Model is a new way of contracting out services, in short Auckland Transport will contract one or more routes that are grouped together into a unit that have a fully developed unit. Operators can register a unit as a commercial service where they take any profits only if they run every single service set out in the timetable and they will not receive a subsidy for it. If they don’t want to run it as commercial they will enter into a contract with AT that will include certain performance criteria but also a revenue sharing agreement to act among other things as an incentive to provide good service and increase patronage. What this should do is bring much more control to the current mess which has saw subsidies increase faster than patronage over the last decade with it only coming back a little bit in recent years. PTOM contracts will be rolled out in conjunction with the new bus network and should lead to us getting better efficiency which means less subsidies have to be spent to get a better level of service.

As I said, these projects are really fixing some of the fundamental issues that we have within out PT network right now and combined should lead to some pretty spectacular growth in PT usage. One question I have is, what are the next group of things that we need to be thinking about to take our PT system to the next level? There are obviously some big projects in this list which includes things like the CRL but there are probably a huge number of smaller things like rolling out more bus lanes, improvements to walking/cycling access in general but also combined with better access to busway/train stations and bus stops. So what do you think are the next batch of projects we should focus on from a PT perspective?

Either way the next three years are going to be huge for us in Auckland with so many improvements and changes about to take place, I just wish I had my time machine to see it now.

PTOM – a step in the right or wrong direction?

Last Friday saw what seemed like a belated announcement – that the Public Transport Operating Model (PTOM) had acquired all its necessary approvals and will be implemented in the relatively near future. PTOM is the system under which bus and ferry services will be contracted by regional councils (or Auckland Transport). The announcement was welcomed by Auckland Transport and NZTA, although questioned by the Green Party as missing the big transport questions faced at the moment: booming public transport use and stagnating traffic volumes (while funding priorities are the complete opposite to these trends).

The contracting of bus and ferry services has been an ongoing argument in New Zealand for pretty much the last 20 years. The current/previous system effectively prohibited the logical planning of public transport networks, by splitting individual services into either commercial (run without a subsidy and over which the transport agency had almost no control) or contracted (operated with a subsidy and therefore much more control). The cabinet paper on PTOM describes the problem with this system:

At the moment, public transport services are delivered through a mixture of commercial and contracted services. It is up to operators to identify what services they wish to provide on a commercial basis (ie without public subsidy). A commercial service can be a single timetabled service running from one point to another (for example the 10.48 am from Smithville to the city). Regional councils then determine what other services are necessary to the urban public transport network. These services are then ‘contracted around’ the commercial services to fill service gaps.

The practice of registering single timetabled services as commercial has hampered regional councils’ ability to provide an integrated public transport network and achieve network efficiencies, as these services are not under contract with the regional council and do not have to conform to service standards or fare standards. The presence of commercial registrations has also arguably contributed to poor tender outcomes (on average just over one bid per tender in Auckland and Wellington) and higher prices than in regions where competition is more robust. This has led to increased tensions between regional councils and operators.

The 2008 Public Transport Management Act (PTMA) sought to resolve this problem, but the operators moaned and the new government reviewed the legislation before it could even be given effect to. The result of the review is PTOM – which is described in quite a bit of detail in this earlier blog post.

From reading through the most recent cabinet paper on PTOM many of the most important gains from the PTMA seem like they’ve been retained, although there are a few little nasty parts of PTOM which may hold back our ability to truly achieve the kind of improvement to our public transport system that is so desperately needed. Before I get into those details, let’s start with outlining what we really need from the contracting system:

  • The ability to plan an integrated network (therefore, the ability of the public transport agency to define the routes and timetables of every single service)
  • The ability to implement integrated ticketing and integrated fares (therefore, the ability to ensure operators accept the integrated ticket and fare system)
  • The ability to share risks and rewards from higher or lower patronage between the public transport agency and the private operator. This provides an incentive for both parties to grow patronage while also ensuring an ability for ‘cross-subsidy’ from the more commercial to the less commercial routes and means no more ‘cherry picking’ of the most commercial routes by operators.
  • The ability to measure performance standards and include matters like punctuality (measured properly, not this rubbish) in contracts.

So what’s the good news about PTOM in achieving these goals? Well a few paragraphs from the executive summary of the PTOM cabinet paper answer a few of the questions above:

The introduction of PTOM represents a fundamental shift in the delivery of urban bus and ferry services. Under PTOM public transport services, that form part of the region’s urban public transport network, will be grouped together into units and provided under contract with the regional council to enable stronger network co-ordination and a basis for joint investment. This replaces the existing practice ofoperators being able to register single timetabled services on a route as commercial, and regional councils having to ‘contract around’ these services with subsidised services — a practice that led to poor tender outcomes and network development.

 Units will be operated on an exclusive basis for the duration of their contract, and where appropriate procured through a mixture of competitive tendering and direct negotiation based on unit performance. Sufficient units will have to be put out to tender to ensure confidence in costs. Operators will still be able to set up new public transport services outside of the existing urban public transport network. These services will be exempt from contract and will not have exclusive operating rights (ie other operators will be able to set up competing services).

Both legislative and administrative changes will be required to implement PTOM. PTOM encompasses a range of planning, funding and procuring tools that have been developed with the needs of the three largest public transport markets (Auckland, Wellington and Christchurch) in mind. Many of these tools may be utilised by smaller markets, but not all will be mandated through legislation. I recommend that amendments to legislation be kept simple and limited essentially to the introduction of the unit concept and the requirement for all public transport services to be under contract with the regional council unless exempt.

Properly implemented, PTOM will introduce competition to the system by incentivising operators to compete for exclusive operating rights and directly negotiated contracts. Contractual arrangements allow regional councils to prevent exploitation of these provisions through regulating fare setting and use of cost benchmarking.

The rest of the cabinet paper further answers the questions I set earlier in the post. By combining all services along a particular route (or group of routes) into a single unit, it’s possible to plan a logical network (at least within units), the ‘cherry picking’ issue is resolved, units will be operated on a risk/reward sharing basis – giving all parties an incentive to generate more patronage. All units (except exempt services, which I will get onto soon) will be contracted – meaning that even commercial units will need to provide for the timetable and route structure decided upon by the public transport agency. All units (once again, except for exempt services) will need to accept integrated ticketing and be included in integrated fares networks – should the PT agency want them to be.

So that’s the good news, and largely ticks all the boxes above. Units will be incentivised to become more commercial, by having  fares cover an increasing proportion of their operating costs, because the more commercial a unit is, the more likely it will be contracted through direct negotiation rather than by open tender. Operators dislike open tenders because it introduces significant risk of losing the tender for that area.

Theoretically, the system sets up a framework to get better value for money from our spend on public transport services. Now I have little doubt the government has done this because they want to reduce spending on public transport, so it’s possible to throw even more money at their pointless and stupid Roads of National (Party) Significance – but improving cost-effectiveness of PT services by enabling better network planning has significant benefits regardless of this. With patronage increasing so fast in Auckland, a most cost-effective contracting system means that for any additional funding (and PT funding will not decrease in Auckland while patronage is growing so quickly) we should be able to get more extra service for the same amount of money. All we need is a different government in 2014 (something that’s looking increasingly likely) to boost funding for public transport and we have the ability to create a vastly better system.

That’s the good news, so what are the catches? Well as PTOM is meant to be a giant compromise between all parties, there are a couple catches to be aware of.

  • Exempt services. A number of PT services will be exempt from PTOM and while some of these are rational (like inter-city services) others make less sense, except as part of a fairly messy compromise. Bus routes that are currently fully commercial at all times will be exempt (this includes the Airbus in Auckland), while perhaps more significantly ferry services that are fully commercial will similarly be fully exempt. This includes the Waiheke Ferry – which means that there will continue to be little, if any, control over how that ferry operates in terms of its fares. It may also include the Devonport Ferry, if that runs on a fully commercial basis at the moment.
  • An aspect of the transitional arrangements which seems to allow for a proportion of units to be rolled over to the existing operator for an incredibly long 12 year contract without open tendering. This is seen as a concession to reflect the existing investment in commercial services – but sounds pretty bizarre. I just hope the roll-over of these contracts allows for full network planning to occur and also allows for some assurance that a competitive price is achieved.

Overall, it seems like PTOM is a step in the right direction – although that will largely be dependent upon whether we really do achieve the efficiencies the system is designed to achieve, how the units are structured in terms of their interaction with one another, whether the ‘catches’ listed above turn out to be particularly problematic and whether any of the efficiencies gained are spent on further improving the system to reflect rapidly increasing patronage, or whether they are siphoned off to be flushed down the toilet on another pointless RoNS project. So to an extent, we will have to wait and see.

Improving Auckland’s PT: what we need to do

At last month’s meeting of the Auckland Council Transport Committee there was a very interesting “benchmark study” that compared a wide variety of measures of public transport in Auckland with a number of cities around the world. Inevitably, Auckland performed worst in most of the measures – even when compared against other cities like Perth, Brisbane and Calgary that have much lower population densities, traditionally seen as a fundamental reason for Auckland’s poor performance. In terms of per capita usage, we are right at the bottom:

I noted in my blog post on the study at the time a few key observations:

  • Despite an improvement to Auckland’s PT system over the past decade, we’re still doing very poorly compared to comparative cities in Australia, Canada and the USA. Furthermore, most of those cities have been increasing their patronage at even faster rates to Auckland.
  • Compared to other cities, Auckland’s PT service quality is considered to be extremely low, while quantity of service provided is also fairly low (although somewhat understandably given our low use). Improving service quality (better reliability, faster speeds, value for money etc.) is likely to be the most effective way of increasing use.
  • Compared to the other cities, Auckland’s fares are incredibly high – particularly as we don’t have integrated ticketing. Making fares for unlimited daily, weekly or monthly travel quite a bit cheaper is likely to be quite effective at boosting patronage and making PT seen as better value for money. Peak/off-peak pricing splits are also likely to be a good idea.
  • Compared to Wellington in particular, we are paying too much for the provision of services on a per kilometre basis. Compared to all cities we’re paying too much on a per passenger basis. This suggests that we’re running too many empty/underloaded buses or trains around, particularly during peak times when it’s most expensive to get a vehicle on the road. I also wonder whether this makes a good case for a publicly owned bus company to do what Kiwibank has done to the banking industry and keep prices a bit sharper.
  • Our farebox recovery levels are actually quite high compared to many overseas cities, suggesting that efforts to improve cost-effectiveness should come from boosting patronage through service quality improvements, rather than by hiking fares. 

The Transport Committee was obviously rather concerned by these results, particularly given the significant increase in funding provided to public transport over the past decade. The Committee made a number of resolutions, and following up those resolutions we see in the agenda to next week’s Committee meeting a letter written by Mike Lee to Auckland Transport Chair Mark Ford, which also usefully includes the entire benchmarking study, whereas previously only a portion of it was included. The study (and the letter preceding it) are spread across three documents (one, two and three).

The report is lengthy, and complex, and makes a large number of recommendations for Auckland to pick up on so we can ‘lift our game’ in comparison to these other cities.The recommendations and current constraints in relation to PT service provision are outlined below: There’s really nothing I can argue about what’s outlined above, and it’s certainly good that Auckland Transport are well aware of all these issues. There are some really useful proposals here:

  • Focus on higher frequencies and fewer routes
  • Bus services to be designed around corridors rather than historic operators’ “patches”
  • A big focus on improving speed, particularly through better bus priority measures (as the RTN will always be spatially limited)
  • Enhanced monitoring of reliability – hopefully a shift away from the “99.9 % self reported” bollocks that we see in each monthly patronage report
  • Making it easier (physically and through ticketing) to transfer between services
  • Being careful about fare increases, but exploring potential splits between peak and off-peak pricing
  • Focus on branding “superior” routes, particularly those of the RTN and QTN

As these are generally the same issues I’ve been banging on about over the past couple of years on this blog, it’s good that either the message is finally getting through, or I’ve been thinking along similar lines to Auckland Transport and their consultants the whole time. With integrated ticketing and the new PTOM contracting model rolling out over the next couple of years (which will enable and by necessity require a fundamental relook at the city’s bus routes). As always the key will be the issue of whether these good ideas actually happen. We’ve had a lot of good plans for improving the management of Auckland’s PT system for a long time, the issue has been with implementation.

Usefully, the recommendations don’t just stop with the narrow issue of PT service provision, but also go on to discuss broader transport policy decisions and how they may impact upon our public transport results. Perhaps the most obvious point is that if we continue to build masses of new motorways (particularly along corridors that compete with public transport) we’re probably not going to achieve much of a modeshift (leading to the good old Downs-Thomson paradox): I like the proposal under 2.2 to conduct an integrated pricing study to look at all the costs and benefits of public transport in Auckland. My recent calculations suggested a pretty massive amount of congestion relief benefits coming from Auckland’s public transport system – but it would be good to see some more detailed numbers about this, and also in relation to what the “benefit maximising” fare level might be – potentially a fair bit lower than what we currently have I tend to think. Further analysis of parking policies and priority measures are also obviously things that I’ve been pushing for over quite a sustained period of time.

Another critical matter is land-use integration. While I think the transport-density debate is much more complex than the simple “Auckland’s density is too low for public transport” myth which has infected our transport thinking for decades, there clearly are strong connections between land-use decisions we make and our transport outcomes. But perhaps even more importantly, I think there are very strong links between the transport decisions we make and the land-use outcomes we get, a relationship that is either not well understood or is generally just wilfully ignored. Some useful ideas are outlined in the report in relation to this matter as well: In terms of overall density, I would be interested in seeing a comparison of Auckland to the other 13 comparator cities (maybe such a figure is hidden away somewhere in the report) as I suspect we’d actually have one of the higher overall densities. But as I explained in this previous post, the bigger problem with Auckland is the “flatness” of our density and the fact that many of our newer high density environments are just as auto-dependent and single-use as your typical low density sprawl. It’s also good to see recommendations about “integrating land use and transport planning better”, although I’ve been seeing similar things for years now and I’m yet to really see it mean much more in practice than “build heaps of roads before people start building houses”.

The fourth area of analysis is how to improve the cost-efficiency of the system. Once again this is something that I’ve talked about many times before, with key things being removing duplicative services, running fewer long-haul bus services and  Auckland Transport taking more power back from the operators to reduce the “cherry picking” of commercial services, allowing some level of cross-subsidy from better performing to not-so-busy routes. These issues aren’t picked up on specifically, although we still see some useful recommendations here: Given that ratepayers and taxpayers (through petrol taxes) subsidise PT to the tune of around $150 million a year, one would hope that the results of the further research and analysis recommended above will be undertaken and made public, so we can be reassured we’re getting the best bang for our buck – something I’m not convinced about at the moment.

Finally, some general points are made about the planning and regulatory environment. Much of this seems likely to be resolved through the implementation of the PTOM system – although that still seems to be a messy compromise. Often I do wonder how much simpler life would be if we ran our PT system in the way that most North American systems are operated, with the local government owning and operating the vast majority of all services. Not that a privatised system can’t work – London’s bus system is operated by private companies – but all route planning really does need to be centralised to create a proper PT system. I’m not quite sure how that ‘balance of power’ has been resolved in the rollout of PTOM, we’ll probably just have to wait and see.

The recommendations are pretty comprehensive and align very strongly with the points I have made over and over again during the past couple of years. Most of them won’t really require much extra money, and in fact could save a lot of money in the longer run if implemented well. But in the end it will come down to implementation and whether Auckland Transport most particularly are up to the task.

Getting more from our PT subsidies

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.

Finally we learn something about “PTOM”

There has been a long-running debate raging over the future of the “Public Transport Management Act” since it was passed in 2008. Infratil, who run NZ Bus (who are the largest bus operators in Auckland), were very displeased with this legislation and took their concerns to the new Minister of Transport after the 2008 election, Steven Joyce. They received a fairly welcome response from the Minister, who agreed to put the PTMA up for review – in particular the bits of it relating to greater restrictions on the operation of commercial services. I’ve discussed previously why it’s very important for there to be strategic co-ordination of all public transport services, including commercial ones – otherwise you end up in the inefficient situation of private operators “cherry picking” the best routes and leaving the rest to be subsidised (whereas in the alternative situation you could have the more profitable routes cross-subsidising the less profitable routes).

Furthermore, if we look at what happened to public transport expenditure and patronage in Auckland over the last decade (which has all been under the “pre-PTMA system”), it’s pretty obvious we haven’t been getting good value for money. Subsidies have tripled while per capita patronage has remained steady (it’s only increased in the last year or two): My understanding is that there has been quite a “ding-dong” battle between various players in the public transport sector over the last year or two: trying to sort out finding a solution that can keep the government’s ideology of not restricting private enterprise with the reality that the current system (more specifically, the system prior to the PTMA) is extremely inefficient.

After much waiting and speculation, the Ministry of Transport has finally released some information on the preferred system to govern the operation of public transport services in the future – known as the Public Transport Operating Model (PTOM). There’s also a full Cabinet Paper that outlines the background to the issue and the proposed way forward for resolving the matter. The background is consistent with what’s outlined in the table above – that significant increases in public subsidies over the past 10 years haven’t led to the boost in patronage that one would have hoped: I find it somewhat frustrating as a public transport advocate that Joyce is effectively “crowing” to his cabinet colleagues about “capping” the amount of money spent on public transport services, but we’ll set that aside for now. His bigger point is valid, that we (as taxpayers and ratepayers) not getting good value for money out of what we spend on public transport. Where we differ is where it comes to assigning the ‘blame’ for this situation – I would say it’s the contracting model that existed before the PTMA and the inability to ‘strategically co-ordinate’ our public transport services. Joyce would probably blame the regional councils.

So what of the solution – this new PTOM system? What might it look like? How’s it going to work? Well certainly it’s all good if we base this on a ‘partnership approach’ between the bus and ferry operators and the councils. Things have been pretty ugly in recent years – for example the whole Snapper Card debacle. But in the end all this talk of ‘partnerships’ and ‘collaboration’ tend to be just fancy words in a robust and competitive business environment. What’s I’m really interested in are questions like the following:

  • Who designs the bus network and decides on the frequencies to operate the routes at?
  • Will a company be able to operate some of a route as a commercial service but be subsidised for the rest of the day (ie. do you end up with the 9.05am bus being  commercial but the 9.15am bus being subsidised)? This is the good old ‘cherry-picking’ issue.
  • What happens if the council and the bus operators disagree on something?
  • Will there be certainty that all operators need to accept an integrated ticket?
  • Will one agency have the ability to ‘strategically co-ordinate’ services to make sure we don’t have unnecessary duplication of bus services, or unnecessary duplication of bus and train services?

The next few paragraphs seem to go some way towards answering these questions: There are some really important “wins” here compared to the “old system” (by that I mean the pre-PTMA system that still operates around most of Auckland). The requirement to roll public transport networks into “units” I think is a good thing. This will make it impossible to ‘cherry-pick’ particular peak hour services to operate commercially, leaving the council to pick up the tab for the quiet services (the good old ‘privatise the profits, socialise the losses problem). If a company wants to operate the Dominion Road services – which I assume would constitute a ‘unit’ – commercially then they will have to operate all the services on that basis, including the 11pm on a Sunday night service. As far as I know, only the Airport bus operates exclusively as a commercial service for every single one of its trips – so I am not sure whether I see too many commercial services happening.

The whole Cabinet Paper is well worth a read actually. I must say overall I didn’t have high-hopes for PTOM but I find myself pleasantly surprised. In an ideal world I think all services should be gross-contracted (the council pays the operator a fixed cost to operate the service and then the council gets the fare revenue), but short of that outcome I think PTOM is a reasonable compromise. It is a lot better than the pre-PTMA system that still dominates how PT is operated around New Zealand, while retaining an ability for commercial operators to operate a service without subsidy if they should want to do so.