Draft Alpine Resorts (Management) (Amendment) Regulations 2004

DRAFT ALPINE RESORTS (MANAGEMENT) (AMENDMENT) REGULATIONS 2004

Regulatory Impact Statement

This Regulatory Impact Statement (RIS) has been prepared to fulfil the requirements of the Subordinate Legislation Act 1994 and to facilitate public consultation on the proposed Regulations. Copies of the draft Regulations are provided as an attachment to this RIS.

Public comments and submissions are invited on the proposed Regulations, in response to information provided in this RIS. All submissions will be treated as public documents. Written comments and submissions should be forwarded no later than Friday 24 December 2004 to:

Alpine Resorts (Management) (Amendment) Regulations 2004 Coasts, Alps and Recreation DSE PO Box 500 East Melbourne 3002 or email [email protected] ii

This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1986.

ISBN 1 74106 199 7

General Disclaimer This publication may be of assistance to you, but the State of Victoria and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication.

This Regulatory Impact Statement was prepared by Tim Harding & Associates with assistance from Mardaker Pty Ltd. iii

Summary

The proposed Regulations are intended to amend the existing Regulations, the Alpine Resorts (Management) Regulations 1998 for four specific purposes-

1. To provide Alpine Resort Management Boards (‘Boards’) with the choice of charging ‘access and use fees’ by vehicle or by person up to maximum limits specified in the Regulations;

2. To revise the maximum limits for ‘access and use fees’ to enable the recovery of the costs of providing services to visitors to the resorts;

3. To provide certain Boards with the choice of not requiring day visitors to carry wheel chains on particular days under specified circumstances; and

4. To make minor miscellaneous amendments.

Victoria’s alpine resorts are unique public assets facilitating access to a scarce resource – the Australian alpine environment. The resorts offer visitors the rare experience of being able to stay on mountains above the snow line with ski in/ski out access to the ski fields. They are limited to relatively small areas of Crown land located in environmentally sensitive areas, generally surrounded by National Parks where conservation and environmental protection are of paramount importance. This public ownership of alpine resorts also requires that public access to them should remain reasonably affordable.

As many as 900,000 people visit Victoria’s six alpine resorts during the snow season each year, making them one of the most intensively used areas of public land in the State. The level of winter visitation correlates strongly with the quality of snow cover at each resort.

Alpine Resort Management Boards (‘Boards’) are established under the Alpine Resorts (Management) Act 1997 (‘the Act’). Boards have been appointed for the alpine resorts of Mount Buller, Falls Creek, Mount Hotham, Mount Baw Baw, Lake Mountain and Mount Stirling. Co-ordination of these Boards is effected through the Alpine Resorts Co-ordinating Council.

It is now over six years since the Alpine Resorts (Management) Regulations 1998 came into operation. In the light of this operational experience, the Department of Sustainability and Environment and the Boards have identified some problems that indicate a need to amend these Regulations. iv

Maximum ‘access and use fees’

Amongst other functions, these Boards provide a range of urban services, including garbage disposal, water supply, gas, drainage, sewerage, electricity, fire protection roads, parking facilities and contributions to snowmaking. The levels of service provided are mainly a function of the number of persons visiting each resort and the length of their visit, rather than the number of vehicles in each resort.

The current Regulations require the payment of entry fees for winter visitors arriving by car to be charged on a per vehicle basis, regardless of the number of people per vehicle. On the other hand, visitors arriving by bus are currently charged per person. Having the choice of charging entry fees by vehicle or by person could enable Boards to better comply with the user-pays principle.

Boards are also required to be financially self-sufficient. One of the main challenges of the Alpine Resorts 2020 Strategy is to provide an equitable financial structure that does not disadvantage other resorts and does not rely on significant financial support from the Government.

According to Department of Treasury and Finance guidelines for setting fees–

All user-pay type fees and charges, should be set to recover the full cost of the product or service provided from users, unless there are explicit policy or public good reasons for not doing so.

If the full costs of services provided to users of alpine resorts are to be recovered, then the maximum fees specified in the existing Regulations are insufficient for this purpose.

On legal advice, it is proposed to change the existing daily ‘entry fee’ to a daily ‘access and use’ fee, but this has no bearing on the level of the fees charged.

Carriage of wheel chains

The existing Regulations require that wheel chains must be carried by all vehicles entering the resorts during the snow season, regardless of the road condition and the likelihood of snowfalls requiring their use.

Although the safety of those driving to the resorts in the winter must remain the paramount consideration, there is often a great difference in road conditions between the high altitude resorts and the low altitude resorts. At the lower altitude resorts, day visitors would have greater ease of access at significantly lower cost if the requirement to carry chains was waived on days when they are not needed, particularly towards the end of the season. v

Preliminary consultation

Prior to drafting the proposed Regulations and this RIS, preliminary consultation was undertaken with representatives of key stakeholder groups. Written notice of the nature of the proposed amendments was circulated to various stakeholder organisations. However, the levels of the proposed new maximum fees were not discussed in this preliminary consultation process.

All comments and submissions received (see part 1.4) have been taken into account in preparing the proposed Regulations and this RIS.

Nature and effects of proposed regulations

The nature and effects of proposed Regulations are set out in Parts 2.0 and 4.0 of the RIS.

The proposed Regulations would enable prescribed Boards to waive the requirement for motor vehicles to carry wheel chains on specified days. Such decisions would be subject to the latest weather forecasts and public safety considerations, and for that reason must be made no earlier than the day prior to the day in which the waiver is to apply. Adequate signs or notices of such decisions must be displayed.

The Regulations propose that Boards be permitted to charge access and use fees on either a per person or a per vehicle basis, subject to specified conditions. The Regulations also propose an increase in the maximum fee based upon full recovery of the highest cost per visitor day during an average season at any of the resorts other than Mt. Stirling i.e. Mt Baw Baw at $13.25 (see Appendix 2). It must be emphasised that these regulated fees are maximums, and not necessarily the actual fees, which are competitively determined by each Board below the regulated maximum. It is possible that some Boards may increase their actual fees very little or not at all. A comparison of the existing and proposed maximum fees is given in Table 3.

Alternatives to Regulations

Part 3.0 of the RIS identifies practicable alternatives to the proposed Regulations, including maintaining the status quo i.e. the existing maximum fees and requiring the carriage of wheel chains at all times during the snow season.

Charging no fees is not a practicable alternative because it would not meet the Government’s recently published strategy of requiring Boards to be financially self- sufficient. The development of a voluntary code of practice regarding the carrying of wheel chains is not a practicable alternative on safety grounds.

For reasons outlined in Part 3.0 of this RIS, a regulatory approach is considered to be the most appropriate form of intervention to achieve the identified policy objective. vi

Assessment of Costs and Benefits

Part 4.0 of the RIS assesses the relative costs and benefits of the proposed Regulations for the Victorian community, and compares and contrasts the costs and benefits with the practicable alternatives.

The assessment in Tables 4 and 5 indicates that the benefit-to-cost ratio for the access and use fees and carriage of wheel chains is expected to be greater for the proposed Regulations compared with the practicable alternatives i.e. the existing Regulations.

The proposed maximum fee structure allows for the recovery from all visitors of the full cost of efficiently produced visitor services and for greater flexibility in the basis of entry fee collection. This ensures that there is incentive to invest in the provision of infrastructure, which will provide for improved visitor services in the future.

While the existing Regulations regarding the carrying of wheel chains meet the harm minimisation objective, this is achieved at a higher cost than would occur with the proposed Regulations. The cost of compliance to achieve the safety objective is set too high.

The cost benefit assessment in Part 4.0 of the RIS concludes that the proposed Regulations are the best alternative for achieving the identified policy objective, in which the costs of the proposed Regulations are outweighed by their likely benefits.

National Competition Policy tests

The proposed Regulations relating to maximum access and use fees pass the NCP tests because they impose no restrictions upon competition as all visitors and businesses will experience the same regulatory environment. The proposed Regulations also contribute to the competitive neutrality principle (that is, the need for fair competition with other private sector businesses in the same market).

On the other hand the proposed change in relation to carriage of wheel chains does represent a restriction on competition, by potentially making the resorts other than Falls Creek and Mt Hotham marginally cheaper to visit on certain days throughout the winter season.

The benefits of this restriction relate to public safety at Falls Creek or Mt Hotham. These resorts are higher in altitude than the others, increasing the risk of snow and ice on the roads. The cost to life and property of a vehicle without wheel chains slipping off an icy road or colliding with other vehicles could be very high.

For these reasons, the benefits of the restriction of competition relating to wheel chains clearly outweigh the costs. vii

Table of Contents

SUMMARY...... III

TABLE OF CONTENTS...... VII

PRELIMINARY...... VIII

1.0 BACKGROUND ...... 1

1.1 SETTING THE SCENE ...... 1 1.1.1 The alpine resorts ...... 1 1.1.2 The visitors ...... 2 1.1.3 Resort management ...... 3 1.1.4 The Principal Regulations ...... 5 1.2 THE NATURE AND EXTENT OF THE PROBLEM ...... 5 1.2.1 Maximum access and use fees ...... 6 1.2.2 Carrying of wheel chains...... 8 1.2.3 Problem definition ...... 8 1.3 POLICY OBJECTIVES OF REGULATORY PROPOSAL ...... 9 1.4 CONSULTATION TO DATE ...... 9 1.5 AUTHORISING LEGISLATION...... 11 1.6 NEED FOR REGULATION...... 12 1.7 FEASIBILITY OF REGULATION ...... 12 2.0 NATURE AND EFFECTS OF PROPOSED REGULATIONS...... 13

3.0 ALTERNATIVES TO REGULATIONS ...... 16

3.1 MAXIMUM ACCESS AND USE FEES ...... 16 3.2 CARRIAGE OF WHEEL CHAINS...... 17 4.0 ASSESSMENT OF COSTS AND BENEFITS ...... 17

4.1 COSTS TO THE COMMUNITY...... 18 4.2 BENEFITS TO THE COMMUNITY...... 18 4.3 ASSESSMENT OF EACH OF THE OPTIONS...... 18 4.3.1 Access and use fees...... 18 4.3.2 Carriage of wheel chains...... 24 4.4 SUMMARY OF COST BENEFIT ANALYSIS...... 29 5.0 NATIONAL COMPETITION POLICY TESTS ...... 29

5.1 NATIONAL COMPETITION POLICY AND GUIDELINES ...... 29 5.2 NCP ASSESSMENT...... 30 5.2.1 Relevant markets...... 30 5.2.2 Competitive neutrality policy...... 31 5.2.3 Competition tests...... 32 REFERENCES ...... 34

APPENDICES ...... 34

APPENDIX 1 – GLOSSARY OF SELECTED ECONOMIC TERMS ...... 35 APPENDIX 2 – CALCULATION OF MAXIMUM ACCESS AND USE FEES ...... 36 APPENDIX 3 – DRAFT REGULATIONS ...... 40 viii

Preliminary

This Regulatory Impact Statement (RIS) has been prepared to fulfil the requirements of the Subordinate Legislation Act 1994 and to facilitate public comment on the proposed Regulations. The RIS contains information on–

• the nature and extent of the problems to be addressed by the proposed Regulations;

• the policy objectives of proposed solutions to the identified problems;

• public consultation to date;

• the case for Government intervention;

• the authorising legislation, objectives, nature and effects of the proposed Regulations;

• alternatives to the proposed Regulations;

• a cost-benefit analysis of the proposed Regulations and alternative policy options; and

• National Competition Policy tests.

The relationship between the above elements of the RIS is depicted in Figure 1.

Alpine Resorts (Management) (Amendment) Regulations 2004 Coasts, Alps and Recreation DSE PO Box 500 East Melbourne 3002 or email [email protected] ix

Figure 1 - RIS flow chart 1

1.0 Background

1.1 Setting the scene The proposed Regulations are intended to amend the existing Regulations, the Alpine Resorts (Management) Regulations 1998 for four specific purposes-

1. To provide Alpine Resort Management Boards (‘Boards’) with the choice of charging ‘access and use fees’ by vehicle or by person up to maximum limits specified in the Regulations;

2. To revise the maximum limits for ‘entry fees’ to enable the recovery of the costs of providing services to visitors to the resorts;

3. To provide certain Boards with the choice of not requiring day visitors to carry wheel chains on particular days under specified circumstances; and

4. To make minor miscellaneous amendments.

Under section 9(1)(a) of the Subordinate Legislation Act 1994, an RIS is required to be prepared unless-

the proposed statutory rule would not impose an appreciable economic or social burden on a sector of the public.

This RIS has been prepared to fulfil this requirement. The cost-benefit analysis in Part 4.0 of the RIS identifies the appreciable economic or social burdens to be imposed by the proposed Regulations.

To set the scene for this RIS and to put it in a geographical and policy context, this Part provides some general background information about the alpine resorts and their visitors.

1.1.1 The alpine resorts

Victoria’s alpine resorts are unique public assets facilitating access to a scarce resource – the Australian alpine environment. The resorts offer visitors the rare experience of being able to stay on mountains above the snow line with ski in/ski out access to the ski fields. They are limited to relatively small areas of Crown land located in environmentally sensitive areas, generally surrounded by National Parks where conservation and environmental protection are of paramount importance.1 This public ownership of alpine resorts also requires that public access to them should remain reasonably affordable.2

1 Department of Sustainability and Environment (2004) Alpine Resorts 2020 Strategy, Melbourne. 2 Department of Natural Resources and Environment (1998) Regulatory Impact Statement - Alpine Resorts (Management) Regulations 1998, Melbourne. 2

The larger resorts of Mount Buller, Mount Hotham and Falls Creek offer a wide range of alpine experiences including downhill skiing, snow play, quality accommodation and dining. Mount Hotham and Falls Creek also offer extensive cross country trails and easy access to the Bogong High Plains.

The smaller resorts are closer to Melbourne and provide easy and affordable access to the snow, especially for day visitors. Lake Mountain and Mount Stirling3 have no lift systems but attract cross country skiers and snow players. Mount Baw Baw offers downhill skiing, snow play and access to cross country skiing areas.4

These six alpine resorts provide a significant contribution to Victoria’s economy. In the most recent detailed economic study undertaken in 2000, the total estimated value added spending within the Victorian economy during both the winter and non-winter seasons of 2000/20015 was $100 million. During this period 3,738 jobs were supported as a result of the existence of these resorts.6 The resorts generate substantial commercial activity in sub-alpine regions throughout the year.7

1.1.2 The visitors

As many as 900,000 people visit Victoria’s six alpine resorts during the snow season each year, making them one of the most intensively used areas of public land in the State. Visitation to the resorts in the non winter seasons is more modest, but has doubled over the last decade.8

The level of winter visitation correlates strongly with the quality of snow cover at each resort. The range of the number of winter visitor days since 1985 is shown in Table 1.

3 The Mount Stirling resort is now managed by the Mount Buller and Mount Stirling Alpine Resort Management Board. 4 Department of Sustainability and Environment (2004) Alpine Resorts 2020 Strategy, Melbourne. 5 To April 2001. 6 KPMG Consulting (2000) Victorian Alpine Resorts – Economic Significance Study 2000, Alpine Resorts Co-ordinating Council, Melbourne. 7 Department of Sustainability and Environment (2004) Alpine Resorts 2020 Strategy, Melbourne. 8 Ibid. 3

Table 1 - Range of the number of winter visitor days (‘000) by resort 1985 - 2002 Resort Highest Typical Average Typical Lowest recorded9 good season11 poor recorded13 season10 season12 Mt. Hotham 348 (2000) 300 225 150 154 (1993) Mt. Buller 578 (2000) 550 435 320 136 (1993) Falls Creek 397 (1988) 365 320 275 265 (1993)

Mt. Baw Baw 71 (1989) 64 46 27.5 15 (1988) Lake Mountain 200 (1990) 157 124 90 35 (1993) Mt. Stirling 33 (1985) 10 7 4 3 (1993)

Between 70% and 80% of all winter visitation is to Mount Buller, Falls Creek and Mount Hotham (approximately half of this is to Mount Buller). Lake Mountain captures more than half of the remaining winter visitation.14

1.1.3 Resort management

Alpine Resort Management Boards (‘Boards’) are established under the Alpine Resorts (Management) Act 1997 (‘the Act’). Five Boards have been appointed, managing the alpine resorts of Mount Buller and Mount Stirling15, Falls Creek, Mount Hotham, Mount Baw Baw and Lake Mountain. Co-ordination of these Boards is effected through the Alpine Resorts Co-ordinating Council.

Under the Act, the functions of each Board include the following -

• to act as a Committee of Management of any Crown land deemed to be permanently reserved under the Crown Land (Reserves) Act 1978 in the resort;

• contribute, together with Tourism Victoria and the Council, to the overall promotion of alpine resorts;

• to develop a tourism and marketing strategy for and to promote the resort and to collect and expend voluntary contributions from commercial undertakings in the resort for this purpose;

9 Data from Alpine Resorts 2020 Strategy. 10 Data compiled from questionnaires completed by the resorts for this RIS. 11 Extrapolated from range of figures supplied in questionnaires. 12 Data from Alpine Resorts 2020 Strategy. 13 Data from questionnaires completed by the resorts. 14 Department of Sustainability and Environment (2004) Alpine Resorts 2020 Strategy, Melbourne 15 To maximise cost-efficiencies, a single Board to manage the Mt. Buller and Mt. Stirling resorts was created by the Alpine Resorts (Management) (Amendment) Act 2004. 4

• to provide a range of urban services;

• to charge contributions for the provision of those services;

• to provide transport services in the resort;

• to collect fees prescribed by the Regulations for the resort;

• to attract investment for the improvement of the resort in respect of which the Board is established; and

• to carry out any other function conferred on the Board under this or any other Act.

The urban services provided by Boards include garbage disposal, water supply, gas, drainage, sewerage, electricity, roads, fire protection and contributions to snowmaking. As Boards perform similar functions to local councils in alpine resorts they are eligible for some of the minor government grants normally given to local governments and other agencies (but not from the Federal Grants Commission). Boards are required to be financially self-sufficient. One of the main challenges of the Alpine Resorts 2020 Strategy is to provide an equitable financial structure that does not disadvantage other resorts and does not rely on significant financial support from the Government.16 The three primary sources of revenue available to the Boards are-

• service and utility charges;

• site rentals; and

• vehicle access and use fees.

Service and utility charges are usually set at full cost recovery and site rentals are charged at market rates. These charges are regularly reviewed, just as the vehicle access and use fees are now being reviewed.

Consistent with the Alpine Resorts 2020 Strategy, an Alpine Reform Package was approved by the Government and released in August 2004. This reform package introduced a series of measures designed to give the alpine resorts greater independent financial viability and efficiency. Measures contained in the Alpine Reform Package included:

• The abolition of the support payments system;

• A greater emphasis on year round visitation;

• Consistent financial reporting mechanisms;

16 Ibid. 5

• The establishment of a snow drought fund to guard against the impact of poor snow seasons.

1.1.4 The Principal Regulations

The proposed Regulations will amend the Alpine Resorts (Management) Regulations 1998 (‘the Principal Regulations’). The Principal Regulations are made under section 57 of the Act, and their objectives are to provide for the protection, management and control of alpine resorts by– (a) regulating the general use and control of alpine resorts; and

(b) prescribing fees for the purposes of this Act.

In summary, the Principal Regulations aim to–

• ensure public safety within Victoria’s alpine resorts;

• protect the natural environment and infrastructure within alpine resorts; and

• ensure the long term sustainability of alpine resorts.17

Amongst other things, the Principal Regulations provide Boards with powers to–

• restrict access or activities within the whole or parts of resorts;

• control adverse visitor behaviour and use of resorts;

• charge entry fees for vehicles, helicopters, motor cycles, bicycles and pedestrians; and

• require the fitting of wheel chains for safety reasons (wheel chains must be carried at all resorts at all times during the snow season).

1.2 The nature and extent of the problem

In accordance with Government guidelines,18 the RIS is required to identify and describe the problem to be addressed by the proposed Regulations. In other words, why are the Regulations being proposed?

It is now over five years since the Alpine Resorts (Management) Regulations 1998 came into operation. In the light of this operational experience, the Department of

17 Department of Natural Resources and Environment (1998) Regulatory Impact Statement - Alpine Resorts (Management) Regulations 1998, Melbourne. 18 Office of Regulation Reform (undated) Regulatory Impact Statement Handbook, Melbourne. 6

Sustainability and Environment and the Boards have identified some problems that indicate a need to amend these Regulations as follows.

1.2.1 Maximum access and use fees

Existing Regulation 15 enables the relevant Board to determine the fee for a vehicle19 entry permit to the alpine resort for which the Board is responsible. Entry fees must not exceed the maximum fee specified in the Table in Schedule 2 to the Regulations.

In the proposed regulations, entry fees are called access and use fees. The reason for the regulated maximum access and use fees is to ensure that access to alpine resorts remains reasonably affordable, notwithstanding the fact that these fees are usually only a minor proportion of the total cost of visiting some alpine resorts. Other costs incurred by visitors can include ski lift tickets, transport, meals, equipment hire and accommodation if staying overnight, as discussed in Part 4.0 of this RIS.

Entry fees are set by Boards annually in advance of each snow season, usually by November the preceding year. This is necessary to give sufficient advance notice for the preparation and printing of marketing brochures.

The basic justification for the charging of entry fees by government agencies is to recover the costs of providing services to visitors, either in full or in part. There is a user-pays principle involved whereby those who use the services should be obliged to pay for those services, rather than the funding being provided by taxpayers, many of whom may not be resort visitors.

According to Department of Treasury and Finance guidelines for setting fees–

All user-pay type fees and charges, should be set to recover the full cost of the product or service provided from users, unless there are explicit policy or public good reasons for not doing so.20

The main policy issue to be addressed is whether the full cost of services provided to users of alpine resorts should be recovered, or whether there are explicit policy reasons in the public interest for not doing so. This issue is addressed in Part 4.0 of this RIS.

If the full costs of services provided to users of alpine resorts are to be recovered, then the maximum fees specified in Schedule 2 to the existing Regulations are insufficient for this purpose. Based on an average occupancy rate of three persons per motor vehicle, the current maximum daily fee of $23.10 per vehicle is equivalent to only $7.70 per person. On the other hand, data from recent questionnaires completed by

19 ‘vehicle’ includes– (a) a motor vehicle within the meaning of the Road Safety Act 1986; (b) a motor cycle within the meaning of the Road Safety Act 1986; (c) a bicycle, cart, trailer, caravan or horse-drawn vehicle; (d) a recreation vehicle within the meaning of the Road Safety Act 1986. 20 Department of Treasury and Finance (2004) Setting Fees and Charges Imposed by Department and Budget Sector Agencies Guidelines BFMG-21, Melbourne. 7 the resorts (see Appendix 2 of this RIS) show that while this maximum daily fee per person may be sufficient to recover the cost of providing services to visitors at some of the major resorts in average and above-average seasons, it is not sufficient to recover costs at other resorts, as shown in the following Table 2.

The maximum fee has been set at the average cost per visitor per day plus GST during an average season at any of the resorts other than Mt Stirling. The reason that Mt Stirling is excluded from the calculations is that the level of winter visitation at this resort (approximately 7000 visitors) will never be enough to fully recover the cost of providing services to its visitors. Mt Buller and Mt Stirling will be managed by a joint Board in the future in order to maximise cost efficiencies.

Table 2 - Range of estimates of average $ cost per visitor day (inc. GST) for 200421

Resort Best Good Average Poor Worst season22 season23 season24 season25 season26 Mt. Hotham 5.39 6.25 8.33 12. 50 12.17 Mt. Buller 3.80 3.99 5.04 6.86 16.14 Falls Creek 6.08 6.61 7.54 8.77 9.12

Mt. Baw Baw 8.58 9.52 13.25 22.16 40.63 Lake Mountain 7.31 9.31 11.79 16.74 37.97 Mt. Stirling 7.76 25.63 36.61 64.08 85.43

Another issue is that the current Regulations require entry fees for visitors arriving by car to be charged on a per vehicle basis, regardless of the number of people per vehicle. On the other hand, visitors arriving by bus are currently charged per person.

According to the user-pays principle, the method of charging entry fees should relate to the nature of the services provided. Resort Boards provide works and services to people as well as to vehicles, but the mix of the different types of services varies between resorts. The levels of service provided are mainly a function of the number of persons visiting each resort, rather than the number of vehicles in each resort. Having the choice of charging entry fees by vehicle or by person could enable Boards to better comply with the user-pays principle.

On legal advice, it is proposed to change the existing daily ‘entry fee’ to a daily ‘access and use’ fee, but this has no bearing on the level of the fees charged.

21 Calculated by dividing estimated visitor costs for good and poor seasons (as supplied in questionnaires) by the number of visitor days in each category. 22 Data from Alpine Resorts 2020 Strategy. 23 Data from the questionnaires completed by the resorts. 24 Extrapolated from range of figures supplied in questionnaires. 25 Data from Alpine Resorts 2020 Strategy. 26 Data from the questionnaires completed by the resorts. 8

1.2.2 Carrying of wheel chains

Existing Regulation 54 requires that wheel chains (sometimes referred to as ‘snow chains’) must be carried by all vehicles entering the resorts during the snow season, regardless of the road condition and the likelihood of snowfalls requiring their use. Wheel chains must be properly fitted to the drive wheels of vehicles at the direction of an authorised officer, usually in poor weather conditions.

Similar requirements to carry wheel chains throughout the winter season and fit them where directed exist at alpine resorts in New South Wales and New Zealand, although weather conditions at these resorts can be more extreme and less predictable than at Victoria’s lower altitude resorts of Mt. Buller, Mt. Baw Baw and Lake Mountain. The South Island of New Zealand is also considerably more southerly than Victoria in latitude. At northern hemisphere alpine resorts, such as in Canada and the USA, winter tyres are normally fitted to vehicles in preference to wheel chains. Winter tyres are not used in Australia.

Affordability of resort visitation is a key issue for the future of Victoria’s resorts, and the ability of the resorts to attract new markets and new entrants to the sport will at least partially depend on being able to provide easy and seamless access to the snow.

Although the safety of those driving to the resorts in the winter must remain the paramount consideration, there is often a great difference in road conditions between the high altitude resorts and the low altitude resorts. At Falls Creek and Mount Hotham, chains must continue to be required at all times during the winter season due the nature of the weather conditions at those resorts.

At the other resorts, however, there are many days when snow is not forecast and the road is clear of snow and ice. For example, during the 100 day snow season in 2004, wheel chains were required to be fitted to 2WD vehicles on only 20 days at Mt Baw Baw, 16 days at Lake Mountain (only 6 days in 2003) and 27 days at Mt. Buller.

At these lower altitude resorts, day visitors only would have greater ease of access if the requirement to carry chains was waived on days when they are not needed, particularly towards the end of the season. There would also be considerable savings for day visitors both in terms of time and money and a resulting ‘demystification’ of the winter resort experience.

1.2.3 Problem definition

In the light of the above discussion the problem to be addressed by the proposed Regulations may be formally defined as–

The setting of appropriate maximum fees for access (by vehicle or person) and use of alpine resorts; and appropriate controls over the carriage of wheel chains in alpine resorts. 9

1.3 Policy objectives of regulatory proposal

To address the problem identified in Part 1.2.3 of this RIS, the following policy objective is suggested–

The setting of appropriate maximum fees for access to and use of alpine resorts; and appropriate controls over the carriage of wheel chains in alpine resorts in a way which–

(a) is compatible with the economic, social and conservation objectives of the State;

(b) takes into account the contemporary and future role of alpine resorts;

(d) recognises that alpine resorts are public assets, access to which should remain reasonably affordable;

(e) minimises risks to public safety;

(f) results in net community benefits; and

(g) is economically efficient.

1.4 Consultation to date

One of the main purposes of an RIS is to allow for an informed process of consultation with the public regarding the regulatory proposal and its associated costs and benefits.

• skiers; • other resort visitors; • tour operators; • resort businesses; • Victoria Police; and • Vic Roads.

However, the levels of the proposed new maximum fees were not discussed in this preliminary consultation process. 10

It was not possible to conduct preliminary consultation with all manufacturers, retailers and hirers of wheel chains because of the dispersed nature of this industry. (Many visitors to alpine resorts purchase or hire their wheel chains in the Melbourne metropolitan area, and even in other capital cities). These and other stakeholder groups will have an opportunity to comment on the proposed Regulations when the RIS is released for public comment.

Responses to the preliminary consultation were received from the following stakeholder groups-

• Buller Ski Lifts Ltd;

• Victorian Snowsports Association;

• Mt. Buller Ratepayers Association;

• Various wheel chain hire outlets in Mansfield; and

• Victoria Police.

Buller Ski Lifts Ltd supported both the proposal to charge entry fees by either per person or per vehicle and the proposal to waive the requirement to carry wheel chains on fine weather days.

The Victorian Snowsports Association stressed the need to keep all gate entry fees to a minimum, and asked for clarification of the proposed fee structure. The Association is a strong advocate of safety in the alpine region and seeks additional information and justification regarding the wheel chain proposal before it could endorse the proposed change to the Regulations.

Mt. Buller Ratepayers Association fully supported the proposed power to charge entry fees per person rather than per vehicle. The Association would like any additional revenue gained from this initiative to subsidise the 4WD taxis from the car parks in the village by approximately 50%. The Association also fully supported the proposal to waive the requirement to carry wheel chains on fine weather days.

On safety grounds, the Victoria Police advised against enabling waiving the requirement to carry wheel chains at Falls Creek and Mt. Hotham.

Oral feedback from various wheel chain hire outlets in Mansfield was negative regarding the proposal to waive the requirement to carry wheel chains on fine weather days.

All comments and submissions received have been taken into account in preparing the proposed Regulations and this RIS. 11

1.5 Authorising legislation

The relevant provisions of the Alpine Resorts (Management) Act 1997 include sections 3 (Definitions), 34 (Establishment of Boards), 38 (Functions of Boards), and 57 (Regulations).

Section 38(1)(f) of the Act provides that one of the functions of Boards is ‘to collect fees prescribed by the regulations for the resort’.

The authorising power for the proposed Regulations is section 57 of the Act which authorises the Governor in Council to make regulations for or with respect to various matters including-

(a) the protection, management and control of alpine resorts;

(b) prohibiting or regulating the entry into alpine resorts or parts of alpine resorts by persons, vehicles or vessels and the landing in resorts of helicopters or other aircraft and prescribing the periods during which persons, vehicles, vessels, helicopters or other aircraft may remain in alpine resorts; … (d) setting aside areas in alpine resorts for public use and-

(i) prohibiting or regulating the nature of the use of any such area;

(ii) prescribing measures to be taken for the safety of persons using any such area; … (j) fixing fees for entry by-

(i) persons or classes of persons; or

(ii) vehicles (including helicopters and aircraft) or classes of such vehicles-

to alpine resorts and providing for exemptions from the payment of fees;

(m) fixing fees for access to or for the use of any area set aside by or under the regulations for public use; … (n) the carriage and fixing of wheel chains in alpine resorts;

(o) any other matter or thing required or permitted by this Act to be prescribed or necessary to be prescribed to give effect to this Act.

Section 57(2) of the Act also provides the necessary heads of power for the proposed Regulations. It provides that the regulations made under this Act may-

(a) be of general or limited application; and

(b) differ according to differences in time, place or circumstances; and

(d) impose specific minimum or maximum fees and provide for the waiver or reduction of fees; and 12

(e) impose penalties, not exceeding 20 penalty units, for contravention of the regulations.

1.6 Need for regulation

Having identified the problem and the policy solution, the threshold or first preliminary question to be addressed is: whether there is a sufficient case for further Government intervention to assist in solving the problem?

The consequences of inaction are that there would be-

• A continuation of the present method of charging fees for entry i.e. by vehicle rather than by visitor, when much of the costs of service provision relate to the number of visitors rather than the number of vehicles;

• A decline in visitor services in those resorts where fees are set at less than full cost-recovery, and where revenue to make up this shortfall cannot be made up from other sources (such as increases in other Board charges);

• A continued deterrence of some potential day visitors to some resorts in good weather, because of the perceived unreasonable cost of having to hire wheel chains (around $25 per day), with corresponding revenue forgone by the affected resorts.

1.7 Feasibility of regulation

The next preliminary question to be addressed is whether Government intervention is practicable, that is, are Regulations likely to be effective?

A measure of the effectiveness of the proposed Regulations is the likely level of compliance with them.

The Alpine Resorts (Management) Act 1997 is a ‘relevant law’ under the Conservation, Forests and Lands Act 1987. This means that employees of Boards can be appointed as authorised officers to enforce the Alpine Resorts (Management) Act 1997 and regulations made under that Act, using the enforcement provisions of the Conservation, Forests and Lands Act 1987.

The Boards advise that the general record of visitor compliance with regulations is relatively high. In fact, apart from oral warnings, enforcement action rarely needs to be taken. If any breaches of the Regulations are observed, an authorised officer is called to the scene, and if appropriate, offenders are usually asked to cease doing the offending activity under Regulation 56 or to leave the alpine resort under Regulation 55. Marginal enforcement costs are therefore minimal.

The proposed increases in maximum ‘entry fees’ are unlikely to have any compliance implications, as visitors will continue to be required to pay fees upon entering the resort. The proposed waiver of the requirement to carry wheel chains in some resorts 13

under some circumstances will result in a net reduction in compliance pressures on visitors.

There is, therefore, no reason to suppose that the implementation of the proposed Regulations is not practicable.

2.0 Nature and effects of proposed Regulations

Draft Regulation 1 states the formal objectives of the proposed Regulations i.e. to–

(a) prescribe maximum fees for persons to access or use set-aside areas in alpine resorts; and

(b) make further provision for the carriage of wheel chains in vehicles; and

(d) to make other miscellaneous and consequential amendments to those regulations.

Draft Regulation 2 cites the provision of the Act that authorises the making of the proposed Regulations (see section 1.7 of this RIS).

Draft Regulation 3 specifies the commencement date of the proposed Regulations.

Draft Regulation 4 defines the existing Alpine Resorts (Management) Regulations 1998 as the Principal Regulations.

Draft Regulation 5 defines various specific terms used in the proposed amending Regulations.27 In particular-

• the proposed definition of ‘contractor’ relates to new Regulation 16C regarding complimentary passes and existing Regulation 6 regarding the application of the Principal Regulations;

• the proposed definitions of ‘day visitor’ and ‘prescribed Board’ relate to Draft Regulation 13 regarding the carrying of wheel chains;

• the proposed definitions of ‘motor cycle’ and ‘motor vehicle’ relate to Regulation 15 regarding maximum entry fees to alpine resorts.

• the proposed definition of ‘prescribed Board’ is needed to exclude the Falls Creek and Mt. Hotham Boards from the power to waive the carrying of wheel

27 It should also be noted that definitions specified in the Act apply to regulations made under the Act. 14

chains. (Local conditions make it prudent that wheel chains are carried at all times during the snow season at these particular resorts}.

Draft Regulation 6 amends Principal Regulation 10(1) to authorise Boards to set aside areas for additional public purposes.

Draft Regulation 7 is a consequential amendment to Principal Regulation 13(1) to alter certain references to other Regulations.

Draft Regulation 8 substitutes a new Division 1 of Part 3 of the Principal Regulations setting the maximum fees for access to and use of alpine resorts. These maximum fees are based on full cost-recovery of visitor services (see Appendix 2 to this RIS).

Proposed new Regulation 14 creates an offence to enter an alpine resort as a bus passenger without paying a fee and sets the maximum fee payable.

Proposed new Regulation 15 creates an offence to enter an alpine resort in a motor vehicle without paying a fee and sets the maximum fees payable. Sub-regulation (4) enables Boards to set fees either per person or per vehicle, subject to conditions on the number of persons in each vehicle to encourage car pooling for the purpose of conserving car parking spaces within the resort.

Proposed new Regulation 16 creates an offence to enter an alpine resort other than in buses or motor vehicles (for example by motorcycle, bicycle, helicopter or as a pedestrian) without paying a fee and sets the maximum fees payable.

Proposed new Regulation 17 enables Boards to issue annual passes and sets the maximum fee for annual passes. Maximum fees for annual passes maintain the existing ratio of 12 times the daily fee. It is proposed that there will no longer be annual passes for motorcycles as there is no demand for them.

The proposed differences in maximum fees for entry permits and annual passes are as set out in the following Table 3. 15

Table 3 – Maximum Fees for access and use of alpine resorts (including GST)

Existing Proposed Existing Proposed maximum fee maximum fee maximum fee Means of entry maximum fee per day per day per annum per annum

Bus authorised under the Transport Act $13.2528 for 1983 to operate $6.05 for each each passenger not applicable not applicable a regular passenger and driver scheduled service to an alpine resort

Bus (other than a bus authorised under the Transport Act $13.25 for each $8.50 for each not applicable 1983 to operate passenger and not applicable passenger a regular driver scheduled service to an alpine resort)

$42.00 for each vehicle or Motor vehicle $25.40 for each $13.25 for each $304.80 $504.0029 vehicle person in a vehicle

By other than a N/A bus or motor $8.50 per person $13.25 per $101.65 vehicle person

(See Appendix 2 to this RIS for the basis of calculation of the proposed new maximum fees).

The actual access and use fees will be competitively determined by the Boards within the maximum limits set by the proposed Regulations. It is possible that some Boards may increase their actual access and use fees very little or not at all.

28Maintaining different fees for ‘authorised buses’ and ‘unauthorised buses’ cannot be justified in terms of National Competition Policy.. 29 Maintains existing ratio of 12 times daily vehicle fee. 16

This arrangement provides each Board with some flexibility to recover their individual costs of visitor services and take into account commercial and marketing considerations as provided in existing proposed Regulation 16B.

Proposed new Regulations14, 15 and 16 also set the maximum fees for off-season entry permits and maintains the existing ratio of one third of the fee for permits during the snow season.

The proposed new Regulation 16C specifies various classes of persons who are not required to pay access or use fees, including persons authorised under leases, licences or other agreements, persons in transit through resorts, contractors, authorised officers and other persons on official duties. Proposed new Regulation 16D authorises Boards to reduce or waive fees for entry for other specified classes of persons.

Draft Regulations 9, 10 and 11 removes reference to fees for helicopter permits.

Draft Regulation 12 inserts additional sub-Regulations after Regulation 54(3) enabling prescribed Boards to waive the requirement for motor vehicles to carry wheel chains on specified days, for reasons explained in Part 1.2.2 of this RIS. Such decisions are subject to public safety considerations and strict criteria including road conditions and the latest weather forecasts; and for that reason must be made no earlier than the day prior to the day in which the waiver is to apply. Adequate signs or notices of such decisions must be displayed. This Regulation is likely to result in costs and benefits to different stakeholders as discussed in Part 4.0 of this RIS.

3.0 Alternatives to Regulations

The RIS is required to identify all practicable alternatives to the proposed Regulations and their relative costs and benefits compared to the proposed Regulations (as quantitatively as possible, otherwise qualitatively). Conversely, the RIS is not required to identify alternatives which are not practicable, or which are beyond the scope of the existing Act. No alternatives are required to be identified, nor are costs and benefits required to be assessed where there is no appreciable cost burden imposed on any sector of the public.

3.1 Maximum access and use fees

The practicable alternatives are considered to be–

• maintain the status quo (i.e. existing maximum fees) – access and use fees by vehicle only, with partial cost recovery of visitor services at some resorts; and

• the proposed Regulations - full cost recovery of visitor services, with choice of charging access or use fees by vehicle or by person.

Charging no access or use fees is not a practicable alternative because it would not meet the Government’s strategy of requiring Boards to be financially self-sufficient. 17

There are alternatives that could have been worth considering in this analysis (eg. empowering Boards to set fees at levels of their own choice or allowing more light- handed approaches such as price monitoring). However as there is no provision under the Act for setting access and use fees other than by prescribing an actual or maximum fee in the regulations, such an alternative is not possible.

3.2 Carriage of wheel chains

The practicable alternatives are considered to be–

• maintain status quo i.e.: existing regulations requiring the carriage of wheel chains at all times during the snow season; and

• the proposed regulations – empowering certain resort Boards to waive the requirement to carry wheel chains under specified circumstances.

The development of a voluntary code of practice regarding the carriage of wheel chains is not a practicable alternative on safety grounds. In any case, most of the visitors to alpine resorts do not belong to an organisation that could develop such a code of practice or influence their behaviour.

4.0 Assessment of costs and benefits

The purpose of this section is to assess the relative costs and benefits of the proposed Regulations for the Victorian community; and to compare and contrast the costs and benefits with the practicable alternatives as identified in Part 3.0 of this RIS.

The RIS needs to assess whether–

• the expected benefits of the proposed Regulations are greater than the expected costs; and

• the net benefit of the proposed Regulations exceeds the net benefit of the feasible alternative.

The assessment of the relative benefits and costs for each of the feasible policy alternatives will be conducted in relation to how well the underlying policy objectives in section 1.3 of this RIS can be achieved. Where data exists, quantitative estimates of costs and benefits will be made. However, where cost and benefit data is not available, the assessment will be made using qualitative arguments about the achievement of the policy objectives.

The framework below is used to examine the expected costs and benefits of the options: 18

4.1 Costs to the community

The costs to the community involve any net additional costs (that is, additional resources) that are likely to be required under each of the policy alternatives. These costs include net additional costs that would be borne by–

• the visitors and potential visitors to alpine resorts, and

• the resorts and industries that operate in and around alpine resorts.

4.2 Benefits to the community

With respect to the benefits, the issues examined relate to–

• whether the policy alternative is likely to be effective in meeting the policy objectives of the cost recovery of efficient provision of visitor services, affordability to visitors, and contemporary and future role of alpine resorts; and

• whether the policy alternative is expected to have any adverse impacts.

4.3 Assessment of each of the options

4.3.1 Access and use fees

As discussed in Part 1.1.3 of this RIS, alpine resorts provide a range of services for visitors. These include the following services, available to visitors to the resorts-

• road services and car parking, including snow clearing services;

• ski patrol and safety services;

• village transport30;

• visitor information, including publications;

• snow reports;

• cross country trails and grooming;

• community facilities, including public toilets;

• snow play areas;

30 Not all resorts provide village transport in the entry fee. 19

• contributions to snowmaking;

• environmental services; and

• village maintenance and services, including garbage collection and removal, lighting and sewerage.

Resorts also incur other costs such as public liability insurance, depreciation on assets, proportion of village maintenance, street lighting, garbage etc. These costs also need to be recovered under the user-pays principle.

All visitors to alpine resorts use the roads (and those in cars use car parks) to travel to the resorts. Each visitor pays a daily access and use fee that reflects the usage of roads, as well as other visitor services that are provided (such as road snow clearing services, search and rescue, visitor centre, garbage disposal, water and sewerage, a pro-rata proportion of administration costs, etc). Those that travel up the mountain each day pay such a daily fee at the entry gate, while those that stay on the mountain pay a multiple day entry fee.

In addition, those that stay on the mountain also pay (indirectly, via the accommodation charge) the site rental charges that reflect the additional costs incurred by these visitors when they stay on the mountain. Service charges and site rentals are regularly reviewed, so any revenue increases can come from these sources as well as increases in access and use fees. Those who utilise shops and cafes (whether day visitors or overnighters) also indirectly pay for the site rentals/service charges of these shops and cafes when they make purchases. In this way, there are no cross subsidies taking place between day visitors and overnight stayers.

The access and use fees are usually only a minor proportion of the total cost of visiting some alpine resorts. To give a typical example, for a couple of downhill skiers staying overnight in mid priced accommodation at a large resort for a weekend (staying Friday and Saturday nights), the cost of the access and use fee as a percentage of the overall cost of the weekend is estimated at less than 5% as follows:

• Access and use fee @$25/day = $50 • Chain hire@$25/day = $50 • Lift ticket@$150/person/weekend = $300 • Accommodation@$150/night = $300 • Ski hire@$60/person/weekend = $120 • Food, beverage, petrol and incidentals@$80/person/day = $320

Total cost = $1140

For a day visit to a smaller resort closer to Melbourne, the access and use fee would be a higher proportion of the overall cost, but is still only around $25 for two people.

The proposed maximum access and use fees are shown in Table 3. The data and methodology used to calculate these maximum fees is outlined in Appendix 2. 20

The principles taken into account in establishing the proposed maximum access and use fees were–

• The application of the ‘user-pays’ principle, so that visitors to alpine resorts pay for the cost of services provided to them. These visitor services relate to services consumed directly by visitors, with no spillover effects. Therefore, there is no public good argument for subsidies by taxpayers for the provision of these services. As outlined in section 1.1.3, Government policy requires the Boards to be financially self-sufficient, with no reliance on the taxpayer. Therefore, revenue from access and use fees should improve the ability of resorts to provide an appropriate level of visitor services, with no reliance on public funding. All resorts are self sufficient with the exception of Mt Stirling and Mt Baw Baw. Mt Stirling will be managed by a joint Board with Mt Buller in the future to maximise cost efficiencies and broaden the product offer at both mountains. Mt Baw Baw still relies on government investment, which is now geared towards achieving future financial viability for this resort.

• The maximum fee structure should encourage efficient resource allocation, both within the resorts and between each resort and other competing activities. The fee structure should also recognise the importance of full cost recovery (that is, recognising that costs include both current costs plus the annual capital charge that relates to investment goods ‘used up’ each year in the production of visitor services). Therefore, while the setting of access and use fees that are too low for full cost recovery may not affect services in the short run, this could lead to deterrence of new or replacement investment. This is likely to lead to inadequate services in the future.

• The maximum fee structure allows for flexibility. The Principal Regulations provide for maximum fees, with each Board having the flexibility to determine the actual fee at each site. This allows for fees to reflect different cost structures and different levels and standards of visitor services. The entry fee options should also be competitive with access and use fees for competing attractions, taking into account seasonal and other marketing factors.

• The proposed Regulations also propose to build in greater flexibility in the basis of fee collection. In the case of visitors entering by vehicle, the proposed regulations introduce the flexibility to charge either on a per person or on a per vehicle basis. However, each Board must make an advance determination of the basis of fee collection in each case. For example, an advance determination would be made on whether access and use fees collected at the entry gate (for example, as distinct from a package deal that includes entry fee, accommodation, etc) would be collected on a per person or on a per vehicle basis.

• The cost recovery system should be viewed as ‘fair’ by visitors, potential visitors and the community. The resulting fee structure charged by the Boards needs to be competitive with other competing recreation activities and attractions, or potential visitors will switch to alternative activities. 21

In summary, in generating sufficient revenue to recover all of the costs of visitor services, the maximum fee structure also has to take account of any likely negative impact of a possible actual fee increase on visitation (that is, any fall in visitation due to higher actual fees permitted by the increased maximums), the value for money afforded by visitation to each resort, and the need for Boards to remain competitive with alternative recreation activities and attractions.

Table 4 provides an assessment of the costs and benefits of each policy alternative.

Table 4: Assessment of the policy alternatives Option 1 - Maintain the status quo (that is, maintain the existing maximum entry fee structure) Expected Costs Expected Benefits

Access and use fees would not cover cost of visitor Effectiveness in meeting policy services at some resorts objectives To ensure full cost recovery, without an increase in Continuation of the current access and use fees, some Boards would need to: Regulations would be expected to • provide a lower level and/or standard of services; have the following benefits: such as road improvements, snow making, over snow transport or the frequency of garbage • Visitors to some resorts would collection and/or incur lower costs of visitation • increase fees from other revenue sources, such as where the access and use fees site rentals and service charges. This raises the charged by a Board was lower issue of why day visitors should be subsidised by than could be charged under the those who stay in accommodation at the resort. proposed Regulations. This loss in This would also place providers of accommodation revenue would have to be within the resorts at a competitive disadvantage compensated for, with the most compared with off-resort accommodation; and/or likely option being adjustments to • seek increased government funding. However, as service levels and quality. To the government policy requires Boards to be extent that expenditure on visitor financially self-sufficient, this is not likely to be a services had to be reduced, feasible option. declines would be expected in the quantity/quality of visitor services. Reduced access and use fees revenue to some To the extent that this flowed Boards is likely to reduce incentives to invest in through to reduce the incentives to infrastructure invest in new and replacement The gap between the costs of visitor services and the infrastructure, there would be less revenue collected to fund them would be expected to capacity to provide high quality widen over time, with rises in the cost level (e.g. visitor services in the future. increases in salaries). As noted above, there are Therefore, the net increase in limited options available to Boards to cover this benefits to visitors in the short run shortfall, and the most likely approach would be to from lower access and use fees reduce expenditure on visitor services. While (relative to the proposed recurrent expenditure is likely to be maintained as far Regulations) would have to be as possible, it would be expected that investment in adjusted to take account of any new and replacement facilities would take the brunt loss in benefits due to reduced of any cuts to expenditure. Over the medium to visitor services in the medium to longer term, this would result in a lack of longer term. development of resort infrastructure, with consequent impacts on future visitor services. 22

Reduced flexibility for basis of collection • Those who view lower cost Maintenance of the status quo would not provide the access to a community resource flexibility to Boards to choose in advance the basis of as an entitlement, would collection (e.g. whether to collect fees on the basis of perceive a benefit from knowing ‘per person’ or ‘per vehicle’). that access and use fees to some resorts were lower than with the Entry fee collection costs proposed Regulations. The costs involved in collecting access and use fees are expected to be about the same either with this approach or with adoption of the proposed Regulations. Option 1 Summary: this is not the preferred approach. This approach would not recover the full costs of efficient provision of visitor services at all resorts. As Boards are required to be financially self-sufficient, it is likely that there would have to be reductions in the quality/quantity of visitor services at some resorts, and/or there would have to be increases in other fees and charges. The former approach could impact on incentives to invest in future infrastructure, leading to a decline in investment services to visitors in the future. The latter approach would be inequitable, with those operating and staying in the resort subsidising day visitors. In addition, the present approach does not provide Boards with the flexibility to decide in advance the basis of collection of access and use fees.

Option 2 – Maximum access and use fees to allow cost recovery of efficient service provision, including flexibility in the basis of collection (as nominated in advance by each Board)

Expected Costs Expected Benefits

To visitors and potential visitors of Effectiveness in meeting the policy objective resorts • Resource allocation. Full cost recovery through The proposed maximum fees are the proposed Regulations is expected to improve significantly higher than those resource allocation through the continuing currently in place, which may result in provision of price signals information to higher actual access and use fees suppliers and visitors of the cost of providing charged by the Boards of some resorts. visitor services. There is continuing competitive Although it could be argued that the pressure on individual resorts to provide services total cost of visitation at some resorts is efficiently and to keep access and use fees (and much higher than the entry fee alone other charges) as low as possible to compete (i.e. when additional costs such as the with other alpine resorts (in Victoria and time and travel costs are taken into elsewhere) and other leisure attractions. account), at the margin, one would expect some drop in visitation (all else • A fair system. Visitors pay, on a cost-recovery being equal) due to an increase in basis, for services provided to them. Taxpayers actual access and use fees. are not required to fund visitors, and overnight visitors at resorts are not required to pay higher A positive relationship would be fees to cover the costs of day visitors. It is expected between the percentage share viewed as fair that those directly benefiting from of access and use fees in the total cost visitor services should fully fund their provision. of visitation and the impact on visitation of entry fee increases. That • To taxpayers. The proposed Regulations is, a relatively small share of access provide for Boards to recover the costs of visitor and use fees in total visitation costs services, with no call for additional funding for would imply a smaller impact of a these services from taxpayers. particular percentage increase in access 23

and use fees on the number of potential • To resort Boards. There is increased flexibility visitors. in the way in which fees can be determined and collected (e.g. ‘per person’ or ‘per vehicle’ as The extent of a possible decline in nominated in advance). The Regulations allow visitor numbers would depend on the the setting of fees up to the maximum fee, with degree to which the total cost of account taken of levels and costs of services, visitation remained competitive with and the costs of visitation at competing competing attractions. It is assumed attractions. Pricing also enables access and use that visitor services are provided fees to encourage car pooling. efficiently, due to competition between resorts, and between resorts and Viability of resorts’ ability to provide services in competing attractions. Only those who longer term viewed a visit as providing enjoyment Without the ability to recover costs, Boards would equal to, or greater than the entry fee have to reduce the quantity and/or quality of (and other visitation costs) under the services. Adequate revenue generated by the proposed Regulations would visit proposed fee structure would ensure maintenance resorts. It is likely that there would less and enhancement, where there is the demand, of impact from any increases in access infrastructure facilities. and use fees on interstate and overseas visitors. For these visitors, the price The proposed maximum fees would prevent the elasticity of demand would be less problems that would result from access and use fees elastic, as access and use fees comprise that are set too low. a smaller share of total visitation costs. Viability of the different resorts Market forces may lead to visitors The proposed maximum fee structure recognises choosing the resort/s that charge the that different Boards have different cost structures, lowest access and use fees. and offer a different range of services to visitors (and potential visitors). This includes recognition The full recovery of visitor services that costs vary from year to year depending on the costs from all visitors to the resorts is type of snow season (e.g. ‘good’ or ‘poor’). an equitable result, compared with alternatives where taxpayers or other The maximum fee structure provides for flexibility visitors (for example, those that stay across the different types of fees, and allows for overnight at the resort) would be competition between resorts (and with other required to fund the cost of services for competing attractions). day visitors. The proposed maximum fee structure does not Affordability of access inhibit the ability of Boards to charge fees that It could be argued that the proposed reflect cost structures, but it also builds in Regulations could result in actual flexibility to charge below the maximum to access and use fees that are too high compete with other activities. and thus do not allow for affordable access of all visitors to all resorts, which are located in areas that are publicly owned.

However, some resorts will be more accessible as a day trip for snow play. A visit to Lake Mountain may be more attractive or possible for low income metropolitan users compared with a visit to Falls Creek.

Entry fee collection costs The proposed Regulations are not 24 expected to change entry fee collection costs relative to the existing fee structure.

Option 2 Summary: this is the preferred approach. The proposed maximum entry fee structure allows for the recovery from all visitors of the full cost of efficiently produced visitor services at all resorts except the special case of Mt. Stirling (see Appendix 2). This provides pricing signals to suppliers and consumers, including an adequate return on investment. It ensures that there is the incentive to invest in provision of infrastructure, which will provide for improved visitor services in the future. Within the full cost recovery objective, the proposed Regulations provide for greater flexibility in the basis of entry fee collection. The continuation of maximum fees allows flexibility to each Board to decide on the fee structure that meets their cost structure, the nature and quality of the services and visitor experience, and the ability to compete with other resorts and other competing attractions. Of the two alternatives, this option is therefore expected to have the higher benefit-to-cost ratio.

4.3.2 Carriage of wheel chains

The purpose of altering regulations in relation to carriage of wheel chains is to reduce unnecessary regulation and reduce costs to the consumer.

There are three groups of resort visitors affected by regulations regarding the carriage of wheel chains:

(1) Those who are required to carry chains and road or weather conditions require them to be fitted,

(2) Those who are required to carry chains and road or weather conditions do not require them to be fitted,

(3) Those who (under new regulations) will not required to carry chains on particular day at certain resorts.

The beneficiaries of the proposed changes to the regulations are group (3), as discussed in Table 5, which provides an assessment of the costs and benefits of each policy alternative. 25

Table 5: Assessment of the policy alternatives

Option 1 – Maintain the existing Regulations. The current situation is that wheel chains must be carried by all vehicles entering each of the alpine resorts during the snow season.

Expected Costs Expected Benefits

Expected costs to visitors Effectiveness in meeting the policy Regardless of the likelihood of snowfall requiring objective their use, visitors must carry wheel chains at all times The present regulatory regime is at all resorts. Some visitors may be unnecessarily effective in reducing the risk of harm inconvenienced by having to hire wheel chains for arising from accidents while traveling visits on days where there is no snow or ice on the to and from alpine resorts during road, or snow is forecast. snowy and icy conditions. However, it is not effective in achieving this For those visitors who hire wheel chains, the objective at minimum cost. financial cost would remain at all times for all alpine resorts during the snow season. The cost of hire of Expected benefits to visitors wheel chains is currently about $25 per day. This Some visitors may have concerns imposes additional costs on visitors who would need about safety, and the security of to hire wheel chains. The additional cost will vary, knowing that all vehicles should depending on the difference in the number of days carry wheel chains at all times during when wheel chains must be carried under the present the snow season may provide these Regulations compared with what would apply under visitors with an added level of the proposed Regulations. This is expected to have comfort and security. It may be the following costs: considered that heavy snow falls are not always easy to forecast and that • To the extent that this cost requirement reduces, at this risk needs to be kept as low as the margin, the number of day visitors, potential possible. visitors lose the enjoyment they would otherwise experience from visiting alpine resorts, and instead derive a lower level of enjoyment from undertaking the next best activity. The net impact would be the difference in enjoyment of the two activities.

• For those visitors who still visit resorts, but who have to hire wheel chains (when they would not be required under the proposed Regulations), there is a diversion of money from visitors (who could have spent this on the purchase of other goods and services) to the businesses that hire out wheel chains. There is an opportunity cost to visitors in these instances (i.e. the loss in enjoyment from the next best use of this expenditure).

Expected costs to resorts and to industries that operate in, and in the vicinity of, resorts

To the extent that, at the margin, the present wheel chain requirement reduces visitation, certain alpine 26 resorts experience a lower level of day visitation than they otherwise would. This results in a transfer of expenditure away from expenditure at alpine resorts to expenditure on other goods and services. This switch in expenditure is not a net cost to the economy if the regulatory regime is pitched to meet the safety objective at the least cost.

However, there are net costs if the regulatory environment is too prescriptive. The lower level of visitation (than would otherwise occur) has the effect, at the margin, of changing the industry and regional structure of the economy (although the alternative patterns of expenditure are not known) through: • lower revenue to resorts from reduced access and use fees; and • lower expenditure within and around resorts, which flows through to affect revenue and employment.

The present approach, through being too prescriptive, places some resorts (and visitors and potential visitors to those resorts) at a competitive disadvantage during good weather conditions in the winter seasons.

Cost of enforcement The current costs of enforcement would be expected to be unchanged with continuation of the present Regulations.

Objective of good regulation at lowest cost to community Compared with the proposed Regulations, the status quo does not allow for a flexible arrangement to take account of weather conditions at specific resorts. The harm minimisation objective is met at a cost that is higher than is expected to apply with the proposed Regulations.

Option 1 Summary: this is not the preferred approach. While the current Regulations meet the harm minimisation objective, this is achieved at a higher cost than would occur with the proposed Regulations. The cost of compliance to achieve the safety objective is set too high. 27

Option 2 – The proposed Regulations. The proposed Regulations provide certain Boards (Mt Buller, Mt Baw Baw, Lake Mountain, and Mt Stirling) with the option of not requiring day visitors to carry wheel chains on particular days during the snow season. The proposed Regulations set out specific requirements and criteria for Boards to follow in assessing the requirement to carry wheel chains and in communicating this to potential day visitors. Expected Costs Expected Benefits

Expected cost to visitors Effectiveness in meeting policy The only cost of this option to visitors is a very objectives slight increase in the risk of accidents if road or The proposed Regulations are weather conditions significantly deteriorate after expected to maintain the current level a decision is made to waive the requirement to of safety for those travelling to and carry wheel chains. The reason this risk is very from alpine resorts during the snow season. Those resorts where there can low is that the proposed regulations require such be sudden, unexpected changes in decisions to be made no earlier than the same weather conditions on more exposed day or the day prior to the day that the waiver roads (Mt. Hotham and Falls Creek) applies. The proposed regulations specify strict are not provided with the choice for criteria requiring that the Board must take into day visitors and carriage of wheel account public safety considerations, including– chains by all visitors remains mandatory. • the general conditions of the roads; and

• the extent of any snow or ice on the roads; For the other resorts, the proposed Regulations provide adequate and requirements and criteria to ensure that the obligation to carry wheel • the latest available weather forecasts. chains is only waived when road and In the case of uncertain weather conditions, or if weather conditions make it safe to do so. Therefore, the proposed ice or snow on the roads is present or is forecast, Regulations are expected to maintain then the carriage of chains will be required the current level of safety. irrespective of whether they are fitted. There is no evidence of any increase in the rate of accidents However, the proposed Regulations on days where wheel chains were not required to be have the advantage in improving the fitted. regulatory regime. This is achieved through ‘minimum effective Expected costs to suppliers of wheel chains regulation’, by allowing flexibility (to accommodate different or The proposed Regulations are not expected to changing circumstances) in cases significantly affect sales of when chains, as those where safety is not expected to be who choose to purchase wheel chains are likely to reduced. This enables the safety continue to do so. (Wheel chains will still be regulation to be tailored to the required for part of the snow season at each resort). weather risks of particular resorts on particular days. Therefore, the costs However, there is likely to some cost to those who of regulating for risk and safety is hire out wheel chains from lower level of hirings by expected to be achieved at the lowest visitors to the lower altitude resorts on some days. possible cost to visitors. An improvement in the regulatory In effect, there will be a transfer of benefits from regime is expected to impose the wheel-chain hire businesses to resort visitors. least possible burden on those who Because of the inability to predict changes in visitor are regulated and on the broader numbers that may result from a reduced requirement community. Visitors (and potential to carry wheel chains and the number of days in each visitors) to particular resorts can 28 season that this requirement is likely to be reduced, it decide on the most cost-effective way is not possible to quantify this cost. of complying with the requirement to carry wheel chains (e.g. to buy, Expected cost of enforcement borrow, or hire). The costs of enforcing the present Regulations and the proposed Regulations are not expected to vary There must be clear communication significantly. of information to those day visitors who need this information before With the proposed Regulations, there would be a deciding on making the day trip (e.g. reduction in the cost of enforcing the carriage of signage and phone line information). chains on particular days. However, this is likely to be offset to some extent by a slight increase in The proposed Regulations therefore resources to assess roads and weather conditions, place resorts on a better competitive make decisions about waiving the requirement to footing. Those resorts where safety carry wheel chains and the costs of communicating would not be compromised by this information to visitors (for example, through providing a choice on specified days phone line information and changing signage to on the carriage of wheel chains are provide adequate advance information to visitors). not placed at a competitive disadvantage due to an inflexible regulatory regime.

Expected benefits to visitors At the margin, it would be expected that some visitors may decide to undertake day visits to resorts if a choice is provided on the hiring of wheel chains in particular circumstances. On these occasions, this would reduce visitation expenses by the hire cost of about $25 per day, which could be a significant proportion of the cost of a day visit to the smaller resorts closer to Melbourne. This cost reduction would increase the enjoyment of these visitors, who would otherwise have to undertake a different activity with a lower level of net benefit.

In addition, those visitors who would still have planned a day trip, but who would otherwise have been required to hire wheel chains, would be better off by the reduced costs of the trip.

Option 2 Summary: this is the preferred approach. The proposed Regulations maintain the level of safety to visitors to alpine resorts, but provide for the harm minimisation objective to be met at the least cost. This allows for ‘minimum effective regulation’, and also places the resorts on a better competitive footing. This approach is expected to have a higher benefit-to- cost ratio compared with the present Regulations. 29

4.4 Summary of cost benefit analysis

The proposed maximum fee structure allows for the recovery from all visitors of the full cost of efficiently produced visitor services and for greater flexibility in the basis of entry fee collection. This ensures that there is the incentive to invest in provision of infrastructure, which will provide for improved visitor services in the future.

Whilst the existing Regulations regarding the carrying of wheel chains meet the harm minimisation objective, this is achieved at a higher cost than would occur with the proposed Regulations. The cost of compliance to achieve the safety objective is set too high.

In conclusion, the proposed regulations are considered to be the best alternative for achieving the identified policy objective, in which the costs of the proposed regulations are outweighed by their likely benefits.

5.0 National Competition Policy tests

5.1 National Competition Policy and Guidelines

At the Council of Australian Governments (COAG) meeting in April 1995, all Australian governments agreed to implement the National Competition Policy (NCP). As part of the Competition Principles Agreement, all governments agreed to implement the following principle–

Legislation should not restrict competition unless it can be demonstrated that:

• the benefits of the restriction to the community as a whole outweigh the costs; and

• the objectives of the legislation can only be achieved by restricting competition.31

As part of its implementation of the NCP agreement, the Victorian Government’s Competition Policy Task Force has issued Guidelines32 which require any proposed regulation to be evaluated through the Regulatory Impact Statement (RIS) process.

According to these Guidelines, the RIS must state whether or not the proposed Regulations contain a restriction on competition and provide sufficient documentation to support the arguments used and the conclusions reached.

To successfully pass the competition and cost-benefit tests, for each proposed regulation it is necessary to–

31 State Government of Victoria (1996) National Competition Policy, Review of Legislative Restrictions on Competition, Guidelines. 32 Published by the Department of Premier and Cabinet in December 1995, and revised in January and May 1996. 30

• Step 1: Identify the restriction on competition, if any;

• Step 2: Show that the restriction, if any exists, is necessary to achieve the objective;

• Step 3: Assess the costs to the community caused by the restriction;

• Step 4: Assess the community benefits; and

• Step 5: Assess whether benefits outweigh the costs.

If no restriction on competition is found in the course of Step 1, it is not necessary to complete the remaining steps (that is, Steps 2 to 5).

This section evaluates the extent to which the proposed Regulations pass the competition and cost-benefit tests set out in the Competition Policy Task Force Guidelines.

5.2 NCP assessment

5.2.1 Relevant markets

Assessment against the NCP Guidelines involves consideration of the relevant markets and market participants and the impacts on them of the proposed Regulations.

The proposed Regulations will affect those visitors (and potential visitors), Boards of alpine resorts, and commercial organisations (and potential entrants) who provide services within or in the vicinity of the resorts.

A market exists when buyers and sellers of a product interact with one another and engage in exchange. While few markets are perfectly competitive, a key characteristic of competitive markets is that buyers and sellers are mobile.33 Within the market, this mobility leads to buyers being able to move between alternative sellers, and sellers are able to move between alternative buyers. When the price of a product rises, this also includes the ability of consumers to switch to the consumption of alternative products (that is, to substitute one product for another). Where products are close substitutes, the delineation of the boundaries between markets is not always straightforward.

Within alpine resorts and leisure activities, the relevant potential markets could be–

• alpine resorts in Victoria, and alpine resorts in other parts of Australia and overseas;

• other recreational experiences, such as holidays to national parks, theme parks, and coastal holidays, or other activities such as sky diving or rafting.

33 Richard H Leftwich and Ansel M Sharp, (1982) Economics of Social Issues, Business Publications Inc., Fifth Edition, , p.32. 31

The experience offered by alpine resorts, including the opportunities for winter sports, is not unique to Victoria, and Victorian resorts are in competition with alpine resorts in other parts of Australia and overseas (for example, New South Wales and New Zealand). However, potential visitors to alpine resorts would also assess the costs (and benefits they would derive) from visits to alpine resorts with alternative leisure activities. Therefore, some substitution of visits to alpine resorts with alternative leisure activities (for example, a visit to a sub-alpine national park, or a coastal holiday to Queensland or the Asia/Pacific region) would be expected. However, the degree of this substitution is not known.

5.2.2 Competitive neutrality policy

The proposed access and use fees are expected to apply a fair application of the user- pays principle and thus contribute to the principle of competitive neutrality.

In April 1995, the Commonwealth and all State and Territory governments signed three interrelated agreements, which collectively underpin National Competition Policy. Under the Competition Principles Agreement (CPA), Victoria is obliged to apply competitive neutrality policy and principles to all significant business activities undertaken by government agencies and local governments.34

The objective of competitive neutrality is set out in Clause 3(1) of the CPA as–

The elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government business should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business, non- profit activities of these entities.35

The Victorian Government’s policy is that competitive neutrality measures should be introduced where the expected benefits of introduction outweigh the costs and where the proposed measure does not jeopardise other public policy objectives. If there is a potential conflict with other public policy objectives a public interest test may be required to explore options.36

Full cost-reflective pricing is one of the most common ways of implementing competitive neutrality and should take into account all of the costs that can be attributed to the provision of the good or service plus the competitive advantages and disadvantages of public ownership. Conversely, advantages and disadvantages that accrue from sources other than government ownership are not relevant.

The competitive advantages of public ownership arise from additional costs (or other factors affecting the supply of goods or services) which would be faced by a government business if it were a private firm.

34 Department of Treasury and Finance, (2000), Competitive Neutrality Policy Victoria 2000, Melbourne, p.1. 35 Ibid. p.4. 36 Ibid. 32

Competitive advantages of public ownership may include–

• exemptions from taxes such as payroll tax, land tax, Financial Institutions Duty (FID), and debits tax;

• exemptions from other levies and duties such as stamp duties, accident compensation levy and local rates and charges imposed on land;

• exemption from the requirement to earn a rate of return on capital funds which could otherwise be used elsewhere; and

• access to various corporate overheads free of charge, e.g. office accommodation, payroll services, human resource and IT services, insurance.

Competitive disadvantages of public ownership may include–

• different public sector employment and industrial relations requirements;

• greater accountability costs due to public sector reporting and regulatory requirements;

• compliance with government specific legislation, regulation or directives, e.g. FOI; and

• limited flexibility in reducing or restructuring corporate overheads.

5.2.3 Competition tests

Having identified the relevant markets, the next step in the NCP assessment process is to consider how the proposed Regulations will impact on the markets in contrast with how the markets would function in the absence of the proposed Regulations. If entry to the market were to be limited, made more costly, or the number of firms would be reduced, then the proposed Regulations contain a restriction on competition.

Maximum access and use fees

The proposed maximum access and use fees do not contain any of the restrictions on competition outlined above. They pass the initial tests (Step 1 above). That is, they:

• do not allow only one company or person to supply a good or service (monopoly);

• do not require producers to sell to a single company or person (monopsony);

• do not limit the number of producers of goods and services to less than four (duopoly or oligopoly); 33

• do not limit the number of persons engaged in an occupation.37

All visitors (and potential visitors) will experience the same regulatory environment in relation to maximum access and use fees. While the proposed maximum fees may enable Boards to increase their actual access and use fees, the fees are imposed to recover increased costs of provision to those who derive a direct benefit from the facilities and services provided. The proposed Regulations do not impose restrictions on consumers, who can weigh up whether to switch to the consumption of alternative products. To the extent that they impact on commercial businesses that transport visitors, or provide services to visitors, all operators (and potential operators) would be affected by the same regulatory environment.

It is consistent to set maximum entry fees for all resorts and then allow each resort to competitively set its own actual entry fees below that maximum. A similar situation occurs in a number of markets – for example, in taxis a maximum fee is set, but drivers can discount below this. Similarly, in the book market, there is a recommended price, but competitive discounting below take place. On the contrary, to set a different maximum fee for each resort would be anti-competitive, because it would force by regulation some resorts to charge lower fees than others, rather than the fees being set according to market forces below the single maximum.

The proposed Regulations also contribute to the competitive neutrality principle (that is, the need for fair competition with other private sector businesses in the same market).

Carriage of wheel chains

On the other hand, the proposed change in relation to carriage of wheel chains does represent a restriction on competition, by potentially making the resorts other than Falls Creek and Mt Hotham marginally cheaper to visit on certain days. On days that the requirement to carry wheel chains is waived at the other resorts, visitors who hire wheel chains may save around $25 per day. Visitors who own their own wheel chains would not save any costs.

Thus some visitors who choose to visit the Falls Creek or Mt Hotham resorts may incur an additional cost of $25 per day in hiring of wheel chains, compared to other resorts where the requirement to carry wheel chains may be waived on particular days. However, as discussed in Part 4.0 of this RIS, this cost would only be a minor proportion of the total cost of visiting the Falls Creek or Mt Hotham resorts.

The benefits of this restriction relate to public safety at Falls Creek or Mt Hotham. These resorts are higher in altitude than the others and are subject to more extreme weather conditions, increasing the risk of snow and ice on the roads. The cost to life and property of a vehicle without wheel chains slipping off an icy road or colliding with other vehicles could be very high. On public safety grounds, the Victoria Police are opposed to the Falls Creek and Mt Hotham Boards having the discretion to waive

37 Competition Policy Task Force (1995) Guidelines for the Application of the Competition Test to New Legislative Proposals, Department of the Premier and Cabinet, Melbourne. 34 the requirement to carry wheel chains and the Boards of Mt Hotham and Falls Creek do not wish to have this option.

For these reasons, the benefits of the restriction of competition relating to wheel chains clearly outweigh the costs.

References

Competition Policy Task Force (1995) Guidelines for the Application of the Competition Test to New Legislative Proposals, Department of the Premier and Cabinet, Melbourne.

Department of Natural Resources and Environment (1998) Regulatory Impact Statement - Alpine Resorts (Management) Regulations 1998, Melbourne.

Department of Sustainability and Environment (2004) Alpine Resorts 2020 Strategy, Melbourne.

Department of Treasury and Finance (2004) Setting Fees and Charges Imposed by Department and Budget Sector Agencies Guidelines BFMG-21, Melbourne.

Department of Treasury and Finance, (2000), Competitive Neutrality Policy Victoria 2000, Melbourne. .

KPMG Consulting (2000) Victorian Alpine Resorts – Economic Significance Study 2000, Alpine Resorts Co-ordinating Council, Melbourne.

Leftwich, Richard H., and Sharp, Ansel M., (1982) Economics of Social Issues, Business Publications Inc., Fifth Edition..

Office of Regulation Reform (undated) Regulatory Impact Statement Handbook, Melbourne.

Rivers, G., and Ward, I., (2002), Economics in the Business Environment, Pearson Education.

State Government of Victoria (1996) National Competition Policy, Review of Legislative Restrictions on Competition, Guidelines, Department of the Premier and Cabinet, Melbourne 35

Appendices

Appendix 1 – Glossary of selected economic terms

CPA: Competition Principles Agreement. Elasticity of The degree of responsiveness of quantity demanded to a demand: change in price.38 Elasticity of The degree of responsiveness of quantity demanded to a supply: change in price.39 Elasticity: A concept used to assess the responsiveness of one variable to changes in another variable.40 Externalities: Costs or benefits related to good or service that fall on others besides buyers and sellers of that particular good or service.41 Free rider: Anyone who receives benefits from a good or service without having to pay for them. Full cost: The total cost of all resources used in the production of anything for which a cost measure is required.42 Fixed costs: Costs unaffected by product or service delivery levels eg: finance expenses, administrative overheads and rental costs.43 Inelastic: The percentage change in quantity is less than the percentage change in price. Marginal A change in total cost resulting from a unit change in cost: output. Monopoly: A market structure such that only one firm supplies the entire market. Monopsony: A market dominated by one buyer. Natural Industry in which economies of scale (see Glossary) makes monopoly: it possible for an established firm to effectively prevent rivals from entering the industry. Oligopoly: A market dominated by a few sellers. Public good: A good or service that will not be produced in private markets because there is no way for the producer to keep those who do not pay for the good or service from using it. Regulatory A charge for the granting of access rights to engage in a fee: desired activity.44 Tax: A compulsory monetary contribution imposed by an Act of Parliament for government revenue purposes and levied on incomes, property, goods purchased, etc.

38 Rivers, G., and Ward, I., (2002), Economics in the Business Environment, Pearson Education. 39 Ibid. 40 Ibid. 41 Ibid. 42 Department of Treasury and Finance, (2004), Setting Fees and Charges Imposed by Departments and Budget Sector Agencies, Guideline BFMG-21, Melbourne. 43 Ibid. 44 Department of Treasury and Finance, (2004), Setting Fees and Charges Imposed by Departments and Budget Sector Agencies, Guideline BFMG-21, Melbourne. 36

Appendix 2 – Calculation of maximum access and use fees

The purpose of this appendix is to-

• estimate the range of costs per visitor day using data for the period 1985 to 2002 provided in the Alpine Resorts 2020 Strategy, and data from the questionnaires completed by the resorts collected for this RIS; and

• explain the basis of the calculation of maximum access and use fees in the proposed regulations, in accordance with the principles set out in Part 4.3.1 of this RIS.

Data from the Alpine Resorts 2020 Strategy has been analysed and compared with data from the questionnaires completed by the resorts. The relevant key findings are presented in the following tabular format.

Table A1 shows the range of the number of winter visitor days for each resort during the period 1985 to 2002.

Table A1: Range of the number of winter visitor days (‘000) by resort 1985 - 2002 Resort Highest Typical Average Typical; Lowest recorded good season47 poor recorded49 45 season46 season48 Mt. Hotham 348 (2000) 300 225 150 154 (1993) Mt. Buller 578 (2000) 550 435 320 136 (1993) Falls Creek 397 (1988) 365 320 275 265 (1993)

Mt. Baw Baw 71 (1989) 64 46 27.5 15 (1988) Lake Mountain 200 (1990) 157 124 90 35 (1993) Mt. Stirling 33 (1985) 10 7 4 3 (1993)

The total cost of providing visitor services at each resort in 2002 is shown in Table A2. The total costs for 2003 and 2004 are estimates, based on assumptions regarding visitation and associated costs for a ‘good’, or a ‘poor’ season. The visitation levels for a ‘good’ and a ‘poor’ season at each resort are presented in Table A1.

45 Data from Alpine Resorts 2020 Strategy. 46 Data from the questionnaires completed by the resorts. 47 Extrapolated from range of figures supplied in questionnaires. 48 Data from Alpine Resorts 2020 Strategy. 49 Data from the questionnaires completed by the resorts. 37

Table A2: Expected cost of providing visitor services (actual costs in 200250 and estimated costs in 2003 and 2004 for a good and a poor season) from questionnaires

2002 2003 2004 (Actual) (Estimated) (Estimated)

$000’s $000’s $000’s season good poor good poor average 51 Mt. Hotham 1890 1834 1520 1889 1704 1520 Mt. Buller 1896 1952 1939 2008 1995 1982 Falls Creek 2108 2232 2029 2299 2194 2090

Mt. Baw Baw 510 560 525 570 554 538 Lake Mountain 1530 1800 1300 1486 1329 1173 Mt. Stirling 227 233 234 233 233 234

Table A3 presents the estimated average cost per visitor day, including GST, for each resort and for each category of snow season. These figures have been calculated by dividing the estimated cost of visitor services for an average season in 2004 (Table A2) by the average $cost per visitor day (inc. GST) for 2004 (Table A3). The average cost per visitor day ranges from $3.80 at Mt Buller in the best season to $85.43 at Mt Stirling in the worst season.

The cost items included in the calculation of visitor services costs were as follows:

• Gate entry/fee collection • Village transport • Visitor information • Water Supply • Community facilities • Garbage Collection and Removal • Ski patrol • Sewerage • Traffic and parking • Workshop/ Village Facilities • Snow clearing • Vehicle fleet • Snow making • Administration • Cross country trails • Depreciation

50 It assumed for the purposes of this paper that depreciation costs are calculated in a similar manner for each resort. 51 Average of figures for good and poor seasons. 38

Table A3: Range of estimates of average $cost per visitor day (inc. GST) for 200452

Resort Best Good Average Poor Worst season53 season54 season55 season56 season57 Mt. Hotham 5.39 6.25 8.33 12. 50 12.17 Mt. Buller 3.80 3.99 5.04 6.86 16.14 Falls Creek 6.08 6.61 7.54 8.77 9.12

Mt. Baw Baw 8.58 9.52 13.25 22.16 40.63 Lake Mountain 7.31 9.31 11.79 16.74 37.97 Mt. Stirling 7.76 25.63 36.61 64.08 85.43

Basis of maximum access and use fees

Having regard to National Competition Policy, it is not appropriate to set a different maximum entry fee for each resort or for the large and small resorts. Such an approach would be anti-competitive, because it would force by regulation some resorts to charge lower fees than others, rather than the fees being competitively set according to market forces below a single maximum. There is also doubt whether this would be legally possible under the Alpine Resorts (Management) Act 1997.

The maximum fee should be structured to encourage efficient provision of services to visitors and to enable recovery of reasonable costs. The fee regime should not encourage ‘cost padding’ (that is, inefficient service provision). A difficulty with setting a maximum fee that is too low is that it discourages investment and provision of adequate services in the future.

Setting the maximum based on the average $cost per visitor day plus GST for the worst season at one of the minor resorts (eg: Mt. Baw Baw at $40.63 or Lake Mountain at $37.97) or a poor or worst season at Mt. Stirling would result in a maximum that is far too high for the major resorts, and which has therefore been rejected as impractical.

The most appropriate basis for setting the maximum fee is on the highest cost per visitor day plus GST during an average season at any of the resorts other than Mt. Stirling58 i.e. Mt Baw Baw at $13.25. The 17 years of visitation data from 1985 –

52 Calculated by dividing estimated visitor costs for good and poor seasons (as supplied in questionnaires) by the number of visitor days in each category. 53 Data from Alpine Resorts 2020 Strategy. 54 Data from the questionnaires completed by the resorts. 55 Extrapolated from range of figures supplied in questionnaires. 56 Data from Alpine Resorts 2020 Strategy. 57 Data from the questionnaires completed by the resorts. 58 Mt. Stirling is a special case, and is not considered representative of the other resorts. To maximise cost-efficiencies, a single Board to manage the Mt. Buller and Mt. Stirling resorts was created by the Alpine Resorts (Management) (Amendment) Act 2004. 39

2002 is considered sufficiently representative to base the maximum fee on an average season, on the assumption that revenue from poor and good seasons will balance out over that period of time. Basing the maximum fee on an average season at Mt. Baw Baw will, over time, enable the recovery of visitor service costs at all resorts except Mt. Stirling.

Maximum daily access and use fees per motor vehicle

The average ratio of visitors to motor vehicles and motorcycles for each resort is as followsTable A4: Occupancy by vehicle type (in 2002) from questionnaires

Resort Motor vehicles Motorcycles Mt. Hotham 3.1 1 Mt. Buller 3.0 1 Falls Creek 3.3 1.5

Mt. Baw Baw 3.2 1 Lake Mountain 3.6 1 Mt. Stirling 3 1

Taking into account the weightings for different visitor numbers at each resort, the mean ratio of visitors to motor vehicles for all resorts is 3.17. Multiplying the maximum daily entry fee in the preferred option of $13.25 per visitor by 3.17 gives a maximum daily entry fee plus GST per motor vehicle of $42.00.

Maximum annual access and use fees per motor vehicle

The current annual fee per motor vehicle of $277.20 is exactly 12 times the daily entry fee per vehicle of $23.10. Maintaining the same ratio, a maximum daily motor vehicle entry fee of $42.00 would produce a maximum annual motor vehicle entry fee of $504.00

*** 40

Appendix 3 – Draft Regulations 41

STATUTORY RULES 2004

S.R. No…..

Alpine Resorts (Management) Act 1997

Alpine Resorts (Management) (Amendment) Regulations 2004

The Governor in Council makes the following Regulations: Dated:

Responsible Minister:

JOHN THWAITES Minister for Environment

Clerk of the Executive Council

1. Objective The objective of these Regulations is to amend the Alpine Resorts (Management) Regulations 1998 to–

(a) prescribe maximum fees for persons to access or use set-aside areas in alpine resorts; and

(b) make further provision for the carriage of wheel chains in vehicles; and

(d) make other miscellaneous and consequential amendments to those regulations.

2. Authorising provision These Regulations are made under section 57 of the Alpine Resorts (Management) Act 1997. 42

3. Commencement These Regulations come into operation on 1 June 2005.

4. Principal Regulations In these Regulations, the Alpine Resorts (Management) Regulations 19981 are called the Principal Regulations.

5. Definitions In Regulation 5 of the Principal Regulations– (a) insert the following definitions– “commercial motor vehicle” has the same meaning as in the Road Safety Act 1986;

“contractor” includes an employee or sub-contractor of a contractor;

“day visitor” means a person who enters an alpine resort after 7.00am and leaves the alpine resort before midnight on the same day;

“motor cycle” has the same meaning as in the Road Safety Act 1986;

“motor vehicle” ” has the same meaning as in the Road Safety Act 1986, but does not include a commercial motor vehicle or a motor cycle;

“prescribed Board” means– (i) the Lake Mountain Alpine Resort Management Board; or (ii) the Mount Baw Baw Alpine Resort Management Board; or (iii) the Mount Buller and Mount Stirling Alpine Resort Management Board.

(b) in the definition of “vehicle”, omit “within the meaning of the Road Safety Act 1986” where first and secondly occurring;

6. Board may set aside areas for public use (1) In regulation 10(1)(h) of the Principal Regulations, for “is permitted.” substitute “is permitted; or”.

(2) After regulation 10(1)(h) of the Principal Regulations insert– 43

“(i) as an area where the parking of vehicles or classes of vehicles is permitted; or (j) as an area where downhill skiing is permitted during the snow season; or (k) as an area where any other public use is permitted.”.

7. Board may grant authority for certain purposes

In regulation 13(1) of the Principal Regulations, for “regulation 14, 20” substitute “regulation 14(1), 15(1), 16(1)”.

8. Division 1 of Part 3 substituted

For Division 1 of Part 3 of the Principal Regulations substitute- "Division 1 - Fees for Access or Use of Alpine Resorts" 14. Offence to enter an alpine resort as a bus passenger without paying fee

(1) A person must not enter an alpine resort as a passenger in a bus unless that person has paid the fee determined by the relevant Board in accordance with sub-regulation (2). Penalty: 5 penalty units.

(2) A relevant Board may determine a fee that is payable for persons to access or use areas in the alpine resort for which that Board is responsible that are set aside by or under regulations made under the Act for public use.

(3) The fee determined by the Board under sub- regulation (2) for entry to the alpine resort during the snow season must not exceed $13.25.

(4) The fee determined by the Board under this regulation for entry to the alpine resort in the off- season must not exceed one-third of the amount specified in sub-regulation (3).

15. Offence to enter an alpine resort in a motor vehicle without paying fee

(1) A person must not enter an alpine resort in a motor vehicle unless the fee determined in accordance with sub-regulation (3) by the relevant Board has been paid. Penalty: 5 penalty units. 44

(2) Sub-regulation (1) does not apply to a person if the person enters the alpine resort in a motor vehicle in respect of which an annual fee determined in accordance with regulation 16A(l) by the relevant Board has been paid.

(3) A relevant Board may determine a fee that is payable for persons to access or use areas in the alpine resort for which that Board is responsible that are set aside by or under regulations made under the Act for public use.

(4) In the case of entry to the alpine resort in a motor vehicle during the snow season, the fee determined by the Board under sub-regulation (3) must not exceed-

(a) $42.00 for the motor vehicle for each day that the motor vehicle remains in the alpine resort; or

(b) if the Board so determines –

(i) if the motor vehicle contains the minimum number (as determined by the Board) of persons or more, $39.75 for the motor vehicle for each day, that the motor vehicle remains in the alpine resort; or

(ii) if the motor vehicle contains less than the minimum number of persons, $13.25 for each person in the motor vehicle for each day that the motor vehicle remains in the alpine resort.

(5) The fee determined by the Board under this regulation to access or use areas in the alpine resort in the off-season must not exceed one-third of the amount specified in sub-regulation (4).

16. Offence for persons to enter alpine resorts by means other than in buses and motor vehicles without paying fee

(1) A person must not enter an alpine resort, other than as a passenger in a bus or in a motor 45

vehicle, unless the fee determined in accordance with sub-regulation (2) by the relevant Board has been paid.

Penalty:5 penalty units.

(3) In the case of entry to the alpine resort during the snow season, the fee determined by the Board under sub-regulation (2) must not exceed $13.25 for each person for each day that the person remains in that alpine resort.

(4) The fee determined by the Board under this regulation to access or use areas in the alpine resort in the off season must not exceed one- third of the amount specified in sub-regulation (3).

16A. Power of Boards to determine annual fee for access or use of alpine resorts

(1) A relevant Board may determine a fee that is payable in respect of a motor vehicle, for access or use by persons entering an alpine resort for which that Board is responsible in that motor vehicle, of areas in that alpine resort that are set aside by or under regulations made under the Act for public use at any time during any period of 12 months determined by the Board.

(2) The fee determined by the Board under sub- regulation (1) must not exceed $504.00.

(3) The Board may determine to reduce or waive the fee determined under sub-regulation (1) if the person applying to pay the fee has paid an annual fee to access or use such set aside areas in another alpine resort in respect of that vehicle for that year. 46

16B. Considerations Board must take into account in determining fees

In determining a fee under regulation 14(2), 15(3) or 16(2), a relevant Board must take into account - (a) any commercial considerations; or (b) any marketing considerations. 16C. Classes of person not required to pay access or use fees

A person who is in any one of the following classes is not required to pay a fee determined by a relevant Board under this Division in relation to the alpine resort for which that Board is responsible –

(a) a person acting in accordance with an authority issued by the relevant Board that allows that person to access or use the areas in the alpine resort set aside by or under regulations made under the Act for public use without paying the fee for that access or use;

(b) a person authorised to access or use the areas in the alpine resort set aside by or under regulations made under the Act for public use without paying the fee for that access or use by -

(i) a lease, licence or other agreement issued under the Act or a corresponding previous enactment; or

(ii) a lease or licence issued under the Crown Land (Reserves) Act 1978 in respect of the alpine resort;

(c) a person entering the alpine resort during the off-season who is not given a reasonable opportunity to pay the fee for access and use of the areas in the alpine resort set aside by or under regulations made under the Act for public use; 47

(d) a person travelling directly through the alpine resort to a place outside that resort;

(e) a member, employee, agent or contractor of the Council or the relevant Board of the alpine resort who is acting in the course of his or her duties as such a member, employee, agent or contractor in the alpine resort;

(f) an authorised officer who is acting in the course of his or her duties as such an officer in the alpine resort;

(g) a person who has entered the alpine resort at the request of the Board for the purpose of assisting the Board in search and rescue activities.

16D. Board may reduce or waive fees for access or use of alpine resorts

A relevant Board may determine to reduce or waive a fee determined under this Division that is payable for a person to access or use areas in the alpine resort for which that Board is responsible if the Board is satisfied that -

(a) the person is in the course of conducting official business with the Board; or

(b) the person has been invited by the Board (in the course of carrying out its functions) to enter the resort; or

(c) in respect of any day, a fee has already been paid on that day for that person to access or use areas in another alpine resort; or

(d) the person is a pilot of a helicopter that has entered the alpine resort for the purpose of bringing other persons to the resort to access or use areas in the resort.

10. Board may issue helicopter entry permit

In regulation 17(1) of the Principal Regulations for “On payment of a fee determined by the Board under regulation 18, the” substitute “The”. 48

11. Revocation of regulations 18 and 19

Regulations 18 and 19 of the Principal Regulations are revoked.

12. Revocation of Division 3 of Part 3

Division 3 of Part 3 of the Principal Regulations is revoked.

13. New regulation 54A inserted After Regulation 54 of the Principal Regulations insert– “54A Prescribed Board may waive carrying of wheel chains on certain days” (1) A prescribed Board may determine that regulation 54 does not apply to day visitors on a specified day in an alpine resort for which the Board is responsible. (2) The prescribed Board may make a determination under sub-regulation (1) on the day specified in the determination or on the day prior to that day in relation to either–

(a) all vehicles, when entering or remaining in the alpine resort; or

(b) those classes of vehicles that are specified in the determination, when entering or remaining in the alpine resort. (3) In making a determination under sub-regulation (1), the prescribed Board must take into account public safety considerations, including– (a) the general conditions of the roads; and (b) the extent of any snow or ice on the roads; and (c) the latest available weather forecasts. (4) The prescribed Board must ensure that signs or notices informing the public of a determination made under sub-regulation (1), including any details relating to the determination, are displayed adjacent to roads within the alpine resort in such a place and manner that those details are reasonably likely to be seen by any person affected by them.”. 49

13. Revocation of Schedule 2

Schedule 2 to the Principal Regulations is revoked.

ENDNOTES

1Reg 4. S.R. No. 46/1998 as amended by S.R. No. 71/2000.