Ministerial inquiry into sustainable transport in New South Wales Options for the future
INTERIM REPORT August 2003
iii
Contents
Overview ix
Summary of reform options xvii
1 Introduction 1 1.1 Terms of reference for this inquiry 1 1.2 Report structure 2
2 Overview of public transport in New South Wales 4 2.1 Transport in the Greater Sydney Area 5 2.2 Transport in rural and regional New South Wales 7 2.3 The Commonwealth Government and public transport in New South Wales 8 2.4 Rail services in New South Wales 10 2.5 Public bus and ferry services 13 2.6 Private bus services 16 2.7 Other services 18
3 Challenges in delivering better services in the Greater Sydney Area 19 3.1 Challenges to improving services in rail 19 3.2 The need for bus reform 30 3.3 Achieving efficiencies in ferry services 32 3.4 The potential for expansion of light rail 33
4 Revenue needs for the government-operated public transport network 35 4.1 Revenue needs for metropolitan rail 38 4.2 Revenue needs for STA buses 48 4.3 Revenue needs for Sydney Ferries 53 4.4 Revenue needs for CountryLink 56
5 Funding options 58
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5.1 Principal funding sources 59 5.2 Criteria for assessing funding options 60 5.3 User-pays funding options 61 5.4 Beneficiary-pay funding sources 62 5.5 Private funding options 69 5.6 Public investment options 76 5.7 Summary of funding options 80 5.8 Observations 81
6 Fair fares: equity and efficiency 83 6.1 Requirements for public transport fare structures 84 6.2 Existing ticketing products and fare structures 88 6.3 Options for ticketing reform using smart cards 92 6.4 Options for improved fare integration 93 6.5 Observations 100
7 Service quality regulation, incentives and fares 101 7.1 Current arrangements for regulating quality 101 7.2 Service quality measurement: the role of KPIs 103 7.3 Linking fares and quality of service 105 7.4 Observations 109
8 Charging for road use 111 8.1 Achieving the efficient use and provision of roads 112 8.2 Problems with the current practice 112 8.3 Bearing the costs of NSW roads 113 8.4 The need for road use reform 117 8.5 Tolling on selected arterial roads 120 8.6 Where to from here? 120 8.7 Charging for road use in the Greater Sydney Area 121 8.8 Options for road pricing 123 8.9 Observations 132
9 Decision criteria for choosing transport projects 133 9.1 Possible future investments in transport infrastructure 134 9.2 From broad policy objec tives to projects, not vice versa 136 9.3 Appraisal approaches in New South Wales and elsewhere 138 9.4 What is required to avoid limitations of the past approach? 141
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9.5cThe consequences of a non-integrated approach 144 9.6 Observations 149
10 Concessions and community transport 150 10.1 Overview of concessions and community transport services 151 10.2 The need to better target funding 155
APPENDIXES 169
A Train users in Sydney 171
B Bus users in Sydney 175
C CityRail service and reliability standards 179
D Achieving the efficient use and provision of roads 181
E Examples of charging for road use 186
F Submissions 192
Abbreviations 198
Glossary 200
Boxes, charts and tables 2.1 Trips by residents on an average weekday, Sydney Statistical Division, 1991 and 2001 6 2.2 Journeys to work by private vehicles 7 2.3 CityRail customers’ purposes of travel Average weekday 11 2.4 CityRail sources of revenue, 1998-99 to 2002-03 12 2.5 Percentage of CityRail costs recovered directly from fares 13 2.6 STA customers’ purposes of travel 14 2.7 Sydney Buses sources of revenue, 1998-99 to 2002-03 14 2.8 Sydney Ferries sources of revenue, 1998-99 to 2002-03 15 2.9 Newcastle Bus and Ferry Services revenue sources, 1998-99 to 2002-03 16 2.10 Revenue sources on average for private bus operators under commercial contract in the Greater Sydney Area 18 3.1 CityRail’s three sectors 23 3.2 Existing train services that affect best practice network operation 26
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4.1 Combined government-operated transport agencies forecast annual net funding position, 2003-04 to 2010-11 35 4.2 What is the ‘funding gap’? 37 4.3 Peak one-hour loading pressure 40 4.4 CityRail forecast annual net funding position, 2003-04 to 2010-11 42 4.5 STA performance against key performance indicators 49 4.6 Sydney buses forecast annual net funding position, 2003-04 to 2010-11 50 4.7 Newcastle Bus and Ferry Services forecast annual net funding position, 2003-04 to 2010-11 51 4.8 Sydney Ferries performance against key performance indicators 54 4.9 Sydney Ferries forecast annual net funding position, 2003-04 to 2010-11 54 4.10 CountryLink net funding position, 2002-03 56 5.1 Main types of public–private partnership 71 5.2 Potential risk transfer in public–private partnerships 71 5.3 Summary of issues associated with principal funding sources 82 6.1 Transport fares in Sydney benchmarked against other international cities, 2002 84 6.2 Average recovery of above -rail costs for CityRail, 1996-97 to 2001-02 86 6.3 Sydney bus fares for different ticket products, 2003 89 6.4 Integrated CityRail and STA fares, 2003-04 89 6.5 CityRail fares for different ticket products, 2003 90 6.6 Single fares, STA and selected private buses, 2003 91 6.7 Fare structures within the Greater Sydney Area 91 6.8 Fare structures—strengths and weaknesses 94 6.9 Transport fares in Sydney fall as distance travelled increases, 2002 97 8.1 RTA expenditure and funding, 2001-02 114 8.2 Fuel excise and federal government road funding 116 8.3 Total traffic volume in Sydney, 2003 and 2015 117 8.4 Congestion delays on Sydney’s arterial road network 118 8.5 Additions to Sydney’s arterial road network 119 8.6 Cordon charges are likely to be regressive 125
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8.7 An opportunity for rational road use charging—road pricing on the M5 East? 129 10.1 Concession and community transport expenditure estimates, by funding source, 2002-03 155 10.2 Students receiving subsidised school travel, by state, 1999 157 10.3 Ferry services provided for ‘phantom’ school students 158 A.1 Growth in train trips, total trips and residents by region, 1991–99 171 A.2 Proportion of train trips by fare type, average weekday, 1999 172 A.3 Proportion of train trips by ticket type, average weekday, 1999 173 A.4 Income of train and bus users, 1999 174 B.1 Summary of bus travel in Sydney, 2000 175 B.2 Proportion of bus trips by fare type, average weekday, 2000 176 B.3 Proportion of bus trips by ticket type, average weekday, 2000 177 B.4 Labour force status of bus users, 2000 177 B.5 Income of bus users (annual), 2000 178 F.1 List of public submissions received for the ministerial inquiry into public passenger transport 192
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Overview
THERE IS A WAY FORWARD to a more sustainable public transport system. This interim report proposes a number of options to be explored for delivering better and more sustainable outcomes in public transport. Submissions on this report will help refine our understanding of the problems and better develop options for the way forward.
Over $1.9 billion of taxpayer money goes to fund passenger transport services of one sort or another across New South Wales every year. This is around one-fifth of the total amount of money spent by the NSW Government on health each year and equivalent to the entire budget for police. Most of this money is spent in the metropolitan region in and around Sydney. The bulk is spent on general subsidies by government of CityRail’s capital and operating costs as well as direct subsidies by government for CityRail’s passengers. A substantial amount of taxpayer money also is spent on rural and regional transport, especially through payments to country private bus operators under the School Student Transport Scheme (SSTS), as well as subsidies to CountryLink.
It is hard to believe that taxpayers or the state are getting the best possible value from the large amounts of money being spent each year. This is not new; it has been a problem for many years facing govern- ments from all sides of politics. There are better ways to deliver public transport.
Even though public transport accounts for a small proportion of travel journeys compared with private motor vehicle use, it plays a significant role in terms of the state’s social, environmental and economic life. For many commuters, school students and those without access to private transport, public transport provides an essential service. There is no question that a vibrant, modern economy and society as in New South Wales demands an effective public transport system with an appropriate level of taxpayer subsidy. However, the public transport system needs to meet the needs of users and society efficiently and effectively, with the best possible value for money for taxpayers, users and others who may benefit from such a system.
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OVERVIEW
By international standards, public transport users in Sydney enjoy relatively cheap fares that reflect high levels of taxpayer subsidies. There is a clear case for transport users generally to contribute more to operating the current system and for users and other beneficiaries to contribute more to any expansion of the system. For rail in particular, the quality of service should be clearly aligned to funding increases sought from users. This approach raises the issue of the relationship between service and funding and management failures. In the past management failure has all too often penalised public transport users rather than those responsible. A mechanism that avoids rewarding management failures, but does not punish the transport systems or commuters, must be developed.
CityRail has much to do
It is often said that the CityRail network is like no other metropolitan rail network. The interaction of metropolitan, suburban, intercity and freight lines and services has resulted in an overly complex system. CityRail’s operational systems and timetables also are overly complex with some services meeting the peculiar travel needs of a very small number of passengers, often adversely affecting the reliable operations of large parts of the network.
CityRail has plans to ‘disentangle’ the networks by increasing the separation of the main lines—so-called ‘sectorisation’. This will require some new investment, as well as some operational and timetable changes. CityRail also needs to review its services to ensure that the system is configured and operated to best meet the needs of the whole network and the vast majority of the travelling public, with maximum possible system safety and operational reliability. ‘Sectorisation’ and associated operational changes inevitably will impact on some commuters, possibly requiring changes to their journeys, but will benefit the vast majority of all commuters with improved reliability and overall service enhancement.
The management and workplace practices and culture of CityRail need radical overhaul. Problems with safety and an alleged lack of a strong safety culture have been well canvassed over recent months. The problems seem to go further. There is no doubt that the majority of people working in CityRail take pride in their work; there are many instances of outstanding service. The performance of CityRail during the Olympics, albeit with very different operational conditions, demonstrates what can be delivered. However, there is an overwhelming sense that CityRail does not promote a real commitment to quality, customer focus and a service culture.
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OVERVIEW
Management and unions have a key role to play in ensuring the necessary changes take place. Government must ensure that these changes are delivered. Without such a commitment, CityRail will not be able to deliver the levels of safety, reliability, security and general service quality that customers will be prepared to pay for and taxpayers or others will be willing to invest in.
Passengers can get better value for money and pay a fairer share
There is arguably too much taxpayer subsidy of the overall public transport system relative to the other things that government must fund—education, health, family and community services, for example. One means of addressing this imbalance is better levels of cost recovery for the above-rail (efficient) operating costs of CityRail. Cost recovery varies across the entire network, with inner city and shorter distance suburban travel showing higher cost recovery. The more distant intercity services, such as to the Central Coast, the Blue Mountains and the South Coast, have very low levels of cost recovery from farebox (ticket sales) revenue. Cost recovery cannot be improved overnight; nor will the more distant services necessarily ever achieve the same level of cost recovery as the shorter, inner suburban journeys.
Calculating a ‘fair’ fare and the right target level for cost recovery in rail, bus and ferry transport is problematic: they will vary by distance and by service type. What is clear is that the level of cost recovery needs to be increased. What also is clear is that a sustained real increase in fares can be justified only if services are cost efficient, safe, reliable and of a high quality.
One option is for real fare increases for all transport services to be set by the Independent Pricing and Regulatory Tribunal of New South Wales (IPART) over a longer term price path (say, five years), with the extent of any increases above inflation tied to the delivery of improvements in service quality. The introduction of stored-value ‘smart card’ ticketing also could provide an opportunity to improve product and services across the transport system generally.
Funding and planning public transport has wider implications
One of the major issues involved in more sustainable ways of funding public passenger transport is the relationship between public transport and private transport. Private transport is by far the dominant form of transport across both the metropolitan region and the state. Large amounts of
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OVERVIEW
taxpayer funding go to road infrastructure, as well as privately funded and operated toll roads.
Motorists already pay substantial amounts for using motor vehicles, including registration charges and fuel excise. But they pay for specific road use on only tolled roads and crossings (such as the Harbour Bridge and Harbour Tunnel). This is at the heart of the dilemma: there is a general payment for private transport use but there is relatively little specific pricing of road use. As a result, private transport users do not get the same price signals from road pricing that public transport users get with fares for a parallel journey. And in the absence of transparent relative price signals, public transport will always be at some disadvantage to private car use.
Road pricing (as distinct from the charging to raise revenue from general motor vehicle ownership and use) is increasingly being used to both better manage congestion on roads and better signal the relative price of public versus private transport. But we are some way off being able to introduce a more targeted system of road use pricing—not least because effective road pricing designed to encourage greater use of public transport and ease road congestion (and better manage investments in new roads) must be accompanied by good quality, reliable public transport alternatives.
We need to look ahead and have the debate now about how targeted, specific road use pricing might fit into a future integrated approach to sustainable transport, especially in the Sydney metropolitan region. Such an approach needs to focus not only on better managing road congestion (and new investments in road infrastructure) but also on how road use pricing might send better relative price signals between public and private transport and generate funds for investment in public transport infrastructure.
At the same time, it is clear that there must be a much better framework for planning investment in future transport needs. The past lack of integration between road and public transport planning and the failure to apply robust investment rules to both road and other transport infrastructure represent a significant and costly shortcoming. The new Department of Infrastructure, Planning and Natural Resources presents an opportunity to better coordinate planning for road and public transport infrastructure and impose a disciplined and transparent decision framework on the investments.
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OVERVIEW
Government (and taxpayers) must get better value from transport expenditure and better meet the community’s transport needs
There is no doubt that some of the transport services operated by CityRail and the State Transit Authority (STA) do not represent good value for money. Some STA ferry services carry few passengers, are costly to operate and provide a service that can far more efficiently be met by alternative bus services. The total dollars are relatively small, but do go to the important question of how best to meet the community’s transport needs with a given amount of taxpayer funds.
The CountryLink rail services provided by the State Rail Authority of NSW (SRA) fall into a similar category, but the dollars are far greater. Few of the CountryLink intrastate train services are justifiable. They are used by very few people, are expensive to operate and will require major new investments in both below-rail infrastructure and rollingstock. CountryLink needs to be refocused. There must be better ways to provide services that meet the needs of rural and regional communities. For example, CountryLink coach services are a far more cost-effective means of providing rural and regional transport within the state. It is not obvious that these coach services are less safe or less speedy. Indeed, investing in CountryLink coaches, buses and coach stations in rural towns, with intrastate as well as regional community transport services, may better meet health and community transport needs and, thereby, provide far greater benefits to rural New South Wales.
A surprisingly large amount of taxpayer money (more than $800 million each year) is used to fund concessions and what is referred to as ‘community transport’. The largest items are seniors concessions ($173 million) and the School Student Transport Scheme ($427 million). There is also a lesser amount of money directed to health, disabled and rural community transport.
It is hard to believe that the taxpayer is getting best value for this large amount of money or that the current arrangements are best meeting society’s transport needs. Very large amounts are being directed to two specific schemes, with relatively less available to broader community needs, in particular rural and regional health and community transport. § The so-called ‘pensioner excursion ticket’ for use on government- operated public transport is a misnomer. It is in fact available to a much wider group of ‘seniors’, but only for government-operated services. The concession is not targeted to the least advantaged in our society—for example, those receiving some specific form of pension or those entitled to a health card. And it is not available to ‘pensioners’ for
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OVERVIEW
non-government services. There is little disagreement that senior citizens in general merit some form of transport concession. However, it is hard to see why a half-price concession is not the appropriate form of concession for the non-pensioner ‘senior’, with the more generous pensioner excursion ticket appropriately directed to ‘pensioners’ and health cardholders and available for use on government-operated and privately operated transport services across the state. § In any event, the ‘seniors’ ticket price has not been adjusted, other than for GST, since 1988. It has not even kept pace with inflation. The current payment of $1.10 for most journeys ($2.20 and $3.30 fares apply in outer suburban and rural areas) is patently too low and needs to be increased. § There is also a case for limiting access to the more generous pensioner excursion ticket to off-peak times. Evidence from the transport agencies show an increasing proportion of peak-hour travellers are using these tickets. For STA buses in particular, this is significantly adding to peak crowding pressures and, indeed, will increasingly influence rolling– stock investment requirements to meet peak-hour demands. Heavily discounted concession travel should be restricted to off-peak times.
The School Student Transport Scheme has been examined by many agencies over a number of years, most recently the Public Accounts Committee. There is little doubt that the scheme is far more generous and costly than any other similar state scheme in Australia and continues to grow rapidly. § At the most basic level, payments should be made only for actual student trips—not for so-called ‘phantom’ travel. There is also the issue of whether the concession should be limited in some way so as to better control the burgeoning size of the scheme. Further, the amount paid by the Ministry of Transport to metropolitan and rural private bus operators solely for the scheme appears well above what might be expected from a more competitive bidding process. § It is surprising that this large transfer of taxpayer funds ($348 million in 2002-03) to private bus operators is not being used to purchase a much more extensive and appropriate range of community transport services across the state. These issues are being examined in detail by the Unsworth inquiry into the bus industry.
There are several options for better targeting taxpayer funding of community transport across the state. There are areas of need not being adequately met, including the disabled and rural and regional health and
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OVERVIEW
community transport. The funds released from investing in a more appropriate CountryLink coach and bus service, as well as more targeted and better managed transport programs for pensioners, seniors and school students, will be more than adequate to deliver more and better transport services in these areas of need.
In summary
New South Wales cannot continue with the current arrangement for providing transport services—whether road, rail, bus or ferry and whether publicly or privately operated.
We have: § a metropolitan rail system that is so ‘tangled’ that it is unable to cope with necessary system changes, let alone essential service expansion § a government-operated bus system that is providing some services that are not obviously needed, yet a privately operated bus system that is not adequately servicing large parts of the state, especially in rural New South Wales § highly subsidised country passenger rail services that are not being effectively deployed to the overall benefit of rural and regional communities in meeting their health and community transport needs § expensive and poorly targeted school student transport and ‘pensioner’ excursion ticket schemes and disparities between different transport modes in the availability of fare concessions § a congested road network that provides no real price signals, § a costly public ferry service that includes what is effectively a subsidised water taxi service for mainly middle to high income earners and tourists § an underfunded community transport scheme that means that patients in regional and rural hospitals are not provided with even basic transport when they need it most.
We need: § a twenty-first century solution to create a sustainable transport system for the people of New South Wales, the cost of which will run into billions of dollars § some difficult decisions affecting all those involved—users, taxpayers and service providers
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§ better deployment of funds and efficiency measures to improve value from the nearly $2 billion that taxpayers currently spend each year on passenger transport alone – including changing the way in which CityRail delivers its services, CountryLink operates as a rural transport facilitator, and private bus operators are funded § extra funding from taxpayers as well as from real fare increases, and from refocusing existing subsidies for school students and seniors § some measures introduced immediately and others phased in over several years, including real fare rises.
We will then have: § a sustainable transport system that delivers a more functional, safe and reliable metropolitan rail system, with improved services and less overcrowding § rural and regional communities receiving more and better bus and coach services, including a major expansion of health and community transport § far greater equity in the application of concession schemes across transport modes, with pensioners accessing the same concessions on private buses as on the government-operated system § in time, a road system that is properly priced, sending the correct signals to users of transport services.
* * * * * *
I would like to thank the 289 individuals and organisations who have made submissions to this inquiry. I look forward to further submissions on the observations and options that have been put forward for further discussion in this interim report. Finally, I would like to thank the team that has assisted with the inquiry, including Ross Chapman and the Centre for International Economics, Liz Livingstone, Mark Duffy and Michael Petrie.
Thomas G Parry August 2003
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Summary of reform options
Rail sector § Simplify complex rail operating patterns through increased sectorisation and other changes that may include: – reversing poor past route and timetable decisions – simplifying complex stopping systems – investing in track infrastructure that allows better separation of services on the existing network – reforming crew rostering practices to align with simpler operating patterns – improving management of ‘close downs’ for periodic renewal of assets. § Replace some CountryLink rail services with CountryLink bus services. § Implement a five-year public contract for SRA’s Board and Chief Executive Officer that: – specifies delivery of designated quality improvements – specifies necessary changes to culture, operations and infrastructure that the CEO would be empowered to address to deliver designated improvements – provides guaranteed funding and independence from intervention when implementing unpopular temporary measures to achieve necessary change.
Bus sector § Give the STA a more ‘business unit’ structure, competing within itself to service its contract areas (East, North, etc) and subject to competition for these contracts (and the subsidy payments involved) every five years from private operators. § Subject future private contract areas to competition from STA businesses. Performance-based contracts for all operators should be required.
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SUMMARY OF REFORM OPTIONS
§ Enable the regulator to withhold fare increases when there is evidence of uncaptured efficiency gains that could be used to help fund quality improvements. § Ensure that the NSW Government rather than the STA makes all decisions on providing unprofitable or ‘CSO’ services that involve taxpayer funds.
Ferry sector § Improve the cost effectiveness of government-operated ferry services by separating ferry operations from the STA and establishing a Sydney Ferries Corporation that would focus solely on ferry services. § Review the private ferry contracting system with a view to removing fare regulation. Where a ferry operator is an essential part of the transport infrastructure, price monitoring may be the most appropriate form of government oversight.
Light rail sector § Integrate any planning for light rail expansion with planning for other transport modes, particularly in the central business district (CBD) of Sydney.
Fares and ticketing § Have IPART set real fare increases for all transport services over a longer term price path (say five years). To improve the acceptability of fare increases greater than the rate of inflation, service improvements would need to be delivered in conjunction with improvements in service ‘quality’. § Use the peak-period single-trip fare as the basic ticket product with the introduction of smart card ticketing. This could involve: – providing discounts only for off-peak travel and concessions, withdrawing periodical and other existing stored value tickets like TravelTen – setting the cash fare for a single trip at a premium to the smart card fare to reflect the higher costs – tying discounts to higher levels of stored value, adding frequent trip ‘bonuses’ to the card.
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SUMMARY OF REFORM OPTIONS
Other revenue options § Federal commitment Approach the federal government for a financial commitment to assist in the development of major public transport infrastructure. § Developer bonus Offer bonuses to developers who contribute financially to public transport. Development rights such as floor space bonuses could be offered, subject to the payment of a public transport levy. § Development density rights Sell development density rights to developers for use within infrastructure value capture districts, subject to predetermined urban planning and development outcomes, with the funds raised dedicated to public transport investment. § Section 94 Contributions Plans Consider either an expansion of Section 94 Contributions Plans to reflect both existing and new local and regional contributions or separate value capture legislation. § Increased commercialisation Use commercialisation opportunities in and around public transport facilities through, for example, the sale of property and airspace as a means of attracting private sector investment in public transport. § CBD employee tax Introduce an employee tax as a possible additional source of revenue from non-user beneficiaries of the public transport system—employers. The location of the workplace should determine whether the workplace is inside or outside the public transport perimeter. Rebates could be offered to employers for demonstrated off- peak employee travel work times. § Transport levy Place a transport levy on motor vehicles or households across New South Wales to be used specifically for transport funding. However, such levies would be difficult to justify without a corres- ponding reduction in fuel excise. Transport levies could take the form of: – a metropolitan special ‘transport improvement’ rate levied on a per property or ad valorem basis or a combination of both, or – a vehicle registration levy applied to vehicles registered in Sydney. § Property-based transport improvement levy Collect a transport improve- ment levy by increasing the council rate payable on residential and commercial properties in the Sydney metropolitan area. Rates could be levied on a flat or ad valorem basis. A hypothecated property rate could be based on a combination of both of these approaches.
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SUMMARY OF REFORM OPTIONS
§ Vehicle registration levy Levy an additional charge on vehicle regis- tration based on a range of variations including vehicle type, usage, weight, engine capacity, fuel type, kilometres travelled or age. The rate could be struck by calculating target revenue and percentages to be drawn from various categories. § Parking levy Further increase the existing parking levy and review the exemptions that currently apply to, for example, parking spaces in retail shopping centres.
Road pricing § Meaningful changes to road charges require two things to happen first: – federal government cooperation to rationalise the current taxation of motorists – a coordinated approach to providing public transport alternatives, particularly in new development areas. § The federal government should review taxation (for example, the fringe benefits tax), expenditure and other policies that are detrimental to the use of public transport. § The federal government should address the problems and inefficiencies of the fuel excise identified by a multitude of inquiries over the past 20 years as part of a sustainable approach to proper road pricing and public transport. § Road use charges could take two possible forms: – variable charges, which influence distance travelled and driving behaviour—examples being cordon pricing, electronic road pricing, distance and axle load related charges, and fuel taxes – fixed charges, which are tied to the vehicle and are paid annually or when the vehicle is purchased—examples being a registration charge or vehicle purchase tax. § An option for the future is electronic road pricing as a more sophisticated form of cordon pricing, which can address externalities associated with congestion, road wear and tear, environmental pollution, and accidents. As an example, congestion pricing could involve a pricing system that is capable of levying a variable congestion charge, with the charge dependent on: – time of day – location or trip route – number of other vehicles on the road at the time.
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SUMMARY OF REFORM OPTIONS
Future transport planning and investment § Establish a coherent and consistently maintained set of objectives for transport policy development and a realistic, sustainable strategic framework for developing, assessing and funding transport projects. This would involve: – adopting a consistent, transparent process in comparing projects – undertaking comparisons based on cost–benefit analysis across the transport sector including roads – considering the integration of the roads and other transport portfolios in the interests of a whole of transport polity. § Develop a multimodal plan, integrated with a metropolitan planning strategy. Requirements would include: – the development of overall objectives for the transport sector against which transport proposals can be assessed – similar scenario modelling for other modes (bus, car, etc) as has been developed for rail.
Community transport reforms § Fund SSTS based on actual travel. – Establish new funding arrangements for the SSTS based on the actual use of services. – Determine whether it is cost effective to install technology that allows electronic validation of tickets on private buses until integrated ticketing is implemented. – Alternatively, use updated data from the survey currently being undertaken for the Ministry of Transport to adjust funding formulas until integrated ticketing is available. – Examine the appropriate reimbursement rate for the purchase of school student travel. § Cap SSTS subsidies and co-payments. – Cap the level of subsidies for each student. The level of the cap could vary depending on location and available transport services. – Cap the total amount of money the government allocates to the SSTS. This amount could be indexed. – Introduce an annual application fee indexed at the rate of inflation.
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SUMMARY OF REFORM OPTIONS
§ Provide a broader range of services in rural and regional New South Wales. – Implement more flexible and cost effective private bus contracts that facilitate the provision of packages of services that better meet community transport needs, rather than provide for only limited school student transport. § Provide equitable pensioner excursion tickets. – Make available pensioner excursion tickets to eligible pensioners using the CityRail, the STA and metropolitan private bus networks. – Make seniors cardholders eligible for half-fare concessions rather than pensioner excursion tickets. – Pensioner excursion tickets not available for travel in the morning peak period (7.00 am to 9.00 am). – Abolish the existing metropolitan pensioner excursion ticket fare scales and replace them with one fare set at $2.50. – Increase the CountryLink pensioner excursion fare from $2.20 to $3.00. – Index and increase in future pensioner excursion ticket fares in 20 or 50 cent increments. § Ensure fairer funding of other concessions. – Provide the same concessions to private bus passengers as those provided to passengers of government operated services. – Review the government’s concessions policy to ensure it is fair and reflects social priorities. § Better coordinate community and health transport. – Bring local service providers and transport users together to develop plans for better services and promote coordination of available resources – Broker streamlined funding and administrative arrangements that meet local needs. The scope should include funding from Home and Community Care (HACC), the Community Transport Program (CTP) and SSTS and funding from other agencies including NSW Health. § Provide more funding for community transport. – Direct some savings from proposed changes to the SSTS and the pensioner excursion ticket and rationalisation of CountryLink services to increasing community transport services.
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SUMMARY OF REFORM OPTIONS
§ Introduce a wheelchair accessible taxi (WAT) scheme that meets community needs. – Provide incentive payments for WAT drivers that meet perform- ance standards for response times. – Or dedicate WAT vehicles and salaried employees of taxi networks to providing disabled and non-emergency health transport services. The vehicles would not be available for general hire.
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1 Introduction
PUBLIC TRANSPORT in New South Wales plays an important role in meeting the needs of the travelling public and in providing community- wide benefits in terms of sustainable urban development and access to services. The NSW Government is committed to providing a safe and reliable public transport system at reasonable cost to those who use it and to taxpayers who fund the large part of it. However, the future of the public transport system must be examined in terms of what the community needs, how those needs can be funded, and how public transport can best meet broader economic and social policy objectives.
1.1 Terms of reference for this inquiry
The Minister of Transport Services requested an inquiry into sustainable transport in New South Wales in May 2003. The purpose of the inquiry is to examine various aspects of the sustainability of transport, and to review and report on: § the likely future revenue needs of the CityRail and STA bus and ferry operations, having regard to efficient operating and capital costs for the networks § funding options to meet these revenue needs, as well as funding options for any future expansion of the public passenger transport system § options for enhancing the optimum use of public passenger transport relative to private transport modes § possible arrangements for incentive mechanisms that better link fares and service standards, including safety § options for better targeting of funding and delivery of transport services to meet the needs of different groups in the greater metro- politan and non-metropolitan communities, including rural community and health transport needs.
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1 INTRODUCTION
The Minister requested that an interim report be presented by the end of August 2003 and that a final report be submitted in December 2003. Preliminary submissions to the inquiry have been received from 289 individuals and organisations, and have been used for their factual content as well as to obtain views on the impact of current and potential scenarios for transport on the community. A list of submissions is provided in appendix F.
Further submissions are invited in response to the issues and options raised in this interim report.
1.2 Report structure
Chapters 2 and 3 provide important background information in terms of the state of play of public transport services in New South Wales, and the key challenges to be faced. Chapter 2 provides an overview of public transport, including existing patterns in the Greater Sydney Area and in rural and regional areas, customer profiles, and funding sources for rail and for public and private buses.
Chapter 3 looks at the pressures confronting the public transport network due to urban consolidation and community demand for better services and value for money, and the challenges transport providers face in responding to these pressures. The challenges include the likely need to reverse some operational decisions in the interests of the majority of transport users, the need to explore options for enhancing the capacity and reliability of the rail system, the need for bus reform, and the imperative to develop a skilled, flexible and customer-oriented management and workforce that are better able to improve service quality.
Chapter 4 outlines revenue needs for metropolitan public transport. These will depend on the types of service offered, service standards, the extent to which customers use them and how efficiently they are delivered.
Chapter 5 looks at existing and new funding sources for public transport with the option of extracting more from those who benefit (both users and non-users) without compromising the broader social and environmental responsibilities of government. Four broad funding sources are explored: § direct users of the public transport network § others who benefit from the existence of public transport § direct private sector investment § other general sources of funds.
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1 INTRODUCTION
Funding options depend on the nature of the network to be funded. This chapter examines the extent to which funding options can be linked to improvements in the quality of public transport, including possible network augmentations.
Chapter 6 discusses options for ‘fairer’ fares, and ticketing and fare structure reform. It examines how the public might respond to fare changes and what it is willing to pay for, the role that distance and peak-hour consider- ations could play in setting fares, and ways of determining fair fares. Several options for restructuring fares are explored.
Chapter 7 looks at quality of service issues and the relationship to fares to see whether the link between service quality and regulated fare increases can be strengthened.
Chapter 8 looks at the scope for charging for specific road use to promote (and possibly fund) greater public transport use. It examines the underlying causes of the current bias in favour of private transport using road travel and the contribution of underpricing of road use to the dominance of private vehicles in the transport task. Several options for specific future road use charging are examined.
Chapter 9 looks at how future decisions about public transport investments should be made to avoid past mistakes and maximise the sustainability of the public transport network. It outlines some of the possible future transport projects identified in submissions to the review, and develops a framework for assessing the relative merits of alternative transport proposals. To be sustainable, new projects must be financially viable, and they should be ranked on their ability to contribute to economic, social and environmental welfare.
Chapter 10 considers the NSW Government’s funding of transport programs specifically designed to enhance access of particular groups to services and community life. Existing concessions and community transport services are examined as well as options for better targeting of funding for these so that they better meet community needs.
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Overview of public transport in 2 New South Wales
More than $3 billion TRANSPORT IS CRITICAL to the population of New South Wales. It is spent on NSW affects where people live, where they work and their access to services. public transport More than $3 billion is spent on public transport in New South Wales each each year, including year, including about $1.9 billion by the NSW Government.1 This money is about $1.9 billion spent on rail, and public and private bus and ferry services.2 However, the paid by the NSW NSW population is largely car dependent and cars account for most Government passenger journeys throughout the state (table 2.1).
Despite dependence on cars, public transport has important economic, social and environmental benefits. Public transport corridors are heavily used by commuters travelling to key employment centres, relieving congestion on city roads and reducing air pollution, noise and accidents. For those with limited access to cars, public transport facilitates access to services such as health, education, shopping and recreation, and allows active participation in community life.
This chapter provides an overview of public transport services in New South Wales, including existing patterns of services in the Greater Sydney Area and in rural and regional areas. It also outlines the services, customer profiles and funding sources of the primary public transport modes.
1 The $3 billion comprises expenditure by the SRA and the STA and by the Ministry of Transport on private bus services. Estimates are based on data provided by the authorities and the ministry. 2 General taxi services are outside the scope of this inquiry. Wheelchair accessible taxis and the Taxi Transport Subsidy Scheme are considered in chapter 10.
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2.1 Transport in the Greater Sydney Area
Public transport The existing system of public transport services in the Greater Sydney networks are Area3, and particularly in Sydney, is largely inherited from its pattern of focused on urban development throughout the 20th century. It features a radial rail Sydney’s CBD and network focused on Sydney’s CBD, which means it is denser close to the are more city. Although it provides links to outer suburban centres, there are large concentrated in suburban tracts without easily accessible services. Public bus services inner city areas operated by the STA are also concentrated in the inner city and middle ring. This reflects the establishment of rail and public bus networks in the first half of the 20th century when the city was compact, public transport carried the bulk of urban travellers, and employment was mainly in and around the CBD. The STA also provides bus services in Newcastle.
In the second half of the 20th century, increasing affordability of cars and the post-war population boom led to Sydney’s expansion beyond the compact inner city to outer suburbs and distant centres such as Wollongong, the Central Coast, and Penrith and the Blue Mountains. Transport investment was predominantly in roads. Local private bus services in outer areas had previously been established to bring people from surrounding regions to the rail networks and to service local schools. This pattern became entrenched, despite changes in the population’s travel patterns stemming largely from more dispersed employment.
Expansion of road There was limited expansion of the rail network in the latter half of the 20th networks dominated century. This included the Eastern suburbs railway, the East Hills Line infrastructure extension, the airport link and some track amplifications on existing lines. development in the In comparison, major road projects included a number of motorways (M2, last half of the 20th M3, M4 and M5), the Gladesville and Taren Point bridges and the century Cumberland Highway among many others.4 Coverage by public bus services has generally not expanded with Sydney’s urban sprawl. Recent investment in transitways and the establishment of bus priority lanes have led to some additional longer distance public and private services focused on major employment centres such as the CBD and Parramatta. However, cross-regional services that reflect dispersed patterns of employment, particularly in western Sydney, are limited and these journeys are largely undertaken in private vehicles. The Western Sydney Regional Organisation of Councils stated in its submission:
3 In this report the Greater Sydney Area is defined to include Sydney, Wollongong, Newcastle, the Blue Mountains, the Central Coast and parts of the Hunter Valley, the Southern Highlands and Shoalhaven. 4 State Transit Authority submission, 2003, p. 11.
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Commuting patterns for workers resident in Western Sydney are increasingly complex despite continued employment generation within the region. As employment within the region is spread across locations in major industrial and service areas, within major suburban service and retail centres and within the major metropolitan CBD of Parramatta, the patterns of cross regional movement are high and dominated by use of private vehicles.5
Public transport Private vehicle use accounts for approximately 70 per cent of all weekday services account for trips in Sydney and has been increasing at a faster rate than public 11 per cent of transport use, which accounts for about 11 per cent of trips (table 2.1). weekday trips in Though a relatively small proportion of total trips, public transport services Sydney are essential in serving the employment corridor from Redfern, through the CBD to Chatswood and other key centres such as Parramatta. For example, train and bus passengers account for 71 per cent of arrivals in the CBD between 8.00 am and 9.00 am on weekdays.6
2.1 Trips by residents on an average weekday, Sydney Statistical Division, 1991 and 2001
Change Percentage of Mode 1991 2001 since 1991 trips in 2001 ‘000 ‘000 % % Total private vehicle 9 216 10 998 19.3 70.0 Train 691 776 12.3 4.9 Bus 917 885 -3.5 5.6 of which: Government bus 559 3.6 Private bus 326 2.1 Ferry 33 38 15.1 0.2 Total public transport 1 641 1 699 3.5 10.8 Walk only 2 700 2 713 0.5 17.3 Bicycle 98 101 3.1 0.6 Taxi 103 117 13.6 0.7 Other 20 83 415.0 0.5 Note: Figures in tables are rounded, but percentages are calculated from original unrounded data. They do not include trips taken by international, interstate or intrastate visitors, as these are not collected by the Transport Data Centre. Source: Transport Data Centre, Household Travel Survey, 2001.
There are important differences in travel behaviour in areas across Sydney that reflects both the patterns of public transport services and the more dispersed nature of employment in outer areas. Table 2.2 shows a much higher use of private motor vehicles for travel to work in western Sydney that in the inner metropolitan regions.
5 Western Sydney Regional Organisation of Councils submission, 2003, p. 3. 6 Transport Data Centre, Household Travel Survey, 2001.
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2.2 Journeys to work by private vehicles
WSROC Councilsa % IMROC Councilsb %
Baulkham Hills 86 Drummoyne 66 Hawkesbury 81 Concord 62 Fairfield 77 Lane Cove 61 Holroyd 75 Auburn 59 Liverpool 74 Strathfield 59 Penrith 74 Burwood 52 Blacktown 73 Leichhardt 50 Blue Mountains 71 Ashfield 50 Parramatta 71 Marrickville 48 Sydney 25
WSROC average 76 IMROC average 53 a WSROC = Western Sydney Regional Organisation of Councils. b IMROC = Inner Metropolitan Regional Organisation of Councils. Source: State Transit Authority, 2003.
Population growth, urban expansion and consolidation, and changing patterns of employment are putting increasing pressure and new demands on transport systems in the Greater Sydney Area. The use of some public transport services, particularly trains, is exceeding crowding standards in peak periods. At the same time, private bus use is declining and growth in private car use is contributing to increased congestion and travel times on roads. It is important that future government expenditure on public transport matches the population’s needs.
2.2 Transport in rural and regional New South Wales
Public transport services in rural and regional areas are less extensive than in the Greater Sydney Area. The two main services are: § public trains and buses, provided by CountryLink, for medium and long distance travel between rural and regional centres and to metro- politan areas § private buses, which provide local services, particularly for school student transport, under government contracts.
Although transport services are important for maintaining social inclusion, a low population density and limited population growth within rural and regional areas mean that the mass transport networks that are effective in large cites are not sustainable in these areas. Furthermore, demand for transport services has traditionally been driven by community needs rather than commuters travelling to work. These often require more flexible and local solutions.
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Government Nevertheless, the NSW Government spends significant amounts of money expenditure on on rural transport services. It is estimated that in 2003-04 the transport public transport in portfolio will spend more than $566 million on targeted rural and regional rural and regional programs including: areas will exceed § $250 million for school student travel $566 million in 2003-04 § $102 million to support rural and regional passenger services provided by CountryLink § $72 million for transport concessions § $11.8 million for community transport projects § $3.8 million for the Taxi Transport Subsidy Scheme.7
The challenge is to ensure that funding provides transport services to rural and regional communities that best meet the needs of these communities in the most efficient way.
2.3 The Commonwealth Government and public transport in New South Wales
The Commonwealth The Commonwealth Government has an important role in planning and has a role in funding funding transport networks of national significance including the major transport infra- interstate highways and, more recently, rail networks. Identifying parts of structure of national the transport infrastructure that have national significance can be problem- significance atic. For example, public transport services in Sydney have local benefits but also contribute to Sydney’s importance as a key driver for the national economy.
Several submissions to the inquiry commented on the need for Common- wealth contributions to public transport funding.
The Federal Government needs to consider playing a role in funding public transport. Public transport has an integral role in the sustainability, growth and management of major urban areas in Australia. The National Public Transport Summit (March, 2003) concluded that passenger transport is an issue of national importance and that a greater role for public transport is in the national interest.8
Major new infrastructure will call for a joint financial commitment from Commonwealth and State Governments.9
7 Ministry of Transport submission, 2003, p. 5. 8 NRMA submission, 2003, p. 3. 9 Western Sydney Alliance submission, 2003, p. 5.
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Recommendation: State Government develop a detailed approach to the Federal Government to provide a program of structural funding to assist in the development of a metropolitan-wide public transport coordination approach.10
The Commonwealth collects substantial amounts of revenue from trans- port users. More than $12 billion each year is collected in fuel excise alone and most of this can be attributed to motor vehicle users. Nearly all of the revenue from the fuel excise is paid into consolidated revenue. In 2001-02, only about $2 billion was allocated to road and rail infrastructure across Australia and nearly all of this was allocated to roads (see section 8.3.2 for more details). As a proportion of the revenue collected from the fuel excise, Commonwealth spending on roads and rail declined from a peak of 37 per cent in 1992-93 to 16 per cent in 2001-02.11
The Commonwealth In the past the Commonwealth has contributed funding to urban public has not considered transport infrastructure. Examples are the extension of the East Hills rail funding urban line in the early 1970s and the Merrylands to Harris Park ‘Y’ link in the public transport 1990s under the Building Better Cities program.12 However, the Common- infrastructure in its wealth’s Green Paper on the proposed national land transport plan released green paper on in 2002 was criticised by NSW transport agencies for failing to consider transport planning future funding for urban public transport.13 The Railway Technical Society of Australia also comments that:
[The Government’s] AusLink proposals are commendable, but glaring omissions, such as the lack of funds for urban public transport and mainline track straightening near Sydney, demonstrate the lack of understanding of the seriousness of transport issues in [Greater Metropolitan Region].14
The Commonwealth Government, as shareholder of the Australian Rail Track Corporation, has put forward a proposal for the long-term lease of the NSW interstate rail system. Although this network is integral to the national network, it was constructed and is owned by the NSW Government. The proposal is currently being negotiated. If accepted, it will mean that the Australian Rail Track Corporation rather than the NSW Government will have responsibility, for the term of the lease, to manage and maintain the infrastructure.
10 Western Sydney Regional Organisation of Councils submission, 2003, p. 10. 11 NSW Transport Agencies Response to the Commonwealth Green Paper, AusLink: Towards the National Land Transport Plan, February 2003, p. 10. 12 Rail, Tram & Bus Union (NSW Branch) submission, 2003, p. 33. 13 NSW Transport Agencies Response to the Commonwealth Green Paper, AusLink: Towards the National Land Transport Plan, February 2003, p. 19. 14 Railway Technical Society of Australia, covering letter to submission, 2003.
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Commonwealth tax Apart from funding selected infrastructure projects, the Commonwealth policies can make it also influences transport use through its taxation policies. An example is more difficult to the fringe benefits tax policy, which provides incentives for users of achieve objectives company and government cars, including NSW government cars, to increase for public transport the distance travelled. In contrast, salary packaging of public transport tickets and GST on fares provide limited incentives to use public transport. Despite comprising only 16.5 per cent of car sales, company and government cars account for 40 per cent of peak-hour traffic and 20 per cent of all traffic.15 The Commonwealth’s policies have the potential to limit the NSW Government’s ability to achieve its public transport objectives. As stated in one submission:
The Federal Government does not have an urban transport policy but does pursue a tax regime that is detrimental to the use of public transport. It is difficult for the NSW Government to provide high quality public transport services without that supportive policy framework.16
In addition, the Commonwealth is directing investment towards improved accessibility of transport services through the Disability Discrimination Act. Although improvements will result in significant benefits to people with disabilities, they are expensive to implement and transport operators have not received direct Commonwealth assistance.
2.4 Rail services in New South Wales
The NSW rail system provides passenger and freight services through much of the state, with interstate links. Passenger services are concentrated in metropolitan Sydney and along the eastern seaboard. The majority of passenger services are provided by the SRA through its CityRail and CountryLink business units. Freight services are operated mainly by the private sector. The rail infrastructure is managed and maintained by the Rail Infrastructure Corporation (RIC), although the Minister for Transport Services recently announced that RIC’s metropolitan operations and the SRA will merge. Rail services and their sources of revenue are described in the following sections.
2.4.1 CityRail services
In 2001-02 CityRail provided more than 275 million passenger journeys in the Greater Sydney Area. Customer profiles show almost half of all
15 Action for Public Transport submission, 2003, p. 31. 16 UITP – International Association of Public Transport submission, 2003, p. 4.
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journeys made by CityRail passengers on a weekday are made by commuters travelling to work or on work-related trips (see table 2.3). Social, recreational and educational trips are the next most popular reason for rail travel. Journeys on weekends are predominantly for social and recreational reasons. The average personal income of full fare paying passengers on CityRail services is $43 371.17 Further details of the types of tickets purchased, incomes of passengers and growth in train travel are in appendix A.
Most passengers 2.3 CityRail customers’ purposes of travel Average weekday travel in peak times Reason for travel Percentage of trips to key employment % centres Commuting 42 Social/recreation 16 Education/childcare 14 Shopping 10 Personal business 8 Other work related travel 5 Serve passenger 4 Source: Transport Data Centre, 1999.
There is a heavy concentration of passenger flows over the morning peak (7 am to 9 am). About 60 per cent of trips made in the peak period are to the key employment corridor bounded by Redfern and Chatswood, including the CBD.18 This concentration leads to significant rail capacity challenges at the entrance to the CBD. The number of services entering the CBD during peak times on most lines cannot be increased without network enhance- ments. The congested network and overcrowded trains contribute to the deteriorating reliability of services because of the dependency of each train on others on the network to meet its timetable and because of the additional time it takes to load and unload crowded trains.
Over the past 20 years the number of passengers on CityRail services has increased by more than 30 per cent.19 There has been a decline in patronage of 3 per cent since 2000-01 but forecasts suggest that patronage will increase by 13 per cent in the 10 years from 2001 to 2011.20 This rate of growth will mean a continued decline in rail travel relative to motor vehicle use.
17 Transport Data Centre 2001, Household Travel Survey. 18 State Rail Authority submission, 2003, p. 11. 19 Ibid, p. 7. 20 Ibid, p. 24.
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2.4.2 CountryLink services
CountryLink CountryLink provides long-distance passenger services predominantly services are funded between Sydney, Melbourne, Canberra and Brisbane as well as intrastate by government to services between major cities along rail routes from Armidale, Broken Hill, provide public Murwillumbah, Dubbo, Griffith and Grafton. Rail services are supported transport access to by coach services, many of which are the only mode of public transport rural and interstate from town to town in rural areas. In 2001-02 CountryLink carried over destinations 2 million passengers.21
More than 50 per cent of CountryLink’s passengers are concession card- holders.22 The business is a community service obligation subsidised by government to provide a reasonable level of access to public transport with rural and interstate destinations. CountryLink’s market is sensitive to fluctuating airfares and reductions in journey times by road. It is not expected to grow significantly.
2.4.3 Funding sources for rail
On average, over the past five years CityRail has recovered about 28 per cent of its revenue directly from passengers and nearly two-thirds from the government through payments for concessions and other subsidies. Sources of CityRail revenue are shown in chart 2.4.
2.4 CityRail sources of revenue, 1998-99 to 2002-03 5-year average
Internal Revenue 5%
Revenue from other rail org. Farebox revenue 5% 28%
Other govt subsidies Free & concession 52% funding 10%
Data source: State Rail Authority, 2003.
21 Ibid, p. 17. 22 Ibid, p. 17.
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During the three years 2000-01 to 2002-03 the proportion of CityRail’s total costs recovered from passenger fares declined from 27 per cent to 23 per cent (table 2.5), reflecting increased costs, real fare decreases and declining patronage.
2.5 Percentage of CityRail costs recovered directly from fares
Units 2000-01 2001-02 2002-03 Revenue from fares $m 483.8 463.1 463.5 Total CityRail costs $m 1 788.0 1 786.4 1 982.4 Proportion of costs recovered from fares % 27.1 25.9 23.4 Data source: State Rail Authority submission, 2003, p. 22.
CountryLink collected about 38 per cent of its revenue from fares and other revenue in 2002-03 and more than 60 per cent from government contributions.23
2.5 Public bus and ferry services
Sydney Buses, Sydney Ferries and Newcastle Bus and Ferry Services are the responsibility of the State Transit Authority. The STA also has a separate business unit, Western Sydney Buses, which operates services on the Liverpool–Parramatta Transitway under a commercial contract. Sydney Buses is the main operator of buses in the eastern half of the Sydney metro- politan area. Sydney Ferries operates most of Sydney Harbour’s public ferries, while Newcastle Bus and Ferry Services operates the public bus and ferry services in Newcastle.
2.5.1 Sydney Buses—services and funding sources
Sydney Buses Sydney Buses services approximately 280 routes throughout the inner operates mainly in metropolitan area of Sydney, the lower north shore and the northern inner-city areas beaches. It also operates some charter services, replaces rail services for planned and emergency events and offers additional services for major events. Table 2.6 shows the purpose of travel for STA bus passengers.
About one-third of passengers are commuters, which is lower than the proportion for rail (see table 2.3). Social, education and shopping trips make up just over 50 per cent. Annual patronage for Sydney Buses is about 187 million passengers, comprising 90 million full fare paying passengers, 25 million half fare, 35 million pensioners, 30 million school students and
23 State Rail Authority submission, 2003, p. 21.
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7 million tourists.24 The average personal income of full fare paying STA bus passengers is $43 471, similar to that of CityRail’s passengers.25
2.6 STA customers’ purposes of travel Average weekday
Reason for travel Percentage of trips % Commuting 34 Social/recreation 18 Education/childcare 21 Shopping 12 Personal business 9 Other work-related travel 3 Serve passenger 3 Note: The data include both the STA’s Sydney and Newcastle bus operations. Overall the data are heavily weighted by Sydney Buses passengers because of the much larger number of passengers it carries. Source: Transport Data Centre, 2000.
For further information about the types of ticket bought, income levels of passengers and their labour force status, see appendix B.
The sources of Sydney Buses revenue are shown in chart 2.7. Revenue paid directly by passengers is just over 50 per cent of the total—close to twice the proportion of CityRail.
2.7 Sydney Buses sources of revenue, 1998-99 to 2002-03 5-year average
Internal Revenue 5% Gains on Asset Disposals 1%
Other govt subsidies 10%
Farebox revenue 52% Free & concession funding 32%
Data source: State Transit Authority, 2003.
24 State Transit Authority submission, 2003, p. 6. 25 Transport Data Centre, Household Travel Survey, 2001.
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2.5.2 Sydney Ferries—services and funding sources
Ferry services Sydney Ferries operate the majority of the Sydney Harbour ferry network, feature high levels which extends from Manly in the east to Parramatta in the west. Although of tourist travel the market features a high level of tourist travel, 43 per cent of the 13.5 million annual trips are for travel to work.26 However, research indicates that at least 25 per cent of passengers using ferries are not residents of Sydney.27 Sydney Ferries trips represent 0.2 per cent of all travel on an average Sydney weekday. There are 2000 ferry services weekly on eight route groups comprising seven inner harbour services, the Manly ferry and JetCat services and the Parramatta River services. The average personal income of full fare paying passengers on STA ferries is $59 425—about 37 per cent higher than STA bus and CityRail passengers.28
Chart 2.8 shows that fares paid directly by passengers account for 52 per cent of the total revenue over the past five years. Special grants and government subsidies are other main sources of revenue. ‘Special grants’ are capital funding provided by the government to refit the Freshwater Class ferries, to refurbish and replace engines for three JetCats and to purchase four SuperCats.29
2.8 Sydney Ferries sources of revenue, 1998-99 to 2002-03 5-year average
Special grant (ferries replacement) Internal revenue 10% 1%
Gains on Asset Disposals 0%
Farebox revenue Other govt subsidies 52% 25%
Free and Concession Funding 12% Data source: State Transit Authority, 2003.
26 State Transit Authority submission, 2003, p. 7. 27 Transport Data Centre, Ferry Users in Sydney, Issues Paper 2003/01, 2003, p. 1. 28 Transport Data Centre, Household Travel Survey, 2001. 29 Ibid, p. 42.
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2.5.3 Services provided by Newcastle Bus and Ferry Services
The Newcastle Bus and Ferry Services network operates within the City of Newcastle and Lake Macquarie. The services cater for mainly school student and seniors travel. About 95 per cent of fares are concessions.30 Commuters make up a small proportion of total users, reflected in the relatively low proportion of revenue from the farebox and the high proportion of government-funded concessions and community service obligations (chart 2.9).
2.9 Newcastle Bus and Ferry Services revenue sources, 1998-99 to 2002-03 5-year average
Internal revenue Gains on Asset 5% Disposals 0% Farebox revenue Other govt subsidies 22% 16%
Free and Concession Funding 57%
Data source: State Transit Authority, 2003.
2.6 Private bus services
Private bus operators are contracted to provide public transport services in western (including north-west and south-west) Sydney and across rural and regional New South Wales. These areas include Sydney’s lower density residential areas and new urban fringe suburbs.
In the Greater Sydney Area there are 32 private companies with about 2000 accredited buses providing services. In the rest of New South Wales, 84 private companies are accredited to operate about 4000 buses.31 Contracts are for five years and include renewable rights.
30 State Transit Authority submission, 2003, p. 49. 31 Data provided by the Ministry of Transport, 2003.
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On an average weekday, passengers make 367 000 trips on private buses. However, patronage has been in steady decline since the early 1990s. The average trip rate (rate of use of services of all people in an area) declined by an estimated 18.1 per cent between 1991 and 2000.32 This is despite new services from outer suburbs that go directly to Sydney’s CBD. Only 20 per cent of all trips are undertaken by full fare paying passengers.33 Many customers are school students or are eligible for half fare concessions. The average personal income of full fare paying passengers on private buses is $29 171, which is more than 30 per cent lower than CityRail and STA passengers.34
The NSW Government has 187 commercial contracts and 1784 non- commercial contracts with private bus operators. Operators under commercial contracts receive revenue from full fare paying customers, half fare concessions from passengers, subsidies from the government for some concessions and the government’s School Student Transport Scheme. Underutilised buses may be used to earn additional revenue from charter and tourist services. Under non-commercial contracts, the government provides funding for school services through a contract rate formula based on ‘standardised’ gross cost of service provision.
Private bus services In 2002-03 $348 million was paid to private bus operators under the SSTS receive most of their and about $30 million for concessions.35 Preliminary estimates of revenue revenue from the sources for an average private bus operator under a commercial contract in government Sydney, Wollongong and Newcastle have been made by consultants. These are shown in chart 2.10. The results are based on limited information provided by 17 operators.
The data for these operators indicate that they recover a higher proportion of their revenue from the government than the government-operated Sydney Buses. The average proportion of funding from SSTS is 45 per cent but the proportion varied across the 17 individual operators from 22 to 87 per cent. The average amount paid in concessions is 7 per cent. Only 31 per cent of revenue is recovered directly from passengers compared with 52 per cent by Sydney Buses. There are concerns that, despite high levels of government funding, many private operators are failing to maintain viable businesses.
32 Transport Data Centre, Household Travel Survey results 1991–2000. 33 Transport Data Centre, Household Travel Survey, 2000. 34 Transport Data Centre, Household Travel Survey, 2001. 35 Data provided by the Ministry of Transport.
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2.10 Revenue sources on average for private bus operators under commercial contract in the Greater Sydney Area
Other 3% Charter & contract 14% Fare box 31%
SSTS & concession reimbursements 52%
Note: Data are based on a survey of 17 priv ate operators in Sydney, Wollongong and Newcastle. Results varied widely between individual operators. For example, the proportion of revenue from the SSTS ranged from 22 to 87 per cent. Data source: Preliminary results produced by INDEC Consulting for the Ministry of Transport, 2003.
2.7 Other services
Private ferry operators are granted exclusive rights to particular routes. Six operators have 10 runs in New South Wales. Maximum fares are currently set by the Director General of the Ministry of Transport in contracts with the operators. In recent years IPART has been asked by the Minister for Transport Services to recommend these fare levels. Some operators receive funding from the SSTS.
Metro Transport Sydney operates a small, light rail network in the inner city and Sydney’s city monorail. These networks are not funded by the government or subsidised to provide concession tickets. They carry a very small proportion of the total transport task.
Private long-distance coach services36 in New South Wales are deregulated. They are operated on a purely commercial basis and are not obliged to offer concessions. Consequently they do not receive government funding.
The government does provide some funding for community transport services for people who are transport disadvantaged throughout New South Wales. The various schemes are administered by a number of government departments. Many of the services are provided by non- government organisations and depend on volunteer involvement. These services are discussed further in chapter 10.
36 These services must carry passengers more than 40 kilometres.
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Challenges in delivering better services in the Greater Sydney 3 Area
Achieving TRANSPORT NETWORKS IN THE GREATER SYDNEY AREA are facing sustainability increasing pressures because of high levels of population growth, urban requires difficult consolidation and sprawl, and changing needs. The community expects decisions to be better services and demands value for money. There are a number of made and strong options presented in this interim report for increasing the funding available commitment by to improve services. However, their success depends on ensuring that any government existing and additional investment will deliver benefits cost effectively.
This chapter discusses some significant barriers to maximising the benefits from public transport for customers, the community and taxpayers. It focuses primarily on rail, bus and ferry transport. Addressing the barriers requires the government and transport agencies to: § reverse poor past decisions—this may inconvenience a few but will benefit the vast majority § explore options for changes to services to enhance the capacity and reliability of the rail system overall § reform private bus services § develop a skilled, flexible, and customer-oriented management and workforce that can deliver better services.
If these issues are not properly addressed, neither taxpayers nor those people who rely on public transport will get the benefits they should from the large investment in the public transport network.
3.1 Challenges to improving services in rail
CityRail is expected to perform against a range of service standards. These relate to system safety, passenger security, cleanliness, reliability and crowding. All are important to passengers but it is more difficult to
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perform against some standards than others. For example, it is relatively simple, though costly, to target resources to improve passenger security and to clean trains. Mobile cleaning squads were recently introduced on the train network to respond quickly to any cleaning needs that arise between scheduled cleaning times. The Minister for Transport Services has also recently announced that 500 transit police will patrol trains to improve security. Measures such as these can have a rapid and positive effect on users’ perceptions of service quality.
Operating the network safely and ensuring reliable services are much more complex tasks. Safety failings have resulted in tragic events such as the Waterfall and Glenbrook accidents. These events are rare but the inquiries into these accidents underline the critical need for a strong safety culture supported by appropriate management and work practices.
Meeting some Achieving reliability and capacity standards is increasingly difficult within standards is the constraints of the existing network. There is potential to use existing becoming resources better but it requires changes that may be difficult to implement. increasingly difficult The following sections outline some of the operational and organisational constraints faced by CityRail that affect its ability to enhance the safety, reliability and capacity of its network. CityRail needs strong government support and commitment to maintaining rail as a significant transport mode to overcome these constraints. CountryLink faces its own challenges to provide services that meet community needs cost effectively. These are also described. Some options are presented for responding to these challenges. Further submissions on all these options are encouraged.
3.1.1 A safe CityRail network and a strong safety culture
Although the number of safety incidents per million passenger journeys on CityRail’s network has decreased from 5.2 in 1993-94 to 2.1 in 2001-02,37 recent inquiries into safety issues have exposed critical deficiencies in both the SRA’s and RIC’s practices.
A Track Condition Review in 2001 concluded that reductions in programs such as ballast cleaning, re-sleepering and turnout replacements had corresponded with a deterioration in the assets. Funding for track maintenance has since been increased.38 SRA management has identified that existing maintenance practice with current funding levels is likely to
37 State Rail Authority submission 2003, p. 15. 38 Fellows Medlock and Associates, Report into the Management of Safety Critical Infrastructure, Office of the Coordinator General of Rail, 2003, p. 8.
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lead to an increased number of train carriages falling behind their mainten- ance program and a deterioration in fleet presentation and reliability.39 Audits of the SRA’s maintenance program by the Quality and Technical Support Unit have also identified problems with the use of incorrect specifications and verification of repair work.40
A review of the management of safety-critical infrastructure highlighted: § the inadequacy of technical information and its relevance for mainten- ance staff § the failure to effectively implement all elements of required inspection and maintenance regimes § limited verification of inspection and repair work § gaps in defect reporting and maintenance recording systems § perceived shortages of competent staff in some areas § limitations in succession planning and professional development § a lack of clarity in accountability for asset management and certification.41
A strong safety The final report on the Glenbrook Inquiry stressed the importance of culture has to be establishing a safety culture, stating that: established For an organisation to have an optimum level of safety performance there must be a safety culture. A safety culture consists of individuals participating as part of a group and being guided in their behaviour by jointly held beliefs about the importance of safety and by their knowledge that the importance of safety is a matter which every member of the organisation believes in and is prepared to support other members of the organisation in trying to achieve the result that there will be no incidents and no accidents. The combination of the individual belief and the sharing of that belief then influences behaviour producing cooperation which in turn ensures that the safety management system works either by application of particular specified procedures or by their appropriate modification to ensure a safe outcome.42
It criticised the SRA for its focus on ‘on time running’ at the expense of safety. Though the Glenbrook Inquiry acknowledged that improved reliability was not inconsistent with a safety culture, it stressed that safety had to have priority and could not be compromised in order for trains to run on time.
39 Ibid, p. 11. 40 Ibid, p. 11. 41 Ibid, p. 57. 42 McInerney, the Hon. PA, Special Commission of Inquiry into the Glenbrook Rail Accident Final Report, 2001, p. 41.
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These findings raise serious concerns and present clear challenges to managers and staff. The public expects train travel to be safe. It is of fundamental importance to the operation of the whole network. The extent of deficiencies is evidence of the need for widespread change. Not only do work practices need to change but a new culture has to be established. Management, employees and their unions all have a part to play. A sustainable rail system has to be a safe system. The recent announcement of the establishment of an independent Transport Safety and Reliability Regulator should provide the platform for a new safety culture.
3.1.2 The constraints and complexity of operating within the existing CityRail network
Five types of rail Rail infrastructure in the Greater Sydney Area is used by five types of rail service use the service, including country passenger, inter-city passenger, suburban, inner- network, which city and freight. These have varying operating requirements and their makes it complex to interaction reduces the capacity and ability of the network to manage each operate and transport task effectively. The range of services provided on the CityRail compromises network is unlike any other system in the world and ultimately leads to service standards compromises in service standards. Restrictive curfews are imposed on freight, and signal design impedes the efficient operation of passenger trains.43
Operate the network in sectors
To enhance the network’s operation, CityRail seeks to separate the operation of the network into three sectors (chart 3.1): § Sector 1 (Illawarra), extending south from the Bondi Junction terminus of the Eastern Suburbs Railway to Hurstville, Sutherland, Cronulla and the South Coast § Sector 2 (South), essentially covering the south-western suburbs of Sydney as far as Campbelltown and Macarthur § Sector 3 (Northwest), essentially covering the western and northern Sydney rail lines.
In doing so, it hopes to reduce the complexity of timetabling and better manage the interaction of a large number of services. Ideally, each sector would operate independently and trains would not travel from one sector to another or across sectors. Therefore delays in one sector would not affect the other two sectors.
43 State Rail Authority submission, 2003, p. 12.
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However, the sectors are ‘tangled‘. Each of the sectors shares some lines with the others. This is most pronounced for sectors two and three, which share rail tracks between Granville and Redfern. The more segregated sector one has superior reliability than sectors 2 and 3.44 3.1 CityRail’s three sectors Sectorisation presents its own challenges …
Source: State Rail Authority (2003).
Apart from sharing tracks, the operation of sectors is complicated by the different types of service using the entire network. Inter-city and freight services cannot be restricted to individual sectors and even some urban services cut across sectors, increasing timetabling complexity and the chance that delays spread across the sectors.
Catering for so many different types of service on one network makes all parts of the network more vulnerable to the impacts of individual problems. It makes it harder to maintain reliability and reduces the capacity to
44 Ibid, p. 16.
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introduce higher frequency services or a simplified timetable. It means that the system cannot be designed to meet only the needs of inner-city passengers, long-distance commuters or businesses for freight services. Trade-offs need to be made to facilitate the operation of all rail services on one network.
Increase sectorisation to improve efficiency and reliability
There are a number of strategies for increased sectorisation that could be pursued.45 These can involve operational or infrastructure-based changes or both.
Operational strategies are based on the rearrangement of existing services and timetables. It involves changing the stopping patterns of services so that services from different sectors are largely operated on separate tracks. For example, the overlap between sectors 2 and 3 could be reduced by enforcing a greater separation of train services operating on the lines between Clyde and Redfern. This would mean delays in one of these sectors are much less likely to affect the other and overall reliability would be improved. This may increase journey times for a small proportion of passengers as it may mean that some services incorporate more stops. A rationalised set of stopping patterns has the advantage of increasing track capacity.
Infrastructure strategies could include investment in ‘turnbacks’46 and track amplifications. These would increase separation of the sectors and provide additional capacity. This would provide greater scope for retaining a mix of stopping patterns and express services but would be more expensive and in some cases limited by the amount of space available for additional tracks.
Any strategy to improve sectorisation of the existing metropolitan network is likely to involve a mix of operational changes and capital investment in track infrastructure. The operational changes would affect a small propor- tion of passengers either through slightly longer journey times or a need to … but has the change trains. Changing trains is already common practice for many potential to increase CityRail passengers and on rail networks in other cities. The capital strategies network reliability would require additional funding. Both strategies would deliver overall and capacity benefits to the majority of passengers. Train services would be more reliable
45 This discussion of strategies for sectorisation is based on discussions with both the State Rail Authority and the Rail Infrastructure Corporation. 46 New turnbacks aim to reduce the impact of the time needed by terminating trains to turn around.
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and the capacity of the existing network would increase, which would allow some increase in the number of services on the most congested lines.
The limits of the existing approach to managing rail operations have been reached. Further ‘tangling’ of the sectors is not sustainable without compromising service standards. Sectorisation is an alternative that would allow the existing network to perform better and cater for increased demand for services in the future. The Minister recently announced a 10- year plan to create five discrete lines. This will increase the sectorisation of the network and promises to deliver substantial benefits to commuters through increased reliability and frequency of services.
3.1.3 A commitment to change to improve the efficiency of the CityRail network
CityRail has failed to meet its key performance target for on-time running in all but three of the past 14 years.47 Capacity at critical points in the network has been reached and the management of competing rail services operating on the same infrastructure is becoming increasingly complex as demand increases. CityRail is exceeding its train crowding standards on several lines in the morning peak. To address crowding issues CityRail requires additional services and more rollingstock. However, in some cases this would result in further decreases in reliability if there were not accom- panying changes to services and investment in infrastructure. This is because additional services on some lines would make the network too congested to operate at the same levels of reliability on the existing infrastructure.
Reverse poor route and timetable decisions
Some services Some system constraints stem from past decisions to establish specific compromise the passenger services that meet the needs of very small groups but compromise efficiency of the the efficient operation of the whole network and contribute to further whole network ‘tangling’ of the sectors. Once established, these services are difficult to withdraw. Some of these services are highlighted in box 3.2.
Other services incorporate special stops or set-down requirements that cause significant difficulties. For example: § All suburban trains on the Illawarra Line stop at Kogarah and Rockdale. This leads to very high loadings on trains from Cronulla. Local trains depart from Rockdale virtually simultaneously with the Cronulla trains but have much lower loadings and only take three minutes longer to reach the city.
47 The target requires that 92 per cent of services arrive within three minutes of the scheduled time.
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3.2 Existing train services that affect best practice network operation § Wyong – Parramatta – St Marys two-carriage intercity service This service allows commuters to avoid changing trains at Strathfield when travelling from the Central Coast to Parramatta. It is estimated that around 50 customers a day use the service for the journey from the Central Coast to Parramatta. It cuts across two major routes adding to the complexity and fragility of the whole network. § Carlingford through services Two services using four-car trains are provided in morning and afternoon peaks to supplement the Carlingford–Clyde shuttle at other times. The services carry 100 to 200 people each. This compares with loads of up to 1200 people on fast trains from the west to the city using the main western lines. The limited through services cut across three very busy routes and cause considerable timetable complexity. § Southern Highlands through service One four-car diesel train from Moss Vale operates to Central in the peak morning period via the East Hills Line. It carries a maximum of 320 people a day and has an average of 250 passengers on arrival at Central. However, it occupies the space that would otherwise be used by a 900-seat suburban train, thereby creating service gaps and significant overcrowding on other suburban services. The service crosses from the East Hills Line to the busy Illawarra route to reach Sydney Terminal, which prevents the addition of a much needed peak- hour service from Sutherland, which would carry about 1000 passengers a day.
§ Some express services during peak times between the city and the Blue Mountains do not stop at stations in the lower Blue Mountains, Emu Plains, Penrith or Blacktown. This results in vacant seats on peak services and large service gaps for passengers travelling from the city to these western Sydney destinations, as well as between Penrith and the Blue Mountains. The SRA has also diverged from standard operating patterns in some instances because the level of congestion means that additional services do not fit within timetabled patterns. For example, an additional service has been introduced in the morning peak from Emu Plains, which forces an Epping train to run via the City Circle. The current operation of the East Hills and airport line also features a complex range of stopping times. A timetable rewrite is required to rationalise these patterns.
The decisions to Reversing past decisions to provide these services and a commitment to provide these ensure that any new services established are consistent with the efficient services should be operation of the whole network would result in some capacity gains and reversed improved overall reliability without investment in additional infrastructure. It would allow several new services on the most congested lines, including a peak service from Sutherland that would carry an additional 1000 passengers and more, higher capacity trains on the Western Line. It would also reduce crowding on Cronulla services that are currently exceeding capacity standards. It would provide overall reliability benefits through the
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simplification of operating patterns. These benefits are difficult to quantify but simpler operating patterns would reduce the chance of something going wrong and help to contain the impacts when it does.
Passengers would still be able to make the same journeys, but some would be required to change trains. For example, passengers travelling to the city from the Southern Highlands in the morning peak would need to change at Campbelltown in the same way they currently do at other times of the day.
Enhance reliability through other operational changes
Other operational changes may deliver further improvements to reliability. These include: § simplifying complex stopping patterns—achieved partly by increasing sectorisation and withdrawing the special services that cut across main traffic flows, although a wider review of stopping patterns of passenger services may be required § reforming complex crew-rostering practices to align with simpler operating patterns § improving the management of ‘close downs’ for periodic renewal of assets to minimise their frequency and disruption to passengers.
Operational changes can deliver benefits but will involve some trade-offs that may prove unpopular either with some public transport users or staff. Changes that have proven benefits for the overall system and for the majority of passengers should be implemented. Change requires govern- ment commitment and effective communication with all stakeholders to promote its acceptance.
Changes to the way that the network is managed and services are operated that improve the reliability and safety of the whole system and benefit the vast majority of passengers must be carefully examined and implemented. These issues are too important to be derailed by knee-jerk reactions from small, but vocal, vested-interest groups . Of course, changes likely to involve trade-offs and affect the travel journeys of passenger groups, no matter how small, must be carefully examined and implemented. Full public communi- cation and consultation is critical to the success of any such changes.
We invite comments on the issues of operational complexity and the options for increased sectorisation and associated network reform to deliver greater safety, reliability and service quality.
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3.1.4 Additional investment in the rail network, which requires CityRail to demonstrate its competence
In the future, providing rail services that cater for demand and meet the standards of service expected by passengers will require significant invest- ment, even before allowing for network expansion. ‘Investors’, whether the government, the private sector, customers paying increased fares or others who benefit, need to have confidence that their investment will deliver the desired outcomes in the most cost-effective way possible. This means that transport businesses need to demonstrate their competence to manage and operate their networks safely, efficiently and cost effectively.
CityRail has to This means that all parts of the system must have the same objectives and demonstrate its be committed to achieving agreed outcomes. It is not inconsistent with the competence in order Labor Council’s proposed ‘Results-based Management and Accountability to attract more Framework’.48 The goal for results-based management is to establish a funding more productive cycle of planning, measuring, evaluating and transparent reporting of results. This supports a culture of continuous learning and adjustment and involves clear and logical design that ties resources to expected outcomes.
For example, the potential gains from increased sectorisation would be maximised if train driver schedules, the location and operation of maintenance facilities, the timetabling of services and investment in rail infrastructure were all consistent with the ideal operation of the sectors. This would require: § changes to awards to allow new train driver schedules § rationalisation of maintenance facilities and relocation of staff § the introduction of a new timetable.
Investing in track infrastructure if the other inputs are not aligned is a poor investment and a wasted opportunity.
Making all the necessary changes can be difficult. It requires both strong, results-focused management and changes for the front-line workforce. It also needs political and community support. As the Rail, Tram and Bus Union states:
The transport job is too large for one part of society to fix … Governments, individuals, commuters, employers, land owners and transport providers must all make a contribution.49
48 Labor Council of New South Wales submission, 2003, p. 18. 49 Rail, Tram & Bus Union submission, 2003, p. 3.
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And, of course, it involves the commitment and positive contribution of all employees and their unions.
Work practices and In this context, traditional work practices and management styles are likely management styles to be challenged and cultural change demanded. These changes are will be challenged probably the most difficult to deliver, particularly in an industry with the history and traditions of rail. However, without them it will be almost impossible to attract the funding necessary to maintain a viable rail network in the Greater Sydney Area. Indeed, in the absence of a clear commitment to and delivery of such reforms, it is difficult to argue for any increase in either taxpayer or user funding of the CityRail system. A decision not to tackle these challenges is effectively a decision to down- grade the rail network and increase reliance on other modes of transport in the future.
3.1.5 Sustainable CountryLink services
CountryLink requires high levels of government subsidy to move relatively small numbers of passengers by rail. It is expensive to maintain a state- wide rail network that meets all the safety and reliability standards of passenger services. Over time, many of the rail services provided on low- density rail routes and branch lines have been replaced by bus services. This is much more cost-effective and reduces travel times. However, a number of services are still provided by rail.
For example, on the branch lines to Armidale and Murwillumbah a single passenger rail service moves 50 to 300 passengers a day at con- siderable cost. Though the journey is slower than a connecting coach service, community sentiment favours the retention and even expansion of rail services.50
A sustainable The historical links between rail services and rural and regional CountryLink will communities are strong. However, a sustainable transport network has to provide services give priority to the most appropriate and cost-effective services that meet that meet community needs. CountryLink rollingstock is ageing and requiring community needs in greater levels of maintenance. It is anticipated that from 2010 fleet the most cost- replacement will be necessary.51 effective ways Transport services in rural and regional areas of the state are important, but they must be more effective and better meet communities’ real transport needs, including health and community transport. This means that replacing
50 State Rail Authority submission, 2003, p. 37. 51 Ibid, p. 18.
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some rail services with CountryLink bus services must be considered. With appropriate intrastate coach services, rural communities will benefit from faster travel times and potentially more frequent services. Refocusing CountryLink should not be interpreted as downgrading services, but rather as focusing on better meeting regional and rural communities’ transport needs. The option of a better focus on community and health transport in rural and regional NSW is developed in chapter 10.
3.2 The need for bus reform
New South Wales New South Wales does not have an integrated bus network. Fares differ does not have depending on whether the government or private contractors operate integrated bus services. Private operators rely heavily on government funding, parti- services cularly the SSTS, yet the services they deliver are limited and many operators are failing to maintain viable businesses. Routes are restricted by the allocation of exclusive rights to defined areas, which prevents the provision of cross-regional services that better reflect the travel needs of the population. Private and public operators are also characterised by very different work practices and award conditions, which increases the relative cost of STA services.
Potentially, buses could have an expanded role in providing public transport services in New South Wales. Buses are relatively cost-effective compared with other modes of transport. Additional benefits include lower up-front capital investments and increased flexibility to adapt to changing needs. However, existing structural problems in the industry need to be addressed to ensure value-for-money services that meet customer needs before consideration is given to expanding services.
SSTS payments for commercial operators are not based on actual patronage but on providing a specified level of capacity based on estimates of how many students use their school student travel passes. They provide operators with the revenue needed to maintain a certain level of capacity on their school routes. The way the payments are structured means that there is an implicit subsidy provided by the government to private bus operators through the SSTS and that there are few incentives for operators to provide other services that meet community needs. The Central Coast Regional Organisation of Councils comments that:
Minimum service levels give primacy to ‘week-day’ school/commuting n eeds. Nights, weekends, holidays and services to essential facilities … have become much more important … Transport regulation and services have lagged in their responses to changed demands.
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In many parts of western Sydney and in rural and regional areas, private bus services are the only available means of public transport. The Western Sydney Community Forum comments in its submission that various studies have reported the following problems: § a lack of cross-regional services within the local area, with particular concern about a lack of services to hospitals and universities § circuitous bus routes and long journey times § poor urban design of bus interchanges § poorly coordinated timetables between bus and train operators § infrequent or non-existent services, especially at nights and weekends.52
Declining patronage and reliance on SSTS funding indicate that existing private bus services are not meeting community needs. The effectiveness and efficiency of the existing services have been questioned in many submissions to this inquiry. For example, the Central Coast Regional Organisation of Councils comments that: ‘On-going operator contracts minimise market discipline and blunt entrepreneurial incentives eg community transport brokerage initiatives’.53
A review of bus Sydney Buses achieves a higher level of cost recovery than do private services has been operators but it benefits from servicing higher density and more profitable established and routes in the inner city and middle ring suburbs and from a wider range of reform has to be concession reimbursements than private operators do. Despite its level of implemented cost recovery, many of its costs are higher than those of private operators because of more generous award conditions and higher expenditure on new buses that meet its detailed specifications.
The Minister for Transport Services has initiated a review of buses to consider how bus services in New South Wales can be improved. The review is to consider the integration of fares across public and private operators, the potential benefits of an improved bus network with better links to other transport modes, better use of resources in rural and regional communities, and contracting arrangements for bus services. Bus services in New South Wales are due for reform. Implementation of reform has to occur if buses are to become a flexible and cost-effective transport mode that meets community needs.
52 Western Sydney Community Forum submission, 2003, p. 27. 53 Central Coast Regional Organisation of Councils submission, 2003, p. 2.
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3.3 Achieving efficiencies in ferry services
Ferries are heavily Publicly operated ferry services are heavily subsidised by taxpayers and subsidised but few patronage by those commuting to work has been declining for the past two people benefit from decades, though the services attract increasing numbers of tourists.54 Some the services services such as the Parramatta RiverCat are used almost exclusively by tourists yet the service is priced as a regular public transport service rather than a premium service.55
The recommendations of a 2001 review by the NSW Waterways Authority of Sydney Ferries operations suggest Sydney Ferries faces a number of workforce challenges. These include communication between management and operations staff, achieving a core set of terms and conditions across all staff, more transparent processes for the allocation of relief duties and implementation of training programs that meet legislative and policy requirements and improve work practices.56 The report states that relatively high turnover in management has resulted in staff unions attempting to fill a perceived management void.
There is potential to A 2003 cost-efficiency study also highlights that an increasing number of achieve efficiencies vessels in the fleet in multiple classes increases costs.57
Inefficiencies are exacerbated by poor service decisions. For example, the demand for services on the Manly route can be met by ferry services alone. However, an additional JetCat service is provided. This service has required significant investment in additional vessels that is difficult to defend. JetCat services, though faster than ferry services, have inferior reliability.58 They are a low-capacity premium service. Subsidies for these services are difficult to justify on any traditional grounds such as accessibility, reduced congestion, reduced emissions or improved equity.
Rationalisation of Sydney ferries are an important feature of the harbour. However, only a services should be small proportion of the population directly benefits from these services and considered there are lower cost transport alternatives available. It is important to ensure that public subsidies are justified and that costs are efficient. This is likely to require decisions about rationalising services and new service delivery models. This is discussed further in section 4.3.2.
54 State Rail Authority submission, 2003, p. 7. 55 State Transit Authority submission, 2003, p. 31. 56 NSW Waterways Authority, Review of Operations of Sydney Ferries, 2001, pp. 60–76. 57 Sinclair Knight Merz 2003, Sydney Ferries Cost Efficiency Study, p. 30. 58 IPART, CityRail and STA Buses and Ferries Public Transport Fares from 1 July 2001, p. 25.
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Regulation of Maximum fares for private ferry operators are set by the Director General private ferry fares of the Ministry of Transport. However, most operators face competition should be reviewed from Sydney Ferries on Sydney Harbour or land transport, waters taxis and commuter dinghies in regional areas. The use of private services is also often of a discretionary nature, particularly by tourists. Submissions to IPART’s most recent review of fares also raised concerns about the financial viability of operators.59 IPART recommended that:
… the private ferry contracting system be reviewed with a view to removing fare regulation. Where a ferry operator is an essential and dominant part of the transport infrastructure, price monitoring may be the most appropriate form of government oversight.60
There is no clear need to regulate private ferry fares and the inquiry supports IPART’s recommendation that this be reviewed.
3.4 The potential for expansion of light rail
The small light-rail network in Sydney is privately operated and not sub- sidised to provide concession tickets. The service is underutilised and its commercial viability cannot be ensured in its present form.61 However, many stakeholders consider the extension of light-rail services an attractive option and there is some degree of public expectation that existing networks will be expanded. The following comments were included in submissions.
There may be A proposal to extend the [light rail] system through the CBD was shelved in potential for an 1998 and will not proceed until after the completion of the cross-city tunnel … expanded light-rail despite this, the light rail extension should be built as soon as possible, after the tunnel’s completion.62 network … We believe that ultra light rail, light rail and high speed train technologies all have roles to play in Sydney’s transport future.63 Travel times can be reduced through the construction of new light rail lines on major trunk routes.64
Recommendation: that light rail be considered as a means of increasing the capacity of public transport in the central suburbs of Sydney due to its greater capacity and amenity.65
59 IPART, Report on Fares for Private Buses and Ferries—from 31 August 2003, p. 8. 60 Ibid, p. 8. 61 Metro Transport Sydney submission, 2003, p. 1. 62 Total Environment Centre submission, 2003, p. 3. 63 Western Sydney Alliance submission, 2003, p. 4. 64 Environmental Defenders Office submission, 2003, p. 8. 65 Eco Transit Sydney submission, 2003, p. 16.
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… but it needs to be Light rail does not require the same levels of investment as heavy rail and considered has greater capacity than bus services but clear evidence of whether the alongside other network can be extended cost effectively is lacking. Light rail may have the transport modes potential to be part of the solution to congestion in the CBD and the increasing pressure on the heavy-rail network at the entrance to the CBD. Careful analysis of whether this is the best option is needed, giving approp- riate consideration to other transport modes that are already established and concentrated in the inner suburbs. Planning for an expansion of light rail needs to be integrated with planning for other transport modes.
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Revenue needs for the government- 4 operated public transport network
THE REVENUE NEEDS FOR PUBLIC TRANSPORT NETWORKS in New South Wales depend on the types of service offered, the standards of these services, to what extent customers use them and how efficiently they are delivered. This chapter outlines the forecast revenue needs for government- operated transport providers in New South Wales. These include CityRail, Sydney Buses and Sydney Ferries. CountryLink’s existing funding position is also described but its future needs are not included in the analysis of the needs for the Greater Sydney Area. Funding options to meet forecast revenue needs are discussed in chapter 5.
Government- Chart 4.1 summarises the forecast funding position for the government- operated transport operated transport providers in the Greater Sydney Area to 2011.66 The providers in the Greater Sydney Area require $2.5 billion 4.1 Combined government-operated transport agencies forecast annual net funding position, 2003-04 to 2010-11 Greater Sydney Area in revenue each year
Revenue needed Funding position 100 Funding gap $229m (9%)
80 Government contributions 60 Operating cost $1435m (56%) $2043m (80%) % 40
Farebox and 20 other revenue Capital $879m (35%) $500m (20%) 0
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. The SRA did not provide forecasts of government contributions. These have been estimated based on historical levels. Data sources: State Rail Authority and State Transit Authority, 2003.
66 This does not include CountryLink.
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forecasts are based on the assumption of a ‘steady state’. That is, the levels of service are assumed to remain broadly similar to existing levels, but with some small improvements in performance against standards that operators are currently failing to meet. ’Steady state’ assumes there will be no expansion of transport networks apart from allowing for expected growth in demand due to population growth. The forecasts do not include savings from potential efficiency gains.
Based on these estimates provided by the transport agencies, they require $2.5 billion (in 2002-03 dollars) each year to 2010-11 to maintain their services. Close to $0.9 billion is forecast to be recovered from passengers and other revenue and over $1.4 billion is forecast to be government contributions—assuming these contributions follow historical trends. That means there is an overall funding gap of $229 million.
Better service levels on the existing network would require even more revenue. For example, ensuring all railway stations meet the Common- wealth’s disability standards within the set time frames will require an additional $20 million a year. More analysis is needed to quantify the costs of other service enhancements. The funding to eliminate the $229 million gap should be considered the minimum required just to maintain and enhance services in a limited way on the existing network, without significant efficiency improvements. Factors that can increase or decrease the gap are outlined in box 4.2.
Efficiency gains can Reductions in total revenue requirements could be achieved by increasing deliver savings … the efficiency of service delivery. A number of opportunities for savings have been identified. However, further analysis and information is required before these can be properly quantified. These have not been incorporated in the forecast funding needs. Conservatively, a minimum saving of $100 million a year is estimated. This excludes the large efficiency gains being pursued by RIC, which are already incorporated in the forecast revenue needs. If RIC’s projected savings are not achieved, the funding gap will increase significantly—by at least $60 million a year. Further information will be sought from the transport agencies to refine these estimates for the final report.
… but a ‘funding Even with efficiency gains, a funding gap is still likely. It is not a gap’ is still likely sustainable position for any of the transport agencies. In most cases, past strategies to offset funding gaps, such as selling excess properties or increasing debt, have been exhausted. Alternatives are needed.
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4.2 What is the ‘funding gap’?
The funding gap is the amount of money needed in addition to existing sources of revenue to maintain a specific level of service. The $229 million gap shown in chart 4.1 is derived from CityRail and STA forecasts of their revenue needs to reach a ‘steady state’—that is, maintain service levels broadly in line with existing levels. The funding gap is determined by assuming that existing revenue remains relatively constant in real terms and comparing this to forecast expenditure, also calculated in real terms.
Additional revenue to meet the gap could come from existing sources including passengers and the government (taxpayers) or from other sources. Potential revenue sources are discussed in detail in chapter 5.
The funding gap increases if: § service standards are increased (eg if all train stations are to meet the Commonwealth’s disability standards by 2022, the gap increases by $20 million a year) § The network is expanded (eg if a new cross-city rail line is built the gap increases by $300 million a year) § RIC does not achieve the savings planned from its existing efficiency program.
The funding gap decreases if: § existing levels of service are not maintained (eg if further crowding is allowed on peak train services less new rollingstock would need to be purchased, or cheaper buses without specifications such as airconditioning could be bought to replace ageing vehicles) § CityRail and the STA can achieve efficiencies (eg by centralising train signalling operations or by rationalising unprofitable bus routes that aren’t required by the government).
Forecasts of funding needs beyond 2011 are more difficult. A continued steady state can be assumed unless higher than forecast growth in patronage requires services to be expanded. Such growth could bring forward the need to construct a major rail link through the city. If bus services were expanded, increased revenue would be needed for new depot facilities. These scenarios are considered unlikely based on ‘steady state’ assumptions, but if they did eventuate could add more than $300 million a year to revenue requirements.
The funding needs for CountryLink have not been included in this analysis. It currently faces a funding shortfall of $34 million a year (see section 4.4). This is anticipated to increase as infrastructure and rollingstock require substantial new levels of investment.
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4.1 Revenue needs for metropolitan rail
The existing metropolitan rail system is approaching capacity. Peak-hour trains are more crowded than they should be and CityRail has met its on- time running standard in only three of the past 14 years.67
Inquiries into the Glenbrook and Waterfall disasters have also raised serious concerns about the SRA’s and RIC’s safety cultures. Their findings require that these organisations refocus their objectives towards the safe operation of the network and implement a range of initiatives to improve safety.
Passengers also demand clean trains and stations, timely information and an appropriate security presence.
Service standards are a key driver of revenue needs. Section 4.1.1 discusses current performance against key service standards and section 4.1.2 outlines the sustainable level of funding required to at least maintain performance against the standards.
The potential impacts on standards of service of either alternate scenarios of capping funding at existing levels or increasing funding beyond forecast needs are also considered. Overall, CityRail estimates it needs nearly $2 billion each year to achieve a steady state without significant enhancements to service levels. If farebox and other revenue and government contributions remain at historical levels a funding gap of about $150 million each year is anticipated. More substantial improvements in service quality will require additional network and rollingstock investments and add to the likely funding shortfall. Preliminary analysis of the potential for efficiency gains suggests that the funding gap could be reduced substantially—though savings would not be made immediately. In any event, CityRail’s likely funding gap is unsustainable.
4.1.1 Service standards
CityRail’s service standards are established through a community service obligation contract between the Ministry of Transport and the SRA. The key requirements relate to safety, frequency and reliability of services, crowding, security, provision of information, and cleanliness.
67 State Rail Authority submission, 2003, p. 14.
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Appendix C provides a complete list of the standards. A brief discussion of how these drive revenue requirements is provided below.
Safety
As already noted, the number of safety incidents per million passenger journeys on the CityRail network has decreased from 5.2 in 1993-94 to 2.1 in 2001-02.68 However, the Glenbrook and Waterfall accidents are stark reminders of the need to improve safety. As emphasised in the report on the Glenbrook Inquiry, safety relies on more than systems and processes— it is underpinned by workforce culture. It cannot be improved by simply spending more money. On the other hand, it is important to ensure that any funding needed to meet safety requirements is available.
Safety Fundamental to maintaining safety on the network is the condition of the improvements track. Following investigations in 2002, it was acknowledged that the require additional condition of the rail infrastructure had deteriorated significantly following revenue years of relatively low funding.69 Additional funding is now needed on an ongoing basis to restore track condition and improve safety. RIC has agreed with Treasury that to maintain the existing track infrastructure requires $410 million a year. This is a substantial increase on the $287 million paid in 2001-02. Any additions to the rail infrastructure will result in incremental increases to this amount.
The Glenbrook Inquiry included many recommendations to improve safety. Actions to date have included: § the establishment of an Office of the Rail Safety Regulator within the Ministry of Transport and increased funding to enhance the audit and inspection programs70 § much greater emphasis on competency-based training, particularly in safe working practices § a comprehensive rewrite of RIC’s safe working rules § the enhancement of technology to support safety training § the development of an improved set of rail network road maps for driver training § a program to install data loggers on trains.
68 State Rail Authority submission, 2003, p. 15. 69 B Godfrey, Independent Review of Rail Infrastructure Corporation Metropolitan Maintenance Funding and Related Issues, 2002, p. 1. 70 The Minister for Transport Services recently announced further reforms. This office which will be replaced by the Transport Safety and Reliability Regulator on 1 January 2004.
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Funds have also been spent to enhance the safety of rollingstock. Current projects include train visibility enhancements and locking door motors. These ‘miscellaneous’ projects cost about $5 million a year. Much more is spent on maintenance. Major periodic maintenance alone costs about $115 million a year and is essential to maintaining safety and reliability.71
Safety is integral to a sustainable rail system and has to be incorporated into any consideration of future funding needs. Continued implementation of the Glenbrook Inquiry recommendations and increased maintenance to restore track condition require additional revenue. The final recommend- ations from the Waterfall Inquiry may add to the total amount needed.
Crowding
CityRail is Table 4.3 shows CityRail’s performance against its crowding standards on exceeding its some peak-hour services. The standards require that the number of people crowding standards on trains does not exceed 135 per cent of seating capacity and that in peak periods passengers are not required to stand for more than 20 minutes. These standards are being exceeded on several lines during the morning peak.
More trains are The SRA estimates that it needs to provide about 20 additional services and needed to provide purchase 202 additional carriages to relieve overcrowding and to cater for additional capacity expected patronage growth to 2011.72 Investment in rollingstock to replace ageing carriages and to provide additional services is expected to cost an average of $230 million a year. Nearly half of this amount is required for additional services to relieve crowding. Providing the additional services will also require operational changes and some capital investment to enhance the capacity of the existing network.
4.3 Peak one-hour loading pressure
Service Location Trains Passengers Load Standard no. no. % Cronulla–City Sydenham 4 5 410 150 135% East Hills via Sydenham Sydenham 4 5 000 140 135% Berowra–City St Leonards 2 2 430 145 135% Campbelltown–City Merrylands 6 5 850 116 20 min stand Richmond–City Marayong 2 1 960 107 20 min stand Source: State Rail Authority, 2003.
71 Data provided by the State Rail Authority. 72 State Rail Authority information provided in presentation to the inquiry, 2003.
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Reliability and frequency
CityRail has not achieved its performance standard of 92 per cent on-time running in any month from February to July 2003. Performance was particularly poor in February at 83 per cent but had improved to 90 per cent in July.
Operational changes Failure to meet this standard results from a combination of factors, and some capital including capacity constraints and the need to operate several types of train investment are service, including freight, on a single network. Increased sectorisation needed to improve would deliver benefits. But it requires capital investment and needs to be reliability supported by timetable and rostering changes to maximise the benefits.
CityRail is planning a number of track enhancements that will relieve some of the infrastructure constraints and enable increased sectorisation. These enhancements will cost about $45 million a year73 and will allow some additional services in peak periods. For example, the Bondi turnback will increase the capacity of this station from 14 to 20 services each hour once other improvements are completed on the Illawarra Line. These enhance- ments have been included in CityRail’s forecast revenue needs.
The Minister for Transport Services has also recently announced a 10-year plan to establish five discrete lines or sectors. The purpose is to allow for simpler timetables, more frequent services and higher levels of reliability. Many of CityRail’s planned projects are consistent with this strategy.
Other service quality measures
CityRail has improved its performance against a range of quality measures. Over 60 per cent of rollingstock is now airconditioned compared with 10 per cent in 1984.74 Its Easy Access Program has resulted in 20 per cent of stations being upgraded to meet accessible transport standards. About $40 million a year is required for 100 per cent compliance with the Common- wealth standards by 2022. Only about half of this has been allowed for in CityRail’s forecast of its revenue needs. Additional funding has been allowed for to meet demand at overcrowded stations, including Town Hall.
Cleaning services and security presence have also grown significantly. The SRA now spends more than $35 million a year on security personnel.75
73 Ibid, p. 25. 74 State Rail Authority submission, 2003, p. 14 75 Based on data provided to the inquiry by the State Rail Authority.
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Revenue is required to maintain these standards and to deliver further improvements.
4.1.2 CityRail’s forecast funding needs
The SRA has estimated the funding CityRail requires to achieve a ‘steady state’ scenario to 2010-11. These forecasts assume that rail’s overall share of total travel in Sydney will remain relatively static but employment and population growth will result in a 13 per cent increase in rail travel. Chart 4.4 shows CityRail’s forecast net funding position for 2003-04 to 2010-11.
CityRail needs CityRail’s forecast expenditure should result in some slight improvements nearly $2 billion in to the existing service. Progressively replacing old rollingstock with revenue each year carriages that have improved features such as airconditioning will improve passenger comfort. Investment in network enhancements and simplified operation of the network through increased sectorisation will allow for some growth in services to meet growth in patronage. Station upgrades will also improve access and safety.
4.4 CityRail forecast annual net funding position, 2003-04 to 2010-11
Revenue needed Funding position 100 Funding gap $147m (8%)
80 Government contributions Operating cost 60 $1200m (61%) $1527m (78%) % 40
Farebox and 20 other revenue Capital $434m (22%) $614m (31%) 0
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. The SRA did not provide forecasts of government contributions. These have been estimated based on historical levels. Data source: State Rail Authority, 2003. Forecast expenditure will Though there will be some improvements, the forecast expenditure is allow some small essentially aimed at maintaining existing levels of service rather than ex- improvements in panding coverage or achieving significantly higher performance standards. service standards Forecasts beyond 2011 are more difficult. The investment in track enhance- ments to 2011 will alleviate existing pressures but capacity constraints at
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the CBD could become critical in the period from 2011 to 2020. There are a number of operational and technological options that could be used to enhance capacity. At the extreme, a new underground city corridor would need to be built. This is estimated to cost around $5–6 billion. However, if it is assumed that no new major rail links are required, the SRA estimates that required revenue will remain relatively static. The forecast changes significantly if any major links are built. These could add up to $300 million a year to funding needs over 20 years.
Forecasts do not include any expenditure that may be required in response to the findings of the Waterfall Inquiry.
Payments to the Rail Infrastructure Corporation
The SRA pays access fees to RIC for maintenance funding. RIC has agreed with Treasury that a sustainable level of funding for maintaining the metro- politan infrastructure in a ‘steady state’ is $410 million a year. This amount is included in CityRail’s forecast revenue needs. Arriving at this figure involved a degree of rigour but the information base used to derive it was imperfect and has been criticised.76 It is anticipated that in five years time, information systems would have been established that will allow a critical review of this amount. However, $410 million is the accepted figure for the medium term among key stakeholders.
Apart from maintenance expenditure, RIC also receives capital contributions from the SRA for specific capital projects. These have been incorporated in CityRail’s forecast revenue needs.
Outside of the SRA’s existing access payments, RIC is providing capital funds for the Epping to Chatswood rail link through borrowings for construction. These funds are to be recovered through increased access payments on completion of the link. From 2008-09 this will increase the SRA’s access fees substantially until the loan is repaid.77 This has been incorporated in the SRA’s forecast expenditure from 2008-09. The full impact is masked since forecast funding is averaged over the period 2003- 04 to 2010-11 and the increased access charge will apply only from 2008-09.
What if CityRail’s revenue was capped at 2002-03 levels?
If CityRail’s revenue sources, including farebox revenue and government contributions, were capped in real terms at 2002-03 levels it would need to
76 B Godfrey, Independent Review of Rail Infrastructure Corporation (RIC) Metropolitan Maintenance Funding and Related Issues, 2002, pp. 4–9. 77 Rail Infrastructure Corporation Statement of Corporate Intent, 2003, p. 29.
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cut planned expenditure by nearly $150 million a year. This has implications for standards of service. The SRA has indicated that if this scenario were to eventuate its first priority would be to maintain its core assets.78 A funding cap would result in The SRA would ensure that expenditure was directed to maintaining the deteriorating service existing rail infrastructure and rollingstock in a safe and reliable condition. levels Cost cutting would affect service enhancements rather than basic services, though even these measures would probably result in deteriorating service levels and eventually loss of modal share. This could affect: § the replacement of rollingstock (Existing stainless steel rollingstock would be refurbished rather than replaced, with potential savings between $50 and $100 million a year.) § upgrades of station infrastructure (Existing infrastructure would be maintained in a safe condition. However, stations may not be updated to contemporary standards, including standards for improved accessi- bility, which could result in savings of $20–40 million a year.) § information services (The roll-out of improved information services, including electronic screens, would be limited and save several million dollars.) § increased services to cater for growth (Investment in infrastructure to unlock capacity and in additional rollingstock to cater for more services would be limited, resulting in increased crowding and reduced reliability on existing services and ultimately a decline in rail’s overall share of the transport task. This may save $20 million a year, depending on the projects that are cut.)
What could be achieved with more than the forecast expenditure?
Additional expenditure (implying an increased funding gap) would allow CityRail to meet some increased service standards. This may involve: § a faster roll-out of new rollingstock to improve passenger comfort § additional investment in track enhancements such as turnbacks and the amplification of tracks on congested lines § increased security services § better systems for providing passenger information § more stations meeting accessibility standards at an additional cost of about $20 million a year.
78 Discussions with SRA staff, July 2003.
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Further analysis of service enhancements and their costs needs to be undertaken.
One of CityRail’s most publicised standards is on-time running. It is unlikely that additional expenditure alone will deliver better performance against this standard. It largely depends on operating strategies, including timetabling and the degree of sectorisation. The Minister for Transport Services’ recently announced plan to effectively establish five sectors is expected to deliver better performance against this standard.
4.1.3 Scope for efficiency savings
The changing nature of the SRA’s operations provides opportunities for substantial efficiency gains. For example, centralised signalling operations will result in much lower operating costs, partly because the number of staff needed will be reduced. Strategies for purchasing and maintaining rollingstock offer the most potential to deliver savings. These and other opportunities are outlined below.
Centralisation of signalling operations
Centralising Consistent with trends overseas, CityRail plans to consolidate its signalling signalling and train control operations to one or two locations. This will occur operations will gradually as existing assets are replaced. This strategy offers both improved reduce operating reliability and reduced operating costs. It is expected that the number of costs signalling staff will be reduced.
Rollingstock—acquisition, maintenance and presentation
There are a number of ways to achieve efficiency savings in relation to rollingstock. However, maximising savings under one strategy is likely to offset the savings that can be achieved under another. For example, savings from a decision to refurbish rather than replace existing stainless steel carriages will be partly offset by not realising the savings from the reduced maintenance requirements of new rollingstock.
Current contracted purchases of rollingstock will replace all existing carriages over 35 years old including all ‘red rattler’ era carriages. Once these are replaced, 498 stainless steel carriages will remain in a total fleet of 1544. More than half of these are not airconditioned. The stainless steel construction of these carriages means that their life could be extended through refurbishment that would delay replacement and result in savings of around $50–100 million a year.
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While delaying the replacement of existing stock offers substantial savings, Savings on rolling- there are potential trade-offs. For example, if new rollingstock were stock could be designed to require minimal maintenance, many of the components could achieved by a be ‘plug in’ modules that reduce the time carriages spend out of service. number of strategies Contracts for purchasing new stock could also be designed to spread risk by requiring the builders to maintain the stock. A faster roll-out of new rollingstock could enable CityRail to achieve significant efficiencies in its maintenance operations.
There are other benefits from the reduced time new rollingstock with these features spends out of service during maintenance. A larger proportion of the fleet is available to meet demands in peak periods. This effectively reduces the size of the fleet required to deliver the same number of services. The approximate cost of one suburban carriage is $3.5 million. Inter-city carriages are more expensive. If changes to maintenance practices could free more carriages during peak hour, the savings are considerable.
A Steady Fleet Purchasing Plan was recently outlined by the Minister for Transport Services.79 The intention is to standardise the purchases of new trains to one or two types and to have a long-term regular supply of trains. This strategy has the potential to deliver long-term savings.
McKeown recently reviewed the management of technical faults of the Millenium trains. He recommended that the SRA review its requirements for new rollingstock, in particular the requirement for a Train Management System.80 This system provides integrated control functions but considerably increases the capital costs, complexity and technology risk of new rollingstock. In contrast, operators in Melbourne have opted to purchase trains that do not have this system but offer similar levels of service to customers.81
Savings on maintenance will be offset to some extent by requirements to upgrade maintenance and stabling facilities. Existing facilities need to be progressively upgraded to achieve operational efficiencies, to improve occupational health and safety and environmental standards and to enhance train cleaning.82
79 Minister for Transport Services, Media Release, 21 August 2003, p. 2. 80 C McKeown, Independent Review of the Management of Technical Faults with Millenium Train, Department of Infrastructure, Victoria, 2003. 81 Ibid, p. 11. 82 State Rail Authority submission, 2003, p. 29.
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Head office operations and corporate services
Merging the SRA with RIC offers some opportunity to reduce the ‘head office’ costs of operating the organisations separately. Some positions will become redundant when the organisations are merged. There is also potential to streamline corporate services across these rail agencies to achieve further savings.
On-train staff
The SRA claims that there is limited scope for savings from reducing the number of on-train staff. In Victoria and the United Kingdom, many train services are operated with only a driver on board. The SRA believes this is not feasible on CityRail’s network because long trains that lack continuous internal access and curved platforms with large gaps between platforms and trains create safety hazards that increase the importance of having on- board staff.83 These hazards cannot be removed easily.
There is some potential to increase productivity by adapting existing rostering constraints, such as minimum mileage and route requirements for train drivers. Importantly, changes would support the effective operation of an increasingly sectorised network. Rostering patterns need to reflect train-operating patterns to maximise the reliability of the network.
Rail Infrastructure Corporation’s existing efficiency program
RIC has a five-year RIC has already embarked on a substantial efficiency savings program to efficiency program reduce the gap between existing levels of funding and the required level of already in place steady-state funding. The five-year program is estimated to achieve savings of more than $150 million a year by 2006-07 across all of its operations. RIC is funding a $60 million gap for its increased rail maintenance expenditure on the metropolitan network through borrowings until its efficiency savings are achieved. Major components of the program include staff reductions, integration of business systems, restructured engineering functions and centralised purchasing.
RIC’s forecast efficiencies have already been incorporated in the estimates of future revenue needs.
We will work with CityRail to further refine the data to obtain a clearer picture of the likely range of additional funding required for different levels of service for the existing network.
83 State Rail Authority submission, 2003, p. 30.
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We invite comments from stakeholders about the appropriate service priorities for CityRail in view of the potential cost implications of different service standards.
4.2 Revenue needs for STA buses
Assuming a steady-state scenario, the STA forecasts little variation in funding needs for its bus operations beyond the five-year horizon.84 Bus operations are simpler than rail. Existing road infrastructure means that there are fewer constraints to growth and fewer operational challenges involved in managing the network of services.
This section excludes analysis of the operations of STA’s Western Sydney Buses, which operate under a commercial contract with the Ministry of Transport.
The current review of bus services in New South Wales is anticipated to result in reform of the way funding for these services is structured. Impacts from these changes have not been incorporated into estimated revenue needs. It is also likely that improved funding arrangements will drive increased efficiency.
4.2.1 Standards of service
Under the Passenger Transport Act, the STA has a contract with the Ministry of Transport that specifies minimum service levels. These levels are based on a policy agreed between the Ministry of Transport and the Bus and Coach Association in 1991. They include requirements for: § service frequency § temporal service coverage (day, nights, weekends) § spatial service coverage.
These are intended to ensure an area receives a minimum level of service based on characteristics of the area, including population, car ownership and availability of other transport. The STA, rather than the Ministry of Transport, sets timetables and routes that comply with the minimum service levels. The STA must also meet vehicle standards, including a specified average fleet age, federal accessibility standards and cleanliness.
84 State Transit Authority submission, 2003, p. 46.
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A difficulty in assessing performance against current bus service levels is Service standards the lack of an effective performance-monitoring program. The Passenger for bus services are Transport Act was changed in 1997 to facilitate the introduction of a not properly ‘Performance Assessment Regime’ to apply to the renewal of bus contracts. monitored However, no regime has been introduced.
Table 4.5 shows performance information recently provided to IPART for its fare determination process by the STA. Overall, STA buses are exceeding the key performance indicators (KPIs) or at least improving on past performance.
4.5 STA performance against key performance indicators
KPI (2002-03 target) 1989-99 1999-00 2000-01 2001-02
Reliability On-time running (>95%) 97.10 97.40 96.10 96.20 Service reliability (>99%) 99.50 99.60 99.50 99.60 Mechanical reliability (<15 bus changeovers per 100 000 km) 20.65 20.51 20.89 17.68 Traffic reliability (<4 change overs per 100 000 km) 5.31 5.45 5.02 4.83
Safety (per million passenger trips) Safety incidents (<1.4) 1.55 1.54 1.44 Security incidents (<0.4) 0.44 0.40 0.51 0.41 Personal injuries (<0.8) 1.16 1.31 1.27 1.23 Comfort Average bus age (<12 years) 11.9 11.8 12.2 11.7
Convenience Total kilometres (km) 70 979 74 502 77 444 77 916 Passenger revenue kilometres (>63 000 km) 57 209 60 049 62 420 62 800
Customer service Complaints per 10 000 trips (<1) 0.56 0.65 0.66 0.86
Accessibility Accessible buses (% of fleet) 9.2 17.4 21.7 26.7 Source: State Transit Authority, 2003.
4.2.2 Sydney Buses and Newcastle Bus and Ferry Services revenue needs
Sydney Buses
The STA outlined Sydney Buses revenue needs for a steady-state scenario in its submission. It assumes that current levels of service are essentially maintained though, over time, passenger comfort will improve since all new buses purchased will be airconditioned and meet disability standards. This scenario also assumes patronage growth of 2 per cent a year. This results from population growth rather than changes to modal share.
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Sydney Buses estimates that it requires $437 million in total each year in Sydney Buses faces 2002-03 dollars. It can recover 50 per cent directly from fares and other a $32 million revenue. Another 43 per cent is estimated to be recovered through govern- funding gap ment contributions for concessions and community service obligations. It needs to purchase about 100 buses a year to maintain the average age of its fleet at 12 years. This is the main driver for capital expenditure. It anticipates a funding gap of $32 million a year (chart 4.6).
4.6 Sydney buses forecast annual net funding position, 2003-04 to 2010-11
Revenue needed Funding position 100 Funding gap $32m (7%)
80 Government contributions 60 Operating cost $187m (43%) $378m (86%) % 40
Farebox and 20 other revenue Capital $217m (50%) $59m (14%) 0
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. Source: State Transit Authority, 2003.
These forecasts do not include the STA’s Western Sydney Buses operations. The STA estimates that these transitway services will lose between $3 million and $4 million in 2003-04.
Newcastle Bus and Ferry Services
Newcastle Buses Patronage of Newcastle Bus and Ferry Services has been declining for years and Ferries funding and is reflected in an increasing operating deficit. Both the operating deficit gap is 39 per cent of and capital program are funded by debt, which has constrained the capital total costs program. It is anticipated that this position cannot be improved if current service levels are maintained.85 About 95 per cent of passengers on these services are eligible for concessions and government contributions far outweigh farebox revenue.86 The forecast funding gap for a steady-state scenario is $19 million a year—39 per cent of total costs (chart 4.7).
85 State Transit Authority submission, 2003, p. 49. 86 Ibid, p. 49.
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4.7 Newcastle Bus and Ferry Services forecast annual net funding position, 2003-04 to 2010-11
Revenue needed Funding postion 100
Funding gap 80 $19m (39%)
60 Operating cost $46m (94%) % Government 40 contributions $22m (48%)
20 Farebox and other revenue Capital $3m (6%) $8m (17%) 0
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. Data source: State Transit Authority, 2003.
4.2.3 Scope for efficiencies
Continuing to meet The funding gap anticipated by the STA’s bus services is not sustainable. funding gaps by This section considers the scope for efficiencies to reduce that gap. raising debt is not However, it is clear that even if some efficiencies can be achieved the STA’s sustainable Newcastle operations will not be able to significantly improve its funding position.
Review unprofitable routes not required by government
The STA maintains The NSW Audit Office completed a performance audit of the STA’s bus unprofitable maintenance and its contractual arrangements in 2002 and identified some services not scope for efficiencies, particularly related to fleet reduction on the basis of required by service rationalisation.87 About 69 per cent of STA bus routes are unprofit- government able. The government provides community service obligation payments for many of these, as it requires the STA to provide the services to meet social objectives. However, some of these services are not required as either minimum service levels or community service obligations and could be considered inefficient.
In its response to the auditor, the STA claims that it provides the services to meet community needs and has the capacity to cross-subsidise them from
87 NSW Audit Office, State Transit Authority: Bus Maintenance and Bus Contracts, 2002, p. 21.
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more profitable routes.88 This suggests that the government and the STA have different views on the levels of service that should be provided to meet community needs. This difference needs to be resolved. It is essential that decisions about services that involve taxpayer funds be made by government. The cost of subsidising unnecessary services is ultimately borne by the taxpayers. The way in which the STA provides these services must be clarified and the provision of these services reviewed by government.
Review the specifications of new buses
Are all the new IPART has previously questioned the specifications for the STA’s purchases buses’ specifications of new buses implying that costs are too high. Some specifications, such as necessary? low floors, have become mandatory under the Commonwealth’s Disability Discrimination Act 1992. The STA claims others, such as airconditioning are demanded by passengers. The STA also justifies high purchase prices on the basis of more extensive warranties, catering for high passenger loads and ‘whole of life’ performance requirements.89 Buses purchased today cost around $400 000 to $450 000 each, though compressed natural gas buses cost considerably more. The costs of buses they replace, which have high floors, steps, no airconditioning and less sophisticated engine management systems, are valued at $290 000 each in today’s dollars.90
It is not obvious that the decisions the STA makes to purchase higher cost buses are necessary to meet their service obligations or that these buses provide the best value for taxpayer funds.
We invite further clarification of and comments on this issue.
Review award conditions
Changes to IPART commissioned a review by Sinclair Knight Merz in 1998 that employment identified scope for efficiencies.91 Reform of employment conditions was conditions could identified as having the potential to deliver the most savings of any of the generate savings identified measures. However, the Minister for Transport decided in 1999 that conditions of employment or entitlements would not be reduced. As a result, these efficiencies have not been realised. Differences in award conditions between private operators and the STA remain significant.
88 Ibid, p. 9. 89 State Transit Authority submission, 2003, p. 40. 90 State Transit Authority submission, 2003, p. 24. 91 Sinclair Knight Merz, Analysis of the Costs of State Transit Bus Operations, 1998.
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Introduce restrictions on pensioner excursion tickets during morning peak
Limiting travel on Peak-period travel determines the size of the Sydney Buses fleet. The STA pensioner excursion estimates that 11.4 per cent of passengers during the morning peak are tickets to off-peak passengers travelling on pensioner excursion tickets. All pensioners and times could lead to seniors cardholders are eligible for these tickets. In some cases, full fare worthwhile savings paying passengers cannot board buses because they are full during this period. The STA believes there is potential for real savings by limiting travel on these excursion tickets to off-peak times.92
Restricting the use of pensioner excursion tickets during the morning peak could allow the STA to reduce its fleet size and may result in increased revenue if additional full fare paying passengers use the services. Pensioners would still be eligible for half fare concessions at these times. Reducing the number of new buses purchased by the STA by 10 a year (10 per cent) would result in savings of between $4 and $5 million a year. (Restricting the use of pensioner excursion tickets is considered further in chapter 10.)
4.3 Revenue needs for Sydney Ferries
In some ways, Sydney Ferries offers a premium service. On nearly all routes, alternative bus services are available and a large segment of the market is tourists, although commuters account for 43 per cent of journeys. It is not clear that the revenue needs of such services should be treated in the same way as other public transport services, particularly since Sydney Ferries operates with a large deficit. This section includes discussion of Sydney Ferries service standards, revenue needs, the potential for efficiency improvements and options for better managing these services.
4.3.1 Service standards
Table 4.8 shows Sydney Ferries performance against its service indicators from 1998-99 to 2001-02. Overall, Sydney Ferries performs well against these indicators, achieving higher standards than do other public transport modes.
92 State Transit Authority, 2003, p. 69.
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4.8 Sydney Ferries performance against key performance indicators
KPI (2002-03 target) 1989-99 1999-00 2000-01 2001-02
Reliability On-time running (>99%) 99.4 99.5 99.4 99.4 Service reliability (>99%) 99.2 99.3 99.3 99.3 Mechanical reliability (>99%)) 99.6 99.6 99.7 99.8
Safety (per million passenger trips)* Security incidents (<0.4) 0.00 0.23 0.67 0.07 Personal injuries (<0.8) 0.46 1.28 2.15 1.82
Customer service Complaints per 40 000 trips (<2) 1.52 1.78 2.04 1.68 Source: State Transit Authority, 2003.
4.3.2 Sydney Ferries revenue needs
A steady-state forecast of Sydney Ferries annual revenue needs is $96 million. About $40 million is recovered in fares and $26 million received as government funding. There is a funding gap of $31 million.93
Sydney Ferries does Sydney Ferries does not recover sufficient revenue to recoup operating not recover enough costs (see chart 4.9). The existing gap is funded by debt but this is not revenue to pay its sustainable. operating costs 4.9 Sydney Ferries forecast annual net funding position, 2003-04 to 2010-11
Revenue needed Funding postion 100
Funding gap 80 $31m (32%)
60 Government Operating cost contributions
% $92m (96%) $26m (27%) 40
Farebox and other revenue 20 $40m (42%)
0 Capital $4m (4%)
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. Data source: State Transit Authority, 2003.
93 Data provided by the State Transit Authority, 2003.
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4.3.3 Scope for efficiencies
Sydney Ferries has made poor fleet decisions in the past. It now has 32 vessels in seven classes and only 22 of these are operational at peak times. Rationalising the fleet and reviewing the services provided can achieve cost savings. Sinclair Knight Merz’s 2003 cost-efficiency study estimated potential savings of $4 million in the medium to long term by reducing the fleet to 25 vessels with consequent modifications to services. Other potential savings were identified in the following areas. § Increasing crew interchangeability could reduce the level of overtime required at penalty rates. Savings of up to 0.5 per cent of operational costs could be achieved, although some would be offset to some extent by additional training needs. § Respecifying the period of operation of manned ticket outlets at the Circular Quay wharves could save five positions with a wage cost benefit of up to $300 000 a year. § Divesting ownership of wharves could reduce costs but this is likely to be offset by annual leasing charges. § Lowering the insurance values may deliver savings but will increase risk. § Conducting a consequence analysis of the inventory at Balmain Shipyard could yield $200 000 (savings exclude the cost of the analysis). § Reforming maintenance practices, including the development of an Asset Management Plan, that reflects government guidelines could yield cost savings of $2.5 million a year in the medium to long term.94
Improved efficiency Overall, it seems reasonable to expect efficiency savings of at least $3.5 could save $3.5 million a year in the medium term. Additional savings could be achieved million by rationalising services. For example, the Manly ferry operates below capacity and could carry all Manly JetCat passengers.
Apart from direct efficiency savings, it is important to consider whether a different business structure would improve the cost effectiveness of providing ferry services. Services could still be provided but with reduced or, for some services such as JetCats and tourist services, with no govern- ment subsidy. One option is to separate ferry operations from the STA and establish a Sydney Ferries Corporation. The new corporation could focus solely on
94 Sinclair Knight Merz, Sydney Ferries Cost Efficiency Study, 2003, pp. 57–61.
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ferry services. New funding arrangements that reflect the special nature of these services could be established.
4.4 Revenue needs for CountryLink
As already noted, CountryLink services are subsidised by the government to ensure a reasonable level of public transport access to country and interstate destinations. In all of its service areas, concessions and pensioner vouchers exceed full fare payments.95 This is reflected in its funding position. In 2002-03, expenses exceeded total revenue by $43 million (chart 4.10). This funding gap increased from $8 million in 2001-02.96
Revenue sources have remained relatively stable since 2001-02. However, operating costs have increased by 28 per cent. An important driver of increased costs is the ageing XPT fleet. Maintenance for these carriages is increasingly expensive. The fleet has been heavily used, which has also reduced the effective economic life of the carriages. It is anticipated that carriages will need to be replaced from 2010 at considerable expense.97
4.10 CountryLink net funding position, 2002-03
Revenue needed Funding position 100 Funding gap $43m (20%) 80
Government 60 contributions Operating cost
% $106m (49%) $217m (99%) 40
Farebox and 20 other revenue
Capital $1m (1%) $69m (32%) 0
Note: The diagram represents annual cash flows and forecasts are in 2002-03 dollars. Data source: State Rail Authority, 2003.
95 State Rail Authority, 2003, p. 17. 96 Data provided by the State Rail Authority, 2003. 97 State Rail Authority, 2003, p. 18.
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Forecasts of CountryLink’s funding position to 2011 have not been provided. However, the SRA anticipates that costs will continue to increase while revenue remains static.
It will become increasingly expensive to provide safe passenger rail services in rural New South Wales. As discussed in section 3.1.5, there is potential to deliver more appropriate services to rural communities by replacing some CountryLink rail services with coaches, as part of a more fundamental refocusing of CountryLink and on better providing and coordinating needed rural and regional transport services. This is examined in chapter 10.
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5 Funding options
THE REVENUE NEEDS OF PUBLICLY OPERATED TRANSPORT authorities in the Greater Sydney Area amount to $2.5 billion each year (in 2002-03 dollars) to 2011, based on existing levels of service and no significant network expansion. After allowing for fare and other revenue and government contributions, there is a funding gap of $229 million a year, making additional funding necessary to avoid unsustainable debt levels or significant cuts to services and/or expenditure. If quality-of-service investments and/or network expansions are required, this gap (and funding need) becomes significantly larger. Therefore an increase in revenue from existing and new sources is critical to funding both ongoing shortfalls and new capital expenditure for the sustainable provision of public transport.
This chapter explores the options for funding, from four possible sources: § users who benefit directly from public transport § groups who benefit indirectly from the existence of public transport § direct private sector investment § public funds raised from the collection of non-transport specific charges, in addition to existing payments from consolidated revenue.
More funds are To ensure that public transport is provided in a sustainable manner, it is needed from more critical that existing and new funding sources are explored, and their sources for relative merits and risks evaluated. The challenge is to fund more from sustainable public those who benefit (both users and non-users) without compromising the transport broader social and environmental responsibilities of government.
Funding options will partly depend on what those funds will pay for. For instance, increases in fares or greater advertising revenue may be less viable when the network is operating at or close to capacity during peak hours, and where quality standards are not being met in some areas. Quality-of-service enhancing investments that directly benefit users of
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public transport may improve the viability of changes to the structure and level of fares if users can associate higher fares with improved outcomes. Similarly, a better quality public transport network can open up options for private sector investment, such as improving the attractiveness of advertising or investing in businesses in and around transport hubs. Network extensions that provide substitutes for private vehicle use may open up even more funding options.
5.1 Principal funding sources
There are four main sources of funding for public transport in addition to government payments for community service obligations and infrastructure from general revenue: § user charges, where transport users pay part of the total cost of providing the service, which include: – fare box revenue – access charges § charges and levies on people or firms who benefit from the provision of a public transport network (whether or not they use it), which include: – various forms of property-based ‘value capture’, where some of the increase in value of land around public transport infrastructure is captured and used to fund new infrastructure – development charges, where development levies and taxes are linked to the sale and leasing of development opportunities within, around and above current and new infrastructure; § direct private investment, either in transport infrastructure itself or in the retail space surrounding transport hubs § additional public funds raised via means not specific to public transport, such as through public debt issue or from charges such as a CBD employee tax, transport levy or additional road user charges, with funds raised dedicated to public transport.
A range of funding These funding sources need not be mutually exclusive, and it is likely that sources may be funding will continue to come from a range of sources, particularly where required more expensive extensions or modifications to the network are required.
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5.2 Criteria for assessing funding options
At the broadest of levels, there are four principles that should be considered in an assessment of funding options. These include: § efficiency to ensure that the economic cost to the community is minimised § effectiveness to ensure that funding is delivered when it is needed § equity to ensure that the mechanism is fair and that those suffering hardship or disadvantage are adequately and transparently assisted § appropriateness to ensure that the mechanism is in the wider community’s interest.98
More specifically, the net benefits associated with particular funding options will be influenced by: § the incentives established to use and invest in public transport § incentives for transport providers to meet KPIs, and the cost of those incentives to government § the timing of funding options, and the extent to which substitutes for private car travel are funded up-front § the ability to transfer financing, construction, management and other risks between the public and private sectors § the acceptability of funding options to investors, public transport users and the wider community § intergenerational equity implications § impacts on public transport demand, such as user sensitivity to changes in fare levels and structures § the effect of each option on competition within the transport network § the impact of options on the integration and use of public transport services § practicality, including administrative complexity and cost.
98 Obtained from discussions with staff of the Department of Infrastructure, Planning and Natural Resources.
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5.3 User-pays funding options
Fares could be structured so that they recover more of the cost of travel. The scope for increasing fares depends on: § sensitivity of users (and categories of users) to fare increases and/or changes to discounts for longer distance trips and periodical and multi- trip tickets § willingness to pay for any improved standard of public transport § alternatives to public transport, and the price of those alternatives § equity considerations.
Key equity concerns raised in submissions include: § affordability—the poorer members of society, who are the least able to pay for transport, tend to rely more on the more expensive single trip ticket and have a greater reliance on public transport § the decision to provide subsidised travel for selected groups § the decision to provide non-commercial services to areas without viable public transport alternatives (such as Newcastle Services, where only 5 per cent of passengers pay full fares).
As the Local Government Association submitted:
Many public transport users in remote locations, on low incomes or in disadvantaged groups are adversely affected by fare increases as they have little alternative transport available.99
Subsidised fares are However, providing subsidised fares is not the only way of achieving equity not the only way to objectives. This may be particularly the case when the sustainability of public achieve equity transport is considered, and the funding needs of public transport are so objectives much greater than current fare revenue (needing $2.5 billion a year in the Greater Sydney Area, only $0.9 billion of which is recovered from passengers and other revenue).
Some options for equitably increasing the farebox share of cost-recovery are discussed in chapter 6.
99 Local Government Association of NSW and SA of NSW submission, p. 7.
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5.3.1 Funding service improvements from higher fares
Higher fares may be Funding service improvements that are valued by users may open up better accepted if opportunities for increasing fare revenue. Improving service levels may standards are raised also broaden the scope for increasing revenue from non-passenger direct users, such as via commercial revenues (notably advertising).
Service levels are important to public transport customer satisfaction, such as on-time running, reliability and vehicle quality. Yet they are a cost driver for transport authorities. In its submission to the 2003 fare review, the SRA states that the ‘trend for increasing service expectations drives costs faster than savings can be realised … Cost cutting in areas of customer service … or not upgrading trains is not supported by customers.100
Improved standards To improve the acceptability of higher fares, service improvements need to should come before be delivered in conjunction with fare rises. As submitted by the Local or in line with fare Government Association: increases Public transport users cannot be expected to pay increased fares on the basis of some future improvements to service, any more than a price increase for a product in a private sector competitive market situation could be justified ahead of an improved product actually being available. Increases to fares without these improvements, or with a ‘promise’ that the improvements may take place some time in the future sends the wrong message to the market and would be unlikely to attract existing car users away from their motor vehicle.101
While this is noted, businesses in the private sector must at least recover their costs or they fail to survive.
5.4 Beneficiary-pay funding sources
Indirect Many benefit indirectly from the existence of the public transport network beneficiaries could (even if they do not use it). For example, other forms of transport may be pay for service less congested because of it, or land values rise because of the proximity of improvements and the land to public transport. To date, most indirect beneficiaries have not network extensions been charged for the gain they receive. Typically, such beneficiaries’ contributions to funding are linked to development densities and are designed to recognise increases in land and development values.
100 State Rail Authority, Submission to the Independent Pricing and Regulatory Tribunal: CityRail Fare Review, 2003, p. 6. 101 Local Government Association of NSW and SA of NSW submission, p. 7.
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The principal mechanisms for targeting indirect beneficiaries include: § property-related value capture, where the impact of public transport on land value is captured by government, possibly via stamp duty, land tax, and levies § development charges, where development levies and taxes are linked to the sale and leasing of development opportunities within, around, and above current and new transport infrastructure.
The Environmental Defenders Office submitted that another possible avenue for value capture lies in levying promoters of special events, who create increased demand for public transport.102
Development charges and special events charges may be potential sources of funding for the existing transport network. However, land value capture requires extensions to the transport network.
5.4.1 Development charges/levies
Development fees There are several models that seek contributions from developers through are already in place the planning process, typically to mitigate the negative impacts of develop- ment or to provide services for the future occupiers of the development. Contributions are usually levied by local councils according to a specific contributions plan. They may include dedicating land pro rata for open space, supporting public facilities and/or making monetary contributions or providing the physical infrastructure required as a condition of develop- ment consent.
One major benefit of developer charges is that they help to ensure land is not developed without necessary services, and encourages development in areas that can be most efficiently serviced. Discussions with staff of the Department of Infrastructure, Planning and Natural Resources suggest that developer contributions on new fringe development around Sydney could raise $1.7 billion, levied at $15 000 per lot. However, this is likely to feed through to lot prices and consequently affect housing affordability.
Models for development levies
Development levies have been researched considerably over recent years and have been introduced in several forms in Australia and abroad.
102 Environmental Defenders Office submission, p. 8.
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An issue for this inquiry is the scope for additional levies to be introduced with the revenue directly or indirectly obtained by the state government and dedicated to public transport funding.
Developers in New South Wales currently make Section 94 payments to local councils, which are designed to pay for the facilities and services that their developments generate a demand for. Other examples include charges payable under an infrastructure charges plan such as in Queensland, where infrastructure is separated into trunk items (charged for through the plan) and non-trunk items (provided by the developer). In Victoria, proposed changes to the development contributions system would see infrastructure costs apportioned according to their projected share of beneficial usage, and the collection of an infrastructure charge to cover capital costs, which compels the council to supply the facility or return the money. State governments would gain indirectly from investments that improve land values via stamp duty and land tax revenue.
These schemes are similar to the Section 106 of the Town and Country Planning Act 1990 in the United Kingdom, where developer payments are levied for improvements to local roads and accessibility improvements, and where it is common for developers to operate local bus services early in the development when a commercial service would be unprofitable.
Developer levies now used to raise money for public transport include: § an interim development contribution of $15 000 per lot on four new land releases in south-western Sydney § development contributions for the North Sydney rail station, levied at $88 per square metre on added floor space for all new development in the North Sydney CBD.
Voluntary ‘bonus’ Another approach is to offer bonuses to developers who pay public models also exist transport contributions. The Planning Institute of Australia submitted that development rights such as floor space bonuses could be offered, subject to the payment of a public transport levy such as that being considered for the Green Square Town Centre development.103 This is similar to the United States density bonusing or increased floor space ratio approach. Under this model, contributions are voluntary and developers can increase density or the floor space ratio with a payment to public transport improvements. However, voluntary approaches may be susceptible to free-rider problems if developers can benefit in some way whether or not they contribute.
103 Planning Institute of Australia (NSW Division) submission, p. 4.
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Density rights could A related approach is for the government to sell development density be sold in exchange rights to developers for use within value capture districts, subject to pre- for a contribution determined urban planning and development outcomes, with the funds raised dedicated to public transport investment.
Several submissions to the review supported the use of development levies.
The concept of a levy per lot on developers to fund transport provision is well advanced and promises the most substantial source of new funding for public transport. It could play a very important role in the critical task of generating funding for public transport for new urban growth areas.104 It is entirely appropriate that developers who will yield substantial profits from development of the urban release areas be required to contribute to the costs of providing public transport services to meet new demand.105
However, equity issues were also raised.
It is both inequitable and economically damaging for property owners to face additional, specific levies in addition to general taxes … developer levies ultimately result in fewer private sector investment and redevelopment, and higher rental and purchase costs for consumers.106 There is concern with this [development levies] approach if it results in an increase in the cost of housing and hence a reduction in affordable housing especially for new home buyers … It also raises questions of equity in requiring new home owners in a particular area to contribute to a transport system which will invariably provide much wider benefits. For example, a new rail link to the NorthWest sector is not only of benefit to residents of new release areas but also to those in established areas through which it passes.107
The Property Council of Australia suggests that the North Sydney rail station development levy adds about 6 per cent to the cost of construction in North Sydney, and states that by affecting construction costs on a localised basis the competitiveness of regions as an investment destination is adversely affected.108
Key factors affecting the application of development levies
There are limits to While development contributions provide opportunities to raise additional development levies revenue and ensure that new developments can support increased patronage of public transport, they do have their limits.
104 EPA submission, p. 7. 105 Total Environment Centre submission, p. 3. 106 Property Council of Australia submission, p. 3. 107 Western Sydney Community Forum submission, p. 20. 108 Property Council of Australia submission 2003, p. 2.
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The Property Council of Australia noted in its submission that development levies do not provide sufficient funds up-front for public transport infra- structure investment to secure alternatives to private road use or meet the ‘lumpy’ maintenance profile of the existing transport network. For instance, the North Sydney rail station levy alone was said to not raise sufficient funds for the station redevelopment for 75 years. The acceptability of levies to developers also depends on the tangible outcomes associated with the use of funds. For instance, despite the new levy the upgrade of the North Sydney rail station has not been bought forward, with redevelopment not expected to occur until after 2010.109
It may also be difficult to equitably construct development levies that can contribute to infrastructure that is already in place, even when additional investments are required for service and quality improvements.
In terms of equity, levies do not take into account the gains or losses faced by developers. There are also equity implications of making any scheme retrospective, which further limits their application to the existing network. The incidence of levies also raises equity considerations, given that they apply to new developments, and thereby purchasers or lessees of new developments.
Administration complexities can also be significant, given the need for a legislative framework that is well suited to the needs of public transport investment, and for well-organised working relationships between the administrators and developers. For developer contribution models to work effectively, councils dealing with developers need to be well resourced and able to negotiate with developers. Where councils are sma ll, state govern- ment involvement may be required (adding another layer of complexity). For levies to be dedicated to public transport funding there is also the administrative issue of transferring funds to the state government.
Levies work best for Experience suggests that development levies may be best suited to funding network augmentations to the existing transport network, but not in all cases. augmentations Development levies were considered but not preceded with for the New Southern Rail link. Discussions with staff of the Department of Infrastructure, Planning and Natural Resources suggest that developer contributions may be most useful where the proposed development is not contiguous to existing infrastructure, or is in an area where the lag in council programs has not yet managed to extend services. Development levies are likely to be particularly suited to larger developments, which have well-defined objectives and planning priorities.
109 Ibid.
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5.4.2 Property-based value capture
Public transport Improved accessibility to public transport frequently increases the value of could share in the land along transport corridors. Land value capture funding approaches increase in private offer another funding choice through a system of property-based rates that land value due to seek to capture some of the premium brought to land owners by proximity transport proximity to public transport.
For instance, one source of increased land value as a result of transport network extensions is the change in permissible land use, as land near a railway enables/permits higher density and high value use. The following elements can add value to land: § changing land use due to changing demand § increased carrying capacity of the land/sites § improved accessibility to existing employment centres, allowing greater flexibility and diversity § greater connectivity to the overall transport network, improving public transport services for those living in existing areas, stimulating demand and boosting property values in those locations.
Private benefits of access to new public transport can be significant. In London, it was estimated that the Jubilee Line extension, which cost the public A$10 billion, generated over A$30 billion for the private sector.110
Overseas An example of the application of land value capture approaches includes experience shows the imposition of impact fees in San Francisco in the early 1980s, applied to values can be office development along a corridor in the city serviced by the Municipal captured Railway LRT Line to increase the transit system. The fee was a one-time charge to cover the costs of providing transit over the 45-year useful life of the office building.111
Land value capture funding received support from several submissions.
Active consideration needs to be given to either an expansion of Section 94 Contributions Plans to reflect both existing and new local and regional contributions or separate value capture legislation. The introduction of the current draft SEPP 66 (Integrated Land Use and Transport) is a good start.112
110 Hazel and McGregor, Using Land Value Gains to Finance Transport Infrastructure: Cast Study—The E-Rail Consortium and the Plan to Re-Open the Edinburgh South Suburban Railway, 2002. 111 Berry and Sims, North American Examples of Innovative Funding for Public Transport, 1999. 112 Planning Institute of Australia (NSW Division) submission, p. 4.
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Public transport enhances the value of the land and the businesses in its corridors. Thus it is reasonable to expect that the beneficiaries of that increased value contribute towards the cost of the public transport infrastructure.113 Recommendation: The inquiry supports, in principle, the introduction of new value capture measures to fund public transport. Examples might include a ‘betterment tax’ regime to capture part of the improved private land values arising from land use changes and transport investment: retail levies at railway stations and intensification and commercialisation of transport terminals.114
A transport Another option is to use properties as the basis for levying a transport improvement levy improvement rate, which could have a ‘beneficiary pays’ component if the could have a funding mechanism is skewed towards those properties that benefit beneficiary-pays directly from public transport investments. This is discussed further below component in the context of broad-based charges, which could be hypothecated to transport funding.
Most property-based value capture models are a one-off charge paid when land is sold within the vicinity of newly constructed (or to be constructed) public transport infrastructure. They typically rely on extensions to the existing transport network as new transport corridors connected to the already established network enhances adjacent areas and allow increases in value to be captured. Apart from selected transitways, many of the opportunities for network extensions known to the inquiry relate to rail, as outlined in the Long Term Strategic Plan for Rail. Yet even for rail it may be complex to devise a value capture model to fund new rollingstock purchases, upgrading to stations or new signalling systems.
Financing risks may also be substantial, given the range in degrees of certainty of income from value capture. For instance, some revenue streams may be highly speculative with value capture through a new housing or commercial development with improved access to rail corridors.
The effectiveness of funding options based on land value capture will depend on being able to apportion increases in value from access to public transport rather than other infrastructure (schools, hospitals, etc), and on being able to raise revenue in the short term, particularly if land is not sold immediately.
There is also the difficulty associated with apportioning the benefits of net- work extensions to residents in new areas compared with those serviced by the existing network.
113 Western Sydney Community Forum submission, p. 20. 114 Rail, Tram & Bus Union (NSW Branch) submission, p. 31.
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In terms of equity, it is also relevant that property purchasers are already taxed at a high rate compared with other industries, given that in all likelihood, development levies will be paid for, at least in part, by the final purchasers. Land value capture levies are also likely to be unpopular with developers constructing new buildings, as they will see existing property owners escaping the payment.
Model works best in Funding under a land value capture model is likely to be best suited to less developed areas that are undeveloped or underdeveloped in a strong property areas market, where it is possible to improve public transport accessibility. This might apply to a possible future rail link between Glenfield and Bringelly.
5.5 Private funding options
Options for private sector investment in public transport depend on the nature of possible network augmentations and the extent to which operational responsibilities can be transferred to the private sector. Private funding options flagged in submissions to the review include: § public–private partnerships (PPPs) § private franchises § funding instruments linked to new investment opportunities in station/interchange redevelopments.
Private funding In the main, private funding models are implemented in conjunction with options usually user-pays principles. For instance, private investors in PPPs or franchises depend on access to can recoup their costs through fares, possibly in addition to ongoing user charges government payments to purchase private sector output. This raises challenges for government in overseeing its responsibilities to the community and providing a viable and sustainable funding platform for the private sector.
5.5.1 Public–private partnerships
The use of private funding for infrastructure through joint ventures between the public and private sectors has been relatively successful for road projects. The NSW Government first used private funds in the construction of the Sydney Harbour Tunnel. Other notable partnerships involved various motorways in and around Sydney including the M2, M4, M5 and Eastern Distributor. However, the experience of private investment in providing rail infrastructure has not been as successful, evidenced by the
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problems surrounding the Brisbane and Sydney airport links and the decision not to proceed with the Bondi Junction rail extension.
Successful PPPs need good risk allocation and viable patronage.
The effectiveness of PPPs for funding new public transport extensions or the commercialisation of existing parts of the network depends on: § adequately allocating risks to the private partner § providing private investors access to sustainable commercial revenue streams § integrating any new investments with the existing transport network.
Risk management
In principle, one of the key benefits of PPPs is the opportunity to allocate risks between parties so that they can be more efficiently managed. The ability to transfer risk from the public to private sector will partly determine the attractiveness of a project for the government and the private sector.
Table 5.1 outlines the most common PPPs. Table 5.2 lists the types of risk a project will have in each stage of development, and those risks that can be transferred to the private sector.
A PPP structure can result in improved efficiency and commercial focus in the delivery of infrastructure. The Australian Council for Infrastructure Development (AusCID) submitted that:
AusCID strongly encourages a cooperative approach between the public and the private sector in addressing the needs of the public transport system. There are many benefits the private sector can bring in this area, including access to broader funding and benefits in the areas of risk allocation, earlier project delivery, enhanced efficiency, better customer focus, access to latest technology, and economically sound decision making.115
Allocating risks is Using the PPP structure to allocate risks is not straightforward, as shown not easy and costs by the experience of both the Brisbane airport rail link and the Sydney can be large airport rail link.
115 AusCID, Private Financing of Infrastructure and Certain Government Services in NSW, Australian Council for Infrastructure Development, February 2000, p. 10.
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5.1 Main types of public–private partnership
Contract type Characteristics
Design and The government specifies the asset it requires in terms of its functions and desired construct outcomes. The private sector is responsible for designing and building the asset and any related risk. The asset is then passed to the government to operate.
Operate and An existing, government-owned asset is managed by a private f irm for a specified maintain period. The contractor is responsible for providing services to customers, maintaining the asset to a specified condition and ensuring management practices are efficient.
Design, build The service provider has a contract to design, construct, operate and maintain the and operate asset. It is responsible for project financing during construction and retains management function and risks. Government purchases the asset for a pre-agreed price before or directly after commissioning.
Build, own, The service provider is responsible for design, construction, finance, operations, operate and maintenance and commercial risks and owns the project throughout the concession transfer (BOOT) period. The asset is eventually transferred to government, often at no cost.
Build, own and Similar to BOOT, but the service provider retains asset ownership in perpetuity. The operate (BOO) government agrees to purchase the services produced for a fixed period.
Lease, own and Similar to BOO but an existing asset is leased from government for a specified time, operate which may require refurbishment or expansion but no ‘new build’ assets.
Alliance Private–public agreement to share the pain/gain associated with risks. Parties agree to a benchmark price, time and service standard and any benefits (or costs) are shared.
Source: AusCID, Private Financing of Infrastructure and Certain Government Services in NSW, AusCID, February 2000.
5.2 Potential risk transfer in public–private partnerships
Stage of project Type of risk Public sector delivery PPP structure Public sector Private sector Development phase § Design risk ü ü § Technology risk ü ü § Urban planning risk ü ü Funding phase § Interest rate risk ü ü § Foreign exchange risk ü ü § Inflation risk ü ü § Default risk ü ü Construction phase § Construction risk ü ü § Political risk ü ü § Regulatory risk ü ü § Industrial relations risk ü ü § Environmental risk ü ü § Force majeure risk ü ü Operation phase § Performance risk ü ü § Patronage risk ü ü § Operating cost risk ü ü § Residual value risk ü ü § Safety risk ü ü § Competition risk ü ü § Pricing risk ü ü § Transport integration ü ü Source: Debande, ‘Private financing of transport infrastructure: An assessment of the UK experience’, Journal of Transport Economics and Policy, vol. 36, Part 3, pp. 355–87; Lemos, Betts, Eaton and Almeida, ‘Model for management of whole life cycle risk uncertainty in the Private Finance Initiative’, Journal of Project Finance, vol. 6, no. 4, pp. 68–80; Arndt, ‘Risk allocation in the Melbourne City Link Project’, Journal of Project Finance, vol. 4, no. 3, 1998, pp. 11–24.
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With respect to the Sydney airport rail link, AusCID’s submission pointed to problems of: § overestimation of patronage, resulting in lower than expected revenue levels that were insufficient to meet the operating costs and debt service obligations—the success of the Eastern Distributor being a contributing factor § government failure to deliver the quality and reliability of service for which it was contracted, resulting in arguments between the SRA and the Airport Rail Link Company § failure by all stakeholders to proactively and effectively promote the link, resulting in a lack of community awareness of its operations.116
There is also the significant issue of resistance to the fare surcharge for local users.
PricewaterhouseCoopers also submitted that PPPs are by no means a ‘magic pudding’ but ‘a well structured PPP with the appropriate level of risk transfer should provide value for money for Government’.117
Recouping costs and returns
Viable patronage Access to sustainable revenue streams is critical to the appeal of PPPs to the levels are critical to private sector. However, in a regulated fare environment influenced by success broader transport objectives, it is difficult to secure commercial revenue streams that cover both operating and infrastructure costs. Another difficulty is that the factors affecting patronage include those specific to, and independent of, the investment itself.
Although new rail links can generate their own separate revenue streams, the price of tickets would be prohibitive if full cost recovery through the farebox were required and there were no other measures to change the perceived cost of alternative transport, particularly cars. Currently, the UK Department of Transport is implementing a PPP to provide infrastructure and rollingstock for the London Underground. However, cost recovery for operational costs already exceeds 90 per cent.118
It may also be difficult to partition private revenue streams from public ones. For example, extra revenue that might be generated from additional turnback facilities, duplication of single tracks and quadruplication of
116 AusCID submission, p. 11. 117 PricewaterhouseCoopers submission, p. 14. 118 AusCID submission 2003, p. 12.
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sections of existing double track cannot be easily separated from revenue generated from existing infrastructure. Consequently, private companies do not have a transparent revenue stream and patronage risk, performance risk and pricing risk cannot be easily transferred.
Investors may need Any capital investment in new rail links by the private sector or attempts to the lions share of commercialise the existing network would probably require a significant ticket revenue proportion of the ticket price to be allocated to the private sector, leaving the government to fund its operation.
To limit exposure to some of these problems, a PPP structure that does not rely on ticket revenue as the sole income source can be more attractive. This would require the NSW Government to pay an ongoing fee to the private partner for access to the infrastructure, removing the need for up-front funding and spreading the cost over the life of the project. This would put any new extensions on the same footing as services on the existing network, and may help risk management issues by effectively creating a joint venture. It would also overcome the resistance to higher fare surcharges from existing and potential users of the extension.
The government could recoup some of the fees paid to the private partner through the usual IPART process of fare determination. This approach recognises the impact of any network extensions on existing services, delivering system-wide benefits to which all rail users could contribute. This would be similar in principle to Sydney Water ratepayers who pay for the three privately funded water treatment plants.
To ensure appropriate delivery and maintenance, KPIs would have to be established to take into consideration the private sector’s dependence on the established network, along with appropriate incentive/penalty payments.
Integrating private investments with the existing network
Efficient patronage levels on any privately funded part of the network depend on the ability to integrate the privately funded sections with the existing network. However, this gives rise to additional risks that private investors cannot hedge, given that other parts of the network are managed by (and subject to the objectives of) the public transport authorities. This may limit a private company’s ability to respond to changing market conditions. Links between privately funded and existing parts of the network also make it difficult to transfer responsibility for performance outcomes.
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5.5.2 Private franchise
Franchising provides another option for drawing on private funds for additional network investment. This could see transport authorities segregate the current network and allow companies to tender. Authorities could maintain responsibility for rollingstock and buy access to parts of the network, or allow both to be franchised.
Franchising was used by the Victorian Government in 1998, which split the urban heavy and light rail network into four geographically segregated franchises and invited the private sector to bid for the rights to maintain, operate and upgrade each of the franchises. Financial problems for the franchisees emerged in 2001 and at the end of 2002 one, National Express, decided to withdraw.
PricewaterhouseCoopers submitted that, while promotion of competition is important, over-segmentation of the system should be avoided as it can limit service integration, marketing initiatives and the achievement of economies of scale. Problems can arise if responsibilities for quality are fragmented. For instance, in Victoria, franchisees did not have control of ticketing and were dependent on a third party to ensure an effective new ticketing system including satisfactory machine availability. There was a failure to have adequate material penalties for not meeting agreed ticketing standards, payable to the party who is financially at a loss, to provide sufficient incentives to quickly rectify shortcomings.119
Some issues that affect the benefits and costs of franchising include the following. § There is the possibility of default by the private franchisee, which would transfer project responsibility (and costs) to the government. § The terms under which subsidies for community service obligations are provided may change, given that such subsidies would also be required to be provided to franchisees. This could affect the net cost to government. § Government must give strong leadership to franchisees, delivering a focused vision of transports’ future agenda, purposes and objectives, and a plan detailing how this vision will be delivered. § Appropriate KPIs, using financial incentives for compliance, must be established and monitored.
119 PricewaterhouseCoopers submission, p. 18.
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§ Integration with other forms of public transport should be supported to the greatest extent possible via timetables or destinations, for example. § Structural fragmentation could lead to increased transaction costs and a breakdown in communication among franchisees and the regulator, leading to limited cooperation and a lack of knowledge sharing. § Franchisees will focus on operations that provide the greatest returns, even if these are not core activities. Departed chief executive of British Rail’s former private infrastructure provider, Railtrack, noted in a BBC interview that:
There is tension between shareholder interests and public service obligations. The only way we [Railtrack] can make profits is by not doing the things we should do to make railways better.120
Good contracting is Ultimately the success of a franchise will depend on contract specifications, critical the tendering system and the procedures for monitoring contracts. The period of the franchise contract is an important parameter. Short franchise periods allow more frequent competition for the market, maximising competitive pressures on the incumbent to perform. However, franchisees will have little incentive to invest in infrastructure. As noted by Kain when commenting on the reform of rail transport in Great Britain:
… a standard franchise length of seven years, the acquisition lead-time and the high cost of trains work against investment in rollingstock purchase. The payback period is far longer than the standard franchise length, which adds to the investment risk, as the train operating company must bear all the risk of a low resale value at the end of a franchise period on the premise that the train operating company can fail to re-win its franchise.121
Consequently, franchises with long-term contracts normally face fewer constraints to investment and innovation. In drafting the contracts, the government would need to weigh up the costs and benefits from each.
Careful contract design—without being overly prescriptive so as to limit innovation—is paramount. Still, contracts need to try to prevent private operators behaving opportunistically, such as by allowing assets to run down towards the end of the franchise period.
120 Martin, British rail privatisation: What went wrong? http://www.publicworld .org/docs/britrail.pdf, Accessed 2 July 2003, p. 6. 121 Kain, ‘The reform of rail transport in Great Britain’, Journal of Transport Economics and Policy, vol.32, no.2, 1998, p. 256.
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5.5.3 Private investment opportunities
Increased commercialisation opportunities in and around public transport facilities could be used as a means of attracting private sector investment in public transport.
For instance, discussions with staff of the Department of Infrastructure, Planning and Natural Resources highlighted the sale of property and airspace on a tranche or case-by-case basis, for the purpose of creating another revenue stream for public transport. Property development could occur in and around railway stations, bus depots, wharves, ports and vacant land, which could all potentially yield significant funding for transport.
However, for a variety of reasons (development costs, alternative supply of land), the sum of money that could be realised may be modest, though not unimportant.
Development opportunities could also attract beneficiary-type levies, as submitted by the Total Environment Centre:
Improvements to rail stations and public transport interchanges provide obvious commercial opportunities and advantages to retail and service industries. Beneficiary levies should be applied to link property value increases with sale of air space and commercial activity at stations and interchanges.122
5.6 Public investment options
Some public funding Public funding options will continue to comprise part of the future funding will be needed as of the public transport system. International funding approaches show that well as new revenue public subsidies are still heavily relied on, and where they are less so (such streams as in the United States), public transport use is much lower. AusCID submitted that in Western Europe and Canada, transport agencies rely on public subsidies for 25–75 per cent of operating costs and 100 per cent of capital costs (as in Australia). However, these governments also enjoy a degree of freedom as to the allocation of funds. For instance: § in Germany, state and local governments receive block grants for spending on public transport § local governments in Denmark, Norway and Sweden are responsible for allocating subsidies for public transport capital and operating needs.123
122 Total Environment Centre submission, p. 5. 123 AusCID submission, p. 13.
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Most mechanisms for raising public revenue for transport are not designed to supply an immediate lump-sum cash injection, rather they provide an ongoing revenue stream to support other funding sources.
One of the major broad-based charges that could be applied relates to new funding approaches for roads, which could free up or provide money for public transport investment. The different types of possible road user charges that might be hypothecated to public transport investment are outlined in chapter 8. Similarly, current toll rebates for vehicle use of the M4 and M5 roads could be discontinued with funds redirected to public transport. However, the viability of road charging as a public transport funding source depends on the public transport alternatives to roads, and the extent to which a general move toward road tolling is adopted.
More desirable broad-based taxes would be those that provide incentives consistent with the NSW Governments’ long-term strategic urban plan. These include a possible CBD employee tax and/or a transport levy. Another option would be to issue public debt.
5.6.1 CBD employee tax
Taxes on employees Because most transport routes are designed to service employment centres, in major centres the aim of the employee tax is to charge those who put pressure on the could collect funds transport system. Under such a tax, the geographical location of the for public transport workplace should determine whether the workplace is inside or outside the public transport perimeter. In establishing boundaries, it is important to try to dissuade firms from implanting a limited headquarters just outside the perimeter and to then report all the wages through it.
The employee tax was first introduced in Paris in 1971 under the name versement de transport. The tax is paid by employers located within the CBD with 10 or more employees at a rate of 2.2 per cent of the payroll and is mandatory for every firm, public or private. To encourage the use of public transport, the revenue is used to subsidise cheap periodical tickets called carte orange. In 2003 the tax revenue will account for approximately 65 per cent of the Paris transport authorities’ budget.124 But this would not encourage greater This approach to funding does not differentiate between those who use public transport use public transport or alternative transport modes and, therefore, does not
124 GLA, Transport in Paris. A delegations visit to Paris Greater London Authority, http://www.london.gov.uk/assembly/reports/transport/paris_report.pdf Accessed 24 July, 2003, p. 11.
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provide an incentive to switch modes. However, it could provide an incentive to shift peak-load travel if rebates were offered for staff working non-peak hours. Like any geographically determined tax, it is possible such a tax could encourage businesses to move away from employment centres and arguably to areas that are not well serviced by public transport, creating a modal shift back to motor vehicles.
For many businesses, relocating out the CBD is not viable or is not sensible from an economic or efficiency viewpoint. Employers pursuing a location strategy on broader economic criteria may therefore be disadvantaged.
Although this type of funding has been used by 85 per cent of eligible cities in France, there has been very limited mention of this type of tax in the submissions.
We would be interested in stakeholder views regarding the desirability of a CBD employee tax for the purpose of funding public transport.
5.6.2 Transport levy
A transport levy could be placed on motor vehicles or households across New South Wales and specifically used for transport funding. Several submissions advocated the use of transport levies, which could take the form of: § a metropolitan special ‘transport improvement’ rate levied on a per property or ad valorem basis or a combination of both § or an additional levy on vehicle registration applied to vehicles registered in Sydney.
Property-based transport improvement levy
A transport improvement levy could be collected by increasing the council rate payable on residential and commercial properties in the Sydney metropolitan area. The Local Government Act allows councils to levy a special rate for services and facilities provided, or to be provided, by the council on the basis of benefit from, or contributing need for, services. Rates can also be levied on a flat or ad valorem basis. A hypothecated property rate could be based on a combination of any of these approaches. Again, administrative issues concerning the channelling of funds to the state government for public transport investment are raised.
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There are several Examples of similarly based rates include: existing models for § the Sydney Water Environmental Levy, which was a property-based a property-based flat rate per property for a specific purpose rate with funding for a special purpose § Melbourne’s Special Underground Railway Rate, imposed on all non- residential rateable properties within the municipal boundary to contribute funding to the rail loop § Victoria’s Parks and Reserves Trust Funding, which is a charge levied on commercial and domestic properties throughout the Melbourne metropolitan area, the bulk of which is paid to Parks Victoria § South Australia’s Emergency Services Levy, which is a levy on all real estate and some vehicles throughout the state.
Any property-based levy is likely to face objections from local councils, given that they would probably be added to local council rates, particularly if councils do not see their residents directly benefiting from public transport improvements. Equity issues may also emerge, depending on the coverage of the levy. These may include ability to pay, the fact that property values (some of which is collected via stamp duty at the time of purchase) already reflect proximity to transport, difficulties in establishing benefits at the local level, and the wide community benefits associated with improved public transport.
Vehicle registration levy
An additional charge could be levied on vehicle registration based on a range of variations including vehicle type, usage, weight, engine capacity, fuel type, kilometres travelled or age. The rate could be struck by calculating target revenue and percentages to be drawn from various categories. Such a charge offers the potential to not only raise funds for public transport investment but also to support the government’s environmental policies through, for example, reductions in vehicle kilometres travelled, and moves to more environmentally friendly vehicle types. Such a levy already exists for some vehicles through the weight tax, which charges heavy vehicles for road damage.
Equity issues that would need to be resolved include impacts on households with high car ownership and lack of access to public transport. Equity would be affected by where the money is spent and how current car users might benefit from better public transport in the future. The appropriateness of such a levy also depends on the extent of existing and potential charging for road use through tolls or some other method.
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5.6.4 Public debt
Debt financing is an attractive option for investments that are ‘lumpy’ and spread over long time horizons. They also enable easy coordination between capital expenditure requirements and available finance. Debt instruments theoretically have the potential to provide additional revenue at little additional cost if the funds are used to generate a return that can eventually pay down the loan. However, this has not been the experience of public transport authorities. Conversely, debt-funded transport infrastructure has typically not generated revenue.
The NSW Government has been reluctant to increase public debt, although it has done so for the first stage of the Parramatta Rail Link. The desirability of increasing public debt depends on any flow -on impacts to the ability to provide other services. The Productivity Commission notes:
Concerns over debt levels and the impact of additional borrowings limit the ability of State governments to fund economically justified infrastructure projects. This is particularly the case today, as governments are sensitive to community expectations about responsible financial management and possible reactions by financial markets and credit rating agencies to higher levels of public borrowing.125
The ratio of the net debt to gross product will affect the state’s credit rating. Borrowing for projects that do not provide an immediate return could worsen its credit rating leading to a higher cost of financing immediate projects, and increase interest payments on outstanding debt.
5.7 Summary of funding options
There are many funding options for public transport, drawing on new and existing funding sources. The viability of options varies according to what is to be funded. For instance, fare increases may be appropriately directed to quality-of-service enhancing investments. Value capture models may be well suited to funding station or interchange upgrades or network extensions. To recap, the advantages and disadvantages of options depend on the following attributes of each funding source in terms of the intended use of funds: § efficiency—the extent to which the economic cost is minimised § effectiveness—the extent to which funding can be delivered when needed
125 Productivity Commission, Private Investment in Urban Roads, Productivity Commission, 1997, p. 12.
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§ equity—impacts on community groups and their ability to pay § appropriateness—the extent to which community-wide benefits are maximised.
The impact of user-pays, beneficiary-pays private investment, and public sector funding sources according to these criteria, are summarised in table 5.3.
5.8 Observations
The following observations are drawn to highlight key funding issues. § More funds need to be extracted from those who directly and indirectly benefit from public transport. § The acceptability and equity of increasing fares is likely to depend on service quality improvements. In general, it is reasonable to expect quality-related investments to be at least partly funded by higher fares. § Development levies should be used to promote and fund public transport use. Property-based value capture instruments offer another legitimate source for funding. For equity and other reasons, both are most suited to funding network extensions in less developed areas, and will require supplementary funding from elsewhere. § Good contracting (and careful risk allocation) is critical for all models involving private investment. Investment must be attractive to the private sector without compromising on quality and equity objectives. § Private investment in public transport infrastructure is likely to deliver better transport outcomes if private returns are not solely based on fare revenue. § Some public funding will continue to be needed. New ways of raising revenue for public transport funding should be explored and/or existing charges modified to better achieve (and fund) public transport outcomes. Drawing on further public debt is unlikely to be sustainable.
We are interested in further submissions on the scope for different funding options for public transport, in addition to increased user charges, including some of the options for ‘value capture’, a CBD employee payroll tax, and further PPP investments directed to enhancing and/or extending the existing public transport system.
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5.3 Summary of issues associated with principal funding sources
Funding model Efficiency Effectiveness Equity Appropriateness
User pays Is the only way to reduce Is not suitable for Affordability and access to Depends on whether other the gap between the cost providing up-front capital alternatives are important, mechanisms can of an additional journey investment but can be but could be targeted in encourage greater public and the price paid for it. used to cover funding other way s. transport use. shortfall.
Development charges Transfers some costs to Cannot be used to fund Depends on the basis on Depends whether the levy beneficiaries. Collection is infrastructure already in which the rate is set, and discourages development possible via existing place, and will only partly how funds raised are near public transport. development consent fund any new extensions expended. process. or developments.
Land value capture Enables some costs to be Cannot be used to fund Other households out of Need to ensure rezoning borne by beneficiaries. infrastructure already in the value capture area does not compromise Collection is possible via place, and will only partly may benefit from network other urban planning existing land charges. fund any new extensions extensions, but not pay objectives. or developments. indirect charges. Also, is hard to isolate increases in value attributable to transport.
Public-private Has potential to reduce Offers the capacity to Private investors need May depend on the level partnerships costs if risks can be draw on private sector access to sustainable of integration with the efficiently allocated. funds for large revenue (either from existing transport network. investments. increased patronage and/or higher ticket prices). Can be difficult to separate private from public revenue.
Private franchise Has potential to reduce Offers the capacity to Need to ensure incentives Depends on whether costs if risks can be draw on private sector are in place to avoid a fall segmentation reduces efficiently allocated. funds for large in service quality. integration with other investments. public transport, and the effect on competition.
Private investments Provides another potential Offers the capacity to Can be structured with a Improves the use of public revenue stream for public draw on private sector beneficiary-pays transport infrastructure. transport. funds for large component. investments.
CBD employee tax May reduce c osts if peak- Is not able to provide Does not differentiate Has no impact on hour congestion can be sufficient capital funds for between employees who encouraging greater reduced. up-front investment. use/do not use public public transport use but transport. off-peak rebates could be used to reduce congestion.
Transport levy Is unlikely to affect costs. Is not able to provide Does not distinguish Is unlikely to encourage sufficient capital funds for between transport greater public transport up-front investment. users/non-users. Could use. impose an additional charge on groups already heavily taxed.
Public debt Is unlikely to reduce net Offers the capacity to May adversely affect state Has no impact on costs, given debt-financed draw on private sector credit rating, and thereby encouraging greater use investments have not funds for large non-transport of public transport. been proven to generate investments. investments. revenue. Source: CIE.
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6 Fair fares: equity and efficiency
FARE STRUCTURES AND TICKET TYPES need to be reappraised in a funding review of public transport. Public transport users in Sydney face a variety of flat, distance-based and zonal fares tailored to the requirements of the different modes and operator types. There are also a wide variety of tickets—standard single trip, various discounted periodical and multiple trip, stored value (TravelPass) and, in the case of Newcastle buses, time- based products—but with integration of ticketing and fares across modes limited to government-operated services.
Changes could be beneficial in two key areas: § the structure of the fares—in how they are based, the extent to which they contribute to cost recovery and equity across users, and how they differ for journeys of different length and complexity § the ticket products that impose the ‘price’.
Simplification is possible and desirable in both fares and ticket products. The term ‘integrated fares’ means applying the same fare structure across rail, buses and ferries. That is, integrated fares apply to multimodal travel. A less radical move would involve fare alignment—imposing the one structure within, say, rail or across the bus network.
‘Simplified ticketing’, on the other hand, refers to the use of a single stored- value card to purchase travel—the so-called ‘smart card’. It can be intro- duced in combination with fare restructuring, with simplification in the range of ticket products, or as a means of selling the existing range of tickets.
How should fares be How should public transport fares be structured for the Greater Sydney changed, why, and Area? What characteristics should we expect of an effective fare structure? what would be How does the public respond to fare changes in its use of public transport achieved? and what is it willing to pay for? What role should distance and peak hour considerations play in setting fares and what are ‘fair’ fares? Is the standard single fare still the correct basis on which to price other ticket products?
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Options for better This chapter examines these issues and considers options for greater fare integration and integration of fares and a simpler ticket product range bearing in mind that ticketing smart card ticketing will soon be operational with ‘tag on–tag off’ recording of journeys possible. Options canvassed include: § the removal of multiple ticket purchases that inconvenience multimodal users across private and government-operated services § better cost recovery through higher real fares per kilometre in the longer term § a simpler ticket product range, with the peak hour trip as the basic unit of transport purchase.
6.1 Requirements for public transport fare structures
Some submissions point out that by international standards, and reflecting the high level of taxpayer support via subsidies, public transport users in Sydney enjoy relatively cheap fares. This is supported by benchmarking, which shows that Sydney’s intercity fares (per distance travelled) are the cheapest among other selected international cities and are also relatively cheap for general and long distance commuter trips (chart 6.1). This does not take variations in quality, and therefore value for money, into account.
6.1 Transport fares in Sydney benchmarked against other international cities, 2002
$1.60
$1.40 Short metro fares General commuter fares
.. Long distance commuter fares Intercity fares $1.20
$1.00
$0.80
$0.60 A$ per travel kilometre $0.40
$0.20
$- Berlin Detroit Hong Kong London New York San Fran. Sydney Tokyo Toronto Washington
Data source: ARUP report prepared for RIC, 2002.
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6.1.1 Fares are both funding mechanisms and price signalling devices
Fares have to fund, Public transport fares play multiple roles, making the structure and level of as well as fares important. As prices they play a part in influencing choices about the encourage, the use mode of travel (bus versus car versus rail, etc) and about the amount of of public transport discretionary travel undertaken. They can also affect choices about where people live in relation to work. But fares also partially fund the service and help to determine the quality of what is supplied to the travelling public. In this funding role the level of fares is critical.
6.1.2 What would an efficient and equitable fare structure look like?
Ideally, non- Because of the under-recovery of costs on all modes of metropolitan public concession fares transport, fares do not give customers an accurate signal of the real costs of would differ the service. Different degrees of subsidisation of rail, ferry, bus and private according to the car travel contribute to this. Ideally the ‘full fare’ paying public would cost of service less make decisions about mode of travel and the amount of discretionary any social and travel based on: environmental § fares for longer journeys that increase to reflect costs that rise with benefits generated distance (passenger kilometres) travelled by that mode of public transport § fares that contained a subsidy element, which could differ between modes to reflect different pollution-saving and other social and environmental benefits associated with additional use of that mode § targeted availability of concession fares that direct subsidies to better meet government’s social welfare objectives § fares that face ‘level playing field’ competition from private car use through better structured specific road pricing.126
Public transport fares in New South Wales do not have any of these properties. Road users are not charged in a way that reflects the full social cost of their road travel. Levels of cost recovery and subsidisation differ widely from mode to mode. Rail travellers benefit from the state’s taxpayers funding all of the below-rail infrastructure costs. This is deemed a rough offset for the environmental and other social benefits claimed for public transport by rail. Non-concession users of the private bus system do not benefit from any direct subsidy, though the bus companies themselves enjoy substantial taxpayer funding of student travel.
126 The last point highlights the need for a clear understanding of the desirable role for road pricing in any attempt to settle on equitable and efficient fares for public transport. Road charging issues are dealt with in detail in chapter 8.
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Within CityRail there are big differences in the levels of cost recovery from inner metropolitan, outer suburban and regional services (chart 6.2).
6.2 Average recovery of above-rail costs for CityRail, 1996-97 to 2001-02
80
70
60
50
40
30
% above rail costs recovered 20
10
0 Total CityMet Outer surburban Regional
Note: Includes actual figures for 1996-97 to 1999-2000 and forecast figures for the subsequent two years. Revenue is from all sources including non-farebox revenue. Data source: IPART, CityRail and STA Buses and Ferries Public Transport Fares from 1 July 2001.
The different contributions of revenue, and fare revenue in particular, means that different public transport users in different parts of the metro- politan system are being treated very differently when it comes to their contribution to cost recovery.
6.1.3 What does the fare buy, what are the full costs to the traveller and what are customers willing to pay for?
Choice based on The availability of public transport and choices among transport modes value for money vary across the metropolitan area. The choice of travel mode, when it is involves much more available, comes down to a very broad ‘value for money’ consideration by than just comparing travellers in which each of the following may be relevant: fares with car § pre-existing private investments in transport (car purchases already running costs made and travel habits already formed) § the fare itself compared with the cost of other transport for the same journey § other implicit and explicit costs (waiting time, parking costs and parking availability and search time) § the quantity of travel purchased for the fare paid (the distance transported)
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§ benefits of using a particular mode that reflect quality of service such as speed of travel, frequency of service, punctuality (on-time running), reliability (cancellation or services that fail to stop), comfort and cleanliness, safety and convenience (avoidance of interchange, ticketing).
These service attributes influence: § the decision to use private travel rather than public transport § the likelihood that existing travellers will switch modes § whether public transport will be used by new travellers or for new trips.
These attributes vary in their importance from user to user, between travel segments involving the same mode (for example between different city bus routes) and across modes.127 The attributes refer to private benefits from the use of the bus, train or ferry and exclude any public benefits (air pollution and greenhouse gas reduction, community-wide benefits from accident avoidance, etc).
Given that travel choice is about much more than the dollar cost of the trip, how responsive are travellers likely to be to fare changes made in the interests of funding more sustainable or better services? Their responsive- ness has important implications for revenue and for car usage. If fares play only a minor role in mode choice, changes in fares alone may have little impact on the level of car use.
6.1.4 The effect of fares on patronage
Fare changes have There is widespread agreement that the demand for public transport in limited impact on Sydney is relatively insensitive to fare changes (‘price inelastic’), with public transport use neither fare increases nor decreases (in real terms) on existing services having a strong impact in terms of travel numbers. Work commissioned by IPART suggested that a 5 per cent increase in commuter (peak time) rail fares would decrease patronage by only 1.25 per cent if nothing else changed.128 Off-peak public fare responsiveness is generally higher, with the majority of travellers having more options, including making fewer trips. Off-peak rail fares are currently 40 per cent cheaper than peak fares.
127 See, for example, D Hensher, P Stopher and P Bullock, ‘Developing a service quality index (SQI’ in the provision of commercial bus contracts, Transport Research, Part A, forthcoming. 128 IPART, Estimation of Public Transport Fare Elasticities in the Sydney Region, Research Paper No.7, 1996, p. 25.
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Fare changes also do little to reduce the amount of private vehicle use. For example, one study suggests that even a 40 per cent bus fare decrease (over a 10-year period) would cut the share of car use for commuting by only 2 per cent.129
Changes in fares have a limited effect on patronage for other reasons. Travel decisions depend on what is termed ‘the generalised cost of travel’ by different modes rather than the narrow er ticket price compared with alternatives. The NRMA has pointed to other more influential effects than fare changes on travel behaviour.
A more integrated approach to service delivery is likely to encourage the use of public transport when the effect of service levels on demand is considered. Service levels are about twice as important as fares in affecting the level of demand (the service level elasticity of demand is about 0.7 compared with about -0.3 for the fares elasticity).130
Nevertheless, fares do have an influence, especially on the uptake of new services as the experience of Sydney’s airport rail link shows. Furthermore, it is important not to lose sight of the fact that, while changes in service quality may have a bigger impact on public transport usage than fare changes, one may be needed to help make the other possible. Unsustainably low fares may trap operators into offering unattractive low-quality services. (The relationship between fares and quality is examined in the following chapter.)
6.2 Existing ticketing products and fare structures
In the subsidised services that typify the metropolitan area, the fares fund less than the total cost of service provision, although the fraction varies widely from service to service. Importantly, it also varies widely within a service. For instance, as shown above, there is significantly less recovery of the operating costs of the long-distance rail commuter services than of the costs of inner city services. And the STA is known to enjoy different levels of cost recovery from its different service areas, with the high-patronage short-journey eastern suburbs services with the highest cost recovery.
129 D Hensher, ‘Urban public transport in Australia: issues and challenges in retaining and growing patronage’, Road and Transport Research, vol. 12, no. 2, June 2003. 130 NRMA submission, p. 4.
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Most forms of public Among the 60 odd operators of transport in the Greater Sydney Area, only transport use a Newcastle Bus and Ferry Services does not use some form of distance- distance-based fare based fare structure. Fares per kilometre differ from service to service. structure Private bus operators are bound under their contracts to the maximum fare schedules set by the Ministry of Transport and reviewed by IPART. The majority of STA bus fares are lower than these, with community service obligation funding provided to the STA by government.
There are a variety of ticketing products for the government-operated part of the public transport system and within this product range there are fare discount variations that have efficiency and equity implications. Tables 6.3 to 6.5 illustrate the range on offer. They demonstrate that there is a degree of fare integration via the TravelPass tickets, which provide unlimited travel over the period of issue (week, quarter, year) within the geographic zone to which they apply using CityRail trains and STA buses and ferries.
6.3 Sydney bus fares for different ticket products, 2003
Discount from Bus single sectiona Single fares TravelTen fares single fare $ $ % 1–2 sections (Blue) 1.60 11.80 26.3 3–5 sections (Brown) 2.70 19.70 27.0 6–9 sections (Red) 3.50 24.50 30.0 10–15 sections (Green) 4.00 33.20 17.0 16 or more sections (Orange) 4.80 41.80 12.9 a 1 section = 1.6 kilometres. Source: IPART, Report on the Determination of NSW Public Transport Fares, CityRail and State Transit Authority, from 31 August 2003.
6.4 Integrated CityRail and STA fares, 2003-04
Effective average discount Fares from standard single fare $ % TravelPass—bus and ferry Blue 29.00 42.8 Orange 36.00 46.5 2 Zone 29.00 34.3 Pittwater 49.00 33.4 Rail/bus/ferry Red 32.00 32.8 Green 40.00 34.5 Yellow 44.00 37.9 Pink 47.00 35.7 Purple 54.00 44.9 Source: STA data provided to IPART, July 2003.
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6.5 CityRail fares for different ticket products, 2003
Distance up to Single journey fares Off-peak return fares Weekly fares km $ $ $ 5 2.20 2.60 18.00 10 2.80 3.40 22.00 15 3.00 3.60 25.00 20 3.60 4.40 28.00 25 4.00 4.80 31.00 30 4.40 5.40 33.00 35 4.40 5.40 34.00 45 5.20 6.40 37.00 55 6.00 7.40 40.00 65 6.60 8.00 44.00 75 8.00 9.80 47.00 85 8.80 10.80 50.00 95 9.80 12.00 52.00 105 10.20 12.40 54.00 115 11.40 14.00 56.00 125 12.80 15.60 59.00 135 13.00 15.80 64.00 155 15.00 18.40 70.00 175 17.00 21.00 74.00 195 21.00 26.00 82.00 215 21.00 26.00 82.00 235 25.00 31.00 96.00 255 25.00 31.00 96.00 305 28.00 34.00 108.00 305+ 28.00 34.00 108.00 Source: IPART, Report on the Determination of NSW Public Transport Fares, CityRail and State Transit Authority from 31 August 2003, Determinations 5 and 6, 15 August 2003.
In 2002 IPART drew attention to the different income profiles of users of these different kinds of ticket ‘products’.131 For rail users, middle to high income earners were more frequently represented among the users of the heavily discounted weekly tickets while lower income earners were more prevalent purchasers of the more expensive, ‘cash’ single tickets.
This raises questions about the appropriateness of the single cash fare as the basis for setting other fares, both from an equity and efficiency point of view. Peak-hour congestion is a public transport and private road user phenomenon and peak-load pricing is one possible means of addressing this. Yet the most common forms of ticket used at peak times are relatively heavily discounted to those who can best afford to pay and who arguably have a highly inelastic demand for this kind of service—relatively well-off peak-hour commuters.
Private bus operators with commercial contracts typically price their services at the maximum allowed by government and do not differentiate
131 IPART, CityRail and STA Buses and Ferries Public Transport Fares from July 2002, Determinations 2 and 3, 24 June 2002, p. 13.
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off-peak and peak fares. A comparison provided by IPART in its review of fares for private operators shows very clearly the increasing disparity between private and STA fares as distance increases (see table 6.6).132 It should be noted, however, that according to the Bus and Coach Association information provided to IPART and cited in the review, 86 per cent of private patronage is for 7 sections or less—that is, distances of less than 12 kilometres.133
6.6 Single fares, STA and selected private buses, 2003
Maximum Westbus Busways STA Section Distance full adult fare adult fare adult fare adult farea km $ $ $ $ 1 1.6 1.10 1.10 1.10 1.50 2 3.2 1.70 1.70 1.70 1.50 3 4.8 2.40 2.40 2.40 2.60 4 6.4 2.70 2.70 2.70 2.60 5 8 3.10 3.10 3.10 2.60 10 16 4.60 4.60 4.20 3.90 15 24 5.70 5.30 4.80 3.90 20 32 6.70 5.80 5.00 4.70 a Single cash fares. Source: Bus and Coach Association and IPART, April 2003, op cit, p. 34.
Table 6.7 summarises the basis for fares charged currently by public transport operators.
6.7 Fare structures within the Greater Sydney Area
Fare structure consistent with other Fare level consistent Operator Basis of fare structure operators? with other operators? CityRail Distance-based Yes a No Plus zonal-based Yes b Yes b Private buses Distance-based Yes a Yes c Sydney Buses Distance-based Yes a Nod Plus zonal-based Yes b Yes b Newcastle Buses Time-based No No Private ferries Distance-based Yes a No Sydney Ferries Distance-based Yes a No Newcastle Ferries Time-based No No a CityRail, Sydney Buses, private buses, Sydney Ferries and private ferries are all distance-based. b Consistent in both structure and fare level with the Sydney Buses and Sydney Ferries network. c Around 50 private bus operators are bound by the same maximum fare levels. d However, Sydney Buses are set with reference to private bus fare levels. Note: LightRail and Monorail have not been included at this stage. Source: Ministry of Transport communication.
132 IPART, Review of Fares for Taxis, Private Buses and Private Ferries in NSW: an Issues Paper, April 2003, p. 34. 133 Ibid., p. 35.
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6.3 Options for ticketing reform using smart cards
Smart card ticketing Smart card technology opens up the possibility of moving further away provides its own from cash fares. The elimination of cash fares and enhanced speed through benefits the turnstile have the potential to increase bus speeds and crowding at ticket windows in rail stations in particular.
The inquiry understands that the integrated ticketing under design has the possibility of continuing to handle multiple ticket products. But rationalis- ation and simplification of existing ticket products is needed.
Stored-value smart cards make periodical, multitrip and travel pass tickets redundant. They facilitate time-of-day pricing on all transport modes where they are accepted. They also reduce some costs to the operator compared with single cash tickets. One option would be to adopt the following simplified ticket product structure.
A standard ticket § The peak-period, single-trip smart card fare could become the basic that is peak-hour ticket product. ‘trip’ based is one § The only discounts from this would be for off-peak travel and for option concessions, with periodical and other existing stored-value tickets such as TravelTen redundant § The cash fare for a single trip would sell at a premium to the smart card fare, reflecting the higher costs of a cash fare service. § The initial purchase of the smart card before any value is added would involve an outlay by the traveller. This would provide ‘up-front‘ revenue, which could be taken into account in offering some ‘value stored’ discount. Bonuses for accumulated travel could be added to the card.
By ticketing in this way some anomalies and inequities in the existing structure could be removed. In particular, ending the heavy discounting of the periodical and multitrip tickets commonly purchased by peak-hour commuters against the single trip fares commonly purchased by less well- off travellers would improve equity. It would also better recognise the reality that peak-hour travel generates the highest costs and should not be purchased at the existing unsustainably high discount levels.
However, there are significant hurdles to overcome. Simple fares when multimodal travel is involved require agreements on revenue sharing between the different operators. It may also involve adjustment to the level of government subsidy to different operators. Nevertheless, ‘tag on–tag off’ ticketing using a smart card that is electronically read provides the opportunity to deal with these issues.
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Smart card ticketing will facilitate information retrieval that would be critical to the equitable distribution of fare revenue among operators based on their share of passenger servicing. This information is needed for designing more integrated fares.
The simplified ticket product structure proposed here would represent a significant departure from the current arrangements and could be phased in to coincide with the introduction of ‘smart card’ technology. At the moment there is a wide range of ticket types available across the government-operated transport network. The current arrangements build in discounts and cross-subsidies that bear little relationship to the costs of the transport service or any equity considerations. The introduction of integrated ticketing could permit the introduction of much simpler and, arguably, more cost-reflective tickets and fare structures.
We invite comments on the option of introducing a simplified ‘smart card’ ticket structure based on the relevant peak-hour journey, with discounts limited to off-peak, concessions and ‘stored value’. Such a ticket structure would allow for multimodal journeys across government and privately operated services on one integrated ticket, without multiple ticket purchases payments.
6.4 Options for improved fare integration
6.4.1 Options for fare reform
Fare structures that can accommodate varying degrees of fare integration across transport modes include: § a strictly distance-based system with a single ticket purchase or access component (the taxi fare system) regardless of operator § a flat fare for a trip regardless of distance § a zonal system with a set fare applicable within a zone for a pre- specified time of use § a mixture of zone and distance-based fares.
Each approach has Each has its strengths and weaknesses (table 6.8). There is broad acceptance its strengths and of the relationship between travel distance and the cost of providing the weaknesses service. But because that relationship varies across modes and with quality, complex reimbursement issues arise when multiple carriers each impose their own separate access component of the fares they charge.
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Smart card ticketing helps remove some of the difficulties of transfers and irregular journeys associated with distance-based charging, which has much to recommend it because of its relationship with costs of service.
6.8 Fare structures—strengths and weaknesses
Structure Strengths Weaknesses
Flat fare Simplicity No relationship between fare and distance travelled Low ticket issuing costs Significant cross-subsidisation between No scope for overriding short and long distance trips, which distorts travel patterns Distance based Establishes strong relationship Transfers difficult but not impossible to between fare and distance travelled handle Generally perceived to be ‘fair’ Calculation of fare for irregular journeys difficult (ie distance travelled and fare Cost of providing service is closely cannot readily be established) related to distance travelled Time based Simplicity Late running and service cancellations may impact on ticket ‘value’ Facilitates straightforward transfers between services No direct relationship between fare and distance travelled Zonal Broad relationship between fare and ‘Boundary problems (ie passengers distance travelled travelling a short distance across a zonal boundary) Relatively easy to understand Facilitates straightforward transfers between services
Source: Ministry of Transport communication.
A possible agenda for further fare integration and ticketing reform that would contribute to greater farebox funding could involve the following: § removing multiple ticket purchases in the private bus sector and between private bus and STA interchanges as a priority with the introduction of smart card technology on both STA and private services § maintaining different per kilometre rates in calculating the ticket price for bus and rail travel (and ferry fares set much closer to cost recovery) but offering a single fare for integrated bus–rail travel and bus–ferry travel § announcing a longer term price path that factors in a gradual rise in the real per kilometre component of the fare § introducing these changes through a simplified ticket product structure along the lines discussed earlier.
Peak-hour train services for longer trips would become relatively more expensive over time, but are not likely to achieve the same levels of cost recovery of the shorter distance trips. Those who are currently discouraged from using feeder services to bus transitways and rail stations would
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benefit as the changes would reduce some of the disincentives to use multimodal public transport. The degree of cross-subsidisation of long- distance rail commuting and subsidisation of ferry travel would fall over time.
Any program of fare reform, possibly involving further fare integration, should be assessed by its contribution to efficiency, equity and simplicity (in access and administration). As usual, there are trade-offs in trying to achieve each of these.
Changes to fares Efficiency and fare equity objectives can be difficult to achieve when fares may involve trade- are also used to encourage public transport use. For instance, if a case can offs between be made on efficiency grounds for raising the relative price of longer transport objectives distance trips, its implementation in isolation from increased road user charges may work against public transport use. Commuters who have established themselves in the Blue Mountains and the Central Coast could claim they have done so factoring in the influence of past government policies and the affordability of travel. This must be taken into account in targeting long-term cost recovery levels.
6.4.2 What would be involved in fare integration?
Full fare integration The picture of fares and ticket products that emerges for the Greater would reduce Sydney Area is complex. There would be benefits in being able to purchase complexity for public transport on a simpler and more uniform basis—in a way that did travellers but could not inconvenience travellers for multiple boardings, allowed multimodal further weaken links users to travel on a single ticket, and better recognised the reality that the between costs and majority of trips are done via so-called discount tickets rather than through fares the standard single fare. Fare integration would allow this.
An extreme version of fare integration could be achieved using a constant charge per kilometre travelled regardless of mode or operator and would require one of the following to happen: § the alignment of all fares to those of one operator type (for example private buses or rail or the STA) with upward or downward adjustments of other operators’ fares § the determination of an ‘average’ uniform fare for use as the standard fare per kilometre across all modes.
Either approach would result in significant changes to the share of costs recovered by farebox revenue in the subsidised state-owned services and would require substantial changes to the share of total public transport subsidisation going to each. It would raise the possibility of having to
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explicitly subsidise current commercial operations of private bus companies, depending on the choice of base fare. The administrative complexity of dividing up the revenue among the operators would be significant. It would rule out any regulatory attempts to link fare changes to cost efficiencies in particular services. This form of extreme fare integration is not well suited to Sydney’s transport system. Fare alignment within a mode is These problems could be reduced if fare integration were restricted to fare administratively alignment within a mode. Such an approach would mean that a bus journey simpler but quality of a given distance would cost the traveller the same price regardless of issues need whether it was undertaken with a private or public provider. This would addressing go some of the way towards addressing equity concerns of those who point out that the western parts of Sydney dependent on private contractors are typically paying higher bus fares than their STA-serviced counterparts. It would still leave the issue of service quality unaddressed and this is a contentious issue for many travel stakeholders. There have been claims that service quality in the private bus sector is below that for STA-provided services.
The possible future alignment of STA and private (commercial contract) bus fares has significant implications for future subsidy arrangements and contractual arrangements being reviewed as part of the concurrent bus inquiry. The revenue-sharing requirements that would have to underpin any such alignment are made more complex by the current large number of private bus operators.
6.4.3 Equity and efficiency in fare reform: dealing with the distance factor
In general, fares in the Greater Sydney Area fall on a per kilometre travelled basis as distances increase (chart 6.9). From an efficiency point of view, if it can be demonstrated that the unit operating costs fall with increasing distance, there is a case for the distance-related component of a ticket to mirror this fall.
In its submission to the Commonwealth Grants Commission in 2002, NSW Treasury pointed out that cost of providing rail services to outer areas is higher and cost recovery lower because of a combination of trip length, low density and the need to provide a higher level of comfort for longer journeys.134
134 NSW Treasury, Commonwealth Grants Commission General Revenue Grant Relativities 2004 Review, New South Wales main submission, May 2002, pp. 288–9.
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6.9 Transport fares in Sydney fall as distance travelled increases, 2002
$0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 A$ per travel kilometre $0.10 $0.05 $- Short metro General commuter Long distance commuter Intercity
Data source: ARUP report prepared for RIC.
Either way, it is hard to demonstrate because of the highly interdependent nature of transport costs. Long-distance limited-stop outer urban and intercity rail services, for instance, share a common track and signalling system with inner metropolitan services. These long distance services generate their own operating costs but also impose increased costs on the inner metropolitan services, which could be run more efficiently in a regime where stopping patterns are more uniform. Sectorisation is a way forward, as discussed in chapter 3. Investments that increased sectorisation of rail services would help reduce these ‘external costs’ of longer distance limited-stop services, but sectorisation is costly to achieve.
There would be A higher access charge component could be applied to longer distance trips opposition to to reflect this. Penrith City Council has drawn attention to a dilemma over substantially higher any move towards reducing the current disparities between per kilometre distance fares on charges for long and short trips and more cost-reflective fares where equity grounds distance is a factor in operator costs. In its submission it claims:
The lack of employment opportunities in the Penrith LGA compared with the workforce has led to a need for the workforce to travel long distances (beyond the city boundaries)
And, In addition to the imbalance between residential and employment generating developments, the traffic network and the public transport system has not kept up with the population increases, and further burdens the journey to work. Changes to travel behaviour over the past 20 years have also seen a threefold increase in car usage compared with population increases.135
135 Penrith Council submission, attachment, p. 1.
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The Central Coast Environmental Network in its submission also draws attention to both the high level of car ownership and car dependence on the Central Coast and work dependence on Sydney and Newcastle.
The implication is that the workforce in outer Sydney is disadvantaged in terms of access to public transport and that any disproportionate increase in long-distance public transport fares would particularly disadvantage these outer Sydney groups.
6.4.4 Peak-load pricing in fares and efficiency effects
Peak-hour fares There is significant discounting of off-peak rail fares against their peak could be used to equivalent. Data provided by the Transport Data Centre show the patterns address congestion of work trips to the CBD and other business centres by time of day and costs according to type of work (industry sector). Around 75 per cent of arrivals in the Sydney CBD between 8 and 9 am are by rail and bus.
This raises important questions about the usefulness or otherwise of across- the-board approaches to peak-hour fares. Buses do not currently have peak/off-peak fare differences even though they also face capacity constraints in the morning peak. Their imposition could have perverse effects if it discouraged the use of buses to access CBDs or to access rail or ferry, or to use buses in preference to cars.
Attempts to spread the peak will depend on the flexibility available to workers and the self-employed in their working hours. There is limited apparent flexibility at present for the 59 per cent of workers accessing the Sydney CBD who work in the finance, property and business services sector. Their arrival times are tightly bunched in the 8.00–9.00 am peak. Others’ times are more dispersed. Any attempt to spread the peak and thereby reduce capacity-related costs, whether by use of peak-hour public transport fares, time-based road charging or other methods, would have to address this reality. It would require cooperation from employers.
6.4.5 What are ‘fair’ fares?
Changes to fares and ticket products are needed to help with funding a viable public transport network. Taxpayer subsidies that drift upward over time are unsustainable. They are also arguably inequitable as they come at the cost of diverting ever-increasing amounts of state taxpayer revenue away from growing public health, education and other demands. Changes can also be made that will address unfairness in the way different users of the public transport system are charged.
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In its submission to the inquiry Campbelltown City Council said:
There is fare inequality between areas serviced by Government operated STA services and those serviced by private bus operators. Passengers who live in STA areas benefit from generous fare subsidies paid to the Government operator.136
In similar vein the Council of Camden said:
The most important matter that should be addressed in the Inquiry is equity. Existing cost inequities must be addressed and any new funding or pricing proposals must be equitable.137
‘Fairness’ raises the question of capacity to pay, which is currently dealt with mainly through pensioner concession fares. In some other respects the current arrangements deliver questionable equity. The high degree of subsidisation of ferry and JetCat fares, for example, benefits users from one of Sydney’s higher income areas.
There are many Fare equity involves consideration of community views on what different different views on users in different circumstances should be asked to pay for as users. From a what is ‘fair’ about user-pays perspective, fairness means that those who travel further should fares pay more. In another sense, however, it may not be ‘fair’ if longer distance travellers are disadvantaged in other respects (access to jobs etc).
The varying contribution of farebox revenue to cost recovery across the different transport services has been referred to in previous chapters. And these contributions vary for routes and sectors within a service, as discussion of CityRail and the STA has shown. It is impractical and not necessarily desirable to try to equalise the degree of cost recovery achieved from different lines within rail—for instance, between the outer suburban services and inner metropolitan services. But it may be seen as inequitable if these levels of cost recovery are allowed to drift further apart over time
‘Fairness’ can also refer to the fact that public transport costs are dominated by the capital and capacity costs of servicing peak-hour demands. Efficiency considerations call for some form of peak-load pricing. ‘Fairness’ in the user-pays sense also requires it.
‘Fairness’ also relates to quality of service, where ‘fairness’ can require service providers to deliver quality improvements as part of a real fare increase. This is considered in the following chapter.
136 Campbelltown City Council submission, p. 1. 137 Council of Camden submission, p. 5.
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We invite comments on what should be the main considerations for determining ‘fair’ fares.
6.5 Observations § Fair and efficient fares require: – fare levels and a level of cost recovery from the farebox that ensure an unreasonable subsidy burden does not fall on the taxpayer – fares and ticket products that signal the higher cost of catering for peak-period and long-distance services – fares and ticket products that do not inadvertently encourage private car use by discriminating against passengers who have to use multiple modes – real rises in fair levels delivering improved value for money through improvements in the quality of service. § The existing structure of fares and range of ticket products in the Greater Sydney Area are neither efficient nor fair. There is inequity between private and STA bus users. Multimode travellers are incon- venienced unless they can purchase travel pass tickets. § Excessive discounts are available to purchasers of periodical and multiple trip tickets, even though they are valid for peak-hour travel which have the highest costs of service delivery. § Longer distance travellers pay significantly less per kilometre and contribute less to cost recovery. § Smart card, stored value ticketing offers options for changing fare structures and ticket products. – One option would be a basic peak-period ‘trip’ ticket as the standard ticket product, irrespective of whether multiple modes are used. The only variations would be concessions and off-peak travel. – A further change could involve aligning fares within modes (for example, private and STA bus fares), again using a simple peak- period ticket with a fixed rate per kilometre fare. – While such changes would increase travel costs for some and decrease them for others, any general increase in fares could be phased in and aligned to quality improvements.
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Service quality regulation, 7 incentives and fares
PUBLIC TRANSPORT in the Greater Sydney Area has struggled to provide services of a quality that meets public expectation. The rail system and private buses have been singled out for criticism in submissions.
Why not link regulated fare increases to demonstrated improvements in the quality of service, thereby providing a farebox incentive to improve quality over time? Unfortunately, when public transport is provided on a not-for-profit basis, that approach may be self-defeating. Even where private profit-oriented operators are involved as with western Sydney buses and private ferries, there may be better methods of inducing quality improvements.
This chapter considers these problems. It looks at the main ways in which regulators can influence service quality. The use and usefulness of Key Performance Indicators (KPIs) are explored and the need for performance measures that relate to outcomes that operators can control is stressed. Alternative approaches to service improvement through increased compe- tition for the market in the bus sector may be feasible. In rail, the twin needs of cultural change and capital expenditure to improve quality mean that quality improvement cannot be instantaneous. A five-year increase in real fares to help fund improvements will be justified only if cultural change in the workplace enables operations to change to deliver the required services. A transparent contractual approach involving the Ministry of Transport, the CEO of the SRA and the workforce is suggested as a way forward.
7.1 Current arrangements for regulating quality
Inadequacies in the quality of public transport services were the focus of many submissions to this inquiry. Service quality and safety issues are at the core of a problem where better access and value-for-money service are necessary to increase the use of public transport, but real fare increases over time will be needed to help fund that use.
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Appendix C of this report lists the quality-of-service requirements that CityRail currently should meet under its community service obligations and other agreements with the Ministry of Transport. These stress on-time running, missed stops, service frequency and a variety of other performance indicators. It is at this level (CityRail performance) that the travelling public is affected directly by the quality of service delivered. At another level, the CityRail Access Agreement between the SRA and RIC sets out KPIs that govern the relationship between those providing the infrastructure services (RIC) and those operating services for the public (CityRail).
The Passenger Transport Act requires all commercial bus contracts to specify minimum service levels. These are determined by the Ministry of Transport and cover service frequency, geographical coverage and the availability of bus services over days, nights and weekends. There are eight grades of service recognised under these minimum service levels. Under current arrangements operators set their own timetable and route services to meet the minimum service requirements. The Ministry of Transport sets the service standards for all non-commercial contracts. IPART is also required to consider quality of service in setting maximum fares.
Following an IPART review in 1997, the Passenger Transport Act was amended to create a performance assessment regime to apply to the renewal of commercial contracts for private buses. It required contractors to meet certain best practice objectives. It is understood that due to difficulties with implementation and opposition from the Bus and Coach Association none of the requirements of the performance assessment regime have been acted on.
The regulatory framework for determining, monitoring and enforcing quality-of-service and safety requirements in public transport has under- gone change. Further change is needed to achieve a transparent and effective regulatory regime that covers safety and quality of performance. Currently, regulatory arrangements differ across services. The government has recently created a Transport and Rail Safety Regulator post. It is understood that the regulator will combine the safety regulation functions of the former Transport Safety Bureau with an advisory role with respect to other aspects of mass transit performance. The regulator will monitor and report on performance as well as supply research-based advice on appropriate standards. However, standard setting, whether expressed through the contractual arrangements of the bus sector contracts or community service obligations and other contractual agreements in rail, will remain the responsibility of the Ministry of Transport.
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7.2 Service quality measurement: the role of KPIs
Services subject to competitive pressures force suppliers to heed their customers’ requirements for quality, or risk loss of business and profits. For public transport, where service providers enjoy some degree of monopoly power, contracts and regulation must be relied on to a greater degree to ensure consumer demand for quality is met.
The four main means by which regulators can influence service quality are: § publication of information on performance (‘name and shame’ relying on community and political pressure) § service quality adjustment to fares—perhaps based on a service quality index or some other measure § compensation of individual customers for inferior service § minimum service levels with penalty for failure.138
KPIs are potentially KPIs are widely used as a means of effecting quality-of-service regulation useful instruments in transport. They provide a means of monitoring performance and assessing compliance with minimum required standards. KPIs have been used for the different levels of the rail business in New South Wales—for RIC in the below-rail business and for the operator, the SRA. CityRail’s Services Agreement 2002–08 with the Transport Coordination Authority sets out the standards to which that operator has agreed to in return for government funding contributions.
The NSW Rail Access Regime under which CityRail and other users access RIC’s lines and services is supported by undertakings on key network performance indicators and there is a requirement to publish quarterly reports of RIC’s performance against these.
KPIs must be For KPIs to be useful as a regulatory tool they need to possess the character- relevant, istics of measurability, relevance, comparability with other regimes, and measurable comprehensiveness. They must be able to identify and communicate the comprehensive and things that tell whether an operating regime is complying with its regulatory auditable obligations.139
138 L Rovizzi and D Thompson, The regulation of product quality in the public utilities, The Regulatory Challenge, 1995; M Bihop, J Kay and C Mayer (eds) and Network Economics Consulting Group (NECG), Report on Key Performance Indicators for the Rail Access Regime, Office of the Rail Access Regulator, WA, March 2003. 139 See NECG op cit pp. 22-23.
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Measurement can relate to outputs (on-time running, frequency, etc), inputs, cost of service, and outcomes (customer satisfaction). Processes (for example train management systems) can also be appropriate subjects for KPIs although they may be more difficult to quantify. Unless the indicators are measurable and auditable they cannot provide a framework against which compliance can be assessed, cause of underperformance determined and responsibility assigned.
Customer satisfaction is at the heart of a proposed approach for developing a single measure service quality index with potential for use in the contracting and/or performance monitoring of commercial services developed at the Institute of Transport Studies.140 It tries to use choice modelling of passengers’ stated preferences to incorporate the attributes of a service that matter most to them into a quality index against which actual performance can be benchmarked. Individual input or output measures could still be used in combination with this and would probably need to be, given the fact that the operator has limited or no control over some of the attributes of service that matter to the passenger.
For KPIs to be an effective regulatory tool when service outputs are linked (for example RIC and CityRail), with dependence of one agency on another, they need to be complementary. RIC has been criticised for adopting asset management processes that are not currently linked to customer KPIs.141
An agency’s KPIs For KPIs or a quality indicator to be relevant from a regulatory point of view should target those they must give the regulator and stakeholders a means of distinguishing things under its between outputs and outcomes that are under the agency’s control and control those that are not. This has been a critical problem for RIC and the SRA when operating as separate entities. Track possession for maintenance purposes was required by both agencies from time to time. It is thought that major gains in reliability could have been achieved with better coordination of these requirements.
KPIs need to be able to trace, record and analyse instances of service unreliability, late running and unsafe operation, although agencies do not always have the incentive to expose this information. Similarly, information relevant for assessing cost efficiency can be difficult to elicit if it is thought to threaten funding. With rail operations, the network ‘owner’ responsible for signalling equipment, track condition, etc should be able and required to report on the proportion of ‘healthy’ services—those that experience no above-rail sourced delay—entering and leaving various sectors according
140 See Hensher, Stopher and Bullock, op cit. 141 Godfrey Report, op cit, point 3.4.
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to timetable, give or take three minutes for instance. This kind of perform- ance database would help to distinguish where infrastructure improvement was required and assist in analysis of quality shortcomings.
The relevance of different KPIs changes with system changes. For CityRail, successful further sectorisation could mean increased service frequency, thereby reducing the costs to the public of late-running occurrences. Strict punctuality becomes less important when services are more frequent.
However, even when KPIs are well designed and information is readily available to the regulator, serious incentive problems remain in linking payments, and fares and fare revenue in particular, to performance.
7.3 Linking fares and quality of service
7.3.1 Conflicting stakeholder interests
Linking fares with Linking fares with quality of service raises issues for operators, regulators, quality is hard when the travelling public and taxpayers. For the public and taxpayers there is a stakeholders have question of value for money. For the operator there is pressure from the competing interests regulator acting on behalf of the public for the (subsidised) service that they purchase to deliver ‘contracted’ levels of service. The operator must secure funding from all sources sufficient to balance service quality in the interests of consumer satisfaction (and ultimately patronage) with any required expansion of service. The farebox is one source of funding and the regulator (IPART) is required to take service quality into account when setting maximum fares. For taxpayers, funding quality improvements through other means than the farebox raises the trade-off questions of the benefits forgone from other purchases of health, education, etc.
The regulator is faced with a dilemma in taking quality into account when setting fares. The problem is potentially most acute when the service is provided on an exclusive basis by an authority that, though having a commercial charter, is not essentially driven by profits and is highly subsidy dependent (RTA ferry services and the SRA). In this case, there is a fundamental difficulty in establishing any meaningful relationship between farebox revenue and quality of service and hence between fares and quality of service.
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7.3.2 Quality regulation and private provision of public transport services
The quality problem is also present when private sector providers deliver the service. Private service providers are profit motivated and there is an incentive to conserve on quality if it drives up costs and erodes profit. That incentive is weakened if the operator is vulnerable to loss of revenue through adverse patronage reaction or, where the service is regulated, through some form of financial penalty.
While there is apparently greater potential to use incentives in the private bus sector to deliver the desired quality of service the outcomes are questionable. The Western Sydney Community Forum has drawn attention to what it sees as flaws in the current contracting system when it comes to service delivery. The forum cites the minimum service level requirements within restrictive contract areas, historically based on rail feeder systems, combined with income from the SSTS as impediments to better services.
There is no incentive in the current system for an operator to attempt to provide more flexible or innovative services to capture other segments of the market. In western Sydney perhaps the only examples of innovative services by private bus operators are the CBD services on the M2 motorway by Westbus and the Harris Park Transport for the commuters from the North West and the Baxters Flexibus in the Merrylands area for elderly passengers.142
Submissions have also complained of a lack of monitoring of the minimum service levels in these contracts, rendering them an ineffective tool for ensuring quality delivery.
Commercial bus The long-held expectation that private bus service contracts would be contracts are not renewed indefinitely, combined with minimum service levels that do not being used represent a meaningful quality benchmark and seem to lack enforcement, effectively to has apparently led to a very weak incentive environment for regulating promote quality quality via contracts. The Ministry of Transport is supposed to audit operators at least once in their five-year contracts. This does not provide ongoing pressure on operators to meet and improve standards. Despite the existence of service performance standards for operators an effective monitoring program to assess operators (private or STA) has not emerged.
Some have argued that where competitive contracting in public transport is possible, performance-based contracts are a superior mechanism for service quality delivery compared with minimum service level regulation. Hensher and others have put the case for performance-based contracts that replace
142 Western Sydney Community Forum submission, p. 38.
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the mix of farebox remuneration plus SSTS-type subsidy-based contracts. 143 Contracts could be structured around explicit payments from the public purse for the achievement of performance that can be linked to the delivery of social and environmental external benefits, and penalties for falling below benchmark KPIs. Incentive payments are triggered by measured increases above base levels in passenger kilometres or similar indicators of the increased social benefit (reduced car use) of increased bus patronage (presumably where buses are the only major available public transport form otherwise there would be reward for attracting patrons from rail, etc).
7.3.3 Further competition to increase value for money in the bus sector?
The STA-serviced parts of Sydney and Newcastle are divided into notional contract areas. STA services are delivered at considerably higher cost than the private services provided to Sydney’s west, despite some variations. There is scope for further structuring the whole of the bus sector along competing business lines. This could involve restructuring the STA to be more of a ‘business unit’ competing within itself to service the contract areas (East, North, etc) and being subject to competition for these contracts (and the subsidy payments involved) every five years from private operators. Likewise, future private contract areas could be subjected to competition from an STA business or businesses. Performance-based contracts that keep pressure on the operator to deliver could be part of the change.
7.3.4 Incentive-based regulation for rail?
Regulating to improve the cost-effectiveness of the SRA’s service delivery is inhibited by the following. § If longer term performance benchmarks are to be set for CityRail there needs to be much greater information disclosure. This information should be provided on a sector-by-sector basis in line with the thrust towards greater sectorisation as a performance-enhancing strategy. Currently the KPIs that characterise the CityRail Access Agreement focus on reporting such things as the number of infrastructure incidents causing peak-hour train delays. Aggregate information of this kind for the whole of the network is of limited use.
143 D Hensher and J Stanley, ‘Performance based quality contracts in bus service provision’, Transportation Research, Part A, 2003, pp. 519–38; D Hensher and Houghton, ‘Performance based contracts from the bus sector: delivering social and commercial value for money’, Transportation Research, Part B, 2003, in press.
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§ This information is likely to be more readily forthcoming and relevant in a more secure funding environment for the SRA, particularly with respect to major maintenance and projects designed to deal specifically with reliability in as much as it cannot be addressed by altered operating procedures. The scope for improved performance through altered operating conditions needs to be firmly established first. Such funding assurance acts as a form of incentive, particularly for management.
There are significant There is, however, a major impediment to genuine incentive-based impediments to regulation in the rail sector. There is little, if any, scope under existing incentive-based public service employment conditions for rewarding the workforce in any regulation for rail way that is closely tied to performance measures that matter to the travelling public. While enterprise bargaining agreements refer to ‘productivity related’ pay increases there is no mechanism for aligning these with movement towards benchmark performance measures that are passenger relevant. At the same time, these employment conditions and work culture put a floor under what can be achieved in cost efficiencies.
Similarly, while withholding funding from fare increases is a possible response to failure against KPIs, it is of doubtful effectiveness as a performance incentive under current arrangements. It could be perverse in its effects. Funding improvements to deliver the key reliability and other quality outcomes can come from improved operating efficiencies (cost savings), farebox, operating subsidy and capital grants. There is the danger that if it is faced with reduced access to farebox revenue the organisation will become more risk averse and less prepared to tackle difficult changes involving staff and customer acceptance of timetable rationalisation that could deliver longer term benefits.
If claims for fare increases to help fund future quality improvements are denied because of evidence of current underperformance in either quality or achievement of efficient costs, there are again dangers. There is limited scope for cost cutting if political pressure prevents truncation or termination of unjustifiable services.
KPIs must be used carefully as an instrument for achieving quality im- provements and for justifying the withholding or granting of fare increases.
On-time running in CityRail is an example. If peak-hour trains are found to be unpunctual largely because of a lack of sectorisation and resulting congestion, there may be limited scope for short-term improvement. This depends on how much can be done through operational changes and how much requires significant new capital expenditure. Importantly, any such improvements must not compromise system safety in any way.
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If inflexible work practices are an impediment to timetable changes that could help with sectorisation (and thereby contribute to punctuality and/or increased frequency of service), fare increases that enable rubber-stamped wage increases with no change in work practice cannot be justified. However, if further improvement also hinges on the funding of additional turnbacks and other capital works, real fare increases may be necessary. Without these increases, and failing to mobilise private capital, increased taxpayer funding or persistent substandard service will be the only alternative.
A major task in the reform process is to spell out to the public just what is achievable by way of quality improvement (if any) without workplace and operating practice reform and what is only achievable with such reform.
A new contract- Ideally, the regulator would limit real fare increases if there were evidence based approach that of uncaptured efficiency gains that could be used to help fund quality involves public ‘buy improvements. The real challenge appears to be that of putting in place a in’ may be more safety and quality-oriented culture in rail. One way of doing this may be effective for rail CEOs and rail boards to have five-year contracts that specify the delivery of designated quality improvements. These improvements would need to be determined in the light of negotiations with the workforce and agreed by the Board of the SRA. The board would be required to determine on advice from management the changes in culture and operations that would be necessary for additional expenditure to be effective in delivering quality improvements. The specific improvement commitments should form part of the customer charter. In return, the SRA could be guaranteed funding and independence from intervention if unpopular temporary measures were required to achieve necessary change.
The contractual arrangement would need to be public. It would need to disclose many of the impediments that the CEO would be empowered to address to deliver designated improvements. This would ensure that the travelling public is better aware of what is needed by way of cultural and operating change within the SRA to deliver the changes they are helping to pay for. It would facilitate public ‘buy in’.
7.4 Observations § The link between fares and quality of service is difficult to establish when competition is limited or absent. The right incentives for operators to deliver better quality in response to higher fares or to avoid sanctions for underperformance are often missing. Sanctions can have the perverse effect of reducing services.
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§ KPIs are a tool that can assist in monitoring quality of service provided they are relevant, comprehensive, measurable and auditable. In rail they need to be sector specific to be of greatest relevance. § For buses the regulatory approach to minimum service levels in contracts has not worked well. Lack of enforcement and expectations about contracts being automatically renewed have contributed to this. Increased competition among operators, performance-based contracts and possible industry rationalisation that could follow is an option for delivering better value for money to bus users. § For rail the reality of a single operator requires a different solution. Clear public recognition is needed of what can be achieved if workplace culture and operating procedures change. The public needs to know what quality improvements are feasible if this happens. It also needs to know what is precluded if change does not occur. Increased funding and real fare increases to support expenditures on quality improvements are justified only if the operating conditions allow change. § A transparent contract, with a life of several years between the CEO and Board of the SRA and the Ministry of Transport could be an implementation method. It would require commitment of the CEO and the Board of the SRA to deliverable quality improvements. It could specify what would be required for their delivery by way of operational change and expenditure in return for guaranteed increases in funding. § The farebox contribution to this additional funding provided by real fare increases would need to be accompanied by improved cost efficiencies by the operator and demonstrated quality improvements. Only then will the public be able to see what these measures are achieving.
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8 Charging for road use
CHARGING FOR SPECIFIC ROAD USE is one option for promoting (and possibly funding) greater public transport use. The car plays an important role in meeting the transport task in the Greater Sydney Area, with the private vehicle accounting for the majority—some 70 per cent—of weekday trips in Sydney. In contrast, the mode share of public transport is only 11 per cent.144
What is the cause of this bias in favour of private transport road travel? Undoubtedly, there are many reasons, but price differences between transport modes are likely to be a factor. The under-recovery of costs of public transport through fare revenue is well known. This should favour public over private transport. However, specific private transport road use is also underpriced, particularly when its full costs—including congestion, road wear and tear, pollution and accidents—are taken into account. The absence of specific pricing of road use, except in the limited cases of toll roads, contributes to the dominance of private vehicles in the transport task.
Efficient road Evidence suggests that subsidising public transport has a negligible effect pricing will do more on mode switching by existing travellers, and therefore on road use.145 to encourage public Compared with efficient road pricing, subsidisation of public transport is transport use than only a second best means of encouraging greater use of public transport. subsidising public transport This chapter examines the scope for direct charging for road use and the impact of charges on public transport use to help pave the way for a sustainable and integrated transport system. It is most unlikely that specific, targeted road use pricing will be in a position to replace more general road funding mechanisms such as motor vehicle registration and fuel levies in the near future. However, it is worth considering the scope for
144 Transport Data Centre, Key Transport Indicators: Household Travel Survey Data Set 2001, http://www.planning.nsw.gov.au/index1.html, Accessed 23 July 2003. 145 Centre for International Economics, Subsidies and the social costs and benefits of public transport, March 2001, pp. 28–42.
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specific road pricing as part of developing the full range of options for sustainable public transport.
8.1 Achieving the efficient use and provision of roads
Efficient road use To achieve an efficient use of existing roads, road users should be directly requires marginal charged the full marginal social cost arising from their road use. The cost pricing marginal social cost measures the total cost to society of a road user’s journey.
Every time a motorist uses the road network, they incur some costs. Examples include petrol, vehicle wear and tear, parking charges and general motor vehicle charges (such as registration). Such costs are termed ‘private costs’ and are paid directly by the motorist. However, driving a vehicle is associated with other costs such as congestion, road wear and tear, pollution and accidents. Motorists typically do not directly bear these costs. As such, road use is not directly priced and may be undercharged, as some of the costs arising from vehicle use are not directly borne by motorists.
Marginal cost pricing of road use would seek to recover all costs arising from a vehicle using the road network. Some of these costs—the private costs—are already being recovered from motorists. Specific road pricing would seek to recover those costs currently not directly borne by motorists.
Marginal cost pricing and its use in achieving efficient road use are discussed in appendix D.
8.2 Problems with the current practice
New South Wales has inherited a road system largely devoid of direct user pricing. While there is some critical-point tolling, such as on the Harbour Bridge, and tolling on the privately owned arterials, virtually all of the state’s 182 000 kilometres of roads are publicly owned and maintained and not subject to specific road use pricing.
Road users do not Once motorists have paid their registration and third party insurance, they directly pay for road are free to use roads without incurring specific road use charges (excluding use specific toll roads). They fund roads via fuel levies and other fees, but with few exceptions do not pay directly for specific road use. Motorists incur private costs, such as vehicle purchase costs, fuel consumption, vehicle wear and tear, parking charges and the (partly optional) cost of insurance. Private costs are not related to road access/use, such as to use a stretch of road.
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Existing taxes do Road infrastructure in New South Wales is valued at around $51 billion, not provide and incurs additional costs for maintenance and augmentation. Existing incentives to use road taxes and charges (both federal and New South Wales) are not targeted roads efficiently charges, and hence cannot provide motorists with incentives to switch from private transport road use to different public transport modes. Indeed, the incentive is to drive more so as to lower the cost of up-front fees (such as registration and third party insurance) on a per kilometre basis. This effectively increases demand for roads, leading to congestion, at which point government agencies respond by building more roads.
This is different from charges for other important infrastructures such as electricity, gas, water, telecommunications and ports, which are charged for according to user-pays pricing rules. Should road use be any different?
8.3 Bearing the costs of NSW roads
The state The NSW Government, through the RTA and local councils, is responsible government for managing a road system of 182 000 kilometres. Around 11 per cent of manages 11 per cent this distance (21 000 kilometres) are state roads managed by the RTA with of NSW roads, but the remaining 89 per cent (161 000 kilometres) being local roads managed spends 88 per cent by councils.146 In 2000-01 spending on state roads in New South Wales of road expenditure totalled $1.45 billion, while spending on roads managed by local councils totalled $206 million.147 Hence state-managed roads account for 11 per cent of road distance in New South Wales, but 88 per cent of road expenditure. This reflects the fact that state roads comprise the major arterials and national highways, which carry the majority of traffic. For example, urban arterials account for less than 2 per cent of total road length in Australia, but these roads carry 40 per cent of all traffic.148 Hence state roads in New South Wales incur higher construction and maintenance costs because they carry more traffic.
8.3.1 Funding of state-managed roads in New South Wales
The RTA had a budget of $2.5 billion in 2001-02. Table 8.1 shows how this money was expended and the source of the RTA’s funding. Expenditure on state roads in 2001-02 totalled $1.9 billion. Some of the RTA’s road expendi- ture is allocated to (road related) public transport infrastructure, such as
146 Bureau of Transport and Regional Economics, State spending on roads, Working Paper 56, Department of Transport and Regional Services, Canberra, 2003, p. 9. 147 Ibid, p. 13. 148 Austroads, RoadFacts 2000: An overview of the Australian and the New Zealand road systems, Sydney, 2000, p. 23.
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the $260 million Liverpool–Parramatta Transitway. While the funding of such infrastructure reduces the expenditure the RTA can allocate to its roads program, at the same time the private sector and federal government has contributed to the funding of the road network. For example, the private sector has funded most of the additions to Sydney’s arterial road network over the past 15 years (see below), while the federal government is responsible for funding the $1.25 billion Western Sydney Orbital.
8.1 RTA expenditure and funding, 2001-02
Expenditure $m Network development 946 Infrastructure maintenance 724 Traffic and transport 250 Road safety and road user management 424 Debt servicing and repayment 100 M4/M5 Cashback 50 Voluntary redundancies 2 Total expenditure 2 496 Funding source $m Motor vehicle taxes 824 Consolidated fund allocation (NSW) 699 Commonwealth (fuel excise) 359 Untied Commonwealth road funding 125 M4/M5 Cashback scheme (NSW) 50 RTA revenue 340 Increase in liabilities/reduction in assets 100 Total funding 2 496 Source: Road and Traffic Authority, Annual Report 2002, Sydney, 2002, p. 15.
Motorists contributed $1.3 billion by way of general charges flowing to the RTA (motor vehicle taxes and charges and federal government road grants funded via the fuel excise). Note that motorists’ contribution to the RTA does not represent total payments by motorists. For example, the RTA estimates that in 2003-04 NSW motorists will contribute around $8.9 billion in road/vehicle related fees and charges to the RTA, the NSW Government and the federal government. With a budget of $2.7 billion in 2003-04, only 30 per cent of NSW motorists’ payments will be returned to NSW road users.149
Motorists in NSW In terms of direct and targeted charges, motorists in New South Wales met directly met 68 per 68 per cent of the costs associated with road usage/demand. The shortfall cent of road was overcome via a contribution of $612 million from consolidated revenue infrastructure costs to the RTA in 2001-02. In terms of the RTA’s overall expenditure and funding, the contribution was $699 million.
149 Road and Traffic Authority submission, 2003, p. 2.
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On the one hand, the contribution from consolidated revenue could be viewed as a subsidy of NSW motorists—the NSW community (through the NSW Government) is funding a significant portion of the RTA’s activities. However, an alternative viewpoint is that the contribution from consolidated revenue is not a subsidy as payments collected from NSW motorists exceed the RTA’s budget. The contribution from consolidated revenue is simply returning motorists’ payments back to the RTA. NSW Treasury takes the view that the taxes and charges levied on NSW motorists are general charges rather than road-specific charges. As such, the contribution from consolidated revenue reflects a political decision by the NSW Government to inject funding into the road network rather than a return of motorists’ payments.
The important observations are that funding from consolidated revenue is not by way of direct or targeted road use pricing, nor are the motor vehicle charges collected by the NSW Government hypothecated to road expendi- ture. (Prior to the mid-1990s, revenue collected from NSW motorists was hypothecated to the road network.)
8.3.2 The fuel excise and road funding
In 2001-02 the RTA received $484 million of funding from the federal government. Part of this funding ($359 million) is tied to expenditure on certain road infrastructure projects, including National Highways in New South Wales, Roads of National Importance and the Australian Transport Safety Bureau’s Blackspot Program.
The federal The federal government collects a large amount of money from the fuel government collects excise levied on petroleum products. In 2001-02 it collected around $12.4 over $12 billion in billion in fuel excises, of which over 99 per cent was paid into consolidated fuel excises, less revenue. Of the amount going to consolidated revenue, around 24 per cent than 4 per cent went was allocated to fuel rebates, subsidies and grants; 15 per cent was to the RTA allocated to road construction and maintenance activities; and the remaining 61 per cent contributed to funding other government activities. This distribution saw the federal government contributing over $1.8 billion to road infrastructure, of which $484 million went to the RTA.
As shown in chart 8.2, there is a considerable difference between revenue raised through the fuel excise and federal road funding. Not all of the fuel
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8.2 Fuel excise and federal government road funding
14 000 Fuel excise collected Commonwealth road funding 12 000
10 000
8 000 $m 6 000
4 000
2 000
0
1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 Data sources: Australian Automobile Association Statistics Database; Parliamentary Library, Commonwealth Road Funding Update, Parliamentary Library Research Note Number 2, 2001, http://www.aph.gov.au/library/pubs/rn/2001- 02/02RN02.htm, Accessed 7 July 2003; Department of Transport and Regional Services (personal communication).
excise collected is attributed to road vehicles, which contribute around 80 per cent of the collected fuel excise.150
There is no link The vast majority of revenue raised through the fuel excise is not allocated between fuel to a particular use. Since 1992 the federal government has specified road excises and road funding in the budget process.151 This has effectively broken any direct link funding between revenue raised through fuel excises and road expenditure. Indeed, the House of Representatives Standing Committee on Communications, Transport and Microeconomic reform has recommended that the hypothec- ation provisions within the relevant Act—the Australian Land Transport Development Act 1988—be removed to end the notion of a link between fuel excises and road funding.152
Despite a multitude of inquiries over past 20 years into the problems and inefficiencies of the fuel excise, there have not been significant changes to excise arrangements, or the amount of federal funding allocated to road infrastructure. As can be seen from chart 8.2, since 1992-93 the federal government has consistently allocated around $2 billion a year to road infrastructure.
150 Parliamentary Library, Petrol and Diesel Excises, Parliamentary Library Research Paper 6, 2000, pp. 5 and 9, http://www.aph.gov.au/library/pubs/ rp/2000-01/01RP06.htm, Accessed 7 July 2003. 151 Department of Treasury, Fuel Taxation Inquiry Issues Paper, CanPrint, Canberra, August 2001, p. 23. 152 Parliamentary Library, Commonwealth Road Funding Since 1990, Parliamentary Library Research Paper 13, 2001, p. 2, http://www.aph.gov.au/library/pubs/ rp/1999-2000/2000rp13.htm, Accessed 7 July 2003.
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Hence the RTA’s It is reasonable to expect that the current level of federal road funding will funding shortfall is persist into the foreseeable future. Hence the current shortfall of $612 unlikely to be met by million between the RTA’s expenditure on roads and revenue raised is the fuel excise unlikely to be met via the federal government allocating a greater amount of fuel excise revenue to New South Wales for road infrastructure projects.
8.4 The need for road use reform
Road congestion in Roads in the Greater Sydney Area are becoming increasingly congested. the Greater Sydney Strong economic and population growth and greater reliance on private Area is forecast to vehicles for transport have contributed to there being more vehicles on get much worse Sydney’s roads. The growth in road usage looks set to continue. It is estimated that in 2003 there will be some 1.9 million cars, travelling around 29.1 billion kilometres, on Sydney roads. By 2015 there will be in excess of 2.2 million cars travelling over 34.6 billion kilometres.
These figures are for passenger cars only. If light commercial vehicles and rigid and articulated trucks are included, the number of vehicle kilometres travelled in Sydney (in passenger car equivalents) is estimated to increase from 37.2 billion in 2003 to 47.6 billion in 2015. This represents an increase in traffic volume of just under 28 per cent. Chart 8.3 provides a breakdown of the estimated distances travelled by various vehicles on Sydney’s roads in 2003 and 2015. Growth in commercial traffic volume is estimated to account for half of the total traffic volume increase between 2003 and 2015.
8.3 Total traffic volume in Sydney, 2003 and 2015 Passenger car equivalent kilometres
50 2003 2015 45 40
.. 35 30 25 20 15 Kilometres (billion) 10 5 0 Passenger cars Light commercial Rigid trucks Articulated trucks All vehicles vehicles
Data sources: CIE calculations based on methodology of Bureau of Transport Economics, Working Paper 38: Forecasting light vehicle traffic, Canberra, 1998; and Australian Bureau of Statistics, Population projections Australia 1999 to 2101, Cat. no. 3222.0, ABS, Canberra, 2000.
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Increasing traffic volume, if left unchecked, will place additional demands on the road network. Sydney’s urban arterial roads and freeways are already experiencing high levels of congestion—the highest level of any major Australian city. Chart 8.4 shows congestion on Sydney’s urban arterial roads and freeways. The congestion indicator is derived from differences between nominal travel times based on posted speed limits and actual travel times (which are influenced by traffic conditions) for a representative sample of urban arterial roads.
8.4 Congestion delays on Sydney’s arterial road network Minutes of delay per kilometre travelled
0.9 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 0.8 0.7 kk 0.6 0.5 0.4 0.3 Minutes delay/km 0.2 0.1 0.0 a.m.peak p.m. peak Off peak All day
Data source: Austroads, op cit, p. 63; and National Performance Indicators database, Group 7 Travel Speed: Con- gestion Indicator (Urban), http://www.algin.net/austroads/, Accessed 2 June 2003.
On average, Sydney drivers travel around 40 kilometres per weekday. If we assume this distance is spread evenly between the morning and evening peak times, with 75 per cent of the kilometres being travelled on arterial roads, then traffic congestion would have caused travel time in 2000-01 to increase by 11 minutes in the morning peak and 9 minutes in the evening peak.
However, time delays due to congestion are actually declining (chart 8.4). In the morning peak in 2000-01 traffic congestion saw drivers on Sydney’s arterial roads being delayed by around 43 seconds per kilometre travelled, down from 50 seconds in 1998-99.
The largest impact on congestion reduction is likely to have come from new infrastructure projects such as the Eastern Distributor, which opened to traffic in December 1999. With the opening of the M5 East Freeway in December 2001, and with greater compatibility and uptake of electronic tolling systems, it is expected that the 2001-02 congestion indicator will
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show a further reduction in congestion delays despite increasing traffic on Sydney’s arterial roads.
Faster flowing traffic is better for Sydney and its motorists. However, roads such as the Eastern Distributor and M5 East Freeway are expensive options for addressing congestion. Table 8.5 shows the cost associated with building some of Sydney’s major arterial roads. Most of these roads are currently owned by the private sector under build-own-operate-transfer (BOOT) schemes. The year in which the road reverts to RTA ownership is shown in brackets.
Congestion has Over the next three years $5.73 billion in new capital works is planned for been addressed roads in the Greater Sydney Area. Around 50 per cent is to be funded by NSW through building taxpayers, with the private sector and federal government funding the more/better roads remainder. Around 90 per cent of the capital works expenditure is to occur in Sydney (including the Great Western Highway). Capital works include major route development, other road improvements, inner city bypasses, transitways and cycleways in Sydney, Newcastle, the Central Coast and Wollongong. Some projects have already commenced (and are nearly completed). Expendi- ture yet to occur is around $3.88 billion.
At best, building In response to increasing demand for roads and rising congestion, all levels more roads reduces of government have responded by building more roads, which inturn congestion for only become congested. The cycle then repeats itself. The conclusion we can a few years draw from the above expenditure estimates is that building roads to satisfy the ever-increasing demand for roads is an expensive option. With the NSW Government coming under increasing financial pressure, addressing the problem of congestion via building more and bigger roads is unlikely to be sustainable over the long term.
8.5 Additions to Sydney’s arterial road network
Arterial road Year opened Ownership Cost $m M2 May 1997 Private (2042) 644 M4 May 1992 Private (2010) 246 M5 August 1992 Private (2023) 533 M5 East Freeway December 2001 RTA 794 Harbour Tunnel August 1992 Private (2022) 683 Eastern Distributor December 1999 Private (2048) 700 Lane Cove Tunnel Expected 2007 Private (?) 815 Cross City Tunnel Expected 2005 Private (2036) 640 M7 Westlink Unknown Private (?) 1 540 Source: Various.
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8.5 Tolling on selected arterial roads
Current arterial tolls On some major arterial routes in Sydney—the M2, M4, M5, Eastern are not about Distributor, and Sydney Harbour Bridge and Tunnel—motorists already rational transport face tolls. However, these tolls are about funding the cost of the privately solutions suppled infrastructure (with the exception of the Sydney Harbour Bridge). The tolls are not designed to address the market failures (externalities) or to provide rational transport solutions. Hence tolls to date do not reflect the full costs arising from an individual’s road use. For example, current tolls do not include a charge for congestion.
8.6 Where to from here?
Can specific road use pricing overcome the identified market failures and lead to a more efficient use of roads and better transport solutions for the Greater Sydney Area?
Charging for road The success of road charging in contributing to better transport solutions in use is not straight- the Greater Sydney Area is not straightforward. There are many important forward—many issues to resolve. issues need to be § What roads are to be subjected to congestion pricing? Congestion resolved pricing will need to be comprehensive in application so as to stop con- gestion moving elsewhere. § Can appropriate congestion and road use charges be determined? § Prior to implementation of road charging measures, there is a need for convenient, reliable and affordable alternative transport modes so that commuters can still make journeys. § Equity issues—should congestion and other road user charges be varied according to ability to pay? § Should current motor vehicle charges (such as registration) be scaled back if road use charging is implemented? § Will congestion charges be scaled back in instances where there are no alternative transport modes (such as buses and rail)? § What will be done with the raised revenue? Will it be: – recycled to road users – used to subsidise mass transit (SRA/STA) so as to increase patron- age and minimise any decrease in trips made, and/or – used to address the externalities?
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§ If used to subsidise mass transit, what will this do to incentives for private operators to invest in future road infrastructure, and will current private operators need to be compensated due to road users subsidising a competitor (buses/rail)?
Many cities have Many cities have concluded that expanding roads to meet unconstrained implemented some demand does nothing to ameliorate traffic conditions or maximise efficient form of road use road use. Over the past decade there has been a shift in emphasis away charging from road construction/expansion to travel demand management strategies that provide sustainable solutions. Numerous OECD countries/cities have implemented road-pricing schemes (among other initiatives) as a strategy to manage travel demand. Road use charges take two possible forms: § variable charges—which influence distance travelled and driving be- haviour. Examples include cordon pricing, electronic road pricing (ERP), distance and axle load related charges, and fuel taxes § fixed charges—which are tied to the vehicle and are paid annually or when the vehicle is purchased. Examples include a registration charge or vehicle purchase tax.
Perhaps the best known road use charging regimes are the London cordon pricing scheme and the Singapore ERP scheme. Both of these measures have been shown to be effective in reducing congestion and increasing average vehicle speed. A sample of mainstream road charging schemes implemented in OECD countries/cities is provided in appendix E.
8.7 Charging for road use in the Greater Sydney Area
There is wide Many submissions to this inquiry supported the use of road pricing to support for road use address congestion and air quality, achieve an efficient use of road infra- charging … structure, and raise revenue for hypothecation to public transport. A selection of comments is provided below.
In line with an objective to reduce growth in private vehicle travel, the Inquiry [should] recommend to government the need to internalise, over time, the externality costs of the private motor car.153
…the EPA considers the Inquiry should particularly focus on mechanisms which incorporate the external costs of car use and thus also serve as travel demand management tools … Peak hour tolls/charges, such as London intro- duced in 2003, merit exploration.154
153 Rail, Tram and Bus Union submission, 2003, p. 16. 154 NSW Environment Protection Agency submission, 2003, p. 6.
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TEC strongly endorses the introduction of a congestion pricing/road pricing scheme as a positive step toward improved travel demand management and as a source of funding for public transport infrastructure.155 AusCID considers that a sustainable transport system requires a combination of incentives and constraints that are aimed at either encouraging the use of the optimal means of transport, or detracting from sub-optimal transport modes such as private vehicles, or a combination of both measures. Options … include: congestion or environmental pricing; increasing parking fees; appropriately targeted subsidies for public transport fares; improved public transport services.156
… are a number of policy measures that could be considered to minimise the growth in congestion. This includes parking policies and other road user charges, priority for public transport on the road network and use of intelligent transport systems. These measures will also assist in reducing greenhouse gas emissions.157
… but not universal There is not universal agreement on the desirability of all road use charging support for all measures. For example, the Parking Operators Association and Property variants Council of Australia are both strongly opposed to a road use charging regime that incorporates further increases to the current parking levy. However, there was typically agreement on the need for some form of road pricing, which spans most groups including the RTA and other govern- ment agencies, environmental lobby groups, unions and infrastructure developers.
Submissions to this inquiry supported the (in part) use of revenues raised from road charging for public transport improvements. Charging motorists for the full social costs of their road use should see some motorists shifting to alternative transport modes or to other non-congested or alternative routes. This has been the experience in other cities that have implemented some form of road pricing (see appendix E for examples). If the public transport alternative does not have wide coverage or is not reliable, frequent and efficient, charging for road use would see a net decrease in trips made. Such an outcome may adversely affect economic activity.
Alternative transport OECD countries/cities that have implemented road use charges typically modes need to be in hypothecate raised revenues to public transport improvements to ensure place prior to road that consumers priced away from the road market can still make trips. use charging being Indeed, the OECD has noted that, prior to implementation of road use implemented
155 Total Environment Centre submission, 2003, p. 5. 156 Australian Council for Infrastructure Development submission, 2003, p. 14. 157 Road and Traffic Authority submission, 2003, p 8.
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charging measures, convenient, reliable and affordable public transport alternatives to driving must be in place.158
The need for feasible alternative public transport solutions provides guidance on which projects (some of) the revenue raised from road use charging should be hypothecated to. The need for reliable, frequent and efficient public transport prior to implementation of road charges also limits where road use charging can be employed today.
8.8 Options for road pricing
The three major options for road user charges in the Greater Sydney Area include: § cordon pricing § electronic road pricing § parking levies.
8.8.1 Cordon pricing
Cordon pricing, whether fixed or variable, offers an avenue for correcting the relative prices of private vehicle and public transport. The community’s opinion of such road use charging regimes appears to be changing. A recent NRMA survey found that 40 per cent of people were prepared to pay a city toll of $10 in order to cut congestion.159 This has changed since the late 1990s when research found that no more than 25 per cent of those surveyed favoured anything ‘restricting driver behaviour or penalising drivers’.160 The reason for the apparent change is unclear. It could reflect that motorists are getting more used to road tolls, so the idea of paying another toll is not as unpopular as before. It may also reflect that, as Sydney’s road-related problems get worse, an increasing number of motorists are willing to pay to reduce those problems. What we do not know, however, is how motorists see the problem being addressed by the
158 Organisation for Economic Cooperation and Development, Road Travel Demand: Meeting the Challenge, OECD, Paris, 2002, p. 77. 159 Sydney Morning Herald, ‘A car tax to clean the air’, article by Frank Walker, http://www.drive.com.au, Accessed 22 July 2003. 160 W Adam, 1998, ‘Knowing your market—how to switch on more public transport use’, in Australian Institute of Traffic Planning and Management National Conference ‘Moving smarter, challenges in traffic and transport’, 4–5 June 1998, Darling Harbour Convention Centre, Sydney.
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toll. For example, is the $10 toll to fund new/improved roads or to price some motorists away from road use?
The issue of what toll to use in a Sydney CBD -specific cordon has been illustrated by the Warren Centre for Advanced Engineering.161 Under various simplifying assumptions, it calculated that a daily peak cordon toll for the Sydney CBD of around $20 plus an increase in parking charges of about $5 per car would have the effect of reducing car use to 15 per cent of total commuters. The proceeds of the peak cordon and parking charges may be in the order of $300 million a year. More recently, it has been suggested that a cordon toll of $6 could cut overall traffic in central Sydney by around 13 per cent, while raising more than $60 million a year.162 For motorists entering the cordon once per weekday, the $6 cordon charge would have an annual cost of around $1380.
Submissions to this inquiry supported the use of cordon pricing to address congestion. It was suggested that a cordon be established around Sydney whereby all vehicles are tolled on entering the CBD, with the revenue hypothecated to public transport.163 Cordon pricing was suggested not only for the CBD, but also for other major centres.164 For reasons of efficiency and to make use of available tolling infrastructure, it was suggested that toll collection be undertaken electronically. Only one submission provided details on which centres to include in a cordon pricing scheme, which roads/entry points to toll, and the price to set the toll at.
Consideration of the major issues
The main issues surrounding the introduction of a cordon pricing scheme concern which area(s) to include in the cordon, the availability of alter- native transport modes and equity implications, and boundary effects.
Congestion does not just occur in Sydney’s CBD, but in many commercial and retail centres. Areas where congestion is considered to be sufficiently bad to warrant attention would be obvious candidates for cordon pricing. Examples of areas (or cordons) potentially suited to cordon pricing include: § Sydney and North Sydney CBDs
161 Warren Centre for Advanced Engineering, Sustainable Transport in Sustainable Cities: Transport Pricing: More than just a Tax, Sydney, 2002, pp. 56–8. 162 Glazebrook submission, 2003, p. 8. 163 AusCID submission, 2003, p. 15. 164 Total Environment Centre submission, 2003, p. 5.
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§ commercial/retail centres such as Chatswood and Parramatta § Kingsford Smith Airport.
The suitability of an area to cordon pricing depends in part on a restricted number of ‘entry and exit’ points to the cordon, and suitability of those points to tolling infrastructure/gantries. Sydney has around 20 entry roads to the inner city bounded by York Street, Macquarie Street, Hyde Park, Central Station, Haymarket and Darling Harbour. In comparison, the London cordon has many more entry points. It uses a network of 203 enforcement cameras, situated at 174 entry and exit points to the charging zone to monitor every single lane of traffic into and out of the zone. There are an additional 64 CCTV-type monitoring camera sites in central London.
A further issue to resolve concerns the period(s) over which the cordon pricing scheme is active. For example, Singapore enforces a cordon pricing scheme for its CBD during peak hours, while the London cordon pricing scheme operates over extended business hours (7.00 am to 6.30 pm weekdays). One submission to this inquiry suggested that the cordon pricing scheme should operate 24 hours a day, with weekends and public holidays excluded.165 The same submission suggested that city residents, taxis, buses and commercial vehicles would be exempted from the $6 toll under the proposed model.
A cordon charge will A cordon toll of around $6 per car per entry imposes a large impost on be regressive. There motorists for whom there are no feasible alternative transport modes may be a need to (including public transport, car pooling, changed travel times if the cordon compensate some toll is variable by time of day, and so on). Table 8.6 shows that the impact households
8.6 Cordon charges are likely to be regressive
Average NSW Cordon tollb Toll as a share of Income quintile household incomea income $/yr $/yr % Lowest 20 per cent 8 655 1 380 16 Second quintile 22 446 1 380 6 Third quintile 38 622 1 380 4 Fourth quintile 60 498 1 380 2 Highest 20 per cent 108 242 1 380 1 Average 47 673 1 380 3 a Household income figures refer to year 1998-99 (the most recent Household Expenditure Survey). b The absolute expenditure on the cordon toll will depend on the number of times a motorist enters the cordon. A smaller toll will see a correspondingly smaller share of household income being allocated to the toll. However, the cordon toll will still be regressive in nature as it is a fixed charge. Sources: Australian Bureau of Statistics, Household Expenditure Survey: Summary of Results, cat. no. 6530.0, Canberra, 2000; Glazebrook, op cit, p. 8; CIE calculations.
165 Glazebrook submission, 2003, p. 8.
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on low income households of a cordon charge is likely to be regressive. This raises the prospect that low income households without access to alternative transport modes may need to be compensated. Determining which households are to be compensated (and by how much) will be difficult to resolve and administer. How will we resolve whether an individual has feasible access to alternative transport modes?
Alternative transport To date, cordon pricing in London appears to have been effective in modes are central to reducing congestion. A question arises as to whether a cordon pricing a successful cordon scheme for Sydney’s CBD (as an example) could be as successful. This will pricing scheme clearly depend on whether there are alternative transport modes to carry motorists displaced from driving into/through the CBD, as was the case in London.
Improving service delivery (that is, frequency, coverage and reliability) in the public transport system in order to provide travellers with a realistic alternative to the car will be expensive and take time. Until travellers do have alternative transport modes to switch to, a cordon pricing scheme may not bring about a noticeable decline in traffic volume. Those who could not afford the toll would probably stop travelling, which might adversely affect economic activity.
The final issue concerns adverse boundary effects. We can expect an increase in demand for park and ride facilities around the boundary of the cordon as motorists try to avoid the charge. This is likely to be associated with some congestion moving from inside the cordon to just outside its boundaries. In the absence of public transport services capable of dissipating the boundary effects, the cordon pricing may simply move the congestion from one area to another.
Some commentators have noted that cordon pricing may also have adverse developmental effects as businesses are forced out of charged areas into undeveloped areas (that is, decentralisation of centres).
8.8.2 Electronic road pricing
ERP can address a ERP is a more sophisticated form of cordon pricing, which can address wider range of externalities associated with congestion, road wear and tear, environmental external costs pollution, and accidents.
First best solutions to charging for road use will charge motorists directly for the costs arising from their road use. Taking congestion as an example, first best congestion pricing would involve a pricing system that is capable of levying a variable congestion charge, with the charge dependent on:
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§ time of day § location or trip route § number of other vehicles on the road at the time § vehicle type.
To enhance efficiency of road usage, all roads (new and existing) must be accurately priced and included in the scheme. If this does not occur spill- over effects may be generated, as vehicles divert to other roads to avoid charges, thereby causing congestion in areas or at times that were previously uncongested. Equity considerations would also require that all vehicles be levied with congestion charges if they impose such costs on other motorists, and hence all vehicles would need to be included in the scheme.
The technology required to implement first best ERP systems is currently available and already in use in numerous international cities (for example, New York, San Diego, Singapore and Toronto). Enough is known about the size of the externalities associated with congestion, road wear and tear and environmental pollution to incorporate such costs into ERP schemes.
Costs may range ARRB Transport Research has performed modelling of the effects of road between 13 and 21 tolls for Sydney.166 The modelling found that applying differential charges cents per kilometre on different road types during peak periods could yield net benefits in travelled Sydney of $521 million a year. This allows for a significant reduction of car user benefits as car users are diverted from their preferred transport mode to others by the change in relative prices that would disadvantage road use. Optimal peak-period congestion charges were estimated to vary from 62 cents per vehicle kilometre in the CBD to 21 cents on inner arterial roads and 7 cents on outer arterials. Charges on motorways between peak periods were as low a 2 cents per kilometre. The average optimal charge was calculated to be 13 cents per kilometre. Implementation costs were assumed to be $150 per vehicle (comprising electronic smart card readers, intersection readers and so on).
The Warren Centre has expanded on the congestion charge calculated by the Bureau of Transport and Communication Economics to include all externalities arising from car travel. Using some simplifying assumptions, the Warren Centre calculated that the total amount that needs to be recouped through some form of road use charging was around 20.7 cents
166 Bureau of Transport and Communication Economics, Traffic Congestion and Road User Charges in Australian Capital Cities, Report 92, AGPS, Canberra, 1996.
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per car kilometre, assuming the costs of accidents are adequately covered by insurance.167
Submissions supported an ERP scheme, but again lacked detail on the nature of the ERP. No submissions commented on which arterial routes should be subject to ERP, or what the charge should be. Submissions noted only that ERP would be inappropriate in the absence of alternative transport modes.
The RTA did note, however, that a critical mass of e-tag holders (perhaps 1 million) would be required before it would be realistic to consider the option of ERP and variable tolling. Over 350 000 e-tags have so far been issued. The uptake of e-tags is expected to increase with the opening of the Cross City Tunnel and Lane Cove Tunnel, as these roads will not have cash facilities and will use full electronic tolling.168
Consideration of the major issues
ERP can be The nature of ERP means that it can be applied selectively to certain routes. selectively applied … Hence in contrast to cordon pricing, which can be applied universally only to a geographic region, ERP can be used in areas/routes that satisfy the precondition of existing alternative transport modes. Such flexibility means an ERP scheme could be introduced immediately in suitable areas, and expanded to other metropolitan areas as public transport coverage and frequency in those areas improves. For example, a substantial number of submissions to this inquiry noted that western Sydney is poorly serviced by public transport. Hence, although congestion may be an increasingly important issue for western Sydney, ERP on key arterial roads in the region is unlikely to be a suitable measure to address the problem of congestion due to the (current) absence of alternative transport modes.
… to roads where This situation is not, however, experienced across all regions in the wider there is a realistic metropolitan area. It is possible to identify numerous congested regions alternative to car that are well serviced by public transport, and arterial roads in those transport regions could be candidates for ERP, as shown in box 8.7.
Selectively applying ERP to arterial roads may, however, result in congestion moving to once uncongested roads/areas as motorists attempt to avoid the charge.
ERP does raise privacy issues, which may be the biggest hurdle to implementing a first best road use charging regime. Variable road tolls,
167 Warren Centre, op cit, pp. 54–5. 168 Road and Traffic Authority submission, 2003, pp. 9, 12.
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collected at tolling booths, could be designed to address privacy issues by allowing road users to choose between electronic or manual payment methods. Such payment options are already available for motorists who use toll roads in Sydney. Road users who use the electronic payment option should in theory be charged at a marginally lower rate, as they will contribute less to congestion at tolling points.
A second best pricing system introduced through road tolls would not have the unilateral coverage of a first best system, raising the prospect that road users may attempt to circumvent payment by diverting to other non- tolled roads and hence causing congestion at other times or locations.
8.7 An opportunity for rational road use charging—road pricing on the M5 East?
Given the presence of an alternative transport mode—namely, the East Hills train line— the M5 East Freeway may be an appropriate candidate for road pricing. A one-way toll of around $2.20 would cover the infrastructure costs of the M5 East Freeway. (Note that this toll is based on numerous simplifying assumptions concerning asset life, required rate of return on invested capital, traffic volume per day, volume growth and depreciation method.) Modelling conducted by the Transport Data Centre shows that a one way toll of $2.20 would see: § for an average weekday, rail passengers on the East Hills and Illawarra lines increasing from 162 000 to 168 000 § the number of vehicles on the M5 East Freeway decreasing from 113 000 to 100 000.
As the M5 East Freeway connects the M5 Motorway with General Homes Drive and onto the Eastern Distributor, there would presumably also be decreases in the number of vehicles using these roads. If the M5 East toll were also set so as to include charges for congestion and road wear and tear, greater substitution between private vehicle and rail transport could be expected. While some motorists will switch to rail transport, others may decide to take alternative road routes or use other transport modes (such as buses ), which were not included in the modelling. There may be a small reduction in total travel.
While subjecting the M5 East Freeway to road use charging would reduce traffic volume, it would also raise costs for freight operators and other through traffic that does not have access to alternative transport modes. Whether there are net benefits or costs for freight operators depends on the magnitude (and value) of time saved from having 13 000 fewer vehicles using the M5 East Freeway every weekday.
Recovering the cost of the M5 East Freeway from those who use it should allow taxes to be lowered elsewhere (or if taxes are maintained as is, allow greater expenditure in other areas). That is, in this example, road charging is associated with a double dividend effect as (costly) externalities are reduced while allowing other distorting taxes to also be reduced.
Sources: Transport Data Centre modelling, personal communication, July 2003; CIE calculations.
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8.8.3 Parking levies
Over 60 000 car The Parking Space Levy Act imposes an annual levy on parking spaces in spaces are levied Category 1 areas (City of Sydney and North Sydney—43 159 spaces) and in Category 2 areas (Bondi Junction, Chatswood, Parramatta and St Leonards—17 418 spaces). The parking space levy (PSL) was introduced in response to government concerns about congestion and pollution in commercial areas of Sydney.
Money raised goes The PSL was increased on 1 July 2003 to $840 for spaces in Category 1 areas to public transport and $420 for Category 2 areas. The PSL is now subject to annual indexation. In 2002-03 the PSL raised $40.5 million. Funds raised through the PSL are hypothecated to infrastructure facilities that improve access to public transport.169
The PSL applies to off-street non-residential parking spaces. However, not all spaces attract the levy. Exemptions are granted for certain parking spaces in both categories (unloading goods and casual services spaces) while other exemptions apply to only Category 2 areas (restaurant and retail customers, club members and guests, and hotel customers and guests). There were 7493 exempt spaces in 2002-03, resulting in forgone revenue of $3.8 million. A further $6.7 million is forgone as a result of concessions.170
The availability of convenient and (relatively) free parking is a major deter- minant in whether people choose to drive. Parking levies can therefore be used to influence modal choice. Sydney’s PSL is likely to have had the effect of reducing commuter traffic in the Category 1 and 2 areas, thereby reducing congestion and localised pollution. An important question is whether the PSL can be used to achieve greater switching from the private car to public transport.
Opinions were On this issue submissions to the inquiry were mixed. There was some mixed on the support for further increases in the PSL, in conjunction with expanding the appropriateness levy to include parking spaces in retail shopping centres (currently exempt of a PSL in Category 2 areas). It was noted that the current exemptions limit the effectiveness of the levy due to the role that retail shopping centres play as major trip generators.171 An extension of this viewpoint may be to subject all retail shopping centres to the PSL. It is not known how many off-street
169 NSW Ministry of Transport, Parking Space Levy: Facts and Figures, NSW Ministry of Transport, Sydney, 2003. 170 Ibid. 171 Total Environment Centre submission, 2003, p. 6.
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and non-residential parking spaces there are across the wider Sydney metropolitan area. However, it is believed that applying the PSL to parking spaces in the wider Sydney metropolitan area would generate substantial revenue.
Other submissions noted that it was inappropriate to use parking levies as a (car) travel demand management tool. It is claimed that only 8 per cent of vehicles entering Sydney park, and hence are subject to the PSL. The remaining 92 per cent of vehicles entering Sydney are simply transiting and would therefore be exempt from the levy. Hence the PSL is ineffectual and discriminatory as only a small proportion of vehicles contributing to Sydney’s congestion/pollution are charged for it.172 The Parking Operators Association also identified the problem of parking levies forcing cars onto residential streets in search of free parking.
Consideration of the major issues
For a PSL to Given the role retail shopping centres play in generating car trips, it would influence the travel seem inappropriate to exclude retail centres from the PSL. If retail centres mode chosen, are to incur the PSL, an issue is how that levy will be passed on. For the motorists will need levy to influence travellers’ mode choice, motorists have to directly incur to directly incur the the levy rather than having the levy paid for via higher priced goods and levy services. Under the later scenario, the incentive is still to drive to a retail centre despite the PSL—the cost to the motorist in the form of slightly higher prices is the same irrespective of mode of transport taken to the centre. Hence, for the PSL to be an effective travel demand management tool, motorists will need to directly incur the PSL.
This raises the prospect that currently ‘free access’ off-street car parks, such as those found in many suburban retail centres, may need to put in place entry/exit points where motorists can be directly charged for their car space use. If entry/exit is not controlled, it will not be possible to establish a direct relationship between the cost of using a car and using alternative transport modes.
A related theme is the frequent use of ‘first 2 hours free’ schemes by tolled car parks. Such schemes may have to be revisited as they encourage a high turnover of vehicles, which ultimately adds to congestion. A preferable arrangement may be one where the charging regime encourages motorists, once they have entered the car park, to stay put and complete all shopping rather than leave within two hours and return at a later stage.
172 Parking Operators Association submission, 2003, p. 6.
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There are two noticeable concerns regarding using and expanding the PSL A PSL targets only a to address congestion. Firstly, as pointed out above, the PSL targets only a subset of motorists subset of vehicles contributing to congestion, raising potential equity issues and may adversely if the PSL is used in isolation of other road use charging measures. affect park and ride Secondly, a PSL applied to all off-street parking spaces may have an initiatives adverse impact on initiatives to encourage greater public transport use such as ‘park and ride’. Hence there may be a case for exempting certain parking spaces—such as those found at rail stations—from the levy.
8.9 Observations
Specific charging for road use has the potential to reduce demand for road travel, and therefore potentially promote greater use of public transport. As such, charging for road use warrants further investigation and consultation with the community and stakeholders.
However, the success of any road use pricing scheme depends critically on the availability of alternative transport modes to the private vehicle. For equity and economic reasons, road pricing should be considered only where there are alternative transport modes available to motorists who are ‘priced away’ from road use.
Given this constraint, specific road use pricing is likely to be a thing of the future. The immediate task is to improve service delivery (that is, frequency, reliability and other quality attributes) of the public transport system in order to provide travellers with a realistic alternative to the car.
Given the potential importance of road use pricing as a part of the approach to sustainable transport in the medium to long-term, especially in the metropolitan region, we invite comments on the various options for such a charging system.
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Decision criteria for choosing 9 transport projects
EXPANDING THE SYDNEY METROPOLITAN PUBLIC TRANSPORT NETWORK in the future opens up new funding options, particularly for private sector investment. But what is to be funded, and on what basis are funding choices to be made? New corridors and network augmentations need to respond to changes in the distribution of the population and employment growth, and take into account how well or poorly the existing transport corridors and networks deliver effective peak-hour services.
Corridor purchases or options to purchase have to be timely. To be sustainable, new projects must be financially viable. Commercial returns will be required for any private capital invested. Equally, there is a need to ensure that any investment involving public funds does not impose unexpected and unfunded exposure on the constrained budget of the state. Projects should be ranked consistently on their ability to contribute to economic, social and environmental welfare.
Project choice must The need to choose wisely among projects competing for public funding be based on a calls for a robust decision framework that is consistently applied to all sound decision proposals. This is because decision makers will have to choose between framework competing projects and decide on the most appropriate method for delivering desired transport outcomes. Individual projects must also be able to be assessed in a comparable way. Such a framework has not always been evident in previous funding decisions.
This chapter outlines some of the possible transport projects that have arisen in transport planning discussions and in submissions to the inquiry, and provides a framework for assessing the relative merits of any proposal to draw on substantial additional funds for the transport network.
It highlights the need to establish and consistently apply a set of objectives— for example, economic, environmental and social integration objectives— against which individual projects can be developed and appraised. It illustrates the dangers of failing to take a multimodal approach in which
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planning for road projects is fully integrated with strategic decisions on other transport modes.
9.1 Possible future investments in transport infrastructure
The menu for major Transport planners and others have identified a set of possible projects that new transport could compete for funding. Those outlined in submissions and documents investments is made available to the inquiry include the following. extensive § New rail lines, which potentially could include the following. – Expansion in Sydney’s west, which would cost an estimated $2.4 billion each year or $48 billion over 20 years. This would see lines constructed to the north-west and south-west sectors. In addition to the Epping to Chatswood section of the Parramatta Rail Link it would include a rail link between Epping and Castle Hill, with the potential to extend to Mungerie Park and Rouse Hill, and a rail link between Glenfield and Bringelly. – Expansion in the inner metropolitan and Northern Beaches, which would cost an estimated $2.65 billion each year or $53 billion over 20 years. This would involve expansions to the rail system in the inner areas of western Sydney. In addition to the Epping to Chatswood section of the Parramatta Rail Link it would extend rail to the Northern Beaches (Brookvale/Dee Why), the south-eastern suburbs as far as Maroubra, the inner west via Victoria Road as far as Parramatta, and the inner south-west via Newtown, Sydenham and the Sydney airport. – Potential new European ‘metro’ style lines in inner areas, and a new rail pathway through the CBD to increase capacity and enhance sectorisation of existing services. § Upgrades to existing rail lines, including lines to Newcastle and the Illawarra, to increase the frequency of intercity services in line with population growth and to reduce travel times. These, along with other investments aimed at creating faster services, would cost an estimated $2.55 billion each year or $51 billion over 20 years. § Investment to permit increased separation of passenger and freight services on rail lines. § Further transitway development in western Sydney, and possibly in the Hunter and the Illawarra. § Potential conversion of some bus routes to light rail to provide higher capacity services.
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§ Expansion of the bus priority measures on the existing road network to improve the attractiveness and reliability of bus services. § New and improved rail and transitway stations, including major upgrades to Town Hall and Wynyard stations. § New ferry wharves to keep pace with growth adjacent to Sydney Harbour and the Parramatta River. § Transport interchanges (for example, bus–rail, bus–ferry) at key points of the network. § Integrated information and ticketing systems. § New buses, trains and ferries to cater for growth and to replace an ageing fleet. § Improved facilities for pedestrians and cyclists. § Increased maintenance, especially of the rail network. § Transitways in western Sydney including the Parramatta to Mungerie Park Transitway and the Blacktown to Castle Hill Transitway to provide rapid transit bus-only access routes to and between these centres. (Land corridors have already been acquired.) § Any additional safety requirements that might result from the current Waterfall inquiry.
A number of these projects require land acquisition. Timeliness of invest- ment decisions is critical. To be effective alternatives to private car travel, public transport services have to be operating from the outset of any new residential development so that they can be part of new travel habits. The NSW Government faces decisions about when to purchase land for possible rail links or some rapid transit alternative.
Whether the government purchases the land in anticipation of its use or whether it waits until future rail scenarios are decided are issues that need to be addressed. In communications from staff of the Department of Infrastructure, Planning and Natural Resources, views have been expressed that, if major new funding sources cannot be identified, there needs to be at least an increased allocation of resources for corridor identification and purchase, so projects can occur at some time in the future. There could be scope, for instance, for developers to offer land in corridors as a development contribution rather than cash. The implementation of much of the then Department of Main Roads’ major roads plan, first enshrined in policy and plans in 1948, shows the value of preserving dedicated corridors for future transport development. The land also provides income for the government (rent) and (temporary) open space benefits for communities.
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Another issue to consider is the sequencing of decisions when purchasing the land. Decisions by the government to rezone future transport corridors have an immediate impact on its value and, therefore, should arguably be made after acquisition of the land has taken place.
Some expansion A number of the projects listed above are interdependent. For instance, the projects will require impact of expanding the rail network on the demand for existing network more funds for the capacity may require a new rail corridor through a tunnel and an existing network to additional harbour crossing. Similarly, expansions to the bus fleet and a cope with demand new bus depot would be required to accommodate the additional demand generated by the proposed transitways.
Some capital expansion decisions—for instance, those involving rolling- stock—can be made by service providers within the usual decision-making framework for commercial operators. But what is the appropriate decision framework for formulating and choosing between major infrastructure projects?
9.2 From broad policy objectives to projects, not vice versa
It is important that project selection evolves from a sound policy framework that articulates the broader needs of the community in terms of an integrated transport system. This makes it important to make transparent the linkages between: § desirable urban outcomes and social objectives § transport networks, service levels and price relativities between modes § the associated funding task.
Past project Such transparency has not necessarily been a part of the history of selection has approaches to project selection, as was highlighted in submissions to the occurred without inquiry. For instance, the Western Sydney Community Forum has proper expressed dissatisfaction with past approaches and emphasised the need consideration of for an integrated approach. investment choices Transport planning in Sydney over the last decade has taken a piecemeal across modes approach and at best an approach which is primarily a list of required transport infrastructure projects.173
The aim of an integrated approach is a sustainable urban transport system consistent with sustainable urban evolution. The task for government is to select a set of policies that are ‘welfare improving’—contributing to state
173 Western Sydney Community Forum submission 2003, p. 29.
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product, environmental ‘goods’, social gains, or some combination. In short, transport policy development requires a coherent and consistently maintained set of objectives—not necessarily targets in terms of reduced vehicle kilometres and the like, which tend to lock in solutions before competing solutions can be evaluated
Policy implementation requires a realistic, sustainable strategic framework for developing, assessing and funding transport projects. It involves prioritising and choosing among investment projects and choosing among alternative versions of the one project. This means adopting a consistent, transparent process for comparing projects.
An urban plan is a The starting point for this approach is the urban plan, which itself will be necessary first step affected by transport decisions. Transport investment decisions must be responsive to: § where the demands are now § where the growth is likely to be § what the transport constraints to that growth are § what the benefits and costs are associated with removing the constraints.
9.2.1 Prerequisites for good project choices
This inquiry examined funding possibilities for projects that: § make the current system of public transport sustainable—that is, capable of operating with existing traffic levels without further deterioration of service levels § enhance what is there and enlarge capacity of the existing network § allow improved service levels § cater for growth.
To make appropriate choices among these it is necessary to: § establish an agreed set of needs—transport demands, competing and interdependent, that require resources to meet them and possible solutions across modes § make a menu of projects available to the private sector for possible proposals to get an indication of what level of private sector funding or operating interest is present and to which projects it applies § recognise the full social costs and benefits of accommodating additional transport use under any option
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§ undertake full benefit–cost appraisal of developed options in advance of the environmental impact statement (EIS) process—not during or after it—without the risk that the cost–benefit appraisal will be reshaped as part of the EIS process rather than being allowed to stand § determine in advance of final selection what pricing regime will apply to any competing options.
9.3 Appraisal approaches in New South Wales and elsewhere
Where transport infrastructure is predominantly publicly owned as in Australia and Europe, appraisal of projects competing for public funding is, as Bristow and Nellthorp point out, usually:
… concerned with achieving a range of social (as opposed to private) objectives. These typically include: • economic efficiency measured by the results of a social cost benefit analysis; • minimising environmental damage using environmental impact assessment methods; and • other objectives concerned with, for example, equity, accessibility, with long term cash flow for the state or with achieving regional development policies.174
Cost–benefit Cost–benefit analysis is at the core of any project appraisal. The major steps analysis is central to in such analysis are well known and typically form part of the EIS project appraisal development. 175 They consist of: § specifying the set of alternative projects that are possible solutions to the particular transport problem or ‘need’, and the ‘base case’ (what happens without the project) against which any option is to be evaluated § deciding whose benefits and costs are to count (present generation of travellers, future generations, public and private sector providers, local ratepayers, New South Wales taxpayers) § deciding what impacts matter (avoiding any double counting) and cataloguing the relevant impacts and selectin g the units of measurement
174 AL Bristow and J Nellthorp, ’Transport project appraisal in the European Union,’ Transport Policy, 7, 2000, pp. 51–60. 175 See, for example, AE Boardman, DH Greenberg, AR Vining and DL Weimer, Cost–Benefit Analysis, Concepts and Practice, Prentice Hall, New Jersey, 2001, p. 7.
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§ predicting the impacts quantitatively over the project life (changes to created travel time saving with growth of traffic) § giving dollar values to all included impacts (those things that cannot be quantified such as the importance of access for non-car owners being addressed separately from cost–benefit analysis) § turning the dollar values of future benefits and costs into present values by discounting § establishing the robustness of the results through sensitivity analysis (simulating the effects on net benefits of higher or lower than assumed patronage, construction costs, operating costs, prices of substitute services, etc).
9.3.1 What are the meaningful alternatives that should be compared?
Cost–benefit analysis is a useful tool for helping to make decisions between different possible ways of addressing a particular problem (for example, a bus transitway versus light or heavy rail to augment existing transport infrastructure serving Sydney’s north-west growth area). It is also approp- riate for comparing a selected infrastructure proposal with the status quo (build/do not build the Liverpool–Parramatta bus transitway, build/do not build the airport rail link). However, it cannot solve the problem of what options are to be compared in the first place.
It is critical that, before any cost–benefit appraisal, an informed set of options for solving the given transport task is considered as candidates. For instance, failure to consider the outcomes of a busway alternative to the second stage of the Parramatta rail link, or alternative termination points for that link, limits the decision-making contribution of cost–benefit analysis for the proposed link.
Less use is made of rigorous cost–benefit comparisons when it comes to more macro choices. Ranking projects that make a claim on the total public sector budget is not straightforward, even if relatively narrow cost–benefit criteria are used. A freeway extension can not be readily ranked against a series of hospital upgrades. Such comparisons are rarely attempted. Instead, projects compete for funds within a broad sectoral budget.
Proposals should be There is a stronger case for undertaking comparisons based on cost–benefit compared across analysis across the transport sector. In New South Wales, comparisons are not the transport sector typically made at this level since roads (and their budget) are under a separate ministry from the rest of transport. Some submissions called for an
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integration of the roads and other transport portfolios in the interests of a whole-of-transport budget.
Another model for promoting integration is put forward by Kirwan in an article for the Warren Centre. He recommends a Metropolitan Transport Council be formed to set strategic objectives and transport prices and charges. A separate strategic roads authority would oversee road con- struction and maintenance and traffic management, and a public transport integration authority would oversee the provision of integrated public transport.176
We invite views on whether such an integration would force a greater degree of project comparison and perhaps strengthen the multimodal approach to sustainable transport solutions.
9.3.2 Costs and benefits plus what? Dealing with other criteria
Government has an obligation to assess the economic welfare consequences of any major public sector investment. It is also obliged to make clear the size of any non-economic gains that would be needed if one project is selected over another even though it has a lower economic benefit–cost ratio or lower present value.
Limiting analysis to The approach taken in the United Kingdom has been to establish relatively economic impacts narrow boundaries on what are included in the monetary valued costs and can be simpler benefits of transport projects.177 Some environmental benefits, for instance, are excluded and instead environmental and social benefits are brought to account separately. This has the advantage that on strict economic criteria alone it is more likely that like is being compared with like.
There are particular dangers if, for instance, regional or local ‘development’ benefits are included in the cost–benefit analysis. They carry the danger that what is being measured is the transfer of economic activity from one area to another rather than the creation of new activity. This might occur, for example, if local employment impacts for a new plant are counted as new jobs, when an economy-wide perspective may be transfers of jobs from surrounding areas. Estimates of development benefits can vary widely according to the method used to estimate them. Rather than prescribe a
176 R Kirwan, ‘The pricing and funding of urban passenger transport in Sydney— a vision for 2021’, in Transport Pricing: More than Just a Tax, Warren Centre, Project Sustainable Transport in Sustainable Cities, 2002, p. 25. 177 For example, R Vickerman, ‘Evaluation methodologies for transport projects in the United Kingdom’, Transport Policy, 7, 2002, pp. 7–17.
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method, there is a case for excluding them from the cost–benefit analysis itself and considering them as separate inputs to the evaluation process where environmental, safety and other outcomes are also subsequently brought into the comparison along with the results and rankings from the cost–benefit analysis.
9.4 What is required to avoid limitations of the past approach?
Transport planning The road authority in New South Wales (now the RTA) adopted a long- needs to take a term planning approach to the road sector many years ago. In doing so it long-term view has succeeded in purchasing options for the sector in the form of access rights to future road corridors. These have typically been acquired up to 20 years in advance and the outlays recognise that the option to construct has its own value. Such purchases have been possible because the road sector has developed a long-term view of possible road transport demands to accommodate growth. But it has been done largely in isolation from any comparable or complementary public transport long-term view.
In a media release issued on 8 May 2002 the then Minister for Transport referred to the Long Term Strategic Plan for Rail, which had been developed in response to a request from the government in June 2000. The Minister referred the plan back to Transport NSW for review.
Integration with other transport modes, the need for a clearer focus on service to customers, and transparency in the patronage forecasts driving the Plan’s investment program were some of the issues that needed further action.
Thinking on a set of possible infrastructure futures for rail involving different levels of investment has gone beyond costing these alternatives, drawing attention to funding needs and issues of how to fund them. For instance, options for increasing rail’s share of transport funds have been explored, as have means for raising additional funding through levies and charges, the funds from which might be used to fund rail extensions. However, guidance for decision makers choosing between future rail plans needs to be based on the net social and economic benefits of these in the context of a total transport planning strategy.
Some land use That context also needs to recognise that transport and land use planning is planning parameters a two-way process, but for some purposes the broad parameters of urban need to be taken as land use planning must be taken as given. Discussions with staff of the given Department of Infrastructure, Planning and Natural Resources and information provided to this inquiry suggest that this has happened—for instance, in rail planning with acceptance of the following propositions.
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§ The most significant industry transformation (away from manufacturing towards services) has already occurred. § The existing urban structure is comprised of a dominant business centre, concentric rings of decreasing density containing a second CBD at Parramatta, and a limited number (22) other smaller centres of density where economic activity will be concentrated. Within this urban structure, all but Dee Why/Brookvale on the Warringah Peninsula and Camden in the south-west, are on existing or planned rail corridors. § The existing policy of accommodating growth in Sydney (currently growing by approximately 50 000 people and 25 000 dwellings each year) through having 70 per cent of new housing in established metropolitan areas and only 30 per cent on the fringe will continue and is appropriate.
9.4.1 A multimodal transport plan for Sydney?
New South Wales has had a tradition of assessing transport infrastructure projects on a unimodal basis. However, there is a basis for integrated land use/multimodal transport planning through capacity developed under the Scenario Modelling Project carried out under the auspices of the (then) Department of Transport with support from the (then) Department of Urban Affairs and Planning, RIC, the RTA and the SRA. The Transport Data Centre within the Ministry of Transport supports the Strategic Sydney Travel Model, which is a multimodal transport forecasting model including public transport and road systems.
This capability is important because the spatial concentration of population and employment centres and/or movement along corridors is essential for rail transport and in understanding the journey-to-work market that tests the operations and capacity of Sydney’s rail system.
The relevance of the Strategic Sydney Travel Model to the majority of journeys, dominated by other than work travel, and the most efficient ways of accommodating and managing this demand, needs to be demonstrated. The development of strategic bus networks and routes outside the well- served eastern suburbs, for instance, needs to be able to take into account the demand for non-work travel.
The growth of population in regional centres runs well ahead of the growth of jobs in those areas. There has been significant suburbanisation/region- alisation of retailing employment and some spreading of other jobs with the development of industrial parks. However, overall there is limited progress towards regional self-containment.
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There are dangers in developing sectoral transport plans that are not well integrated with plans for other transport modes. There is the need for a multimodal plan, integrated with a metropolitan planning strategy. Among the requirements for this are: § the development of overall objectives for the transport sector against which transport proposals can be assessed § similar scenario modelling for other modes (bus, car, etc) § synthesis and harmonisation of these modelled futures.
The proper adoption of a multimodal framework has been absent from many recent transport infrastructure initiatives in New South Wales where project appraisals have not benefited from embedding in a multimodal plan.
9.4.2 Multimodal approaches to transport planning development elsewhere
Multimodal appraisal is an emerging trend. Since 1995 France has used a harmonised cost–benefit framework for appraising transport projects and safety.178 A multimodal approach to solving transport problems emerged in the United Kingdom with its so-called ‘New Approach’ to transport appraisal, which was promoted through the UK Government’s 1998 White Paper, A New Deal for Transport. This developed an appraisal framework that addresses the need for: § choosing between options to solve the same transport problem § prioritising transport projects § assessing value for money.
The approach involves identifying and assessing problems, and identifying and assessing options.
Transport solutions Five UK central government objectives for transport solutions provide the must consider the reference framework, and include the environment, safety, economy, access environment, safety, and integration. The framework adds requirements for assessments to spell economy, access, out the net impacts on interested parties, including private and all public and integration sector providers, including those operating related services. It requires explicit revelation of all investment phase and ongoing costs and revenues and all transfers between the public and private players. It also provides for disaggregation of impacts by modal group, corridors and operators, which is a worthwhile requirement.
178 Bristow and Nellthorp, op cit, p. 57.
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The ‘package The UK Government’s ‘Guidance’ document that sets out the details of the approach’—a new appraisal approach recognises the need to package measures/projects missing element in effectively.179 The multimodal emphasis is apparent in the need to support recent NSW one measure/project with complementary changes elsewhere. Bus priority experience measures and peak-hour road tolling variations would be one example. This package approach has been largely absent in transport planning in the Greater Sydney Area.
9.5 The consequences of a non-integrated approach
The following case studies highlight the problems with project appraisals that take limited account of imminent and future developments affecting other modes and the net benefits from the project in question.
9.5.1 The New Southern Railway
Cost–benefit The rail link to the Sydney airport (the New Southern Railway project), appraisals of the which provided a link between Central Station and the existing East Hills Sydney airport link line at Turella via the Sydney airport, underwent several studies employing were done prior to conventional cost–benefit procedures used in transport appraisals in New commencement South Wales. Benefits taken into account included: § travel time saved for those using public transport for trips to the airport § savings in motor vehicle operating costs for airport and City South travellers switching to the new link § reduced road accident costs from reducing road traffic to the airport § savings from reduced congestion on airport neighbourhood roads § deferral of rail track increases between Sydenham and Erskineville § reduced need for parking spaces at the airport
§ reduced CO2 emissions and noise pollution § reduced road maintenance costs due to reduced car travel § urban consolidation benefits in City South.
While the new rail link provides an alternative rail link via the East Hills line to Sydney’s growing south-western suburbs, the benefits of this alternative were not part of the formal cost–benefit analysis.
179 UK Department of Transport, Guidance on the Methodology for Multi Modal Studies, vol. 1, September 2000.
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Costs included capital, operating and tunnel maintenance costs, and additional time costs to East Hills line users and Sydenham station users caused by train services routed via the airport.
Cost–benefit The cost–benefit analysis assumed that the city–airport premium fare analysis assumed component would contribute roughly half of the farebox revenue generated premium fares by the link, despite accounting for only 20 per cent of the total number of would generate passengers carried over the link. Furthermore, the assumptions about fare necessary revenue, responsiveness and about the use of the CBD–airport link rather than taxis but this was wrong were flawed.
The appraisal, carried out in the mid-1990s, was conducted before another large-scale government-funded piece of infrastructure, the M5 East Freeway extension, was built. The two projects were appraised largely independently of the effects of each on the other.
The cost–benefit analysis component of the EIS for the project undertook sensitivity analysis on key factors affecting project success, such as a combined 20 per cent capital cost overrun and a reduction in all benefits by 20 per cent. It showed that the project would still achieve a benefit–cost ratio greater than 1 and a positive net present value, indicating that the project was worthwhile on economic efficiency grounds. Similar work undertaken for the Department of Transport in 1994 gave similar results but admitted the possibility of a marginally adverse benefit–cost ratio if patronage, capital costs and consolidation benefits were all adversely affected by 20 per cent compared with the assumptions contained in the original feasibility study.
A value-for-money test was also applied to the project, with independent advice to the government on whether commercial arrangements represented value for money to the government and on whether contractual arrange- ments afforded appropriate risk sharing. The findings were favourable.
Patronage results As things turned out, the modelling forecasts have not been supported by turned out far worse events. Compared with the base estimate of patronage of 46 000 single trips that even sensitivity per day for the airport–city link, actual patronage has been closer to analysis allowed for 16 000—a much worse case than the 20 per cent underperformance allowed for in the cost–benefit analysis. This underperformance led to the insolvency of the private airport link operator and the consequent transfer of revenue risk, which is now being borne fully by the government.
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9.5.2 The M5 East freeway
The M5 East Freeway is the latest link in Sydney’s orbital road network and was opened to traffic in December 2001, less than a year after the airport rail link. The 13 kilometres of freeway (not subject to a toll) connects the privately owned and tolled M5 Motorway at King Georges Road with General Holmes Drive (which passes the airport) and the Eastern Distributor to the city and the north, which provides a connection to Port Botany.
Unlike other major road infrastructure projects (the M2, for example) the M5 East Freeway was fully funded by the taxpayer at a cost of nearly $800 million. The opening of the freeway has been a major generator of additional road user demand, which has increased toll revenue for Macquarie Infrastructure Group’s Interlink, the owners of the existing private stretch of motorway. The additional 25 000 journeys per month made between November 2001 and May 2003 provided toll revenue of $82 000 per month to Interlink, with no revenue accruing to the state. Conversely, rail patronage on the East Hills line, which provides the major rail alternative, has declined by around 5 per cent since December 2001, a rate of decline nearly twice that experienced by the rest of the network since peaks in 2000.
Other benefits of the M5 East Freeway accrue to the local community through reduced congestion and heavy vehicle presence on local roads. The RTA estimated that traffic on these roads declined by as much as 51 per cent in the first six months after opening.180 This decline translates to reduced road damage and local air pollution, brought about by traffic bypassing 20 sets of traffic lights.
A major beneficiary has also been the road freight industry, which has benefited from reduced travel times on the fast link from Sydney’s south- west to Port Botany and the city, estimated by the RTA to save 15 minutes travelling between Beverly Hills and Port Botany.181
The road provided This suggests that the provision of additional freeway capacity has conferred private and social selective private and social benefits, but it has contributed to increased benefits but rather than decreased road use and has inadvertently encouraged users to effectively reduced substitute increased road use for recently enhanced public transport demand for public capacity. An ex post cost–benefit analysis of the M5 East Freeway would be transport one means of establishing both the level of net benefits or costs of this untolled motorway and their likely distribution.
180 RTA, M5 East—Six Month Report Card, media release, 28 June 2002. 181 Ibid.
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9.5.3 The Liverpool–Parramatta Transitway
The Liverpool– The Liverpool–Parramatta Transitway combines significant stretches of Parramatta purpose-built rapid transitway and modified existing roads to link the two Transitway caters centres with strategically located railway stations, built at a cost of for passengers west approximately $600 million. The transitway has, in theory, a large passenger of the main catchment to the west of the main Southern Rail Line. It has been Southern Rail Line operational for about five months, operated by Western Sydney Buses, a subsidiary of the STA, which won the contract via a competitive tender process.
The route cuts across the contract areas of five existing private bus operators in the region. Existing bus services were historically established as feeder services to railway stations and contract areas reflect this. The role of these local services remains problematic for the performance of the Liverpool–Parramatta Transitway. No cross-regional strategic bus route with effective priorities had been established prior to the transitway’s con- struction. An alliance of these operators had been offering a ‘Red Arrow’ service, which linked the two centres via existing roads but could not offer the rapid transit alternative provided by the Liverpool–Parramatta Transit- way, operating as it did to prevailing traffic arrangements.
Patronage modelling underpinned the cost–benefit analysis of the proposal. A paper prepared for the EIS provided estimates of likely patronage and explored the likely impact of changes to the (regulated) fare levels, service frequency and journey time. The studies showed relatively little response in terms of patronage to changes in service frequency and journey time and integration with other services.
While the transitway has been operating for a relatively brief period and patronage has grown, the STA reports that losses of between $3 million and $4 million will be made in 2003-04. There are concerns about the failure to deal first with the contracts of the local bus services. Desirably these would have ensured that an acrimonious court action to decide the rights of the Liverpool–Parramatta Transitway could have been avoided and local routes could have been adjusted to ensure better feeder services to the trunk service. The Western Sydney Community Forum has said in its submission:
… issues have already been raised regarding the integration of the transitway services with other bus services in the region and the connectivity between the transitway route and the surrounding community.182
182 Western Sydney Community Forum submission, p. 31.
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9.5.4 Lessons for the near future
New transport The proposed next motorway under the orbital road network program will projects must link the privately tolled M2 Motorway with the Gore Hill Freeway. An consi der the impact issue arises as to the likely effect on patronage of the Epping to Chatswood on public transport rail link already under construction, which runs close to the tunnel alternatives corridor. There is a danger that an untolled or inappropriately priced road link would repeat the experience of the East Hills line, undermining patronage on the rail option and simultaneously contribute to further end- point (CBD–North Sydney–Chatswood) road traffic congestion.
Patronage modelling problems are an acknowledged risk for all traffic infrastructure cost–benefit analysis. Using stated preference techniques involving choice modelling is often best practice, but has problems when the new option being introduced is unfamiliar, and the service attributes are difficult to envisage by those being surveyed. For instance, respondents in the survey for the airport rail link may not have fully considered the relative costs of the train and taxi options when group travel is involved, as it so often the case for this trip. It is not known how well the improved travel times afforded by the Eastern Distributor/airport road link were captured in eliciting the started preferences of patronage survey respondents who were the source of patronage estimates. Furthermore, patronage building for transit services takes time and cost–benefit analyses need to avoid over-optimism about patronage levels in early years. So do contractual arrangements.
Some transport Rapid bus transitways are an area where there is advantage in making projects need complementary changes prior to construction and preferably prior to complementary project appraisal. Transitways would desirably sit in a fully developed changes elsewhere network of strategic cross-regional bus routes that is at present only truly evident in Sydney’s eastern suburbs. Such networks give the best opportunity of exploiting synergies to maximise patronage. Private contracts affect the feasibility of network development and the chances of getting the right balance between density and frequency of service in a network. Future transitways may need to consider the benefits of allowing more than one operator to offer an integrated service along the trunk route and beyond to overcome interconnection disincentives. This would also involve consideration of what offsetting subsidy or new franchise area concessions might be needed for private participation.
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9.6 Observations
The choice of transport infrastructure projects in the Greater Sydney Area has not been made on a consistent basis, except in the case of roads. There is little evidence until recently that a long-term strategic view of transport needs has underpinned project choice. Reference to a coherent urban plan is needed and this has been absent. Although cost–benefit analysis has been used to screen projects, it needs to be reviewed to achieve consistent treatment of things such as ‘development benefits’.
A multimodal approach to choosing between alternative solutions to transport problems has been missing. The impact of any transport project on other modes (for example, the impact of a road development on bus and train use) needs to be more closely assessed. Optimism about patronage has been a problem with rail link assessments. The need to accommodate other changes to make innovations such as rapid transitways successful is essential.
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Concessions and community 10 transport
$825 million is spent ACHIEVING SOCIAL OBJECTIVES is an important aspect of government each year to meet funding of transport services. This chapter considers the NSW Government’s specific social funding of programs specifically designed to enhance access of particular needs groups to transport services. This funding amounts to $825 million for the whole of New South Wales. The funding provides for the School Student Transport Scheme, pensioner excursion tickets and other concessions, as well as special services for the transport disadvantaged including those with health needs, the disabled, the frail and elderly and others without access to private cars or public transport.183 Services targeted at the transport disadvantaged are referred to collectively as ‘community transport’. This term does not include travel concessions.
Section 10.1 provides an overview of existing concessions and community transport services and their funding sources. Section 10.2 discusses options for better targeting funding for these services so that they better meet community needs. These options include: § reforming the SSTS so that providers are paid on the basis of actual usage of services and by capping subsidies per student, capping the total amount the government spends on the scheme, and introducing an application fee for travel passes to discourage inefficient use § changing the concessions policy so that available concessions are consistent across transport modes § implementing a more equitable pensioner excursion ticket program by streamlining fare schedules, increasing the base fare rate, extending availability of tickets to metropolitan private bus services and narrowing
183 Data for expenditure on concessions and some community transport services were provided by the Ministry of Transport for 2002-03. Other estimates of expenditure were provided by NSW Health and the Department of Ageing, Disability and Home Care.
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eligibility to pensioners—with seniors cardholders eligible for half fare concessions § improving community transport services by refocussing expenditures currently spent on CountryLink and directing some savings from reforms to the SSTS, pensioner excursion tickets and CountryLink to providing more appropriate services to meet community needs § introducing incentives for drivers of wheelchair accessible taxis to meet performance standards or employing salaried drivers to provide services only for wheelchair users or others with special needs.
10.1 Overview of concessions and community transport services
The NSW Government spends a large amount of money on transport concessions and community transport services. This section describes these concessions and services and how much they cost, showing that: § the structure of concessions is inequitable, particularly for private bus users § most of the government’s funding for concessions and community transport is directed to the SSTS and pensioner excursion tickets § funding for community transport is fragmented and services are not meeting increasing needs.
10.1.1 Concessions
The NSW Government funds a substantial concessions scheme. Bene- ficiaries include the elderly, unemployed, ex-service personnel, and full- time school and tertiary students. However, there are inconsistencies in the availability of concessions, particularly between private and government- operated bus services. Broadly, there are three types of concession fares: § half fare concessions § free travel § discounted excursion tickets.
Half fare concessions are primarily available to students and pensioners184 and in some cases to other groups, including apprentices and those on the Commonwealth’s full-rate unemployment benefits. Free travel is provided
184 Pensioners mainly use concessions for private bus services as pensioner excursion tickets are available for government operated services.
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to and from school for school students who are eligible for passes under the SSTS.
Discounted excursion tickets are available on government operated services to all NSW residents who are pensioners or have seniors’ cards. In the metropolitan area, these allow unlimited travel on government- operated public transport services on the day of purchase. They cannot be used on private bus services. There are different arrangements for CountryLink services. Pensioners are eligible for some free trips but excursion tickets can also be bought for single or return trips on these services.
Private bus users There are differences in the way the government subsidises concessions for are disadvantaged government and privately operated services. For example, the SRA and the by the existing STA receive government subsidies for half fare concessions provided to concessions policy tertiary students. These concessions are available to students seven days a week. Private bus operators are required to provide half fare concessions to tertiary students under the terms of their contracts but they are not specifically reimbursed for these and provide them only to students under the age of 30 who are travelling to or from their tertiary institution, Monday to Saturday. Apprentices and trainees are also eligible for half fare concessions on government-operated services but not on private bus services. Private bus operators are required to provide concessions to those on full unemployment benefits. Overall, private bus users are disadvantaged by the government’s existing concessions policy.
In 2002-03 the NSW Government spent $333 million to subsidise concession fares plus a further $427 million on the SSTS.185 This represents about 40 per cent of the government’s total contribution of $1.9 billion to public transport (including private bus services).
10.1.2 Community transport services
Community Government funding for community transport is provided to 130 transport is organisations across New South Wales. They provide mainly transport provided by 130 services to the frail aged, disabled and the economically or geographically organisations … disadvantaged (particularly in rural and regional areas). Most of these are not-for-profit community-based organisations and many rely on volunteers to provide services. They include local government bodies, indigenous organisations, charitable organisations, and religious and community groups. Other groups also provide community transport on an informal basis and without government funding.
185 Information provided by the Ministry of Transport.
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Community transport provides transport-disadvantaged people with access to recreation, shopping, education, health care, social services and social contact where other transport services are not accessible or not available. The types of service vary and vehicles used include coaches, minibuses and cars. In many cases, drivers or assistants provide some form of special care for their passengers to provide for particular health or physical needs. However, community transport is not appropriate for passengers with acute health needs.
… with funding from Funding for community transport is from a variety of sources. Some of the many sources key funding programs are outlined below. § Home and Community Care funding is used to provide assistance to frail older people and younger people with disabilities and their carers. It is provided by the Department of Ageing, Disability and Home Care and is administered by the Ministry of Transport. It amounted to $21.6 million in 2002-03. Funding has increased by 50 per cent over the past three years.186 § Community Transport Program funding is directed at the transport disadvantaged. Criteria for eligibility relate to mobility, isolation and age (targeted at young people). It is provided by the Ministry of Transport, which allocated $2.5 million in 2002-03. § Area Assistance Schemes fund specific programs that provide transport to particular destinations or places—for example, to and from Westmead Hospital. This funding is available in only coastal regions of New South Wales. No similar scheme is available in the Far West.187 § NSW Health provides funding for non-emergency health-related trans- port services. NSW Health estimates it spends more than $26 million each year on these services through a variety of programs.188
Funds are also made available by the Commonwealth Department of Health and Ageing and the Department of Veterans’ Affairs.
About $50 million is It is reasonable to assume that combined funding for these community spent on these transport services exceeds $50 million though not all sources can be easily community identified and accounted for. There are differences in eligibility criteria, transport programs administrative arrangements and reporting requirements for programs each year from each funding source. This limits the effectiveness and efficiency of the
186 Information provided in discussions with staff from the Department of Ageing, Disability and Home Care. 187 Far West Area Health Service submission, 2003, p. 4. 188 NSW Health submission, 2003, p. 5.
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services that can be provided within the total funding pool. Many stakeholder submissions identified the need to coordinate funding and services, cut the administrative burden on providers, reduce duplication and improve services.
Organisations that provide community transport services report that they cannot keep pace with demand.189 In particular, NSW Health has found that the lack of transport to access health services is one of the most significant health concerns of the community and a barrier to providing effective health care.190 There is also concern that the current reliance on volunteers to provide services is not sustainable as the population ages.
10.1.3 Taxi services for people with disabilities
There are two main initiatives administered by the Ministry of Transport targeted at improving the accessibility of taxis for people with disabilities: § the provision of incentives for operators to invest in wheelchair accessible taxis § the Taxi Transport Subsidy Scheme.
Incentives for operators to invest in WATs include much cheaper plate costs for new licences, interest-free loans to cover part of the costs of purchasing wheelchair accessible vehicles for operators in rural towns and extended allowable operating lives for vehicles. The Taxi Transport Subsidy Scheme is targeted at people with a permanent disability. Eligibility depends on the extent or severity of a disability or mobility limitation. Subsidies are limited to 50 per cent of the metered fare up to a maximum of $30 per trip. In 2002-03 the scheme was allocated $14.4 million.191
People needing Despite these initiatives, those who depend on these taxis services wait, on wheelchair average, much longer than other users for services regardless of booking accessible taxis wait well in advance. About 6 per cent of the taxi fleet in New South Wales is too long now wheelchair accessible and additional licences have been sold and will become operational over coming months and years. However, it is clear that those who need the services are not always receiving timely service, placing severe constraints on their activities.
Taxis are also used to provide for the transport disadvantaged in other circumstances. For example, Area Health Services may pay taxi fares for
189 NCOSS submission, 2003, p. 11. 190 NSW Health submission, 2003, p. 3. 191 Data provided by the Ministry of Transport.
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patients if it is an appropriate means for them to travel home from hospital and other transport is not available. Information on the amount of money spent on this type of service is not available.
10.2 The need to better target funding
Based on minimum estimates for 2002-03, the NSW Government spends about $825 million a year on transport concessions and community transport services (table 10.1). It is important that these resources are used effectively and targeted to achieve the government’s social objectives.
10.1 Concession and community transport expenditure estimates, by funding source, 2002-03
Funding source Amount $m Concessions § School Student Transport Scheme 427.2 § Other concessions 333.4 Community transporta § Home and Community Care 21.6 § Community Transport Program 2.5 § NSW Health 26.1 § Taxi Transport Subsidy Scheme 14.4
Total 825.2 a Minimum estimate based on known expenditure. Data sources: Ministry of Transport; NSW Health; Department of Ageing, Disability ad Home Care.
Recent reviews raise The bulk of funding is for the SSTS and other concessions, in particular concerns that SSTS pensioner excursion tickets ($173 million). Recent reviews, including the funds are not used Public Accounts Committee Review and the Independent Inquiry into effectively Public Education in New South Wales, raised concerns about the SSTS.192 The cost of this scheme has increased from $260 million in the early 1990s to $427 million. This has occurred when data show that more children are being driven to school.193 The main concerns relate to the basis for allocating funds for services. Funding is not based on actual use of services but on estimates of the rates of usage of school transport passes and, for private buses, on maintaining high levels of capacity.194 The SSTS is the most
192 Vinson, Report of the Independent Inquiry into Public Education in New South Wales, New South Wales Government, 2002, pp. 161–3. 193 Public Accounts Committee, Inquiry into the School Student Transport Scheme, New South Wales Parliament, Report no. 131, 2002, p. xii. 194 Commercial bus contracts require that operators provide sufficient bus capacity to carry 92 per cent of student pass holders.
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generous school student transport scheme in Australia because of minimal eligibility criteria and no requirement for a co-payment from beneficiaries.
The SSTS has a significant impact on private bus services. For many operators, particularly those with non-commercial contracts, the scheme provides the bulk of their revenue. As a result, some operators centre all their operations on school student transport and have few incentives to provide services that meet the needs of other groups in the community. This results in underutilised assets and unmet community needs. Queanbeyan City Council comments:
Usually the only form of public transport available in the rural areas is the school student transport services. This service is inappropriate to meet most peoples’ travel requirements.195
Pensioner excursion Pensioner excursion tickets are also subject to criticism. One of the reasons ticket policies are is because they are not available on private bus services. Pensioners and inequitable seniors in areas not serviced by government-operated transport services, including outer suburban areas and rural and regional New South Wales, do not benefit from the generous subsidies that apply. In addition, the cost of these tickets has remained constant, apart from adjustments for the introduction of the GST, since 1988. The tickets are available to all seniors and pensioners regardless of income. There are obvious inequities that result from the existing pensioner excursion ticket policy.
Additional funding Relative to the SSTS and funding for concessions, the amount of money is needed for allocated to community transport is small. Many of the submissions to the community inquiry report increasing demand for services and concerns that heavy transport reliance on volunteers to provide services is not sustainable. In addition, costs associated with higher insurance premiums, occupational health and safety legislation and accreditation requirements have not been funded.196 Most stakeholders consider better use of existing resources and increased services could be achieved through improved regional coordination but they also claim additional funding is needed to meet demand.
It is clear that there is potential to better target the combined concessions and community transport funding pool—more than $800 million. The following sections consider some of the existing problems in more detail and propose options for addressing them. The approach taken is to consider how the total funding pool can be used to effectively and efficiently purchase a package of services that better provides for the transport needs of the community.
195 Queanbeyan City Council submission, 2003, p. 2. 196 Community Transport Organisation submission, 2003, p. 2.
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10.2.1 A more effective School Student Transport Scheme
Almost double the All students are eligible for free transport to and from school unless they proportion of live within a specified distance of their school. About 60 per cent of NSW students is eligible school students benefit from the SSTS, nearly twice the proportion benefiting for free transport in from comparable schemes in other Australian states (chart 10.2).197 NSW compared with other states 10.2 Students receiving subsidised school travel, by state, 1999
NSW
Tasmania
Queensland
Victoria
Western Australia
Northern Territory
South Australia
0 10 20 30 40 50 60 70
% of all students receiving subsidy
Data source: Ministry of Transport.
The forecast cost per student in 2003-04 is $658.198 Recent reviews have criticised the scheme and documented its weaknesses. The issue was also debated at the annual NSW Parents and Citizens conference in July 2003, which brought forward proposals for reducing costs included subjecting the scheme to means testing and ensuring students were provided transport to their closest school only. Some of the problems were highlighted in a recent newspaper article that is summarised in box 10.3. Options for moving towards a more sustainable scheme are discussed below.
197 Public Accounts Committee, Inquiry into the School Student Transport Scheme, New South Wales Parliament Report no. 131, 2002, p. xv. 198 NSW Treasury, Budget Estimates 2003/04, Budget Paper No. 3, 2003, pp. 21–7.
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10.3 Ferry services provided for ‘phantom’ school students
The NSW Government pays $100 000 a year for a ferry service chartered to carry 89 school student transport pass holders from Mosman and Cremorne to Rose Bay. All are students of four private schools. A Daily Telegraph reporter found that on the day they investigated the 150 capacity service, only 33 students used it in the morning and 59 in the afternoon—the rest are ‘phantom’ riders.
The annual cost per student is about $1117 and is paid regardless of whether the students use the service. The service is restricted from taking paying passengers on its twice daily run across the harbour. Sydney Ferries runs services that cover this route and an annual student pass on these would cost about $600.
Source: Information from Daily Telegraph article, 23 July 2003.
Funding based on actual travel by students
Student transport The most common criticism of SSTS payments are that they are based on funding is based on estimates of the rates of school student travel pass usage rather than actual out-of-date data travel. The information these estimates are based on is at least seven years old, though the Ministry of Transport is currently undertaking a survey to update the data. Transport Data Centre survey data show that there has been an increase in the proportion of school children being driven to school in this period, which suggests the estimated rate of travel pass usage is an overestimate and that transport providers are being overcompensated for school student travel.199 The updated survey data will confirm whether this is the case.
Funding should be Ideally, SSTS funds should be used to purchase actual services. Funding based on actual mechanisms should be based on trips taken rather than estimates. This is travel feasible for train and public bus services as electronic ticketing systems record trips made by passengers. The technology is also available for private buses, although delays to the integrated ticketing project mean that this technology is not expected to be installed in most private buses until at least 2006.
In addition, the government should expect to pay lower than standard fares for the SSTS. A purchaser who buys a large proportion of a business’s services would normally receive some discount on the standard price in recognition of the benefits the business receives from this source of revenue. Contracts with service providers should reflect all the benefits they receive from the government’s SSTS payments.
199 Public Accounts Committee, Inquiry into the School Student Transport Scheme, New South Wales Parliament, Report no. 131, 2002, p. xii.
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Options § Establish new funding arrangements for the SSTS based on the actual use of services. § Determine whether it is cost effective to install technology that allows electronic validation of tickets on private buses until integrated ticketing is implemented. Alternatively, use updated data from the survey currently being undertaken for the Ministry of Transport to adjust funding formulas until integrated ticketing is available. § Examine the appropriate reimbursement rate for the purchase of school student travel.
Changes to bus contracts that allow the implementation of these options should be considered as part of the Review of Bus Services in NSW.
Capping subsidies and introducing co-payments
Students apply for Minimum eligibility criteria and no requirements for a co-payment mean passes they do not that many students apply for a pass even if they never, or only rarely, use use it. There is no disincentive to take up a pass that will not be used, yet this adds to the cost of the scheme.
Changing education policies can also affect the cost of services. For example, most school children can now attend the public school of their choice and increasing numbers are attending private schools rather than their nearest school, which increases travel costs.
One option to improve the sustainability of the SSTS is to cap the level of subsidies available for each student. This would mean that those who travel longer distances to their school of choice may need to contribute to the total cost of travel if it exceeds the level of the cap. Eligibility criteria would need to be carefully determined so that students in rural and regional areas who have no choice but to travel long distances to attend school are not disadvantaged.
Alternatively, the total amount of taxpayer money spent on the scheme could be capped. Policies for the SSTS would need to be implemented that ensured the costs of the scheme were contained within the cap. This could include the introduction of means testing to determine eligibility. The total amount could be indexed.
A third option is to introduce an annual application fee for school travel passes. This could be set at say $30 a year ($7.50 per term) and indexed at the rate of inflation. Exemptions could be available for students from low-
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income households, possibly based on their eligibility for specific Centrelink payments. Although the proposed fee is small compared with the cost of the service, it may deter applicants who do not use the service.
Depending on how a new SSTS scheme based on the actual use of services is implemented, the third option could be an interim measure until SSTS funding mechanisms were changed to reflect actual service use. If payments were made only for students that actually use the service, the need to deter applicants who do not use their passes would be diminished.
Options § Cap the level of subsidies for each student. The level of the cap could vary depending on location and available transport services. § Cap the total amount the government spends on the SSTS. § Introduce an annual application fee indexed at the rate of inflation.
Providing a broader range of appropriate services in rural and regional New South Wales
Bus services are The large amount of funding allocated to the SSTS and the nature of the designed to cater for contracts with private bus operators are often the main determinants of the school transport … types of transport service provided by these operators, particularly in rural and regional New South Wales. The design and capacity of buses, the timing and frequency of services and the routes they travel are focused on providing school student transport. Transport for school students needs to be maintained but there is scope for a more flexible service that better meets the needs of the whole community and better uses assets that are mostly, if not entirely, government funded.
Operators under non-commercial bus contracts in rural and regional areas are paid fixed amounts on a per bus basis based on a formula that includes the average number of school days, bus size, total hours taken to provide the service and kilometres travelled. In 2001-02 about $113 million was paid to these operators. This is more than a quarter of the SSTS funding but only about 13.4 per cent of SSTS beneficiaries use these services.200
… but other services One way to maximise the social benefits of these contracts is to extend their could be provided at scope. Instead of the government buying only school student transport marginal cost services from operators, it could purchase a package of services that maximise the use of the operators’ assets and that match community needs.
200 Public Accounts Committee, Inquiry into the School Student Transport Scheme, New South Wales Parliament Report no. 131, 2002, p. 31.
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For example, a rural Area Health Service successfully negotiated with a local private bus operator to provide a daily service to a local facility for 22 stroke respite patients when alternative transport became too expensive. By using down time in the existing school transport fleet this service can be provided at marginal cost and saves the health facility the cost of main- taining its own bus and employing a driver.201
Stakeholder submissions support this approach.
BCANSW is a strong supporter of the community getting best use of the existing capital investment and targeting resources to the most efficient and effective means of delivering a move towards transport equity.202 School bus transport contracts in rural NSW need to be able to incorporate the transport needs of other community members.203
Adjusting contract arrangements may facilitate the brokering of these types of arrangement on a larger scale. The Review of Bus Services in NSW is an opportunity to make some provisions in legislation and bus contracts for local communities to work with private operators to provide the services they need. Section 10.2.4 describes a strategy for improving the coordination of community services. More flexible bus contracts will be an important part of that strategy.
Option § Implement more flexible private bus contracts that facilitate the provision of packages of services that better meet community transport needs, rather than provide for only limited school student transport.
10.2.2 Equitable provision of pensioner excursion tickets
The inequities in pensioner excursion tickets have already been made clear. The tickets are not available to private bus users and those in outer suburbs pay more, even if they do not travel long distances. It is also difficult to justify no increases in fare levels, apart from adjustments for the GST since 1988.
The total cost of the scheme is high and increasing since the level of the fares is held constant. It is also questionable whether all seniors should be eligible for the fares if they have the capacity to pay for their travel. Any
201 NSW Health submission, 2003, p. 10. 202 Bus and Coach Association submission, 2003, p. 38. 203 Regional Communities Consultative Council submission, 2003, p. 2.
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extension of the scheme without addressing rising costs would not be sus- tainable, especially when the ageing profile of the population is considered.
In addition, those travelling on these tickets comprise a significant proportion of passengers travelling in peak periods—more than 11 per cent of STA bus passengers in the morning peak.204 This limits the capacity of service providers to carry full fare paying passengers in these periods and contributes to the high cost of catering for peak loads. The greatest capacity constraints are in the morning peak.
Options § Make pensioner excursion tickets available to eligible pensioners using the CityRail, STA and metropolitan private bus networks. § Make senior cardholders eligible for half fare concessions rather than pensioner excursion tickets. § Limit travel on pensioner excursion tickets to outside the morning peak period (7.00 am to 9.00 am). § Abolish the existing metropolitan pensioner excursion ticket fare scales and replaced them with one fare set at $2.50. § Increase the CountryLink pensioner excursion fare from $2.20 to $3.00. § Index pensioner excursion ticket fares and increase the fares in 20 or 50 cent increments.
A higher fare would allow the scheme to be extended to users of private bus services, increasing the range of services eligible passengers can use.
The nature of the pensioner excursion ticket is similar to the ‘daytripper’ ticket. This allows unlimited travel over a whole day on buses, ferries and trains. These tickets cost $15 for full fare paying passengers ($7.50 for half fare). In comparison, even if the price of pensioner excursion tickets was increased to $2.50, the discount remains very large.
10.2.3 Fairer funding of other concessions
The existing concession scheme discriminates against private bus users and needs to be reviewed. The concessions policy should be applied consistently across all transport modes and reflect the government’s social priorities.
204 State Transit Authority submission, 2003, p. 71.
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Consistent Apart from the inconsistencies of existing concessions, some stakeholders concessions should argue that there are groups that suffer hardship because they are not apply across eligible for concessions. One of these groups is indigenous people who transport modes participate in the Community Development Employment Program. Partici- pants forgo unemployment benefits and instead gain work experience and training in exchange for equivalent wages. This means they are no longer eligible for transport concessions. In some cases, this has meant participants have withdrawn from the program because they cannot pay travel costs.205 And they lose the long-term benefits of the program.
Options § Provide the same concessions to private bus passengers as those provided to passengers of publicly operated services. § Review the government’s concessions policy to ensure that it is fair and reflects social priorities.
10.2.4 Better coordination of regional, community and health transport
Stakeholders see clear benefits in stronger coordination of regional com- munity transport. The large number of providers and the fragmented funding pool make it difficult to maximise the use and effectiveness of existing resources. Coordination mechanisms have already been established in some areas and have been trialled in others. For example, the Premier’s Department funded trials of projects to develop public transport services in the Broken Hill and Dubbo regions. The objectives of these projects included improving the coordination and provision of services and improving community awareness of the available services.206
Better coordination NSW Health has also directed considerable effort over the past year into can improve establishing better coordinating mechanisms for non-emergency transport community to health services. This has involved establishing health transport units in transport Area Health Services that provide a central point of expertise and coordination of demand and supply in cooperation with other transport providers.
There is sufficient evidence from existing programs and trials that community transport services can be improved through better coordination.
205 Aboriginal and Torres Strait Islander Commission, 2003, p. 11. 206 Institute for Rural Futures, University of New England, Public Transport Service Development—Evaluation of the Demonstration and Methodology Project, 2003, p. 10.
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Evaluations of the projects in Broken Hill and Dubbo and other coordination initiatives have reported the benefits of these.207
Several stakeholders suggested that regional passenger transport develop- ment workers be established across the state.208
A refocus of the large expenditure on CountryLink services also has the potential to fill an important role in transport coordination in rural and regional areas. Apart from providing more appropriate services by replacing some existing rail services with bus and coach services, resources could be redirected to include investment in community transport centres that become the point of coordination of community transport services. The large amount of money now spent on CountryLink services used by only a few could be used to provide the transport services communities need most.
Options § Bring local service providers and transport users together to develop plans for better services and promote coordination of available resources § Broker streamlined funding and administrative arrangements that meet local needs—including funding from HACC, the CTP, the SSTS and funding from other agencies including NSW Health. § CountryLink to provide much needed community transport services in rural and regional New South Wales.
10.2.5 More funding for community transport
There is substantial Stakeholders argue that the existing unmet need for services and increasing unmet need for demand in the future, especially because of an ageing population, mean community additional funding is necessary. transport NCOSS outlined in its submission how restrictions tied to funding and competition between groups for the same pool of money have left many organisations struggling to maintain services. It claims that the limited amount of funds means that community transport services meet only a small proportion of the transport needs of disadvantaged communities
207 NCOSS submission, p. 19; Institute for Rural Futures, University of New England 2002, Public Transport Service Development—Evaluation of the Demonstra- tion and Methodology Project, 2003, pp. 6–9. 208 EPA, p. 11; NCOSS, p. 20; Shellharbour City Council, p. 1; Bathurst City Council, p. 1; submissions, 2003.
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across New South Wales.209 The unmet need for transport assistance to get people to health facilities alone is estimated to total around 250 000 occasions of service a year. Overall demand for such services is anticipated to rise by 16–20 per cent between 2001 and 2006.210 Other organisations also forecast increased demand.
With an increasing, aged population on the Central Coast and volunteer transport input [both formal and informal] falling, as well as growth in demand for transport within the community through infirmity, injury or retirement of licenses, sections of the community may suddenly require relocation or in-home service delivery. This is additional to the needs of people with a disability, who are more numerous, more mobile and have heavier aids than previously. Greater budgetary attention needs to be given to increasing community mobility to offset the negative affects of social isolation.211
Savings from the proposed changes to the SSTS, pensioner excursion tickets and CountryLink services could be used to increase funding for community transport services. The development of local plans could identify unmet needs that funds should be targeted towards.
Some stakeholders are concerned that existing funding sources are almost solely targeted at the frail and elderly. While acknowledging the value of these services, they suggest similar consideration should be given to the needs of other groups, especially young people.212 Regional coordination and additional flexible funding should be aimed at providing whole-of- community solutions that meet a mix of needs. In many cases the needs of different groups are not mutually exclusive.
Retaining the savings from changes to the SSTS and pensioner excursion tickets in the transport sector is important to sustain transport services that meet community needs. How these savings would best be generated as well as used for bus services will be considered as part of the Review of Bus Services in NSW. A refocus of funds away from CountryLink’s unused and inefficient services, can also be an important part of these initiatives.
209 NCOSS submission, 2003, p. 11. 210 Transport Planning and Management and Applied Economics, Non-Emergency Health Related Transport—Facilitating Access to Health Services in NSW, 2001, pp. 26-7. 211 Central Coast Regional Organisation of Councils submission, 2003, p. 4. 212 Commission for Children & Young People submission, 2003, p. 6.
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Option § Direct savings from proposed changes to the SSTS and pensioner excursion tickets and rationalisation of CountryLink services to increas- ing community transport services.
10.2.6 A wheelchair accessible taxi scheme that meets community needs
It is not acceptable that people in wheelchairs do not receive reliable taxi services. The Physical Disability Council of New South Wales reports that service delays of between 45 minutes and several hours are commonplace.213 Operators are awarded heavily discounted licence plates for wheelchair accessible vehicles on the understanding that priority is given to wheelchair users. However, this obligation is not properly enforced and there is evidence that many drivers do not give wheelchair users appropriate priority.
Wheelchair The Ministry of Transport also issued 92 ‘nexus plates’ to networks in the passengers should late 1980s and early 1990s. Each of these was a pair of plates—one an have high priority unrestricted taxi plate and the other a WAT plate. The idea was that access to revenue derived from the standard plate would be used to fund the wheelchair operation of the WAT plate. Evidence from IPART’s most recent review of accessible taxis taxi fares, though limited, suggests that at least some of these plates are no longer used as they were intended. Instea d, operators have received a wind- fall since the total value of the 92 standard plates is in excess of $25 million at current plate values.214
Options § Provide incentive payments for WAT drivers that meet performance standards for response times. § Dedicate wheelchair accessible vehicles and salaried employees of taxi networks to providing disabled and non-emergency health transport services. These vehicles would not be available for general hire.
The first option was proposed by the Physical Disability Council of New South Wales. It argues that operators, rather than drivers are the beneficiaries of existing subsidies and that an incentive for drivers could be effective in ensuring wheelchair users are given priority. A driver incentive scheme has been operating in South Australia for the past year and anecdotal evidence suggests it has resulted in improvements to services for wheelchair users,
213 Physical Disability Council of New South Wales submission, 2003, p. 29. 214 IPART, Review of Fares for Taxis in NSW in 2003, 2003, p. 33.
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10 CONCESSIONS AND COMMUNITY TRANSPORT
although the limited time the scheme has been in operation means there is no data available to assess it. These drivers receive a $6 payment if they pick up wheelchair users within 30 minutes of the booked time. A mechanism for government funding of the incentive would need to be developed. This could be considered as part of a review of the Taxi Transport Subsidy Scheme. The level of the subsidy under this scheme has not been increased since 1999 despite increases of more than 20 per cent in taxi fares.215
The second option guarantees those with the greatest needs are given priority. However, this would require significant changes to the way taxi services operate. It may be considered too restrictive by many operators who want to maximise their returns by providing services to a broader market. This type of change would need to be carefully considered to determine whether it could meet all the needs of wheelchair users for taxi services and how it could be funded to ensure appropriate levels of service.
A number of options have been proposed that are designed to improve the delivery of community transport services, including the health and community transport needs of regional and rural parts of the state. We invite comments on these options.
215 Physical Disability Council of New South Wales submission, 2003, p. 34.
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Appendixes
171
A Train users in Sydney
THE INFORMATION in this appendix has been sourced from the Transport Data Centre publication Train Users in Sydney 1999. This publication presents information on rail travel and rail travellers living in the Sydney Statistical Division, which includes the Central Coast and the Blue Mountains.
Growth in train travel in Sydney by region216 § The growth in train travel in Sydney over time has occurred at different rates in inner and outer Sydney. Train travel on weekdays by residents of inner Sydney has grown at a faster rate than train travel by outer Sydney residents.
A.1 Growth in train trips, total trips and residents by region, 1991–99 Average weekly
16 Growth in train trips Growth in total trips Population growth 14
12
10
% 8
6
4
2
0 Inner Sydney Outer Sydney Sydney SD
216 Definition of Regions: Inner Sydney: SLAs containing one or more train stations approximately 10 kilometres from Sydney Central (Ashfield, Burwood, Canterbury, Marrickville, North Sydney, Rockdale, South Sydney, Sydney Inner, Sydney Remainder, Willoughby, Woollahra). Outer Sydney: all
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 172
A TRAIN USERS IN SYDNEY
§ The number of train trips by residents of inner Sydney increased by 15 per cent between 1991 and 1999, faster than the growth in total trips and double the rate of population growth in the region. § The number of train trips by Outer Sydney residents increased by 10 per cent from 1991 to 1999, which was similar to the rate of population growth, but slower than the growth in total trips.
Fare type § Sixty-one per cent of all train trips are made with the payment of full fare, compared with only 35 per cent of bus trips. § Concession fares account for 23 per cent of all train trips. § Nine per cent of all train trips were made with school passes.
The breakdown of fares used has remained stable since 1991.
A.2 Proportion of train trips by fare type, average weekday, 1999
Other/unknown No fare required 1% 4% Concession - other 3% Concession - student 11%
Concession - pensioner/aged 9% Full fare 61% School pass 9%
Child fare 2%
Ticket type § Weekly tickets are the most common type of ticket used for train travel. § Periodical tickets (weekly, quarterly, yearly) account for 40 per cent of all train trips.
other SLAs in Sydney SD, including Central Coast and Blue Mountains. Total Sydney: all SLAs in Sydney SD.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 173
A TRAIN USERS IN SYDNEY
§ Single and return tickets are used for around 37 per cent of all train trips. § The tickets used were similar in 1991.
A.3 Proportion of train trips by ticket type, average weekday, 1999
No ticket required Other 2% 4% Single ticket School pass 11% 9% Quarterly/yearly 3% Return ticket 26%
Weekly 37% Full day 8%
Labour force status of train & bus users § Sixty per cent of train users are in the workforce (full- or part-time/ casual) compared with 35 per cent of bus users. § Fifteen per cent of train users attend school compared with 37 per cent of bus users. § A slightly higher proportion of bus users are pensioners compared with train users.
Personal income of train and bus users § Train users have higher incomes on average than bus users, reflecting that a much larger proportion of train users are in the workforce compared with bus users. § The average train user has an annual income of between $20 800 and $31 199, while the average bus user is a person with an income of between $10 400 and $15 599 a year. § Forty-six per cent of train users have an annual income of less than $20 800, compared with 62 per cent of bus users and 53 per cent of the total population aged over 15 years.
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A TRAIN USERS IN SYDNEY
A.4 Income of train and bus users, 1999
100% 90% $78 000 or more 80% $41 600-$77 999 70% 60% $20 800-$41 599 50% 40% $10 400-$20 799 30% 20% $0-$10 399 10% 0% Train users Bus users All people
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 175
B Bus users in Sydney
THE INFORMATION in this appendix has been sourced from the Transport Data Centre publication Bus Users in Sydney 2000. This publica- tion presents information on bus travel and bus travellers living in the Sydney Statistical Division (population of 4 million), which includes the Central Coast and the Blue Mountains.
B.1 Summary of bus travel in Sydney, 2000a
STA Private buses Number of bus passenger trips Average weekday 554 000 367 000 Average weekend day 243 000 65 000
Proportion of bus passenger trips Average weekday 60% 40% Average weekend day 79% 21%
Purpose of bus passenger trips b on an average weekday Work 34% 15% Education 21% 52% Social/recreation 18% 10% Shopping 12% 12% Other 15% 11%
Average distance of bus passenger trips on an average weekday 6.2 km 8.8 km Average duration of bus passenger trips on an average weekday 21 mins 23 mins
Fares used for bus trips on an average weekday Full fare 47% 20% Concession 33% 20% School pass 13% 44% Other 7% 16% Labor force status of bus users School children 19% 55% Full-time workers 37% 17% Part-time workers 9% 5% Pensioners 18% 13% Other 17% 10% a For residents of Sydney only. Excludes bus travel by visitors and tourists. b Trips to return home are allocated to a ‘priority purpose’.
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B BUS USERS IN SYDNEY
Fare type § For the STA 47 per cent of trips are by full fare paying passengers. Of the remaining fares, concession fares account for 33 per cent of trips and school passes for 13 per cent. § For the private bus companies only 20 per cent of trips are by full fare paying passengers, with the remaining trips being by school pass (45 per cent) and concession fares (20 per cent).
B.2 Proportion of bus trips by fare type, average weekday, 2000
50 State transit Private bus 45 40 35 30
% 25 20 15 10 5 0 Full fare Child fare School pass Concession- Concession- Concession- No fare required Other Pensioner/Aged student Other
Ticket type § Most private bus trips are made by passengers using a school pass (47 per cent) or a single trip ticket (38 per cent). § Trips by STA passengers are more likely to be made using periodical tickets such as TravelTen (25 per cent) or weekly tickets (17 per cent), while only 13 per cent are by school passes and 18 per cent by single tickets.
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B BUS USERS IN SYDNEY
B.3 Proportion of bus trips by ticket type, average weekday, 2000
50 State transit Private bus 45 40 35 30
% 25 20 15 10 5 0 School pass Single ticket Return ticket Full day Weekly (eg Fixed multiple No ticket Other Travel Pass) trips (eg required TravelTen)
Labour force status § The labour force profile of STA users is similar to Sydney’s total population, and quite different from that of private bus users. § School children are the largest group of users on private buses (55 per cent), and the second largest group of STA bus passengers (19 per cent). § The largest users of STA buses are full-time workers. They comprise 37 per cent of all STA bus travellers and 17 per cent of private bus users.
B.4 Labour force status of bus users, 2000
60 State transit Private bus All Sydney residents 50
40
% 30
20
10
0 Full time work Part Unemployed Adult studying Pensioner Keeping house Attend school Other time/casual full/part time work
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B BUS USERS IN SYDNEY
Personal income (excludes people aged less than 15 years) § On average people who use private buses have lower incomes than people who use STA buses. § The average private bus user has an annual income of between $4160 and $10 399, while the average STA bus user is a person with an income of between $10 400 and $15 599 per annum. The median income for all Sydney residents aged 15 years and over is between $10 400 and $15 599 per annum. § Seventy-two per cent of private users have an annual income of less than $20 800, compared with 53 per cent of STA passengers and 50 per cent of Sydney’s population aged 15 years and over.
B.5 Income of bus users (annual), 2000
40 State transit Private bus All Sydney residents 35
30
25
% 20
15
10
5
0 $0 - 4 159 $4$4 160- 160- 10 $10$10 400 400- - 15 $15$15 600 600- - 20 $20$20 800 800- - 31 $31$31 200 200- - 41 $41$41 600 600- - 51 $52$52 000 000- - 77 $78$78 000 000 or 10399 399 15599 599 20799 799 31199 199 41599 599 51999 999 77999 999 ormore more
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CityRail service and reliability C standards
CITYRAIL’S CURRENT SERVICE STANDARDS, including those imposed as community service obligation requirements by the Ministry of Transport, are: § to provide safe and reliable passenger rail services in an efficient, effective and financially responsible manager § a 92 per cent target for peak on-time running § a 99 per cent target for the proportion of scheduled peak services which run § a target that no more than 1 per cent of station stops should be ‘skipped’ § the provision of at least four trains in the morning peak hour for any station used by more than 1000 passengers in the peak § minimum half-hourly service in both directions between 5.30 am and midnight at all suburban stations (on the Richmond and Carlingford lines, minimum hourly service must be provided) § a least a two-hourly service in both directions between 5.30 am and midnight at all outer suburban stations § passengers should not have to stand on any train for more than 20 minutes except by choice § no CityRail train should have a loading of more than 135 per cent of its seated capacity, except by passenger choice § any passenger who chooses not to catch a train because of excessive loadings or excessive standing time must be able to board a train 15 minutes earlier or later that meets these service standards § 90 per cent of rollingstock to be available to run services during peak periods
MINISTERIA L INQUIRY INTO SUSTA INABLE TRANSPORT IN NEW SOUTH WALES 180
C CITYRAIL SERVICE AND RELIABILITY STANDARDS
§ no more than 0.20 collisions, 0.15 derailments, 2.25 passenger falls, 2.00 passenger ‘strikes’ or 0.25 fires or explosions per million passenger journeys § two security guards on every CityRail train at night, CCTV on every station and the fitting of CCTV on all new trains § comprehensive and accurate real-time passenger information systems at stations and on trains § answering 95 per cent of phone calls to the 131 500 Infoline within 40 seconds § cleaning the exteriors of at least 95 per cent of CityRail trains at intervals of no more than 14 days § cleaning of the interiors of at least 95 per cent of CityRail trains at least daily, and removal of litter during off-peak periods and major cleanings at intervals of no more than 30 days § upgrading of train interiors every six years § removal of graffiti from CityRail trains as soon as possible, and always within 24 hours.
There are no formal CityRail service standards concerning train speeds or journey travel times.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 181
Achieving the efficient use and D provision of roads
TO ACHIEVE EFFICIENT USE OF EXISTING ROADS, road users should be charged the full marginal social cost of their road use—the so-called marginal cost pricing rule. Marginal social cost measures the resource cost to society of the road user’s decision to make a journey.
D.1 Marginal cost pricing
Efficient road use The social cost associated with road use comprises private costs and costs requires account to external to those undertaking road use (so-called externalities). Private be taken of all costs costs are those costs directly incurred by the motorist, for example, petrol, wear and tear on tyres and mechanical components, parking costs, road tolls, and other costs associated with running a vehicle. External costs are those costs incurred by others (including other motorists) as a result of an individual’s road use. External costs associated with road use include: § road wear and tear—road pavement damage is largely determined by a vehicle’s axle load and configuration, distance travelled and technical characteristics of the road § congestion—increased travel time and running costs, other indirect effects such as increased likelihood of accidents and localised pollution § environmental pollution—emission of greenhouse gases, nitrogen oxides, particulates and noise pollution § accidents—road crashes result in property damage, injury and death.
The external The external costs arising from road use are significant. It has been impacts associated estimated that traffic congestion in Sydney imposed a cost of $6 billion in with road use are 1995, and is forecast to rise to around $9 billion by 2015.217 Road accidents substantial in Australia were conservatively estimated to cost around $15 billion in
217 Bureau of Transport Economics, Urban Transport—Looking Ahead, Information Sheet 14, 1999, http://www.btre.gov.au/docs/is14.pdf, Accessed 4 July 2003.
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1996 (including private and external costs)218. In 2003 the NSW transport
sector will emit around 24.7 million tonnes of CO2 equivalent greenhouse gases, representing over 31 per cent of the total emissions from the Australian transport sector.219 Road transport vehicles will account for over 86 per cent (some 21.3 million tonnes) of the total NSW transport sector’s greenhouse gas emissions. Between 2003 and 2015, emissions from road transport vehicles in NSW are estimated to rise by over 16 per cent.220
D.1.1 Application of marginal cost pricing
Motorists do not Currently, motorists only directly incur the private costs associated with currently face the their decision to make a journey. Requiring motorists to pay the full social full cost of their cost will ensure that the benefits they derive from road use will at least road use cover the costs to society of that road use. Identifying the marginal cost associated with each of the external costs, and then finding an efficient, equitable and practical way for charging for these, is central to the better use of roads.
Full cost recovery Marginal cost pricing is about efficient road use. The cost of the original and costing for investment in the road is ‘sunk’ and plays no role in the efficient pricing efficient road use rule. Similarly, how to achieve cost recovery for investments in new roads are different is a separate issue from achieving an efficient use of roads. concepts The likelihood that the average cost of road supply per vehicle falls as road use increases mean that charges for optimal (efficient) road use may not cover the full cost of road provision. In other words, most roads are natural monopolies through economies of scale in their provision and economies of scope in their use. If the economies of scale and scope are substantial then there is no guarantee that revenues collected under efficient pricing will achieve full cost recovery (although if congestion is priced realistically on urban roads, more than full cost recovery may eventuate).
Charging for infrastructure wear and tear
Road users damage Road users ‘use’ infrastructure in that they damage it. Pavement damage road infrastructure … depends on the technical characteristics of the road, the axle configuration
218 Bureau of Transport Economics, Road Crash Costs in Australia, Report 102, 2000, p. xi, http://www.btre.gov.au/docs/r102/r102.pdf, Accessed 1 July 2003. 219 Bureau of Transport and Regional Economics, Greenhouse Gas Emissions from Transport: Australian trends to 2020, Report 107, Department of Transport and Regional Services, Canberra,.2002, p. 49. 220 Ibid, pp. 55–7.
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D ACHIEVING THE EFFICIENT USE AND PROVISION OF ROADS
of vehicles and load per axle as well as distance travelled. In principle, charges can be set to match these costs—so-called mass-distance charges.
Heavy vehicles (rigid trucks, coaches and articulated trucks) accounted for 99.97 per cent of pavement loading in 1996.221 Accordingly, we would expect heavy vehicles to account for the vast majority of the marginal costs arising from road wear and tear.
The National Road Transport Commission has implemented a national charge for road use by heavy vehicles. The charging system attributes a portion of total road expenditures to heavy vehicles in a way that differentiates between vehicle types, reflecting broad estimates of relative cost causation for each vehicle type. The national road use charge of $1.3 billion is recovered from heavy vehicles via fixed annual access charges, mass distance charges (also collected as a fixed annual charge) and a variable road use charge, set at 20 cents per litre of diesel. The objective followed by the commission is a budgetary one—full recovery of costs associated with providing and maintaining roads for heavy vehicles— rather than the desired economic efficiency objective of marginal cost pricing of road use.
… this is costly to If we assume the $724 million spent by the RTA in 2001-02 on infra- fix structure maintenance (see table 7.1) reflects the marginal cost associated with road wear and tear, then around $724 million would need to be recovered from heavy vehicles in New South Wales. It needs to be noted, however, that because of the full cost recovery approach adopted by the National Road Transport Commission it is likely that an amount greater than the assumed marginal cost of $724 million is already being recovered from heavy vehicles in New South Wales.
Charging for congestion
Many roads in the Congestion imposes costs on other road users in the form of increased Greater Sydney Area travel time and running costs, and on society through increased pollution. are congested … Typically, road users are not charged for these costs, and in the absence of a price mechanism to allocate a road to those motorists who most value it, many roads are overused (congested) at particular times. The result is inefficiencies in road use, in vehicle use, and in the use of motorists’ time.
221 Austroads, RoadFacts 2000: An overview of the Australian and the New Zealand road systems, Sydney, 2000, p. 60.
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Because of the complexity of urban travel behaviour, estimating congestion costs is not straightforward. However, as discussed above, congestion costs in Sydney are thought to be large and will be around $9 billion in 2015.
… charging for road Congestion pricing aims to charge road users for the costs they impose on use may alleviate other commuters. Prices should be set in accordance with the marginal this congestion cost imposed by each additional vehicle on the road. The ideal congestion charging system involves charging according to location or trip route, time of day, number of vehicles on the road at the time, and vehicle type. Congestion charging should be introduced over as wide a network of roads as is practicable. If this does not occur, spill over effects may be generated as vehicles divert to other roads to avoid charges, causing congestion in areas or at times that were previously uncongested. Equity considerations would require that all vehicles be levied with congestion charges if they impose such costs on other road users. A congestion pricing system must be cost effective to implement, be simple to administer and maintain, and be convenient for users.
Charging for environmental pollution
Vehicle use is The use of vehicles on roads causes damage to the environment. Fuel associated with combustion releases an array of pollutants including organic compounds, pollution … nitrogen oxides, greenhouse gasses and particulates. These can be harmful to human health and the wider environment through exacerbating respiratory problems and contributing to global warming. Vehicle noise can also be regarded as a cost imposed by road users on others.
It is appropriate that vehicle users be charged for the damage they do to the environment to internalise these costs. This will provide incentives for environmental damage to be reduced. It also provides funds to compensate the losers and/or address the environmental problem.
… but charging for The amount of environmental damage from emissions will vary according pollution is not to the type of vehicle (particularly engine size and efficiency), technology, straightforward the type and cleanliness of the fuel and where the vehicle is used. Charging directly and accurately for environmental damage is therefore difficult. Noise and air pollution (excluding greenhouse gas emissions) have been costed at $511 million (Australia-wide) and $212 million (New South Wales) respectively.222
222 JB Cox, Diesel Fleet Characteristics: Emissions Project Update: Project 1.1., report to the National Road Transport Commission, June 2001.
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Charging for greenhouse gas emissions is more difficult. It will be inefficient and inequitable for the NSW road transport sector to go it alone in emissions reductions. Furthermore, there is the issue that compliance with the Kyoto Protocol—which is yet to be ratified—is at the whole of country level rather than at the state/territory level.
Charging for accidents
External costs of Much of the potential costs of vehicle accidents are already internalised to accidents may be the road user through the purchase of safe vehicles and various insurances. better suited to But there are also external costs—travel delays, workplace disruptions, loss other policy of labour from the household and community, (some) medical costs and so responses on—that need to be charged back to road users to ensure that they face the full social costs of their road use.
As noted above, road accidents were costed at $15 billion in 1996. At issue is how much of these costs are not internalised through third party and private property dama ge insurances and need to be charged for through some other mechanism. There is no consensus on this. One position is that all accident costs should be regarded as externalities and hence charged for, while others argue that all relevant costs are already internalised by road users.
Given the numerous causes of road accidents—alcohol, speed, mechanical failure, road condition and driver inexperience—it is not immediately apparent on what basis accident charges should be calculated. Direct regulation may be the more appropriate policy response.
D.1.2 What is feasible?
Realistically, the NSW Government is only placed to consider incorporating the external costs of congestion and infrastructure wear and tear in any road use charging regime. We know the cost of these externalities with some accuracy, the appropriate basis on which to levy the charge on is apparent, and the technology is there to implement first best charging solutions. This is not the case for environmental pollution and road accidents.
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E Examples of charging for road use
CHARGING FOR ROAD USE is one strategy for managing the demand for road travel that has been widely employed. The European Conference of Ministers of Transport have identified five objectives that road use pricing schemes should achieve. § Financing—road users should pay their share of (historic and future) infrastructure costs in order to provide the funding needed for new road investments and maintenance. § Efficient road use—the charging system should provide incentives to use as little (marginal) resources as necessary to satisfy mobility needs. This means low fuel costs, low road and vehicle maintenance costs and low congestion costs. § Safe and environmentally sound driving characteristics—the charging system should provide incentives to improve safety and minimise ecological damage. § Transparency and enforcement—the charging scheme should be transparent to users and guarantee enforcement. § Low implementation and administration costs—resources needed for the charging system need to be taken into account.223
In practice, there will be trade-offs between some of these objectives. For example, efficient road use may necessitate a sophisticated and complex charging regime, which may act against low implementation costs and transparency.
Economic incentives and relative travel costs (including reliability, comfort, travel time and frequency) influence the demand for travel, the choice of mode and time of travel. By charging motorists the true costs associated with their travel, road charging can influence travellers’ decisions on if, how, when and where a journey should take place. Road charging is
223 INFRAS, Variabilisation and Differentiation Strategies in Road Taxation, report prepared for European Conference of Ministers of Transport Group on Transport and Environment, 2000, p. 5.
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E EXAMPLES OF CHARGING FOR ROAD USE
accompanied by the expectation that some car travellers will either reduce their vehicle use or shift some trips to alternative transport modes, to other non-congested travel periods or to alternative routes.224
A sample of mainstream road charging schemes implemented in OECD countries/cities is provided below. Unless otherwise noted, the examples mentioned below are taken from the OECD’s Road Travel Demand: Meeting the Challenge.
E.1 Cordon pricing
Trondheim, Norway, provides an example of a congestion pricing system. A cordon was erected around the city in 1991, with variable prices charged at tolls between 6.00 am and 5.00 pm. The impact of the toll rin g was to decrease traffic in the CBD by 10 per cent during toll hours, increase it by 8 per cent outside toll hours, and decrease traffic overall by 4 per cent between 1990 and 1993. Weekday bus travel has increased by 7 per cent.225 The revenue raised from Tronheim’s cordon toll is used for financing road infrastructure, with some revenue earmarked for public transit and pedestrian and bicycle facilities.
Cordon toll rings are also in operation in the Norwegian cities of Oslo and Bergen. However, these cordon tolls are not structured to price peak hour use/access at a premium.
In February 2003 the city of London introduced a cordon pricing scheme in response to increasing road congestion. Cordon pricing was introduced to encourage the use of other modes of transport and to ensure that, for those who have to use the roads, journey times are quicker and more reliable. Prior to the scheme commencing, congestion was estimated to cost around £2–4 million every week, with motorist spending 50 per cent of their time in queues.226
The London scheme requires private drivers to pay £5 per day if they wish to continue driving in central London during the scheme’s hours of operation (7.00 am – 6.30 pm weekdays). Since the introduction of the
224 Organisation for Economic Cooperation and Development, Road Travel Demand: Meeting the Challenge, OECD, Paris, 2002, p. 80. 225 Intelligent Transport Systems Decisions, Congestion pricing, 2002, p. 11–12, http://www.path.berkeley.edu/itsdecision/serv_and_tech/Congestion_prici ng/congestion_pricing_report.htm, Accessed 1 July 2003. 226 Transport for London, Congestion charging, http://www.cclondon.com/, Accessed 11 July 2003.
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charge traffic in central London is down 20 per cent, traffic jams are down 40 per cent, buses are travelling 15 per cent faster and bus patronage is up 14 per cent on inbound routes in the morning peak.227
Not all drivers have to pay the congestion charge. There are a range of exemptions and discounts available to certain categories of drivers and certain categories of vehicles and individuals (for example, residents living within the cordon pay only 10 per cent of the levy). The charging scheme relies on automated license plate recognition to enforce compliance.
By law, all money raised from the congestion charging is to be used to improve London‘s transport facilities. The congestion charging is also to be accompanied by a wide range of other measures designed to make public transport easier, cheaper, faster and more reliable.
E.2 Electronic road pricing
Singapore has attempted to control congestion through a number of pricing measures including cordon pricing for the CBD and electronic road pricing for a number of expressways.
In 1975 Singapore introduced the Singapore Area Licence scheme which was based on vignettes. Motorists needed to purchase and display a valid permit in order to enter the CBD between 7.30–10.15 am and 4.30–6.30 pm. The scheme proved highly successful in reducing the number of vehicles entering the cordoned area. The electronic road-pricing scheme began in 1998 and is based on automatic fee collection whenever a vehicle passes under one of the 33 gantries. The electronic road pricing tolls vary according to the time of day and route, and are adjusted every three months to ensure optimal traffic flow. The charges are designed so as to achieve an average speed of 45–65 kilometres per hour (kph) on the expressways and 20–30 kph on arterials.228 By way of comparison, speed during peak periods on seven major routes to and from Sydney averaged around 30–35 kph in 2001-02.229
The road pricing measure introduced in Singapore has resulted in a decrease in the proportion of solo drivers, a shift in vehicle use from peak to non-peak periods and an increase in average speeds.
227 Transport for London, TfL Press Releases, 2003, http://www.tfl.gov.uk/ tfl/press_cc_news_latest.shtml, Accessed 22 July 2003. 228 Singapore Land Transit Authority, http://www.lta.gov.sg/motoring_ matters/index_motoring_erp.htm, Accessed 23 July 2003. 229 Road and Traffic Authority, Annual Report 2002, Sydney, 2002, p. 11.
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Electronic tolling has been implemented on a multitude of North American highways/arterials. The toll charged varies with the level of congestion. On some highways (such as Interstate 15 in San Diego) variable message signs inform drivers of the going toll rate.
E.3 Distance and load related charging
In 2003 the German government introduced distance-based charges for heavy goods vehicles (HGVs) travelling on motorways. The German government identified HGVs as being responsible for a disproportionately high share of the costs for the construction, maintenance and operation of motorways. The road wear and tear caused by a HGV with an axle load of 40 tonnes is about 60 000 times as high as the road damage caused by a passenger car. In keeping with European Union transport policy, the German government is pursuing the objective of increasing the contri- bution made by HGVs to the funding of infrastructure by means of an allocation of infrastructure costs in line with the user pays principle. The German government also believes that the HGV toll system will also lead to the establishment of fairer conditions of competition between the road and rail transport modes.230
Vehicles over 12 tonnes are required to pay distance-based charges of €0.14–0.19 per kilometre, with variation depending on a vehicle’s axle load and exhaust emissions. The toll was established by estimating the costs of road wear and tear and maintenance occasioned by heavy vehicles. Tolls are to be used to fund the upgrading of transport infrastructure, including an anti-congestion program. The HGV toll system is completely automated.
E.4 Escalating fuel taxes
In order to encourage manufacturers to design more fuel-efficient vehicles and to provide incentives for motorists to avoid unnecessary vehicle trips and/or consider alternate transport modes, the UK Government introduced a fuel duty escalator in 1993. The escalator, which annually raised petrol prices above the rate of inflation, was set at 3 per cent in 1993 later increased to at least 6 per cent 1997.
230 German Federal Ministry of Transport, Building and Housing, http://www. bmvbw.de/English-Content-.454.13835/Facts-about-the-toll-system-for- heavy-goods-vehi...htm, Accessed 14 July 2003.
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E EXAMPLES OF CHARGING FOR ROAD USE
The British government estimates that by 2010 the fuel duty escalator will have saved between 1–2.5 million tonnes annually of carbon and achieved small reductions in emission of local pollutants.
Raised revenue is used to fund road infrastructure and public transport in order to reduce congestion and pollution.
E.5 High vehicle purchase taxes
Compared to other OECD countries, Denmark imposes relatively high taxes on car purchases and registration, totalling around 55 per cent of the sales price of the average car. As would be expected, the high level of taxation is one contributing factor to Denmark having a relatively small passenger motor vehicle fleet of 347 cars per 1000 population. In contrast, France (475), Italy (563) and Germany (532) have higher levels of car ownership—in the vicinity of that experienced in Australia (508 cars per 1000 population).
The relatively small car fleet in Denmark reduces the demand for car based transport and road capacity.
In 1997 taxes on fuel-efficient cars were lowered while those on fuel- inefficient cars were raised in order to reflect the environmental costs associated with energy consumption.
E.6 Parking levies
In 1998 the West Australian Government and the city of Perth implemented the Perth Parking Policy. Under the policy, the state government licenses and imposes a tax on all non-residential parking, including tenant parking, in the Perth Parking Management Area (essentially central Perth plus surrounding areas). Parking bays attract an annual charge per bay of $155 for short-stay public parking, $180 for long-stay public parking and tenant parking, and $77.50 for motorcycle bays. Certain parking bays are exempt from the charge.
Revenue raised through the Perth Parking Policy is used to fund free public transport within the Perth Parking Management Area. Funds raised may also be used to improve public transport to central Perth, enhancing the pedestrian environment and supporting bicycle access plus other initiatives that promote a balanced transport system.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 191
E EXAMPLES OF CHARGING FOR ROAD USE
Rather than influence demand for parking, the city of San Francisco has moved to limit the supply of parking spaces. San Francisco’s Transit First policy limits parking area to 7 per cent of a building’s gross floor space. City planners report that despite considerable office growth, there have not been major increases in downtown peak traffic.
Nearly all OECD countries have instituted parking pricing and manage- ment policies. In the most advanced programs, cities such as Zuric h, Breman and Copenhagen have eliminated all free public parking.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRANSPORT IN NEW SOUTH WALES 192
F Submissions
F.1 List of public submissions received for the ministerial inquiry into public passenger transport
Name of individual/organisation 1. A L Larsen 2. Aboriginal and Torres Strait Islander Commission 3. Action for Public Transport 4. Adrian Lee-Archer 5. Adrian Plaskett 6. Aida E Merino 7. Alex MacLeod 8. Andrew Dunk 9. Andrew E Cochineas 10. Andrew Popoff 11. Andrew See 12. Angela Hayward and Lesley Hargrave 13. Ann Dean 14. Anthony Linlithgow 15. Anthony Massers 16. ARPA Over 50's Association Ltd 17. Arthur W Hunter 18. Australasian Railway Association 19. Australasian Railway Association, VIC 20. Australian Business Limited 21. Australian Council for Infrastructure Development 22. Australian Democrats 23. Australian Institute of Marine and Power Engineers 24. Australian Rail Track Corporation 25. Avron Lincoln 26. B J Turner 27. B L K Badham 28. B Lehane 29. B Mason 30. B Sieber 31. Ballina Shire Council 32. Bankstown City Council 33. Bankstown Transport Working Party 34. Barbara Lagats 35. Barbara Rooke 36. Bathurst City Council 37. Bernie Payne 38. Beth Seach 39. Bev Martin 40. Beverley Duff 41. Bicycle NSW (Continued on next page)
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 193
F SUBMISSIONS
F.1 List of public submissions received for the ministerial inquiry into public passenger transport (continued)
Name of individual/organisation 42. Bishop Austrans Ltd 43. Blacktown City Council 44. Blue Mountain Commuter and Transport Users Association 45. Bob Daisley 46. Bovis Lend Lease 47. Brad Slaughter 48. Brian Hague 49. Brian Noad 50. Bruce Jensen 51. Bus & Coach Association NSW 52. Bus Industry Confederation 53. Caitlin Fitzsimmons 54. Campbelltown City Council 55. Central Coast Community Environment Network 56. Central Coast Regional Organisation of Councils 57. Cessnock City Council 58. Cessnock Community Transport Inc 59. Chak Ng 60. Charter Vessel Association of NSW 61. Chloë Mason 62. Chris Downs 63. Clarence Community Transport Inc 64. Clement Hall 65. Clint Rafaud 66. Clover Moore MP, Member for Bligh 67. Coffs Harbour, Bellingen and Nambucca Community Transport 68. Combined Pensioners & Superannuants 69. Commission for Children and Young People 70. Community Transport Organisation 71. Council of Social Services 72. Craig Little 73. Cyclists Action Movement West 74. Cyril McColough 75. D McIlveen 76. Daryl Taylor 77. ‘David’ 78. David Caldwell 79. Dean Jones 80. Deirdre Mason 81. Derek Cheng 82. Dorothy Sparkes 83. Dorothy Sullivan 84. Doug Buckley 85. Driver Group Sightseeing 86. Dulcie Lee 87. Easthamsted Transport 88. Eco Transit, Sydney 89. Eddie Ozols 90. Eileen Zinader 91. Elizabeth Williams 92. Environment Protection Authority 93. Environmental Defenders Office, NSW 94. Evol M Knight (Continued on next page)
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 194
F SUBMISSIONS
F.1 List of public submissions received for the ministerial inquiry into public passenger transport (continued)
Name of individual/organisation 95. FC Crook 96. Far West Area Health Service 97. Francis McQuade 98. G A Morrice 99. G E Chorlton 100. G Starkey 101. Garry Glazebrook 102. Garry Sanders 103. Gary Auer 104. Gary Earl 105. Global Fuel Solutions Pty Ltd 106. Gordon Mills 107. Goulburn Radio Cabs Co-Op Society Ltd 108. Greg Sheehan 109. Helen Hamilton 110. Mountains Community Transport 111. Hills/Baulkham Hills ALP Branch 112. Howard Morrison 113. Hubert Lam 114. Hurstville City Council 115. Iain McGregor 116. Ian De Mellow 117. Ian Kohler 118. Imogen Da Silva 119. Institute of Transport Studies - the University of Sydney 120. Inverell Shire Council 121. J Evans 122. J Longton 123. James Jackson 124. Janet Coombs 125. Jeff Mitchell 126. Jill Murray 127. Jim Donovan 128. Jim McLean 129. Joan Frain 130. Joanne Burns 131. Joe Lazanja 132. John Hampson 133. John Heal 134. John Ready 135. Jonathan Falk Planning Consultants Pty Ltd 136. Joseph Vnuk 137. Judith Clark 138. June Leathart 139. Karen Rule 140. Keith Bennett 141. Keith Whitfield 142. Kerry Hortop 143. Kevin Eadie 144. Kogarah Council 145. Labor Council 146. Lachlan Shire Council 147. Lake Macquarie City Council 148. Lane Cove Community Aid Service 149. Lara Carne (Continued on next page)
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 195
F SUBMISSIONS
F.1 List of public submissions received for the ministerial inquiry into public passenger transport (continued)
Name of individual/organisation 150. Laurie Wilmott 151. Leichardt Council 152. Lloyd's Register 153. Local Government & Shires Association 154. Local Government Association of NSW 155. M Abbas 156. M Devenish 157. M Hughes 158. Manly Council 159. Maria Peters 160. Marie Atkinson 161. Marie Owens 162. Marilyn Long 163. Martin Olmos 164. Medical Consumers Association Inc 165. Metro Transport Sydney 166. Michael King 167. Michael Pollock 168. Michael Rolfe 169. Mike Belfield 170. Mike Threlkeld 171. Mincom 172. Mosman Municipal Council 173. N Hitchen 174. Nancy Hillier 175. National Liaison Committee for International Students 176. Neil Hinsch 177. Newcastle Port Corporation 178. Noel Selway 179. Norman Rich 180. Norman White 181. Northern Rivers Social Development Council 182. NRMA 183. NSW Road Transport Association Inc 184. NSW Urban Taskforce 185. Office of Rural Affairs 186. P G Laird 187. P McCauley 188. Parking Operators Association 189. Patonga Beach CP&SA 190. Patricia Guy 191. Peggy Loukin 192. Penrith City Council 193. People With Disability 194. Peter Cook 195. Peter Donovan 196. Peter Innes 197. Peter J Carlton 198. Peter L Merton 199. Peter Mills 200. Peter Seager 201. Peter Stone 202. Peter Vail 203. Philip McGavin (Continued on next page)
MINISTERIAL INQUIRY INTO SUSTAINABLE TRANSPORT IN NEW SOUTH WALES 196
F SUBMISSIONS
F.1 List of public submissions received for the ministerial inquiry into public passenger transport (continued)
Name of individual/organisation 204. Physical Disability Council of NSW 205. Planning Institute of Australia (NSW Division) 206. Port Kembla Port Corporation 207. PricewaterhouseCoopers 208. Property Council of Australia 209. Quantm Ltd 210. Queanbeyan Shire Council 211. Rachael Harris 212. Rail, Tram and Bus Union 213. Railway Technical Society of Australasia 214. Rathmines Progress Association 215. Regional Communities Consultative Council 216. Richard J Ennis 217. Roads and Traffic Authority (RTA) 218. Robert Annear 219. Robert Iacopetta 220. Robert Mitchell 221. Robert Scott 222. Robert Vaughn 223. Robert Walter 224. Robin Carter 225. Lockhart & District Community Services Inc. 226. Rockdale City Council 227. Rod Hannan 228. Roger Migowan 229. Ron Bellinato 230. Ron Verstegen 231. Ross Mewton 232. Russell Paine 233. S Highlands 234. Samantha Lysaught 235. Sandra Van Kampen 236. Sandrine Barlet-Chagnot 237. Shauna-Marie Wilson 238. Shellharbour City Council 239. Sheryl Goodrich 240. Shoalhaven City Council 241. Shoalhaven Public Transport Working Party 242. Simon Luckhurst 243. Snowy River/Cooma Monaro Community Transport 244. South East NSW Area Consultative Committee 245. South West Community Transport 246. Southern Sydney Regional Organisations of Councils 247. Stan R Beevor 248. State Rail Authority 249. Stephen Howard 250. Steve Edwards 251. Stewart Reed 252. Sutherland Shire Council 253. Sydney Olympic Park Authority 254. Sydney Ports Corporation 255. Sydney Retired Metalworkers and Veteran Printers 256. Tad Kiemski 257. Ted Floyd (Continued on next page)
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 197
F SUBMISSIONS
F.1 List of public submissions received for the ministerial inquiry into public passenger transport (continued)
Name of individual/organisation 258. Terence Apps 259. Teresa Snowden 260. Terry Furnance 261. The Audit Office of NSW 262. The Chartered Institute of Logistics & Transport 263. The City of Newcastle 264. The Council of Camden 265. The Rail Now Campaign 266. The Warren Centre 267. Theodore Galanis 268. Tony Magrathea 269. Tony Proust 270. Total Environment Centre 271. Town and Country Planning Association 272. Transit Planners Pty Ltd 273. Transport Planning and Management 274. Transport Workers Union 275. Tweed Shire Council 276. UITP - International Association of Public Transport 277. University of Western Sydney 278. Vic Robertson 279. Warren Grzic 280. Warwick Pelly 281. Waterways Authority 282. Wayne Johnston 283. Western Sydney Alliance 284. Western Sydney Community Forum 285. Western Sydney Regional Organisations of Councils 286. Wollongong University Postgraduate Association 287. Woollarah Municipal Council 288. Youloe-Ta Indigenous Development Association Incorporated 289. Youth Action and Policy Association NSW
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 198
Abbreviations
BOOT Build-own-operate-transfer
CBD Central business district
CEO Chief executive officer
CSO Community service obligation
EIS Environmental impact statement
EPA Environment Protection Authority
ERP Electronic road pricing
HACC Home and Community Care
IPART Independent Pricing and Regulatory Tribunal
KPI Key performance indicator
MSL Minimum service level
OECD Organisation for Economic Cooperation and Development
PET Pensioner excursion ticket
PPP Private–public partnership
PSL Parking space levy
RIC Rail Infrastructure Corporation
RTA Road and Traffic Authority
SRA State Rail Authority
SSTS School Student Transport Scheme
STA State Transit Authority
MINISTERIAL INQUIRY INTO SUSTAINABLE TRANSPORT IN NEW SOUTH WALES 199
TTSS Taxi Transport Subsidy Scheme
WAT Wheelchair Accessible Taxi
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 200
Glossary
Ad valorem A tax, duty, or fee which varies based on the value of the products, services, or property on which it is levied
Beneficiary pays Those who benefit either directly or indirectly from a market transaction contribute to the purchase or construction of the good or service in part or up to the value added from their benefit.
Choice modelling A method to estimate non-market values by conducting a social survey and asking respondents to state their preferences out of a set of options that contain common attributes but at varying levels.
Community service Services provided to the community by a business that are not obligations necessarily compatible with commercial objectives and for which financial reimbursement is paid by the government to provide.
Commercial contract A contract between the Ministry of Transport and a bus operator where (bus operators) operator remuneration is derived from revenue generated by passengers’ fares and reimbursement for concessions and school student transport. The contracts set out minimum services levels to be provided by the operator.
Community Transport services provided to a broad range of people who experience transport transport disadvantage. Transport disadvantage is defined by a number of factors including mobility, isolation and age.
Cordon pricing Motorists pay a toll to enter (or exit) a geographic area. Cordon tolls may be fixed or vary with time of day and day of the week.
Cost–benefit The method of evaluating a policy/project by comparing the economic, analysis environmental and social cost and benefits in common units associated with the policy/project. The common units are usually monetary.
Development A tax, duty, or fee collected from developers and appropriated to either charges mitigate negative impacts from the development or provide required increased due to the development.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 201
Electronic road Automated tolling (via smart cards and transponders) of motorists pricing accessing/using the road network. Current technology allows tolls to vary with time of day or volume of traffic.
Externality A cost or benefit arising from an activity that does not accrue to the person or firm carrying out the activity.
Force majeure risk Risk usually associated with unforeseeable major environmental and social events.
Greater Sydney Includes Sydney, Wollongong, Newcastle, Blue Mountains, Central Area Coast and parts of the Hunter, Southern Highlands and Shoalhaven.
Indirect beneficiaries Those who benefit from a market transaction but are neither the buyer nor the seller and are therefore external to the transaction.
Integrated fares The same fare structure is applied across rail, bus and ferry transport modes thereby allowing multimodal travel to be undertaken using one ticket.
Integrated ticketing The use of a single stored value card to purchase travel referred to as the ‘smart card’.
Intergenerational Meeting the needs of the current generation while leaving equal equity opportunities for those generations to follow.
Marginal cost Setting the price of a good/service equal to the marginal social cost of pricing producing that good/service. It can be argued that marginal cost pricing is economically optimal as it equates marginal benefit to marginal cost.
Marginal social cost The total cost of an activity. Includes not only private costs falling on the person/firm conducting the activity, but also external costs falling on other people who are not able to extract any compensation for the cost impost.
Minimum service Minimum service levels bus operators are required to meet which are levels specified in commercial service contracts and determined by the Ministry of Transport.
Ministry of With effect from 1 July 2003, the name of the former Department of Transport Transport (which had previously been renamed Transport Co-ordination Authority) changed to the Ministry of Transport.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 202
Net present value The present day value of a project, found by discounting the future costs and benefits associated with a project by an appropriate rate, usually the long term bond rate plus a risk premium. The present value costs are then subtracted from the present value benefits to arrive at a net position.
Non-commercial A contract between the Ministry of Transport and a bus operator where contract operator remuneration is fixed at an agreed rate based on the gross costs of the service to be provided. These contracts primarily cater for school student travel.
Peak load pricing Increasing peak hour fares as a strategy to address peak hour congestion on rail, bus and ferry transport.
Pensioner excursion Discounted tickets available to pensioners and seniors card holders. They ticket allow unlimited travel on the metropolitan government operated transport networks and a flat discounted fare for travel between country locations on the day of purchase.
Private franchise A system by which independent private firms are authorised to use a common business system. The holders of the franchises are subject to supervision of their operations in order to maintain the reputation of the franchised product.
Public-private Partnership between public and private sectors to provide infrastructure partnerships and allocate risk effectively. There are many different types of PPPs, with the most popular in New South Wales being the build-own-operate- transfer project.
Rail Infrastructure Responsible for below rail operations such as track infrastructure Corporation maintenance throughout NSW. The metropolitan operations of RIC are to be merged with SRA from 1 January 2004.
School student Provides free travel for eligible school students on government rail, transport scheme government and private bus and ferry services and long distance coaches between home and school. Students are eligible if they are residents of NSW, enrolled at school and live more than a specified distance from their school.
Sectorisation The division of the rail network into increasingly independent sectors which reduces the movement of trains from one sector of the network to another.
State Rail Authority Responsible for operating passenger rail services in the Greater Sydney
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES 203
Area (CityRail) and throughout NSW (CountryLink) including the operation of trains and stations. SRA is to be merged with the metropolitan operations of RIC from 1 January 2004.
State Transit Responsible for government operated bus and ferry services in NSW Authority including services provided by Sydney Buses, Sydney Ferries and Newcastle Buses and Ferries.
Track amplification The construction of additional tracks on existing lines to allow higher frequency of services along specific routes.
Track possession Withdrawing the availability of tracks for normal use to allow for maintenance work or construction.
Transitway A combination of roads only for buses and priority bus lanes on existing roads that can deliver fast and high-frequency bus services.
Turnbacks Rail track infrastructure that allows terminating trains to turn around.
Transport Safety To be established by 1 January 2004. It will have authority to investigate and Reliability transport accidents, set safety standards, conduct safety and performance Regulator audits and provide advice to government on the performance of the transport services industry.
Value capture Monetary gains received within a market transaction from those who benefit indirectly.
MINISTERIAL INQUIRY INTO SUSTAINABLE TRA NSPORT IN NEW SOUTH WALES