LC EIC Inquiry into Expanding Me bourne Free Zone submission 403

ABOUT THE VICTORIAN ACTION GROUP This submission is made by the Victorian Transport Action Group (VTAG), an independent forum of transport experts that meets monthly to discuss the challenges of transport in .

The members have a range of expertise across transport, planning, State and , IT and the environment; including past employment with Government, Government Agencies, the Department of Transport and VicRoads.

VTAG has an extensive network of connections in local government, planning and that it can access for insights into the complexity of transport issues and provide options for equitable, practical solutions.

Members are familiar with the challenges of developing and implementing transport plans across all transport modes and understand the difference between blue sky ideas and the reality of funding, political interest and community support.

We are particularly conscious that limits on funding necessitate placing priorities on projects; and that in turn leads to communities competing to achieve outcomes that satisfy their needs.

OVERVIEW - THE HISTORY OF PUBLIC TRANSPORT STRUCTURES

Public transport have a long and heated history in . Compared to other cities, we have been slow to adopt new technologies. The bad experience of “scratch tickets” and initial teething problems with and have created a lot of unjustified dissatisfaction and a pool of disgruntled public transport users. As a result, successive State Governments have sought to refine the fare structures to win political kudos with outer suburban residents and other particular groups. There have been numerous changes to Melbourne’s fare system over the last decade, including: • Abolition of Zone 3 (2007) – when patronage was low • Free weekend for Seniors (2010) – when weekend capacity was underused • Early Bird free travel (touch off before 7:15) - to encourage people to shift out of peak times • Capping of Zone 1/2 fares (2015) - election commitment • Free Fare Zone in the CBD (2015) - election commitment The policy on how fares should be increased has also fluctuated between: • Freezing of fare increases • CPI+5% for two years from 2009 (to pay for the 2009 Transport Plan initiatives) • Capping of increases at CPI (since 2012) Many of these changes have in practice been against the long-term interests of travellers, by shrinking the fare box and restricting available funding for more frequent and reliable services. The growth of the system has been restricted by the lack of growth in fare box revenues in line with patronage as the number of people exempted from fares has grown.

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Fare evasion itself has been controlled by a combination of policing and awareness campaigns. It probably peaked at a time that the new myki ticket system was heavily discredited in the media but is now back to manageable levels. Melbourne now has very flat fare structures with a single rate for a trip, regardless of length, with a single fare covering journeys across two or more modes (within less than 2 hours). At the time, abolition of distance-based fares was estimated to cost farebox revenue $40 m or 10%. Now it costs as much to catch a tram from the inner city to the CBD as it does to get there from Sunbury or Lilydale, …and those using it within the CBD pay nothing. The myki smartcard system came under initial severe attack when it was introduced – which was largely unwarranted. It is now well accepted and works without difficulty. myki provides an ability to adjust fares automatically and could support a much more sophisticated fare structure. Because small change is no longer necessary, there is no longer a need to stick with rounded fares. However, with myki what you actually pay is virtually invisible to a lot of people. This makes the fare less front of mind but means that there needs to be better public communication, if fare strategies are intended to influence public behaviour. Fare cuts and concessions have become a staple feature of elections. During the 2002 state election then Opposition Leader promised to abolish Zone 3. The Transport Minister, , memorably claimed that this was a bad idea because the metropolitan rail system would not be able to cope with the resulting patronage increase. This attracted some mirth as it suggested the Liberal policy would be both popular and successful. At the 2006 state election the new Opposition leader, , resurrected the promise to abolish Zone 3 and this time the Bracks Government followed suit and matched the promise. This was delivered in March 2007 and provided deep discounts for outer suburban travellers and a consequent surge in usage. The cost of a daily (return) ticket for former Zone 3 travellers, fell from $12.60 to $9.70, a saving of $2.90 a day or 23%. This is one factor in the strong growth seen from 2006 to 2010, although it doesn’t stand out as a peak of its own. Baillieu also promised to make public transport free for children and most students. His party costed this proposal at $285 million over a four-year period. Tertiary students who funded their own transport costs welcomed the idea, but public transport advocates were alarmed at the funding cost, which they believed would be better spent on fixing actual transport problems. There is considerable evidence in support of this view from surveys in which commuters are given the choice between lower fares and more frequent services. They clearly prefer the latter. Aware of this, the Brumby Government announced in 2009 that it would increase fares by 5% above CPI for two years to help pay for its spending commitments in the 2009 Transport Plan. Free travel at the weekends for pensioners and concession card holders was introduced in the lead up to the 2010 state election; partly as a trade off against negative publicity over the teething troubles with introduction of the ‘myki’ ticketing system. The incoming government introduced a short-term freeze on fares. Political populism continued in the run up to the 2014 state election with both sides promising to create a free tram zone in the CBD. This was partly a political gimmick and partly intended to avoid problems with the new myki system, which was causing delays as passengers tried to swipe on as they boarded. The policy, however, had a dramatic effect and significantly boosted

3 of 13 LC EIC Inquiry into Expanding Me bourne Free Tram Zone submission 403 tram patronage. CBD monthly tram boardings jumped by 22.6% in March 2015 compared to March 2014. Tram boardings outside the CBD grew 2.8% in this time. 1 At the same time, Zone 2 was effectively abolished by applying the same fare cap across Melbourne. This was another popular pitch for the outer suburban vote but had little impact, apart from reducing the demand for parking at stations just inside Zone 1. This time the Public Transport Users Association (PTUA) directly opposed the change, arguing that there would be significant fare increases due to the revenue being lost. They argued that having the same fare for short and long trips was inequitable and likely to lead to short trips becoming unaffordable.2

Term of reference 1: Expansion of the free tram zone

VTAG does not support the expansion of the free tram zone, as this would only compound the problems that have been created by its introduction. Rather, we would like to see the Parliamentary Inquiry ventilate all the facts and recommend that the free tram zone be abolished in order to improve performance of within the CBD. The free fare zone in the CBD has been particularly problematic. It was intended to avoid delays as people “touched on” as they enter a crowded tram – with the fear that initially this would hold up trams in the city. It has had the perverse effect of actually increasing crowding as people shift from walking relatively short distances to” jump on the tram”. Trams are now slower than ever, more crowded and struggling to keep up with the avoidable demand created by people who previously walked using the tram. The only real beneficiaries of the free tram policy have been those living within the city. Tourists, the supposed target beneficiaries, still need to buy a myki to travel around the city as a whole – and are separately provided for by the free tourist and the free City Circle tram. The actual impact has been to slow down the trams and create uncomfortable conditions for passengers. The offer of free travel crowds out people making more desirable mode shifts from to public transport for longer journeys. People changing from other modes are already not charged an additional fare in the CBD and hence do not benefit from the Free Tram Zone. ’ response to inner city crowding has been to create “short routes” that deliver increased frequencies through the city. The constraint on this policy is the amount of trams that can fit into each corridor—the limit being two trams per traffic light cycle—and the available length of tram superstops. Capacity cannot be easily further increased and the growing demand from outside the CBD puts the spotlight on why there was such a surge in usage when the Free Tram Zone was introduced. Abolishing the free tram zone would capture a large revenue stream from city workers/ residents who previously walked. They now contribute almost nothing to the fare box. It would also have a positive effect of encouraging people to walk for short trips within the CBD.

1 https://www.ptv.vic.gov.au/news-and-events/news/ptv-releases-latest-patronage-statistics-for-victoria-s-public- transport/ 2 https://www.ptua.org.au/2014/03/26/zone-2-likely-worse-off/

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The need for more facts The facts about how trams are operating in the CBD are not in the public domain. Hopefully, this inquiry will obtain and release the detailed information held by government agencies. The PTV last mentioned the impact of the Free Tram Zone in a March 2015 media release. It reported that Public transport grew by 3.5% in the March 2015 quarter compared to the previous year, with the strongest growth being on the tram network as post election fare changes and the introduction of the Free Tram Zone in Melbourne’s CBD took effect. The March 2015 quarter saw CBD monthly tram boardings grow by 22.6 per cent in March 2015 compared to March 2014. Tram boardings outside the CBD grew 2.8 per cent over the same period for an average growth of 10.2%. The capacity for movement through the CBD could be expanded by: • Buying more E Class trams for use on the major route • Introducing tram priority measures to maximise throughput at intersections • Altering routes to make better use of existing rolling stock • Running more routes along William and Latrobe St with better interchange stops The current proposal to expand the free tram zone should be strongly resisted. It would further compound the current problem and weaken the fare box revenue – with the inevitable outcome that a future government would cut services to “reduce losses”. In summary, removing the Free Tram Zone would reduce the current overcrowding on CBD trams – which contributes to their slow operating speeds and boost revenue. Expanding the zone would compound these problems and impact other inner urban areas.

Term of reference 2 and 3: Expansion of free fare provisions to students and Seniors

Full time students, pensioners and Senior card holders already enjoy half fares for all travel. Seniors also get a week of free Metro travel each year and two V/Line passes. These are significant state concessions to assist those groups and it is hard to justify providing a higher level of subsidy. And these groups represent up to 60% of the patrons on public transport. In fact, these same groups are amongst the most reliant on public transport. Older people and those with a disability are those most disadvantaged by crowded vehicles. Therefore, it is not in their interest-for reductions in investment on more rolling stock, DDA compliance upgrades and improved services. Removing their contribution from the fare box would be inequitable and reduce investment. The situation of international students is a little more complicated as they do not get the current half fares. Whilst this concession has been granted in some States, the argument in Victoria is that as full fee-paying students getting the advantage of Australian universities they should pay their own way. This is really a social policy issue for government about whether to extend this benefit, and the cost to revenue of doing so is unclear. VTAG’s concern is that if this concession is extended it should not be at the expense of investment in public transport. However, the idea of making public transport totally “free” is mistaken. Whilst this is a popular idea, the revenue foregone from abolishing fares in a city like Melbourne would have a bigger impact if it were instead spent on making public transport more competitive with driving.

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Allan Davies in the Urbanist blog (June 10, 2019) did a detailed examination of the introduction of free fares in 2013 in , the capital of (one of the few places a totally free system has been tried) According to a World Economic Forum news report, the results are less than impressive. A before-and-after study by Dutch and Swedish researchers found that while public transport use had increased by 14% after almost one year, 40% of the increase came at the expense of active transport i.e. mostly walking. Davies points to research that suggests that fare elasticity is strongly asymmetric. In other words, passenger demand decreases in response to an increase in price, but the effect associated with a price reduction is insignificant. The actual experience of free public transport is analysed in the Finnish article at Attachment 1. It basically documents that the social policy aimed at income support had very negative impacts on the operation of the Tallinn public transport network (principally trams) The consensus of critics is that such a policy in Melbourne would exacerbate existing overcrowding of trams in the city centre, replace even more walking trips, and continue to provide no financial benefit to the great majority of commuters. Of course, Melbourne and Tallinn aren’t alike. Apart from the big difference in population, public transport’s mode share was 56% in Tallinn before the new policy, ’s share was 32%, and walking’s was 12%. That’s a far cry from Melbourne, where public transport accounts for only 9% of trips, cars for a whopping 73%, and active transport for 19%. Term of reference 4: New technology VTAG strongly supports the adoption of new technologies to improve the delivery of public transport services and in particular improve passenger information. PTV has done well in recent years with the development of tram tracker, “rainbow boards”, real time texts and information on delays and introducing improved passenger information displays. The roll out of these is somewhat inconsistent as some lines still miss out. Less successful, have been the upgrade of the PTV website and the absence of a bus tracker app for phones. The integration of timetables with maps and the release of real time data to enable third party phone apps to be developed is also much delayed in Melbourne compared to other cities. The management fragmentation of train, tram and particularly bus services under different operators is a major constraint on efficient running and coordination of the system. Holding feeder when a train is running late is a constant complaint – particularly for outer urban stations with a limited 40-minute frequency bus service. A single Public Transport Control centre and open sharing of real time data would enable considerable improvement. VTAG is also interested in exploring the use of demand responsive “ buses” in poorly serviced fringe areas with insufficient density to justify a regular 20-minute service. The earlier technology of “tele buses” has had limited success but the potential of smart phones and computer despatch means a new generation service should be feasible to balance the needs for access with cost.

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LC EIC Inquiry into Expanding Me bourne Free Tram Zone submission 403

ATTACHMENT 1: YLE News 8.1.2020 15:30 https://yle.fi/uutiset/osasto/news/free-of-charge public transport isnt free finnish experts say/11147862

Free-of-charge public transport isn't free, Finnish experts say Public transport in Tallinn, Estonia has been free since 2013 but that's not likely to happen in Finland any time soon.

File photo of tram in Tallinn, Estonia. Image: Patrick Holmström / Yle In a bid to reduce congestion and cut traffic emissions, some cities around the world have made their public transportation systems free-of-charge. Meanwhile, prices for public transport tickets - along with expanded routes and services - are generally rising in the Helsinki region. Some residents would like to see ticket prices slashed or even eliminated, but several experts said offering free public transport is not viable. , Europe's wealthiest country, is set to make its public transportation system free- of-charge in March. Meanwhile, in Tallinn, Estonia, locals have been travelling for free on local buses, trams and trains since 2013. Luxembourg decided to stop charging for public transport services over a growing problem. But Tallinn's decision was primarily aimed at reducing the cost of daily life for residents. Experts and researchers in Finland have examined the possible effects that a free public transportation system would have on mobility, the use of private cars, emissions and energy consumption, public transport management and competitiveness. However, according to the director of the transport ministry's markets unit, Elina Thorström, free public transportation is not the answer to many of those issues. "According to research and trials, free transport systems offer no significant reduction in personal vehicular traffic, and its impact on cutting transport emissions has been limited," Thorström said. Traffic only marginally reduced The head of the research group at Tampere University's Transport Research Centre Verne, Heikki Liimatainen, said that mere act of making public transport free to customers is not a solution in itself without broader urban development goals and business plans.

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"Free public transportation increases the number of passengers, and can increase them significantly, but the shift is mainly from pedestrians and cyclists, and hardly takes drivers from their cars," Liimatainen said. According to Liimatainen research in various cities around the world has found that car traffic is not necessarily reduced once public transport fees are waived, but rather when parking costs are increased. "If a door-to-door journey on public transport takes as long as it does by car, half of commuters will take public transport and half will drive their cars. If the same trip by bus or train is one- and-a-half times longer, public transport use drops by 25 percent. If the journey is twice as long as in a car, then no one other than those who have no other means will use public transport," Liimatainen said. "I'd rather walk" The director of customer experience at Helsinki Regional Transport Authority HSL, Mari Flink, said free public transport would encourage unnecessary and excessive use of the services at the expense of society. "There's no justification to take public transport trips for one or two bus stops. I'd rather walk," Flink said. Walking and levels decreased during trials of free public transport in Mariehamn, Åland, and the same phenomenon occurred after Tallinn made its transportation system free. Flink said that free rides would lead to a decline in value of public transportation itself. "There's a lot of research that found when monthly ticket packages are higher people use public transport more in order to get more value out of them," Flink said. "Free" isn't free. The transport ministry's Thorström said that free public transportation reduces revenues for such services. "Increasing the attractiveness of public transport by improving service may be a better option than cutting ticket prices," she said. Helsinki has experimented with reduced ticket prices for its elderly customers. The transport authority gives passengers over of 70 a 50 percent discount on single tickets during the day between 9-2pm. However, most seniors don't take advantage of the offer. HSL's Flink said it is possible the transport authority may examine other models of limited reduced or free services someday in the future. Transportation researcher Liimatainen estimated that making public transport totally free would only reduce personal vehicular traffic by a couple of percentage points, but at the same time potentially overburden the transport system. "Due to the capacity constraints of public transport, they would become congested," he said, noting such a development would negatively affect the experience of end users. Flink noted that transport service levels in Tallinn have not been sufficiently developed since they went ticket-free. She said that no new tram lines have been built since 2013 even though new housing developments have sprouted up in the city. She said municipalities would have to bear the financial burden if ticket revenues disappeared, saying that the threshold to improve or develop services would become very high. "If public transport were free, it would mean that development of services would likely stop," Flink said.

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ATTACHMENT 2: PTUA BLOG NOV 2018 Myth: Making public transport free will encourage use and political support Fact: Although Melbourne’s fares are too high for shorter trips, cost is not the main factor that puts most people off using public transport in Melbourne. Just eliminating fares without improving services won’t shift the habits of enough people to justify the cost. But if service improvements can attract more people to public transport, we might as well maintain (reasonably cheap) fares so as to recover some of the cost. That’s what came to be accepted in : the city that became most famous for making its local transport free, but which ultimately had to abandon the policy on financial grounds. A popular suggestion by advocates is that more people would be persuaded to leave their cars at home and use public transport, if public transport were free. One can also make a case for free public transport on social grounds, by analogy with free health care and free public education. The difficulty with this idea is its effectiveness, when compared with the cost. What primarily deters people from using public transport is not its cost (provided it’s competitive with car travel) but factors like flexibility, convenience and door-to-door travel times. If you live or work in one of the many Melbourne suburbs with no usable public transport at all, the fact that it’s free isn’t going to make it any more attractive. I love public transport and have always been a vocal supporter. However, I work long shifts in an industrial park in Tullamarine, where the nearest bus line is not remotely within walking distance. If it wasn’t for the location of my workplace, I wouldn’t own a vehicle. Industrial parks are booming, yet they are nearly always inaccessible to public transport. How would free public transport be of benefit to employees like myself? —Erin Lewis (Fitzroy North), The Age, 12 March 2006 I would love to get the bus to wherever I want to go, and I’m more than happy to pay for it – but it has to exist first! The bus services here are hopeless, every hour on a Saturday, not at all on evenings or Sunday. Oh, and only one route. Too bad if you want to go anywhere other than Southland. Free transport will only benefit those who have a good choice already. — Gillian Scott (Aspendale Gardens), The Age, 12 March 2006 Economists acknowledge the existence of these non-financial barriers when they say that public transport has a low ‘price elasticity of demand’. What this means is that, all other things being equal, a 10 per cent drop in price causes less than a 10 per cent increase in patronage. Thus Adelaide, despite long having ’s cheapest public transport fares, also had Australia’s most steeply declining public transport patronage through the 1990s, and today has a low (albeit stable) modal share by capital-city standards. (Adelaide was also in the early 1990s the first city to experiment with free public transport for students, as has occasionally been proposed for Victoria. This did not help arrest Adelaide’s steep decline in patronage, and is best seen as a policy that may or may not have benefits for education but probably doesn’t for transport.)

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So, if the objective is to maximise public transport patronage, eliminating fares on its own is a rather ineffective strategy. As it is also the most costly strategy, it is probably not the first we should consider. Given the huge cost of the Myki system and our less-than-ideal rates of cost recovery, it’s tempting to imagine that most of our actual fare revenue gets absorbed in administering the fare collection system itself, so if we abolished both fares and Myki equipment we’d only be out of pocket a small amount. This is quite untrue: actual revenue at some $600 million a year is substantial, even after deducting about $60 million as the annual cost of Myki, and even if we spent an estimated $80 million extra each year to re-employ tram conductors and station staff. The ratio of fare revenue to operating costs for public transport in Melbourne is around one-third (though often made to appear lower by throwing in phoney ‘costs’ like capital asset charges). This is modest by world standards, but could be improved without charging passengers more, mainly by improving the quality of off-peak services (and suburban buses in particular) to boost patronage and revenue at modest incremental cost. Thus, in 2006 an Age article estimated that free public transport would cost about $340 million a year. Logically, this ought to have been weighed up against the alternative, which was to spend an additional $340 million a year on improved services. Such an increase in service would likely boost patronage more than free public transport would, and because more passengers means more fares collected, there would be increased revenue allowing services to be improved further still. On the other hand, once you’ve made public transport free, the money for any additional services has to be found in government budgets. So does the money to employ staff, that are needed for passenger assistance and security even if they’re not selling tickets. This means that the more well-used the system is, the more it costs the taxpayer – quite the reverse of the world’s best public transport systems, which come close to covering their costs (often despite relatively low fares) because they attract high patronage and hence high fare revenue. So, that $340 million of forgone revenue in 2006 has now risen to nearly $600 million, due to patronage growth in the years since. Here is the fundamental problem. Had we made public transport free in 2006, we would by now be looking for a further $200 million or more each year, just to fund the additional services required to handle growing patronage. We should expect patronage to go on growing, if we want the system to succeed – and not rely on the whims of a State Treasury with all its competing priorities for public funds. Given the enduring popularity of the idea of free public transport, it’s reasonable to expect that if it were truly a good idea it would have been tried already in at least one of the dozens of large cities around the world where public transport is popular, successful, and subject to a much greater degree of democratic control than in Melbourne. Certainly, it’s a characteristic of these cities that their fares tend to be cheaper than ours. And yet, international experience with free public transport in large cities is rare. One example commonly cited is Hasselt in , a town of 70,000 people (roughly the size of Bendigo) where buses were free of charge from 1997 to 2014. As a measure to revive a declining city centre by encouraging people to visit more often it was an outstanding success.

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But a survey of bus passengers a year after implementation found that 18% were former cyclists, 14% former pedestrians and 23% former car users – making the free service more successful at reducing walking and cycling than at reducing car travel. The free service ceased in 2014, not because of a lack of political support but from sheer financial necessity, given bus operating costs had quadrupled over the period since 1997 in line with patronage growth. Meanwhile, over that entire period the 200,000 daily visitors to Hasselt from the wider region had continued either to drive or to pay to use trains and regional buses. Other places to introduce free public transport include Châteauroux and Aubagne in France, in 2001 and 2009 respectively. Like Hasselt, these are regional towns with populations between 50,000 and 100,000 (compared with Melbourne’s 5 million), with free travel limited to town bus and tram services and funded through a municipal levy on local businesses grateful for the increased custom. (’s local businesses, at the time, were petitioning their council to remove town bus stops from in front of their shops.) In Châteauroux the change was less radical than one may have imagined: nearly half of existing passengers were already entitled to free travel, and cost recovery ran at just 14%. The world’s largest experiment with free public transport commenced in January 2013 in Tallinn, Estonia: a city of 450,000 people (less than one-tenth the size of Melbourne). As is the case elsewhere, free travel does not extend to train services, and in Tallinn’s case is only available to local residents who obtain a smartcard. (So, in this case there was no offsetting cost advantage from eliminating the ticketing system.) The estimated cost of €20 million a year equates to less than 5% of the revenue raised from Melbourne public transport users. A 2018 expansion of this system was misleadingly reported as ‘free travel nationwide’, but in fact only extends to regional bus services in Estonia—not to trains or city buses outside Tallinn. Once again, these are only free of charge for residents of Estonia. Notwithstanding all this, it’s certainly true that public transport fares in Melbourne for shorter trips are higher than they should be. For many years Melbourne had the highest fares in Australia relative to journey length, and recent fare increases for single-zone travel have outstripped both the rate of inflation and the change in the cost of owning and operating a car (which actually decreased at the time the GST was introduced in 2000). They are now at the level where many trips can be made more cheaply by car. For this reason, the fare increases from 2012 onward should be reversed, and at least part of the dividend from future patronage growth should be applied to reducing fares to competitive levels for shorter trips. International experience points to a more effective strategy for shifting travel habits from cars to public transport than just axing fares. It involves such measures as high service frequencies, central coordination of timetables, traffic priority for trams and buses, and a conspicuous staff presence. Provided fares are set at a level competitive with car travel, these measures have been proved more effective in boosting public transport use than making public transport free – and at a much lower cost to the public purse.

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