Scenarios for change The farebox recovery ratio can be improved by: • Retaining current fares and increasing patronage by improving service quality eg improving the network, providing transfer opportunities, increasing fre~uency and service times, and reducing travel times, but this is subject to the funding available. For this NLTP only $31 million was set aside for service/operations improvements for the whole country. • Reducing costs through the retendering of contracts but this would depend on the degree of competitive tension. This competition only really exists in Canterbury. • Optimising schedules, frequencies and service times, providing priority measures and/or reducing services can also reduce costs. This requires reviewing RPTPs and netwo~k~pi s followed by negotiating or retendering (currently underway in Auc~~and Wellin ut hampered by uncertainty related to the potential implications ~!~~ of th~. becau~~ic:ities ~~rred • Increasing fares (which could be counterproductive as in 20 Otago . Also, many of the existing net contracts do not i~c1~a "c~aw.~ck" ~ision which enables regional councils to adjust downwards the c~~rice to additional fare revenue to the operator). ~fl~;:;~: J The table below sets out the impacts if fares wer~~Od~Y~o percent farebox recovery ratio target for the Auckland RegiO~al~rt Auth I ,G ter Wellington Regional Council and Environment Canterbury - ~o Id be a ~~ or Wellington. An increase in fare levels will cause patronage to decr e t tal re~e!~~StiIi increase overall, therefore reducing the cost of providing contr cted. ces. ~~ ~ fall in patronage will also decrease the economic benefits for the se . e ;/lese hav ~~i ated using the values and methodology set out in NZTA' E c Eval a ual. Each public transport user in the three major cities currently@~ rela~' ig benefits, e.g. $21.20 for each peak time user in Auckland. Therefor tQ~n econ~1 e Its is several times the savings in funding cost. '\/~ ---~", Region Current Required Patronage Funding Economic fare change (%) cost benefits change change change (%) ($m) ($m) ARTA $2.26 1996 -796 -$8.40 -$63.94 Greater $2.03 -996 396 $4.31 $22.14 Wellington Environmen $1.38 $1.57 1496 -596 -$1.95 -$8.88 Canterb 20 Two increases of 5096 has resulted in a significant loss of patronage and a decline in ratro from 43.196 to 38.296. 67 Conclusions on current farebox recovery ratios and 50 percent scenario for change • The economic impacts of public transport are proportional to the level of patronage. If fares increase, patronage will decrease in proportion to the elasticity of demand. • There are a range of other factors that also determine the demand or patronage of a service e.g. service frequency, petrol prices etc. Each demand factor has its own elasticity of demand value estimated from statistical studies that isolate the effect of each factor, even though several may vary simultaneously. • At present there is very little recent research on NZ data, but a Transfund research report recommended a value of -0.4 for fare changes, based on an exhaustive literature revie~ and 21 analysis • ~ ~~,' • If the quality of the service Improves it will not change the ela>!;~man~w(/i.,!'rees~/ ~t to fares, rather it will have its own separate effect on demand ~\;((3'~iS the 4¥tkJ!Y16r </~ '''-J service frequency. " ""',, '0 t. \S< ':\ '..) " ' • A fare increase may improve revenue and the fare~(~ry rati~~<) but patronage and therefore the overall benefits may decrease~t6!~~Cl(:CePtab;~,~,ffare increases are not set and managed appropriately. General~~~d reg~~l;treases are preferable to irregular and large increases. <~~ ~~~ • This analysis does not take into cOnSi~~gnifiC nf:~-e,'r?ces between the main public transport regions that means a blari\~~rcent fa~:~c~very ratio target is difficult to justify eg different levels of p~trans:portsyst eNty, investment, topography/corridors, c0'7'~~'evels, em_~ /~) entres and GOP per capita. , e~'~",~~~~~"a""n, a~6~~2:~ • In the absence of an d methodology for setting farebox recovery ratio targets for regio undls, set6& ercent farebox recovery ratio target can be ~ I to" construed as arbitF~~/:>'(/ ....~ • Setting 50 pednV;~box rec~s could create perverse incentives such as discontil}U~ ;;~servlces, se~~s designed to free up capacity in the peak (eg school servic~~~ices ~~d?r the transport disadvantaged, and such a high level of far~,~~ryw~ul ~ifk:antly affect the patronage in smaller public transport regions sin~~nt ral\:~\:)the range of 20 - 40 percent d)~~0V considera~~~ar~ingincreases in patronage To be ~~n contributing to the government's desired outcomes patronage increases need to be generate(] from a shift from the private car to public transport during the peak periods. The ability to increase patronage will be influenced by a number of factors. These include: • Service capacity. While there is some bus capacity available during the peaks in Auckland and Christchurch, it is constrained on most routes in Wellington. Providing additional capacity would increase operating costs but some gains may be made by rationalising services and ensuring integration between modes. Rail capacity in Auckland and Wellington is currently limited but will be enhanced when the new rolling stock is delivered (2011 for Wellington and 2013 for Auckland). 21 A more recent study of a fare change in Wellington estimated the elasticity as -0.35, which is therefore consistent with the value of -0.4 officially recommended by NZTA. 68 • Quality and reliability. Patronage is known to increase if the services are of good quality (comfort, convenience, staff customer attitude and safety), reliable and competitively priced. The option of parking levies to discourage car use and as a source of revenue for public transport services will need to be considered if substantial patronage gains are to be made. • Integrated ticketing. The introduction of integrated services and integrated ticketing will improve the user experience by enabling quicker boarding and transfers as well as the convenience of cashless fares. This has already proved its worth on the North Shore busway using a simple paper ticket and can only get better with the completion of the AIFS. • Political priorities and funding. Central and local government support for a greater mode share for public transport is essential, as well as the necessary funding commitment to provide services that offer a viable alternative to private car use at peak times in particular. 69 (;:;'\ ~~Offinancially viable and efficient public ~ )t/o~t:tlC~~fficult for the NZTA to justify setting a specific farebox recove r I t et for a r' council. But the NZTA can influence the farebox recovery raY9>t~ t f regi.~ co~nc' s through the formal development of their Regional Public Transpo ~ 's W~il~t~any NZTA concerns about the contribution from public transp nd/or e' ~cy of a public transport system/mode operating in a particular region we prop~el~~e '0 account. We have seen the impact of this influence on ARTA's recent draft R?,Z~' . ludes the aim of 50 percent fare box recovery (40 percent fare box recovery f«~ services), and its recent fare increase. We bel~~he NITA will make cons iderable gai ns through the adoption of the following requlre~ms: • All regional councils will have a fare box recovery policy in place as part of their RPTP by 1 January 2012. • All regional councils will set a farebox recovery ratio target or target range as part of this policy. • The farebox recovery policy will explain why the target/target range has been chosen, and how it will be applied, as well as how the policy contributes to the RPTP, RLTS, CPS and LTMA. • The fare box recovery ratio will be calculated according to a standard formula. 70 • There will be regular reporting of the farebox recovery ratio performance of each region by system and by mode. • There will be regular fare price reviews and six yearly reviews of fare structures. • Better data will be collected through contracts and the capture of information from commercial services through section 14 of the Public Transport Management Act 2008. These provisions cover patronage data and farebox revenue, but not operating costs. The NZTA will also: • Update the Regional Public Transport Plan guidelines to address farebox recovery policy and set out the NZTA's expectations. • Develop tools to assist regional council's to make decisions on oPt~~fares and e.q~."ble contributions from public transport users, ratepayers and road use:t:: Q "" ~ , 'I' Part B - The Funding Policy approach /;/>~ (~~ /. ~ \v~ What do we need to address? ~,' .~/ \' The pressure on the National Land Transport Fund a~.j,' .. ~~Ithat. ~.. ~.=;"provided for public transport achieves the government's desi7<~~S: an~/,\~f~)mOney. Determining what we want from public tra~~ fun(:.~jt~rdingIY '~~eSigned\t~ ~Q\~n"better The NZTA's Investment and Revenue St . value for money from the resources available, and to direct Inves~j;r,;, ac~.··~~~.\··~~'\/~ontribute to the government's desired impacts in the CPS (the~des m;~k~'.~~·s on other LTMA objectives). The NZTA has interpreted this f~r~~~!:i~spor~~~mentand Revenue Strategy as providing activ~~~~~1ihPro< ~ increased priority for <.' . ~ I ,,/ E. Economic row a . uctivi • Improv:m,~\~eY ;i.~e ~~~:n key routes :::in~::es~n~:'~~en :. which enables: / i<~"'· • Extracting th~,,~LfJ'J"{value from past and current investments .' • OPtim~a~ex'"" overy rates • Imp ~ticiri of farebox policies across the public transport network. ( \ C. Ac" ie \are iven a hi h riorit where there is si nificant im rovements in one or more of: • Peak time public transport patronage in major urban areas with severe congestion • Optimising public transport services and infrastructure • Farebox recovery rates.