Will New Govt Agency Policy Kill Public Transport?


The transport agency appears to be embarking on a scary accountants mindset in its approach to public transport, and some fear it’s a Trojan horse to controlling public transport strategy in New Zealand.

In fact, the agency’s decision to “review the effectiveness of its expenditure on public transport “could have a “dramatic negative impact on the development of Auckland public transport system,” according to an ARC transport report – and lead to higher fares forcing more people back into using cars.

The agency wants to implement next March a “farebox recovery policy,” to “support regional councils and ARTA to improve value for money on the investment in public transport services through a best practice process for ‘fare policy decision-making’ or reviewing fares.”

Tomorrow’s ARC transport committee will consider a report from its transport general manager that warns:” For a given transport demand, setting a farebox recovery ratio will determine the funding available for services, which will in turn determine the set of services that will deliver that target. The farebox recovery ratio target will effectively be the public transport policy for the region.” The ARC’s initial assessment suggests that to raise fares sufficiently to achieve the agency’s suggested 50% farebox recovery ratio would involve pushing a number of current passengers into cars.

The “worrying” proposal for this farebox recovery ratio for Auckland, Wellington and Christchurch to be set at a minimum of 50% “could have a dramatic negative impact on the development of Auckland public transport system and on the Auckland transport system generally.”

The ARC says that no evidence or rationale is produced for this number, other than it is not too different to the current ratios.

It says the agency’s  consultation document focuses on the efficiency of public transport with no discussion of how public transport fits within the wider policy context. The document does not recognise wider government objectives such as the support in the GPS for public transport in major cities, the acknowledgement in the National Infrastructure Plan discussion document of the importance of urban form and the “shaping” role played by transport in delivering this, or the requirements in the National Energy Efficiency and Conservation Strategy for improvements in public transport in order to reduce energy use.

There is “no recognition of the expectation that the Government will adopt greenhouse gas reduction targets within a matter of months, and that improved public transport will play a part in delivering these targets.

“There is certainly no recognition of the Auckland transport strategy of deliberately moving away from road improvements in favour of improving the public transport system,” says the ARC transport manager’s report.

So what’s the secret agenda then?  The agency’s stated aims are set out as:

  • Help improve the effectiveness and efficiency of public transport services
  • Ensure that the costs and benefits of providing public transport services are shared fairly between those who use public transport and those who don’t
  • Improve the transparency and consistency of the approach to farebox recovery implemented by regional councils throughout the country
  • Set out NZTA’s expectations on having a fair distribution of costs for providing public transport services Arrest the decline in users’ contribution to the total cost of providing public transport services. This contribution has been falling for a number of years and is forecasted to continue to decline without intervention Enable the NZTA to undertake better benchmarking and monitoring of farebox recovery ratios throughout New Zealand.

It justifies it as saying the agency provides a significant amount of funding to regional councils for public transport services (the 2009–12 allocation in the National Land Transport Programme for public transport services is $630 million) and therefore has a strong interest in ensuring that its investment is used in the most efficient and effective manner.

On rail, the ARC report says that particular care needs to be taken in interpreting farebox recovery ratios. For rail there is a very strong relationship between operating costs (which are included in the farebox recovery ratio) and investment in infrastructure (which is not). Operating cost is very much related to the age and type of rolling stock. New electric rolling stock will have considerably lower operating costs (and therefore higher farebox recovery ratio) than old, diesel rolling stock. In Auckland, lower operating costs will not be fully gained until the electrification project is completed, and the increase in patronage (the “farebox” side of the ratio), will continue for some time after that. The ARC report sayst that a farebox ratio target for rail would therefore need to be staged over time to account for the impacts of capital investment.

The ARC report says any target with an arbitrary lower limit that did not take account of the investment timeline would be quite misleading. In conclusion, “forcing regional councils to set a Farebox Recovery Ratio is a blunt and ineffective way of improving cost effectiveness costs.”


From the Q&A explanation in the transport agency document

What do you mean by farebox recovery policy?

The term ‘farebox’ is used to describe the revenue collected from tickets (cash, prepaid,  passes and electronic purses) purchased by those who use public transport system. In a literal sense, a farebox is the device/other method used to collect fares for the use of buses, trams, trains and ferries. A farebox recovery policy by those regional councils that have one in place sets out the contribution public transport users are expected to make to the cost of providing public transport services in their region. It should take into consideration the private benefits to the user as well as the wider benefits to society from that usage, such as less congestion and having access to an alternative mode of transport.

The NZTA’s draft policy sets out the aspects it wants regional councils to cover in their farebox recovery policies, including asking them to set a formal farebox recovery ratio target. In some cases, the NZTA would set that ratio as a default; in other cases, it would agree a target with the regional council. Both options are on the table for consultation.

What is a farebox recovery ratio?

A farebox recovery ratio measures the contribution fares make to the full cost of providing public transport services, and is typically expressed as a percentage. Few public transport systems are completely self-supporting, so government subsidies and other revenue such as advertising and parking fees are usually required to cover the costs.

Who are you targeting with this proposed policy?

This policy is primarily targeted at regional councils as they are the organisations that plan and contract for the delivery of the public transport services. The regional councils have the powers to set maximum fares, which strongly influences how much the users pay. The NZTA wants to ensure that the councils are provided with the tools and are aware of the NZTA’s expectations when they set those fares. In addition, we are seeking feedback from public transport operators who set their own fares in some circumstances, particularly for commercial services. Finally, we will also be seeking feedback from public transport users groups because of any potential implications this policy could have for them in their regions.

Why are you doing this consultation?

The consultation is intended to:

  • inform stakeholders of the proposed draft policy and seek their feedback
  • identify issues/opportunities relating to the draft policy
  • enable informed, robust recommendations to be made to the NZTA Board that take into account the views of stakeholders

What are the key changes that this new policy proposes?

The draft policy proposes that all regional councils that receive NZTA funding for public transport services have:

  • a farebox recovery policy in their regional public transport plan that is linked to the strategic goals of their organisation and the government’s desired impacts for public transport as a condition for NZTA funding
  • an explanation of the rationale for their policy
  • a formal farebox recovery ratio target and a standardised formula for calculating it
  • a requirement to conduct regular fare reviews
  • performance reporting by region, centre and mode of transport.




  1. James says:

    How would the formula cope with the free infrastructure provided to buses (roads) vs the included cost infrastructure for rail (tracks+stations etc.) ?

  2. Jeremy Harris says:

    How dopey, when the Government passes legislation requiring all people to pay for their own parking (whereever it is) and trucking companies to return 10% on the cost of the infrastructure they use year on year then I’ll support a 100% farebox recovery policy until then it is daft to reduce/remove subsidies on form of transport and not on others.

  3. George Darroch says:

    Daft it is then. New Zealand is going back to the stone age.

  4. Joshua says:

    I fully agree with policy - in about 50years when Public Transport Investment matches what has been invested in the roading network, and a common policy is applied to personal vehicle use.

  5. Cambennett says:

    Not sure about back to the stone age, looks to me like we are going back to the 90s.


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