Brian Rudman: Time to end free ride for bus firms

Auckland Transport is seeking ways to avoid having to prune $31.2 million from its public transport budget. Photo / Greg Bowker

Auckland Transport is seeking ways to avoid having to prune $31.2 million from its public transport budget for the coming financial year. In what has been another boom year on the buses and the trains, the answer seems obvious. Put the squeeze on the private bus operators to open their books and justify the huge public subsidies they continue to rake in, whether the times be good or bad.

I'm not an accountant, but it seems simple arithmetic to me that if a bus two years ago carried a handful of fare-paying customers, and required a subsidy to help cover the costs, and now that bus has people hanging from the straps, then perhaps the operator no longer needs the public subsidy he once did.

It might also be worth investigating the level of profits flowing from "economic" services on traditional unsubsidised main route services. If they were commercially viable before the recent surge of customers back to public transport, what sort of margins are the operators pocketing now.

In July 2008, then Auckland Regional Council chairman Mike Lee observed wryly in a letter to Transport Minister Annette King, that "it would appear that the private bus companies in Auckland are much more interested in increasing bus subsidies than increasing bus numbers".

He noted that at the time of writing "overall bus patronage is down nearly 5 per cent compared to four years ago" even though public expenditure on bus services had increased by 90 per cent between 2004-05 and then.

It took the war in Iraq and rocketing fuel prices to reverse the trend, bringing passenger numbers back to the 2005 total of 43.1 million.

Mr Lee, now chairman of the Auckland Council's transport committee, noted in that letter, that between 2005 and 2008, despite a blip downwards in passengers numbers, annual subsidies to private bus operators in Auckland nearly doubled from $45 million to $93.3 million - shared between ratepayers and the Government.

In recent times, thanks to rising petrol prices and the concerted action by the old Auckland Regional Council, and in its dying years, the previous Labour government, Aucklanders have begun abandoning their cars. In March, public transport passenger numbers exceeded seven million for the first time in decades.

This included, for the first time, more than a million train trips. For the year to March 2011, bus patronage totalled 50.45 million rides.

Obviously this increased patronage brings with it additional costs, such as new buses - though they do seem to all end up on routes other than mine. You might also expect it to bring economies of scale, such as turning once uneconomic subsidised routes, into viable commercial services. Or if not fully able to survive on the fare take alone, at least needing a lower subsidy than when passenger numbers were seven million fewer.

The Auckland public transport subsidy totals around $140 million, and the bus operators take the lion's share.

In September 2007, with the decline in bus patronage finally flattening out, Mr Lee despaired that providing subsidies was "like pumping blood into the patient and getting the odd twitch".

That came after three years in which subsidies had increased 89 per cent with nothing to show for it in terms of passenger growth.

Times have changed. The patient is more than just twitching. It's showing distinct signs of life. To continue the transfusion metaphor, perhaps it's time to turn off the artificial blood supply and encourage the patient to stand on his own two feet.

If he can't, at least he should be made to produce a doctor's certificate showing that he's not malingering.

After all, it happens the other way round. In 2005, NZ Bus's former owners, Stagecoach. beat off rivals in the tender process, then a year or so later, came back to say they could no longer operate 13 of its "commercial" routes without a subsidy. It had the regional transport authority over a barrel with the choice of leaving the passengers high and dry, or giving in and providing a subsidy.

In the end it handed over $8 million to add to the existing $40.6 million subsidy bill.

Now that times are more rosy, it's time to try the process in reverse. Remove the subsidy where it's no longer warranted.