Editorial: Time for the councils to contribute

As a rule of thumb, regional councils should have the greatest degree of freedom possible to develop passenger transport systems within their domain. It is they who have developed strategies based on an intimate knowledge of patterns and problems, and it is they who strike contracts with transport operators. Additionally, their aims and ambitions may not always coincide with those of central government. For those reasons alone, the newly announced changes to the Government's funding system for passenger transport is welcome.

That is not to suggest that the scheme, in action since November 2000, has been a dud. Its strong suit is the way it ties Transfund grants to regional councils for subsidising the cost of bus services to performance. The highest payments are for patronage growth in times and places that most reduce congestion. Thus, councils have a clear incentive to identify particularly congested routes and provide peak-time services of greatest value to passengers.

The Government praises the present scheme, saying it has spawned several major transport initiatives improving bus services in Auckland, Wellington and Christchurch. Overall, it says, the number of journeys taken on public transport has increased 25 per cent since the scheme started.

There are drawbacks, however. Aside from the inherent risk of hidden cross-subsidies, there is potential for frustration and inconsistencies. The objectives of central and local government will inevitably differ from time to time, as will priorities. The Treasury can be a strict financial disciplinarian, as Auckland has lately discovered with a condition attached to a $20 million Transfund booster payment to the city council's Britomart transport hub. Half of the sum was offset by an equivalent reduction in future patronage finance paid to the regional council for increased passenger transport.

Transfund's reasoning was that both payments were designed to achieve the same end - easing congestion - and that it should not pay twice for the same benefit. Clearly the city has struggled to justify the cost of Britomart in purely public transport terms to both Transfund and the regional funding body Infrastructure Auckland. The civic benefits of Britomart are properly charged to the city.

There is also scope for questioning what constitutes orchestrated patronage growth and what is merely natural increase. Transfund allows for natural growth by declining to pay more than 80 per cent of a region's total spending. But taxpayers are entitled to ask whether a large percentage of Auckland's rapid patronage increase cannot be laid at that door. Much of it is clearly prompted by the influx of foreign students who, while the basis of a burgeoning industry, do not pay taxes. On that basis, are taxpayers subsidising Auckland too much? Should such subsidies more properly be the domain of the regional council and ratepayers, who derive direct benefit from the students?

That will, in fact, be the product of planned revisions to the patronage funding scheme. Government subsidising of public transport will slow and regional councils will contribute more. Most importantly, the councils will gain a degree of flexibility that echoes their increased financial role. That process will be aided by proposed changes in Transfund's thrust, as the distinction between the way baseline services and new services are funded is removed. Essentially, there will be greater scope to improve existing operations. The patronage funding scheme was designed to kick-start public transport initiatives. By focusing on performance, it has achieved that. But the time is now right to hand a greater share of the responsibility back to regional councils. That is where it most properly belongs.