No such thing as a free lunch: Free public transport cost $110m during Covid-19

Public transport patronage and fare revenue has dramatically dropped since New Zealand went into lockdown at the end of March. Photo / Jason Oxenham

NZTA has forked out $110 million to keep public transport running during Covid-19, picking up the tab for Auckland Transport and councils across the country.

The transport agency is funding the full cost of decreased fare revenue and Covid-19 operating costs up until the end of this month, but is yet to make a commitment to top up councils going forward.

Worst case scenario forecasts from some councils show there could be as much as a 40 per cent drop in revenue into July and the ensuing months.

Without ongoing help from NZTA, their options include debt funding, which could result in a ten-year rates hike, or reducing services, which could call into question the viability of some cities' public transport systems.

Usually about 40 per cent of public transport costs are met by fares and the rest of the balance is funded from local rates and the National Land Transport Fund.

But patronage and fare revenue dramatically dropped when New Zealand went into lockdown in March.

No fares were charged on public transport during Covid-19 alert levels 3 and 4 as a safety measure and for essential workers to get to their jobs.

It's not just the loss of patronage that's put the pressure on councils, they've also faced increased operating costs associated with Covid-19.

These include increased cleaning requirements, PPE supply and the deployment of extra services to make up for physical distancing requirements.

Greater Wellington Regional Council chairman Daran Ponter said the extra $110m paid for out of the National Land Transport Fund was a "huge lifeline" for authorities up and down the country.

But GWRC anticipates that patronage and fare revenue will also be considerably lower than pre-Covid-19 levels for the foreseeable future.

The council's forecasts show there could be as much as a 40 per cent drop in revenue and without further Government support to pick up the tab, the council would have to increase debt levels or reduce service levels.

Council documents reveal debt levels would increase by about $20m, which would result in a 1.9 per cent rates increase for 10 years to repay the loan.

If the council chose to reduce service levels, it would need to generate savings of about $40m, which would bring into question the viability of public transport in the Wellington region.

Fog guns were used to clean Wellington's buses and trains during Covid-19. Photo / File

An NZTA spokesperson said the organisation was still working with councils to understand the likely revenue gap for the 2020/21 year and determine how much more money would be required from July.

"Waka Kotahi recognises that councils will need support from the National Land Transport Fund in order to maintain public transport services. Waka Kotahi continues to work with councils and the Ministry of Transport to quantify likely revenue and costs so that firm commitments can be made."

Ponter said the extra money would come as a cushion for councils in recognition they were in an extraordinary position.

But he also hoped the money would be seen in relation to the importance of public transport.

"The Government already makes a significant investment into public transport and in many ways it does that because it is more efficient and effective to fund public transport than to build more roads."

Auckland Transport told the Herald it was still assessing its revenue gap but that as recently as last week the public transport network was already at two-thirds of its normal patronage.

"The numbers coming back to use public transport in Auckland have grown quicker than we predicted. Our numbers are increasing by around 10,000 a day."

A surge was predicted this week with many corporates returning to the office.

The return of tertiary students would also bolster numbers as they were worth about 14 per cent of the network's total patronage.

Environment Canterbury documents show the regional council has considered patronage impact scenarios ranging from a net loss of 10 per cent through to 40 per cent for the 2020/21 financial year.

Patronage was reported to have increased from just 31 per cent at the beginning of level 2 to a weekday high of 69 per cent towards the end of May.

"It is expected that patronage levels will be negatively impacted for some months to come, but the return of customers under alert ;level 2 has been very encouraging," the report said.

The council would be able to draw on its public transport reserve fund to sustain services for the upcoming financial year if the Government didn't help out, but that wouldn't be possible for future financial years.