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Dear Dr Keating,
We thank you for the opportunity to comment on the matters raised in your "Issues Paper" concerning proposed changes to IPART's fare setting approach. Our comments are given below under the 23 issues raised. In some areas where we have limited knowledge or experience we have made no comment.
To someone from another Australian capital, or even to the legendary Man on the Clapham Omnibus, this review must seem an extraordinarily complex and prolonged method of working out a simple bus fare,
In previous reviews IPART has basically taken last year's fares, added a percentage for cost increases, made adjustments for anomalies, compromised between conflicting interests, absorbed some political interference, rounded the figures, and there's your answer.
This year, in an in-depth review, IPART is going back to basics to establish the efficient costs (1), to determine a fair mix of passenger (2a) and taxpayer (2b) contribution, to estimate the number of passengers (3), to apply (2a) against (1) to get dollar passenger contribution (4), and to divide (4) by (3) to get an average fare. This will then be seasoned with dashes of legal requirements, political realities, economic theories, environmental considerations, social justice platitudes, technical limitations and sundry hocus pocus to get a scale of fares.
By-products of the review include an 82-page Issues Paper, an arcane 69-page consultant's report on external benefits and another consultant's report on efficient costs. Later in the year, there will be a 100-page draft report calling for further comment, and a final determination in December.
After the review, the fares will go up by five or ten percent, the people will grumble but pay up anyway and forget about it.
Farebox revenue last year was $326 million, so the difference between a 5 percent and a 10 percent fare increase is only $16 million - not a big deal in budget terms. In individual terms, the average fare is about $1.20 ($326m fares divided by 271m passengers), so again the difference between a five percent and ten percent increase is only six cents. The average fare for the four STA regions is $1.47 (page 37).
While we appreciate that IPART is well equipped, well intentioned and has the best interests of government and people at heart, it seems to be using a sledgehammer to crack a nut.
If IPART wishes to do a Really Useful Job it could, instead of examining the costs of providing the current rather ordinary bus service, focus its collective mind on estimating the costs of providing a top quality bus service, and work down from there to calculate the price of a bus ticket.
We suspect that this rigmarole is not followed in other capitals. The relevant authority just does a little basic arithmetic and announces the new fares (probably with tacit government support). The people grumble but pay up anyway and forget about it - same as here. Protection against monopoly abuse, runaway costs and other concerns listed in the IPART Act is provided by various government agencies and by contract clauses. The consumer's ultimate remedy is the ballot box.
In any case, Brisbane, Melbourne, Adelaide and Perth have centralised transport authorities and zone fares. There is no "train fare", "bus fare", "tram fare" or "ferry fare". There is just "a fare". They don't have to trawl through the books of each provider to establish a bus fare.
Similarly, when the harbour city becomes a global city with a central transport authority and zone fares, there will be no need for IPART reviews of this type. IPART can still have a role, but the fare setting structure should be determined by a department or ministry of transport with informed transport planners, economists and operational planning people. In Sydney it seems that government and the providers have all but abandoned that oversight to IPART.
However, as the era of "one city - one system" has not yet dawned in Sydney, Action for Public Transport will co-operate and assist with the current review as best we can.
Our reading of the EOI finds only one use of the word "policy" (*), but we find the words "vision", "concept" and "currently envisaged" used many times. In fact, Section 6.6 is titled "Electronic Ticketing System Concept" and the opening paragraph goes like this:
"The following concept is included to let you know about the key functional requirements of the Electronic Ticketing System envisaged by us. The concept, and any associated architectures or diagrams are not intended to be prescriptive. Alternative concepts that provide enhanced outcomes are invited."
We therefore question whether the several future directions stated in the Issues Paper to be government policy are in fact such.
(*) The only use of policy is in section 6.2(b) which says "supporting the NSW Government's preferred fare structure and cost recovery policy". A cost recovery policy is just the split between fares and subsidy. This would be the same regardless of what fare structure was in place.
1. For the purpose of setting bus fares in the metropolitan and outer metropolitan regions, is it reasonable for IPART to focus on the four largest contract regions (the four STA regions) as the foundation for estimating the costs and benefits of bus services?
The reasons given in the Issues Paper (6.2) seem valid, but we wonder whether two private bus regions might also be chosen for comparison. We do not wish to load IPART with excessive work, but once the process has been established, the marginal cost of examining one or two more regions should not be great.
We also wonder if there might be value in doing the four STA regions separately. The individual operating costs would be easy enough, but head office costs would have to be apportioned. However, that is for IPART to decide.
The Issues Paper also mentions "fare harmonisation". The first stage of this involved making all metropolitan single bus fares the same, and the second stage extended harmonisation to the outer metropolitan areas. The Pensioner Excursion Ticket (PET) is now the same all over NSW, and pressure is likely to extend adult fare harmonisation to all buses state-wide.
2. Should IPART consider a broader set of contract regions in its review of the costs and benefits of bus services? If so, which additional contract regions should IPART include?
As mentioned above, perhaps two private bus areas could also be included for comparison. These would ideally show differences, say one in western Sydney and one on the Central Coast or Wollongong. Or perhaps one with routes to the Sydney CBD and one servicing only local areas.
3. What is the appropriate length (of time) for the fare determination?
We agree that a longer term determination is better, as was done with the rail fares review. However, there would also need to be the same proviso that the second, third and fourth years fares could be varied if circumstances change unexpectedly.
4. Is it better to align the end of the bus fare determination with the end of the CityRail determination, so that fares for both modes of transport can be considered together in 2012?
While parallel rail and bus (and ferry?) fare reviews may require additional resources for IPART, it would be desirable to review the fares and implement the determinations simultaneously. However, we would hope that by 2012 we might have a Central Transport Authority. The current detritus of 150 years of boutique fares and tickets for each mode will have been swept away in favour of a simple zone or time based fare system.
5. Are IPART's proposed assessment criteria for the review reasonable? Should IPART reconsider the criteria, or prioritise them differently?
IPART appears to have very little room to move under the net of regulatory requirements, passenger expectations, future developments, Treasury pressure, and political realities.
The priority given to the four assessment criteria in Box 3.1 seems reasonable.
Box 4.1: A 1998 review comparing bus costs of STA and private operators does not seem particularly relevant to today. While the STA's superior staff award conditions were mentioned, we wonder if the generally superior standard of STA vehicles was noted, or the higher level of overtime (how many private buses run after midnight?) or the higher cost of land for depots.
6. What is the most appropriate approach for setting the value of initial capital base in the four largest contract regions?
Book value seems the most appropriate approach.
7. What is the appropriate rate of return to allow on regulatory assets in the four largest contract regions?
No comment.
8. What is the appropriate average remaining life for regulatory assets in the four largest contract regions?
No comment.
9. Is it appropriate to determine the share of costs to be borne by taxpayers based on the external benefits approach? What are the advantage and disadvantages of this approach?
The external benefits approach seems simpler to calculate and simpler to explain that the optimisation approach, and that is the one we recommend.
10. Are there other external benefits of bus services that IPART should take into account?
Paragraph 5.2.1 says that non-work trips on public transport do not ameliorate road congestion to nearly the same extent (as peak hour trips), because roads are generally not congested at the times of days often used for non-work trips. Observation would suggest that weekend road traffic in Sydney can be as congested as morning and evening peak hours on other days.
11. How should IPART take into account the external benefits of bus services that cannot be quantified?
Since IPART deals only in dollars, the unquantifiable will have to be quantified. Make an allowance somewhere between zero and $100 million. It is better to be nearly right than exactly wrong.
Some hypotheses could be developed:
12. Is it appropriate to determine the share of costs to be borne by taxpayers based on an optimization approach? What are the advantage and disadvantages of this approach?
In paragraph 5.3.3 the paper says "This subsidy means that less funding is available for the Government to direct to other services such as public health, education and law and order." This statement is rather biased. One could have said "If the subsidy were removed, and passengers had to pay the full cost of the services they use, then the government would have to spend more money on roads to cater for the passengers who abandon public transport for their own cars, and on additional services for people who cannot use a car, for whatever reason."
The optimisation approach seems too complex for what small additional accuracy it might provide. As paragraph 5.4 says, the resulting figure would still need to be adjusted by several other factors.
13. How should IPART take account of the likely implications for affordability and patronage in its fare decisions?
Affordability is a difficult criterion to apply to public transport fares. The occasional beat-ups, both in the media and by IPART, about people in rich suburbs having subsidised fares are unhelpful. Most suburbs have rich and poor residents. Maybe the commuters are not residents of the rich suburbs. Maybe they live at Mt Druitt and commute to their house-keeping jobs at Mosman or Double Bay.
Commuters are willing to pay more for a reliable, frequent, fast and comfortable service. At the other end of the scale, many lower income people can obtain some form of concession fare. The problem is with the working poor who are generally ineligible for any concessions. Perhaps this needs to be addressed by the governments concessions policy rather than by IPART.
Patronage, on the other hand is a no-brainer. Government policy, this time made clear in the State Plan, is to increase public transport patronage, and especially by mode shift from private motor cars. How should IPART take account of the likely implications for patronage in its fare decisions? IPART must do whatever it can to increase patronage.
14. Should Newcastle fares be harmonized with fares in the other bus contract regions? If not, what justification is there for a separate fare structure?
To look at the second question first, we understand that the time zones were implemented because of the low service frequencies and circuitous routes on STA Newcastle buses. However, we will leave that for our Newcastle colleagues to explain.
To answer the first question - yes, the Newcastle fares should be harmonised with the other contract regions, by changing all the others to timed or zone fares the same as Newcastle.
15. What will be the increase in demand for bus services over the next five years?
That depends on what the government does about reliability, frequency, bus priority, capacity, non-peak services, area coverage, connectivity, integrated ticketing and fares.
In any case, IPART should not be asking that question, for two reasons:
16. What factors are likely to have the biggest impact on bus use?
We agree with the five factors mentioned in the Issues Paper (a) fares, (b) recent trends, (c) social and economic factors, (d) service quality and (e) alternative transport available. Under service quality the prepay buses may also have provided impetus.
Other factors should also be considered:
(f) the connecting transport available
(g) one-off items like the opening of the Epping Chatswood railway
which has replaced some bus services.
(h) climate change issues which are likely to force governments to
adopt pro-public transport policies fairly hastily
(i) Australia's drawn-out recession which is likely to increase bus
use.
17. Are recent increases in patronage likely to be a good indicator of patronage changes over the next five years? Why or why not?
The factors mentioned under item 16 above are all likely to continue with increased force in the next few years.
18. Is a flat flagfall and a per kilometre charge that reflects the fixed and variable costs of providing bus services the most appropriate fare structure?
No. As mentioned above, Sydney's ticketing and fares system is not just so last century, it is absolutely prehistoric.
A flat flagfall plus a charge per kilometre may well reflect the fixed and variable costs of providing bus services but the passenger is indifferent to that.
19. Under what circumstance should passengers only pay a single flagfall charge when using more than one bus to complete a journey or multiple transport modes? Given the limitations of current ticketing technology, how could this be achieved on buses?
Under what circumstance? Every time.
Cabarita and Flemington are both about 16 km from Town Hall station via Burwood station. The passenger from Cabarita pays $5.70 ($1.90 bus + $3.80 train). The passenger from Flemington pays $4.00 all the way by train. Of course, a regular commuter from Cabarita would buy a Green TravelPass ($46) but the casual traveller does not have that option. That is inequitable.
Parramatta and South Granville are both about 23 km from Town Hall via Granville station. A traveller from Parramatta pays $4.80, but a traveller from South Granville pays $6.30 ($1.90 bus and $4.40 train). This time there is no TravelPass option because the bus is privately operated.
Under a zone or time based system, the separate bus and train trips would be counted as one journey.
"Given the limitations ....how could this be achieved?" Brisbane's zone fare system was implemented with paper tickets.
APT's role is to achieve results for passengers, not to devise solutions. That is what highly paid public servants and consultants are for. Instead of its vision being limited by Sydney's outdated technology, IPART should be looking to the future and advocating a fare system that can be handled by the new smart card system.
When the Tcard system was aborted, and hopes for imminent solutions to fare inequities were dashed, the Ministry, egged on by IPART and consumers, managed to implement a weekly ticket for private buses using existing technology. We do not wish to wait another six years until the new smart card system arrives, if ever, before we have a seamless fare system. The century is slowly slipping away.
20. Is the current aggregation of ticket sections (1-2, 3-5, 6-9, 10-15 and 16+) appropriate? Should more or less ticket types be introduced to better reflect a consistent flagfall and per kilometre charge?
Yes, the current section bands are adequate. We don't need any more ticket types.
21. Should all bus passengers travelling more than 16+ sections (24 kilometres) be charged the same fare?
Yes. We don't need any more ticket types. For STA routes, the 16+ zone would have to be split into something like 16-21 and 22-29 to handle the 29 sections on the Palm Beach route. The percentage of passengers who make trips of 22 sections (34 km) or more must be so small as to be not worth the effort. No other STA route comes close to 29 sections. The L20 from Parramatta to the CBD is only 18 sections, and nobody would ride it end-to-end. Any private bus route would have infinitesimally small patronage over this distance.
22. What factors should IPART take into account when considering the social impact of fare options on bus passengers?
All the graphs and figures given under Passenger Profile are interesting but do not seem particularly useful to the task at hand, especially when they are distorted by the inclusion of penniless schoolchildren.
We agree that bus patronage is relatively price inelastic. For most passengers, fares are well down the priority list after frequency, speed, reliability, hours of services, safety, comfort, etc.
IPART is taking the view that fare options only means an increase, decrease or no change in prices. Other options could be in changes to the ticket type.
23. Are there any other factors IPART should take into account when considering the environmental impacts of bus fares?
The factors considered seem adequate. Considering any more would probably not make much difference to the outcome after everything was averaged, rounded, etc.
A colleague has provided the writer with a number of thoughts. It was difficult to incorporate these into the above classifications, so we have included them as an Appendix. We trust that you will take these into consideration also.
We have no objections to the contents of this submission being made
publicly available.
Yours faithfully,
Allan Miles
Secretary
Action for Public Transport (NSW)
Sydney has a large multi-modal public transport network that is primarily centred on the Sydney CBD but with significant service to other areas. Interchange between modes is an inevitable part of such a complex and widespread network.
Sydney public transport is not well presented as a network:
The Sydney network has design and operational deficiencies, some seemingly related to the poor presentation noted above:
Improving the network could actually make some bus operators appear less efficient: