Wellington City has the worst PT services yet pays the highest fares and the highest Transport Rates.
* About 20 cents in every dollar of fare paid by Wellington City Bus riders actually goes to help fund poorly used bus services in the rest of region
* About 40 cents in every dollar paid by Wellington City, Lower Hutt City and Porirua city residential ratepayers goes to subsidise expensive rail and poorly used bus services in Upper Hutt, Kapiti and especially the Wairarapa
* In 2017/18, Wellington City ratepayers outside the CBD paid 20% of the region’s Transport Rates and this more than pays for Wellington City public transport (PT) services. By 2023/24, Wellington City ratepayers outside the CBD will be paying 30% of the regions Transport Rate. Why does the city with the worst PT and the least investment have to pay even more?
In the three previous posts, I have shown how the Greater Wellington Regional Council (GWRC) has cheated Wellington City residents in terms of reducing bus services, rip-off fares and excessive rates. Previous posts have described where the tens and hundreds of millions of dollars every year are spent on public transport and identified who really pays. This post tries to reduce these totals to numbers that are meaningful to the ordinary resident.
Fares per passenger
GWRC Policy on Fare Contribution
The GWRC has a fares policy that states:
Public Transport User charges: 35-50% from fares and other user charges. Council applies user charges (fares) for the private benefits gained by people who use public transport.
Greater Wellington Regional Council Long Term Plan 2018-28 –Policies Pages 14-15
The GWRC’s own Fares Policy states fares should reflect the private benefit of commuters and PT riders should contribute between 35-50% of the cost of their PT service. Every year the GWRC only reports on whether the regional average Public Transport fare is within the range of the Fares Policy … and it regularly raises all fares if it is not.
Fare Contribution to PT Services in each area
Information released by the GWRC shows the Wellington Region bus operators are paid an average of $3.18 for each passenger trip with bus fares paying an average of $1.67 towards it (the rest as subsidies from rate and taxpayers). So fares pay an average of 52% of bus operator costs.
Looking at each area, it will come as no surprise that Wellington City bus commuters pay the lowest average fare at $1.60 per trip. But it will be a surprise to many that it only costs the GWRC an average of $2.52 for a Wellington City bus trip which means fares cover 63% of the cost within Wellington City.
In stark contrast, the costs per bus trip in Wairarapa and Kapiti are $9.77 and $12.42 respectively while fares are only $2.34 (25%) and $2.06 (17%). This means that the bus commuters in these areas to the north are only paying a small fraction of the cost of their bus service.
Commuters really only use the PT services in and to their own area. So logically the bus or train users in each area should contribute their share of the private benefit they receive from using the PT services. One way to assess this is to assume the fares in each area should contribute the same portion, say 52%, towards the cost of providing the PT service to their area and here are the calculations for Wellington City vs Kapiti:
It is clear that Wellington City bus users are paying more in fares than the regional average while Kapiti bus users are paying much less than the Regional Average. A graph of all the regional areas shows all bus users, except Wellington city pay less in fares:
This chart above shows that Wellington City bus users are being overcharged by about 20% to help make up for the much lower fare contribution from users of bus services in every other part of the Wellington Region. A 28 cent extra fare charge does not sound like much but Wellington City bus passengers are paying a cool $5.6 Million towards funding bus services in areas they cannot not use!
Wellington City PT users are cheated with high fares
Over 1/3rd of all the region’s PT travel is by Wellington City bus riders. Yet Wellington City pays the highest fares for distance travelled in the region and, indeed, New Zealand. Just compare travelling three zones inside Wellington City:
- Island Bay – Wellington = 4km
- Kilbirnie – Wellington = 5km
- Karori – Wellington = 6km
- Johnsonville – Wellington = 10km
With travelling three zones out of Wellington City:
- Johnsonville – Porirua: 13km
- Lower Hutt – Silverstream: 14km
- Paraparaumu – Pukerua Bay: 18km
- Masterton – Woodside: 27km
Higher fares for shorter distances would be understandable if Wellington City bus fares paid for the same portion of the costs but, as outlined above, our bus fares pay a much higher portion of the costs compared to other areas.
The GWRC Fares Policy says PT users should pay for the private benefit they get from using their PT service. The issue is there is no private benefit to Wellington City bus users from paying fares to fund the costs of PT services they do not use. For years the GWRC has overcharged Wellington City PT users in contradiction to its own Fares Policy. It has secretly passed these “fare profits” to keep rail fares down and fund costly, poorly supported, bus services especially in Kapiti and the Wairarapa.
Wellington City fares and zones are clearly unfair and they need to be changed.
Transport Rates per household and business
Unfortunately, as previously detailed, the Greater Wellington Regional Council also overcharges Wellington City Ratepayers to cross- subsidies PT services to the most other areas (it also over-charges Lower Hutt and Porirua ratepayers).
Due to the new PTOM bus contracts (and the intervention of the Ombudsman to force the GRWC to release information) the costs and ratepayer contribution for PT services in each area can now be revealed. The following tables outline the Transport Rates required to fund PT services in each area compared to the rates charged by the GWRC to the average business, residential and rural property.
CBD Business Transport Rates
CBD Business ratepayers are defined as “Wellington City Downtown City Centre Business”. The GWRC Transport Rates Policy has a special category for CBD Business ratepayers that charges them 5 times the amount charged to Non-CBD businesses. In the year 2019/20, CBD business ratepayers contributed $25 million towards funding PT services which is 35% of all ratepayer funding … a very large amount to come from a relatively small group with each CBD Business paying an average of $7,393.
The argument for such a high payment is because the Wellington CBD is the primary beneficiary of regional PT services given the high portion of workers who travel by bus and train to work each day. As about half the PT commuters travel from outside Wellington City, this analysis assumes the CBD Transport Rate contributes 50%, obviously mostly for passenger rail services, with the rest supporting bus and rail serving Wellington City.
One major issue with this model of CBD Business Transport Rates is the GWRC requires the whole of the Wellington CBD to pay 5 times normal businesses while a much smaller area is actually accessible from the by passenger rail commuters funded from by this ratepayer group. The Wellington Railway Station walking catchment is described in Section 7.11 of the GWRC’s own report on walking access:
The map shows that most rail users work towards the northern end of the CBD, a short distance from Wellington railway station. Most trips were by foot as shown by the predominance of red spots. Relatively few rail egress trips extend past Cuba Street; of those that do, around half were made by bus.
GWRC State of Walking Report: Wellington Region (June 2015) Page 34
The following diagram outlines the huge difference between the CBD Downtown Levy Area used by the GWRC to define CDB Business Ratepayers and the 10 minute walking catchment from Wellington Railway Station:
It does seem that CBD businesses to the south (and some to the north) are being charged very large amounts towards passenger rail services that their workers cannot actually use. A case could be made that businesses outside the walking catchment of Wellington Station should not have to fund rail services given they cannot benefit from them.
Non-CBD Business Transport Rates
Business Ratepayers outside of the CBD area contribute $6 Million towards the region’s PT services which is about 9%. The following table shows the Transport Rates paid by the average business in each area against the funding contribution required to fund the PT services in and from each area:
PT services from areas further from Wellington City are being cross-subsidised by business ratepayers from closer to Wellington City. It is unclear why the GWRC can justify charging all business ratepayers the same amount given the very large difference in the cost of providing PT services in each area.
Residential Transport Rates
The residents of the Wellington Region are the largest contributor towards funding PT services paying $39 Million (about 55%). The following table shows the Transport Rates paid by the average household in each area against the funding contribution required to fund the PT services in and from each area:
As with the Business ratepayers, the generic funding formula used by the GWRC does not match the funding support required to provide PT services in each area. This leads to the residents of some areas paying significant amounts towards supporting PT services in other areas. The residents of Wellington City, Lower Hutt and Porirua are paying extra to make up the shortfall in the contribution from Upper Hutt, Kapiti and, especially Wairarapa ratepayers.
The GWRC has never provided any evidence or justification for this hidden cross subsidy and, indeed, works actively to keep the cost of PT services hidden from the public (as said previously, the financial information used for this analysis has only been released following the intervention of the Office of the Ombudsman).
It is especially notable that the ratepayers of Kapiti and the Wairarapa do not know how much the PT services in their area costs or that their own Transport Rates contribution is paying less than half of this cost. The GWRC can only provide these PT services by overcharging residential ratepayers in Wellington City and other areas.
Rural Transport Rates
Last (and least) are the rural ratepayers which are rightly the smallest contributor towards funding PT services paying about $1 Million (about 1%). The following table shows the Transport Rates paid by the average rural property in each area against the funding contribution required to fund the PT services in and from each area:
Although the amounts per property are much smaller, it is clear that some rural ratepayers are helping fund PT services in other areas.
GWRC policy is to increase subsidies from Wellington City
The GWRC changed the formula used to allocate Transport Rates in the 2018/19 Long Term Plan. The previous model was based on allocating PT costs to the ratepayer groups that benefited from it and, although flawed, it did charge more to areas where PT costs were higher.
Since 2018, the GWRC has been gradually moving to the new Transport Rates Policy where the cost of an area’s public transport services is no longer part of the Transport Rates allocation. This means that areas with lower cost, low quality PT Services (e.g. Wellington City) will be charged the same as areas with high cost, high quality PT services (e.g. Kapiti and the Wairarapa). The overall effect of this policy is to increase rates for businesses and households in more expensive areas (i.e. Wellington City) and reduce rates for areas in cheaper locations. Few ratepayers noticed this change but this was analysed in an earlier post. Interestingly, after a submission by the Wellington Chamber of Commerce, the percentage of the Transport Rates paid by CDB Business ratepayers is constant at about 37% … it is Wellington non-CBD businesses and, especially, residents who are having to pay an ever greater share which is discussed in this post.
Wellington City Businesses outside the CBD to pay more than double
The impact of this new Transport Rates policy on the average non-CBD businesses is shown in the following graph*:
There are clearly two groups of businesses paying the GWRC the Transport Rate:
- Lower Hutt, Upper Hutt and Porirua whose contribution towards PT services stays the same even while the average rates paid is rising about 2.5% per year
- Wellington City, Kapiti and Wairarapa businesses whose Transport Rates are increasing between 12% and 17% every year
Kapiti and Wairarapa business ratepayers currently pay very little towards their rail and bus services and so some rates increase is perhaps understandable.
But Wellington City businesses outside of the CBD are mainly served by the cheap Wellington City bus service and yet still paid the average amount for the region. What cannot be understood is why Wellington City businesses outside the CBD must more than double their Transport Rates contribution and will pay almost all the $2.5M in increased GWRC Business Transport Rates?
Wellington City Households to pay more while other pay less
The impact of this new Transport Rates policy on the average residential household is shown in the following graph*:
Wellington City Residential households used to pay less than the average which reflected the much lower subsidy cost of the Wellington City bus service.
Under the new Transport Rates policy, the GWRC is raising Wellington City household rates for PT to be higher than any other area. The new policy is essentially based on the average house value and Wellington City, having more expensive housing, must now also pay much more towards funding public transport.
The percentage of Transport Rates to be paid by Wellington City residents is increasing from 19% in 2017/18 to be 27% in 2023/24, an increase of over $100 for the average household. This increase not only pays for all the increase in Residential Transport Rates ($5 Million) but another $3 Million is taken to reduce the rates for Porirua and the Hutt Valley residents below the regional average.
As outlined in the previous section, as of 2019/20, the GWRC already takes nearly half of the Transport Rates paid by Wellington City Households and uses it to support PT services in other areas. None of this massive increase in Wellington Residential Transport Rates is needed to support PT services in Wellington City … it all goes to fund heavily subsidised, higher quality PT services in other areas, especially in Kapiti and the Wairarapa.
Wellington City Ratepayers are cheated by the GWRC
Wellington City fares for bus and rail services pay for 43% of the cost of those services while fares paid by commuters in other areas only fund 31 – 33%. This largely reflects the high passenger fares required to ride on the low-cost Wellington City bus service.
In 2017/18, Wellington City ratepayers outside the CBD paid 20% of the region’s Transport Rates and this more than pays for Wellington City PT services. By 2023/24, Wellington City ratepayers outside the CBD will be paying 30% of the regions Transport Rate. The extra $10 Million dollars is not to improve Wellington City PT services but is actually being used to fund increasingly costly PT services in other areas. The GWRC has made little effort to invest and improve Wellington City PT services … indeed it could be argued that the “Bus Debacle” changes made in 2018 have made our PT services worse.
Over the past decade the main focus of Greater Wellington Regional Council public transport for Wellington City is to cut costs for the bus service, as well as increasing rates and fares.
Instead the GWRC uses Wellington City money to hide the real cost of passenger rail and poorly supported bus services across the rest of the region. This analysis reveals the evidence that the Greater Wellington Regional Council has cheated and continues to cheat Wellington city commuters and ratepayers.
Wellington City has the worst PT services yet pays the highest fares and the highest Transport Rates. The only way to change the GWRC’s rip-off policies on fares and rates is to tell the GWRC, through your Regional Councillors and by submitting to the GWRC Long term Plan Consultation.