What do you mean you saved $18M on Buses but spent it on the Trains ?

  • In 2016 the GWRC announced it expects a multi-million dollar PT cost saving from its new passenger rail PTOM contract with TransDev.
  • In 2017 the GWRC announced it also expects multi-million dollar PT cost savings from its new bus PTOM contracts.
  • This analysis compares the PT costs in the 2018/19 Farebox Review with previous costs and reveal major changes to Wellington PT revenues and costs. In particular, an $18.6M saving from Bus PTOM contracts
  • But these huge bus savings are to be spent on an apparent $17.9M Rail cost blowout !

This is the first of three posts, looking at the Greater Wellington Regional Council (GWRC) proposed public transport costs and fares for the 2018/19 year.

GWRC previously announced major savings in PT operating costs

In 2016 and 2017 the GWRC re-tendered rail and bus services under the new NZTA Public Transport Operation Model (PTOM). During this time the GWRC claimed both the new rail contract and new bus contracts will both save millions in the cost of providing PT services:

In 2016, the GWRC announced:

“The new performance-based contract, awarded to Transdev Wellington Ltd and expected to start in July, will deliver savings of around $100m over the next 15 years.

Chris Laidlaw, Chair of Greater Wellington Regional Council (GWRC), says rail commuters will see a new look to rail services including the move to one public transport brand, Metlink. “And ratepayers can expect to see real lifts in value for money over the term of the rail contract.
GWRC Press Release 15 March 2016

In 2017, the GWRC announced the outcome of the Wellington regional bus service tenders with new operator Transit being awarded the bulk of the service contracts.  The GWRC Chair, Cr Chris Laidlaw stated:

The outcome of the tender is expected to reduce operating costs by several million dollars a year, paving the way for new public transport initiatives such as fare discounts.
GWRC Press Release 4 May 2017

These and other announcements about the new contracts for rail and bus services claimed savings of around $10M per year with the rail savings starting in 2017/18 and bus savings starting in 2018/19.

Then the Fare Reviews say we need a Fare Increase

But then, in the last year, the 2017 Greater Wellington Regional Council (GWRC) Better Metlink Fares Review concluded that a 3% Fare increase was required to help fund a range of new discount fares:

We haven’t increased fares for over five years, but we’ll need to apply a 3% fare increase to all Metlink fares from mid-July. This will really help us to offset the cost of other fare changes, including new discounts, and to ensure all of us that use public transport contribute to the share of the cost.
Simplier and Fairer Fares – Metlink Website

The need for the 3% fare increase was reconfirmed by the “2018 Fare Review” report presented at the same GWRC Council meeting on the 14th March 2018 that also approved the 2018/19 Long Term Plan consultation.

So what happened to the multi-million dollar PT cost savings the GWRC Chair Chris Laidlaw said were “expected to reduce operating costs by several million dollars a year, paving the way for new public transport initiatives such as fare discounts” ?

Did the GWRC achieve promised multi-million dollar PTOM cost savings ?

What follows is a detailed analysis of the GWRC fare reviews and, more particularly, the supporting fare calculation information obtained under LGOIMA that was used to support the GWRC fare reports.

The GWRC only provided the supporting fare review calculations due to an Ombudsman Complaint

The details of obtaining the Farebox calculation spreadsheets to be used in the 2018/19 Fare Review were:

  • 20th January 2018 – A LGOIMA request to the GWRC asking for the 2018/19 Farebox Recovery calculation spreadsheet.
  • 19 February 2018 – The GWRC responded that:

GWRC will provide you with a copy of farebox recovery calculations as part of reporting on compliance with the farebox recovery policy and review of budget provisions in LTP, once it is finalised and after the Council meeting on 14 March 2018.

  • 16th March 2018 – after no further communication from the GWRC, a following request for the information was sent
  • 23rd March 2018 – a complaint was made to the Office of the Ombudsman.
  • 4 April 2018 – the Ombudsman investigator made contacted on the 4th of April saying he had contacted the GWRC.
  • 6th April 2018  – the GWRC finally released an edited versions the Farebox Recovery calculations used in the 2018/19 proposed annual plan … over three weeks after the GWRC promised it would be provided.

The following information should be read with the understanding that the GWRC only provided this information due to the intervention of the Office of the Ombudsman.

PTOM Savings as outlined in the Farebox Recovery Spreadsheets

First we look at Wellington Regional bus operating costs between 2015/16 and 2018/19 where PTOM contracts commence in the last, 2018/19 year:

Bus Operating Costs 2015/16 – 2018/19

Instead of the GWRC reducing “operating costs by several million dollars a year“, it appears the GWRC has made huge savings of $18.6 million in Direct Operating Costs from the new PTOM bus service contracts.  It it not surprising the GWRC has not shouted the nearly 20% savings in bus operating costs from the rooftops ?

Now looking at rail operating costs, the GWRC had set the expectation of Wellington Regional rail operating cost savings or around $7M/year to kick in from July 2017 when Transdev took over the Wellington passenger rail contract from Kiwirail.  The following outlines the predicted rail operating costs versus actual operating costs from the Farebox Recovery spreadsheets:

Rail Operating Costs 2015/16 – 2018/19

The 2016 GWRC press release that the new rail contract would “will deliver savings of around $100m over the next 15 years“, but rail costs did not reduce in 2017/18.  Even worse, 2018/19 rail operating costs appear to increase by a huge $17.9M (which is a cost increase of over 20%) !!!  In its second year, the gap between what the GWRC promised the PTOM based rail service Direct Operating would be and the costs in the 2018/19 plan is over $25M !

Why is the GWRC silent on these major changes in PT Costs ?

The 2018 GWRC Long Term Plan has maybe a dozen different documents with literally hundreds of pages yet the GWRC has not published anything about these major changes in the underlying 2018/19 costs of the Wellington Regional public transport service.   That this information have never been reported by the GWRC is very concerning and contrary to the principle of open transparent government the council claims to support.

It is also strange that the GWRC appears to have achieved such a massive savings in bus direct operating costs but these savings are consumed by an equally large cost blow-out in rail direct operating costs.

The next Wellington Commuter post looks at the question “They saved over $18M on the buses so are bus users now paying too much ?

2 Comments

  1. Mike Mellor said:

    The contrast between the anticipated cost savings on the rail contract and the increased actual operating costs is stark, with costs for 2018/19 about 25% above where they were predicted to be, according to your graph. That’s a pretty large increase: is there any explanation, or breakdown of the “actual” figures in the papers that you have? Is it perhaps related to the train frequency improvements that are planned for July (which should be offset by an increase in revenue)?

    It would be interesting to see graphs for predicted and actual bus and rail revenue for the same years, as a comparison.

    24 May 2018
    Reply
    • Wellington Commuter Wellington Commuter said:

      Thank you for your comment Mike. You asked exactly the correct question and this question is answered with today’s Post … feel free to have a look (http://wellingtoncommuter.nz/?p=282).

      01 Jun 2018
      Reply

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