Wellington City and Lower Hutt Cheated by Public Transport Rates

* Understanding the funding of bus and rail services is an essential part of understanding the value of spending $301M on bus and rail services to different parts of the Wellington Region

* Greater Wellington Regional Council (GWRC) collects about $70M in Transport Rates to help make up the difference between fares and bus/rail costs – but not all ratepayers are being charged equally.

* This analysis shows the GWRC is quietly overcharging Wellington City and Lower Hutt City residents and non-CBD business ratepayers by 25% ($8M and $4.5M respectively) to subsidise more costly and less used PT serving Kapiti and the Wairarapa

Most Wellington public transport (PT) discussions are about the operations of the Wellington bus service, the train service or where major improvement projects are needed.  There is too little discussion on funding public transport and, in particular, nothing on how the funding for PT from a city or area is related to the costs of providing PT services to that city or area. Many might believe that what they pay in Transport Rates roughly covers the cost of their own area’s PT service but, in fact, there are significant winners and losers in how the GWRC charges these rates.

What does public transport cost and who pays ?

The Annual Plan outlines who must pay the Transport Rates taken by the GWRC, but what is never discussed is how the Transport Rates being taken from different cities are actually spent to support the cost of our region’s bus and rail PT services? This article attempts to answer this question and also the questions:

  • What do bus and rail services to each area cost ?
  • Does the Transport Rates taken from ratepayers in each Territorial Local Authority (TLA) fairly reflect the cost of providing bus and rail PT services to each area ?
  • to what extent are ratepayers in some TLAs actually paying to support PT services to other parts of the region ?

The 2019/20 GWRC Annual Plan “Staying on Track” publishes regional council rates information including the $71.5M for Transport Rates and, on page 60 of “Supporting Information to the Annual Plan 2019/20”, how much of this is to be paid by the ratepayers of different cities and regions to subsidise the region’s bus and rail services:

But there is nothing published on PT costs and so, to answer the above questions, the detailed Transport Rates calculation information used to support the 2019/20 Annual Plan was requested and released under the relevant official information act.  The detailed annual plan shows the Greater Wellington Regional Council (GWRC) spent $304M on providing Metlink PT services across the region and funded this expenditure from a variety of sources including fares (“External Revenue”) and $71.5M from Transport Rates:

Of particular note is the Annual Plan outlines Transport Rates of $70.4M* are taken by the GWRC to support bus and rail services.

*Note this analysis excludes discussion of the $1.1M in Transport Rates spent on Taxi/Mobility Services.

The Cost and Required Rates Revenue for Bus and Rail Services

To answer the question of how much PT services to each area cost we need two pieces of information:

  • The cost of bus and rail services
  • A method to split the cost of bus and rail services across the regions TLAs

To answer the question of the amount of Transport Rates support needed for PT services to each area we need two further pieces of information:

  • The revenue used to fund bus and rail services including Transport Rates revenue
  • A method to split the revenue of bus and rail services across the regions TLAs

As outlined in a previous post,”Wellington City Cheated by Public Transport Fares” , the GWRC public release of PTOM bus contract operating cost information can be used as the basis to split bus costs between the areas of the Wellington region.  For rail services a passenger kilometre model, based on the 2013 Census, can be used as the basis to split the rail costs.  Network costs were split between bus and rail on a pro-rata cost basis. From this set of information, the cost estimates to provide bus are rail services were calculated (see “Estimating the Costs of Wellington Bus and Rail Services” for more details on this analysis):

The GWRC PT revenue support to fund the region’s public transport services includes PT fares, government subsidies, loans and, of course, Transport Rates and was also calculated from the same information sources.  The resulting analysis provides the following PT revenue breakdown (see “Estimating PT Revenue and Rates for Wellington Bus and Rail Services” for more details on this analysis):

GWRC Transport Rates Taken

The estimated Transport Rate funding required to support the region’s bus and rail services (in yellow above), can now be compared with the Transport Rates taken by the GWRC in their 2019/20 Annual Plan (in blue below):

It is immediately obvious that over 60% of all Transport Rates are paid by Wellington City ratepayers.  However, it must also be recognised that Wellington CBD ratepayers, who pay $24.7M, greatly benefit from rail and bus services bringing workers from areas north of Wellington City.  It is therefore logical that CBD businesses would be expected to contribute towards these services. Equally, CBD businesses also benefit from Wellington City rail and bus services and so an adjustment to allocate 50% of Regional CBD Rates to support PT services outside Wellington City would be reasonable.  This would provide the following adjusted GWRC Transport Rate Taken table (in light blue):

Comparing Transport Rates Required with Transport Rates Taken

Finally, we can now compare the Transport Rates required to support PT serving each TLA against the Transport Rates taken from each Wellington TLA:

The above table shows the difference between the rates required to support bus and rail to areas of the region and the Transport Rates taken from each area.  This analysis shows that, even after allocating half the Wellington CBD rates ($12.3M) towards funding PT outside Wellington City, the GWRC is still taking an additional $8.0M from Wellington City Residential and Business ratepayers to support the bus and rail services in the rest of the region.  Lower Hutt ratepayers are also paying about ¼ of their Transport Rates towards subsidising PT services in the Wairarapa and the Kapiti Coast. Equally, Kapiti and Wairarapa ratepayers do not realise that for every dollar in Transport Rates they pay, their PT service is being subsidised by over $2 and $3 respectively taken from ratepayers in other areas.

Just like public transport fares, every year for the past two decades the Greater Wellington Regional Council has been taking millions in extra Transport Rates from Wellington City and Hutt City ratepayers beyond what is reasonably required to support each city’s PT services.  The GWRC is quietly transferring millions in rates income to provide extra subsidies to bus and rail services servicing Kapiti and the Wairarapa. This huge cross-subsidy has never been justified … it has never even been discussed. A key reason is the because the GWRC has kept the detailed information on the costs of public transport secret so the regions ratepayers cannot find out if their rates support their area’s PT services or being transferred to subsidise PT servicing other areas.

This year the GWRC will demand another round of Transport Rates increases. It is important for all ratepayers to know whether their rates are going to support public transport serving their area or to prop up expensive PT services in other parts of the region.

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