Free Public Transport

Free public transport is one of those ideas that seems to rear its head every few years. John Minto campaigned on this at the last election (he wasn’t elected). Axel Wilke has previously proposed free buses within the 4 Aves. A few other cities/countries around the world have done free public transport, but they are all very different to Christchurch and it’s hard to know what we can take and apply to us here (Dunkirk, Luxembourg).

luxembourg
Just wanted an excuse to put in a picture of Luxembourg really

In my experience, most people seem to instantly dismiss free public transport as sounding expensive and extravagant and going against some kiwi ethic drilled into us that giving out free stuff is not good – as a general principle people should have to pay for the things they consume, including travel. Transport experts tend to dismiss it because it doesn’t really fit into our current funding mechanisms and governance structures.

I know I’ve been highly skeptical in the past for all these reasons.

But a colleague of mine brought it up the other day as something he thinks we need to be looking at more seriously. He has several decades of transport planning experience in senior positions around the country, and I have a lot of respect for him. So I was a little surprised. I thought I’d think twice about free public transport and try to break down the numbers a little here.

Firstly it’s worth setting the transport scene. Transport in New Zealand is not user-pays, and it constantly amazes me how many people still think it is. Most people are aware that walking, cycling and public transport draw on rates money to fund their infrastructure and services. But a surprisingly large amount don’t seem to know that driving does as well – 90% of roads in New Zealand are not fully funded out of fuel excise, but draw on local rates money as well (the exception being State Highways). Most times you drive your car you are not paying your own way, but are being subsidised by ratepayers. There is a definite public perception that public transport is subsidised while driving is not – this is blatantly not the case.

Now let’s look at the costs of increasing the subsidy so that public transport is free. Each year the Greater Christchurch public transport system has total operating costs in the order of $72 million (look on page 56 of the link). I’ll leave parking out of it for the moment in the interests of keeping it simple, but that is another way that rates money is used to subsidise driving. The combined contribution of central and local government comes to about $53 million of the $72 million total, with fares making up the remaining $19 million. So making public transport free would cost us $19 million per year, all else being equal.

Fundingsplit
Diagrammatic Representation of how funding works for public transport in NZ (sizes of slices are not necessarily representative of actual situation)

To put $19m into context, here’s the cost of some of the other significant transport investments either considered or made recently.

Capture

Now let’s think about what it would save. It would mean less expenditure in roads because there would be fewer people driving. In total Canterbury spends about $510m a year on roads (average expenditure 2018-21). This comprises $276m on road maintenance and operation and $234m on road capex.

Making buses free would need to reduce this spend by around $19m per year to make it the financially favourable option. This is equivalent to a decrease of 4%.

Would making buses free result in us being able to reduce the road expenditure by 4%? At first glance I would have thought this seems plausible. If anything it seems that getting more people on to buses could potentially reduce it by a lot more than just 4%. There are currently about 14 million trips a year made by public transport. If free buses meant a few million more, with a corresponding drop of a few million car trips being made, then there could potentially be quite big savings in road expenditure needed.

One thing though is that we would likely see a big shift to buses to the extent that we would need to run more of them. Although the Greater Christchurch bus system has plenty of spare capacity off-peak and in weekends, it is tapped out during peak periods – at least on the popular routes.

I haven’t done any calculations on how much patronage might increase. I know when Ecan made buses free for a day last year patronage jumped up 60%. In Queenstown they lowered fares from $10 to $2 and got 300% increase (although there were other changes at the same time as well). For this exercise I’m just going to run the numbers assuming a doubling in patronage and see where it gets us.

To accommodate a doubling in patronage we would need to run more buses. The increase in operating expenditure would depend on a whole lot of factors like where the demand is, whether it’s peak or off-peak, what sorts of efficiencies of scale we can get. There’s also the savings from being able to scrap all the infrastructure needed to process payment (metro cards, readers, cash registers etc). But I’m just going to go real rough and assume that to accommodate a doubling in patronage we’d need a doubling in operating expenditure. This would mean going from $72m to $144m per year. Currently the combined government contribution is $53m, if we were to make it free and double the service offering then the combined government contribution would go to $144m, an increase of $91m.

So the big question becomes- would making public transport free and doubling the number of people using the buses result in a $91m decrease in the need for road spending? The equates to an 18% reduction in road spend. I’m not sure if it would or not. It would need a bit of work to try and figure this out. But it at least seems possible, maybe even probable.

I suspect the assumption of doubling patronage is on the low side if we are also doubling the service offering, which would make the buses a whole lot more attractive again. If it instead resulted in a tripling or quadrupling in patronage, then the annual operating cost would have to increase to accommodate this, but the road spending needed would also decrease as more cars were taken off the roads. And it would decrease at a faster rate. Overall a higher shift to buses would strengthen the case for making them free, not weaken it.

If it’s cheaper to make buses free than it is to build roads so everyone can drive, then the choice would be a no-brainer from a strictly financial point of view. Obviously there are a whole lot of other factors that would then strengthen the case further. The things that are difficult to monetise, like environmental and social benefits, would favour the free buses option.

There are also equity impacts which would likely strengthen the case for the free buses option.

One tricky aspect I’ve glossed over here is the fractured governance model. I’ve talked about combined government expenditure as though NZTA, ECan, CCC, SDC and WDC are one body acting in perfect harmony, when in reality they are separate entities with different objectives, and the benefits and costs of such a change would fall on each one in different ways. I imagine it could be very messy trying to get something like this agreed across the five competing organisations. A single transport authority would certainly make it easier to implement this sort of change.

This back-of-the-envelope calculation shows that free public transport could potentially be a financially preferable option to the status quo, on top of whatever environmental, social and equity benefits it had. The main objection to free public transport seems to revolve around it being unaffordable and financially irresponsible. But it is quite plausible be that it would actually save us money overall and as such be the more financially prudent option.

As such, I think I agree with my colleague – free buses is something that we should be investigating seriously.

 

5 thoughts on “Free Public Transport

  1. Interesting analysis Chris. Another factor is that fare collection has costs, both in the maintenance and operating cost of the metrocard system and in the time taken to collect fares when boarding bus. With no fare payment passengers can board much faster, so bus dwell times reduce and buses can run faster and more frequently for the same opex cost.

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  2. Something else to consider is that if drivers converted to PT, that would cause a reduction in fuel excise revenue. No idea how much that is worth, but it would need to be added to the $91m required reduction in road spend.

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  3. Semi agree in principle.

    There are strong equity and social benefit arguments to provide a 24/7 full coverage network for those without transport alternatives. Most of these people are lower incomed and should have access to low or zero cost transport. Issue is whether PT should be made free or those people get welfare transfers.

    As for the rest of us getting free PT, depends whether the externality costs imposed by drivers (congestion, under priced parking, vehicle air pollution, full crash costs mitigation) make a business case for doing so, or whether we are better to internalise some/all of those costs. Personally I think we are better off fully pricing car travel first.

    Treasury / MOT / NZTA should be doing a cost benefit assessment for low income access to transport, & also restudying the current subsidies in the transport system with a view to removing them.

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    1. Yea i agree. Charging driving properly is an infinitely better option, subsidising public transport is just a second-best option until we can get there (which may be never). Also agree that targeted free travel might be a better first step. Christchurch lets under 5s travel free. And sort of polytech students. I know other cities in NZ are playing with free travel for all school students or people on community services cards.

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