HAWKE’S BAY REGIONAL COUNCIL
Wednesday 27 May 2020
Subject: Proposed Public
Transport Changes
Reason for Report
1. This item
provides proposals for Council’s consideration, for the introduction of
the Regional Integrated Ticketing System (RITS) on buses, while trialling a
simplified fare structure in order to promote bus patronage.
Officers’ Recommendation
2. Council
officers recommend that Council agrees to implement Option 1 to expedite the
introduction of the RITS bus ticketing system, subject to approval by the New Zealand
Transport Agency and confirmation from the RITS project team that the system
can be introduced as outlined.
GoBay Bus Service Issues
3. The GoBay bus
service is running over budget this year and the Subsidised Passenger Transport
activity (Project 790) has an estimated year end deficit of $280,000 (ex GST),
to be funded from scheme reserves. A significant deficit is also predicted for
2020-21, unless major changes are made. The causes of this over-run
include:
3.1. Significantly
higher required indexation of the bus contract than budgeted, due to fuel and
labour pressures ( pre-Covid)
3.2. Declining
patronage of the bus service, resulting in lower fare revenues
3.3. The effects
of the Employment Relations Amendment Act, which has added 12% to the total
driver hours required to implement the current timetable, with significant
flow-on costs to the bus contract
3.4. Growth in the
use of the Total Mobility scheme.
4. In view of
this, and the need to ensure budgets are adhered to in 2020-21, we propose making
some modest adjustments to the services to reduce costs, effective in early
July 2020.
5. However, a full
review of the services is also warranted to:
5.1. fully address
the issues outlined above
5.2. consider the
likely ongoing effects of Covid-19
5.3. take into
account innovations that allow delivery of public transport in new ways.
6. External
consultants would be engaged to undertake this review from July 2020.
Regional Integrated Ticketing
System (RITS)
7. The Regional
Integrated Ticketing System (RITS) is a joint project between nine regional
councils across NZ. The new bus ticketing system will replace an existing
system that frequently fails, will soon be unsupported and provides very
limited information on passenger movements.
8. The implementation
of the system has been postponed a number of times, due to issues with the
website and back end of the processing system. However, these are almost all
resolved and the system is operational in Northland and Wanganui. Part of the
delay has been due to the need to allow passengers to travel in any of the nine
regions with the same bus card. This integration between regions has been very
complex due to the range of fare products and concession fares used. However,
it now appears that, subject to some minor issues being resolved, the system
could be implemented in a streamlined fashion across the remaining regions, if
regions are able to make some adjustments to their fare schedules.
Covid-19
9. Public
transport provision was reduced across NZ during the Level 4 restrictions, and
to reduce personal contact with drivers, fares were removed. This was a
national directive.
10. In Level 3, most councils
returned to regular timetables in order to be able to provide for school travel
and the greater number of workers likely to be commuting. However, fares
were still not charged. The NZ Transport Agency (NZTA) has committed to
covering the full lost revenue to councils under both Levels 3 and 4, and any
remaining revenue loss until 30 June.
11. Bus use has been very low
during Levels 3 and 4 across the country, with most councils experiencing
around 5% of the usual patronage in Level 4 and 15% in Level 3. Patronage
is expected to grow somewhat during Level 2, although social distancing
requirements will limit the number of passengers that can be carried on any one
bus.
12. Under Level 2, NZTA is
requiring regional councils with contactless smartcard systems (such as Snapper
in Wellington or AT Hop in Auckland) to return to charging fares, at least with
cards.
13. However, NZTA has issued a
draft memo on the reinstatement of fare collection under Level 2, which says
(for RITS regions):
13.1. “Waka Kotahi
(NZTA) strongly encourages opportunities to accelerate the implementation of
electronic ticketing systems and enhancements to existing systems that will
further reduce or eliminate the use of cash on-board. This provides the most
robust option to futureproof fare collection should a medium to long-term
pandemic response be required.”
13.2. Acceleration
opportunities may include supporting temporary changes to fare settings that
will expedite system roll-out, and other initiatives to improve uptake or
promote card registration. We would also consider a short extension to the
COVID-19 fare-free policy in participating RITS regions to facilitate system
changeover, where the benefits and transition path for this are clearly
outlined in a regional fare collection plan.”
Opportunity to Accelerate
Implementation of RITS
14. The RITS project team
views the lower patronage levels and possibility of continued fares-free
operation as an opportunity to speed up the implementation of RITS in the
remaining regions, including Hawke’s Bay.
15. This programme would be
contingent on an accelerated programme of installation of equipment on all
buses, requiring a period between installation and “Go-Live” during
which fares could not be charged via the system.
16. The accelerated programme
is facilitated by councils adopting a flat fare system on a temporary basis
after Go-Live, without any concession fares except for the SuperGold free
travel scheme.
Hawke’s Bay Situation
17. The possibility to
implement RITS in the manner described above provides a number of opportunities
for Hawke’s Bay. However, Council needs to consider a proposed
simplification of our fare structure and to accept a possible consequent loss
of revenue.
18. The RITS team has set out
a draft proposal that would see equipment installed on our buses during the
week of 8 June, and the system would go live in HB on either 13 July or 10
August. (The earlier date places a greater risk on the RITS team, as we
would be sandwiched between the large regions of Waikato and Bay of Plenty. It
is yet to be confirmed whether this is technically feasible.)
19. The implications of this
are:
19.1. No fares could be
charged from 8 June until Go-Live as the buses cannot have dual sets of
equipment and the RITS equipment would not be operational
19.2. A flat fares structure
would need to be implemented at Go-Live, to remove the need for complex
concession registration and allow for the accelerated process.
20. HBRC is not obliged to
enter into the accelerated RITS implementation process. We could continue
with the current fare structures, and agree to implement the full RITS process
at a later date. However, the RITS team has indicated that there will be a
further significant delay, due to the lockdown period and delays with the
technical work being undertaken in Germany. It is very possible that the system
could not be implemented until early 2021.
Covid-19 Effects on Patronage
21. Under Level 4, goBay buses
carried 5% of usual patronage. This is highly consistent with other regions.
Under Level 3, we carried 11.1 % of usual patronage, again remarkably
consistent with other regions.
22. Level 2 bus use is hard to
predict. Schools are back but we have social distancing limitations on the
number of passengers able to be carried. However, we estimate that it is
unlikely to be higher than 30% of usual patronage.
23. Nationally, regional councils
believe that patronage will continue to be affected by the pandemic for some
time to come. This is supported by research conducted by McKinsey and Co for
the Metropolitan Transport Association (USA), which concludes that even with an
early containment and recovery scenario (such as has happened in NZ) patronage
is likely to still be down by 60% by the end of 2020.[1]
24. We will be able to
estimate Level 2 effects once patronage data is received for the week
commencing 18 May. However, at present we are still not charging fares, in
order to maintain social distancing and isolate the driver from
passengers. It is probable that the reintroduction of fares would
negatively affect patronage.
Options
25. There are a number of
options available to HBRC as we ease out of the Covid-19 fare collection and
social distancing restrictions, work towards the implementation of the RITS
system and address budget issues.
Option 1: Immediate
minor service changes, bus review in 2020-21, RITS system in place at latest 10
August, fares free continues until “Go- Live”, simplified fare
structures ongoing for 4 months
26. Service changes are
under discussion and investigation with the operator. The detail of these would
be brought to council for discussion and approval at a subsequent
meeting. However, these are likely to involve services with very low
patronage pre Covid-19, which will be even less viable post-Covid.
27. Under this option, the
service changes would come into effect on 13 July, whether the ticketing system
is implemented then or not. These would stay in place while we undertake a
network-wide review of services.
28. RITS System in place by
10 August at latest, simplified fare structures, fares free continues until
“Go-Live”
28.1. Bus equipment for RITS
would be installed during the week of 8 June, and the new cards would be
distributed to passengers and the public after this date, allowing plenty of
lead-in time to ensure all passengers have the new cards.
28.2. The latest Go-Live date
would be 10 August, but there is an early possibility of 13 July. We are
dependent on fitting into the implementation schedule with the other 8
councils. Therefore, our exact Go-Live date is still to be finalised.
28.3. On Go-Live day, a flat
fares system would be introduced for 4 months, with the ability to return to
the full range of concession fares once the RITS system is fully complete and
able to accommodate this.
28.4. A flat fares proposal
was brought to Council on 25 September 2019 as part of a proposal for
addressing climate change through greater bus use. That report can be found here.
28.5. Suggested flat fares were:
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Adult
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Tertiary Student/Community Services Card
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Child/High School Student/Senior
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Current
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Proposed
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Decrease
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Current
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Proposed
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Decrease
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Current
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Proposed
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Decrease
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Card
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1 zone
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$2.88
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$1.00
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65%
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$1.90
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$1.00
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47%
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$1.43
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$1.00
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30%
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Card
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2 zone
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$3.65
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$2.00
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45%
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$2.86
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$2.00
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30%
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$2.14
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$2.00
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7%
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Cash
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1 zone
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$3.60
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$2.00
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44%
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$2.40
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$2.00
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17%
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$1.80
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$2.00
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11% inc.
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Cash
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2 zone
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$4.20
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$3.00
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40%
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$3.60
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$3.00
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17%
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$3.00
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$3.00
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No change
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29. The benefits of
this proposal are:
29.1. Earlier implementation
of the RITS system with its benefits to customers and HBRC – online card
top-ups, less cash on buses, faster loading times, better patronage data
29.2. An extended fares-free
period will help to stimulate patronage, when there may be considerable
uncertainty about using the bus service
29.3. This provides an
opportunity to trial the flat fares concept discussed in the September 2019
paper to Council
29.4. Ongoing lower flat fares
would provide a social benefit to HB residents struggling financially because
of Covid-19
29.5. Lower flat fares would
also provide a good stimulus to patronage of the bus service, which is more
necessary now than ever.
30. The main issues
with this proposal are:
30.1. The lost revenue
during the period of free fares, compared with charging usual fares during this
time. The table below sets out the likely revenue foregone, assuming that
we carry 30% of usual patronage during this time. However, it is almost certain
that patronage benefits by remaining fare-free. It is highly likely that if
returning to charge usual fares, we would see lower patronage than fare-free,
and therefore the opportunity cost of remaining fare-free could be
significantly less than set out below.
30.2. Discussions are underway
with NZTA about whether it would be willing to cover the full cost of lost
revenue for councils who are later in the order of ticketing implementation, as
these are unfairly disadvantaged by having to wait longer in the fare-free
period. Full reimbursement may be possible for smaller councils as the
revenue risk is less. An update will be provided at the meeting.
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Cost to HBRC (ex GST)
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Assumptions
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13 July Go-Live
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10 Aug Go-Live
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NZTA
funds100% of lost revenue to 30 June, 51% thereafter.
Bus
patronage would have been at 30% of usual level
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$6,000
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$16,500
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NZTA funds
100% of lost revenue until Go-Live
Bus patronage
would have been at 30% of usual level
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$0
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$0
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30.3. The risk of lower
revenue from lower flat fares after Go-Live for four months. Calculations
completed for the September 2019 Council paper estimated that the increased
patronage arising from the lower fares would largely offset lost revenue.
As we would be starting from a significantly lower patronage baseline, extra
services at peak times would not be necessary. Therefore, we estimate that
introducing flat fares would be cost neutral during the trial period, when
compared with maintaining the current fare structure. A trial period
allows us to determine the benefits of this fare structure and the cost-benefit
of continuing it more permanently.
Option 2: As
for Option 1, but flat cash fares introduced from 8 June until RITS Go-Live
31. Under this scenario, once
the RITS ticketing machines are installed and card fares can no longer be
charged, a flat cash fare would be introduced, with no change given.
32. The benefit of this
proposal would be lower cost to HBRC and NZTA, as some revenue would be
collected.
33. The main issues with
this proposal are:
33.1. If there were continued
safety requirements on buses, cash collection would have to be via an enclosed
dropbox, near enough to enable the driver to see that the correct amount was
deposited. No change could be given. This would require the
installation of special equipment in all buses.
33.2. 75% of our passengers
usually use smartcards. A cash-only system would be very inconvenient,
requiring passengers to have exact change for every trip. For regular
travellers, including families with several school children travelling daily,
this could be really problematic and detrimental to regular bus use.
33.3. There would be less
stimulus or incentive for patronage growth and less social benefit, depending
on the level at which fares were set.
33.4. The change from no fares
to cash-only and then to card-and-cash fares, all in less than three months,
could be confusing for passengers.
Option 3: Immediate
minor changes to bus services, bus review in 2020-21, RITS system in place
early 2021, no change to current fare structures, all fares charged from early
June
34. Service changes as
discussed under 23.1 to commence 13 July, with a full service review to follow.
35. RITS system
implementation delayed, fares charged at current levels from early June 2020.
35.1. RITS implementation
would continue as originally planned, with all concession fares introduced and
current fare structures retained.
35.2. Fares (both cash and
card) would be charged from early June.
36. Benefits of this
proposal are:
36.1. Fares would continue to be collected as usual
and the existing concession structure would remain in place
36.2. No loss of revenue.
37. Issues with this proposal
are:
37.1. The RITS system was
already significantly behind schedule pre-Covid, and there are now significant
further delays because of lockdown both here and in Germany.
Implementation of RITS would therefore be unlikely before year-end.
37.2. Under Level 2
requirements, social distancing should be maintained between driver and
passengers. This poses problems as our current ticketing system requires
interaction with the driver for both card and cash fares.
37.3. Returning soon to
charging standard fares will not stimulate patronage growth, especially after
the uncertainty of the pandemic and a significant fare-free period. We could
well see lower patronage than the expected 30%.
37.4. There is no social
benefit to residents struggling through the financial consequences of Covid-19.
37.5. Implementation of RITS
later in the year would be more complex for passengers, due to the need to
register concessions.
37.6. This does not give HBRC
the opportunity to trial the lower flat fares proposal for four months, as a
means of stimulating patronage and reducing carbon emissions.
Discussion
38. Option 1 is dependent on several provisos;
however, we believe there are many advantages to it.
39. There are some minor technical details to be
resolved within the RITS system before accelerated implementation can proceed.
A final decision on these is expected by the date of the meeting.
40. NZTA needs to approve HBRC’s proposal on the timing
and manner of the reintroduction of fare collection under the RITS system.
We have submitted a paper seeking this approval.
41. As discussed earlier, we expect that patronage
post-Covid will be very low for a considerable period and current social
distancing requirements mean carrying capacity on each bus is limited. This means
that the potential fare loss would not be significant if no fares are charged
for some time. An update will be provided at the meeting on the initial bus use
under Level 2.
42. Introducing flat fares with RITS would
significantly simplify the process and reduce risks around the changeover
process for passengers, as well as technical risks.
43. Lower flat fares would stimulate patronage in
the longer term; evidence supporting this assertion was provided in the
September 2019 Council item. Flat fares would be introduced on a trial basis
for 4 months and then re-evaluated.
44. Lower flat fares would help residents struggling
with the financial consequences of the pandemic, reducing travel costs and
releasing funds to be spent in other local businesses.
45. Service adjustments in early July will reduce
costs and cover the anticipated lost revenue if Option 1 were selected,
although they will clearly not cover the full annual service deficit. A wider
review of the bus service is required to address this.
46. An extended fare-free period, followed by a
period of low flat fares and a vastly improved ticketing system, should help to
build patronage and convert more residents to long-term bus use.
Strategic Fit
47. This report contributes to
the Strategic Plan Goal for carbon neutrality by 2040.
Significance
and Engagement Policy Assessment
48. This decision has been
assessed as being of low significance given the low cost involved and the
temporary, trial nature of fare structure changes. Permanent fare structure
changes would require wider consultation through changes to the Regional Public
Transport Plan.
Financial and Resource Implications
49. It is estimated that the
cost of Option 1 will be covered by service reductions in early July 2020.
Decision Making Process
50. Council
and its committees are required to make every decision in accordance with the
requirements of the Local Government Act 2002 (the Act). Staff have assessed
the requirements in relation to this item and have concluded:
50.1. The
decision does not significantly alter the service provision or affect a
strategic asset.
50.2. The use
of the special consultative procedure is not prescribed by legislation.
50.3. The
decision is not significant under the criteria contained in Council’s
adopted Significance and Engagement Policy.
50.4. The persons affected by
this decision are current and potential bus users in the region.
50.5. The
decision is not inconsistent with an existing policy or plan.
50.6. Given
the nature and significance of the issue to be considered and decided, and also
the persons likely to be affected by, or have an interest in the decisions
made, Council can exercise its discretion and make a decision without
consulting directly with the community or others having an interest in the
decision.
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Recommendations
That
Hawke’s Bay Regional Council:
1. Receives and considers the “Proposed
Public Transport Changes” staff report.
2. Agrees that the decisions to be made are not significant under the
criteria contained in Council’s adopted Significance and Engagement
Policy, and that Council can exercise its discretion and make decisions on
this issue without conferring directly with the community or persons likely
to have an interest in the decision.
3. Agrees to implement Option 1, subject to approval by the New
Zealand Transport Agency and confirmation from the RITS project team that the
ticketing system can be introduced as outlined.
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Authored by:
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Anne Redgrave
Transport Manager
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Approved by:
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Tom Skerman
Group Manager Strategic Planning
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Attachment/s
There are no
attachments for this report.
