Report 13.104
Date
6 May 2013
File TD/07/09/04
Committee
Council
Author
Tass Larsen, Manager, Projects and Planning
Fare Structure Review
1. Purpose
To present to the Council:
The principles used to evaluate the various options for the fare components
considered in the Fare Structure Review
The options recommended for further development prior to public
consultation.
A detailed report outlining the options for the structure, products, and
concessions that have been considered, along with analysis, assessment, and
estimated impacts on revenue and patronage is available on the Council’s
website.
2.
The decision-making process and significance
The matters requiring decision in this report have been considered by officers
against the requirements of Part 6 of the Local Government Act 2002.
The subject matter of this report is part of a decision-making process that will
lead to the Council making a decision of medium significance within the
meaning of the Local Government Act 2002. Officers advise that there is no
process explicitly set out in the Local Government Act 2002 or any other
enactment for making the decisions anticipated by this report.
This report assesses various options against the Fare Structure principles, and
recommends options for inclusion in the future Fare Structure. Further detailed
analysis will be undertaken to confirm that the proposed Fare Structure is
financially viable.
Following the further analysis, consultation on the proposed Fare Structure will
occur through the next review of the Regional Public Transport Plan (RPTP).
It is anticipated that detailed analysis around the preferred smart card products
and how transfers are dealt with will be further refined through the integrated
fares and ticketing project.
Officers consider that, in light of their assessment of significance, more
intensive assessment is not warranted for the purpose of identifying the
Preferred Option. Further detailed analysis, modelling and pre-market and
customer behavioural testing with users and potential users will occur prior to
final decisions.
2.1
Community views and preferences
Community feedback on the current Fare Structure and potential changes has
been sought through:
Formal consultation feedback (Report 12.462)
A discussion forum for public transport users, advocates and residents
groups on the issues around any change to the public transport fare
structure
Focus groups around the relative perceived value for money of public
transport in the region
A Reference Group comprising representatives from the public transport
operators, the Council and the community.
A summary of the community feedback is included in
Attachment 1.
Public consultation on the Preferred Option for the future Fare Structure is
proposed to be undertaken as part of the consultation on the Regional Public
Transport Plan in 2013/14.
3.
Evaluation of options
An evaluation of the options considered as part of the Fare Structure Review
has been completed. This was undertaken as three streams of work:
1.
Consulting with the stakeholders and the community as outlined above in
section 2.1.
2.
Learning through review of literature and international case studies of Fare
Structures in cities around the world.
3.
Analysing the options including modelling the patronage and revenue
impacts of the various options.
The Public Transport Fare Structure Review – Exploration of Options Report
summarises the results of these three streams of work.
The initial assessment of the options for each component of the Fare Structure
(i.e. structure, products and concessions) was carried out against review criteria
agreed by the Economic Wellbeing Committee in April 2012 (
Report 12.151).
Feedback from consultation and initial modelling work on concessions and off
peak fares was reported to the Committee in October 2012 (
Report 12.462).
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The review criteria distinguished between structure options, but did not clearly
differentiate between options for products and concessions. As a result, a set of
seven principles have been developed to guide decision making on the
preferred option for the future Fare Structure based on the objectives of the
Fare Structure Review and the objectives and policies of the Regional Land
Transport Strategy and RPTP.
Once the Preferred Option for the Fare Structure is agreed by the Council,
further detailed financial analysis, pre-market and customer behavioural testing
with users and potential users will be undertaken prior to consultation as part of
the RPTP process in 2013/14.
4. Guiding
principles
The principles outlined below set the framework by which the various components
of the fare structure have been assessed in this report. These are:
Principle 1: Continuing affordability of fares. Affordability of public
transport fares, particularly when compared to private vehicle use and the
general cost of living, is a key component of retaining existing users and
attracting new ones.
Principle 2: Increasing patronage. Increasing public transport patronage is a
key outcome in the RPTP. Increased fare revenue, decongestion and liveable
cities are the key benefits of increased public transport usage. Patronage levels
change in response to a range of factors such as public transport service levels,
service reliability, the relative affordability of fares compared to other transport
options, levels of car ownership, and petrol prices. The most relevant factors
relating to Fare Structure that impact on patronage levels are the affordability
of fares, the perceived value for money of fares, how easy public transport is to
use and how easy the payment systems are to use. Patronage increases may
also be gained through attracting non users to use the public transport system.
Principle 3: Reducing complexity. Complexity in a Fare Structure stems from
the nature of the basic structure itself as well as the number of products.
Reducing complexity increases patronage through making the public transport
system easier to use and improving the transparency of the fare structure, and is
a prerequisite for the introduction of integrated electronic ticketing.
Principle 4: Rewarding target behaviours. Fare
products can be used to target
and reward particular behaviours which support the broader aims for public
transport. These target behaviours include:
Encouraging users to shift their time of travel from the peak to off peak
period to alleviate capacity issues in peak times
Encouraging frequent and regular use of public transport (e.g. the number
of journeys made in a day, week or year) to increase patronage
Encouraging greater use of the smart card payment system to shrink the
use of cash fares in the system
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Encouraging non users to use public transport to increase patronage levels.
Principle 5: Improving consistency. Consistency in the Fare Structure means
that users making similar journeys pay similar fares, regardless of operator or
mode. This means that the Fare Structure is perceived as unbiased towards any
particular group or mode. When users are able to see that fares are allocated on
a consistent basis, there is likely to be greater acceptance of changes in the Fare
Structure. Having a consistent set of fare products for all modes also makes the
system less complex.
Principle 6: Meeting fare box recovery targets. Farebox recovery targets
establish the proportion of the cost of providing the public transport service
that is met through fares as opposed to public funding (i.e. rates or NZTA
funding). NZTA set a national target of a minimum of 50% of total costs to be
met through fares. The council’s current target is to meet 55% to 60% of the
cost of the service through fares. This target may need to be reviewed as the
impact of current decisions around integrated ticketing, capital investment in
new rail carriages and a network wide electronic payment system, and fare
structure are included in future budgets.
Principle 7: Enabling incremental change. Any
change to the Fare Structure
will positively or negatively impact on some current users. The acceptability of
any change can be increased by a gradual transition from one Fare Structure to
another, allowing users to adjust their travel patterns in response to the changes
made. Making changes incrementally also enables the Council and the New
Zealand Transport Agency (NZTA) time to adjust their funding levels and
budgets to match the changes in predicted fare revenue.
5. Discussion
5.1
Principle 1: Continuing affordability of fares
Structure
The structure governs the base method by which the fare for any journey is
calculated. Under the current 14 concentric zone structure, longer trips have a
higher fare than shorter trips, the fare per kilometre decreases with increasing
distance travelled, and local trips in Wellington city tend to have a higher fare
per kilometre travelled than local trips elsewhere in the region.
Considerable modelling has been undertaken to establish the impact of
changing the current zonal structure or replacing it with a distance-based
approach. In a revenue neutral environment1, any major changes would
increase fares for a sizeable group, and this would raise affordability issues.
For example in a zonal structure, increasing the size of the zones means that
the one zone fare will increase, negatively impacting users making local trips
anywhere in the region and reducing overall patronage from current one and
two zone trips.
1 A revenue neutral environment is one where the total fare revenue equals the fare revenue received under the current Fare Structure.
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Modelling shows that a distance based fare structure that can maintain at least
the current fare revenue must have fares per kilometre for the first 5 – 10
kilometres of a journey that are roughly comparable to the existing rates within
Wellington city.
A distance based fare structure with a linear decrease in fare per kilometre with
distance travelled over the first 40 km of a journey can increase predicted
revenues significantly with these revenue increases generated mainly from trips
between 10km and 20km (i.e. commuters from the Hutt or Porirua to
Wellington) and from local trips outside Wellington city. Overall patronage
levels are maintained under this scenario as the large reduction in patronage
outside the Wellington city area is off-set by an increase in patronage within
the city itself.
Amending the rate of decrease in fare per kilometre to ensure distance based
fares more closely match the revenue from the current fare structure would
mitigate the issue of higher fares for commuters travelling to and from
Wellington, however there would still be a significant negative impact on local
trips outside Wellington city.
Reducing operational costs
The affordability of fares is increased indirectly by decreasing the underlying
cost structure of public transport. Fare revenue is used to meet at least 50% of
the operating cost of the public transport service, so reducing the overall cost of
running the service also reduces the level of fare revenue required to meet the
50% threshold. The operating cost of the public transport service can be
reduced by:
Reducing demand for vehicles at the peak. The cost of operating the
public transport service is in part related to the number of vehicles required
to meet peak demand. Encouraging users to shift their travel time from
peak to off peak times helps to alleviate capacity issues during the peak
time and consequently reduce or delay the need for capital investment in
vehicles. Reducing the fares charged during off peak times may encourage
users to change from travelling in the peak times to travelling in the off
peak times where spare capacity is generally available.
Increasing the efficiency of the network design. Moving from a complex
system of overlapping “point to point” bus routes towards a simpler
interconnected network design increases the efficiency of the network. For
an interconnected network design to be practical, users must not be
penalised when they make a transfer between modes or vehicles. Allowing
free transfers within a journey achieves this and also assists in improving
the affordability of fares for those already making transfers.
Reducing the passenger boarding and alighting times. Reducing
boarding times increases the speed and consequently the cost of the
service. Boarding times can be reduced by replacing a cash based payment
system with electronic card to reduce the time a vehicle remains stationary
at stops as users ‘purchase’ their tickets as they board.
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Length and frequency of trips
The perceived affordability of public transport is also related to the length of
journey and the number of trips made. Longer journeys have higher fares, and
where these trips are made each day of the week, the total weekly cost of
multiple longer trips can become significant part of a users cost of living.
Implementing a fare structure with a fare per kilometre of travel reduces with
increasing distance goes some way to increasing the affordability of such trips.
Including products that provide discounts for frequent users also moves
towards making a service more attractive and addresses affordability of fares.
Concession fares
Concession fares for the transport disadvantaged may increase the affordability
of public transport for eligible users. The Council may provide concession
fares where these:
Can be justified on a decongestion basis. Child and school student fares
can be justified on the basis of removing the need for parents to take or
pick up their child from school. Currently, congestion in the urban areas is
significantly reduced outside term time when parents make fewer school
related car trips between 8am and 9am and 2.30pm and 4pm. Concessions
for school aged children encourage greater use of school bus services
which reduces congestion.
Address an underlying and persistent social need. The case for
concession fares for tertiary students, people with disabilities on a benefit
or other beneficiaries can be made on the basis of low income. The student
allowance and other single persons’ benefits are set at approximately the
same level of $171 per week or just under $9k per annum. This level of
income means that many people would struggle to meet daily living costs,
however this is not due to excessive transport costs but limited total
income. A distinction may be made between those who have a temporary
social need and those with a persistent need. Tertiary students and other
beneficiaries who have the ability to increase their income in the future
could be argued to have only a temporary need, albeit for a number of
years. People with a disability who are unable to participate fully in the
workforce are likely to be receiving the invalids benefit for the majority of
their adult life. As such, their underlying social need is persistent and a
concession fare is more easily justified.
Reflect central government policy: SuperGold card holders are eligible
for free travel during off peak times. The Council continues to support the
existing SuperGold scheme as funded by NZTA.
One potential advantage of introducing a discounted off peak fare as identified
above is that many beneficiaries and students travel in off peak times. In
particular, most beneficiaries would be able to adjust their travel patterns to
take advantage of reduced fares. As such, an off peak fare could address, in
some part, the need for a concession fare for very low income users.
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A concession fare or discounted off peak fare could be funded through
increasing other fares or through public funding from rates and taxes.
Increasing fares to meet the cost of providing a concession fare or off peak
fares raises fare affordability issues for other users and may impact on the
perceived value for money of the public transport service. Increasing rates to
pay for concession fares raises affordability issues for ratepayers.
5.1.1 Proposed
changes
Proposed elements of a future Fare Structure that would support the continued
affordability of public transport fares in the Wellington region are:
Retaining the existing structure with 14 concentric zones radiating out
from Wellington city
Introducing an off peak fare - available between 9am and 3.30pm and after
6.30pm (Monday to Friday), and from 5am Saturday to 12 midnight
Sunday, and all public holidays
Introducing a universal smart card payment system for all Metlink public
transport services
Removing transfer penalties and introducing integrated fares
Retaining a fare structure with a reducing fare per kilometre travelled
Including discounted products attractive to frequent users
Providing concession fares for children and youths, SuperGold card
holders and, in the event an off peak fare is not introduced, to people with
a disability unable to participate in the workforce.
5.2
Principle 2: Increasing patronage
Making public transport easy to use
Ease of use is an important influencer of patronage and patronage growth.
Public transport ‘ease of use’ is influenced by a range of factors from: how
easy it is to get to, on, off, and transfer between services, how easy it is to find
information about services, and how easy it is to pay for using the service. The
fares aspects of ‘ease of use’ link to how easy it is to know what the fare is for
a particular journey (transparency), how easy it is to pay, and how easy it is to
transfer between services. Ensuring transparency in the Fare Structure gives
people greater certainty and confidence in using the public transport network.
Zonal fare structures tend to provide greater transparency for users regarding
the fare for a journey compared to distance based fares as it is easier for users
to know what fare they will pay prior to boarding.
A single network wide smart card and integrated fares enables easy payment
and easy transfer between services. To become an attractive payment option for
users, any smart card (or other fare media) must be accessible to users and easy
to reload with funds for future travel.
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Peak and off peak fares
Currently, around 28% of rail trips and 57% of bus trips are in the off peak
(making around 48% of all trips in the off peak). If an off peak discount were
introduced, the lower fares are likely to increase patronage in the off peak and
increase the percentage of the overall number of trips made in off peak period.
International examples of off peak fares are generally set at least 20% below
the peak fare. The revenue impact of a 25% differential between peak and off
peak fares is estimated to be $4.5 million per annum if there is no increase in
peak fares. Increasing peak fares to ‘pay’ for an off peak fare will negatively
impact on the affordability of public transport for over half of all trips. Users
who travel by public transport at peak times rather than travelling by private
vehicle provide benefits to the wider transport network through reduced
congestion costs.
Whilst introducing an off peak fare at a lower differential than 25% will reduce
the financial impact, no work has been undertaken as this stage to identify at
which point a discount is likely to influence people’s behaviours and encourage
them to switch from travelling in the peak period to travel in the off peak
period. A low level of discount may not provide sufficient incentive to effect
this change.
New products
Encouraging non-users to use public transport is about making public transport
easy to use but also to encourage new users through providing new products
which are able to provide positive experiences of public transport use. These
products may be based on a full cost recovery model or as a loss leader
acknowledging the potential for attracting new users. The opportunities
considered as part of the review are:
Encouraging greater use at weekends and public holidays
The Council has little robust data on public transport use at weekends,
however anecdotal evidence is that many families avoid using public
transport at the weekends due to the cost. For example, it would cost a
family of two adults and three children around $25 to make a return trip
from Miramar or Island Bay into the central city by public transport. This
does not compare favourably to travel by private vehicle. Providing a
weekend family pass where up to four children under a specified age can
travel for free when accompanied by a fare paying adult would bring the
affordability of public transport use more into alignment with the cost of
travel by private vehicle at weekends for these groups of potential users.
This would increase patronage during a period where there is spare
capacity. A precedent for this type of ticket is set through the current
combined bus and rail Metlink Explorer ticket which allows a child
between 5 and 15 years old accompanying the ticket holder to travel for
free.
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Event tickets
The Council currently has an event ticket for use on rail when attending
large events in Wellington, particularly at the Westpac Stadium. The
pricing of the event ticket means that it is slightly above the fare for a
return trip using a 10 trip ticket on the Johnsonville line and travelling
from zone 5 on the Porirua and Lower Hutt lines, but below the 10 trip fare
for longer trips. Event tickets for bus users are event specific.
Encouraging the use of public transport to get to larger events can greatly
reduce congestion and reduce pressure on parking in the city. A
mechanism successfully used in other cities and for specific events in
Wellington city (such as the Round the Bays run) is to include the use of
public transport in the price of the event ticket. In most cases, the costs of
any additional public transport are funded by the event organiser however
there is potential to investigate working with event organisers and venue
operators to include public transport travel to a venue in the price of an
entry ticket to the event. Patronage benefits are around the potential to
attract new users to public transport through a positive experience of
public transport when using it to attend an event.
Bulk purchase scheme
Bulk purchase schemes typically involve an organisation, group or
business paying up front to bulk purchase public transport period passes at
a discounted rate for their members or employees. The purchasing entity
then administers the distribution and replacement of the period passes for
the transport agency and may set the price of the pass. These schemes are
used successfully overseas as a mechanism to encourage patronage
growth. In the US, the schemes are supported through federal and local tax
incentives which enable employers to offer heavily discounted passes,
however a scheme in Melbourne also runs without similar tax incentives.
A bulk purchase scheme is a potential mechanism to offer groups of users
the opportunity to access cheaper fares. Tertiary students may benefit from
such as scheme provided an umbrella organisation is able to administer the
scheme. Further work on the opportunities provided by this type of product
is required, particularly around how any such product would be priced.
5.2.1 Proposed
changes
Proposed elements of a future Fare Structure that would support increased
patronage of public transport in the Wellington region are:
Retaining a zonal structure
Introducing a single region wide smart card payment system, valid for all
modes and operators of Metlink services
Introducing integrated ticketing allowing one ticket to be purchase for one
journey, irrespective of the number of transfers and modes used
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Introducing a weekend family pass where up to 4 children under a
specified age would travel free when accompanied by a fare paying adult
Developing a bulk purchase scheme for groups of users
Undertaking further work on the benefits of event goers using public
transport to get to large events, including working with event organisers
and venue operators around including travel by public transport to an event
in the ticket price of larger events.
5.3
Principle 3: Reducing complexity
The principle of ‘reducing complexity’ supports greater transparency in public
transport fares and making the public transport system easy to use.
Transparency
Structures ranges from the very simple, such as a single flat fare for all
journeys, to the highly complex, such as point to point fares with a different
fare for every potential journey. Flat fares generally tend to generate less fare
revenue which may increase the level of public subsidy required. Flat fares also
reduce the relative affordability of fares for short trips compared to longer trips
within the same system. A zone based structure is relatively simple and easy to
understand with users able to know how much their fare will cost before
boarding. More complex fare structures, such as distance based and point to
point fares, are generally associated with increased fare revenue from a public
transport network, however the complexity in the fare structure reduces the
ease of use of public transport as it is difficult for users to know how much as
journey will cost prior to boarding. Ensuring that both the fare structure and
fare products offered are consistent for bus and rail also reduces complexity.
Making public transport easy to use
Generally, simplifying the Fare Structure is considered to support patronage
growth through removing a potential barrier for new users who may switch to
using public transport from other modes. Currently there are over 250 fare
products which may be used on the Metlink network. Comparable public
transport networks overseas tend to have fewer products, with some having as
few as 20 to 50 products for their whole network. Reducing the number of fare
products could be achieved through aligning bus and rail fare products,
removing seldom used products, and introducing standardised approaches to
transfers and ticketing. This will reduce the number of products by around 100.
If adult and child off peak fares are retained on rail and introduced on buses,
the reduction would be around 70.
A balance is required between complexity, affordability of fares and ease of
use with the aim that a Fare Structure provides limited and clear choices
around the best fare product for a journey.
5.3.1 Changes
proposed
Proposed elements of a future Fare Structure that would reduce complexity are:
Retaining a zone based structure
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Introducing integrated ticketing allowing one ticket to be purchase for one
journey, irrespective of the number of transfers and modes used
Ensuring the same structure and products for bus and rail, and
Phasing out the seldom used products.
5.4
Principle 4: Rewarding target behaviours
Travelling in the off peak period
Encouraging users to switch from travelling in the peak to the off peak is to be
encouraged as part of reducing capacity issues during peak times on public
transport. This has been discussed above under Principle 1: Continuing fare
affordability.
Encouraging use of the smart card payment system
A single region wide smart card system is proposed to be introduced as part of
the integrated ticketing and fares project and has been discussed above under
Principle 1: Continuing fare affordability. Use of smart cards to pay for fares
may be encouraged through ensuring the best value fares are only available on
smart cards. A premium on cash fares above smart cards may act as a
disincentive to use cash fares and as in incentive to switch to smart cards.
Further work on the level of the premium on cash fares and potentially
amalgamating the zones for cash fares will be undertaken as part of the
integrated ticketing and fares project.
Rewarding regular and frequent use
Period passes are currently used for a variety of purposes, including providing
discounts to regular or frequent users, reducing the cost of revenue collection,
and reducing fare evasion. The monthly rail pass is attractive for rail users as it
gives around a 40% discount on the cash fare based on 40 trips per month. The
current monthly rail pass is estimated to cost around $2 million per annum in
foregone revenue, and to generate around 3% of rail patronage, and is justified
on the basis of reducing administrative costs and improving revenue collection
in a paper based system. There is no product with similar incentives for regular
users on buses. Providing a similar level of discount on bus monthly pass
products would have an impact on fare revenue estimated to be around $3
million per annum, based on 20% of bus users using a monthly pass. The
estimate of the percentage of bus users taking up the monthly pass is based on
a high level analysis of existing travel patterns.
An alternative is to consider changing the type of products offered on both rail
and bus to regular and frequent users. Cities such as Christchurch, London and
Melbourne have introduced a fare capping regime, where the total fare paid for
a specified period of travel is capped at a set amount. Fares can be capped at a
fixed daily, weekly or longer period amount. Fare capping has the advantage
over period passes in that it is a pay as you go fare up to the maximum
predetermined limit above which no additional fare is charged for additional
trips. The pay-as-you-go aspect of the product removes a potential barrier to
lower income people accessing the cheapest fares as under the current system
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they may be unable to afford the upfront cost of a monthly pass. Anecdotally,
this is already occurring with a number of rail users purchasing 10 trip tickets
as they do not have sufficient spare income in any one week to purchase a
monthly pass. In addition, a daily capped fare may be more attractive to regular
public transport users who use public transport one, two or three days per
week. It also allows users to receive the discount based on their actual travel
behaviour, rather than requiring users to forecast their travel over a period and
calculate which product would be cheapest. Fare capping also supports
Principle 1: Continuing fare affordability and Principe 2: Increasing patronage.
A fare capping product offers a significant advantage over period passes to the
majority of users. Further work on the level of the capped fare needs to be
undertaken and will be considered as part of the broader integrated fares and
ticketing project.
Encouraging new users
Encouraging new users to switch from private vehicles to public transport is
achieved through a combination of initiatives around perceived value for
money, making public transport easy to use and new products to attract new
users. These are discussed above in Principle 1: Continuing fare affordability
and Principle 2: Increasing patronage.
5.4.1 Changes
proposed
Proposed elements of a future Fare Structure that would reward target
behaviours are:
Introducing of an off peak fare - available being between 9am and 3.30pm
and after 6.30pm (Monday to Friday), and 5am Saturday to 12 midnight
Sunday, and all public holidays
Setting the single cash fare at a premium above the single smart card fare
Ensuring best value fares are only obtained through smart card usage
Introducing fare capping (further work on setting the level of the capped
fare and capping period required).
5.5
Principle 5: Improving consistency
Consistency can be considered on an individual basis (consistency between
individual journeys), a collective basis (consistency in fares between different
groups of users), a regional basis (consistency fares for similar journeys across
the region), and on a modal basis (consistency of fares and products between
different transport modes).
The current Fare Structure is inconsistent in a number of ways, for example
there are different fare products on rail and bus, off peak fares only on rail, and
different fares for journeys of similar length.
Consistency between products on bus and rail has been discussed above under
Principle 3: Reducing complexity, and off peak fares have been discussed
under Principle 1: Continuing fare affordability.
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Zone boundaries on the western side of the region are more widely spaced than
those between Upper Hutt and the Wairarapa making the fare for a similar
length journey from Kapiti lower than the fare from Featherston. The
boundaries for zones 1 and 2 within Wellington are more closely spaced than
other zones, meaning that a short trip outside Wellington city may be only one
zone and a similar length trip in Wellington city may be three zones. Some
minor modifications to the current zone boundaries to align the fares charged
for similar longer distance travel would increase consistency. Increasing the
spacing of zones in Wellington would increase consistency but reduce the
revenue generated from fares (see Principle 7: Meeting farebox recovery
targets). Reducing the spacing of zones outside Wellington would increase
consistency but reduce patronage in these areas as fares increase. The
introduction of an off peak fare would in some part go towards balancing the
short trip fare inside and outside Wellington city as the majority of off peak bus
travel is in Wellington city.
Charging the same fare for similar journeys is also impacted by how transfers
are dealt with in the fare structure. The current network of routes means that a
number of journeys can be made using either a direct service or two or more
services depending on the time of day travelled and the services operating.
Currently, users who have to transfer between services or vehicles generally
have to pay a new fare for the second leg of the journey which increases the
total fare for their journey above that paid by those on a direct service.
Currently some operators permit free transfers between services; removing any
penalty for transferring between vehicles or modes for all services improves
consistency.
In the current concession fare for school aged students, the current system is
based on an outdated understanding of the age students leave school, and
discriminates against some young people who do not have school identification
or are home schooled. A more standardised approach to the concession for
current school aged student concession would be to extend the concession to all
under 19 year olds. This would simplify and remove any potential
inconsistency around the eligibility criteria.
5.5.1 Proposed
changes
The proposed changes to improve the consistency of the Fare Structure are:
Ensuring the same structure and products for bus and rail
Removing any transfer penalty when transferring between vehicles or
modes
Making minor modifications to the zone boundaries to align the fares for
journeys of similar distance on the Kapiti and Wairarapa lines
Making the eligibility criteria for the school aged student concession to all
children and young adults from the age of five years old to all young adults
under 19 years old
Introducing an off peak fare.
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5.6
Principle 6: Meeting farebox recovery targets
A key issue when considering any changes to the Fare Structure are the
predicted changes in fare revenue. Currently the Council is considering a range
of initiatives either through the Fare Structure review or other projects that
have a potential negative impact on fare revenue that are not currently
budgeted for in the Long Term Plan. Options considered as part of the Fare
Structure Review are summarised in the following table.
Modelled options
Revenue impact3
Patronage impact
Bolded = preferred option
14 concentric zones (current
$0 million
0%
structure)
Large district based zones
- $1 million
0%
Distance based fares
+ $8 million
- 1%
25% off peak discount
- $4.5 million
+ 4%
50% off peak discount
- $12.0 million
+ 10%
Integrated fares1
- $3 million
Not yet quantified
Dependent on level of
Capped fares2
Not yet quantified
capping
Weekend family pass
- $0.5 million
Not yet quantified
Bulk purchase scheme
Dependent on scheme Not yet quantified
design
50% concession fare for tertiary
students
- $4 million
+ 1%
25% concession fare for tertiary - $1.5 million
+ 0.5%
students
50% concession for adults with a
Un-quantified and
disability receiving invalids
- $1.5 million
benefit
approximated to 0%
50% concession for all under
Un-quantified and
- $0.5 million
19 year olds
approximated to 0%
1
Revenue impact based on removal of transfer penalties and a zonal structure. A more
detailed assessment of the revenue and patronage impacts will be undertaken as part of the
Integrated Fares and Ticketing project. Increased revenue for additional patronage has not
been calculated.
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2
A more detailed assessment of the revenue and patronage impacts will be undertaken as
part of the Integrated Fares and Ticketing project. Preliminary high level estimates indicate
that the costs could be of the order of $2 million to $5 million, but costs would be
determined by how a cap operates.
3
The revenue impacts outlined in this table are based on high level modelling and do not
reflect the expected financial impact on GWRC based on the current contractual
provisions. The funding required for any change to the fare structure is subject to
commercial negotiations.
NZTA sets a target of achieving a farebox recovery ratio of 50% nationally and
the Council has a target for the farebox recovery ratio to be between of 55% to
60%. Currently the Council’s projected farebox recovery for 2012/13 is 56.6%,
equating to approximately $11 million above the minimum required under the
NZTA farebox recovery policy.
The preferred options highlighted in bold above add up to a maximum negative
net revenue impact of approximately $9 million to $14 million if all were
implemented immediately. The positive benefits for the Fare Structure
including increased patronage need to be balanced against the requirement to
match the reduction in fare revenue with increased public funding from
regional rates and NZTA funding.
The rates funding requirement for public transport is projected to rise above the
rate of inflation for the next few years as a result of factors including the
reducing NZTA share of funding for rail (ie the reduction in the FAR rate from
60 to 50), integrated ticketing, and the cost of servicing debt to fund capital
investment. The availability of NZTA funding is constrained by the funding
allocation in the Government Policy Statement for Land Transport Funding. In
the short term, there is insufficient headroom from either of these funding
sources to make up a revenue loss of $9 million to $14 million.
The Council has already signalled its intention to introduce a single region
wide smart card and integrated fares with a preliminary estimated cost of up to
$3 million in revenue (the potential revenue impact is not currently budgeted
for in the Long Term Plan). Officers consider that to gain the best advantage
from the introduction of a single smart card system, capped fares are a
desirable part of this project. As such, in the short term, there is limited
capacity to introduce other initiatives without any further patronage growth.
Both capped fares and integrated ticketing are anticipated to have positive
impacts on patronage growth.
Introduction of an off peak fare is predicted to generate additional patronage
but with a net loss in fare revenue. To evaluate the effectiveness of an off peak
fare, further work around customer behaviour and response is required to
assess at what point a differential between peak and off peak fares would
influence the target behaviours (shifting from peak to off peak time of travel
and increased patronage).
Introducing a concession fare for people with disabilities who are unable to
participate in the workforce meets the principles of this review. This would
however be a significant change to the current approach to supporting the
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transport disadvantaged, which largely focuses on the accessibility of services
(rather than affordability), except where there is a standard national approach
such as the provision of child and SuperGold card concessions. A similar
nationally based approach to this issue would be preferable.
The introduction of distance based fares has been modelled as generating
higher revenues, which could then be used to fund other initiatives. However,
this is not supported under the principles of ‘Continuing affordability of fares’
(for those journeys negatively impacted by such a change), ‘Reducing
complexity’ and ‘Enabling incremental change’ and is therefore not
recommended.
5.6.1 Changes
proposed
The changes proposed to the Fare Structure to ensure farebox recovery targets
are achieved are:
Prioritising initiatives on the basis of their positive impact on patronage
growth
Developing a staged approach to implementing the preferred fare structure
Approaching NZTA for a national approach to concessions for people with
disabilities.
5.7
Principle 7: Enabling incremental change
Changes to the Fare Structure will have different impacts on different users.
The acceptability of any change can be increased by a gradual transition from
one fare structure to another, allowing users to adjust their perceptions and
travel patterns in response to the changes made. The patronage growth
anticipated from the introduction of an initiative is unlikely to occur
immediately after implementation and will occur over the short to medium
term. As such, changes to the Fare Structure which are expected to give a net
reduction in revenue and increased patronage, such as an off peak fare, will
have an immediate negative impact on revenue as existing users gain the
advantage of a reduced off peak fare. The revenue impact of the change will
only gradually reduce towards the modelled net revenue position in the short to
medium term as new users are attracted to public transport and existing users
increase their public transport use. A staged approach to introducing each
initiative is required to avoid a single large reduction in revenue and
consequent impact on rates. Any potential changes to the requirement for
additional public funding is not currently in the budgets for either GWRC or
NZTA. As such, fare revenue impacts and the consequent impact on rates will
need to be considered through the Council’s Long Term Planning process as
well as its planning around the future of public transport in the region through
the Regional Public Transport Plan.
As discussed above under Principle 6: Meeting farebox recovery targets, the
public transport network does not generate sufficient fare revenue to enable the
introduction of all the options for change at one time and still meet farebox
recovery targets. Retaining the existing 14 zone structure and gradually
phasing out the existing products as a single smart card is introduced will
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enable a gradual change to the proposed Fare Structure. If larger district based
zones were preferred as the base structure, then incremental change could be
managed through gradually removing some of the existing 14 zone boundaries
for cash fares, and then moving the smart card fares to district based. If
distance based fares are preferred, these would not be implemented prior to the
introduction of a single smart card system, and the integrated fares and
ticketing project would need to determine whether it would be cost effective to
gradually transition to distance based fares through adding more concentric
zones or whether a single shift to distance based fares is preferable.
5.7.1 Changes
proposed
Proposed elements of a future Fare Structure that enable incremental change
are:
Retaining the existing 14 zone structure
Gradually phasing out existing products over the short to medium term
Phasing in other initiatives as they become affordable through increased
patronage growth.
6.
Preferred Fare Structure
The conclusion of this phase of the Fare Structure Review is that the preferred
option has the components outlined below. The preferred option represents an
aspirational statement about the future Fare Structure with implementation
phased over time. The phasing is identified in the table as short (2 to 3 years),
medium (5 to 7 years) and long term (more than 10 years) in the table below.
Implementation
Preferred option
timeframe
Structure
1. Retain the existing 14 concentric zones with minor Short term
zone boundary changes
2. 25% peak / off peak differential available between
9am and 3.30pm and after 6.30pm (Monday to Long term
Friday), 5am Saturday to 12 midnight Sunday, and all
public holidays
3. Universal smart card payment system for all Metlink Medium term
public transport services
4. Transfer penalties eliminated and integrated fares on Medium term
smart cards only
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Implementation
Preferred option
timeframe
5. Consistent fare structure and fare products for bus and Medium term
rail
Already
6. Premium fares for identified services
implemented
Products
7. Existing fare products phased out and replaced by the
following:
Cash fare, set at a premium above the smart card Medium term
fare with the premium increasing over time
Smart card fare with no transfer penalties
Medium term
Fare capping (further work on setting the level of Medium term
the capped fare and capping period required)
Weekend family pass for up to four children
under a specified age travelling with a fare Short term
paying adult (valid on Saturday, Sunday and
public holidays only)
8. Bulk purchase product enabling group purchase of
period pass at discounted rate (further work on pricing Medium to long
and scheme development required, initially targeted term
towards tertiary students and subsequently offered to
other groups)
9. Travel by public transport to and from a venue
included in the price of entry tickets to larger events Medium term
(further work required)
Concessions
10. Concessions as follows:
Free travel on all services for children under 5 years Existing
old
concession
50% concession fare for all services for children and
young adults from five years old up to and including Short term
18 years old
Free travel for all SuperGold card holders outside Existing
peak hours.
concession
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7. Next
steps
Further detailed financial analysis of the Preferred Option, and pre-market and
customer behavioural testing with users and potential users will be undertaken
and to confirm the proposed Fare Structure is financially viable. In addition,
consideration of the cost of achieving patronage growth through changes to the
fare structure compared to achieving similar results through other service
changes needs to be considered. This will occur through the review process
around the RPTP. Once the analysis is complete, consultation will be
undertaken as part of the review of the RPTP in 2013/14.
8. Communication
Communication with stakeholders will continue as part of the on-going work
programme. Formal public consultation will occur through the review of the
RPTP.
9. Recommendations
That the Council:
1. Receives the report.
2. Notes the content of the report.
3. Agrees that the matters for decision in the report have a medium degree of
significance.
Principle based approach
4. Agrees the principles for the Fare Structure Review evaluation are:
Principle 1: Continuing affordability of fares
Principle 2: Increasing patronage
Principle 3: Reducing complexity
Principle 4: Rewarding target behaviours
Principle 5: Improving consistency
Principle 6: Meeting fare box recovery targets
Principle 7: Enabling incremental change.
Fare Structure Preferred Option
5. Notes that the Fare Structure Preferred Option will be refined through
further analysis and future Council decisions as part of the integrated
fares and ticketing project and review of the Regional Public Transport
Plan.
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6. Agrees that consultation on the future Fare Structure will occur through
consultation on the review of the Regional Public Transport Plan in
2013/14.
7. Agrees the following elements of the Preferred Option for the future Fare
Structure:
Structure
a. Existing 14 concentric zones retained with minor zone boundary
changes
b. 25% peak / off peak differential available between 9am and 3.30pm
and after 6.30pm (Monday to Friday), and between 5am Saturday to
12 midnight Sunday, and all public holidays
c. Universal smart card payment system for all Metlink public transport
services
d. Transfer penalties eliminated and integrated fares, on smart cards
only
e. Consistent fare structure and fare products for bus and rail, and
f.
Premium fares for identified services
Products
g. Existing standard fare products phased out and replaced by the
following:
i.
single smart card fare as the standard fare
ii.
no transfer penalties on smart cards
iii.
fare capping on smart cards
iv.
weekend family pass for up to four children travelling free with a
fare paying adult (valid on weekends and public holidays only)
v.
single cash fare set at a premium above the smart card fare
h. Bulk purchase product enabling group purchase of period pass at
discounted rate
i.
Travel by public transport to and from a venue included in the price of
entry tickets to larger events
Concessions
j.
Priority for concessions as follows
i.
free travel on all services for children under 5 years old
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ii.
50% concession fare for all services for children and young
adults from five years old up to and including 18 years old
iii.
free travel for all SuperGold card holders outside peak hours.
8. Directs officers to undertake further policy work including;
a. discussions with operators on proposals to introduce the weekend
family pass and changes to the child and young adult concession
b. discussions with event organisers and operators to investigate
including public transport fares in the cost of an event ticket
c. development of proposals for a bulk purchase scheme for group travel
and work with the main tertiary institutions in Wellington with the
view to initially developing a scheme for tertiary students
d. detailed analysis and user testing of off peak fares
e. detailed analysis of transfers and fare capping through the integrated
fares and ticketing project.
9. Notes that the existing concessions for people not identified in
recommendation 7(j) above will be phased out once they are able to be
replaced by the off peak fare.
10. Agrees that an approach be made to NZTA for a national resolution to the
issue of concessions for people with disabilities.
Timing of implementation
11. Notes the proposed timing of implementation is based on assumptions
about the lead time required and the financial impacts, and may alter once
further analysis is completed.
12. Agrees the following timing for the introduction of initiatives that have a
potential negative impact on fare revenue:
Short to medium term
i.
50% concession fare for all services for children and young
adults from 5 years old up to and including 18 years old
ii.
Weekend family pass
Medium to long term
iii.
Integrated ticketing and removing transfer penalties
iv.
Capped fares
v.
Travel by public transport included in event ticket
vi.
Bulk purchase scheme
vii.
Off peak fare.
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Report prepared by:
Report approved by:
Tass Larsen
Wayne Hastie
Manager, Projects and
General Manager, Public
Planning
Transport
Attachment 1: Summary of community views
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