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Meeting: |
Regional Council |
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Meeting Date: |
9 June 2023 |
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Agenda Item 7.1 under Separate Cover:
Public Transport - Implementation of Government Fare Announcement
As noted on the Regional Council Agenda for the meeting on Friday 9 June 2023, the following item is included under separate cover:
Decisions Required
Agenda Item 7.1 Public Transport - Implementation of Government Fare Announcement 1
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Report To: |
Extraordinary Regional Council |
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Meeting Date: |
9 June 2023 |
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Report Writer: |
Olive McVicker, Corporate Performance Team Lead; Mike Seabourne, Director, Public Transport and Kumaren Perumal, Chief Financial Officer |
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Report Authoriser: |
Mat Taylor, General Manager, Corporate |
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Purpose: |
To determine Council’s approach to implementation of Government announcement on public transport fares. |
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Public Transport - Implementation of Government Fare Announcement
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Executive Summary - In the recent Budget announcement, the Government have provided funding for free public transport for children under 13, and half-price fares for people under 25.
- Government prefers a 1 July 2023 go-live date
- The Regional Consortium is in a position is to deliver the change through the community connect card by July 1, if Waka Kotahi are able to fund the transitional funding.
- As reported to Council at your Annual Plan Deliberations meeting last week, ratepayers receive a proposed targeted rate reduction through extra Government funding.
- Council could also decide on whether we go to a card only payment system.
- There are various opportunities to consider including consistency with other regions.
- Going ‘card only’ means we would eliminate the cashbox theft issue and help improve driver working conditions around safety.
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That the Extraordinary Regional Council:
1 Receives the report, Public Transport - Implementation of Government Fare Announcement.
2 Directs staff to implement the change by 1 July 2023 (as outlined in the report)
(a) Approve Option 1: To align with the government fares announcement as the preferred option
(b) Confirms the new fare’s structure applies from 1 July 2003 to Beecard holders
3 Confirms that the options discussed in this report do not rise to the level of significance under Councils Significance and Engagement Policy that would require additional consultation.
1. Introduction
On 25 May 2023, the government announced cheaper public transport for 1.6 million New Zealanders, including half price fares for people under 25 and free fares for kids under 13. These changes are expected to be live from 1 July 2023.
The government would like us to proceed as quickly as possible to the new fares but understands that there are challenges in doing so. All Public Transport Authorities (PTAs) were supportive of the changes, and most were concerned with the timeline.
Council is well placed to respond however there are policy, financial, operational, customer and community impacts to consider.
1.1 Legislative Framework
Land Transport Management Act 2003 (LTMA)
BOPRC is responsible for funding and contracting public transport services under Part 5 of the Land Transport Management Act 2003 (LTMA).
The overall purpose of the LTMA is to contribute to an effective, efficient, and safe land transport system in the public interest. Section 115 of the LTMA includes a set of principles that are intended to guide the actions of regional councils in undertaking their public transport functions.
1.2 Alignment with Strategic Framework
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A Vibrant Region |
We lead regional transport strategy and system planning, working with others to deliver a safe and reliable public transport system. |
1.2.1 Community Well-beings Assessment
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Dominant Well-Beings Affected |
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þ Environmental Medium - Positive |
þ Cultural Medium - Positive |
þ Social Medium - Positive |
þ Economic Medium - Positive |
Public transport contributes to positive:
a) Environmental outcomes through reduced transport emissions when people choose to take public transport instead of private vehicle trips. These environmental outcomes are further enhanced when the public transport trip is in a zero-emission vehicle.
b) Cultural outcomes (refer to the Implications for Māori section of this report).
c) Social and economic outcomes for our communities. Well planned and effective public transport enables people of all ages and abilities to access a wide range of social and economic activities.
2. Impacts of proposed fare changes
2.1 Current fare structure
2.1.1 Tauranga School Fares - Free Trial
The Tauranga schools fare free trial commenced on 27 January 2020. This initiative was established to see whether free fares for students can assist in Tauranga’s traffic congestion. Free travel applies on weekdays (at peak times only) during the school term for school students aged 5-18 years.
In 2022 the trial was extended to the Whakatāne, and Rotorua services and currently expires on 31 December 2023.
2.1.2 Current half price fares
To note, the Bay of Plenty Regional Council contracted bus services provide half price concession and cash fares. The discounted fares applied from 1 April 2022, following the Government Announcement on Community Connect and were extended to 30 June 2023, across all Council funded routes. The half price scheme also includes Total Mobility services, up to the $25 per trip limit, which have now been made permanent.
Half prices fares end on 30 June 2023 so we will need a decision to commit to the new fares or maintaining the current discount to avoid a customer back lash.
2.2 Proposed fares comparison
Councils’ current fare’s is outlined below and differs from the recent government announcement in the following ways:
Table 1: Current fare structure vs Government announcement
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Age Group |
Current policy |
Govt Announcement |
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0 - 5 |
Free |
Free |
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6 – 12 |
Free (at peak) |
Free (at all times) |
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13 – 18 |
Free (at peak) |
½ Price (at all times) |
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19 - 24 |
Full Price* |
½ Price (at all times) |
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25+ |
Full Price* |
Full Price |
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65+ |
Discount |
Discount |
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Super gold |
Free after 9am |
Free after 9am |
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* Note: these customers currently only pay half price due to the government announcement in February 2023 |
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2.2.1 Customer Impacts
The key points in comparing the current fare policy setting to the announced government policy setting are as follows:
· For 6–12 year-olds: An improvement in their customer experience who now are able to travel throughout the day.
· For 13-18 year-olds: A minor reduction in customer experience who previously were free at peak and full price off peak now will pay ½ price throughout the day.
· For 19-24 year-olds[1]: A improvement in customer experience who now only pay ½ price throughout the day.
The main customer impact with adopting the government fares policy is that 13–18 year-olds will have to pay ½ price fares throughout the day instead free at peak times and full price in off peak.
2.3 Policy Options
Council do not have a specific fare policy that needs to be changed, rather principles set out in the Regional Passenger Transport Plan (RPTP) and all fare decisions have been adopted through Council committees and in decision papers. The options are broadly in alignment with councils’ policy position.
The table below highlights two options and the financial impact of each.
· Option 1 aligns our fare policy to the government announcement but as described above, 13-18 year old’s will have to pay more for ½ price fares than they do currently.
· Option 2 aligns more closely with our current policy and retains free fares for the 13 -18 year old age group at all times.
At minimum our fares policy will need to change to reflect the addition of the 13 -18 age grouping in our fare structure.
Table 2: Fares options
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Current policy |
Option 1 |
Option 2 |
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Align to Govt Announcement |
Retain free fares for 13 -18yo |
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0 – 5
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Free |
Free |
No $ change |
Free |
No $ change |
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6 – 12 |
Free (at peak) |
Free (at all times) |
Positive $ impact |
Free (at all times) |
Positive $ impact |
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13 – 18* |
Free (at peak) |
½ Price (at all times) |
No $ change |
Free (at all times) |
Minor $ change |
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19 – 24 |
Full Price* |
½ Price (at all times) |
No $ change |
½ Price (at all times) |
No $ change |
2.4 Options assessment
2.4.1 Customer
Option 1 allows Council to remain consistent with central government and the regional sector and brings forward the ending of the free fares trial. This allows Council to communicate the fares in step with all other councils and with Waka Kotahi.
The need for further public consultation is mitigated with the risk of challenge for consultation. However, a planned fare review later in the year can potentially address the issue and allow for a consultative process the time to take place.
In addition, recent patronage trends have lifted significantly across the region and staff expect that the half price fares policy have assisted this lift in patronage along with increased reliability (new drivers) and a return to travel patterns pre COVID.
2.4.2 Operational and or Delivery Considerations
Age verification
Age verification is a longer process and conversation with our communities and a pragmatic solution can be in place early, however we will need a high trust model until we are able to transition all bee card holders into an age verified status. We expect this process to take potentially 6 months and is not needed by July 1
National Ticketing System (NTS)
The NTS is proposed to be in place by 2025 (latest 2027) and will solve concessions, age verification and other operational challenges for the whole of NZ. Our solution only needs to last until this system is available.
Regional Consortium
Bay of Plenty Regional Council is one of nine Councils that have joined together as a Regional Consortium that jointly procures a single electronic ticketing solution for bus networks. As such the Councils in the Regional Consortium are well placed to deliver the new fares structure from a technology and process standpoint.
Community Connect project
Delivery of the project aligns with existing Community Connect project implementation, which will give Community Service Card (CSC) holders half price adult fares. If all regions went at the same time, we’d be able to make use of the global concession done centrally. System testing and changes can be completed centrally by 1 July.
Internal resourcing will need to be redeployed to this project to have it delivered by 1 July. This is a risk for resourcing our other priority projects.
Communication
Staff would need to immediately communicate to all children aged under 13 to spend the remaining fare balance on their cards, otherwise we risk having to potentially reimburse several thousand cards. Likewise, wider communications are needed for all other affected stakeholders.
2.4.3 Financial
· The financial implications for Council for both options is financially beneficial because Waka Kotahi will now fund 100% of the fare revenue forgone from 6-13 year olds. Currently this is funded by targeted rates
· The announcement signals an additional $2m of Waka Kotahi funding for the Public Transport activity effective 1 July 2023Option 1 would result in a reduction in fare revenue and targeted rates of $0.4m and $1.6m respectively.
· Option 2 would result in a minor reduction in fare revenue and targeted rates of $0.6m and $1.4m respectively.
· The difference between these options is approximately $0.2m of fare revenue in year 1. This difference is minor and may be consumed by the cost of transition and or any delays Implementation and is therefore a minor consideration on whether to implement.
· Note: During annual plan deliberations Council supported allocating $0.5m of the reduction in targeted rates to replenish the forecast deficit balance of $0.5m on the Tauranga Public Transport Targeted Reserve.
o A revised Tauranga Public Transport real targeted rates increase of 2.8% (4.9% per deliberations) which translates to an increase of $21.98 per rating unit ($26.92 per deliberations)[2].
o A revised Rotorua Public Transport real targeted rates increase of 0.4% (2.8% per deliberations) which translates to an increase of $9.53 per rating unit ($11.51 per deliberations).
o A revised Whakatāne Public Transport real targeted rates increase of 20.9% (24.9% per deliberations) which translates to an increase of $6.53 per rating unit ($8.74 per deliberations).
· This will result in a total real rates revenue increase for 2023/24 of 3.4% comprising of:
o A total general rates increase of 5.0%
o A total targeted rates increase of 1.9%
Staff recommend Option 1
3. Considerations
3.1 Risks and Mitigations
3.1.1 Payments
The 1 July delivery date is achievable by concentrating on Beecard only payment system as there are several operational challenges of remaining with cash fares.
· Verification of a passengers age at the point-of-sale challenge we cannot expect drivers to request proof of ID if handling cash.
· Going card only means we would eliminate the cashbox theft issue (as word got around) and help improve driver working conditions around safety.
· Waka Kotahi support this approach
· Approximately 1/3 of fares collected are cash payments currently and will affect some service more than others.
Staff recommend the policy apply to card only payments on our services that can accept Bee Card which means cash users will pay full fare.
For services that do not have Bee Card facilities i.e. Potaka, Ruatahuna, Matata and Waihi Beach and Intra Regional Services we will work with operators to transition across to the new fare structure by encouraging/incentivising the use of the Beecard.
Working with operators will allow the team to fully operationalise the new fares and move as much of our payments to cashless as possible. Staff intend to monitor this approach and react accordingly as we transition.
3.1.2 Consultation Significance
Council decision making requirements are set out in Council’s Significance and Engagement Policy (SEP), final decisions on the level of significance of a proposal or decision are made by full Council, Council committees and staff in accordance with standing orders and Council delegations. Where a decision makes a ‘significant’ decision, then LGA section 82 consultation principles apply.
Council has consulted with the public before introducing fare free travel at least twice via Annual Plans and Long Term Plans in recent years. Staff are not aware of Council introducing fare free travel without consulting on it. There has been strong support from the community each time we have consulted, and this informed Councils decision to implement various fare free travel options.
Most of the bus users will see greater benefit from the options discussed in this report because of the additional reduced a fare free travel resulting from increased funding by Central Government.
However, under Option 1 (section 2.2) 13-18 year olds will pay more for ½ price fares than they do currently. This is a reduced level of service provided to one of the groups of customers (13-18 year olds) that use buses during the peak times. The proposal however allows for ½ price travel at all times potentially balancing the reduction of level of service. Staff will also monitor this effect as we do not currently collect data on this age group.
Staff advise under the Councils Significance and Engagement Policy, that additional consultation is not required to implement this change.
If Council want to consult with Community the time to consult will make the July 1 deadline undeliverable, and delay the go live date by 3 months.
Options:
· Option 1: Council may decide that ‘Option 1’ is not a significant decision as most of the public will see greater benefit from the decision and that while there is a small section of the community may see reduced benefit, this is not considered to rise to the level of significance that would warrant further public consultation.
A recommendation has been added to the report to reflect this option.
Table 4 – High level risks
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Risks |
Mitigation |
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Age verification process takes longer than 6 months |
Use our fares policy review to consult and communicate the changes we need from our customers |
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System changes are potentially constrained by our single provider for all the Consortium members. This has not been checked and is a key resource risk. |
Risk mitigated by working with Consortium on a structured approach to making the changes |
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Operator buy in will be critical and any increase in bus driver customer requirement will be problematic – particularly with age verification. |
By not requiring bus drivers to age very we reduce the risk of Operator resistance |
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Decision challenged |
Government announcement has communicated the change and created an expectation this will be implemented Our implementation will include a comprehensive communication campaign to outline the changes |
3.2 Climate Change
The matters addressed in this report are of a procedural nature and there is no need to consider climate change impacts.
3.3 Implications for Māori
Public transport has positive effects for Māori through improved accessibility and choice of transport options. This enables Māori to have better access to essential services and opportunities, including employment, education, and health care both within major urban centres and between smaller settlements and larger centres. Māori are also likely to benefit from a sustainable fare system that provides socially equitable access on an ongoing basis.
3.4 Community Engagement
Council has engaged with the community on fare free travel in the past, and the increased level of central government funding has been promoted in the media.
Most of the public will see greater benefit from the options discussed in this report because of the additional reduced or fare free travel because of increased funding by Central Government.
While there is a small section of the community who may see reduced benefit under Option 1 in section 2.2 of this report, this is not considered to rise to the level of significance that would warrant further public consultation.
As discussed earlier in this report, it is important that the community is well informed on what the implications of Implementation of Government Fare Announcement mean to them.
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INFORM Whakamōhio |
To provide affected communities with balanced and objective information to assist them in understanding the problems, alternatives and/or solutions. |
4. Appendix 1
4.1 Fares and Policy Analysis
4.1.1 Waka Kotahi Policy
Most public transport services provided by Regional Councils in New Zealand are funded from a combination of three sources:
· Fares received from customers;
· Regional Council funding e.g., revenue from rates; and
· Financial assistance from the National Land Transport Fund (money collected from fuel taxes, road user charges etc.) which is administered by Waka Kotahi (New Zealand Transport Agency).
Waka Kotahi has policies which guide the decisions it makes about providing financial assistance for the services that Regional Councils contract.
4.1.2 Bay of Plenty Regional Public Transport Plan 2022 (RPTP)
BOPRC adopted the RPTP in September 2022.
Objective 7 – fares and pricing: An equitable fare and pricing system that attracts new customers and rewards frequent use.
This is the objective most directly relevant to the topic of providing free fares and half-price fares. Objective 7 is supported by a suite of policies and actions designed to achieve its goal.
Relevant policies:
Policy 7.1 Fare principles
The following principles will be applied when developing and reviewing public transport fares and pricing in the region:
· Simple – the fare system is simple and consistent across services and networks.
· Customer focused – the fare system is easy for the customer to understand and use.
· Equitable – fare pricing is weighted according to ability to pay.
· Incentivised – fare pricing and initiatives are designed to increase patronage and reward frequent use.
· Balanced – the fare system achieves an appropriate balance between the goals of:
o social equity;
o transport system efficiency; and
o financial sustainability.
Policy 7.2 Fare structure
Work towards the delivery of a simplified, flat fare structure across the region with consistent pricing for comparable journeys.
Policy 7.3 Fare pricing initiatives
Explore a range of innovative pricing initiatives to encourage more frequent use of public transport including, but not limited to:
· Fare capping
· Expanded off peak discounts
· Group based discount schemes
· Employee schemes
· Loyalty credits
· Mobility subscriptions
Policy 7.5 School students
Implement a system of fare free travel for school aged students on the region’s existing public transport services subject to the following considerations:
· consistency with the fare principles in Policy 7.1;
· consistency with Waka Kotahi funding policy; and
· financial sustainability.
The system of fare free travel may be subject to specified limitations or requirements including, but not limited to:
· by time of day or week
· by service
· by geographical area
· trip or fare capping
· compulsory card usage to monitor patronage
5. Next Steps
Set out in the report
