12 July 2004

Auckland Public Transport: Simply Terrible

Why is Auckland's public transport system so poor? The answer can probably be laid at the doors of privatisation, a poor regulatory environment and a funding system that favours roads over the development of the kind of public transport system that other comparable cities take for granted. According to urban planning expert Paul Mees:

"The historic problems with [Auckland's] public transport were compounded by the institutional restructurings undertaken by the Labour and then National governments between 1989 and 1996. Under the 1993 privatisation policy, regional governments divested their ownership of public transport assets and private firms took over service provision on a semi-deregulated basis, but with public subsidies. Privatisation was the major factor in the 1991-1996 collapse of public transport patronage."

It's a good idea to make the provision of public goods like passenger transport more efficient. Sometimes this can be achieved through corporatisation, i.e., by forcing a publicly owned company to behave more like a private firm. But corporatisation is different than privatisation. Most cities with good public transport have found that private markets simply cannot provide public services at an adequate level. Jurisdictions with excellent passenger transport systems have 'corporatised' the delivery of public transit while preserving and enhancing levels of service, but the record of transit systems that have been privatised is more mixed.

In Auckland, the combination of a long institutional bias toward the automobile, a transport funding scheme biased toward roads and forced privatisation plunged passenger transport levels to extremely low levels at the same time as the city was experiencing unprecedented growth. Although privatisation was sold to the public as a way to increase the efficiency of the passenger transport system, private firms have shown themselves to be unwilling or unable to make the kind of serious and sustained investment necessary to make Auckland's public transport effective.

And on the other hand, splitting responsibility for the passenger transport system between public government and private firms has allowed the various levels of government charged with delivering public transport to avoid spending the money required for a reasonable passenger transport system. This kind of fracture is symptomatic of many exercises in privatisation, and has even been thought of as a virtue in so-called New Public Management writings. In reality the separation of public control and private enterprise has insulated public agencies from making effective changes to Auckland's transport system.

Although there has been increased demand for passenger transport over the last few years, Auckland's passenger transport is still terrible by world standards. Most observers agree that there simply has not been enough investment. Part of the reason for this may have to do with the difficulties faced by competitive firms in forward planning important capital decisions when compared to public entities with stable, long term funding. In order to help private passenger transport providers respond to increased demand, the Auckland Regional Council introduced a new system of patronage funding. Under the new policy:

"Government funding to the regions for public transport services is based directly on the patronage generated. This leaves responsibility for service planning with regional government, but encourages them to improve services in such a way as to generate additional patronage. The payment rates are based on estimates of both the user benefits and externality benefits of improving services and hence attracting additional passengers."

However, the results have been less than spectacular. Part of the problem has to do with who puts up the money for capital investment. Governments thought that they could avoid spending money for new stock through privatisation. But it seems that private operators just don't see an advantage in spending serious money on capital assets like quality buses. An evaluation by the World Bank of an ARC 'output-based funding' pilot found that 'after two years the indicative results from the two trials were disappointing to the Council in light of the lack of investment in new bus capacity by operators.' The authors of the study blamed a number of 'external factors', but noted that operators complained of the complexity of the funding scheme.

Senior transport policy wonks Ian Wallis and Jane Gayle note a similar kind of difficulty faced by the new patronage funding scheme, and come close to identifying why levels of capital investment in Auckland's transport system are so pathetically low. Writing in their article Economic Incentives to increase Public Transport: the theory and the practice, the authors comment:

"In the New Zealand context, legal restrictions on regional councils' ownership of infrastructure add to the complexity. Generally infrastructure is provided and funded through a separate local authority. This exacerbates the situation as one party puts up the capital funding, while another receives the Patronage Funding payments."

t's even worse when we consider Auckland's shabby bus fleet, which provides over 80% of passenger trips in the the Auckland region. The problem faced by government is how to pay for passenger transport while still sending 'signals' to private operators which will induce them to invest in modern and efficient buses. Experience suggests that it may not be possible to have a quality, integrated cake and eat it efficiently. Writing on the deregulation and privatisation of public transport in the United Kingdom, Ian Hutton writes:

"Markets can work well; or badly. There is no 'iron law' and behind success, like that of inter-city coaches, usually lurks an institutional advantage that has been shaped by public action. But public creativity in this instance as in all others is not acknowledged to have played any part; the injunction from the centre has been to privatise indiscriminately and roll back public authority, which is deemed to be inefficient and bureaucratic."

It may be that one of the secrets of this 'institutional advantage' lies in the capacity of public authorities to rationalise the structure of agencies and mechanisms involved in the delivery of public goods. It's rarely mentioned that privatisation and deregulation has actually increased and not decreased the number of entities involved in the delivery of transport in Auckland. Simplifying the delivery of a public good also increases the ability of the responsible agency to collect and respond to information - information which will be of crucial importance in setting service levels and making investment decisions.

It's often claimed that privatisation of public services helps public authorities to concentrate on core responsibilities, in this case, planning the overall shape of Auckland's transport network. But it appears that New Zealand's public agencies aren't doing their jobs. A year after the release of the New Zealand Transport Strategy, Transfund completed a ten year financial forecast. This was the first time that the organisation had prepared such a document, and in its summation Transfund admitted that:

"Preparing it has revealed how much we know - and how much we don't know -

about New Zealand's transport needs. The largest allocations (over 80%) go to the roading sector. The dimensions of road maintenance are well understood. We also have a good understanding of road construction, especially in the case of State highways, where the allocations are underpinned by a detailed plan prepared by Transit New Zealand. However, in other areas, such as passenger transport, alternatives to roading, and walking and cycling, funding policies are evolving and we do not have as clear a view of the future. For these outputs, the allocations are more provisional. (Transfund, 2003 p. 3)."

This disconnection of both funding and planning authorities from the precise informational requirements of a passenger transport service in New Zealand's largest - and most congested - city has had serious consequences. The model of privatised passenger transport that was finally adopted in the late 1990's has proven inadequate in the face of increased travel demands and transport planning authorities' greater interest in providing better passenger transport.

A long history of regulatory failure and more recently, of privatisation, is to a large degree responsible for the present poor levels of passenger transport. If as a result of increasing congestion and consumer demand, public authorities begin to see passenger transport as an essential public service, the present arrangements of funding, delivery and provision will have to be changed.

ENDS

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