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Rail contract approved by Greater Wellington

29 June 2006

Rail contract approved by Greater Wellington

A contract for the provision of suburban passenger rail services between Greater Wellington Regional Council and Toll NZ Consolidated Ltd (Toll) has been approved by the Council's Policy, Finance and Strategy Committee.

"This contract secures an affordable, good quality passenger rail service for the region," said Ian Buchanan, Chairman of Greater Wellington Regional Council.

"The new contract is the foundation on which improved passenger rail services can be built. Agreeing on the contract means we can move forward to purchase new rolling stock and improve services over the coming years. The contract also reflects a new working partnership between Greater Wellington and Toll, and provides long-term security for the service."

Toll CEO David Jackson said he was delighted an agreement on a long term contract has been reached.

"The company appreciates what an important part passenger rail plays in the region and congratulates all those involved in reaching this deal," said Mr Jackson.

Nearly 11 million passenger trips are made on the passenger rail network every year, and on a normal weekday morning more than 14,000 passengers arrive at Wellington Railway Station between 7 am and 9 am.

Mr Buchanan said that Greater Wellington had worked closely with Land Transport New Zealand during negotiations on the contract.

"This is an important contract for both Greater Wellington and Land Transport New Zealand. Land Transport New Zealand contributes 60% of the subsidy, and it was important that both parties were satisfied with the outcome." Ian Buchanan said that a key feature of the new contract would be the way Greater Wellington and Toll worked together.

"The contract changes Greater Wellington's role from simply funding the service to one of partnership with the rail operator. This is important because it means Greater Wellington can directly influence issues of importance to the public, such as the level of fares, timetables and the quality and standards of the service."

Mr Buchanan said the increased level of openness between the parties, and the co-operative approach to business planning will mean better decision making in the long run.

"We are already seeing the benefits of increased openness. Obviously I can't divulge the commercial details of the contract, but what I will say is that I regard this as a fair contract which has been negotiated with a high degree of openness between the parties. The level of Greater Wellington's subsidy will actually be lower in the first year of the contract than the current level of slightly more than $19 million."

"For its part, Toll will take an 'open book' approach to the business, providing Greater Wellington with detailed information about operations and finances on a regular basis. Toll will operate the business in accordance with the business plan that both parties will agree to, and will be responsible for all staffing and maintenance."

Mr Buchanan said that the passenger rail system made a major contribution to the regions economic, social and environmental health.

"At a time when the cost of car travel is increasing, and concerns about pollution and global warming are becoming important it is essential that we secure the future of the service."

ENDS Questions and Answers

1. Why did GWRC want a new contract? Isn't the old one OK? The old contract has expired, and is being rolled over on a month to month basis. So we need a new contract. The existing contract does not reflect the new environment we're entering into with Greater Wellington owning the rolling stock, and wanting to enhance services. This contract is more of a partnership with Toll for the provision of services, and gives Greater Wellington substantially more influence over standards and services, including fares and timetables.

2. How long will the contract be for?

The total term of the contract is ten years. At the end of five years the two parties must meet to ensure that the contract is working as envisaged. If the parties cannot agree on changes, the contract will continue unchanged for a further five years.

3. What is the annual cost of the contract to ratepayers? Next year the annual subsidy will be lower than the existing subsidy of just over $19 million (60% funded by Land Transport New Zealand, 40% funded by ratepayers). However, operating costs and track charges levied by OnTrack will increase over the lifetime of the contract, and will be reflected in the subsidy level. Under the new contract any increase in fare revenue will decrease the subsidy payment from GWRC. Previously these earnings were retained by the operator. All the financial details of the contract are commercially sensitive.

4. Will services change as a result of this contract? Not immediately. However, the new contract will enable Greater Wellington to gradually upgrade and improve services, including the purchase of new rolling stock using government grants.

5. Why has it taken so long to reach agreement? There are several parties involved, including Greater Wellington, Toll NZ Ltd and Land Transport New Zealand. It took time to ensure all parties were satisfied with the contract.

6. What benefits are there to ratepayers or commuters from this contract? Next year the annual subsidy will be lower than the existing subsidy of just over $19 million (60% funded by Land Transport New Zealand, 40% funded by ratepayers). Commuters will begin to see improvements in services from 2007, when new rolling stock on the Wairarapa line enters service. Progressive improvements to services will follow over the coming years, including 58 new Electric Units on the main lines.

ENDS


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