Time To Return The Buses To Public Ownership?

OLDTIMER: An old public owned Auckland Transport Board trolly bus

In view of the Auckland bus dispute, is it time to bring public ownership back to the buses?

Auckland’s local authorities used to run the buses – but the National government of the day forced a change over a decade ago and privatised the then publicly owned Yellow Bus Company. The  Shipley government move meant the Auckland Regional Services Trust had to sell the buses, which it did to Scottish company Stagecoach.

Since then, the taxpayer has continued to subsidise the operations in both taxes and rates – and those amounts continue to grow.

In November 2005, Infratil acquired the New Zealand public transport interests of Stagecoach plc for $252 million and created NZ Bus to run the operation.

NZ Bus, which has locked out workers and triggered the present disruption, milks the subsidies.

So much so that , as the present dispute deepens, ARA chairman Mike Lee looked to penalise the company because the council gives a whopping $150,000 a day in subsidies.

In fact the total money going to private bus companies is staggering.

For example in the year to June 2008, private bus operators pocketed $93.3 million in public subsidies (half from ratepayers, half from taxes). In the  year to June 2009 , ARC ratepayers alone paid $51.4 million in subsidies.

Oddly, the law is so framed that the regional council is not allowed to go over the accounts of the bus operators to make sure they’re aren’t just pocketing the money and sending it off overseas to their head office or using it in other means. That inability to make operators accountable is quite frankly nuts.

With that amount of money going out and the present major operators, NZ Bus,  giving the appearance it doesn’t give a damn about keeping the service going during a five-month wage agreement dispute, is it time to reconsider whether public transport is too crucial a public service to leave in the hands of overseas companies?

There are other fishhooks with the present system which means the council just purchases a public transport service.

The subsidies mean operators have no incentive to grow patronage, which is why patronage growth over the past decade has relatively been dismal. There is no performance monitoring allowed to demand they grow the business or any normal business bonus scheme promising the more passengers they bring in, the more reward they will get. They get subsidies to run the business so there is no incentive to provide any sort of service that makes Aucklanders like it enough to start and keep using it.

The bus operators can’t be forced to run unprofitable routes of which there are always some and is why public ownership is needed to pick up the tab.

So as bus operators on their own won’t provide anything but a service that guarantees them money, the council  anyway has to use the subsidies to persuade operators to do a route not considered financially viable on its own.

Then there is the vexed issue of integrated ticketing. Because the various bus operators don’t need to co-operate with rival businesses , it’s been impossible to get heads around the table to agree on such a system and remains a challenge for the company finally now tasked with making it happen in Auckland.

A year ago the Auckland regional council argued before a parliamentary committee for it to be able to run a fully contracted system of passenger services meaning the council would create an integrated public transport system and decide by tender on private operators to do the job at a negotiated price.

Unionist Matt McCarten, summed it up in his weekly newspaper column when he declared that the bus owners “don’t care about the taxpayer who gives them millions of free dollars, nor their workers, nor the travelling public. It is about greed and so they will do whatever they like to keep profiting off the public.  Wouldn’t it be great if the transport policy for the new Supercity included an integrated, publicly-owned transport system, free of these unethical profiteers who suck on the public teat?”

And an opinion piece written back in 2004 on the Scoop website under the name Rohan G.H. Quinby is worth reading in hindsight:

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.

I’m actually not a big fan of a government propping up unprofitable businesses that government servants, untrained in business, have no idea on how to run. I think Veolia does a good job in running our train service. But ARA’s Mike Lee has been an example of a champion for public transport, someone who “gets it” and gets it moving.

The cynical way the present bus company can cream off money and then respond to a union’s work to rule threat by closing down the service for days, affecting the way citizens get around to do their business, is appalling and needs wider public debate on the issue of who runs the buses.

HISTORY:

1917 Auckland City Council takes over the tramways.

1925 the Auckland Transport Board assumed responsibility for both tramways and buses.

1956 Trams withdrawn.

1964 The Auckland Regional Authority take over running the Auckland Transport Board buses.

INFRATIL (NZ BUS):

From its corporate website:

Infratil’s primary goal is to provide its shareholders with a consistent return of 20% per annum over the long term. Infratil invests in growth infrastructure sectors supporting excellent management and employee commitment to deliver top quartile financial, operational and service performance.
Infratil is an owner and operator of businesses in the energy (mainly renewable), airport and public transport sectors. Its energy operations are predominantly in New Zealand and Australia. The Company owns Wellington Airport in New Zealand and airports in Glasgow, Kent and Lübeck. Infratil’s public transport services are in Auckland and Wellington, New Zealand.
Infratil’s long term investment focus has led it to invest heavily in its people and the communities where it operates. Infratil believes that sustained quality people performance and positive relationships and involvement in communities where its businesses are based are key determinants of its financial performance.