Does it cost less to drive to work than catch the train?

Posted: December 10, 2011 | Author: | Filed under: Public transport | Tags: , , , , , , , , | 14 Comments

Laneways of Melbourne (photo from Planning Institute - VYP Street Art Tour)

The Public Transport Users Association (PTUA) is keen to make the case that it costs more to travel by public transport in Melbourne than it does by car. The PTUA says above-inflation fare rises over the last decade mean public transport now costs much more than “petrol in the car” for many trips.

The PTUA might take some moral support from this op-ed in The Age this week by journalist Gabriella Costa (the paper calls it an ‘Analysis’). Like the PTUA, she also argues that commuting by car is cheaper. She says the 9% fare increase announced this week by the Government will make driving a better option. Her contention is that, “even loosely, the maths just don’t add up” for rail:

And it’s a simple equation. A Metro daily ticket from a zone 2 station into the city? $11.90 from January 1. Petrol from home to work and back? two to three litres. Parking: less than $10 a day on the city’s edge.

Ms Costa doesn’t actually do the maths, so I have. Unless she gets her petrol for free, even on those numbers it still costs less to take the train to the city than drive! Petrol at $1.35 per litre is $4.00 a day, plus $10 for parking. Even loosely, that adds up in favour of the train! But as we all know, there’s more to the financial cost of driving than just petrol and parking, so I’ll try to do a tighter estimate.

Ms Costa’s example is based on her own circumstances. I know from her article that she lives in St Albans, near Giniver station in Zone 2. By her estimate, she’s 17 km by road from where she works in the city (presumably at The Age HQ in Spencer St). I’ll assume she commutes 220 days a year after taking rec leave, public holidays, sick leave, the odd day off, a bit of work-related travel and weekends into account. If she drove to work on every one of these 220 days she’d therefore travel 7,480 km in a year.

I’ll assume she drives the cheapest vehicle you can buy new in the small car class, a Hyundai i30. According to the RACV, operating costs of this vehicle for fuel, tyres and servicing, are 16.6 cents per kilometre, giving her an annual commuting cost of $1,224. That’s conservative because the fuel component is based on a city-country average – commuting in busy traffic is thirstier work.

Add to that parking at $10 per day for 220 days and her all up cost for a year of commuting by car to the CBD totals $3,444. That’s still quite a bit more than the cost of catching the train from St Albans, even under the new fare structure that takes effect from 1 January.

St Albans is in Zone 2, so Ms Costa could buy a myki Yearly Pass in 2012 for $2,021. That would save her $1480 compared to driving. Even if she travelled every day on a myki Daily Cap it would cost $2,438 over the course of a year, still putting her ahead by $1,000 compared to driving.

And if she lived any further out the cost of train travel would stay the same but driving would cost considerably more. If, for example, she lived in Pakenham (since she mentions it in her article) her annual expenditure on driving would increase to $6,371 p.a. because it’s 57 km from her workplace. But the cost of the train would be the same as it is from St Albans, since both stations are in Zone 2.

It’s important to note that I’ve only considered variable costs, specifically parking, fuel, tyres and servicing – I’ve taken no account of the cost of owning the car. But it makes no sense to ignore standing costs, because if she doesn’t actually have a car she can’t drive to work! The RACV says the annual standing cost of a Hyundai i30 is $5,668, made up primarily of depreciation, interest, insurance and registration.

If I assume commuting accounts for half of her total annual travel by car (i.e. she drives 7,480 km to work each year as well as doing a further 7,480 km p.a. in non-work travel), then the standing costs that should be attributed to her journey to work come to $2,834.

Add that $2,834 to the $3,444 she pays for parking, fuel, tyres and servicing and Ms Costa is up for an annual total of $6,278 for the privilege of driving to work from St Albans. Remember, a myki Yearly Pass will cost much less, just $2,021, and even a myki Daily Cap will cost her $2,438 for the year. Read the rest of this entry »

Is the 9% increase in public transport fares…fair?

Posted: December 7, 2011 | Author: | Filed under: Public transport | Tags: , , , , , , , , | 17 Comments

Fare revenue per passenger kilometre for selected cities ($)

Many people are outraged that the Government has dared to increase public transport fares in real terms. From 1 January, fares in Melbourne will rise by around 9%, well in excess of the rate of inflation (3.6% for the 12 months to the September Quarter).

From what I can make out, I don’t think anyone is questioning the need to increase revenue for public transport. For all its virtues, the system needs billions spent on things like improved signalling, track upgrades and duplications, more train sets, new rail lines, improved security, and much more. Patronage has grown at around 5% p.a. and that increases costs. Indeed, spending more to improve the system is the key to sustaining increasing patronage.

So the issue is not about the need for more money, but rather about where it should come from i.e. who should pay. Additional revenue for higher capital and operating purposes can only come from a limited range of sources. The main possibilities are:

  • From passengers via fares;
  • From taxpayers generally (by foregoing expenditure elsewhere in the Transport portfolio or beyond);
  • From efficiency improvements e.g. reduced fare evasion, less restrictive work practices;
  • From the beneficiaries of the public transport system e.g. land value capture, levies on city centre businesses;
  • From other transport activities with undesirable side-effects e.g. congestion pricing; levy on car registration.

Each of these sources might be able to contribute something, but the revenue task is huge and there are practical and political limits to how much each can put in.

Fares are an important tool because they directly link supply and demand and they have history. Paying for service is a well established principle in public transport – there are very few public transport systems around the world that don’t charge fares.

Melbourne public transport users already get a pretty good deal – their fares recover none of the capital costs and only 44% of operating costs. Moreover, judged against some other cities, Melbourne’s fares aren’t especially high compared to the cost of providing the service (see exhibit).

The key market for the system is CBD workers who on average are reasonably well paid relative to their counterparts in other parts of the city. Further, a significant proportion of public transport users already benefit from concessional fares.

Those who argue that funding should come from general revenue rather than from passengers don’t always think about what would have to be foregone. They often implicitly imagine it would be at the expense of something they personally see as valueless or negative (new freeway construction is a common target).

But there’s nil guarantee of that. Any such decision would be made by the Government of the day according to its priorities and values. It might come at the expense of a very worthy transport project or it might come at the expense of another portfolio, perhaps a highly emotive one like education, health or community services. This attitude just shifts the problem to somewhere else where it might possibly impact others with less capacity than CBD workers.

In the short term – and this increase will take effect within four weeks – there are really only two choices: raise fares or fund the increase from elsewhere in the budget. In the longer term however there are possible alternatives to future fare increases. Read the rest of this entry »

Should public transport fares be higher?

Posted: October 20, 2011 | Author: | Filed under: Public transport | Tags: , , , | 20 Comments

Fare revenue/per passenger km ($) for public transport in selected cities (data from Ian Wallis & Assocs)

The report in The Age that the Government is considering a 10% real increase in public transport fares has generated an intense negative reaction from readers.

If the Government went ahead with the touted increase, the paper calculates that combined with CPI increases, the cost of a weekly zone one myki pass would rise from the current $30.20 to $34.90 in 2013, or by $4.70 per week. The equivalent zone two pass would rise from $51.00 to $58.95.

Out of well in excess of 100 reader comments on the story, only a handful defended the proposition. The overwhelming view is the system is so broken it would be outrageous for the government to ask beleaguered users to pay more. While many say they’d be prepared to pay more if it meant the system were improved, quite a few think public transport is already too expensive at current fare levels – indeed, a number argued public transport is a “public good” and should be free.

Some warn higher fares would be self-defeating because they’d encourage further fare evasion – equivalent revenue could instead be raised by getting serious about evaders. Another objection is that recent increases in patronage have raised enough additional revenue to obviate the need for increasing fares.

There’s also a common sentiment that increasing fares would increase car use and hence be bad environmentally. A surprising number reckon the increase would make public transport more expensive than driving.

I think The Age has taken some licence here. Current policy is that fares increase in line with inflation, so some of the prospective rise is going to happen anyway. By itself, a 10% increase (i.e. a 5% increase in each of two consecutive years) would put up the cost of a zone one weekly myki pass by $3.10 per week. The corresponding increase for a zone two weekly would be $5.25 per week.

Still, I don’t think even these somewhat lower numbers would do much to assuage the vitriol spat out by most readers. However I disagree with them. As I’ve pointed out before, I support the idea of increasing fares in real terms. This is not a conservative view – the public transport advocates who undertook the Independent Public Inquiry into Sydney’s long-term public transport needs think it’s a good and necessary idea too.

The argument that fares shouldn’t be increased because the system is flawed is politically potent but counter-productive. More revenue is one of the crucial inputs needed to improve the system. Better service is a much more important driver of patronage than fare levels.

Fares aren’t in any event expensive relative to the cost of the service provided. They’re already heavily subsidised – fare box revenue in Melbourne only recovers 44% of operating costs and none of the capital cost. Moreover, fare revenue is around 12 cents per passenger kilometre – that’s around average for Australian cities but considerably lower than some major cities in New Zealand, Canada and the United States (see exhibit).

There’s a sense of perspective missing here. For all its failings (and I’m not suggesting they aren’t real), the public transport system in Melbourne is still delivering a reasonable service. In fact it’s been good enough to support spectacular jobs growth in the transit-dependent CBD over recent years – employers are prepared to bet on it.

There are good reasons for pursuing revenue foregone through fare evasion, but it isn’t a magical hollow log. Collecting the marginal dollar entails substantial and increasing costs, such as employing more inspectors (or conductors). Likewise, recent boosts in patronage have increased revenue, but they’ve also raised operating costs and required more investment in infrastructure e.g. new trains.

The argument that higher fares will increase driving isn’t convincing either. While there would undoubtedly be some drift at the margin, the great bulk of public transport users are “captive” in the sense that they either can’t drive or motoring is simply too expensive due to high parking costs and traffic congestion. Even a one-off 10% real increase isn’t going to change that equation substantially (although I expect it could well give a modest boost to cycling).

The key market for public transport is work trips to the city centre. The CBD couldn’t exist in its current size and form without transit. There’s no convincing reason – on either efficiency or equity grounds – why CBD employers should have the travel costs of their generally well-paid workers subsidised by the rest of the population by holding down fares (in an ideal world I’d favour a tax on central city employers to supplement funding of transit services but that’s another story).

Despite what some readers of The Age think, public transport is not a “public good”. It’s neither non-rivalrous nor non-excludable – it gets congested and users pay. Of course it has a social function but so do water and energy. As is usually the case with these utilities, subsidies should be directed at eligible users, not bestowed on all passengers via the fare structure irrespective of income .

Overall then, I think increasing fares in real terms is a good idea. However I don’t see fares as the only source of revenue – CBD businesses should be paying too (and Sydney’s Independent Inquiry also identified a number of other potential sources of funding). I’d also like to see attention given to the fare structure, so that among other things, it provides further incentive for travellers to shift to non-peak services. Read the rest of this entry »

What should be done with myki?

Posted: September 14, 2011 | Author: | Filed under: Public transport | Tags: , , , , | 23 Comments

Road pricing in London, 18th century

The Age reckons myki is “failing at maths”, but I wonder if the key failing is actually with the way it’s managed rather than with any technical shortcomings.

This report in Tuesday’s paper said “hundreds of travellers (who use myki) are paying too much”. It follows an earlier report by The Age, back in April, when it was claimed that “one third of myki bills are inaccurate”.

Both these stories refer to MykiLeaks, a web site set up by Monash University student Jonathan Mullins. It enables travellers to review (some aspects of) the accuracy of myki statements on-line.

The Age’s latest report indicates a big improvement since April – the proportion of inaccurate statements is down from 33% to 15%. But if valid, that’s still a very high error rate even if, as The Age’s reporter says, the total dollars involved aren’t significant (the combined overcharge across circa 300 faulty statements was $1700, with the biggest error being a traveller charged $18 instead of $6).

But there are reasons to be careful about how much weight to put on the MykiLeaks results. One is that we don’t know how accurate the MykiLeaks algorithm is. Another is that only 2,000 statements have been submitted to the site since it started last December. That’s a very small proportion of the million plus myki cards on issue.

Such a small sample might not be problematic if it were randomly selected, but it seems unlikely the kind of people who use MykiLeaks are representative of the whole body of myki users. They could have good reason to be wary if, for example, they are in the small group who make the kind of complex, multi modal trips where myki appears to be weakest.

I don’t know for sure how accurate myki actually is or even what most of the errors are, but I don’t put a lot of store by MykiLeak’s findings. But that doesn’t really matter all that much because the key issue in my view is the poor public perception of myki – it’s pretty clearly a tainted brand. I’m the first to be wary of on-line polls, but surely it’s not without significance that a staggering 91% of the 5,657 readers who voted in The Age’s poll answered ‘No’ to the question: “Do you trust myki to charge you the correct amount?”.

Moreover, read through the comments on the article and it’s evident there are other issues too. Quite a few people have difficulty understanding their account statements. Others are annoyed by the considerable delay between topping up their account on-line via credit card, and when the funds become available for use. Many resent having to identify errors themselves and then contact a call centre to have it fixed up.

If The Age’s report is a fair account, the Transport Ticketing Authority (TTA) seems to be taking a defensive posture. That’s not good for business and it’s not smart politics either.

The best counter the Chief Executive, Bernie Carolan, could manage was to warn “myki users against giving their personal information to the (MykiLeaks) website”.  He also said he couldn’t confirm MykiLeak’s claims because the Government doesn’t have access to the site. Just as he did back in April, Mr Carolan again provided this reassuring, customer-friendly advice: “If a customer is concerned they have paid more for their fare than required, they should contact the myki call centre on 13 69 54”.

This sounds to me like an organisation that’s a little out of touch with its customers. People don’t want to hang on the phone to a call centre to correct a mistake they didn’t make. Moreover they expect the TTA will identify its own overcharging errors, not leave it up to customers and wait till they complain. Perhaps most of all, they want to be reassured – they want the TTA to tell them honestly and plainly if they’re being over-charged or not. Mr Carolan didn’t answer that question – he responded with bluster. Read the rest of this entry »

Where are the (infrastructure) white elephants?

Posted: August 25, 2010 | Author: | Filed under: Decentralisation, Infrastructure | Tags: , , , , , , , , | 7 Comments

With the renewed political focus on regional development, it’s timely to think about white elephants – in this instance specifically about Infrastructure White Elephants.

Anytime politicians are excited by regional development, herds of white elephants can’t be far away. I touched on this important matter in a previous post on “visionary” projects, but now I’m interested to know which projects, if any, qualify as Infrastructure White Elephants.

To begin with I’ll use a simple definition – according to Wiki, a white elephant is a valuable possession whose level of use is low relative to its cost to build and maintain.

On that definition I’d be tempted to include Sydney’s Cross City tunnel and Brisbane’s Clem 7 under-river tunnel on my list of provisional white elephants, as initial traffic levels were much lower than forecast. Then going back a bit, other potential candidates might include the Ord River Scheme and more recently the Alice Springs to Darwin rail line. Read the rest of this entry »