FILE NOTE
DATE
11/10/2013
AUTHOR
Andrew Ford
SUBJECT
OIA - Concessionary Fares for Tertiary Students
FILE NUMBER
TD/07/09/09-v1
1.
Introduction
This note is a response from GWRC relating to an Official Information Request (OIA)
‘On 6th May 2013 The Dominion Post cited Economic Well-Being Committee chairperson Peter
Glensor as stating the cost of implementing a tertiary concession bus fare as $4million per annum. I
am interested in the origin of this value. To this end I request records of all advice and
correspondence received by Mr Glensor, including any memos, reports, data or other documentation
used in arriving at this figure.”
This note outlines the assumptions and contains the data that underpin the calculation of the
estimated $4 million per annum cost of implementing a tertiary concessionary bus fare.
Some of the assumptions are basic and supported by limited available data, however given the lack
of alternative information and the purpose of the fare structure review - to produce a high-level
assessment of the impact of potential changes to the PT fare structure - the assumptions and level of
detail summarised in the Fare Structure Options Report and reported in this note are considered
adequate.
1.1
Survey Data
Data was obtained from Victoria University, Massey University and Wellington Hospital travel
plans surveys and provides information relating to the mode that staff / students use in order to
travel to University.
Table 1 below shows the results of these surveys showing the percentage of staff / students
travelling by each mode.
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Table 1 Travel to Work Survey Results
Vic Uni -
Wellington
Mode
Vic Uni - Staff
Massey Staff
Students
Hospital
Drove (Alone)
22%
7%
31%
41%
Drove with Passenger
14%
-
11%
12%
Bus
20%
24%
13%
9%
Walk
18%
36%
31%
20%
Train / Ferry
9%
22%
7%
4%
Passenger in Car
6%
7%
3%
8%
Cycle
4%
2%
3%
3%
Motorcycle
2%
1%
1%
2%
No Work
4%
-
-
-
Work from Home
1%
-
-
-
Other
-
1%
-
1%
Given that the Massey and Wellington Hospital surveys only cover staff, who will have different
circumstances / travel needs to students, it was decided that the Victoria University student survey
results should be used for all three establishments.
1.2
Student Role
Information was obtained relating to the number of ‘full-time’ and ‘part-time’ students enrolled at
Victoria University, Massey University and Wellington Hospital. This data is presented in
Table 2.
To estimate the number of full-time student equivalents (FTEs) it is assumed that part-time students
attended University for 50% of the time.
Table 2 Student Role (Estimate)
Full Time
Part Time
Total Students
Student FTE
Students
Students
Vic Uni
17,400
4,600
22,000
19,700
Massey
3,000
1,700
4,700
3,850
Hospital
1,000
1,000
1,000
Total
21,400
6,300
27,700
24,550
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1.3
Yearly Student PT Trips
In order to calculate yearly student PT trips from survey and student role data the following
assumptions have been made:
• Students are at University for 38 weeks per year
• Students make 8 single trips to / from University per week
Table 3 below shows the number of annual single PT trips by mode and establishment.
Table 3 Annual One-Way Student Trips
Total PT
Car
Walk
Bus
Train
Other
Total
(Bus +
Train)
Vic Uni
0.42
2.16
1.44
1.32
0.66
5.99
2.75
Massey
0.08
0.04
0.28
0.26
0.13
1.17
0.54
Hospital
0.02
0.11
0.07
0.07
0.03
0.30
0.14
Total
0.52
2.31
1.79
1.65
0.82
7.46
3.43
1.4
Average Fares
In order to calculate the potential revenue and patronage impact of providing a 50% reduction in the
fare for tertiary students, relative to current adult fares, an estimate of average adult bus and rail
fares was required.
This was derived from annual patronage and revenue data provided by GWRC, bus operators and
Kiwirail to GWRC. The revenue component of this data is confidential.
The resulting average adult fares, excluding GST and taking into account the various different ticket
types available are:
• Bus - $2.43
• Rail - $3.58
1.5
Demand and Revenue Estimates
Table 4 below shows the tertiary PT (bus and rail combined) demand and revenue under the current
fare structure.
Appendix A presents the same analysis separately for bus and rail.
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Table 4 Current Adult Demand and Revenue Estimates
Ticket Type
Demand (mil ion pa)
Revenue ($ mil ion pa)
Average Fare
Adult - Supergold
1.9
5.0
2.59
Adult - Tertiary
3.4
10.2
2.98
Adult - Normal
21.7
62.3
2.87
Total
27.1
77.5
2.87
In order to generate an estimate of future demand an elasticity with respect to fare of -0.4 has been
used. This figure is grounded in both New Zealand and international research – in simple terms it
means that a 50% decrease in fare for tertiary students will result in a 20% increase in demand.
Using such ‘standard’ elasticities is deemed adequate for the fare structure review, given that it is a
high level initial piece of analysis exploring a wide range of options. Should changes to tertiary
fares be taken forward and assessed in more detailed it would be preferable to derive a more robust
elasticity by
Table 5 below shows the tertiary PT (bus and rail combined) demand and revenue under the revised
scenario with a 50% reduction in tertiary fares.
Appendix A presents the same analysis for bus and
rail separately.
Table 5 Future Adult Demand and Revenue Estimate – 50% Tertiary Fare
Ticket Type
Demand (mil ions)
Revenue ($m/pa)
Avg Fare
Change
Adult - Supergold
1.9
5.0
2.59
0.0%
Adult - Tertiary
4.0
5.9
1.48
-50.5%
Adult - Normal
21.7
62.3
2.87
0.0%
Adult - Al
27.6
73.2
2.65
It shows that an additional 800,000 PT trips are generated as a result of introducing a 50% tertiary
fare discount. As a consequence, revenues fall by $4.3 million ($5.9 minus $10.2, approximated to
$4 million).
Given that the amount of funding GWRC receives annually from NZTA is fixed and related to
farebox recovery targets, any shortfall in revenue through the introduction of a discount for tertiary
students would have to be borne by GWRC.
1.6
Summary
This note has:
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• summarised findings from the Victoria University travel to work survey
• documented the number of students at Victoria, Massey and Otago (Wellingotn Hospital)
Universities
• provided estimates of trips / to from University, broken down by mode, and the underlying
assumptions behind these estimates
• tabulated average bus and rail fares used for the analysis
• identified the demand elasticities used to estimate the increase in PT demand resulting from the
introduction of a 50% tertiary fare
• highlighted changes in patronage and revenue as a result of introducing a 50% tertiary fare
1.7
Limitations
It has been acknowledged throughout this note that the findings are based on a number of
assumptions. The level of detail and assumptions used is deemed appropriate given that the fare
structure review is a high-level investigation looking into a number of options and the impact that
these options might have upon patronage and revenue.
Should a 50% tertiary fare discount be taken forward, it is likely that more detailed analysis would
be required to determine the exact impact that such policies might have upon patronage and revenue.
Andrew Ford Strategic Planning
DD: 048304266
[email address]
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Appendix A
Table 6 Bus - Current Adult Demand and Revenue Estimate
Ticket Type
Demand (mil ions)
Revenue ($m/pa)
Avg Fare
Adult - Supergold
1.6
3.8
2.40
Adult - Tertiary
1.8
4.4
2.43
Adult - Normal
13.5
32.8
2.43
Adult - Al
16.8
40.9
2.43
Table 7 Bus - Future Adult Demand and Revenue Estimate – 50% Tertiary Fare
Ticket Type
Demand (mil ions)
Revenue ($m/pa)
Avg Fare
Change
Adult - Supergold
1.6
3.8
2.40
0.0%
Adult - Tertiary
2.2
2.6
1.20
-50.6%
Adult - Normal
13.5
32.8
2.43
0.0%
Adult - Al
17.2
39.1
2.27
Table 8 Rail - Current Adult Demand and Revenue Estimate
Ticket Type
Demand (mil ions)
Revenue ($m/pa)
Avg Fare
Adult - Supergold
0.4
1.2
3.44
Adult - Tertiary
1.6
5.9
3.59
Adult - Normal
8.2
29.6
3.59
Adult - Al
10.2
36.7
3.58
Table 9 Rail - Future Adult Demand and Revenue Estimate – 50% Tertiary Fare
Ticket Type
Demand (mil ions)
Revenue ($m/pa)
Avg Fare
Change
Adult - Supergold
0.4
1.2
3.44
0.0%
Adult - Tertiary
1.8
3.3
1.80
-49.8%
Adult - Normal
8.2
29.6
3.59
0.0%
Adult - Al
10.4
34.1
3.27
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