11
In Confidence
Office of the Associate Minister of Transport
Chair
Cabinet Economic Development Committee
GREEN TRANSPORT CARD INVESTIGATION FINDINGS
Proposal
1.
This paper asks the Cabinet Economic Development Committee to note the findings
of an investigation into the Green Transport Card scheme (the scheme) to reduce the
costs of public transport for Community Services Card (CSC) holders.
2.
The paper seeks Cabinet agreement to begin establishing the scheme, using existing
Budget funding allocated for 2019/20.
3.
The paper also seeks Cabinet in-principle agreement to implement the scheme from
2020/21 onwards, subject to funding approval in Budget 2020.
Executive Summary
4.
I am reporting back to Cabinet on an investigation to reduce the costs of public
transport for low-income households, including people on a benefit.
5.
Low-income households often experience transport disadvantages, which limit their
ability to access social and economic opportunities. Travel costs for low-income
households are increasing, which could perpetuate such disadvantages. The average
weekly expenditure on passenger transport services among low-income households
in New Zealand increased by 63 percent between 2013 and 2017.
6.
The scheme would reduce transport disadvantages, and support social inclusion, by
reducing transport costs for many low income households.
7.
It would also deliver co-benefits for improving people’s health, reducing greenhouse
gas emissions, and managing congestion, by supporting public transport as a
preferred mode of urban travel.
8.
The scheme would target approximately 600,000 CSC holders. CSC holders include
low-income households, solo parents, people with disabilities, tertiary students from
low-income families, and economically deprived seniors.
9.
SuperGold Card holders with a CSC would not be eligible for the scheme, as they can
already travel fare-free on public transport during off-peak periods.
Page 1 of 25
10.
Most regions do not offer public transport concessions for CSC holders (only 2
percent of trips are covered by concessions). The lack of public transport concessions
for CSC holders is a significant gap for addressing transport disadvantages. The
scheme would address this gap, and assist the Government in meeting its broader
transport agenda.
11.
The scheme would primarily benefit CSC holders in urban areas who are able to use
public transport. Three quarters of urban CSC holders live within walking distance of a
regular public transport service.
12.
Other initiatives would be needed to make access more inclusive for CSC holders
who are unable to access conventional public transport services, such as people in
rural areas and some people with disabilities.
13.
The scheme would make it more financially attractive for councils to extend the reach
and/or frequency of public transport services into areas where many CSC holders live
by increasing patronage in these areas.
14.
Three concession options for CSC holders were investigated.
•
Option 1: fare-free travel on public transport during off-peak periods only
•
Option 2: 50 percent discount on adult base cash fares, at any time of the day
•
Option 3: a public transport allowance (e.g. a $100-$200 credit per year)
15.
The investigation found that option 2 would deliver the best mix of benefits and value,
and was the option most favoured by councils involved in the investigation. In
comparison, option 1 would offer low benefits, at a significantly higher cost. Option 3
might be a feasible alternative, but has additional uncertainties and risks.
16.
Based on the investigation, I recommend pursuing option 2 if Cabinet supports the
policy to establish and implement the scheme, subject to funding approval in Budget
2020.
17.
Government would need to keep working closely with councils to deliver the scheme,
as regional councils are responsible for setting local public transport fare policies, and
for planning, procuring, managing and co-funding public transport services. The
scheme would be voluntary for councils to join, similar to the SuperGold Card
scheme.
18.
Councils were supportive of the investigation. Their main concern is that the scheme
should not transfer costs to local government, and that there needs to be sufficient
lead-in time to prepare. Greater Wellington Regional Council (GWRC) is particularly
concerned about the impacts of the scheme on its bus network, and indicated that it
could take two years to resolve its capacity issues.
Page 2 of 25
19.
The scheme would primarily be funded by the Crown. Direct fare subsidies would cost
around $20 million in the first year, if the 50 percent concession option is
implemented. These costs are estimated to fall slightly over the next decade. The
SuperGold Card public transport concessions are also funded directly by the Crown
(approximately $28 million per year).
20.
There would also be additional costs. In particular, some councils are likely to seek a
contribution towards the costs of increasing the capacity of public transport networks
to meet passenger demand driven by the scheme. These costs would need to be
negotiated with councils before final costs can be confirmed and accounted for. These
costs are not anticipated to exceed $2 to $4 million per year. I also note that central
government’s share of these costs could be supported by the next Government Policy
Statement on Land Transport.
21.
I am seeking Cabinet agreement to begin establishing the scheme, funded through
$4.64 million already allocated to establish the scheme in Budget 2019/20.
22.
I am also seeking Cabinet in-principle agreement to implement the scheme from
2020/21 onwards, subject to funding approval in Budget 2020. Although some aspects
of the scheme still need to be finalised, I am seeking this agreement now so that
Ministry of Transport (MoT) officials can begin formal negotiations with regional
councils to establish the scheme. Councils need assurance that the scheme will be
funded by the Crown before commencing the establishment process.
23.
Councils involved in the investigation indicated that they would require at least 12-24
months to implement the scheme. I recommend offering phasing options for councils
that are unable to implement the scheme in 2020.
24.
If Cabinet agrees to support the policy of implementing the scheme, I will report back
to Cabinet by November 2019 with updated cost estimates. MoT officials will prepare
a Budget initiative for Budget 2020, based on these estimates.
25.
I will also report back to Cabinet by November 2019 on implementation timeframes for
each region, and any regulatory changes needed for the scheme.
Purpose of the Proposed Scheme
26.
The scheme primarily aims to improve the well-being of many low-income
households, including people on a benefit, by making public transport more affordable
for these people.
27.
It also aims to deliver co-benefits for improving people’s health, reducing greenhouse
gas emissions, and managing congestion by supporting public transport as a
preferred mode of urban travel.
Page 3 of 25
Figure 1: Overview of the proposed scheme
For low-income households, including people on a benefit
It would mostly benefit
•
urban CSC holders who
600,000 CSC holders
•
are able to access
75 percent of urban CSC holders live within walking
public transport
distance of a regular public transport service
A 50 percent fare concession on public transport
• Any time of day
• Discount off adult base cash fares
More effective and
Using existing travel cards in each region
efficient than
• E.g. HOP cards, Snapper cards, Metro cards
introducing new CSCs,
• Concessions would be loaded on to cards through an
or a separate stand-
automated system, with an expiry date
alone card
Primarily funded by the Crown
Final costs will depend
on future funding
• Direct subsidies funded by the Crown
negotiations with
(around $20 million in year one).
councils
• Administrative costs for local government funded through
the National Land Transport Fund (NLTF).
• Additional public transport services funded through the
usual NLTF processes, potentially with the Crown
contributing an additional share.
Delivered with councils
• Councils plan public transport networks, and set local
fares and concession.
• Voluntary for councils, like the SuperGold Card scheme.
Aiming to implement in mid-2020
Some councils
• A new automated system for concessions needs to be
indicated that they
developed, along with administrative systems.
would be unable to
• Councils will need to adapt ticketing systems, and some
implement the scheme
need to increase the capacity of existing public transport
in this timeframe.
networks.
Councils will be offered
phasing options if they
require more time for
local implementation.
Page 4 of 25
Background to the Investigation into the Scheme
28.
The Confidence and Supply Agreement between the Labour Party and the Green
Party included an agreement to:
Investigate a Green Transport Card as part of work to reduce the cost of public
transport, prioritising people in low-income households and people on a
benefit.
29.
On 3 April 2019, I advised Cabinet on the approach for this investigation (DEV-19-
MIN-0051 refers). Cabinet noted:
29.1. the scheme would deliver significant social, health, and environmental benefits
29.2. the intention was to target the scheme at CSC holders and their dependents
29.3. the relationship with the SuperGold Card would be clarified during the
investigation
29.4. a Budget initiative for the scheme had been submitted to the Treasury
29.5. the investigation would be completed in mid-2019
29.6. I would report back to Cabinet on the findings of this investigation.
30.
Cabinet subsequently agreed to set aside $4.64 million of Budget funding in 2019/20
to establish the scheme. This funding was to “enable the policy development” of the
scheme, and to “establish operational systems (e.g. card development, administration,
and production costs) for [the scheme], for use in the future”.
31.
Budget funding was contingent on completing this investigation by mid-2019, and
Cabinet agreeing to support the policy of implementing the scheme.
Scope of the Investigation
32.
The investigation covered the following:
•
the case for the scheme
•
implementation challenges and opportunities
•
benefits and costs of each option
•
whether to include dependents of CSC holders
•
funding principles.
33.
Three options were investigated for CSC holders using public transport.
•
Option 1: fare-free travel, during off-peak periods only.
Page 5 of 25
link to page 6 link to page 6
•
Option 2: 50 percent concession on base cash fares, at any time of day.
1
•
Option 3: a public transport allowance (e.g. a $100-$200 credit per year).
34.
The investigation excluded an option of providing fare-free travel at any time of day,
due to concerns about costs and impacts on public transport network capacities.
The investigation involved multiple agencies and local government
35.
The MoT-led investigation was guided by a governance group, and assisted by a
working group. These groups involved representatives from Auckland Transport,
Environment Canterbury (ECan), Greater Wellington Regional Council (GWRC),
Hawke’s Bay Regional Council, Horizons Regional Council, Marlborough District
Council, Nelson City Council, Local Government New Zealand (LGNZ), the New
Zealand Transport Agency (NZTA), the Ministry of Health (MoH), the Ministry of Social
Development (MSD), and the Treasury.
36.
The involvement of local government in the investigation was vital, as regional
councils plan, manage, and co-fund public transport networks, and procure services
from private operators. Councils also set local public transport fare policies.
The scheme would target CSC holders
37.
CSC holders include people who receive a benefit from Work and Income, such as
recipients of an accommodation supplement or a disability allowance, people without
paid work, low-income families, people living in social housing, tertiary students that
are eligible for a student allowance, and refugees.
38.
There are approximately 900,000 CSC holders in New Zealand. A third of these
people also have a SuperGold Card.
2 Currently, the population of CSC holders who
are eligible for the scheme is 652,131 people. Approximately 27,000 CSC holders are
tertiary students who receive a student allowance.
39.
I previously advised Cabinet (DEV-19-MIN-0051 refers) that SuperGold Card holders
with a CSC would be excluded from the scheme, as these people can already use
their SuperGold Card to travel fare-free during off-peak periods.
The investigation confirmed that the scheme would improve well-being, by reducing
transport disadvantages for urban CSC holders
40.
To investigate the scheme’s potential to meet its aims, MoT reviewed evidence on the
links between transport affordability and well-being.
1 Base cash fares are standard adult fares before any discounts have been applied.
2 SuperGold Card holders with a CSC have a ‘SuperGold-CSC combo card’ that entitles them to the benefits of both cards.
Page 6 of 25
41.
Extensive international research shows that people who lack affordable access to
transport experience ‘transport disadvantages’. They have more difficulty accessing
goods, services, and opportunities that are available to others, which are fundamental
for participating in society. This difficulty includes access to education, employment,
health services, and sporting, leisure, and cultural activities.
42.
Travel costs for low-income households are increasing, which could perpetuate
disadvantages. The average weekly expenditure on passenger transport services
among low-income households in New Zealand increased by 63 percent between
2013 and 2017.
43.
Research shows that public transport can play an important role in reducing transport
disadvantages and in supporting social inclusion.
44.
Reducing public transport fares for low-income households is one approach that can
be used to reduce transport disadvantages. Other approaches could include
improving transport options (e.g. providing better public transport services to low-
income areas), making services more accessible for people with disabilities, and
increasing household incomes.
45.
There is a lack of research on the extent of transport disadvantages for low-income
people in New Zealand, or the most effective ways to reduce these disadvantages.
This area has received insufficient attention in the past.
The scheme would address a gap in public transport fare concessions
46.
Public transport services operate in all New Zealand cities, including Whangarei,
Auckland, Hamilton, Rotorua, Tauranga, Napier, Hastings, Palmerston North,
Taranaki, Greater Wellington, Nelson, Canterbury, Dunedin, Queenstown, and
Invercargill. Public transport services also operate in many towns, although these
services tend to be less frequent (e.g. twice daily) compared to cities.
47.
All councils in New Zealand offer public transport concessions to some groups who
are known to experience transport disadvantages, although the base fare and
concession rates vary between councils. All councils offer child concessions, some
councils offer tertiary student concessions, and all councils participate in the
SuperGold Card scheme that enables seniors to travel fare-free during off-peak
periods.
48.
Most councils do not offer public transport concessions to CSC holders. Only Hawkes
Bay, Taranaki, Horizons (Manawatū-Whanganui), Nelson, and Tasman offer
concessions of up to 30 percent to CSC holders. These regions account for only 2
percent of all public transport passenger trips in New Zealand.
Page 7 of 25
49.
The lack of concessions for CSC holders in most regions is a significant gap for
addressing transport disadvantages, as CSC holders include low-income households,
solo parents, people with disabilities, tertiary students from low-income families, and
economically deprived seniors. As noted above, these sub-groups tend to experience
more transport disadvantages than others in the population.
50.
Under Section 35 of the Land Transport Management Act 2003 (LTMA), NZTA and
regional councils “must consider the needs of persons who are transport
disadvantaged” when preparing any land transport programme or plan under the
LTMA, including public transport systems. The proposed scheme would, therefore,
assist councils to meet this requirement.
A high proportion of urban CSC holders can access public transport
51.
At a national level, approximately half the population of CSC holders live within
walking distance of a regular public transport service.
52.
In Auckland, Wellington, and Canterbury regions, approximately three quarters of
CSC holders live within walking distance (i.e. 500m) of a public transport service that
operates at least every 30 minutes throughout the day. This data indicates that a high
proportion of urban CSC holders can access a public transport service, although
these services may not necessarily take them where they need to go at the times they
need to travel.
53.
The data means that, on a geographical basis, the scheme would have similar
impacts as the SuperGold Card. Over 80 percent of SuperGold Card holders who use
their cards to travel fare-free on public transport in off-peak periods live in Auckland,
Wellington, and Canterbury.
54.
However, many low-income households live in areas that are not well-served by
public transport. For these households, the lack of access to frequent and reliable
public transport services is more of a barrier than fare prices.
55.
Low-income households are often concentrated in outer-urban areas, where public
transport services tend to be poor. This can perpetuate economic deprivation, as low-
income households can end up in relatively expensive car-dependent feedback loops
that prevent them from being able to save money to move to locations with better
accessibility and more transport options.
The scheme would assist the Government to meet its broader transport agenda
56.
By incentivising higher use of public transport, the scheme would help meet the
Government’s goals to encourage a transport mode shift in urban areas. The scheme
might make it more financially attractive for councils to extend the reach and/or
Page 8 of 25
link to page 9 link to page 9
frequency of public transport services into areas where many CSC holders live, by
increasing patronage in these areas.
57.
The scheme would help to balance the need for improving public transport services,
and addressing transport affordability. Auckland Transport, GWRC, and Environment
Canterbury are prioritising more extensive and frequent public transport services in
their new networks, rather than reducing public transport fares. This scheme would
enable councils to target concessions at low-income people, while councils continue
to expand and increase services.
58.
By increasing public transport use, the scheme would also contribute to the following
positive outcomes that transport agencies aim to deliver to improve well-being and
urban liveability.
3
58.1.
Economic prosperity: public transport plays an important role in managing
traffic congestion, and for making efficient use of high-value urban space.
58.2.
Healthy and safe people: public transport is the safest form of travel in New
Zealand, and people who use public transport regularly are more physically
active than people who commute by private vehicles. Transport mode shifts
from private vehicles to public transport can reduce air and noise pollutants that
harm human health.
58.3.
Environmental sustainability: buses, trains, and ferries with high numbers of
occupants produce lower levels of greenhouse gases, and other pollutants,
than private vehicles.
Options for the scheme were investigated against their potential social impacts,
transport impacts, ease of implementation, and value for money
59.
MoT collaborated with councils to estimate the impacts of three options for the
scheme.
60.
Their modelling of the scheme estimated how many additional trips CSC holders
would be likely to take, based on changes in fare prices. This modelling also
calculated ‘fare revenue foregone’, which represented the subsidy required to cover
the fare concessions.
4 The model did not cover additional costs associated with the
scheme, such as administration costs or providing extra public transport services.
3 These outcomes are based on the Transport Outcomes Framework, which all government transport agencies agreed to in
2018.
4 The model measured the change in revenue under each option, relative to the base case of no intervention. It includes all
trips that would have occurred regardless of the fare concession, and additional trips generated by the concession. For
option 2, the loss in revenue is partially offset by a gain in revenue from additional trips (as CSC holders would be
contributing 50% of the fare price).
Page 9 of 25
61.
Table 1 summarises high-level findings from the assessments. The modelling tracked
anticipated changes over time, from year one to year 10. CSC holders would be
expected to make growing use of the scheme over time.
Table 1: Summary of estimated benefits and subsidy costs for primary CSC holders
Option 1:
Option 2:
Option 3:
Fare-free, off-peak
50% concession,
Travel allowance
any time
Social benefits
Access to employment, health,
Low
Med-high
Med
and education
Additional health benefits
Low
Low-med
Low-med
(including active travel)
Mode shift benefits
Low
Med
Low-med
Annual direct benefits to CSC
$24.7 million
$34.3 million
**
holders (year 1)
Annual direct benefits to CSC
$35.9 million
$50.4 million
**
holders (year 10)
Public transport system impacts
Increase in annual passenger
+3.8 million
+4.5 million
**
trips: year 1
(2.5% increase)
(5.4% increase)
Increase in annual passenger
+8.1 million
+10.9 million
**
trips: year 10
(5.3% increase)
(7.3% increase)
Impact on PT capacities
Low
Moderate
Moderate
Annual revenue foregone / direct subsidy costs
Foregone revenue (year 1)
$33.9 million
$20.1 million
0
Foregone revenue (year 10)
$44.8 million
$18.1 million
0
Travel allowance
0
0
$30-60 million
($100-$200 allowance)
Ease and speed of implementation
Local government
Less difficult than
Most difficult, extra
Quickest option
other options
capacity needed
Central government
No difference between
No difference between
Whole new system,
Options 1 and 2
Options 1 and 2
unknown timeframes
** Benefits and costs of option 3 would depend on the size of the allowance.
A 50 percent concession for CSC holders on public transport at any time of day would
be the best option for the scheme, among investigated options
62.
This option would offer the best balance of value and benefits, compared to other
options.
63.
Many CSC holders need to travel at peak times to access work, education, and health
services. CSC holders are, therefore, likely to use public transport more often in
option 2, compared to option 1.
64.
Option 2 has more potential to encourage a mode shift from private vehicles to public
transport when roads are most congested at peak times, which would enhance the
social, economic, and environmental benefits of the scheme.
Page 10 of 25
link to page 11 link to page 11
65.
Option 1 is less likely to support active travel modes compared to option 2.
International research shows that people often switch from walking and cycling to
using public transport when services are completely fare-free.
66.
Unlike option 1, the direct subsidy costs for option 2 would decrease slightly over time.
This decrease is because CSC holders would continue to pay a portion of fares for
option 2. Lost revenue (foregone revenue) is smaller in the long-term, because in the
long-term there is greater generation of new public transport trips, which brings in new
revenue that offsets the discounts on existing trips.
67.
MoT conducted a Benefit Cost Ratio (BCR) analysis of the financial benefits to CSC
holders, relative to the direct subsidy costs for options 1 and 2.
5 The results are
summarised in Table 2.
6
Table 2: Benefit Cost Ratio for options 1 and 2
Option 1: Free off-peak
Option 2: 50% concession, any time
Short term
Long term
Short term
Long term
(Year 1)
(Year 10)
(Year 1)
(Year 10)
Benefit-cost
ratio (BCR)
0.73
0.80
1.47
2.41
68.
Option 2 would deliver $2.41 of benefit to CSC holders for every $1 of direct subsidy
after 10 years. In comparison, option 1 would deliver only $0.80 benefit for every $1
spent on the fare subsidy.
69.
Councils involved in this investigation also favoured this option, with the exception of
GWRC. GWRC is concerned about the difficulties it is currently facing in increasing
public transport capacities at peak times. GWRC also noted that a 50 percent
concession could not be implemented on Wellington trains until integrated ticketing is
introduced in 2021.
A travel allowance could provide similar benefits to a 50 percent concession, but
would likely cost more and comes with more uncertainty
70.
Option 3 would involve setting up a system to transfer public transport allowances to
travel cards that are registered to CSC holders. Each allowance could be transferred
in instalments (e.g. every 3-6 months).
71.
For this option, the benefits and subsidy costs would depend on the size of the public
transport allowance. For example, if the allowance was $100 per year, and only a third
5 In economic terms, this represents the ‘consumer surplus’ that CSC holders would benefit from as a direct result of the
scheme.
6 The cost components of the BCR analysis did not include costs other than the direct subsidy costs, such as the costs of
implementing the scheme, or of providing additional capacity to manage increased patronage. This issue is because at this
point in time, we do not have accurate data on what these costs will be. The analysis also does not take into account wider
societal benefits that are difficult to quantify, such as reduced congestion, emissions, and crashes.
Page 11 of 25
of CSC holders used the full allowance, it would cost approximately $30 million per
year to fund the allowance for a population of approximately 600,000 CSC holders.
72.
Depending on the size of the allowance, the benefits of a travel allowance could be
similar to option 2. However, CSC holders who are regular public transport users,
and/or need to travel long distances, could quickly exhaust the allowance.
73.
Compared to option 2, the allowance in option 3 would benefit irregular users of public
transport more than regular users, unless the allowance was very high (which would
be prohibitively costly).
74.
Option 3 would be easier for most regions to implement, as it would not require
changes to concession profiles or ticketing systems. However, this option would be
significantly more complex for central government to implement. Ongoing
administration costs could also be higher than other options. A bespoke system would
need to be designed, developed, tested, and implemented to transfer allowances from
central government to registered travel cards in each region. It is also unclear how
long this system would take to develop, or what it would cost. Due to these
uncertainties, I do not recommend progressing with Option 3.
Some benefits and costs were not monetised in this analysis
75.
The social benefits of making public transport more affordable for low income
households to access opportunities such as work, healthcare, and education could not
be monetised. These benefits will unfold after the implementation of the scheme, but
cannot be measured until then. These benefits are in addition to the direct benefits to
CSC holders.
76.
The transport mode shift benefits could not be quantified, due to a lack of data on the
current public transport use of CSC holders. These benefits would be additional to the
direct benefits to CSC holders.
77.
As a comparison, a 2010 Cost Benefit Analysis of the SuperGold Card scheme
identified national economic benefits, including reduced car travel and parking costs,
of $5.7 million per year. The 2010 analysis also identified benefits from road accident
costs, congestion costs, pollution costs, and road maintenance costs, which could not
be quantified.
78.
The costs in Table 1 only identify the direct subsidies for the scheme, to cover the fare
revenue that councils would have received if CSC holders were paying full fare prices.
Central government agencies and councils would face additional costs.
79.
Councils would expect reimbursements from central government for costs incurred by
the scheme.
Page 12 of 25
80.
The most significant additional costs would be providing extra capacity (i.e. additional
vehicles/services) to cater for increased public transport demand. These costs are
discussed further below.
81.
Additional implementation and administration costs would include changes to ticketing
systems, information technology, project management, communications, customer
service, and staff time.
82.
Additional costs have not yet been calculated, as MoT is awaiting additional data from
councils. By way of example, Auckland Transport has indicated that it might cost
approximately $500,000 to introduce a new concession profile on all their ticketing
equipment.
The scheme should not include dependents of CSC holders at this stage
83.
The investigation considered including dependents of CSC holders in the scheme.
84.
MSD estimates that there are approximately 300,000 dependents of CSC holders.
85.
There is no data available on the names, addresses, or ages of dependents. This data
would need to be collected from all CSC holders, at significant cost, before deciding
whether to include them in the scheme.
86.
Dependents of CSC holders do not have their own CSC. Providing all dependents
with a CSC, if necessary, would also add significant costs.
87.
Most dependents of CSC holders already receive child/youth concessions when
travelling on public transport.
87.1. All children under five years old can already travel for free on public transport
anywhere in New Zealand.
87.2. In most regions, children/youth aged 5-15 receive a 40-50 percent concession
on adult fares (although there are differences in age bands).
87.3. Auckland Transport is planning to introduce fare-free travel for children/youth
15 years and younger on the weekends and public holidays. Hamilton City
Council is also planning to introduce a similar scheme.
88.
I do not recommend including dependents in the scheme at this stage, as the costs
are likely to significantly outweigh the benefits (given the wide-range of existing and
planned child/youth concessions).
89.
In the future, there could be opportunities to target concessions for all dependents of
CSC holders on council-provided school bus services and public transport to/from
schools.
Page 13 of 25
Existing travel cards would be used in each region
90.
The scheme would need to function with existing and future ticketing systems in each
region, as these systems are essential for swift passenger boarding, fare payments,
data collection, and public transport planning.
91.
The investigation looked at using CSCs as travel cards, producing a stand-alone
‘green transport card’, and creating a system to load CSC concessions on to existing
travel cards in each region.
92.
The most straight-forward and cost-effective solution would be to link the CSC
concessions/allowances directly to registered travel cards in each region, via an
automated system. This solution would avoid the costs of producing new CSCs, or
separate ‘green transport cards’.
93.
The registration process would need to be accessible for people with disabilities and
impairments, and those without internet access.
94.
This approach would follow the system that some councils are already using to
automate concessions on to cards. Auckland Transport is establishing an automated
system for tertiary concessions, and is exploring automated systems for secondary
students and SuperGold Card holders. The Regional Integrated Ticketing System
(RITS) consortium of nine transport authorities have similarly developed an automated
eligibility system for the SuperGold Card.
95.
CSC holders would be unable to use their registered travel card in more than one
region due to differences in card/ticketing systems. The exception to this limitation
would be regional members of the Regional Integrated Ticketing System, which will
soon share a common card system.
Some ineligible card use would be inevitable, and would need to be managed
96.
After concessions are loaded on to travel cards, it would not be possible to prevent
CSC holders from giving/selling their concession travel cards to others. Some people
already take advantage of concession cards on public transport services while they
are ineligible to do so.
97.
People who access concession fares on public transport usually need to carry an
accompanying card to demonstrate their eligibility (e.g. a student ID card, or a
SuperGold Card). Similarly, CSC holders could be required to travel with their CSC
and produce it on request. This is likely to require a change t
o Clause 13 (3) of the
Health Entitlement Cards Regulations (1993), which prohibits the use of CSCs as a
form of evidence of eligibility outside the health sector. MoT and MoH are
investigating the regulatory aspects of this issue.
Page 14 of 25
98.
Bus drivers seldom request cards for verification purposes, but the requirement to
carry a CSC could at least deter fraudulent use of the scheme.
99.
The appropriateness of existing penalties for fraudulent card use would also need to
be considered.
Councils would need to make changes to ticketing systems to establish the scheme
100. Councils would need to add CSC concession profiles to ticketing systems in their
respective regions. This process can take at least 6-12 months in large regions, as
ticketing machines need to be updated and tested on all buses and trains.
101. Ticketing systems vary between regions, therefore each region would need to
undertake this process separately. Members of the Regional Integrated Ticketing
consortium (which do not include Auckland, Wellington, and Canterbury) will share a
common ticketing system by 2020, which will make it easier to set up CSC concession
profiles in these regions.
102. The costs to change ticketing systems could be funded through the $4.64 million of
Budget 2019 set aside to establish the scheme.
Some councils would need to increase the capacity of their public transport networks
in response to the scheme
103. The scheme would increase public transport patronage at peak times. Most regions
are facing challenges adding extra services due to driver shortages, and NZTA has
advised that no funding is available in the 2018-21 NLTF to fund additional services. It
often takes more than a year to increase capacity. For example, it can take councils
12-18 months to arrange for new buses to arrive after signing contracts with
operators.
104. Additional services are only likely to be needed for some routes in Auckland,
Wellington and Christchurch, during peak hours when services are full.
105. GWRC is particularly concerned about the impacts of the scheme on its bus network,
and has indicated that it could take two years to resolve its capacity issues.
106. Auckland Transport is not facing the same capacity challenges, but it has pinch points
throughout its network.
107. Over-crowding of public transport systems needs to be avoided, as this would create
difficulties for councils. Existing public transport users would also be adversely
affected if they are unable to use services at peak times due to over-crowding, which
may lead some existing users to stop using public transport. This risk is likely to be
the highest in Wellington, due to existing challenges in its public transport network.
Page 15 of 25
link to page 16
108. If Cabinet agrees in-principle to implement the scheme, MoT will work with councils to
estimate how much demand for additional services could be generated by the
scheme, and what it could cost to provide these services. MoT will also investigate
how these additional services could be supported by the next GPS.
The scheme should primarily be funded by the Crown
109. As this initiative is being driven by central government to improve social outcomes, it
would be appropriate for the Crown to fund the fare subsidies for CSC holders. This
funding would need to go through the annual Budget process.
110. SuperGold Card public transport concessions are funded in a similar way, with the
Crown funding of approximately $28 million per year.
111. Establishment costs would also be funded by the Crown. Budget funding of $4.64
million was set aside in 2019/20 for this purpose.
112. Councils’ administration costs should be funded through existing NLTF processes, as
it would not be practical to distinguish and report on these costs separately from other
administrative costs.
A fair funding model would need to be agreed with councils to cover the costs of
providing some additional public transport services
113. Currently, public transport services are funded through fare revenue (approximately
50 percent), the NLTF (25 percent), and rates contributions from regional councils (25
percent).
7
114. If the 50 percent fare concession option is pursued, additional services generated by
CSC holders travelling on the scheme would be funded through fares (25 percent),
Crown subsidies to cover foregone fare revenue (25 percent), and the NLTF (25
percent). Central government could negotiate with councils on how to fund the
remaining quarter of costs. These arrangements are illustrated in the charts below.
7 These ratios are average figures, based on the funding assistance rates set by NZTA. The actual rates vary by region.
Page 16 of 25
How extra public transport
Funding for additional
services are currently funded
services driven by the scheme
Fares
Fares
Crown
NLTF
subsidy
NLTF
Councils
Negotiated
share
115. Councils will expect the Crown to cover some of the costs they would face in funding
additional services generated by the scheme.
116. The simplest way to address this funding issue would be to apply a ‘multiplier’ to the
subsidy. For example, rather than reimbursing councils for 100 percent of the
foregone revenue, councils could be reimbursed for 110-120 percent of the direct
revenue foregone.
117.
118.
9(2)(j)
119. Contributions to additional services could potentially be funded through the NLTF,
rather than by the Crown, if this scheme is operationalised in the next GPS.
120. This approach is different to the bulk funding arrangement used for the SuperGold
Card. This difference is because on-peak services would be affected by the scheme
for CSC holders if option 2 is pursued. In comparison, the SuperGold scheme took
advantage of existing off-peak capacity in public transport networks when it was
introduced.
121. If Cabinet agrees in-principle to implement the scheme, MoT will begin negotiating
funding arrangements with councils in September 2019. I will report back to Cabinet
by November 2019 on cost implications and a recommended approach.
Page 17 of 25
Council participation in the scheme would be voluntary
122. It would take a similar approach as the SuperGold Card concession scheme, which
was also voluntary for councils. All councils decided to implement SuperGold Card
concessions from the outset.
123. The scheme would apply to all eligible public transport services that are specified in
councils’ Regional Public Transport Plans (RPTPs) and contracted to councils under
the requirements of the Land Transport Management Act 2013.
124. Services that are not specified in RPTPs would be exempt from the scheme. Current
examples include the Waiheke Ferry service and the Wellington Cable Car, which are
fully commercial operations that councils have no control over for fares. However, if
any exempt services become specified as a contracted service under the RPTP in the
future, then they would be eligible for inclusion in the scheme.
I recommend going ahead with the scheme
125. Based on the investigation, I recommend establishing and implementing the scheme,
with the following features:
125.1. Targeted at CSC holders, excluding SuperGold Card holders with a CSC.
125.2. Providing a 50 percent concession on public transport fares to CSC holders, at
any time of day.
125.3. Using existing travel cards in each region, with concessions loaded on to travel
cards via an automated system.
125.4. Funding the subsidies and central government administration costs through
Crown funding. This arrangement would need to be approved through usual
Budget processes.
I recommend aiming to implement the scheme in mid-2020
126. To enable the scheme to be implemented in mid-2020, I am seeking an in-principle
agreement from Cabinet to support the policy to implement the scheme in 2020/21, on
the understanding that it will be subject to funding approval in Budget 2020 onwards.
127. Although some aspects of the scheme still need to be finalised, I am seeking this
agreement now so that Ministry of Transport (MoT) officials can begin formal
negotiations with regional councils to establish the scheme. Councils need assurance
that the scheme will be funded by the Crown before commencing the establishment
process.
Page 18 of 25
If some councils are unable to implement the scheme in 2020, they could be offered
phasing options
128. Some councils involved in the investigation indicated that due to implementation
issues such as capacity challenges, they would be unable to fully implement the
scheme within the next 12 months.
129. Councils that are able to fully implement the scheme in 2020 would be expected to
deliver the scheme then. This is likely to include smaller councils (i.e. all members of
the Regional Integrated Ticketing consortium). It may also include Auckland Transport
and Environment Canterbury.
130. GWRC have signalled that it might not be able to implement the scheme before 2021,
due to capacity constraints.
131. Councils that are unable to fully implement the scheme by mid-2020 could be offered
two options.
131.1.
Option A: implement the scheme in their region in 2021.
131.2.
Option B: partially implement the scheme in their region in 2020, if it is
necessary to address capacity concerns, and agree on when the scheme will
be fully implemented. For example, a council could choose to offer a lower
concession rate for CSC holders initially, or limit concessions to off-peak travel
only.
Operational systems can be established in 2019/20, using existing Budget funding
132. Budget funding of $4.64 million was set aside in 2019/20 to establish the scheme.
This funding is to “enable the policy development” of the scheme, and to “establish
operational systems (e.g. card development, administration, and production costs) for
[the scheme], for use in the future.”
133. If Cabinet agrees to the policy of establishing the scheme, this funding would be used
to:
133.1. Set up the automated system for transferring CSC holder eligibility data on to
travel cards in each region. This work would involve MSD.
133.2. Add CSC concession profiles to ticketing systems in each region. Councils
could seek reimbursements from NZTA for these costs.
133.3. Develop a communications plan and materials, to publicise the scheme to
eligible CSC holders when the scheme is ready to implement.
Page 19 of 25
134. This establishment funding was appropriated to Vote Transport: Policy Advice and
Related Outputs (MCA) – Policy Advice. This funding needs to be transferred to new
appropriations to establish the scheme.
Next key steps
135. If Cabinet agrees to establish the operational systems for the scheme, and to
implement the scheme in principle, the next key steps will be as follows:
135.1. I will send a letter to councils, outlining the features of the proposed scheme.
135.2. MoT will develop implementation timeframes for the scheme, and lead
negotiations with councils on an agreed funding model.
135.3. MSD and NZTA will begin establishment processes for the scheme.
135.4. MoT will finalise cost estimates and prepare a Budget initiative for 2020/21, to
fund the scheme’s implementation.
135.5. Cabinet would consider the 2020/21 Budget initiative for the scheme along with
other Budget initiatives in March 2020.
135.6. If Cabinet agrees to fund the scheme through the 2020/21 Budget initiative, the
scheme will be implemented as soon as possible.
Risks
136. Significant risks associated with the scheme are highlighted below.
136.1.
Councils could choose not to implement the scheme. Although councils
supported the investigation, they are very concerned about the pace of
implementation and costs. They are still working through the implications of
recent legislative changes, such as the costs of mandatory rest and meal
breaks for bus drivers associated with the Employment Relations Amendment
Act 2018, and a move to an industry-wide living wage. Councils will be offered
phasing options to address this risk.
136.2.
The subsidy costs could be higher (or lower) than our estimates: there is no
reliable data available on how many CSC holders currently use public
transport, or where they travel. MoT made assumptions on public transport use
based on information from its Household Travel Survey. MoT also made
assumptions about how much public transport use could rise when fare prices
fall. To manage this risk, the costs of the scheme should be reviewed after its
first year of implementation, to update funding estimates. A more detailed
Page 20 of 25
review will be conducted three years after implementation, to assess the
ongoing benefits and costs of the scheme.
136.3.
Fraud issues could add costs and attract negative publicity: some fraudulent
use of the scheme is likely to be unavoidable. This risk could be managed to
some degree by requiring CSC holders to carry their CSC with them while
travelling on concession fares, and by considering the appropriateness of
existing penalties for fraudulent card use.
136.4.
The scheme would raise equity concerns, and some CSC holders may criticise
the scheme if they are unable to access public transport services: this issue
may include CSC holders living in areas without a regular public transport
service, and CSC holders with disabilities who have difficulty using public
transport. Mitigation options for these groups could be investigated.
Consultation
137. The investigation was led by MoT and involved representatives from Auckland
Transport, GWRC, Environment Canterbury, Hawke’s Bay Regional Council, Horizons
Regional Council, Marlborough District Council, Nelson City Council, LGNZ, NZTA,
MoH, MSD, and the Treasury.
138. The following government agencies were consulted on this paper: the Department of
Internal Affairs (DIA), MoE, MoH, MSD, NZTA, and the Treasury.
139. The Department of Prime Minister and Cabinet were notified.
Comments from agencies
140. MoT and MSD support the proposed scheme.
141. MoH supports the aims of the proposed scheme. However, it notes that there are
regulations which prohibit the use of CSCs as a form of evidence of eligibility outside
of the health sector. MoH is engaging with MoT on this issue.
142. NZTA supports this initiative, but shares councils’ concerns around the need to allow
sufficient time to implement the scheme.
143. DIA sees benefits in the proposed scheme, and notes that it would be appropriate for
the scheme to be voluntary for councils to join.
144. The Treasury supports the goal of improving access to transport for low-income
households. However, at this stage, the Treasury considers that there is insufficient
information and evidence to support the proposed scheme as the preferred solution to
potential access issues for these households, both in regards to public transport and
more generally. Lowering the cost of public transport may only provide a limited
Page 21 of 25
solution to a much wider problem. The costs of the scheme are also unclear given that
it will provide a demand-driven subsidy.
145. The Treasury recommends that instead of proceeding with the scheme, Ministers
should direct officials to initiate a wider policy programme looking at transport
disadvantage issues affecting New Zealanders, and the set of interventions that could
be used to address these issues.
146. Alternatively, if Ministers wish to proceed with the scheme now, the Treasury would
recommend that a pilot be undertaken in order to gain a better understanding of the
costs and benefits of the scheme prior to nationwide implementation.
Financial implications
147. If Cabinet agrees to establish the operational systems for the scheme, the scheme will
be funded through $4.64 million allocated for this purpose in Budget 2019/20.
148. Based on current modelling, implementing the scheme will require around $20 million
of Crown funding per year.
149. If Cabinet agrees in principle to implement the scheme, funding will need to be
considered through Budget 2020 initiatives.
Human rights, gender and disability implications
150. No specific human rights issues have been canvassed in this paper.
151. The scheme would likely benefit a greater number of women than men. As of January
2019, 57 percent (529,439) of CSC holders were classified as female, and 43 percent
(391,994) were male. Statistics from the 2013 census show that women are more
likely to use public transport to get to work: 7.1 percent of women used public
transport to get to work, compared to 4.6 percent of men. Statistics from the 2018
census are not yet available.
152. The scheme would have implications for people with disabilities. As of January 2019,
215,963 people who receive a disability allowance have a CSC. People receiving
Disability Support Services funded by MoH are also likely to be eligible for a CSC.
153. Many people with disabilities are able to use public transport. A 2009 report by the
Office for Disability Issues estimated that 26 percent of all disabled adults and 46
percent of all disabled children used public transport for short trips. Many CSC holders
have disabilities that prevent them from using public transport, due to the nature of
their disability and/or because services are not accessible for people with their
disability. The scheme could therefore increase disparities between CSC holders who
Page 22 of 25
can use public transport, and those with disabilities who are unable to access public
transport.
154. Government could explore broader initiatives at a later stage to reduce transport
disadvantages for low-income households in New Zealand that are unable to access
public transport, including through the Total Mobility Scheme (which provides
subsidised licensed taxi services to people who have a disability).
Legislative implications
155.
Clause 13 (3) of The Health Entitlement Cards Regulations (1993) prohibits the use of
CSCs as a form of evidence of eligibility outside the health sector. Currently,
individuals and entities that are allowed to request or demand to see a community
services card are limited to certain health service providers and health professionals.
These regulations may need to be amended to enable CSCs to be used as a form of
identification on public transport. MoT and MoH are investigating the regulatory
aspects of this issue.
156. I will report back to Cabinet if these regulations needs changing, or if any additional
regulations are needed for the scheme.
Regulatory Impact Assessment
157. A Regulatory Impact Assessment (RIA) for the scheme is attached to this paper. The
Regulatory Quality Panel at MoT has reviewed the RIA and considers that it meets the
Quality Assurance criteria. The RIA shows clearly that alternative options have been
carefully considered, implementation risks identified and mitigated, and stakeholders
fully involved in the process.
Proactive release
158. If Cabinet agrees, I intend to release this Cabinet paper on MoT’s website. Information
that could prejudice or disadvantage negotiations with local government on the
scheme will be withheld under the Official Information Act 1982.
Page 23 of 25
Recommendations
159. I recommend that the Committee:
1.
note that this paper summarises the findings of an investigation into a Green
Transport Card scheme (the scheme) to reduce the costs of public transport for
low-income households, including people on a benefit.
2.
note that the investigation found that the scheme would improve the well-being
of many low-income households, and assist Government to meet its broader
transport agenda.
3.
note that the scheme would target approximately 600,000 Community Services
Card (CSC) holders, and that SuperGold Card holders with a CSC would not
be eligible for the scheme as they can already travel fare-free on public
transport during off-peak periods.
4.
note the recommended option for the scheme is to provide CSC holders with a
50 percent concession on adult base cash fares, at any time of day.
5.
note that existing travel cards would be used in each region, rather than
producing stand-alone ‘green transport cards’.
6.
note that the scheme would be voluntary for councils to join, and that local
implementation in some regions may need to be phased.
7.
note that the scheme would require ongoing Crown funding, which, based on
current modelling, is around $20 million per year.
8.
note if Cabinet agrees to implement the scheme, MoT officials will confirm the
amount of funding required and will prepare a 2020 Budget initiative.
9.
agree in-principle to implement the recommended scheme in 2020/21,
providing CSC holders with a 50 percent concession on adult base cash fares
at any time of day, on the understanding that it will be subject to funding
approval in Budget 2020 onwards.
10.
agree to begin establishing the scheme in September 2019, using existing
Budget funding allocated for 2019/20.
11.
note that the $4.64 million set aside in Budget 2019/20 to establish the scheme
was appropriated to Vote Transport: Policy Advice and Related Outputs (MCA),
and that this funding needs to be transferred to new appropriations to establish
the scheme.
Page 24 of 25
12.
agree for the Associate Minister of Transport (Hon Genter), Minister of
Transport, Minister of Social Development, and Minister of Finance acting
jointly to make further decisions on the operational developments of the
scheme, including the allocation of existing funding, consistent with the policy
proposals in this paper.
13.
note that I will report back to Cabinet by November 2019 on the following:
13.1 the outcome of funding negotiations with councils
13.2 implementation timeframes agreed with councils, including any regional
phasing
13.3 updated cost estimates, to inform a Budget 2020 initiative
13.4 any regulatory changes needed to enable the scheme to be implemented.
14.
note that if any significant issues arise that require further policy decisions, I
will report back to Cabinet on these issues.
15.
agree to proactively release this paper, and to withhold any appropriate
information under the Official Information Act 1982.
Hon Julie Anne Genter
Associate Minister of Transport
Dated: _______________________
Page 25 of 25
Document Outline
