Otago Regional
Public Transport Plan
2025–2035
9 .9 Appendix I: Cost recovery and measuring
private share of operating cost
This appendix provides further
Private share is calculated using the
information about measuring the
following formula9:
private share of public transport service
operating cost.
Private share of
It also presents the context and detail
supporting our private share policy FS P2 set
operating expenditure
out in Section 6 (Value for money) of this plan.
Further, this appendix has been developed to
Private share
Total private revenue
respond to a requirement by NZTA to detail our
of operating =
private share targets in our RPTP.
expenditure
Total operating expenditure
Background
Where:
Value for money is a strategic priority
Private revenue =
guiding all transport investments under
Passenger fares
Passenger fare revenue for all
the GPS 2024.
subsidised services.
This means there is a focus on achieving greater
+ Private fare
Third-party revenue from
value from the financial investment in public
substitutes
private fare schemes.
transport activities funded through the NLTP.
+ Commercial
Third-party revenue from
The GPS includes an expectation for PTAs to
revenue
commercial sources including
actively work towards increasing private share
advertising, sponsorship and
revenue (fares and third-party revenue).
rental or investment income
generated from the delivery of
Although this presents challenges to ORC and
the public transport system.
the ambitions that we and our community have
for public transport, our NLTP funding is an
+ Enforcement fees Revenue generated from
enforcement associated with
essential part of how we ensure value for money
the public transport system,
for our own ratepayers.
e.g. fines of unpaid tickets.
As such, we will actively work to grow the
private share contribution to the costs of our
services. By doing so, we will support the
Operating expenditure =
continuity of funding for existing services
and place ourselves in the best possible
Passenger services Total gross expenditure on
position to seek funding for future public
public transport services,
prior to applying any
transport improvements.
subsidies.
+ Operations and
Total gross expenditure on
Private share
maintenance
the maintenance,
operations and
Private share is a measure of cost
management of public
transport services and
recovery and represents the proportion
infrastructure, prior to
of public transport operating
applying any subsidies.
expenditure funded from private
revenue sources.
The government’s aim is to increase private share
to support the increased costs of public transport
In previous RPTPs, cost recovery was referred
and reduce the pressure on ratepayers and
to as farebox recovery. NZTA have recently
taxpayers.
changed their cost recovery policy framework,
including redefining farebox recovery to private
share of operating expenditure.
9 Total Mobility private share is not included in the public transport
private share calculations or targets.
128 | Otago Regional Public Transport Plan 2025-2035
Increasing private share
Private share can be increased by:
Measuring cost recovery is important to
• increasing patronage to collect more fare
revenue
assess the distribution of operating costs
between users and funders.
• reducing operating costs by optimising or
cutting services
Figure 16 below indicates how operating costs for
public transport are distributed between funders.
• increasing the average fare paid by increasing
the base fare or changing the fare structure
Private share reflects the private benefits of
users of public transport, while the public share
• growing third-party revenue streams, such as
reflects public transport’s benefits to road users,
advertising.
the environment and wider community outcomes.
With a complex interaction of factors influencing
Increasing private share will reduce the amount
people’s decision to use (and pay for) public
of public subsidy required to meet our total
transport, how we increase private share over
operating costs.
time to meet our private share targets will require
careful management.
Adjusting anything too quickly or without careful
consideration may undo our recent patronage
gains and negatively impact private share
revenue.
Figure 17 (on page 130) outlines the implications
and trade-offs that we will carefully manage.
Funding equation
Funding equation
Funding:
re
Rates
blic sha
Central
government
Total
Pu
funding
operating
costs
Dynamic
re
Fares and
other private
ivate sha
revenue
Figure 16: A depiction of how
operating costs for public transport
Pr
are distributed between funders.
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Interactions between
Third-party revenue
patronage, fares and
Third-party revenue can increase private share by
reducing subsidy. Third-party revenue can also
service levels
reduce passenger fares or increase service levels,
which can increase passenger boardings.
Increasing passenger
fares can increase
Passenger
private share but can
fares
also lead to reduced
passenger boardings.
+
Private
+
–
–
share
Public
share
Passenger boardings
Operating costs
Increasing passenger boardings can
Reducing operating costs can increase
increase private share by increasing fare
private share, but any reductions in
revenue but can also increase service
service levels can lead to reduced
costs if more capacity is required.
passenger boardings.
–
+
Figure 17: Interactions between patronage, fares and service levels.
(Source: NZTA)
Passenger fares
Public transport provides choice and an
The average private-share contribution in Otago is
alternative to using the private car.
$1.45 per trip (mostly coming from fares), compared
to a private car running cost of $1.2510.
This means the relationship between bus fares and
the cost of driving (petrol costs, parking costs) is
This means that, due to relatively short average
particularly important, and provides a useful
trip lengths on most public transport routes, Otago
comparator for how much we can adjust our public
has one of New Zealand’s highest average fares
transport fares.
compared to private car operating costs. This
leaves little room for us to increase fares.
10 Note: Private car costs have been calculated using a simplified methodology which is simply the IRD 2023/24 per kilometre rate for running costs only
($0.30 excl. GST) multiplied by the average public transport trip length in our region. This comparison excludes costs such as parking and congestion.
130 | Otago Regional Public Transport Plan 2025-2035
Service optimisation
Public transport costs largely come from:
position to attract funding for future investments.
• the cost of paying drivers and supporting staff to
Areas of potential optimisation include:
operate and maintain vehicles
• reducing out-of-service running through:
• the cost of vehicles — both in purchasing vehicles
• timetable and route design
and batteries, and daily running costs such as
• availability of depots and driver break facilities
fuel or electricity
that are close to routes
• infrastructure costs — both passenger
• avoiding excessively indirect routes
infrastructure such as bus stops, stations, and
bus lanes, and operational infrastructure
• priority infrastructure such as bus lanes to speed
such as depots.
up trip times, especially at peak
If we can make more efficient use of drivers,
• easy fare payment to speed up getting on and off
vehicles, and infrastructure, then we can reduce
our services
the amount we spend on public transport,
• making full use of assets such as buses across
or deliver a greater amount of service
their whole lifetime
for the same cost.
• technological solutions to inform efficient
This will improve our financial performance
deployment of vehicles and drivers.
(including private share) and put us in a better
Private share targets
Our 2023/2024 private share of operating
Our private share or operating targets for the next
costs was 18.7%. This is a strong result
three years are:
and well above regions and networks of a
• 20% for the 2024/2025 year
similar size (Figure 18).
• 23% for the 2025/2026 year
ORC has included Policy FS P2 (see Section 6.2) to
• 25% for the 2026/2027 year
actively work towards increasing private revenue
Council recognises that our ambition to increase
contribution to the cost of public transport over
private share must be balanced with a lens of
time in this RPTP.
realism in terms of the mechanisms we have to do
this in Otago.
This supports the direction from central
government to actively work towards increasing
Fiscal sustainability must also be balanced with the
private share to offset the cost to ratepayers and
wider community outcomes we value.
the taxpayer for public transport services.
Private share of operating expenditure
25%
22.6%
20%
20.5%
15%
11.9%
10%
5%
5%
5%
%
%
.1%
2%
.9%
.0%
.2%
23.
20.
11.7
10
18.7
7.
11
13
13
0%
an
aikato
Otago
orizons
Auckland
ellington
Taranaki
Figure 18:
W
Canterbury W
Bay of Plenty H
elson-Tasm
Regional
N
comparison of
Private share 2023/24
National average 2023/24
private share.
(Source: NZTA 2024)
Group average 2023/24
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