Skip to content

Access keys for nzta.govt.nz

  • h Home
  • m Menu
  • 0 Show list of access keys
  • 2 Skip to content
  • 3 Skip to top
Back to Resources

National farebox recovery policy

At its April 2010 NZ Transport Agency Board meeting, the board adopted the national farebox recovery policy.

The purpose of this policy is to encourage a greater focus on efficiency that may have been the case in the past, and to work with approved organisations (such as regional councils) to determine, on a case-by-case basis, what constitutes an equitable sharing of the costs between public transport users, ratepayers and road users through the NLTP, who pay for the provision of public transport services.

The links below take you to the full policy, with supplementary information including Q&As.

Questions and answers

1. What do you mean by a farebox recovery policy?

The term ‘farebox’ is used to describe the revenue collected from tickets (cash, prepaid, passes and electronic purses) purchased by those who use a public transport system. In a literal sense, a farebox was where users placed their cash for fares charged on buses, trains and ferries.

An approved organisation's farebox recovery policy sets out the contribution public transport users are expected to make to the operating cost of providing public transport services in their region. Deciding on what contribution users make needs to take into account the benefits to the user as well as the wider benefits to society, such as less congestion and having access to an affordable, alternative mode of transport.

2. What is a farebox recovery ratio?

A farebox recovery ratio measures the contribution fares make to the operating cost of providing public transport services, and is typically expressed as a percentage. Few public transport systems’ costs are completely covered by fare revenue, so subsidies (and other revenue such as advertising, parking fees and contributions from businesses/organisations) are usually required to cover the shortfall.

3. How are public transport services funded at the moment? Who pays for it and what are their shares in relation to the total cost?

Public transport services are funded by contributions from users (the fares they pay), ratepayers (the approved organisation's share of the cost of services) and taxpayers (the NZ Transport Agency's subsidy) through fuel tax, road user charges and motor vehicle registration and licensing fees. Other sources of funding are also possible, such as parking fees and contributions from third parties eg universities and businesses. These are usually used to directly cover or reduce the fares paid by users.

4. What is this policy about?

It is regional councils’ role to set farebox recovery policy, however, the Transport Agency will be advocating for the national farebox recovery ratio to move to, or remain at, no less than 50 percent over the course of the next two National Land Transport Programmes (covering the period from 2012/13 to 2017/18). The Transport Agency's policy is based on affordability and public transport users, ratepayers and road users all paying an equitable share for services. We are not advocating short term measures that would have major impacts on patronage. An aggregated national target of 50 percent is considered appropriate to address the Transport Agency's concerns and set a positive platform to aim for.

5. Why has the NZ Transport Agency developed a farebox recovery policy?

The Transport Agency's national farebox recovery policy has been developed to improve the efficiency and effectiveness of public transport in New Zealand by:

  • ensuring that public transport users, ratepayers and road users are contributing their fair share towards the costs of providing services
  • preventing further decline in the national farebox recovery ratio
  • addressing the wide variation in regional authority approaches to farebox recovery policy
  • addressing concerns about whether some regional authorities are being subsidised fairly based on their public transport performance.

6. What will the policy do?

The policy is designed to:

  • encourage efficiency in the provision of public transport services in an environment where there is likely to be only small increases in central government funding for public transport services (ie funding to cover operating costs) over the next six years
  • ensure that the costs of providing public transport services are, over time, shared equitably between public transport users, ratepayers and road users
  • prevent any further decline in public transport users' contribution to the cost of providing public transport services, while aiming to increase that contribution where feasible. The user contribution has declined from 58 percent of the operating costs in 2001/02 to 46 percent in 2008/09
  • improve the transparency, accountability and consistency of the approach to farebox recovery implemented by approved organisations throughout the country
  • enable the Transport Agency to undertake better benchmarking and monitoring of farebox recovery performance throughout New Zealand.

7. Who are you targeting with the policy?

This policy is targeted at approved organisations who plan, procure and manage the delivery of public transport services. These organisations also have the powers to set maximum fares, which strongly influences how much the users pay towards the operating costs.

8. What farebox recovery policies do approved organisations currently have when it comes to sharing the costs of providing public transport services?

Contributions from users, if approved organisations have a farebox recovery ratio target in place, tend to be set between 40 and 50 per cent of the operating cost of providing the services. However, not all regional councils have formal farebox recovery ratio targets, and there are differences in the way approved organisations are calculating farebox recovery ratios. The rationale and explanation of the approach adopted by different approved organisations also varies by region. Most have basic statements about users contributing to a reasonable proportion of the costs, a small number of regional councils have more comprehensive policy statements including a ratio target and an explanation of, and some justification for, the approach.

9. What are the main features of the new policy?

The main features of the policy are:

  • all approved organisations will have a farebox recovery policy in place as part of their Regional Public Transport Plans by 1 January 2012;
  • the Transport Agency will work collaboratively with approved organisations to achieve a national farebox recovery ratio of no less than 50 per cent in the medium term (ie two cycles of the NLTP – six years after the end of the current NLTP concluding in June 2018);
  • all approved organisations will set a farebox recovery ratio target or target range as part of their policy explaining why this has been chosen and how it will be applied
  • regular reporting to the Transport Agency of the performance of regional farebox recovery ratios by system and mode
  • regular fare price reviews and six yearly reviews of fare structures.

10. How will the policy work?

The Transport Agency's national farebox recovery policy sets out its expectations, targets and requirements that approved organisations need to cover in their farebox recovery policies, including requiring them to set a formal farebox recovery ratio targets for the public transport system and by mode to be achieved over time, and outline a plan for doing so. The approved organisations will develop their policy and farebox recovery ratio as part of their Regional Public Transport Plans*. The Transport Agency has set out its national expectations and will work closely with approved organisations to ensure that these are taken into account. The final decision on the regional policies and farebox recovery ratios will be made by approved organisations.

* The Public Transport Management Act requires all approved organisations with public transport responsibilities to develop and adopt a regional public transport plan by 1 January 2012 and maintain it thereafter.

11. Why should approved organisations adopt this new policy, and what will happen if they don't?

The Transport Agency's national farebox recovery policy sets out the Transport Agency's expectations regarding the farebox recovery policies developed by approved organisations as part of their new Regional Public Transport Plan. The Transport Agency will require compliance with the expectations expressed in the national policy as a condition of the Transport Agency's funding approval. Failure to adopt a policy may put Transport Agency funding at risk for the next NLTP three year period.

12. How have the views of public transport users been taken into account in the development of this policy?

The Transport Agency sent the consultation document outlining the agency's draft farebox recovery policy - with a list of questions for response - to a number of public transport user groups, as well as to approved organisations and other stakeholders. This consultation took place in October/November 2009. Forty submissions were received, including a number from individuals who had been made aware of the consultation document. Specific concerns, such as access to, and the affordability of public transport services for the transport disadvantaged, have been explicitly accounted for in the revised principles which underpin the policy (refer to the ‘Principles and guidelines’ of the policy).

13. What has informed this policy?

We have conducted extensive research into this policy, which includes conducting a literature review, a survey of six approved organisations and workshop (with six approved organisations), as well as assessing and analysing the Transport Agency's own policies and data collected from approved organisations. The Transport Agency has also undertaken some modelling to gauge the impact of fare increases on the major public transport regions.

14. Why is it important to achieve a national farebox recovery ratio of 50 per cent in the medium term?

The national farebox recovery ratio has declined from 58 per cent in 2001/02 to 46 per cent in 2008/09. In a period of constrained central government public transport operational funding going forward, it is important to encourage a greater focus on efficiency than has been the case over the last decade, where there has been a rapid expansion of the provision of public transport services in New Zealand. The Transport Agency's view is that farebox recovery ratio performance is an important indicator of value for money in public transport, and a national target of 50 per cent is reasonable given that this and better has been achieved in the recent past.

15. Does this proposed policy mean that some public transport services around the country could be cancelled if they don't meet the policy's objectives?

Approved organisations are responsible for planning, procuring and managing public transport services in their regions. Approved organisations will decide how and what services are to be provided in their regions consistent with their legal responsibilities and the availability of funding from the Transport Agency. The Transport Agency will evaluate requests from approved organisations and will provide funding for those services that satisfy its criteria. An approved organisation may provide additional services at its own cost.

16. Does this policy mean that fares will be increased?

This policy is about encouraging more efficient public transport service provision in a time of constrained funding and to ensure that the costs of providing public transport services are shared equitably between the users, ratepayers and road users. Increasing fares is one way to improve farebox recovery, but it is not the only way. Improving the efficiency and the structure of the services through the development of Regional Public Transport Plans and best practice network planning, developing procurement strategies and procedures and increasing patronage through improving service quality, convenience, reliability and simplified fare structures and integrated ticketing systems are other methods. If managed carefully, these measures can improve the farebox recovery ratio without the need for large fare increases or reduced services, which can drive users back to other modes.

Careful consideration must be given to the likely impact of any fare increase on passenger demand. As part of the policy, the Transport Agency recommends that changes to fares (which typically mean fare increases) are managed in an incremental manner.

17. Why do we need regular reporting and reviewing of farebox recovery ratio performance and fare price reviews?

Regular reporting is important so that the Transport Agency can benchmark performance across New Zealand, and also monitor progress being made towards the national target. It is important that farebox recovery ratio performance is reviewed at least once per year so that approved organisations are aware of performance against their farebox recovery policy, and so that measures can be taken to improve the situation if necessary. Regular fare price reviews can be a useful stocktake of revenue, usage, cost and other trends relevant to the operation of a public transport system; it is also an important way to check that current fare settings are appropriate, and to ensure that farebox recovery performance is tracking in line with expectations.

18. Are we talking about a 50 per cent farebox recovery ratio for every regional council or are we talking about a national farebox recovery ratio target of 50 per cent?

We are talking about the latter. We currently have a wide range of farebox recovery ratios by region ie 14 to 55 per cent. The national farebox recovery ratio is calculated by aggregating the revenue and operating cost information throughout the country. We are currently achieving a national farebox recovery ratio of 46 per cent. It is clear that the Auckland, Wellington and Canterbury regions will need to be significant contributors to this target, since these regions account for approximately 90 per cent of the operating costs and 91 per cent of the patronage. This does not imply substantial fare increases in these regions but careful management of all the factors that can influence patronage and operating costs.

19. How will the Transport Agency work with approved organisations on the implementation of the farebox recovery policy?

A substantial part of the Transport Agency's input will be through the two stage consultation process required by the Public Transport Management Act 2008 for the development of Regional Public Transport Plans. We will vary our approach depending on what different councils need in terms of support. Some may want advice and a more hands-on approach, while the larger regions are likely to be comfortable implementing the policy on their own and with Transport Agency input during the consultation stages. This may depend on the existing farebox recovery policies they have and how closely they mirror the Transport Agency's policy.

20. What role does the Ministry of Transport have with respect to this policy?

The Ministry of Transport has been consulted during the development of this policy, but has no specific role in terms of its implementation. The policy will be implemented by approved organisations, with input from the Transport Agency. However, the Ministry of Transport is leading the Public Transport Management Act and SuperGold Card reviews which might have some impact on this policy when completed. For more detail see questions 25 and 26.

21. Is this a good time to be implementing a new farebox recovery policy when there are so many changes happening relating to public transport?

We appreciate that other work is relevant to the farebox recovery policy, such as the review of the contracting provisions of the Public Transport Management Act 2008. This may result in the farebox recovery policy being adjusted after the work has been completed and any changes implemented. However, we do not expect that significant changes to the policy would need to be made. We appreciate that approved organisations are keen to have information on the Transport Agency's policy available now as they develop their Regional Public Transport Plans.

22. What is the relationship between the farebox recovery policy and the funding that the Transport Agency provides?

Given the Transport Agency's responsibilities to evaluate activities and allocate NLTP funds, regional councils' responsibilities to plan, procure and manage public transport services, including the contribution from public transport users through fares and rates, it is necessary to separate the Transport Agency's funding policy (which governs how the Transport Agency makes funding decisions in relation to its obligations under the relevant legislation) from the Transport Agency's expectations regarding the farebox recovery policies and clarify where the policies connect. This distinction makes the Transport Agency's relevant functions clearer ie it is a ‘funder’, but it is also a ‘provider of guidance’ but cannot determine regional policies. The connection is that the Transport Agency's position as a funder will also impact on its expectations given through its guidance, which must be taken into account by the relevant approved organisations when developing their Regional Public Transport Plan.

23. Why is the Transport Agency investigating a new approach to its public transport funding policy?

The Transport Agency Board has expressed a view that it wants a funding policy that allocates funding according to the government's stated outcomes. Currently the Transport Agency funds a set proportion (eg 50–60 per cent) of cost of service specified by an approved organisation. The Transport Agency has an objective of having a revised funding policy completed by the end of this NLTP cycle (2011/12). Approved organisations and other stakeholders will be kept informed as this project develops.

24. Does the farebox recovery policy set an expectation that the larger regions like Wellington, Auckland and Canterbury will be able to take funding from smaller regions for public transport if they are able to achieve higher farebox recovery ratios?

No, this is not the intention of the Transport Agency's national farebox recovery policy. The intention is to work towards a higher national farebox recovery ratio as an indicator of improved efficiency and in recognition of the affordability issues ahead. All regions are expected to contribute to this goal. Funding decisions will continue to be made on the basis of a range of funding criteria under the Transport Agency's strategic fit, effectiveness and efficiency categories, as well as an assessment of affordability.

25. How will the SuperGold Card review impact on this policy?

It is too early to say whether the SuperGold Card review will have any impact on the achievement of any farebox recovery policies. The consultation phase has just been completed and no decisions have been made.

26. How will the Public Transport Operation model affect this policy?

We do not expect that the Public Transport Operating Model being developed by the Ministry of Transport as part of its review of the PTMA will have a material effect on this policy. When that work is completed we will review the policy to see if any changes are required.

27. Where can we go for further information and who can we talk to?

In the first instance queries should be directed tofarebox@nzta.govt.nz.

Top