Title

Development of a public transport investment model

Document Type

Report

Publication Date

2013

Subject Area

economics - appraisal/evaluation, economics - fare revenue, economics - operating costs, economics - subsidy, mode - car, mode - mass transit, place - australasia

Keywords

Hamilton, New Zealand, evaluation, investment model, performance indicators, costs

Abstract

This research was the first stage in developing an investment model aimed at assisting regional authorities and the NZ Transport Agency to make public transport investment decisions. The approach assumed that public transport (PT) subsidies should be invested to maximise allocative efficiency – ie in a way that ensures society gains the greatest overall net benefit from PT. To do this, the investment model applies a second-best pricing method to estimate optimum fare and implied subsidy levels for urban public transport. The model takes into account operating costs and externalities of alternative transport modes (cars and PT), including safety and congestion effects. It also incorporates network spillover effects for existing PT users from changes in frequency. The result is an economic model that incorporates the interactions between prices, service levels and patronage for public transport (bus initially) and private car, and associated performance indicators. The model was developed initially only for Hamilton and detailed in a separate Excel workbook that is capable of expansion to include rail and other cities. The model shows that the costs of public transport are high in Hamilton, and that plausible alternative policy responses include significantly reducing fares or cutting services, with dramatically different budgetary implications. It shows that the idea of a single optimum solution is overly simplistic.

Rights

Permission to link to this article has been given by NZ Transport Agency, copyright remains with them.

Comments

This publication is copyright © NZ Transport Agency 2013. Material in it may be reproduced for personal or in-house use without formal permission or charge, provided suitable acknowledgement is made to this publication and the NZ Transport Agency as the source. Requests and enquiries about the reproduction of material in this publication for any other purpose should be made to the Research Programme Manager, Programmes, Funding and Assessment, National Office, NZ Transport Agency, Private Bag 6995, Wellington 6141.

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