Joint Nelson
Tasman Regional Transport Committee Agenda – 17 April 2024
7 Reports
7.1
Public Transport
Expenditure
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Report
To:
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Joint
Nelson Tasman Regional Transport Committee
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Meeting
Date:
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17
April 2024
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Report
Author:
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Margaret
Parfitt, Manager Transport and Solid Waste, Nelson City Council; Jamie
McPherson, Transportation Manager
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Report
Authorisers:
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Alec
Louverdis, Group Manager, Infrastructure, Nelson City Council; John Ridd,
Group Manager - Service and Strategy
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Report
Number:
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RNTRTC24-04-1
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1. Purpose of Report
1.1 To
advise the Joint Nelson Tasman Regional Transport Committee (JNTRTC) of
forecast over expenditure in Public Transport, and to approve a recommendation
to each council to approve unbudgeted expenditure to cover this increased
forecast in the current financial year 2023/24.
2. Report Summary
2.1 The
JNTRTC delegations include responsibility for the operational oversight of the
joint Nelson Tasman Public Transport Operations Contract (PT Contract) and
associated public transport activity, including the authority to make decisions
and approve policies that support operations. The Committee does not have
financial delegations but does provide the relevant councils with any advice
and assistance requested in relation to their transport responsibilities.
2.2 Officers
signalled at the 20 February 2024 JNTRTC meeting that an over expenditure
forecast was expected for 2023/24 and that a report would be tabled at a later
JNTRTC meeting detailing the forecast. A request for a cost scope adjustment
(at the 51% Funding Assistance rate) has been submitted by each council to the
New Zealand Transport Agency Waka Kotahi (NZTA) for consideration on most
aspects of the over expenditure.
2.3 A
large number of infrastructural changes were required before the bus roll out,
including an interim central city bus exchange. These were anticipated and
budget was allowed for, however construction costs were higher than budget. In
addition, it became evident that more changes to kerb lines and speed tables
were required after trialling the new Foton buses on the proposed routes. The
cost scope adjustment submitted to NZTA includes extra cost of capital works of
approximately $585,000 for Nelson City Council and $550,000 for Tasman District
Council. Councils can largely absorb the local share of this cost scope
adjustment for capital works due to savings in other areas or deferral of other
projects.
2.4 Aside
from capital items, the overall public transport activity operational budget is
forecasting an overspend for the current 2023/24 financial year of $1,050,000
and local share is required which is currently unbudgeted. This local share
will be split between Nelson City Council and Tasman District Council at the
appropriate percentages for each Council. Much of the overspend is tied to the
new PT service roll out and cost splits between the councils vary depending on
different aspects of the contract. Other aspects of the PT budget overspend are
not directly tied to the roll out of the new service but are included for
completeness.
3. Recommendation
That the Joint Nelson
Tasman Regional Transport Committee
1. receives the Public Transport Expenditure report RNTRTC24-04-1; and
2. supports the increased
Public Transport revised forecast for 2023/24 for the reasons as detailed in
Report (R28356) (RNTRTC24-04-1); and
3. approves for
submission to the Nelson City Council and Tasman District Council, for their
local shares respectively, for the increased expenditure following forecasts
for 2023/24 on the public transport roll-out.
Recommendation to Nelson City Council and
Tasman District Council
That the Nelson City Council
1. approves retrospectively
additional unbudgeted funding of $582,000 (being local share) to cover the
public transport financial shortfall for the 2023/24 financial year following
revised forecast and final costs to give effect to the successful roll-out to
the new ebus public transport service.
That the Tasman District Council
1. approves retrospectively
additional unbudgeted funding of $180,000 (being local share) to cover the
public transport financial shortfall for the 2023/24 financial year following
revised forecast and final costs to give effect to the successful roll-out to
the new ebus public transport service.
4. Background
and Discussion
4.1 A
major (and successful) step change in public transport provision has taken
place in the region. The PT contract was tendered and subsequently awarded to
SBL Group Ltd (SBL) in November 2022 and commenced operation in August 2023.
Public transport management traditionally falls to the Regional Council, but as
Unitary Authorities in Te Tauihu this rests with Nelson City Council (NCC) and
Tasman District Council (TDC).
4.2 The
massive step change in PT services for the region required an increased
oversight in management and a dedicated PT resource was only able to be secured
in June 2023 after several attempts. That placed pressure on existing resources
and the extent of the roll-out was under-estimated. This has been a learning
experience for everyone.
4.3 The
dedicated PT position is currently vacant since the resignation of the
incumbent and the new appointee is due to commence shortly. In addition,
resignation of the NCC PT lead also came at an unfortunate time just as the
roll-out was to go live and that placed further stress on the team.
4.4 What
is clear is that the roll-out has been very successful notwithstanding the
challenges in meeting the 1 August start date. It is also clear that managing
PT requires experienced oversight as PT is a dynamic challenging environment.
4.5 A
contract of this nature is fundamentally different in every aspect to
conventional infrastructure contract (both traditional physical works and
traditional operations and maintenance contracts) where deliverables are very
well defined. PT services contracts require specialist planning and delivery.
In recent years PT management has been made even more complex with Covid
response and changes in government policy that have introduced challenges to
predicting PT uptake and usage. This is even more pronounced when rolling out a
new contract for the first time.
4.6 Fare
revenue on the service is currently $25,000 under budget because the expanded
service started one month later than planned. However patronage is continuing
to grow and this gap between forecast and actual is decreasing each month.
4.7 Even
before the service commenced on 1 August 2023 the tender contract price was
subject to a number of variations. These were mainly route variations and a
variation for driver wages and these are expanded on below.
4.7.1 In September 2023 the JNTRTC was informed
that both councils had entered a joint Memorandum of Understanding with the
operator, SBL Group Ltd, and NZTA, regarding driver terms and conditions. The
agreement was required to meet the conditions necessary to access funding from
the Climate Emergency Response Fund (CERF), for both recruiting and retaining
drivers. The funding allowed the operator to uplift wages (of bus drivers) to
an hourly base rate of $29.66, effective from 1 August 2023. An uplift in drivers’
wages was made to mitigate the nationwide driver shortage and SBL were able
recruit and retain overseas drivers to fully staff the service in advance of
central governments initiatives – essentially getting ahead of the game
and securing overseas drivers. The initial variation cost to Councils was
$30,000. However, drivers’ wages have continued to increase, and
this is reflected in the cost indices.
4.7.2 Route variations incur costs for additional
kilometres travelled. During the roll out the tendered routes required
adjustment for a variety of unanticipated reasons. These were in part due to
late decisions about exact bus routes into and out of the city centre
pertaining to the location of the central city bus hub. Other decisions that
affected proposed routes were made between contract letting and the go live
date. Examples include the proposed Nelson Stoke interchange which affected the
Route 2 bus route and added kilometres to the route. In addition, any road work
that requires a detour for the bus that adds kilometres to the route is subject
to cost variations. The planned and tendered route through Berryfields is a
case in point as this has been detoured through Coman Drive. Although small
distances, when multiplied by 24 services a day in both directions the
cumulative effect is large. Overall route variations have nett cost of
approximately $54,000.
4.8 In
addition the PT cost indices, which are applied quarterly, differ from the
general inflation that is applied to budgets and cost escalations have turned
out to be larger than anticipated, (largely due to drivers’ wages and
diesel costs for the 20% of the fleet that are not electric). Cost indices
adjustments are anticipated to be in excess of $147,500 across the joint
funders.
4.9 Operational
budgets for the 2023-24 year were set in the 2021-24 Long Term Plans (LTP). The
new service was anticipated to be launched in year three of the LTP but higher
than anticipated costs have been incurred as part of the start-up phase for the
service and do not match the current budgets set aside for this work. These
include but are not limited to:
4.9.1 Traffic congestion and subsequent delay has
increased since the contract was drafted in 2021-22 and since the timetables
were set. This is evidenced in reliability data received from the real
time information reports received from Radiola, the councils’ contracted
real time information provider. Delays result in customer dissatisfaction and a
loss of faith in the reliability of the service, so a timetable review was
commissioned which proposes changes to timetables and driver scheduling. The
delays currently experienced have not only affected timetable reliability but
it has also put at risk compliance with required drivers rest and meal breaks
(set in legislation). SBL have worked to maintain legal compliance, but this
has resulted in increased costs as drivers transfer across services enabling
breaks to be taken without service interruption. A revised timetable is being
drafted and scheduling tested. This specialist work was placed with consultants
at a cost of $35,000. The timetable changes are anticipated to take effect in
July, ahead of the PT review scheduled to commence in August, due to the need
to comply with drivers' breaks requirements as soon as is practicable.
4.9.2 Patronage since late January, through April
has exceeded expectation and buses have been full to capacity at peak times.
The operator has been able to provide additional overflow buses to meet demand
and ensure a reliable service to ensure uptake, but this is at an unbudgeted
cost of approximately $10,000 a month. Patronage remains high so a forecast of
$50,000 is made.
4.9.3 Promotion and ebus
branding costs exceeded forecast budget. Placing ebus livery on the new fleet
of buses cost $55,000. The PT contract was unclear on whose responsibility this
was so the cost fell to the two councils as principals to the contract. In addition
installing wifi on all new buses cost $27,000 and this
had not been included in the budget setting.
4.9.4 A large amount of
promotion of the new service was undertaken and has been ongoing as the service
has been bedded in. This has been more than anticipated. Changes to the service
including route changes, policy changes to allow dogs etc require ongoing communications
and the forecast overspend is $56,000.
4.9.5 Electronic timetable
readers and live tracking of buses were implemented and have been well
received. E-readers were purchased using Transport Choices funding (separate
from PT budgets and 90% subsidised), but the supporting website and license
invoices have exceeded forecast budget by $50,000.
4.9.6 Advertising revenue for bus backs is $33,000
lower than anticipated and is $24,750 between both councils.
4.9.7 All infrastructure work at the Nelson
Regional Airport is covered by Capex but there is an ongoing commercial lease
for the bus stop required by the Airport. This cost was not anticipated and has
been negotiated to be $13,000 per annum.
4.9.8 There were legal costs to preparing lease
agreements and reviewing advertising guidelines totalling $6,000.
4.9.9 Whilst not specifically linked to the PT
contract councils’ forecast contribution to the development of the
National Ticketing Solution (NTS) is $30,000 higher in the current year than
budgeted. Nelson/Tasman is scheduled for roll out of the NTS in 2026.
4.10 The
above costs will be shared between the councils, however there are some extra
costs that are specific to NCC’s part of the service, and these include:
4.10.1 License agreements and equipment required
for the Stoke On Demand App service provider are $63,000 and were unbudgeted.
The ongoing cost after year one would be $25,000 pa but this service, subject
to approval by NCC, and negotiation with the operator will be terminated this
year.
4.10.2 Costs to clean and undertake security for
the new bus shelters and the interim Bridge Street bus hub have been incurred.
Security (including additional cameras) was put in place following incidents of
disorder and problems with after-hours access to the waiting area. Transport
Choices funded 13 new bus shelters unexpectedly and these require regular
cleaning. Costs exceed budget by $18,000.
4.10.3 Staff time on Public Transport has been
$117,000 higher than what was budgeted. Some reallocations of staff time have
occurred but in general the escalation has been driven by temporary staff costs
within the transport business unit.
4.10.4 Interest and depreciation costs are
tracking $54,000 over budget.
4.11 Total
Mobility, which is included in the PT cost centre, has been oversubscribed this
year. When central government introduced additional subsidy for this service
during Covid, and the subsidy was subsequently made permanent using CERF, the
usage of the service increased and is above what was forecast in 2021 when
budgets were set. It is anticipated that additional CERF allocation will be
secured however the remaining forecast budget shortfall is $10,000.
4.12 Supergold
card expenditure is forecast to be $25,000 over. Supergold is bulk funded from
the Crown and is not part of the National Land Transport Fund (NLTF). As such
it cannot be considered under any cost scope adjustment and there is no avenue
for an increase in the current financial year. NZTA advise that, given the
unprecedented growth of patronage in Nelson Tasman region in the last year, new
higher capped allocations will be made for the next three-year period.
4.13 Summary Table:
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Description
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Report reference
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Amount ($)
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Duration
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Fare revenue
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4.6
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25,000
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One off due to late start of new service
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Driver wage uplift
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4.7.1
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30,000
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One off – included in Cost
indexation going forward
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PT Cost index
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4.8
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147,500
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Ongoing – catered for in the LTP
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Route variations
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4.7.2
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54,000
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One off – future long term road
works detours will be added to capital project cost
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Timetable review
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4.9.1
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35,000
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One off
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Overflow buses
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4.9.2
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50,000
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Reactive
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Bus branding
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4.9.3
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55,000
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One off
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Wifi install
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4.9.3
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27,000
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One off
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Launch promotion
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4.9.4
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56,000
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One off
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Real time info
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4.9.5
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50,000
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On going – catered for in the LTP
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Advertising revenue
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4.9.6
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33,000
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Revenue below budget, only $24,750 now
anticipated.
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Leases
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4.9.7
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15,000
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On going – catered for in the LTP
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Legal costs
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4.9.8
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6,000
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One off - Preparing lease agreements and
reviewing advertising guidelines
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National Ticketing system
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4.9.9
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30,000
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Higher than budgeted
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On Demand App
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4.10.1
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63,000
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One off and terminated
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Security and cleaning
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4.10.2
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18,000
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On going – catered for in the LTP
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Staff time – Transport BU
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4.10.3
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117,000
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One off
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Staff time – Customer service BU
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n/a
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150,000
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No additional cost to Council just an
allocation between activities
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NCC Interest and depreciation
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4.10.4
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54,000
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Revaluation Jun 23 and additional capex
have raised actuals above budget
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Total mobility
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4.11
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10,000
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Increased catered for in LTP
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Super Gold
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4.12
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25,000
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One off – cap will be reset
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TOTAL
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1,050,500
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4.14 A cost scope adjustment has been lodged with NZTA for
both councils for subsidised aspects of the overspent public transport
activity. Local share from each council is required and is currently
unbudgeted.
5. Options
5.1 These costs are costs that have already
been incurred and have been necessary to ensure a successful roll-out of the PT
contract. At this stage in the financial year only minor operational savings
can be made to offset the additional costs and the JNTRTC is asked to support
the recommendation to each council for this over expenditure in 2023/24.
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Option 1: Recommend to
each council that retrospective approval of additional unbudgeted funding to
support public transport in
2023/24.
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Advantages
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· Supports
public transport provision to date and going forward
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Risks and
Disadvantages
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· Will
require additional unbudgeted funding from each council
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Considerations for Decision Making
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1. Fit with Purpose of Local Government
Providing and
giving effect to Regional Land Transport Plan and Regional Public Transport
Plan is a requirement of the Land Transport Management Act 2003
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2. Consistency with Community Outcomes and Council Policy/Legal
requirements
Councils have adopted a joint Regional Land Transport Plan and
joint Regional Public Transport Plan as a requirement of the Land Transport
Management Act 2003. The development and operation of a Public Transport
service contributes to the community outcome “our infrastructure is
efficient, cost effective and meets current and future needs”.
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3. Strategy
and Risks
The
matter of recommending to each council additional budget to support public
transport is of low risk as the service is up and running with start-up work
completed.
The
matter of additional budget for adjusting timetables of bus services is to
attend to risk of noncompliance with legislation regarding drivers rest and
meal breaks.
If funding is not approved the service will require cutting back
and community needs not met.
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4. Financial impact/Budgetary implications
Financial
impact for each council is outlined in the report and is a decision for each.
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5. Degree of significance and level of engagement
Full consultation on the public transport services has been
carried out through the Regional Public Transport Plan in the past. The
matters in this operational report are of low significance and further
consultation is not required.
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6. Climate Impact
Support for growing public transport use will contribute to
reducing transport emissions.
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7. Inclusion of Māori in the decision making process
No engagement with Māori has been undertaken in preparing
this report
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8. Delegations
The Joint Nelson Tasman Regional Transport Committee has the following
delegations to consider:
Areas of Responsibilities:
· prepare the joint regional
land transport plan in accordance with sections 14 and 16 of the Act;
· consult in accordance with
sections 18 and 18A of the Act;
· lodge the joint regional
land transport plan with the Joint Committee of Tasman District and Nelson
City, representing the joint regional councils in accordance with section 18B
of the Act;
· prepare any variation to a
joint regional land transport plan for the approval of the Joint Committee of
Tasman District and Nelson City, representing the joint councils;
· provide the relevant councils with any
advice and assistance requested in relation to their transport
responsibilities;
· adopt a policy that
determines significance in respect of—
o variations made to regional
land transport plans under section 18D of the Act;
o the activities that are
included in the regional land transport plan under section 16 of the Act; and
· carry out any functions
conferred on a regional transport committee under any other provision of the
Act (including functions conferred by regulations made under section 109(c)).
Powers and Limitations:
To adopt a significance policy as outlined in Section 106(2)
of the Act.
The preparation of the following, for adoption by the partner
councils:
o a Joint
Regional Land Transport Plan, including undertaking all required consultation
processes relating to the preparation of this plan and any variations.
o a Joint
Regional Passenger Transport Plan, including undertaking all required
consultation processes related to the preparation of this Plan.
o a Joint
Speed Management Plan, including undertaking all required consultation
processes related to the preparation of this Plan.
To approve submissions to external bodies on policy documents
likely to influence the content of the Joint Regional Land Transport Plan.
The
Joint Regional Transport Committee is responsible for the operational
oversight of the joint Nelson Tasman Public Transport Operations Contract and
associated public transport activity, including the authority to make
decisions and approve policies that support operations.
The
Joint Regional Transport Committee may approve changes to the Public
Transport Operations unless the change requires:
o A permanent change of route; or
o A permanent change to fares; or
o A permanent change to timetable.
Other
than the powers outlined at clauses 3.1,3.3, 3.4 and 3.5 (in the Terms of
Reference) the Joint Regional Transport Committee may only make
recommendations to:
o the partner councils, or
o to the Joint Committee of Tasman
District and Nelson City for the [1]joint
plans outlined in clause 3.2 (of the Terms of Reference) and in relation to
public transport decisions not covered by clause 3.4 or 3.7 (of the Terms of
Reference).
The Joint
Regional Transport Committee has no financial responsibilities or budgets. If
a change to public transport operations requires additional un-budgeted
funding, the Joint Nelson Tasman Regional Transport Committee has the power
to recommend budgets for approval by each Council that is affected.
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6. Conclusion and Next Steps
6.1 If approved the recommendations will be
taken to each council requesting unbudgeted funding in 2023/24 to support the
provision of public transport in the region.
Nil
