ARTA

Auckland bus passengers are assured of 2 years of industrial peace after drivers agreed yesterday to end a long and bitter pay dispute.

About 600 NZ Bus drivers and cleaners voted by an 80 per cent majority to accept a company offer amounting to a 20c hourly pay rise in three instalments. That will lift the top hourly rate for drivers with at least nine months service to $17.45 now, $18.15 next year and $18.75 in February 2012.

The deal includes a minimum of $560 in backpay dated from July 5 and a $500 contribution from the Auckland Regional Transport Authority to wages lost when NZ Bus locked out 875 workers and suspended all its services for seven days last month.

Although the pay rises are the same as offered in a package rejected by 55 per cent of drivers at a rowdy and emotional meeting three weeks ago, union negotiators welcoming a softening of "clawbacks" sought by Infratil subsidiary, which provides 70 per cent of Auckland bus services.

Auckland Tramways Union president Gary Froggatt said the company dropped its demand to be able to review the jobs of drivers absent because of incapacity for more than two months, and had reverted to an existing three-month threshold. It also agreed to add just 24 hours to an existing 48-hour time limit for submitting complaints to drivers, which was half of what it sought earlier.

The deal retains a new weight limit of 115kg for driver recruits but the unions say that is outside their control as a pre-employment requirement, even though Auckland University of Technology nutrition and obesity expert Professor Elaine Rush believes it will discriminate against Polynesians, with higher average weights than other ethnic groups.

Drivers spoken to outside a Tramways Union meeting at Alexandra Park were generally pleased to have settled up before Christmas, given the added financial strain the festive season puts on families, but one said he believed they should have held out for more money. He believed the length of an agreement locking drivers into what he still considered to be low wages would make the company an attractive sale proposition.

Mr Froggatt acknowledged a general suspicion that Infratil may be grooming NZ Bus for sale, but said that gave the drivers no great concern as they had lost confidence in the company. He said that although hourly pay rates were now higher than that of other Auckland bus company, NZ Bus drivers received just time and a quarter for overtime hours and were determined to fight for time and a half after the new agreement expired.

Company operations general manager Zane Fulljames said NZ Bus was confident it had secured an agreement that would meet the needs "of our customers, our people and the business" and looked forward to rebuilding long-term relations with the four bus unions is it reshaped its operation. "This agreement allows us the stability and certainty to move forward with confidence into the Rugby World Cup 2011 and beyond," he said.

Regional transport authority chief executive Fergus Gammie also welcomed the return of stability for bus passengers.

Mike Lee sounds weary. He, along with bus drivers and 80,000 Auckland commuters, is winding down from a long, tough week.

The Auckland Regional Council chairman has already made strong comments about home-grown infrastructure company Infratil, the successful group of investors behind the standstill of much of Auckland's bus system, and he's not finished.

Infratil invests in airports and energy offshore and public transport at home, running buses in Auckland and Wellington through subsidiary company NZ Bus.

On day five of the lockout of the bus drivers, Lee threatened to sack NZ Bus for not fulfilling route contracts, only to find this was not so easy.

The process is more drawn-out than he anticipated.

Lee sounds mystified about the tactics of the "reckless", "clumsy" and "ruthless" men in striped suits who are behind Infratil, the ones really calling the shots over required profit margins and future vision.

Though the buses are back on the street, for now, he says the seven-day lockout, which disrupted life for so many school students and workers, has taken other tolls.

He estimates the region will lose nearly a million passengers from the annual scoresheet, vital statistics which are needed to justify extra investment in public transport.

There's another big impact, too. When you have a dispute such as this, people go away from public transport.

"It's enormously disruptive but they do find alternatives and if they're going back to their cars then, you know, you've got to try to get them back out of their cars.

"There will be a lasting impact."

Lee hesitates at the next question. He's somewhat at a loss, he admits tiredly. He's not quite sure how to fix this problem of ensuring buses stay operating despite employment disputes.

Though this dispute between NZ Bus and its drivers is patched for now, it is only a plaster and could erupt again.

To be honest, Lee says, he has other important things to be doing, such as getting ready for the looming Super City instead of figuring out disputes involving buses.

So when he is asked how he plans to stop such massive disruption again in the future, he is thrown for a minute. "I would much prefer we didn't have this going on but, however, you ask a valid question. What is going to be done about it? "We need to sit down with Arta (the ARC's transport co-ordinating agency) and discuss that very point and resolve on a plan of action, a contingency plan. We can't hand over a mess to the Super City," he says.

Lee says he has been quite shocked at the hardline tactics of Infratil/NZ Bus. The drivers wanted to work to rule while their pay claim was on the table but the bosses locked them out - and, in doing so, locked out Aucklanders. Infratil/NZ Bus have taken such a militant approach, he says, he thinks they have done serious damage to their reputation.

Lee describes the Infratil directors as "guys with Beatle haircuts and striped suits" and "cheery chappies". "You know, if you meet them you're thinking you're dealing with Herman's Hermits, but actually these guys are ruthless operators."

Ratepayers and taxpayers spend around $94 million in subsidies for buses every year - and $58 million of this goes to NZ Bus.

Given the large public subsidies, we asked Infratil CEO Marko Bogoievski whether his organisation cares about bus drivers and Aucklanders.

Bogoievski explains Infratil is a huge investor in both New Zealand and overseas and has been for 20 years. The company's intention is to grow businesses and for them to flourish. He doesn't see how improving and upgrading bus fleets, rebranding buses and schedules, training bus drivers and introducing technology is anything other than a positive for Aucklanders.

He says he understands the havoc the dispute has caused Aucklanders and says this was not an outcome anyone wanted to see, "so obviously you're in the middle of a dispute and it's a live conversation, we're trying to get it resolved".

What about the perception that Infratil directors are ruthless, cold and hard-nosed?

He replies: "We've been around for a long time and we've earned every bit of our positive reputation as a high-quality investor, so the proof's in that really." Infratil is trying to get the best situation in Auckland too, he says. Employees, shareholders and customers of all their services are important parts of the overall equation but they're looking long-term, not just at whether buses run next week.

They have to manage the overall cost of delivering public transport services in the long run, he says.

Every time there is a tender from a local transport authority to run a major bus or public transport service, tenders are given to the lowest-priced operator.

In the process, service levels and the amount of compensation are determined - there is no free lunch for anyone.

He says if you end up increasing cost structures in the medium term, you end up increasing public subsidies for public transport, but that is a policy issue for planning agencies like Arta. Bogoievski also says he believes the bus drivers are quite well compensated relative to their peers.

"The average wage of a driver, if they were to accept our proposal, would be higher than the average wage of a New Zealander."

One of the accusations against Infratil is that they have been lobbying the Government to repeal parts of the new Public Transport Management Act, which would require them, as a commercial operation, to open their books regarding the public subsidies.

Bogoievski says the problem with the Act is that local authorities want to control every aspect of public transport, including confiscating commercial routes that NZ Bus and other operators have been investing in for a long time.

Infratil's preferred model is to let private provision of these services reduce the need for subsidies, "so in effect, Infratil's leading the charge, through NZ Bus, to try to manage the overall cost of public transport to Auckland ratepayers".

Bogoievski says the Infratil directors are not mean people, "no, I think we're pretty average blokes who are just trying to continue investing in New Zealand and we hope we can".

The company stands by its achievements, he says.

"I know it's provocative to refer to merchant bankers sitting in Wellington, but come down and have a look, have a cup of tea with us, we don't look anything like that."

Part of the problem with buses is division over the extent to which public transport should be publicly controlled and run, or whether private operations are best.

For Infratil, obviously private operators must have a big say in how they run.

Others, such as New Zealand urban researcher Dr Jago Dodson, say local authorities have far too little control.

The Brisbane-based Griffith University research fellow warns strongly against any watering-down of the Public Transport Management Act, saying we are already seeing Infratil starting to test its strength in the current dispute with the bus drivers.

Transport Minister Steven Joyce says he is certainly taking a look at the Act because of concerns from NZ Bus and other operators about the ability of councils to contract over the top of commercial services where they are operating successfully and don't require a subsidy.

He doesn't cosy up to anyone, he adds, pointing out that though he has talked to NZ Bus, he's probably talked "way more times" to Lee, "but no one accuses me of cosying up to Mike".

For Lee, the end is not in sight. Joyce has announced a new Auckland Transport Agency which will operate under the Super City, replacing existing Auckland transport entities.

Lee says though the river of public money will flow - "$160,000 a day into Infratil once normal services are resumed" - public control and accountability over it will be weakened by the Minister's new transport authority.

"So when there's another lockout in the Super City, people will ask the Super Mayor what's going on and the Super Mayor will probably have even less power than I do now to get it sorted."

SERVICE CHARGE

The contracting of services for bus routes is a complicated business and though many routes qualify for subsidies, others don't. Ratepayers and taxpayers pay around $94 million in subsidies for buses each year.

Around 26 per cent are commercially run, so don't get a subsidy, but even these will often get a concessionary fare top-up. The bulk of the services - 74 per cent of which are contracted services - are paid for through subsidies.

Even many of the main routes, including the Link bus, and main arterial corridors such as Dominion, Eden and Sandringham Roads, have parts of the service provided through subsidies.

Arta says without the subsidy the number of weekday peak period services offered along Dominion Rd, for example, would be significantly reduced and services after 9pm may not be provided.

Snapper will not rule out installing its smartcard system on parent Infratil's 705 Auckland buses, despite probably missing out on a deal to provide an integrated ticketing system to the Auckland Regional Transport Authority.

The authority announced last week that it had selected a consortium led by French technology firm Thales as its preferred supplier of a system that would let passengers pay for bus, train and ferry travel using a single smartcard. The system is due to be ready in two to three years.

The New Zealand Transport Agency, which would pay for 60 per cent of the project, hopes the Auckland system will become the rump of a "national integrated ticketing programme".

Transport Agency chief executive Geoff Dangerfield says it "is not starting from a blank sheet of paper", acknowledging existing investment in smart ticketing systems in Wellington and Christchurch.

The agency said that its approach would "provide the potential for individual public transport operators to decide which electronic ticketing or smartcard system best meets their business needs".

Snapper Services chief executive Miki Szikszai would not say whether he believed that gave Snapper the green light to install its system on Auckland buses, regardless of the outcome of the Auckland tender. "We are obviously considering the wide range of options," he said.

After apparently conciliatory comments in the wake of Arta's announcement that it had selected Thales for Auckland, Mr Szikszai questioned the rationale for the investment of tens of millions of dollars by the Transport Agency.

Snapper is believed to have offered to extend Snapper to Auckland at no cost to taxpayers.

"There is a really important question which is not being asked, which is, `Why is an investment being made into a system when one already exists?' There was a statement made by NZTA saying they didn't want to invest into a system twice, and I think we should ask why they are investing once?"

The agency says there are several smartcard-based bus ticketing systems in New Zealand.

"Arta have sought a proven system that will also support rail ticketing." It would report on the appropriate process for operators to fund and provide their own equipment.

SNAPPER IN TAXIS

Snapper will be installed in all 1000 taxis in the Wellington region early next year, says Snapper Services chief executive Miki Szikszai.

The agreement follows a decision by Greater Wellington regional council to issue Snapper cards to 7500 disabled people, who cannot use public transport, for use in taxis.

The council pays for their taxi travel under its Total Mobility programme, costing $2.2 million a year, which is paper-based.

Transport and access committee chairman Peter Glensor says the new system will be far more user-friendly for clients.
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Mr Szikszai says Snapper terminals will need to be adapted for use in taxis. Once they are installed, the public, as well as those enrolled in the Total Mobility scheme, will be able to pay for journeys using Snapper.

Don't you love the strange bedfellows MMP throws together? Any day now, all going to plan, Parliament will pass a bill permitting the control of Auckland's highly subsidised public transport network to return to public hands. And joining Labour and its more natural allies such as the Greens and Maori will be that supporter of free enterprise, the Act Party.

Leader Rodney Hide assures me his planned move is very "pro-market". He says Auckland Regional Council (ARC) chairman Mike Lee had lobbied him, arguing that a party representing consumers and taxpayers had to support such a bill, and after consideration "I said, absolutely".

Mr Hide says what the bill allows "is exactly what you'd want to do if you were looking at spending a $94 million subsidy and looking at getting best value for money, so I was on board".

Not on for the ride is the National Party, which, when in power 15 years ago, forcibly privatised the publicly owned Yellow Bus Company, and, strangest of allies, Winston Peters and his New Zealand First Party.

The Public Transport Management Act won't drive private bus operators from Auckland's commuter bus network. It just gives the Auckland Regional Transport Authority (ARTA) the power to design an integrated passenger transport network that serves the needs of the passengers and the subsidisers first, rather than the bus company shareholders.

Merchant bankers Infratil, owners of Auckland's biggest bus operator, New Zealand Bus, have been lobbying around Parliament as though Karl Marx was coming up the hill behind them. But the case for the status quo does not stand up to scrutiny.

When Infratil bought the old Stagecoach Bus company in 2005, patronage in the year to June was 43.1 million passenger trips. A year later, the service had shed 900,000 passenger trips. By the year ended June 2007, a further 200,000 passengers had disappeared.

It took a war in Iraq and rocketing fuel prices to reverse this downward trend. In the year to June 2008, passenger numbers bounced back to 2005 levels. In that time though, subsidy payouts soared. When Infratil entered the scene, public handouts to regional bus operators totalled $45 million. Just five years on, the budgeted annual subsidy has more than doubled to $93.1 million.

As ARC chairman Mike Lee wryly noted in a letter to Transport Minister Annette King this year, "It would appear that the private bus companies in Auckland are much more interested in increasing bus subsidies than increasing passenger numbers."

As the law stands, despite these huge subsidies, ARTA cannot inspect operators' books to check whether they are gouging the system. Their need for a subsidy has to be taken on trust.

ARTA has no powers to design a transport network linking buses and rail and ferry services into a rational, user-friendly web. It can't even insist on integrated ticketing. Operators can cherry-pick the profitable routes, calling them "commercial", then stand aside and wait for the public to come to them, cap in hand, offering subsidies if they will graciously fill in the "non-profitable" gaps left unserved after the plums have been plucked.

ARTA and ARC lobbied strongly for the right to introduce a fully contracted system in which ARTA would design a network of services where, for example, subsidised buses didn't compete with subsidised rail services. Regional councils up and down the country backed Auckland's campaign, even though they were not faced with Auckland's problems.

The bill initially offered a compromise which annoyed both sides. Ms King was sympathetic to ARC's case and has enlisted the Greens to introduce the amendment supporting the full contract model. With luck, and Rodney Hide's support, the amendment will be passed tomorrow or Thursday and the bill itself soon after.

The revolution won't occur overnight, more's the pity. First, a new regional public transport plan will have to be drawn up and go through the normal consultation processes. Seeking changes to existing commercial services requires a 12-month transition and existing contracts don't expire until the end of 2009 and the beginning of 2010.

The only quandary now is what the National Party might do if it wins the election. With such broad support in Parliament and across Auckland for this bill, leader John Key owes it to voters to signal whether he will throw this act in with the recently passed Regional Amenities Funding Act as bad law he will repeal if he becomes Prime Minister.

The current chaos on Auckland's western rail line is not just a real example of New Zealand's infrastructure headaches. It's also a handy metaphor for the inadequate decision-making for solving them.

The work to double-track the line makes great sense. Expanded capacity and greater reliability are needed to help the trains keep up with fast growth in passengers.

But two problems arise. First, the old, fragile infrastructure can't handle the upgrading demands placed on it. For example, heavy construction equipment is damaging cables controlling points and signals so train services are suffering.

By mid-year, new signalling will be in place as part of the $600 million, three-year project for double-tracking and other investments agreed in 2005 by the region and central government.

But as soon as all that's finished, a second, bigger problem will arise: the regional rail network will once again be pushing its capacity limits thanks to New Zealand's penny-pinching, piecemeal approach to infrastructure projects.

There is a solution: electrification of the rail network so faster, more frequent and reliable trains can run. And with lower operating costs and environmental impact compared with a diesel-powered fleet.

Last September, Auckland Regional Council and its public transport agency, ARTA, made the electrification case to government. Again, it was a rather modest proposal. It called for spending $572m over 10 years to electrify and re-signal the lines and to buy the first 40 two-car trains. The ARC reckoned it could come up with $250m so asked government for the other $322m.

While that is a bigger, bolder project than attempted before, there is still a penalty from the piecemeal approach. Some aspects of the new signalling going into the western line now will need to be adapted to handle faster trains and the electromagnetic interference from their power supply.

And there are much bigger projects to come. Crucially, The solution is to make it a through station via a tunnel around the CBD and up to K Road. It would cost some $1 billion and take a dozen years or so to design and build.

With that and other major improvements at a total cost of about $3.6b Auckland, could have a rail network that could handle some 30 million passengers a year by 2030, up from 5.5 million in the past financial year, a year that saw train patronage grow 32%.

Not only would this network help keep Auckland's rapidly growing population mobile, it would do so in environmentally sound ways. ARTA estimates such a network would save 70 million litres of fuel a year and 233,000 tonnes of greenhouse gases, but also reduce road deaths by 9%.

Investing in small chunks is an inefficient way to meet those long-term goals. Above all, it ignores the reality of Auckland's growth. If the region had happened to be in the US, its rate of expansion over the past 15 years would have ranked it the fifth fastest growing urban area after the likes of Las Vegas and Phoenix.

Growth that brisk requires vision, analysis, decision-making, planning, investment and execution of far greater scale and confidence than regional or central government have ever managed to achieve. And if both are serious about making Auckland a truly great city of the world, or at least the Asia Pacific region, then the demands on them are even greater.

But that's not how the electrification issue is playing out. The regional government prepared an excellent case for the investment, presenting it to Wellington last September. Sound analysis proved the economic and environmental case for electric over diesel power, but the government has been dragging its feet.

The delay is becoming crucial. ARTA is achieving growth of passenger numbers well above the forecasts it produced for its case. As a result, it needs to make decisions soon about new train sets. It will certainly buy some old UK carriages and refurbish them in Dunedin. They will be pulled by diesel locomotives which could be replaced by electric ones.

But the sooner ARTA has the go-ahead on electrification, the better the rolling stock decisions it could make. It could minimise the number of carriages and diesel locomotives it buys and maximise the number of electromotive units, rolling stock with built-in motors. These are the quickest, most efficient form of train, but the waiting list for them is long because they are in strong demand around the world.

While there have been plenty of issues and complexities to work through on electrification, there have been two clear drags on the process. First, Treasury has struggled to develop the analytical skills it needs. It remains stuck in the old narrow cost-benefit models it perfected in the late-1980s and 1990s.

For example, it argued initially that the electrification project should be judged on the basis of a 10-year life and a 10% discount rate. That flew in the face of experience overseas. Rail investments are long-life ones of typically 25-40 years and their cost-benefit ratio calculated on a discount rate of 3%-7%.

In the end, Treasury grudgingly agreed to 25 years and 7%. That was still a high hurdle to clear, but electrification has succeeded in doing so.

But the bigger problem remains. The government keeps loading up policy with the likes of multi-faceted economic, climate, environmental and social objectives. These are worthy in themselves, but Treasury, as a crucial player in the decision-making processes, has very little idea of how to work those issues into the advice it gives to ministers.

Unless Treasury learns those analytical skills quickly, it will make a mockery of the bold policies the government is promising on the likes of climate change, carbon neutrality and renewable energy.

But the other drag is the government itself. It has, for example, played fast and loose with some of the wider environmental and economic criteria it built into the 2003 Land Transport Act. It has found bureaucratic ways to subvert those criteria to tilt the playing-field back towards roads and away from public transport.

On electrification, Finance Minister Michael Cullen has proved very hard to convince of the wisdom of the investment. Perhaps the prime minister's support for electrification in her speech in February may have helped him make up his mind.

That comment, plus some by Transport Minister Annette King, had suggested a decision on electrification was imminent. But now people close to the discussions say the go-ahead won't come until June.

It had better come then - and preferably sooner - or confidence in the government to live up to its self-proclaimed bold economic and environmental agenda will ebb further away.