Listed infrastructure investor Infratil could exit its $250 million bus and ferry services if radical transport proposals are pursued by local government.
Infratil director Tim Brown said the proposals would ultimately see the country's bus and ferry networks run by bureaucrats who would collect the fares and pay private operators a fee to provide the service.
They would also have the right to buy the business if it did not meet local authority targets. "It is not a system Infratil would be willing to operate under," he said.
The warning comes after Infratil's ferry company Fullers came under fire for abandoning 120 people overnight on Waiheke Island, near Auckland, last weekend. Brown said the incident was a very disappointing service failure, "and we will make sure it does not happen again". But one shortfall in service did not mean the private sector did not have a role in public transport, he said.
The exact nature of that role is once again under the spotlight as central and local government undertake complementary studies intended to rejuvenate Auckland's decaying public transport network.
Scottish transport group Stagecoach put Stagecoach NZ, the country's biggest bus service, on the market nearly two years ago because it was unhappy with new ownership models put forward for public transport. Infratil bought Stagecoach knowing changes were in the wind, but it believed it would be able to make a difference as a highly-regarded local infrastructure company which had good relations with politicians.
Brown said Infratil hoped that as new rules evolved they would be more sympathetic to private operators than was originally proposed. But the company's expectations were not being realised. Brown said: "Some officials say extremely encouraging things to us like 'We are keen to work with you'," he said.
Competing with Infratil to buy Stagecoach were two Australian private equity firms, who typically take a position in a business with a definite exit strategy in mind.
Brown said Infratil was an experienced long-term infrastructure investor which took an active involvement in the investment. "But if the nature of the business ends up dramatically different from what we bought into, then one of New Zealand's major public transport providers may not have a local (private) owner," he said.
Under proposals being considered, regional governments would also have the right to take over ownership of the business of private operators if they failed to perform.
Brown said such proposals were "extremely unattractive" to Infratil. "We like to invest in businesses where our success is determined by our ability to satisfy customers - in this case bus and ferry users," he said.
Proposals being floated by officials within Land Transport NZ and the Auckland Regional Transport Authority (ARTA) would make bureaucrats the end-customer of a private bus or ferry operator. And that would remove a powerful driver for commercially-driven operators, said Brown.
The end result would be a public transport system run by public operators. "But we have been there before, and public operators presided over periods of much greater decline in the use of public transport then when private operators became involved," said Brown.
Under existing laws, the Auckland Regional Transport Authority calls for tenders for bus services and relies on the free market to come up with the best price. If an operator can run a service profitably without a subsidy, then the authority accepts and registers that service. It then decides what fill-in services are required to complete the network and calls tenders for non-commercial routes.
ARTA has been concerned it cannot require any operator to adopt any performance or customer service standards on commercial services. Under new proposals, ARTA would introduce integrated timetables, ticketing and fares.
But Brown said that would effectively return public transport to public ownership. Being paid a fee by bureaucrats rather a fare from an end-passenger removed a huge driver for a private enterprise. "We would also be giving another party a call-option over our business," he said.
