Going For Gold on the Trains

Friday 6 June 2008

Most media reports today have emphasized the more sensational aspects of the papers released by the Independent Pricing and Regulatory Tribunal of NSW (IPART) - fares up 30%, no guards on trains, a severe cull of middle management, unmanned stations, etc. However, many stages lie between today's news and any approval, let alone implementation of these changes. The final paragraph of the Sydney Morning Herald's coverage reminds us that, "The regulator will take submissions, with a final report and recommendations to the Government due in November."

The following is the full story in IPART's own words.

The NSW Government has asked IPART to review and recommend a new economic regulatory framework that will create better incentives for CityRail to provide passenger rail services at efficient cost levels. IPART has previously indicated that it is time to implement a more comprehensive and robust framework for regulating CityRail's fares. While undertaking this review of the regulatory framework, IPART is also to review CityRail's current fares and determine new fares to apply from the start of 2009.

As part of this review, IPART has released two discussion papers which are available on its website http://www.ipart.nsw.gov.au/.

The first discussion paper, "Determining CityRail's revenue requirement and how it should be funded" (82 page PDF) focuses on the total cost of providing CityRail services and how these costs should be funded between passengers and taxpayers.

The second discussion paper,"Deciding on the structure and level of CityRail's fares" (84 page PDF) focuses on how fares should be structured to encourage efficiency in the use of the CityRail network, equity between different users of CityRail services and promote efficient investment decisions.

The purpose of these discussion papers is to explain IPART's preliminary analysis and views on some of the key issues related to its approach to fare setting and the 2009 fare determination.

IPART seeks stakeholder comments on the discussion papers so IPART can take them into account in making its draft determination which is expected to be released in September 2008. The closing date for submissions is 18 July 2008. IPART will be holding a public roundtable discussion on 30 July 2008.

IPART has also released two consultant's reports. The report by L.E.K. Consulting (37 page PDF) provides advice on the efficient costs of providing CityRail's passenger rail services. The report by CRA International (108 page PDF) provides advice on the appropriate shares of CityRail's costs which should be funded by CityRail passengers (through fares) and by taxpayers (through government subsidies) taking into account the external benefits generated by these services. Both these consultant's report are available on IPART's website.

From the SMH on June 6 2008

Pay more for trains that work

Linton Besser Transport Reporter
June 6, 2008

railcorp The state of rail
Analysis: Transport reporter Linton Besser on the findings. http://www.smh.com.au/interactive/2008/national/nsw-rail-report/index.ht...

* Train fares will rise by 7.5% a year for four years
* Bloated rail network needs job cuts: report
* Your say: Alternatives to fare increases (see link to hidden blog below)

TRAIN fares should rise by up to 30 per cent in just four years and almost 1700 rail jobs should be axed, says a review of CityRail services by the Independent Pricing and Regulatory Tribunal.

A year-long investigation by the pricing regulator has identified cuts of about $480 million a year that must be made to CityRail's bulging bureaucracy.

The regulator has found that the State Government should abolish all 1176 train guards on CityRail services, and eliminate station staff from 204 of 305 stations, replacing them with ticket machines.

This would slash 521 jobs and save $30 million a year.

The recommendations come amid hostile relations between the Government and the unions and as the Premier, Morris Iemma, and the Treasurer, Michael Costa, push ahead with a pro-privatisation agenda.

The pricing review, the first of its kind, recommends huge efficiency improvements to bring CityRail up to the standards of rail services in Melbourne, Brisbane and overseas.

It argues that fares must rise steeply to address a fall in takings that has reached crisis point because of a decision by the former premier, Bob Carr, to freeze fares for three years to compensate for late-running trains.

The proportion of revenue from fares has fallen so much that the regulator has recommended CityRail write down its assets from $11.3 billion to $1.4 billion, for the purpose of setting fares.

It recommends that fares rise by 20 to 30 per cent in real terms over the next four years.

In 2007, train fares rose about 4.1 per cent. A 30 per cent fare increase over four years would take the price of a weekly ticket from Parramatta to Central from $34 to $44.20. A single ticket from Woy Woy to the city would rise from $8.60 to $11.18.

The regulator has reasoned that large-scale fare increases cannot be justified without radical cuts to the CityRail bureaucracy. But the review also points to the need to reform the structure of fares, and long-distance commuters would pay substantially more for their tickets under its preferred model - a flag-fall and a distance-based fare.

The Government consistently baulked at such essential reform during its disastrous six-year foray into integrated ticketing with the failed Tcard project.

The pricing review finds the performance of maintenance and train crews compared woefully to other cities interstate and around the world. Train crews spent only 35 per cent of their day driving trains on scheduled services, while Sydney's rolling stock cost more to run but was vastly more unreliable than that of other networks.

About 300 managers should also be axed, the report finds, with back-office overheads and marketing making up a substantial portion of the fat that must be cut from the organisation.

The regulator suggests the Government adopt a new "rule of thumb" where passengers pay 30 cents in every dollar spent on improvements to CityRail - the Epping to Chatswood rail link is set to cost $2.3 billion, so passengers could expect to shoulder $690 million of fare increases.

The regulator will take submissions, with a final report and recommendations to the Government due in November.
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Train fares will rise by 7.5% a year for four years

Linton Besser
June 6, 2008

LAST July, the Transport Minister, John Watkins, asked the pricing regulator to find a new way to regulate train fares.

Since Sydney's railway was built in the 1920s, the State Government has largely determined rail fares year on year, reflecting an annual budget procedure all departments follow.

But while fares have increased almost every year, there has been very little scrutiny of just how efficiently CityRail provides the services that its passengers pay for. Until now.

It was common knowledge the railway was home to a bloated bureaucracy and thousands of train drivers, guards and station staff with pay and conditions that have been well protected by the powerful rail unions.

But today, in a series of documents that have taken the better part of a year to compile, the Independent Pricing and Regulatory Tribunal has produced a blistering assessment of just how much fat can be cut from RailCorp.

IPART says more than 300 staff must go from management, more than 500 from stations and almost 1200train guards. Did Mr Watkins expect anything like this?

The timing is curious. The reports were due to be released earlier this year, but the Premier delayed the process to accommodate a RailCorp review of its customer service.

It means the review's release today comes right in the middle of a torrid wage negotiation between the Rail, Tram and Bus Union and the State Government.

It also comes amid the charge by an inner circle of cabinet, led by the Treasurer, Michael Costa, for the privatisation of NSW public utilities such as electricity.

But the Government is also widely expected to tip the operation of Sydney's iconic ferry service into private hands, and its new metro rail network will be built, operated and maintained entirely by the private sector.

There are even some top-level transport bureaucrats who continue to push for the franchising of the CityRail network off to the private sector.

Today, the bottom line for commuters is they are going to have to start paying significantly more for their train tickets.

The fare freezes initiated by the Carr government have caught up with CityRail. Fares will have to begin climbing by about 7.5 per cent a year for at least four years.

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Bloated rail network needs job cuts: report

Linton Besser Transport Reporter
June 6, 2008

SYDNEY'S train stations should be largely unstaffed, train guards abolished and staff productivity radically boosted to bring CityRail into line with international best practice, says a report being released today.

A review of the troubled rail service has identified almost half a billion dollars in cuts that can be made to CityRail that would not affect customer service.

Train crews, maintenance yards and stations are all grossly overstaffed, says a new report by the Independent Pricing and Regulatory Tribunal.

The tribunal has recommended the abolition of train guards and the slashing of more than 520 personnel who staff stations that cater to fewer than 2000 passengers a day.

But while worker productivity has been put under the microscope so too has management's performance.

RailCorp is top-heavy, the tribunal found, with 90 head office managers to every 1000 employees - 80 more than organisations of a similar size in Britain.

A cost review by LEK Consulting identified about 300 head office jobs that could be abolished as part of the staff cuts.

"A like-for-like comparison against comparable Australian and international operators has indicated that CityRail operating at benchmark would result in operating costs approximately 23 per cent (about $610 million) lower than projected in 2011-12," the review says.

But the tribunal decided such a radical cut was impossible in the near term. Instead it recommended an 18.4 per cent saving, or $480 million per year by 2011.

The Government's decision to retain all train guards and staff at poorly frequented stations will cost RailCorp about $160 million a year in four years, LEK found.

"[But] about $450 million [in potential savings] cannot be explained by these policy choices and are primarily to be found in overall station staffing, rolling stock maintenance as well as overheads."

The radical efficiency savings would require, however, some capital investment. More than $800 million would be needed over four years to install credit card and eftpos ticket machines at unmanned stations, closed-circuit television cameras to monitor passengers alighting at platforms and a $375 million refurbishment program for the ageing fleet of Tangara trains.

But there were other bloated parts that LEK exposed. The report claims that 42 per cent of costs in the running of train crews can be slashed."CityRail drivers spend only 35 per cent of their on-shift time driving scheduled services," it says.

There was a blog associated with these stories but the Herald has 'archived' it....you can find it here...
http://blogs.smh.com.au/newsblog/archives//018742.html