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Victorians paid more than $2.6 billion last financial year in subsidies to the state's public transport operators, less than a quarter of which made its way back into the public purse through fares.
And the multibillion-dollar bill to taxpayers - already more than $10 billion - is forecast to grow in coming years, defying the predictions of those who spearheaded the system's privatisation 15 years ago.
Victoria's public transport system was privatised in 1999. Then premier Jeff Kennett predicted at the time that subsidies would steadily fall to the extent that public transport would eventually generate revenue for the state - $18.5 million a year ($28.05 million in 2013 dollars) by 2013-14, he said.
In 2012-13, state government authority Public Transport Victoria made more than $1.2 billion in service payments to private operators Metro Trains and Yarra Trams, $935 million to bus companies and $49 million to Asset Co, which manages Southern Cross Station. It also paid $361 million to regional rail and coach operator V/Line, which is a government-owned corporation.
Just $589.8 million of the total service payments bill - 22.2 per cent - was recovered through paid fares, a level considered well below international best practice.
The full cost to the state of public transport subsidies is revealed in figures contained in Public Transport Victoria's corporate plan for 2013-14, seen by Fairfax Media. The plan reveals payments to bus operators alone will top $1 billion in 2014-15.
The proportion of costs recovered via farebox revenue is forecast to rise modestly by 2016-17 to 24.4 per cent, by which time the annual cost of running the public transport system is projected to have risen to more than $2.9 billion.
Monash University professor of public transport Graham Currie said the Kennett government's privatisation model had been doomed to fail from day one because the government had already made deep cuts. ''They sold the international franchisee a dud because they'd already stripped the costs out,'' Professor Currie said. ''So in many ways they ended up bidding on stuff that wasn't feasible …''
After the withdrawal of franchisee National Express from Victoria, the Bracks government increased payments to private operators of trains and trams. Between 1999 and 2007 the annual subsidy rose from $318 million to $569 million.
While Victoria's farebox revenue is 22.2 per cent of subsidies, Melbourne's is closer to 30 per cent, according to the Tourism and Transport Forum. The industry group's report, Public Transport, Private Operators, found Australia's five biggest cities average 36 per cent cost recovery. Melbourne performed better than Brisbane's 23 per cent but worse than Sydney's 32 per cent.
Another 2012 report called State of Australian Cities, released by the federal government in December, observed that Australia's low farebox revenues threatened to hold the country back from proceeding with key major infrastructure projects. ''Fare recovery in Australian urban mass transit systems is already well below international best practice and continues to decline,'' the report said.
It noted Australian cost recovery levels were low even when compared with some low-density US cities such as Washington, and San Francisco.
Public Transport Victoria's corporate plan does not set a target for increasing the rate of farebox revenue, but it lists three methods for seeking more value from public transport expenditure: increasing patronage, cutting fare evasion and yield management.
Professor Currie said the Coalition had already employed yield management methods by twice raising fares above inflation levels. He said the government could consider increasing fares during peak hour, or imposing a Parisian-style tax on CBD businesses that benefit from access to good public transport. ''There is a subsidy but the huge economic benefit [of public transport] for Melbourne is congestion relief,'' he said.
Public Transport Victoria declined to comment on its corporate plan, other than to say its farebox revenue figures did not include V/Line fares.
This article first appeared on www.theage.com.au
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