Era ends for Dunedin buses

A city the size of Dunedin needs reasonable public transport. Though substantial subsidies are required to maintain bus services, it is a cost which must be borne.

Buses are a social service required to contribute towards making Dunedin a socially healthy and fair place to live. And given the worldwide danger of catastrophic climate change, it can be argued that environmental considerations also apply.

Further, the more people use buses, the more space there will be for the remaining cars, whether on the roads themselves or for parking.

Who, then, should control buses? As recently as the 1980s this was the city council's task, subsidising them (as it happens) through electricity profits. The public transport system, however, changed at the end of that decade, with the "independent" Otago Regional Council overseeing bus regulation and letting competitive tenders.

While the occasional route ran without subsidy, most required varying degrees of combined taxpayer and ratepayer support. The change left the city bus company competing, often ferociously, with private operators.

It, nevertheless, won a reasonable proportion of the routes and was not a big loss maker. It bought Newtons at one stage and expanded, with some success, into the tour bus business.

For the past two years, however, the business has suffered and, overall, losses of about $800,000 have occurred. Then, in the last tender round, Citibus, the council-owned company, lost several routes - albeit some by the most slender margin.

The council's decision to sell its bus company has elicited strong reactions. Sometimes these are based on the historic notion that the city must run buses, and that they are core city business. Under the current system, though, Citibus is reduced to being just another competitive bidder. It has no control over the routes and their frequency, or over fares.

Nevertheless, there is a certain sadness on at least two fronts. First, a thread of history going back through trams and trolley buses has been lost. Second, Citibus has, largely, led the way with the quality of its buses.

In the jargon of business, Citibus has made efforts to be a "good corporate citizen". At one stage, before rules on the age and quality of buses were tightened markedly, Citibus' buses were streets ahead of some of the competition.

There is immediate relief that it seems the 65 drivers can be re-employed, and that the purchaser, Invercargill Passenger Transport Ltd, trading in Dunedin as Dunedin Passenger Transport, is a long-established South Island operator.

Hopefully, competition for routes is strong, because the buses are a burden. More than half of each ticket is subsidised.

Citibus is under the control of the city council's Dunedin City Holdings, the directors of which, we are told, thought it best to sell.

Citibus was, in the words of Dunedin Mayor Dave Cull, "haemorrhaging" money. Meanwhile, council pressure for dividends from City Holdings has increased, with extra money needed to fund the Forsyth Barr Stadium an obvious reason.

Under these circumstances, a company making substantial losses year after year was a wound that had to be staunched.

It is interesting other companies seem to have been able to make money from tour business and from subsidised city routes.

While one of the major drains on Citibus was from the need to maintain the quality of its fleet, particularly for tour buses, that consideration surely applied to other companies as well. One wonders, too, about the role of the debt millstone of $4.05 million owed to the council.

Although Citibus and City Holdings chairman Cr Paul Hudson maintains debt - and interest - were "a normal part of running a company", the recession of the past two years has proved the value of low and prudent debt levels.

The question must be asked about the ability of the council, even at arm's length through a company structure and with independent directors, to run successful businesses in highly competitive markets.

Looking to the future, perhaps the opportunity arises for the city council, now it is divesting its commercial bus interests, to become the over-arching body for regulating and subsidising Dunedin's buses.

Many in the regional council have found its role thankless and diverting, and the city council is larger and, because of its many hands-on duties, closer to the community.