Metro reserves buffer against earthquake impact

The impact of the February earthquake has had significant effects on the passenger transport system in Christchurch, disrupting services, the Central City Bus Exchange and reducing the number of buses on the road.

However for the financial year to June 2011, Environment Canterbury’s Passenger Transport will post an operating surplus of around $600,000.

The major contributors to this result are:

• SuperGold card expenditure remained in the budget as gross expense rather than a net expense. This was a deliberate decision adopted to balance the financial risks associated with having to estimate fare revenue under a new gross contracts basis.
• Grant income from central government exceeded the budget. This was because the grant was budgeted for 2010 but came through in 2011. The late receipt was not known at the time when the 2011 budget was prepared. Variations were applied to existing contracts and indexation adjustments also contributed to the increase in grant revenue.
• Fare revenue is expected to be around $2.5 million less than budgeted because of flow on effects of the earthquake. This shortfall is partly offset by the favourable financial variances above.

Since the preparation of the budget, work has been undertaken to identify the ongoing financial repercussions for the 2011/12 year for Metro services.

Environment Canterbury transport planners are forecasting that the network will operate at a cost recovery of around 30%. This means that fare revenue is expected to account for 30% of the cost of running the services, down considerably on the typical pre earthquake level of around 50% of total cost of providing the service.

The 30% assessment has been based on analysis of current post earthquake network performance. “Cost recovery is unlikely to return to pre-earthquake levels due to the loss of the CBD employment centre and associated earthquake impacts,” said David Stenhouse, acting passenger services manager.

“For the first eight months of the year there will be changes to routes and new employment centres to consider in the recovery of the city.”

As a result of these projections there is likely that there will be a financial shortfall in operations of around $3.6 million, which will need to be funded from passenger transport reserves said Mr Stenhouse.