Regional Council all at Sea in its Dealings with NZ Bus

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Agreement to sell New Zealand Bus to Next Capital - 27 Dec 2018 8:31am
  • Bay Waka investigation – Monday, 11 February 2019, 10:00 PM

Cr Thompson refers to bus service as a fiasco

OPINION: Statements by staff and Councillors at its Transport Committee Meeting on Friday 8th Feb 2019, and staff and councillors who met with over 100 disappointed Maungatapu residents at a meeting organised by Sue McArthur at the Maungatapu Marae on Sunday 11th Feb 2019 confirm that they have no idea who, in actual fact, they have contracted to provide our bus services and why since its roll out NZ Bus has delivered such a poor service.

At the Transport Committee meeting staff and Councillors spent over an hour berating, and confirming to themselves that NZ Bus is wholly to blame for the fiasco which has taken place since it awarded the contract to provide this service to NZ Bus Tauranga Ltd, a subsidiary of NZ Bus Ltd.

NZ Bus

A number of Councillors I spoke with had not sighted the Agreement and Council Chairman Doug Leeder was unsure whether it contained a performance bond. Leeder and other Councillors said that Infratil, a very successful public company which invests in infrastructure stood behind NZ Bus. Infratil owns 100% of both NZ Bus Ltd, and NZ Bus Tauranga Ltd. NZ Bus has over 1,000 buses and 2,000 staff.

Infratil

Infratil also owns 66% of Wellington Airport, 15% of Trustpower, a significant NZ commercial property portfolio, and significant investments in Australian infrastructure companies, schools and hospitals. In the past Infratil quit its shares in the Port of Tauranga for a $38 million profit. Infratil was also a 50% partner in purchasing Shell Oil NZ for a total $320 million. Infratil received dividends of $224m from its Z petrol stations during its first 3 years before booking a further profit of $392 million when Z was publicly listed. Infratil is in business. It’s goal is to create the greatest possible profit for its shareholders. It is fair to say that it never considered itself a long term operator of a bus service and we have allowed them to play us for all we are worth.

Lowest Bid

Our Regional Council entered into a $14.8 million contract with NZ Bus to provide the new and much heralded bus service in Tauranga. Regional Council staff accepted the offer stating that it was $1.2 million lower than expected, and telling Councillors NZ Bus’s backing from Infratil was a ‘good thing’. 

Sale of the Business

What many staff and Councillors had no idea about, and to give the benefit of the doubt, maybe other staff did know but said nothing, was that back in December Infratil announced it had entered into an agreement to sell NZ Bus to funds controlled by Next Capital, an independent private equity company in Sydney.

The sale price is between $218 and $240 million, depending on the scale of the business when the sale is finalised. The sale is waiting for Commerce Commission approval as it may well lead to a significant reduction in competition for provision of buses to local authorities. Industry insiders say that NZ Bus has recently lost contracts which suggest that its low bid to BOPRC was more about maximising its sale price than wanting to be a long term and stable partner for our Council. 

Next Capital are not in the bus business and it is expected that Next Capital will split the business, which includes some non bus assets, and sell the buses and contracts to Go Bus Ltd, a company which it has recently sold to Ngai Tahu in Christchurch (67%), and Tainui in Hamilton (33%) for $170 million.  

Councillors Poorly Informed

It appears quite obvious that the information provided by BOPRC’s transport and legal staff to its  Councillors lacked an appropriate level of research or sound understanding of who they were dealing with, the reason they were dealing with them, and the likely performance levels to be provided by NZ Bus.

Who did this?

Councillors have found themselves dropped in a very difficult situation and some have given heartfelt apologies to the community for the disturbance caused by the failure of its bus service, which has been extreme on many users, particularly students and the elderly. Leeder commented that on one day alone last week 90 scheduled services did not run. Councillors Lyall Thurston and Paula Thompson both feel highly aggrieved by the position they have found themselves in. Thurston has stood up and acknowledged that the buck stops with him. In these councillors endeavour to do their absolute best for ratepayers the community has cause to have some level of sympathy for these Councillors. 

What has been learnt?

Councillors will be further embarrassed however by the fact that they did not make what might be considered reasonable enquiry and relied solely on the advice of Council staff which led them into an Agreement which competent governance should have known was with a provider known to be interested solely in ‘profit taking’ and likely to lead to the current unhappy situation.

It is time for a very quick and thorough investigation of the service we need to allow everyone, from 8 years old to 80 years old to be able to move easily around our city on public transport. Great cities always have great public transport systems. The previous service overall must be considered a failure, with bus patronage low and falling.

A proactive team needs to be assigned to this problem. A team who can apply common sense and industry know-how. This is essential on so many fronts, environmental, financial, and to reduce congestion for those vehicles which are required to be on the road. I am sure that our Councillors will be attending to that when they meet tomorrow. Councillors, it is ‘show time’.  

Having seen the changes being bought about in senior staff and structures by the new TCC CEO I suggest that the new BOPRC CEO could perhaps take that as a valuable tip.

By Peter McArthur

I write for Bay Waka to ensure that people of Tauranga are kept informed of how our city is being managed.