EXCLUSIVE: Better Service Finally Coming! What, how and when.

We've just had the federal budget. An election year effort with 'cost of living' a major selling point, it proved disappointing for Victoria relative to other states with regards to infrastructure spending. Then next month we'll have our state budget. That's also pre-election with all eyes on how it will affect November's vote. 

In its first term the Andrews government leased out the Port of Melbourne to fund its 'Big Build' infrastructure projects. These helped its strong showing in the 2018 election as people saw projects coming to fruition all around them. 

The pandemic

Since then we've had a global pandemic, a shift to working from home, greater budgetary pressures and even, for the first time in years, some population decline in Melbourne. That's changed transport patterns. Many large projects were based on growth that didn't materialise, at least not for now. If we knew then what we know now their business cases would be weaker and they could have been deferred without ill effect (as the infrastructure-wary Grattan Institute has argued).  

COVID-19 saw a reduced task for public transport during commuter peak periods. It it is to retain importance then it is going to have to become much more usable for non-CBD and non-peak period trips. This requires a switch to better all-day service as I suggested here. No more then would Melbourne be grossly underusing its transit infrastructure and vehicles with 30 to 60 minute waits at many times people wish to travel. 

Funding challenges

So how do we fund it? There can be some minor redistribution from peak to off-peak but otherwise more drivers and rostered driver hours are needed. Low interest rates and a treasury happier to spend on capital rather than recurring services have made financing difficult. As a result we have lots of expensive capital sitting idle, out of revenue service, for most of the day.

Recent history has shown it's vastly easier to find $10 billion for a major project than (say) $200 million per year for upgraded train and bus services. Even getting small sums like $5 million annually, such as could reform a local government area's bus network, is rare. It's like funding the world's biggest circus tent but sparing only a pittance for a couple of acrobats and not putting on many shows.  

While I won't call anyone a clown, recent public transport policy priorities have not been too far removed from the above circus analogy. This contrasts with Sydney; they too have built infrastructure but their government also implemented substantial frequency upgrades and network reform in the last five years. As an example, gaps between suburban trains now rarely exceed 15 minutes while simplified bus networks have made 10 minute frequencies common all week. That compares with widespread 30 minute train headways and complex overlapping bus routes a decade ago.

Of the recent Victorian state budgets, 2020's most clearly starved service at the expense of infrastructure. 2021's budget, out six months later, was a bit better, moving the dial a couple of notches towards service. 

Since then we've had Victoria's Bus Plan. This said all the right things but was light on detail, being essentially a 'plan for a plan'. We got some sensible overdue low-budget bus upgrades but nothing really game-changing. 

Given high population growth (until very recently) service kilometres need to be greatly boosted if we were even to just restore the per-capita service kilometres we had in 2011. If the 2022 budget doesn't come through with progress here then it's hard to see that later post-election budgets will.

The Better Service Finance Corporation

As we saw with the port sale, the Andrews government has not been averse to doing bold things. With much of its infrastructure program built or nearly so it's time for attention to shift to maximising benefit from it. This requires investment in service. 

The government isn't stupid. They know this too. All that's needed is the means.

With a budget coming up (in an election year no less) the time is right for a creative way to fund the service we need. On this we can be optimistic and I'll tell you why today. 

Moves are afoot to establish a new financial entity to raise the funds required to run better services. Called the Better Service Finance Corporation (BSFC) it would be part owned by industry superannuation funds. These funds will include those popular with RTBU and TWU members. This creates a confluence of interests as more services means more driver jobs in the industry and better security for union members. 

BSFC will do for service what 'Big Build' did for infrastructure. It is understood that the money involved will be about $300 million per year, or, expressed in today's terms, $9 billion over 30 years. That's enough to deliver Sydney-beating service levels across trains, trams and buses for a generation. Our unbeatable combination of infrastructure and service will be unmatched anywhere else in Australia. And it will come with a degree of stability that will bring confidence to business and development decisions based on high quality transit access. 

Where will BSFC get the money and what will it get in return? The BSFC will be backed by substantial A-grade government-backed assets. This will enable low-interest finance to be obtained to deliver 30 years worth of service upgrade.  

This security will be on the back of a deed agreement that passes ownership of the Suburban Rail Loop to the BSFC in 2052. After then the government will pay BSFC an 'availability payment' for the infrastructure and an operating fee to it as the franchisee. The margin on this will enable the BSFC to repay what it borrowed to fund the $300 million annual to pay for better services and provide returns for superannuants as a stable utility-type investment. As well BSFC has negotiated land purchase options on strategic developable sites near proposed SRL stations to further strengthen returns.

Not being a government-owned entity, BSFC finances will be 'off-book'. Government accounting in the 30 years leading up to 2052 will treat this as income to offset spending on the proposed major service uplift. This will allay Treasury concerns and overcome the main impediment we've had to funding high quality turn-up-and-go public transport across Melbourne.  

We've waited a long time for this. It's great that it's finally coming. BSFC promises to be a game-changer in how we fund, run and use the network. No longer will service play second fiddle to infrastructure. No more waiting 40 minutes for a train or buses that don't run on Sundays. 

Hundreds of thousands more jobs will finally have good transport access when people need it, delivering affordable driving alternatives not a moment too soon. Best of all is that the upgrades will flow from 2023, making them a key plank in the government's re-election bid. After all, Better Service Fixes Cities.  

A side-letter formally bringing the BSFC into being and enacting its financial instruments will be signed by Treasurer Pallas by noon today according to a well-placed source. In the meantime enjoy this taste of what it could deliver, starting next year.