Methodology used to estimate the revenue generated by Connex Bus Service

1240/5(1917)

QUESTION TO BE ASKED OF THE PRESIDENT OF THE ENVIRONMENT AND PUBLIC SERVICES COMMITTEE ON TUESDAY 15th JULY 2003, BY SENATOR E.P. VIBERT

Question

Would the President inform the Assembly –

1. of the methodology used by the then Public Services Committee to calculate the likely 12months revenue that would beachievedby the ConnexBusCompany in providingtheIslandbus service?
2. whether this revenue figure was crucial in the consideration of thesizeof subsidy tobe paid by the peopleof Jersey for Connex to provide that service?
3. what that figure was, how it was arrived at,who provided it and whatcheckswerecarried out to ensure accuracy?

Answer

1. The estimation of annualrevenueexpected for 2002-2003was calculated in January 2002,andwasbasedon fare incomecontainedin a report quoting financial accounting figures ofJerseybusin1992and1993,when a similar levelof service wasoperating.Thesewere the last figures provided by theDiamondJerseyGroup, parent company of Jerseybus. This income figure was adjusted for inflation and fare increases, and an allowance madefor a reduction in farepaying passengers in the interveningperiod.
2. An estimated revenue figure of the sameorderofmagnitude was provided to all tenderers andwas relevant to the bidding process only as being indicative of the passenger loadings to beexpected. It does,however, have a bearing on the subsidy required to operate the samelevelof service as operated by Jersey Bus in 1999/2000. This level of service wasapprovedby the States as part of the BusStrategy,(P.104/2001). The difference between the likely revenue as calculated above and any accepted tender is, therefore, the likely subsidy on behalfofusersof the service.

M embers will recall that the then Public Services Committee formed a Bus Strategy Steering Group in

September 2001 to develop the strategy and oversee the tender process. This group consisted of members of the States drawn from the then Public Services, Finance and Economics, and Industries Committees together with a member from the Jersey Transport Authority.

B ecause of the inability to determine the exact bus income figure from Jerseybus, the approach,

recommended by transport consultants Halcrow Limited, advising the Bus Strategy Steering Group, was that, in order to attract meaningful tenders for the service, the States would have to accept the risk of achieving the estimated income level and pay a fixed contract price for the provision of the service. Had any operator been required to take the whole income risk as part of their tender, based on the lack of financial information, the tenders for the contract would almost certainly have been much higher.

3. T

he likely income figure was estimated at £2.5 million.

I t was calculated by Department officers as described in (a) above. It was considered an achievable target by

consultants Halcrow Limited and was agreed as such by the then Public Services Committee and Bus Strategy Steering Group. The Finance and Economics Committee was advised of the figure at its meeting on 12th March 2002, when determining the amount of subsidy to be provided in the first year's operation.

T here was no other means of determining a more accurate level of subsidy in the absence of any further

contemporary and relevant information from the Diamond Jersey Group, parent company of Jerseybus.