This article describes cities that have free public transport:
http://en.wikipedia.org/wiki/Zero-fare_public_transport
A friend, who sent the information to me, confirmed that the information on Auckland is true:
Auckland, New Zealand
A free CBD loop service links the ferry terminus, railway station, universities, theatres, casino, galleries and shopping districts using hybrid electric buses. It operates from 8am to 6pm, 7 days, at 10 mins interval, but not all buses are hybrid.
The quality of service is quite good, although it does get crowded at certain time, eg. school hours, lunch time, etc.
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