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Electrification – a solution

Auckland’s rail electrification project has had a torrid history. For years the previous government put it off, put it off, refused to stump up any money, put it off some more… and then finally came up with a solution where Aucklanders would pay for the project via a regional fuel tax. This was even though Wellington was getting its nice new trains fully paid for by the government.

And then in March this year the regional fuel tax was removed, and the funding for electrification shifting back onto central government. There was much angst as to whether it would proceed at all, but as time went on it seemed like everything was slowly falling into place, with contracts signed about signalling upgrades and other contracts put out to tender for the works as a whole.

Then, a couple of months ago we found out that the money previously set aside for electrification probably wasn’t going to be enough. Due to increases in the scope of works needed to actually properly operate trains at 10 minute frequencies during peak times while not totally destroying the opportunity for the network to run freight trains, it was worked out that some extra money would need to be spent on upgrade works for the tracks. At the same time, it was also discovered that the price of each train had been slightly under-estimated (although this was largely due to exchange rate fluctuations, which by now have probably shifted significantly again). In the end, it appears as though either roughly another $100 million needs to be found to ensure that electrification can proceed as per the original plans, and with the original number of trains, or that we need to compromise in some manner to make it fit the budget.

Now I fully understand that $100 million is a lot of money, and I must say it’s pretty disappointing that the previous investigations and costing of electrification didn’t include the upgrades to the track-work that are now considered necessary. It’s pretty unlikely that the government will be able to dig around in its coffers to stump up that kind of money for this railway project from the “crown grants” that rail is funded from. The Minister has repeatedly noted this. So, either the solution is going to be to find the “least bad” compromise to make things work within the previous funding envelope, or to find that extra money from somewhere else.

As I have noted previously, I do not think that it is feasible to not undertake the extra track work required to run 10 minute train frequencies. It would, quite simply, be daft to lump a whole pile of trains onto a network that couldn’t handle them. So the first priority for the money, in my opinion, should be on getting the infrastructure right. However, the problem with focusing the money here is that you end up having rather little left to spend on the actual trains themselves – only enough for 75 rather than the original 140 apparently. So that’s a pretty unacceptable outcome too in my opinion – particularly as $1.6 billion is being spent to modernize Auckland’s rail system it would be a bit odd to not finish the final bit off so that we have enough modern trains to run on it.

Which means that we’re left in the situation of finding some other way to fill this $100 million funding gap.

Now, this isn’t the first time we’ve seen an unexpected funding gap emerge for public transport this year. Back when the regional petrol tax was cancelled, it was immediately announced that the government would pick up the tab for ensuring Auckland’s rail electrification project went ahead. However, that wasn’t the only project to be funded out of the regional petrol tax. Other projects that had their funding stream removed at that time included the New Lynn train station, the Newmarket train station, the stations on the Onehunga Line and integrated ticketing. There was also the Penlink road that had its funding cut, but I’ll set that aside as I’m specifically talking about public transport projects here.

So when all this happened there was a lot of worry about these other, smaller, projects. But – and it’s a critical point to make – they have been sorted out. We are still getting integrated ticketing, the Newmarket Station is being fully finished, the same with New Lynn and the Onehunga Line stations. Some extra money came from the Regional Council, but the bulk of the extra funds came from NZTA. Even though theoretically rail capital works projects aren’t supposed to be funded by NZTA anymore, it was realised in these particular situations that the projects had to happen, the money had to be found from somewhere, and NZTA was the most logical agency to step in and fill that gap.

Why not do the same for electrification? There’s a clear funding gap of around $100 million between now and 2013 that needs to be filled. I accept that general government funds probably can’t fill this gap, I accept that perhaps the Super City could chip something in but wouldn’t be able to cover too much. So why not NZTA? There’s a clear precedent for NZTA funding rail projects – as they have done so for Onehunga, New Lynn and Newmarket.

So, does NZTA have $100 million available over the next three years? Hey, that’s right – that’s what the investigations and land-purchasing for the Puhoi-Wellsford road are estimated to cost. Bingo!

8 comments to Electrification – a solution

  • Jeremy Harris

    Or how about reinstating the regional fuel tax for the $142 million to do all the work, properly, the first time..?

  • I’m mixed about the fuel tax. While I quite like Auckland having a bit more independence from the Minister, at the same time there is always the question “well Wellington got theirs paid in full, why not us?” And also concerns about whether petrol companies would spread the burden across the whole country.

    I think shifting a tiny fraction of the money being wasted on roads of National significance into electrification should easily do the trick.

  • Nicholas O'Kane

    Regarding the regional fuel tax, do you know how much extra money it would bring in per year?

    I still believe we should push for reinstatement of the regional fuel tax. There are two reasons:
    1) Increase petrol cost to get people out of their cars
    2) Gain extra money for Auckland (independent of the central government) to fund public transport projects. While electrification may be funded elsewhere we still need funds for the CBD rail loop, the airport rail link, and maybe the Northwest busway and improved public transport (I’m not entirely convinced of the rail option, particularly with the tight budget) to Botany/Falt Bush.

    I will be very surprised if National were to do a u-turn, so the best hope would be to ensure Labour keeps it on their agenda when they next get into government.

    “We are still getting integrated ticketing”. Thats news. When will this happen?

  • With regards to integrated ticketing, yeah good question when it’s happening. Hopefully before the 2011 Rugby World Cup. Hopefully…..

  • The Auck petrol tax was going to start at 2c , rising to 5c in July 2010 and 9.5c from July 2011. The 9.5c a litre – 8c for rail – was scheduled to apply through to 2039 to all up total $1.5 billion.

  • The regional fuel tax was a stupid idea that was proceeding against official advice by the last government. Why stupid?

    1. Fuel companies could spread it nationwide for administrative reasons, if they didn’t there were some serious boundary effects for service stations at regional boundaries. It happened before in the 1990s when the Nats did it, it backfired and was removed. How damned silly can a government be to try the same thing again 15 years later?
    2. It had to be introduced on diesel as well as petrol, which meant diesel would need a refund scheme given around half of all diesel is used offroad. This was to be a considerable burden on the rural and marine sectors, as well as an administrative cost. In addition, a diesel tax bears next to no relationship at all to the marginal costs of heavy vehicle road use. RUC exists to do this, but regional RUC under the current system is impossible.

    Given ARH sits on a pile of assets worth hundreds of millions of dollars, you might ask why that shouldn’t be used, since it was generated from the Ports of Auckland and the sale of the Yellow Bus Company.

    However given you’re determined to NOT investigate how the highway between Northland and the rest of the country might be upgraded over the longer term (the land purchase would not be a cost, since you can sell the land typically at least at the price it was bought for), it’s unsurprising you’d stop funding a highway investigation which might, in fact, prove that the best approach for SH1 north of Puhoi is a set of upgrades. It would be helpful if you stop misconstruing this. Investigation looks at the route, and all of the options, narrowing them down to preferred ones based on BCR and other factors. I’d have thought this was fairly important, unless you have the stereotypical JAFA attitude regarding the rest of the country.

  • Louis

    I think a nationwide fuel tax of about 10-30 cents a litre is needed, which would help fund transport projects and would also your ACC levy and registration fee. Vehicle license stickers would not be needed and you wouldn’t need to be an annual registration fee you’d just need a warrant.

  • I think it’s a good idea to take those fixed costs of registration fees and shift it into fuel tax or RUC. The current system is unfair for those who drive irregularly.

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