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Strange Numbers in the 2014/15 Annual Plan

As well as discussing SkyPath (and the Mayor’s recent dramas), tomorrow’s meeting of the Council’s Governing Body is also set to work through the 2014/15 Draft Annual Plan and adopt the Draft for consultation. There are a few unresolved matters in the Annual Plan discussions – particularly reference to an $18 million operational funding shortfall for Auckland Transport that is described below:

Officers reported to the 21 November 2013 Budget Committee meeting on Auckland Transport’s request for an additional $18 million of operational funding relative to the 2014/2015 projections in their Statement of Intent.  Since then, discussions have been held with Auckland Transport to address their funding shortfall.  It has been agreed that further scrutiny of Auckland Transport’s operating expenditure budgets is required.  A joint group of officers will undertake this review over the next few months. Auckland Transport are also reviewing the shortfall in parking revenue where current charges appear to be below market.

This is a pretty massive request for additional funding – one which was previously rebuffed by the Mayor when he originally proposed the budget a few weeks back. Given that Auckland Transport slashed the price of its off-street parking rates in the city centre in recent times, it’s no wonder that has been identified as an area that could raise additional revenue. This should have an additional benefits too, for example there are times when I have needed to drive to town for a meeting (shock horror) only to find the car parking buildings full which indicates that the pricing is probably set too low. The buildings being full are also something you can’t tell before you enter as the parking info system seems about as reliable as the bus real time system.

It would also be nice to start to see some of the efficiencies from rail electrification and integrated ticketing (you know, how we don’t need 4 staff on every train to clip tickets any more) actually filtering through as well. Both should also help to increase patronage and therefore revenue too, especially once people start to see and experience the new trains. Patrick and I were lucky enough to get a trip on one of them last night and the quietness and quality of them is going to blow people away. Let’s just hope the last thing cut in any budget shortfall is public transport services.

Returning to the parking issue, if we look a bit closer at the number in the Annual Plan, it does seem like an extraordinary amount of operational expenditure is going into off-street parking in the 2014/15 Annual Plan:

parking-opex-capex

What the table above shows is that on-street parking and enforcement is a pretty profitable activity: $62.4 million of income and only just over $10 million of expenditure. Yet off-street parking seems to be an absolutely enormous drain on resources with a crazy $133 million of operating expenditure and only $28.6 million of income. Something tells me this has to be either an error or some strange accounting trick that has led to such a giant number – one that’s way higher than in the 2013/14 Annual Plan.

Regardless of what’s led to a requirement of $105 million net subsidy of off-street parking being required, it appears that this is having a huge impact on Auckland Transport’s budgets. Off-street parking should be a profitable activity for Auckland Transport – particularly as many of the central city buildings use up some pretty prime real estate that could otherwise be put to a much better purpose. Removing the $105 million net subsidy to off-street parking would not only eliminate the budget shortfall, it would free up a huge amount of additional operational funding that could go to more worthy areas like improving public transport services, footpath quality and so on.

The other numbers in the Draft Annual Plan that caught my attention related to the level of public transport service expenditure by mode:

pt-services-fundingPresumably, the expenditure on buses and ferries have just been mixed up – it’s hard to imagine how you could have $160 million of operating cost for the ferry network and have buses being so incredibly profitable. It is a bit worrying though to see official documents like the Draft Annual Plan making pretty basic errors when it relates to levels of expenditure up to $100 million.

Finally, pages 188-197 of the Draft Annual Plan report outlines the capital expenditure programme for the 2014/15 year. Below is a list of some of the more interesting projects proposed for capital expenditure in that year:

capex-interesting-projectsThere are still a few key gaps where projects will be required to deliver the new public transport network (Te Atatu interchange, Wellesley Street bus improvements are two that come to mind) which aren’t funded to any great degree in the 2014/15 Annual Plan. Whether this puts the new network’s delivery at risk perhaps depends on the timing of when different parts of the network are rolled out. Generally the capital programme for 2014/15 looks pretty good though – particularly exciting to see the next generation of city centre projects finally coming through.

34 comments to Strange Numbers in the 2014/15 Annual Plan

  • bbc

    So every year AT subsidises the parking buildings at about the level they provide to cycling over a decade. We could have a 1000% increase in the cycling budget and actually make some progress in this area if they simply stopped wasting money. Yet cyclists are the ones who get told they’re getting a free ride. How about the council hands those parking buildings over to a private company to manage, one that will give a return to the council. Alternatively, let’s shut them down and redevelop the land. I can’t fathom that over a decade these buildings are running at a $1 billion loss!?! Considering it is estimated that around 600 milllion is needed to complete the entire Auckland cycling network, we could basically do it twice over in the next decade simply by pricing off-street parking at a level which covers costs. This absolutely beggars belief, AT really don’t appear to be the slightest bit competent to run the business they’ve been set up to run.

  • Harvey Specter

    The expenditure on off street parking has to be a mistake. Even if they had an implied rent for the buildings, I cant see how it could be that high. And if the loss is that high, they need to do something about it – increase prices, reduce the number of parks (how many buildings do they own?) and put that into public transport.

    • conan

      Potentially this is the issue, there could be an accounting change around depreciation and/or implied rent. Of course that just would recognise the value we don’t get out of these assets.

  • Harvey Specter

    Only $1.5m for bus priorities? What a joke. They probably spend more on planing one which means that no actual work will be completed.

    An absolute disgrace!

    • Stu Donovan

      to be fair, the AMETI and Dominion Rd projects include bus priority measures. I suspect the $1.5 million is for further studies to investigate future bus priority projects.

      • conan

        “I suspect the $1.5 million is for further studies to investigate future bus priority projects.”

        Such a depressing sentence. Can’t they just do it already?

  • Chris Werry (@chriswerry)

    I don’t understand this number. According to http://transportblog.co.nz/2013/04/17/the-cost-of-parking-in-the-cbd/ there were approx 475,000 customers in the period Jan – Mar 2013 or about 2m per annum. Revenue of $28 works out at $14 per customer which seems a bit high but maybe possible, However, even if we double the number of customers to 4m per annum expenditure of $133m means they’re subsidising each customer to the tune of $50 for every visit? Am I missing something? Am I missing something? Perhaps it includes all the little off street parks in all the town centres – are they that expensive to run?

  • nonsense

    a very big chunk of the civic carpark is given out for free to council/auckland transport employees and cars. That never sounded quite right to me.

  • Perhaps the issue lies in the fact that this opex includes depreciation. Perhaps they are sitting on a mountain of assets that are depreciating them dry, i.e. massive parking buildings constructed in the 60s and 70s.

  • Is off-street parking expenditure mostly rates? If so it isn’t really expenditure, it is shifting money between council entities.

    • Steve D

      At $100million/year, I think Auckland Transport’s probably leasing the buildings themselves off Auckland Council.

      • Steve D

        Which means that the Council’s not really making a loss on parking, but it does pretty clearly show the opportunity cost of using those buildings for parking rather than another use.

        • Frank McRae

          But an opportunity cost is still a loss, and still a subsidy.

          • Steve D

            I don’t think the idea of whether or not something is a “subsidy” is particularly useful most of the time, including here. The parking buildings aren’t being used for their “highest and best use”, but we don’t want the Council to be focussed on just getting the best financial return from its assets . Rather, we want the best result for society.

            Of course, in this particular case, where the hell is the social benefit in provide cheap parking in town? We shouldn’t flog off or redevelop the sites because they are a “subsidy” – we should flog off or redevelop the sites because having giant parking buildings in the CBD doesn’t fit with the Council’s ostensible goals for reducing car dependency (e.g. in our many high-minded official plans). If people want to drive into town and pay market rates for parking and sit in traffic, that’s their problem.

          • Frank McRae

            Yes. I never said that subsidies are inherently bad, but they should only ever be justified by their ability to provide a public good that would not otherwise occur. Subsidies should never be arbitrary or even worse – produce an outcome that goes against a stated objective (reducing auto dependency / increasing PT, walking cycling).

    • Starnius

      That land could give actual results better than parking. I.e. Council could get rates from a private owner AND active use benefits.

      • Yes because what are the externalities of cheap parking and are they positive? It encourages more driving, ie incentivises congestion, increases emissions, and encourages cars to be taken precisely where they are not wanted. n the case of Central City parking buildings, where most of them are, retailers would say that it helps them compete with suburban malls, yet all the evidence points to City pedestrian numbers growing this century by other modes and actually falling from car users. Hmmmm? Pretty clear that when looked at as a whole value proposition that at very least a repricing needs to occur here, if not a sale process.

        Anyone know the book value of the City parking buildings?

        How many CRL stations could their sale fund?

        • conan

          Surely if they were there for retail customers then AT wouldn’t incentivise all day parking by offering early bird parking, which encourages driving at the very time when roads are at capacity. If this was really the reason for proving CBD parking we should be charging a penalty for arriving before the shops are open.

          Standalong CBD parks have been selling for $50-$100k each. Carrying that across to each gets the following value, admittedly a bit rough and ready:

          Downtown: $94m
          Civic: $41m
          Vic St: $42m
          Fanshaw: $25m

          • Fred

            Council’s property value info suggests $65m for downtown, $45m for Victoria St, $15m for Fanshawe St. Hard to measure Aotea car park as it’s underground.

          • Harvey Specter

            Agree – early bird should be before (say)6.30. After that public transport should be fine.

            Discounted ‘shopping parking” between 10 and 4 (or maybe 3) provided you are less than 2 hours (no need for a receipt as that just wastes everyones time).

            The discounted ‘dinner’ parking after 6

  • Nicholas O'Kane

    Can I ask what the $193m for the city rail link will be spent on? Planning? Property Purchases? or the demolition of the Downtown shopping centre and building extra platforms at Britomart? And I assume it is entirely funded by local, not central government

    • Can say that it doesn’t involve paying anything for Downtown as the owners Precinct Properties are doing that in 2015 and have agreed to accommodate the tunnels under their new buildings.

      As far as I know there is no NZTA contribution to the CRL at this stage, although they do support the project, so this is a Council cost.

      If if does involve property purchase that is hardly a cost but an investment as any land around stations, the only land needed for an underground project, will be considerably more valuable once the project finished.

      Others may have more precise details.

    • It will likely be a mix of paying for more detailed design and property purchase. AT want to get it to the point that as soon as govt/council say go that they can start straight away and not have to muck around for years doing this stuff. As Patrick says it doesn’t involve Downtown although there will likely be some property purchase there. The deal was that Precinct would build the tunnel section through their site at the same time as their development and council would pay for that part of it.

    • mb

      Perhaps they should just convert the aotea car park to aotea station. Its already there. Use the upper levels for shopping, sell the downtown carpark to pay for the tunnel from britomart and get the network alk the way to aotea station for a net cost of $12.50.

  • Fred

    To give credit where it’s due, pretty much all the big capex projects are PT ones. I am guessing that’s a huge change from a few years ago.

    • conan

      The list above is highlights, there is still more spending on road and footpaths than there is on PT projects.

    • bbc

      “Below is a list of some of the more interesting projects proposed for capital expenditure in that year:” This is far from a list of all the projects, the largest projects planned by AT over the next few years are dominated by roading projects, the same goes for NZTA. No way can you state that the major programmed work in Auckland coming up is anything but a continuing road fest.

      • Fred

        Not sure that’s actually true for Council’s spending. Looking at the Annual Plan the only areas of spend above $10m not on the list above are road and footpaths renewals, resurfacing and other maintenance. Plus a couple of other things like NorSGA spending which they are contractually obliged to do.

        Sure the longer term plans are full of rubbish projects, but it seems that they are getting weeded out before actually happening. The system does seem to work.

        Of course this doesn’t apply to state highway projects but council can’t affect those.

  • Jonski

    Kind of off topic, but still to do with parking and money, (something I would have suggested in the competition if I’d thought of it in time): It would be great to pay for parking, both on- and off-street parking, using the Hop card and without the 50c transaction penalty charged against credit cards and mobile phones. Thoughts?

  • Jennie

    By how much are city councils planning to increase cycle ways in NZ in 2014-2015? Are figures available?

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