In this post we look at the economic justification for the Puhoi to North Warkworth Toll Road (PNWTR).
In the executive summary of the Assessment of Environmental Effects (AEE), the NZ Transport Agency has provided the following table of economic effects:
While the NZTA assert that there are positive economic effects from the project, the only evidence supplied is a letter providing a high level assessment. The letter contains general assertions such as “there will be improvements in the economic welfare for Auckland and Northland businesses and residents”, but no quantitative analysis is undertaken.
NZTA claim that the Project will lead to reductions in vehicle operating costs, yet travel time savings for many in the Warkworth and Matakana regions will be in the order of one or two minutes. Tolls will add significantly to vehicle operating costs, so claiming vehicle operating costs will reduce is unsubstantiated.
No evidence-in-chief has been supplied to back up any of the positive economic effects claimed in the Executive Summary.
At the Board of Inquiry, NZTA’s Tommy Parker said the idea of the PNWTR is to stimulate the economy in the north:
It is also important for the Board to know that this is seen as a lead infrastructure so the nature of the policy is to provide infrastructure that will stimulate economic growth in areas of economic potential, and that you will be aware that the two regions that will be affected by this project is New Zealand’s most prosperous region in Auckland and one of its least prosperous regions in Northland. So the idea is to connect the two, get greater connectivity between the two to stimulate the economy in the north.
The reality is there is no correlation between travel time savings and economic growth in Northland. In March of this year, Statistics NZ published regional GDP figures. Here is the chart for Northland:
On 25th January 2009, the Northern Gateway Toll Road (NGTR) opened, offering a travel time saving of up to 9 minutes. This is a far greater travel time saving than that offered by the PNWTR, so you would expect to see a corresponding increase in GDP for Northland if there is a linkage between road building and GDP.
You can see that immediately after opening, GDP in Northland dropped, before rebounding to the 2009 level. There was clearly no correlation for the NGTR, so it is likely that the PNWTR, with smaller travel time savings, will also have no correlation with economic growth.
NZTA have not quantified how project travel time savings equate to economic benefit. Table 7 of the Traffic Assessment Report shows Northbound travel time savings:
The third column is headed up “2026 Project using fastest route”, because in the bottom three scenarios the fastest route is via SH1, not the toll road. The use of percentage figures gives the impression that travel time savings are significant. However, the travel time savings for the Warkworth, Woodcocks and Eastern Beaches routes are miniscule – just one or two minutes at most times of the day. (Ignorning HS and HE which stand for Holiday Start and Holiday End). It is unlikely that these travel time savings will equate to any meaningful economic benefits.
Here are the Southbound trips from Table 8:
Travel time savings are claimed to be greater, but the odd thing here is that this is because the base case travel times are so much more than for the north bound trips. No reason is given in the report for this.
It may be related, but there is a bit of an anomaly with the routes used determine travel times. The report says the 2026 Base Case assumes that the Western Collector will be completed. This is shown on the map below.
The Western Collector should offer travel time savings to Woodcocks and possibly to the North for trips on the existing SH1. However, looking at the travel time routes used for the 2026 scenarios, the Western Collector clearly isn’t used to determine the base case numbers above.
Instead of turning opposite McKinney Rd, trips to and from Woodcocks are modelled to take the long route. This will be overstating the Base Case travel times for trips to the Woodcocks area and possibly to / from the North as well.
Contrast the complete lack of economic evidence for the PNWTR with the evidence-in-chief supplied for the Basin Reserve Board of Inquiry. Here is what NZTA’s economist has to say about that project:
NZTA acknowledge that economics are relevant considerations under the RMA for the Basin Reserve Flyover, but apparently this is not the case for the PNWTR. You could argue that a Benefit Cost Ratio of 1.2 is hardly a ringing endorsement of the economic worth of the Basin Reserve flyover, but at least NZTA have bothered to carry out some kind of calculation of the benefits of travel time savings, vehicle operating cost savings and so on against the cost of the project. Presumably the economics of the PNWTR are so bad that NZTA would rather not provide an economic assessment at all. NZTA should not be able to pick and choose which projects they provide an economic business case for, and which they do not.
Bear in mind that the discussion of economics at the Board of Inquiry takes place in the context of the Resource Management Act. Commissioner Chandler made the following comment at the hearing on the 10th April:
MR CHANDLER: Perhaps I’ll just mention, Mr Pitches, talking about cost benefit ratios, the Board of course cannot take cost benefit ratios into account in its decision making.
MR PITCHES: All right. So just to respond to that. Benefit cost ratios generally are an indicator of the economic worth of the project, which is why I included it in my presentation. I still stand by my statement that the Resource Management Act place weight upon the economic value of the proposed project and should be considered.
To me it seems ludicrous that the Board should not consider the economic worth of the project, as measured through a benefit cost ratio. If the NZTA were proposing a 32 lane motorway then surely a Board of Inquiry would be obliged to test the economic rationale. But then again I’m not an RMA lawyer.
Perhaps it comes down to how adequately the NZTA have considered alternatives. I will be covering this in my next post.