On Wednesday the Council’s Infrastructure committee meet again and there are a couple interesting papers on the agenda. One is about transport trends which I’ll write about in a separate post the other is about funding assistance rates (FARs). They are probably a fairly boring topic for many people but they can have huge implications on councils as they determine how much money the councils get to help pay for transport projects. A brief explanation as to how transport is funded in New Zealand.
- Money from fuel excise duty, road user charges, vehicle registration and a few other sources all go into the National Land Transport Fund (NLTF)
- The NLTF is used to pay for transport projects and other associated activities (like road policing)
- State highways are funding 100% from the NLTF
- Local roads only get a proportion of their costs paid for from the NLTF, the rest comes from rates. It varies from project to project but averages out at about 50%. This covers not just new projects but maintenance too.
This infographic from the NZTA shows breakdown of funding in more detail
The NZTA have been reviewing the FARs over the last 18 months to see if the way they’ve been doing things is the best for going forward. The current way of setting FARs has been in place for over 30 years while the overall concept has been in place since the 1920’s. One of the issues with the current method is that it varies from project to project. In some cases the NZTA will contribute more than 50% and in others less. One of the outcomes of the review is that the NZTA will be setting FARs at a council level so that all qualifying projects within a council area get the same level of funding. The benefit of that is it should allow councils to better plan how much funding assistance they will be able to get.
The paper says that the over the entire country the NZTA will fund an average of 53% of local programmes and most councils will get a FAR of 52%. It has been proposed that Auckland will get a 50% FAR initially which suggests that for most activities this will represent a drop in funding.
Metro services refers to the mount of funding assistance provided to the rail network which is reducing over a longer period of time as was decided a few years ago. It’s also possible that the current state is higher that it normally would be due to the NZTA being bailed out by the Auckland Council a few years ago and are meant to be getting higher FARs at the moment as a result.
Over time the paper says Auckland should move to a 52% FAR however that is likely to take a few years and potentially result in a funding shortfall.
- It is probable that the FAR for Auckland Transport would transition from 50% to 52% over the 2015-2018 period. The effects of these changes need to be calculated in relation to the transport programme being developed for 2015-2018 and discussed with the NZTA. Auckland Transport calculated that a FAR of 52% would be at a similar overall level to the FARs that applied to the 2012/2013 transport programme. It is possible that Auckland Council could suffer a funding shortfall in the years transitioning to a 52% FAR.
- The NZTA Board indicated that FARs should be set at a FAR in the transition which avoids a substantial drop. It is important that the transitional FAR for Auckland Transport is as close to 52% as possible in order to achieve this. The NZTA may need to adjust the starting point FAR for Auckland Transport.
- In the longer term, a single FAR would bring neutrality to investment decisions in relation to the percentage funding contribution from the NZTA. The increase in FAR in relation to maintenance and renewals provides a greater level of certainty regarding the ongoing ability to maintain the condition of transport assets. The proposed reduction in the FAR in relation to public transport activities would place a greater strain on rates funding in order to achieve the transformational shift to outstanding public transport sought in the Auckland Plan.
Any form of funding shortfall is going to mean that Auckland Transport and the council will likely need to make some tougher decisions about which projects they are able to deliver. That means better prioritisation, in some cases getting creative with projects to find cheaper ways to get the majority of the benefits and particularly in the case of streetscape improvements perhaps some JSK style temporary improvements will be what is needed.
It’s also worth noting that Auckland Transport is getting funding pressure from the council too. AT the council’s annual plan debate a month ago the decision was made to reduce capital spending by$50 million however Chris Darby managed to get this very useful amendment in.
That the Budget Committee:
agree that the $5.1 million transport opex increase is dedicated to public transport and the $50 million reduction in transport capex will not be applied to public transport.
That might have been the first time in many decades where PT ended up with a better result than roads.