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MoT’s review of capital spending on roads, part 4

This is the fourth post in a series on the Ministry of Transport’s working paper on New Zealand’s capital spending on roads, which was prepared as an input to the 2015/16 Government Policy Statement (GPS) on Land Transport Funding. It was released to Matt under the Official Information Act just before Christmas. Previous posts:

In the last two posts, I took a look at MoT’s analysis of benefit-cost ratios (BCRs) for new state highway and local road projects. They’ve found that BCRs for state highway projects have fallen significantly since 2008, meaning that we’re spending more money for road with fewer benefits. Consequently, if the Government were focused on getting the highest benefits out of its transport budget, it would have to de-fund most large state highway projects that are currently underway.

This week, I want to take a look at a slightly different issue: Which regions are doing well (or badly) out of road spending? The MoT report includes some in-depth analysis of “regional equity” in NZTA’s expenditures on road maintenance, construction, and public transport over the period from 2002/03 to 2011/12.

Here’s the key chart. It compares the total revenue that NZTA has raised from each region against the amount of money that NZTA has spent in those regions.

A few things jump out from the chart. The first is that NZTA’s spent slightly more than it raised from fuel taxes, road user charges, and other sources. The second is that there are some big disparities between revenue and expenditure in some regions. In particular: Auckland and Wellington are getting about 20-25% more in NZTA expenditure than they pay in revenue, while Canterbury is getting only slightly more than half as much expenditure as it pays in revenue.

MoT regional revenue vs expenditure chart

Here’s a summary table of which regions are doing well and badly out of NZTA’s funding criteria:

MoT regional revenue vs expenditure table

This can’t be explained by a few major projects or funding calls in one or two years. MoT’s analysis of spending over time shows that “where regions either received significantly more in expenditure or significantly less in expenditure, that accumulation was fairly constant over time. Differences are not due to changes in single years.” In other words, the regions that got less spending in 2002 were also likely to get less expenditure in 2012.

The MoT report goes on to take a look at some potential explanations for disparity in spending, such as differences in population, GDP, vehicle kilometres travelled (VKT), etc. Unfortunately, it’s difficult to draw robust conclusions from their analysis as there is likely to be endogeneity, or simultaneous causation, between these variables. (Perhaps MoT should consider using an instrumental variable approach to control for this?)

Here’s one view of the issue, which compares NZTA expenditure with regional population. It tells a similar story – Auckland, the Waikato, and Northland attract more funding than their share of the population would imply, while Canterbury gets less.

MoT regional expenditure vs population chart

One thing that MoT didn’t cover, unfortunately, is the relationship between projected future population growth and spending. It’s reasonable to spend more to enable future growth rather than pouring money into declining regions. This could help to explain the high level of spending in Auckland and the Waikato, which are picked to grow faster than NZ as a whole. However, it doesn’t explain the low level of spending in Canterbury, which is expected to be the second-fastest growing region in the country over the next three decades, or the high level of spending in Wellington, which is not expected to grow rapidly.

Statistics NZ's 2013-2043 population growth projections

Statistics NZ’s 2013-2043 population growth projections

Lastly, it’s also instructive to look at the relationship between NZTA’s regional expenditure and the share of national VKT travelled in those regions. This is a useful measure because VKT per capita varies considerably between regions. According to MoT’s data, people drive less in Auckland (10% less than the national average) and Wellington (almost 25% less than the national average). While major urban areas require fewer roads per capita, they may need more spending on public transport infrastructure and services. Canterbury, by contrast, is pretty close to the national average in terms of VKT per capita.

As you can see, this comparison continues to show that Auckland and Wellington are over-funded relative to their driving behaviour, while Canterbury is under-funded.

MoT regional expenditure vs VKT chart

Because so much of NZTA’s expenditure consists of road spending, this suggests that recent Governments may have misunderstood the needs of New Zealand’s major urban areas. In effect, they have spent a lot of money on roads in cities where public transport, walking and cycling are growing rapidly. Motorway extensions at the edge of town – e.g. Puhoi to Warkworth and Transmission Gully – are not especially useful for meeting transport needs in urban areas. They may be useful in regions like the Waikato where people and freight travel longer distances, but cities are different.

The data also suggests that Christchurch is getting under-funded. As the data series stops in 2012, it’s difficult to tell whether this trend has reversed since the 2011 Canterbury Earthquake, which damaged a fair chunk of the city’s infrastructure. The earthquakes also created space for residents and the city council to push for innovative ideas like a frequent bus network and a network of major cycleways. It would be great to see the region pushing on ahead with these ideas, but past under-funding makes me wonder whether there are institutional barriers to funding projects in Christchurch.

What do you make of MoT’s data on regional transport spending?

14 comments to MoT’s review of capital spending on roads, part 4

  • Stephen F

    Christchurch especially you have a great opportunity to make your urban Centre liveable. Rapid Transit skeleton as green as possible , frequent bus network, seperated cycling and fantastic amenities for all pedestrians. If your focus is people where needs of many outweigh the few then all good. If you go car centric with anything ie parking minimums, carparks in town or motorways etc then you are doomed.

  • My understanding if Christchurch has consistently been underfunded. By comparison Auckland’s extra finding follows decades of under spending

    Also 2012/13 and 13/14 data is available but don’t think it shows any change in trends

    • Peter Nunns

      Unfortunately, MoT’s analysis doesn’t go back far enough to establish what was happening to Auckland’s transport funding in the 80s and 90s.

      I suspect that there was probably a rural bias in transport investments prior to the late 80s – just as there was a rural bias in many other public investments, such as farm subsidies. But what happened in the 90s might have been more a function of a low overall level of investment, rather than a bias against Auckland in particular. Low overall investment would have definitely seemed most constraining in Auckland, due to the city’s high growth.

  • ‘Because so much of NZTA’s expenditure consists of road spending, this suggests that recent Governments may have misunderstood the needs of New Zealand’s major urban areas. In effect, they have spent a lot of money on roads in cities where public transport, walking and cycling are growing rapidly. Motorway extensions at the edge of town – e.g. Puhoi to Warkworth and Transmission Gully – are not especially useful for meeting transport needs in urban areas. They may be useful in regions like the Waikato where people and freight travel longer distances, but cities are different’

    The difficulty is that the policy is product-led, not solutions-led. Urban areas are forced to host exactly the same technology as open countryside through government policy; regardless of need, demand, or local preference. This serves our bigger cities poorly. In Auckland and Wellington’s case poorly and wastefully, in Christchurch, poorly and meanly.

    Both Auckland and Wellington are getting low value high cost ex-urban duplicate highways that rely on all sorts of elaborate justifications. In Wellington’s case, it’s ‘because it’s been proposed for so long’ and ‘quakes’, in Auckland the justification is all about elsewhere; Northland, despite the vast majority of the travel only making it to AKL holiday destinations.

    Chch is clearly missing out on the opportunity the rebuild offers to add a high quality Rapid Transit Network [separate Right of Way], or at the very least a routes protected and served immediately with buses, and a quick service on the rail spine with ex-Auckland rolling stock. The people there have every right to be aggrieved at how their clearly expressed preferences have been ignored, while their taxes head north!

    • Stuart Donovan

      I’d argue this suggests transport funding should be fully hypothecated to a regional level with the NZTA relegated to a role not too dissimilar to that played by NZQA, i.e. quality assurance. Maybe maintenance of SH’s and railways if they’re lucky.

  • stevenz

    It stands to reason that the benefits of new highways has declined. Auckland, for example, has grown considerably in response to infrastructure in place, and that growth has been dense for a variety of reasons, showing a very positive C/B. As low density sprawl continues outward (I guess sprawl only goes outward) less population and economic activity are being served by highways than previously. That’s part of the reason that sprawl is so expensive to service in general.

    With regard to future growth, if a large measure of that is intensifying, then it gets very hard or very expensive to serve additional demand with roads because of the cost of pushing a highway through high density urban development, which also would drive the C/B way down.

    The moral of this story is, road building has reached its practical limit – it’s essentially 50s urban architecture – and it’s time for a shift in thinking to other modes, something (nearly) everyone on this blog understands (to the degree that it’s hardly worth saying, but I thought I would anyway.)

  • JimboJones

    Never understood why we have this obsession with the roading spend being ‘equal’ around the country. The money should be spent where it is needed most. We don’t do this with any other government spending (e.g. sorry you can’t have the unemployment benefit because your city has already had its fair share).

    • Peter Nunns

      Agreed. The question I’d ask, and which MoT seems to be asking, is: “Are we spending money in the places (and on the projects) where it will make us best off?” Ensuring that there is some equity in access to infrastructure is a part of that, as we think it’s important to be fair to all our citizens, but it’s not the only consideration.

      For example, in the long run our wellbeing depends upon our ability to efficiently invest to serve the “marginal user” – i.e. the next person or business who might choose to locate in NZ if the conditions were right. That can lead to some inequities in provision, as not all regions have equal growth prospects.

      • Brendon Harre

        If transport funding is regionally based then a growing region can borrow against that growth to invest in new infrastructure if they know for certain they will get the increased transport funding that follows the growth. So for the regional hypothecated system the marginal user is catered for.

        • Keir Leslie

          Equity issues are probably more important to the NZ taxpayer than they are to transport economists! More seriously, yes, there’s no reason transport spending should be per capita equal across regions, but there’s no obvious reason that Canterbury should receive a much lower spend than Auckland and Wellington considered together. It’s particularly noteworthy considering the financial strains on Christchurch area local government.

  • stevenz

    For lack of any other logical place to put it, an interesting way to make PT more affordable, from the NY Times.

    http://www.nytimes.com/2015/03/01/us/targeting-inequality-this-time-on-public-transit.html?_r=1

  • Better tell Winston not to bang on too much about poor roads in Northland; might come back to bite him 🙂

  • Brendon Harre

    This raises issues of regional and national importance that as per usual, our current government has kicked to touch and ignored.

    •Issues like regional democracy that reflect regional choices about the regional urban framework..

    •Integrating transport funding/planning with affordable housing objectives a la Bertaud

    •Regional hypothecated funding.

    •Whether NZ wants one or two cities of international size.

    This is discussed further here http://transportblog.co.nz/2015/02/27/aucklands-population-to-continue-to-grow-strong/#comment-158038 on Matt L’s article about population growth.

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