A few weeks ago I wrote a post about how the NZTA had shortlisted three groups of companies to build the Puhoi to Warkworth motorway.
One of our biggest complaints about the project is that despite repeated attempts over many years – including Official Information Act requests and via the CBT in the board of inquiry process – we’d never seen the business case for the project. Well the afternoon of that post the agency finally published it (4.6 MB) – although a heavily redacted version of it. As you can see by the revision history below this document has been around for a long time and has been frequently updated. The total document is over 160 pages in length.
At a high level the business case confirms that the primary driver for this project is the simple fact that the government designated it a Road of National Significance (RoNS). The distinct impression I’m left with is that it’s a project about a decade too early and as such one that has massive consequences for a lot of other more beneficial projects. This is also backed up by the timeline of events showing that prior to being named a RoNS there was very little work – only a high level strategic study – that had been done on the project. One comment I think is particularly pertinent is below. Compare and contrast that statement with how the government have
The RoNS projects represent a ‘lead infrastructure’ approach. This means the Government is investing in infrastructure now to encourage future economic growth rather than wait until the strain on the network becomes a handbrake on progress.
Compare and contrast that statement with how the government have treated the City Rail Link for which they are requiring the rail network to be bursting at the seams before they’ll even consider funding.
From there it almost seems like the authors are trying to find reasons to justify the project – something that becomes clear when looking at the economic analysis. One of the big reasons for needing the motorway is the fact that in the Auckland Plan the council identified a lot of potential for greenfield growth. What’s not mentioned is one of the reasons the council put growth in Warkworth was because the NZTA/Government said they were going to build the motorway. A classic example of the motorway industrial complex at work
Another key reason is the often cited need to improve the Northland economy – even though the road stops well short of Northland. The improvement in the economy is supposedly about the fact that a motorway would allow a lot more freight to move in and out of the region. Yet the business case seems to give conflicting information about just how much more freight will be moved. In the executive summary it says:
Freight volumes between the regions are forecast to increase by 70% by 2042 – referencing the Ministry of Transport’s 2014 National Freight Demand Study which I talked about here.
Yet in the body of the report it says
Freight volumes are forecast to double by 2031, with the vast majority of this increase being carried by road vehicles – referencing the 2008 version of the National Freight Demand Study
The problem with both of these figures is from what I can see the 2014 freight study doesn’t support either of these claims. The tables below show the 2012 volumes vs what is forecast for 2042. Also of note is that of volumes leaving Northland, 7% go by rail and 60% by coastal shipping. Excluding the freight that stays within Northland, I’ve calculated the change in volumes at just 43% out to 2042, well short of the claims in the business case. There are also high and low forecasts with the increase range being from 38% to 48%.
As for why some of the potential increase in freight couldn’t go on rail, the main reason they give is that the rail network doesn’t have much available capacity. It seems to be the NZ way that a road with ‘capacity constraints’ get huge sums of money thrown at it while a parallel rail route with capacity constraints is left to rot and threatened with closure. The NZTA justify this position by effectively saying that even if the rail route was upgraded that it is unlikely to have much impact on road demand.
It seems the most valid of the justifications is that the road has a poor safety record and it suggests the road is the 16th worst in NZ. My issue with this is that by waiting for a full motorway solution to be built we will continue to have crashes in the future. Had the NZTA not been under a political directive that the road must be a motorway then it’s possible safety improvements like we’ve suggested in the past could have already happened by now.
One of the most interesting sections is how they say the preferred route performs against the project objectives. This is on page 43 (actually page 51) of the report. Some of the impacts are
- Compared to not building it, traffic volumes increase from 25,000 to 29,000 vehicles per day in 2026 and from 30,000 to 42,000 vehicles per day in 2051.
- Even in 2051 the road will achieve Level of Service A meaning the road will basically feel pretty empty almost all of the time.
- They claim it will produce $9.1 million in crash reduction benefits in its opening year. Unfortunately no mention is made of what happens to the existing road which will still have all its existing safety issues.
- In 2026 travel time will improve by 17 minutes in the PM peak. This is shown below and amazingly they say that with the new motorway it will take just 10 minutes to get from Grand Drive in Orewa to north of Warkworth. That’s a distance of about 24km so suggests vehicles travelling on average in excess of 140km/h.
Also in the wider section they’ve included the following table on the risks to the project from a 2010 study. They noted that it’s highly likely that the project’s costs would outweigh its benefits and that traffic volumes would be lower than needed to justify a motorway.
So what about the economic assessment, they were right that the costs would outweigh the benefits. Assessed over a 40 year period and a 6% discount rate it achieves a BCR of just 0.92 or just scraping over 1 if wider economic benefits were included. Hardly a massive economic saviour. Unfortunately almost all details about the assessment have been blacked out.
There’s no mention of what impact tolling would have on the BCR however they do say this.
An initial toll revenue forecasting exercise has been carried out based on the forecast traffic volumes and light and heavy vehicle mix, and using the conservative price assumption that the same pricing is applied from NGTR. [Blacked out section]. The conservative price assumption was used to produce a lower-end forecast.
This analysis suggested a conservative tolling revenue forecast in the first year of operations (2022), net of collection costs and diversion (but excluding the costs of the tolling gantry equipment), of around $10M, growing to $17M in 2030 and $28M in the last year of the P-Wk PPP concession. The total nominal tolling revenue over the PPP period was forecast at $440m. The potential tolling revenue profile based on this analysis is presented in the figure below:
They suggest this may just cover the operation and maintenance costs of the road.
Lastly the project is going to be built as a PPP. There’s quite a bit of information as to why they think it should be a PPP which you can read though if you’re interested. What caught my eye was Appendix G which covers off where risk sits between the NZTA and the contractor. Below is just the first part of the table.