The Auckland Transport Alignment Project agreed

The Government and the Auckland Council have signed a Terms of Reference on a project to come up with an agreed long term transport plan for the region. It’s been given the imaginative name of the Auckland Transport Alignment Project and will be worked on by officials from the Council, Auckland Transport, the NZTA, Treasury and the State Services Commission. There’s no firm time-frame for this to be completed with the Minister and Mayor just saying the work is expected to take about a year.

Here are the press releases from both Simon Bridges and Len Brown below with perhaps the most interesting quote being from Len calling out the time wasting that has gone on for so long with Auckland

“The signing marks a new dawn in our relationship with the government ending decades of disagreement and time wasting,”

The council and the government have been talking about getting alignment for some time and the cynical side of me suspects there’s some quite different motivations at play. Len wants an agreement however the government will be acutely aware that a year from now we’ll be right in the middle of a council election cycle. Transport is always much more of a local government issue and as such has played a massive part in Auckland since amalgamation in 2010 with it being recognised as one of the key reasons Len became Mayor. The threat of an imminent agreed strategy will probably be enough to take transport off the agenda – or at least reduce it significantly and allow the focus to go on issues such as rates. Any agreement itself would also likely hamstring any future council who may want to advocate for more visionary outcomes.

As with anything, when it comes to this alignment project the devil will be in the details. Helpfully the Terms of Reference have been published so we can at least see what has been agreed so far. There are some good things in the ToR but also a few things that concern me.

On the good side the project isn’t just about confirming either the government or council’s objectives – both of which we’ve criticised in the past. The ToR states project needs to assess alternative packages of transport interventions and recommend the preferred indicative package(s). The scope goes further saying that consideration needs to include issues such as changing travel demand. Hopefully that means those working on the project will not just look at growth but also changes in behaviour – like we’re seeing with many younger people deciding not to even get their drivers licences. One aspect that I think is missing is the

7 Project scope

7.1 The project will test options, seek alignment on, and make recommendations in relation to a strategic approach to the development of Auckland’s transport system over three ten-year bands from 2018.

7.2 The project will include consideration of:

i. likely long term changes in demand for travel

ii. all land transport interventions, including roads, rail, public transport, personal mobility services, walking, cycling, technology, network optimisation and demand management (including pricing for demand management purposes)

iii. alternative combinations of these interventions and their broad timing and scale

iv. costs and benefits

v. the nature, scale and timing of any funding gap for the recommended strategic approach and its alternatives.

I think that one possible package that they should test is this

CFN 2030 + Light Metro

One aspect that I think is missing is the scope is the consideration of the potential to shape demand. Travel demand is often seen as a fixed outcome i.e. we’ve got XX widgets to move and how can we do that. Shaping demand is effectively coming at the problem from the opposite angle, for example perhaps the best long term outcome from an operational perspective is to have a public transport and/or cycle mode-share to 15, 20%, 25%. 30% or even higher across the region. What projects would be needed to achieve that outcome – I gather it would be quite a different list to one that just responded to predicted demand.

The part of the ToR that concerns me the most are the objectives that have been listed. While access is mentioned in point 1, a lot of emphasis seems to be put on reducing traffic congestion rather than focusing on improving accessibility and efficiency of the transport system. For example it seems to suggest that public transport investment is only useful if it addresses congestion.

5 Objectives for the Auckland Transport Alignment Project

5.1 The Parties broadly agree that the focus of the project is to test whether better returns from transport investment can be achieved in the medium and long-term, particularly in relation to the following objectives:

i. to support economic growth and increased productivity by ensuring access to employment/labour improves [relative to current levels] as Auckland’s population grows

ii. to improve congestion results [relative to predicted results], in particular travel time and reliability, in the peak period and to ensure congestion does not become widespread during working hours

iii. to improve public transport’s mode share [relative to predicted results], where it will address congestion

iv. to ensure any increases in the financial costs of using the transport system deliver net benefits to users of the system.

Those issues aside, overall it seems that the agreement at least is pretty good and should hopefully enable both parties to finally agree on something to do with transport in Auckland.

One positive outcome not listed above that I’m hoping for is that it might finally get the government and some of the Wellington based bureaucrats to understand that perhaps they don’t know everything. For a long time Auckland has suffered from being treated like some small rural council that doesn’t know what it’s talking about compared to the government’s “experts”. There are a lot of people within those AC/AT who know what they’re doing – not just on issues of transport – and hopefully this alignment project will show them that.

Lastly the Ministry of Transport are hiring for a Project Director and Project Coordinator for the alignment project.

Photo of the Day: Urban Surgery 1970s Style.

Auckland Star April 1973. Back in the Dark Ages it was considered appropriate to near kill the patient in order to help them. In the 1970s Central government transport planners nearly succeeded in killing the Auckland City Centre through the subtle act of flattening its densest and most proximate dormitory suburbs, then cutting it off any still standing from the city, and turning city streets into motorway off ramps. The charm and glory of these multi-year campaigns are still with us today on the beautiful avenues of Hobson and Nelson Sts, the terrible road pattern and wasted landuse of Union and Cook St, and the blighted devalued areas of K Rd and Newton. And of course the violated and severing gullies themselves. The scale of this ‘surgery’ can be seen in this spread.

CMJ AK STAR APRIL 1973_01_800px

The accompanying text is fairly flat and informational.

CMJ AK STAR APRIL 1973_02_800px

It seems the desire for a Tabula Rasa, a blank slate, like those postwar planners had in Europe, was so great that we made our own ‘bombsite’.

Happily now we live in more enlightened times and the next city surgery of scale will be much more sophisticated, the City Rail link which as an incision compared to this earlier work is laparoscopic; minimal invasive surgery. No need to maim the patient. Once done no one will even see it, except for that high value resource of people flooding on to city streets not in a car looking for a parking space. And will supply at least as much capacity as the three motorways that meet at this point do today*.  So the CRL will double the accessibility to the nation’s most concentrated, biggest, and highest value employment centre, and fastest growing residential area, seamlessly. After the recovery from a few precise cuts, that is.

CMJ AK STAR APRIL 1973_03_800

*Show your work, as Peter always says:

CRL 24 trains per hour each way 750 per train [not crush load; that’s 1000] ~ 36k [crush 48k]

M’ways 12 lanes @2160 [1800 vehicles @1.2 occupants] per lane hour ~ 26k

Of course the buses on the Bridge land some 9000 souls currently too.

Chart of the day: Government bond yields

I’m not a financial economist, but I occasionally take a look at the Reserve Bank’s fantastic collection of credit statistics. Their short-term and long-term data series often say a lot about where the New Zealand economy’s currently going and where it’s been.

One interesting indicator is the 10-year New Zealand government bond yield, which measures the interest rate that the government must pay on its debt. Here’s a chart of the last 20 years of government bond yields (unadjusted for inflation):

NZ government bond yields 1995-2015

As you can see, bond yields were pretty consistent throughout the mid-2000s – sitting at around 6%. However, they started a major downward slide in 2011, rose in 2013, and then fell back again in 2014. At the time of writing (12 August 2015; these posts are written and scheduled in advance), bond yields were sitting at 3.29%.

Essentially, the government’s borrowing costs are sitting at historic lows. This is important for two reasons.

First, it is a symptom of persistent economic weakness in New Zealand and the rest of the world. Pessimism about growth prospects has led people to prefer to lend money to governments, where they can get a lower but more certain return, rather than invest in businesses. The more people try to lend to governments, the more bond rates are driven down.

Second, low government bond yields enable governments to borrow more to make long-term investments in infrastructure and state housing. This doesn’t mean that we should simply borrow money and spend it at random. We still need to exercise some rigour in project selection and economic evaluation, and ensure that we’re not overheating the construction industry by trying to do too much at once.

However, it does mean that we can afford to go a bit further down the list of worthy projects. Many of the issues currently bedevilling New Zealand – Auckland’s growth pressures and Christchurch’s halting rebuild – could be addressed if central government simply borrowed a bit more money to build new streets, public transport facilities, cycleways, and housing developments. It’s literally never been cheaper.

Northern Busway Extension is back

We were rightly dismayed when the previous Transport Minister vetoed the desperately needed extension of the famously successful Northern Busway as part of the big spend up on SH1 on the North Shore. We suspect NZTA were too, as they know that the Busway the single most effective tool for reducing congestion and increasing access and human happiness for the travelling public on this route. And is a vital part of the booming Rapid Transit Network. Additionally this extension surely also helps streamline the general traffic lane design through the SH1/SH18 intersection and beyond. NZTA must be keen to not have to factor in growing numbers of merging buses from shoulder lanes etc.

So we are very pleased to find that the agency has found a way to return this logical part of the project to the programme and out of the shadow of ministerial whim [presumably the change of Minister helped?]:

Northern Corridor

Here is the full document.

Bus users report that their journeys between Constellation and Albany Stations can currently take up a disproportionately large amount of the total trip because of the absence of any Transit right of way; the buses of course are not only themselves delayed but are also delaying other road users here.

The extension will not be a minor structure but as it adjacent to commercial properties it is hard to see how the usual forces of compliant will be able get much traction against it, but it will still need public support at the consultation phase, so Busway users, let yourselves be heard.

We understand the current Busway is built to a standard to enable upgrading to rail systems, we would expect this standard to be continued on this extension, as this does look like the most logical way to next cross the Waitemata Harbour.

Finally, because this is a) spending on the Shore b) not ratepayers funds, and c) not spending on a train or a bike, even the venerable George Wood will be in favour of the proposed extension.

Timeframe for Additional Waitemata Harbour Crossing Announced

The NZTA have recently published information on the Additional Waitemata Harbour Crossing on their website, including all of their technical reports, which are mostly from around 2010. These reports have been available elsewhere, however most people wouldn’t know they existed so it is good that NZTA have pulled them all together on the main NZTA site.

New to me are the timeframes for the project, which the NZTA have indicated are:

YearActivity
2015The Transport Minister asked the Transport Agency to take immediate steps to further develop the project. The Transport Agency will engage professional advisers to help prepare to help future proof the route.
Mid 2016NZ Transport Agency to serve Notices of Requirement for land required.
2017 to 2018Detailed business case investigations including funding options and design. Application and hearings for resource consents.
2019 to 2022Procurement stage including contract award, detailed design, land acquisition and preparation for works.
2022Estimated start of construction.
2027 to 2030Additional Waitematā Harbour Crossing opens.

This is a much more aggressive timeline than the NZTA indicated at their recent briefing on the National Land Transport Programme, where it was suggested that the tunnel was unlikely to progress beyond the designation point for at least a decade.

The project website claims that the Auckland Plan identifies the AWHC will be required between 2025 and 2030 however, as we covered in this post, there isn’t any rational justification for this based on the Preliminary Business Case, which calculated a BCR of just 0.4.

NZTA route map

The project website mentions the “bigger picture”, emphasising that more than “55% of NZ’s freight travels through the Northland, Auckland, Waikato and Bay of Plenty regions”. As Matt covered in this post though, there really is only a tiny proportion of freight originating from Northland that is destined for points south, and vice-versa. It is quite misleading to include Northland in this statistic and it is certainly no justification for the AWHC . In any case, the website doesn’t mention the Western Ring Route, which is a continuous motorway linking Manukau and Albany and is due to be completed in phases in the next few years.

I haven’t reviewed all of the technical documents, but there are a couple of things about the transport modelling report that stand out. The emphasis in the snippet below is contained in the report – it isn’t mine:

Traffic Model Report 8.4

The transport model also has this table of car parking costs as an input assumption for the BCR, on p.42 of the report:

AWHC Carparking Cost Assumptions

I asked the NZTA what the highlighted text meant, and if the parking costs were daily or hourly rates, and they had this to say:

  • The Transport and Traffic Model Report (2010) analysis used costs that are 50th percentile costs which was appropriate for that stage of the investigation.
  • This report was one of the outputs of the Preliminary Business Case which was developed to assess the bridge and tunnel options. The focus was a fair “like for like comparison” between these two options, and as such the BCRs were tailored to the level of assessment appropriate to the decisions that were required to be made at that stage.
  • Currently, no further benefit cost analysis has been completed since 2010. Several years have passed since the benefit cost analysis was completed and we anticipate the BCR will be higher now.
  • Should a designation be secured for the Additional Waitematā Harbour Crossing, the Transport Agency will move forward with a Detailed Business Case in approximately 2017-2018. This will include further investigation to evaluate the preferred option and a detailed analysis of current costs and benefits.
  • The parking costs referred to in the report reflect average daily costs and were accurate at the time the modelling was undertaken.

So it looks like the mysterious Appendix M doesn’t actually exist, and any further analysis of costs and benefits won’t take place until the six lane tunnel for general traffic has been designated. The BCR of a rail only crossing to the North Shore, which will be billions of dollars cheaper than a road crossing primarily for single occupant cars, has not been calculated. The modelled costs of parking for the CBD seem woefully underestimated, compared to current earlybird rates of $24 a day.

This is completely the wrong way to go about a project which the Minister of Transport estimates will cost between $4 billion and $6 billion. Public consultation has been pretty much non-existent. I doubt many North Shore residents realise that if the new crossing is tolled, it is likely to be a toll on both the existing bridge and the new crossing.

There has been a complete lack of analysis of the impact of the fire-hose of single occupant cars which will flood the CBD as a result of the project, and neither has the full cost of increasing the capacity of the CMJ and approaches been considered. The NZTA already have in the scope of the designation work widening the motorway from Esmonde to Northcote, but it is likely that the motorway will have to be widened further north as well. The space required for this motorway widening work will undoubtedly take precedence over any future design for mass rapid transit.

Luke did a post last year on the environmental impacts of the toll road tunnel, including ventilation stacks for exhaust fumes that will be up to 35m (10 storeys) high on both sides of the crossing and the massive amounts of reclamation required. I’m not sure why the residents of Northcote Point haven’t formed an action group yet over the impending loss of Sulphur Beach and the marina. They seem oblivious to their neighbourhood becoming a construction site for at least five years too.

And of course the fact that the tunnels might be “future-proofed” for rail means nothing in practice. The designation process should not be going ahead without a clear understanding of what the mass transit network will look like on the North Shore.

There is no urgency for the crossing either – actual traffic volumes are well below the trend envisaged in the 2010 reports:

AHB Annual Volumes to 2014 - 2

I wrote to Auckland City Councillors and asked them to stand up for what Aucklanders actually want, rather than simply acquiesce to this ill thought-out plan. The only response I got was from Cllr George Wood, who said that “I must say that Simon Bridges is committed to the AWHC” and “people north of the Waitemata want the additional crossing. We certainly don’t want wish it to be stalled.”

Does George speak for everyone on the North Shore? Does Simon Bridges? What do you think?

Updated RPTP consultation outcome

Back in May Auckland Transport launched a short consultation to update their Regional Public Transport Plan (RPTP) on four specific areas to reflect the work and thinking they’ve undertaken since the RPTP was released in 2013. The consultation was limited to four areas:

  • The proposed introduction of simplified zone fares
  • Proposals for a new light rail transit (LRT) network on some major arterial routes
  • Service and infrastructure changes arising from the Ferry Development Plan which was approved by the AT Board in December 2014
  • Revised service descriptions arising from community consultation on the new bus network

AT haven’t formally announced the outcomes of that consultation however a paper on them went to the confidential session of the AT board and that has quietly been released publicly. In total they say 1,251 submissions were received however over 1,000 of those were about SuperGold concessions. Below are the main issues and some of the key recommendations staff have made.

Simplified zone fares

AT say there were 107 submissions referring to the simplified zone fares and that people were mostly supportive of the proposal. There was some concern about specific aspects though such the exact boundaries and what happens for short trips that cross them. One example they give is Orakei where some people want it in the city zone. In addition people wanted a number of other areas considered including

  • integrating ferries into the zone system
  • the time available for transfers along with the number of transfers allowed.
  • improved education and work to get HOP n the hands of more people,
  • fare caps

In response AT have made minor changes to the document or are undertaking more research. They note that it is desirable to have ferries also integrated but that they are limited in their ability to do so due to the current exempt services that are enshrined in legislation. In the case of fare caps AT say they will look at them once the new zonal system has settled in.

Light Rail

RPTP potential LRT + RTN Map

There were 97 submissions about light rail and AT say the majority were positive however five key groups have said there isn’t enough information yet for AT to be including it now. Of these the big and most interesting one is the NZTA who I would have thought AT would have been talking to about it much more. Others with a similar view were AA, NZCID, Bus & Coach Association and the Mangere-Otahuhu local board.

One aspect I predicted would happen with Light Rail has come through with a number of submitters and local boards now also wanting Light Rail in their areas. This includes

  • replacement for the Inner Link bus route
  • connections to the North Shore
  • along the North-western Motorway
  • Panmure-Botany
  • Tamaki Drive
  • Pakuranga Highway to Howick

The main recommendation is to start releasing more intimation about the project.

Ferry development plan

AT say that overall the majority of people supported their ferry development plan although some people were also calling for new services. Other than a few wording changes, it doesn’t appear this will change much which seems reasonable.

New Network service descriptions

Most of the feedback related to the new network was actually about issues such as the SuperGold card concessions for which AT say they will improve the wording to make it clearer nothing is changing.

For the actual topic of the new network service descriptions it was raised that there is no set span of times services will run from/to. In response AT say they will add a policy looking at the issue of span of services and in the next version of the RPTP look at developing that in more detail. The policy the hearings panel recommended be included now is below.

New Network Service Span

Rates for Crown-owned land?

Last month, Local Government New Zealand called for charging rates (i.e. local government property taxes) on Crown-owned land. The idea’s also been supported by the Productivity Commission and ACT’s sole MP, David Seymour:

Local Government NZ, which represents the country’s 78 local and regional authorities, is holding its annual conference in Rotorua.

Its members – including Auckland Council – have voted to investigate the possibility, practicality and principle of local authorities extending rates charges to land owned by the Crown.

The same topic has also been covered by a review by Local Government NZ (LGNZ) of local government funding. A manifesto on this will be presented today.

[…]

Act Party leader David Seymour is a strong supporter of charging rates on Crown land. He said that although conservation and recreational land could be excluded, as a matter of fairness schools and hospitals should pay rates because they compete with private organisations.

Mr Seymour said that although there would likely be a slightly lower rates burden on households, better and more efficient use of Crown land would be a bigger benefit.

“We have got this 430ha of Crown land [in Auckland] that allegedly could be turned into houses. Well, why have they waited so long? I suspect one of the reasons is that the Crown can keep land rates-free.”

In June, a draft report by the Productivity Commission, titled Using Land for Housing, recommended the Government start paying rates on Crown land.

It is definitely worth investigating applying rates to Crown-owned properties – and potentially also to Council-owned properties. As Transportblog has highlighted in the past, a surprisingly large amount of land in our cities is owned by governments – for transport reserves, social facilities, golf courses, etc. It’s important to use that land efficiently, and applying property taxes can help encourage that.

By way of illustration, Kent Lundberg recently took a look at a few parcels of publicly-owned land in Auckland, and alternative ways that they could be used. The short story is that there are opportunities that could be grasped if the incentives were right:

From an economic perspective, not charging rates for publicly-owned land will distort public and private investment decisions. That is, it can encourage government departments to use too much land, relative to other inputs. All else being equal, this will in turn reduce the amount of land available for businesses and households.

Let’s consider a few examples. First: schools, which are funded by central government. Schools have a fixed budget based (roughly) on enrollment and the decile rating of the community they serve. In order to educate students, they buy land, construct school buildings, and hire staff.

However, the various inputs to education are not taxed in a consistent fashion. Teachers are taxed – they must pay income taxes regardless of the fact that they work for the government – but land and properties are not taxed. As a result, there is an incentive for schools to use more land, and fewer teachers, as land is untaxed and thus relatively cheaper. This seems troubling in light of evidence that investing in better teaching pays higher dividends than larger sports fields.

A second example: transport infrastructure. William Vickrey, Nobel laureate and originator of congestion pricing, argued that we should be extremely cautious when allocating land to roads, as land used for roads cannot be used for housing or business:

“a cost benefit analysis can justify devoting land to transportation only when the savings in transportation costs yield a return considerably greater than the gross rentals, including taxes, that private businesses would be willing to pay for the space. This in turn means that an even greater preference should be given to space economizing modes of transport than would be indicated by rent and tax levels. And our rubber-shod sacred cow is a ravenously space-hungry, shall I say, monster?”

At present, local and central government do not pay rates for the land under their roads. While they have to buy land to build roads in the first place, they are under no obligation to account for the ongoing and potentially increasing cost of devoting space to roads rather than alternative uses.

To understand why this might be a problem, consider a case in which NZTA is considering building a road through a growing part of the city. At present, land is cheap, but as the area develops it’s expected to get (relatively) more expensive.

If NZTA had to pay rates on the land it used, it would face different incentives that may lead it to pursue a different road design. It may be more willing to consider putting the road underground or configuring intersections in a more space-efficient way, in the expectation that doing so would allow it to avoid rising rates bills in the future. While this could have a higher up-front cost, in the long run society would benefit as it would leave more land for households and businesses.

Lastly, given local governments’ interest in this topic, I’d encourage them to ensure that they are consistently charging rates on council-owned properties, and valuing council-owned land on an equal basis to nearby land in private ownership. At first glance, this seems a bit pointless – councils would just be paying money to themselves! However, if you take arguments about incentives seriously, it’s important for council-owned properties to start to recognise and account for the cost of the land that they occupy.

What do you think about applying rates to publicly-owned land?

John Key up the transport tax creek without a paddle

A wee while back Auckland Council adopted an interim “transport levy”. The levy amounts to $100 per household has been adopted as an interim measure for three years to accelerate a range of transport improvements that would otherwise be unfunded, e.g. public transport, walking/cycling, road safety, and rural seal extensions.

You can read about the specific types of projects that are funded by the transport levy in this post.

The reception to the levy was interesting. At the positive end of the spectrum was this Herald editorial, which acknowledged 1) Aucklanders wanted better transport; 2) the improvements had to be funded somehow; and 3) the Government wouldn’t allow other revenue raising initiatives.

At the other end of the spectrum were these (rather extraordinary) comments from John Key (source):

“I just think their priorities are wrong,” Prime Minister John Key said on TV3’s Paul Henry programme this morning. “They’ve got to turn around and say, what is the most important issue? The most important issue has to be, in our view, provide roading solutions in the very short-term for where people live. Only 15 percent of people live in the CBD.”

Key goes on to say:

“When the strategy they’ve got is focusing on 15 percent of where people live – not the 85 percent of where they live, or on the fact that we need to build more houses and build those houses we need infrastructure – I think the council does need to sit down with the Government and say okay, because we have a lot of experts. They are going to do that I think, because in the end, if they don’t, then their options will be limited to basically their rates, and there’s only so far rates can go.”

This is an extraordinary statement for several reasons.

First, John Key’s views seem to contradict the choices which Aucklanders are making. Census data shows that from 2006 – 2013 “growth in car use has been pretty anemic – a mere 2.3% increase” while “demand on all other modes is growing like crazy. There have been double-digit increases in bus trips (up 18.8%), train trips (up an astonishing 67.3%), and bike trips (up 26.4%). Ferry and walking trips have also done extremely well.” Absolute growth in non-car transport JTW travel exceeded growth in car JTW travel at the last census. More recent patronage data suggests the growth in demand for non-car modes has, if anything, accelerated since the census. In a nutshell, the absolute demand for non-car transport is growing much faster than the demand for vehicle travel – especially at peak times.

Second, John Key’s views seem to go against what Aucklanders say they want. The results of this 2014 survey show “improved public transport” receives the highest support, whereas this Stuff poll shows Aucklanders want Central Government to focus more on public transport than roads. Then there’s this Herald poll which found over 50% of Aucklanders supported better public transport – which is much higher than the level of support for road improvements (including highways). And an UMR survey which found New Zealanders as a whole supported PT improvements rather than roads. In a nutshell, there’s overwhelming evidence that Aucklanders want greater investment in public transport.

Third, John Key’s seems to be unaware that Auckland Council has been consulting on transport issues for circa 5 years. Key’s comment suggests Council is not prepared to “talk”. This, however, doesn’t acknowledge that in the ~5 years since Auckland Council/Auckland Transport were established, they have been consulting almost constantly on transport issues. We’ve had the Auckland Plan, the Unitary Plan, the Regional Public Transport Plan, the Parking Discussion Document, and the Annual Plan, among other documents. Almost all of these consultation exercises – in which Central Government agencies and MPs have always been welcome to participate – have found strong support for public transport and walking/cycling. In a nutshell, Auckland Council and Auckland Transport have consulted far more extensively on transport issues in Auckland than Central Government.

Fourth, John Key misunderstands what the transport levy will be used for. Let’s note from the outset that John Key gets his figures wrong (or is mis-quoted) when he suggests “only 15% of people live in the CBD”. He must have meant to say only 15% of people work in the CBD. This mistake, however, belies a bigger issue: How is the proportion of Aucklanders working in the city centre even relevant to a levy that funds improvements across the whole region? Such as road safety upgrades and rural seal extensions? Bearing in mind the CRL was included in the base capital programme, and would have been funded regardless of whether the transport levy was ultimately adopted by Council. In a nutshell, John Key seems to misunderstand what the levy is to be used for.

There is another reason why I thought John Key’s statement was quite extraordinary. This is not because of what it says, but instead because of what it fails to mention about the Government’s own transport tax raising efforts. More specifically, the impact of Auckland Council’s $100 transport levy pales in comparison to the extra fuel excise taxes raised by John Key’s Government since it came to power in 2008. The increase in fuel excise taxes which has occurred under John Key’s watch is clearly illustrated in the figure below (source data).

NLTF revenues

 

In 2008/09 there was a big jump in fuel excise revenues, which is subsequently followed by a gradual rise.  My rough calculations suggest NLTF revenues have, under this Government, increased by approximately $450 million p.a.  If we apportion one-third of this additional revenue to Auckland, and divide the result by 1.5 million Aucklanders, then we find that every person in Auckland is paying approximately $100 p.a. more transport tax under this Government than they were under the last. Put another way, John Key’s Government has, for seven straight years, increased the transport tax burden on Auckland’s households by approximately $200 to $300 p.a.

Wow. So let’s get this straight:

  1. After five years of almost constant public consultation on transport priorities and funding, Auckland Council chooses to increase household rates by $100 p.a. for three years to fund a bundle of transport improvements which seem to align fairly well with Aucklanders’ (revealed and stated) preferences; while
  2. Since coming to power, John Key’s Government has – with very little consultation – increased transport taxes by approximately $200 – $300 p.a. to fund a bunch of highways and bridges that National thinks are important, but which really don’t seem to matter that much to most NZers.

And then John Key has the temerity to turn around and criticise the transport priorities of Auckland Council and Auckland Transport?

To this I say “pot, kettle, black”; John Key and his Government are well and truly up the transport tax creek without a paddle on this issue: Transport taxes are approximately half a billion higher each and every year since National came to power, which is a much larger financial impost (and one applied to the whole country) than the transport levy adopted by Auckland Council. Problems with transport “tax and spend” exist much more at the level of Central Government than Local Government, and much more with National than Labour.

Which brings me to one final point: In his statement, John seems to imply the “experts” employed by Central Government agencies (e.g. MoT and NZTA) would agree with his Government’s preferred transport investment strategy. This is an interesting presumption, given that one of the key characteristics of New Zealand’s Westminster system is an “independent, non-partisan civil service“. I personally have not seen any surveys of what the experts at the NZTA and MoT think about this Government’s transport investment priorities.

The MoT’s own analysis suggests Government’s spending, especially the RoNS, has been spectacularly ineffective from an economic perspective – and much less effective than the transport investments made by the last Labour Government. Then there’s a surprising number of business commentators, like Rod OramBernard Hickey, Richard Prebble, and Don Braid who, from my reading, aren’t particularly supportive of the Government’s priorities either. These commentators instead seem to prefer less investment in RoNS and/or greater investment in alternatives, especially rail.

So where does this leave us? Well, based on the evidence I’d wager a bottle of John Key branded wine (2015 vintage) that the transport priorities articulated by Auckland Council and Auckland Transport would receive much more support from the so-called “experts” than the priorities of John Key’s Government.

What do you think?

P.s. This may be my last post from “down under” – as of next week I’ll be moving to Amsterdam to start a PhD in Economics. Catch y’all on the flipside!

Twiddling thumbs on climate change

Under the National government, being the Climate Change Issues Minister must be the easiest job in the world. Sure, Tim Groser does also have the more demanding role of Trade, but if I had to guess the number of hours each week he spends thinking “what can I do to help New Zealand reduce its emissions?” I’d guess the answer is pretty close to zero. And I’d guess much the same for the Associate Minister, Simon Bridges (who is also the Minister of Transport).

This is frustrating, when there are many things that we should be doing to cut our emissions right now – especially in transport. It’s even more frustrating when many other countries are taking climate change seriously, and gearing up to make big pledges at a climate summit at the end of the year, and our own government is so firmly on the wrong side of that line.

Because this summit is coming up, there’s actually been a flurry of articles in the Herald and other media, whereas climate change has struggled to get the attention it deserves in the last few years, in NZ at least. This reflects that our government is heading into the summit with an extremely weak pledge, where we essentially aren’t planning to do anything at all to reduce emissions.

“The Government’s refusal to do much of anything to curb New Zealand’s emissions is as economically myopic as it is morally contemptible”.

Brian Fallow, economics editor for the New Zealand Herald, 2013

Brian Fallow is a man whose pieces tend to be thoughtful and measured in tone, hardly someone who is prone to exaggeration. His recent column on the topic reads:

The legacy of woeful climate policy by the present Government and Labour before it – woeful from the standpoint of actually reducing emissions – is that emissions are running more than 20 per cent above 1990 levels. They shouldn’t be, but they are.

The ETS was enacted in the last few weeks of Labour’s ninth year in power and was promptly emasculated by National. As it stands, it exempts the great majority of New Zealand emissions altogether and has in recent years imposed on the rest a carbon price measured in tens of cents rather than tens of dollars.

Fallow continues, but, essentially National are opting for a “kick the can down the road” policy, without giving NZ businesses and individuals any incentive to actually decrease their emissions. Predictably, some recent modelling work suggests that emissions will actually increase under this scenario. The government will then need to buy credits from overseas countries that are actually doing something, so that we can meet our international obligations.

National’s stance on this has been criticised by a number of scientists and organisations, as in the article above:

Professor James Renwick of Victoria University of Wellington, an actual climate scientist, says the target is as weak as previous ones and does not come close to what is required, if New Zealand is serious about keeping warming to less than 2C, as the Government has said we are.

“The science says, compared to 1990 we need about a 40 per cent reduction by 2030, 90 per cent by 2050, and 100 per cent by 2060 – and then negative emissions (removal of CO2 from the atmosphere) for the rest of the century.”

New Zealand, he notes, is one of the highest emitters in the world on a per-capita basis.

Fallow also wrote another article three days later, which continues on this theme. My emphasis in bold:

The greenhouse gas emissions reduction target for the 2020s the Government intends to pledge has been rated inadequate by Climate Action Tracker, and as falling short of a fair share of the international effort required.

If most other countries were to follow New Zealand’s approach, global warming would exceed 3 or 4°C, a world that would see oceans acidifying, coral reefs dissolving, sea levels rising rapidly, and more than 40 per cent species extinction.

“While most other governments intend cutting emissions, New Zealand appears to be increasing emissions, and hiding this through creative accounting. It may not have to take any action at all to meet either its 2020 or 2030 targets,” Hare said.

There are no policies in place to address the fastest-growing sources of emissions in New Zealand from transport and industrial sources. For the energy system, whilst it is predominantly hydro and renewables, there is potential for further increasing renewable energy, and improving efficiency on the user end.”

It also points out, as domestic critics of the target have and as Climate Change Minister Tim Groser has conceded, that it does not put New Zealand on a direct, straight line path to its longer-term goal of a 50 per cent reduction by 2050, unlike other major economies such as the European Union or the United States.

“New Zealand’s climate policy is projected to head in the opposite direction from the world’s biggest emitters such as China, the United States and the European Union.

It has taken little or no action on climate change since 2008 – except for watering down its ETS – and we can find no evidence of any policies that would change this,” said Professor Kornelis Blok of Ecofys.

As per one of our posts from 2013, New Zealand’s emissions come largely from agriculture – which is a tricky problem to solve – and energy, including transport. Since it’s going to be hard and expensive to cut our agricultural emissions, we’re going to have to put a lot of focus on transport emissions, and reduce them significantly.

John P Emissions

How do we cut our transport emissions? Electric vehicles will help. Indeed, in the decades to come, they could actually make a huge difference, given NZ’s mainly renewable electricity supply. But that’s a long way off. In the meantime, we need to stop building huge new highways and motorways, and start investing in public and active transport instead. These things are not about NZ being a leader in reducing emissions, or even a “fast follower”. We’re slipping further and further behind on that front. It’s simply about taking cost-effective, sensible and actions which will prove themselves much more sensible in the long run.

The government has recently started to boost cycling funding, which is good – and it may well be more effective than public transport spending for our small to medium cities. But for our larger cities, we need both public and active transport. For Auckland especially, we should be investing in public transport infrastructure – the big ticket stuff like the City Rail Link, the quick fixes like bus lanes, and the intermediate things like busways. The council understands this, to a reasonable extent. But the government has stayed right out of it, overriding the priorities set by the council or Auckland Transport and instead pouring billions of dollars into motorways instead. That has to change.

Supply and demand and regional airfares

Back in June, Stuff published a report on regional airfares, focusing on the way that prices are affected by major events such as concerts and sports competitions. Now, I’m no airline economist, but I’ve got a general interest in transport pricing so I figured that it would be worth taking a look at the topic.

The point of the article seems to be that airplane tickets are higher during periods of high demand. That doesn’t seem too weird, but this guy in Nelson is absolutely ropeable at the thought:

Nelson man Steffan Eden is furious about Air NZ’s fares from Nelson to Auckland and return for the weekend of March  5 and 6 when Madonna will give her first New Zealand concert at the Vector Arena.

Fares that the previous weekend cost $79 are twice that at $159 on the weekend of the concert, an $89 fare rises to $169; and a $129 fare becomes $209…

“Look at the fares the weekends before and after the concert, they’re normal fares. Then on the concert weekend they’re virtually double.  It’s quite blatant.”

Eden said the same thing happened when he wanted to go to the Cricket World Cup match between New Zealand and England on February 20.  “I wanted to take my kids but didn’t in the end because of the cost,” he said.

The man quoted in the article seems to argue that these jumps up in fares are due to uncompetitive or discriminatory practices by Air NZ. By contrast, the airline says that the price increases are just due to cheaper tickets selling out faster:

An Air New Zealand statement said it has been experiencing high demand for flights into and out of Nelson that weekend due to both the New Zealand Masters Hockey Tournament which is being held in Nelson from February 28 to March 5 and the Madonna concert in Auckland.

“As you will appreciate, where there are major events on flights tend to sell out well in advance, with the cheaper fares selling out the fastest, so booking as early as possible is recommended.”

Now, as an economist I’m always wary of the potential for companies with few immediate competitors to exercise market power over their customers. But in this particular case, I don’t think that’s happening. What we are seeing is the normal, and in fact beneficial, working of supply and demand.

Let’s start with the supply side. Air NZ doesn’t have an infinite budget for airplanes and staff. It faces constraints. If it wanted to run more services between Nelson and Auckland on particular weekends of high demand, it would have to either:

  • Pull airplanes off other regional routes, which would potentially satisfy Nelson’s demand but would in turn lead to similar stories about how unfair Air NZ was being to Napier or Timaru or what-have-you, or
  • Buy extra airplanes and hire extra staff that would sit idle most of the time and fly only during a few periods of exceptionally high demand. This is superficially appealing, but it would mean an across-the-board increase in fares to pay for a bunch of empty planes.
mojave desert boneyard1

This isn’t really related, but it’s an interesting picture (Source)

So that’s the supply side. What about demand?

Air NZ has observed, correctly, that demand for flights is not constant over time. Simply put, more people want to fly at some time periods than during others. Airlines can respond to this in a few different ways. The first would be to keep prices constant, regardless of demand. This would turn air travel into a first-come-first served game, which is great if you always buy tickets months in advance but terrible if you have to take a last-minute trip for work or a medical emergency.

The second approach, which Air NZ may be using, is to charge higher prices during periods of higher demand. This may seem less fair, but it’s actually better for (almost) everyone. It means that airlines aren’t constantly booking out flights well in advance or misallocating resources in a futile attempt to give everyone a cheap flight. Travellers also benefit – they get a choice between paying more to travel at their preferred time or finding a cheaper fare at an off-peak time.

I fly for work on a semi-regular basis so I’ve noticed some of the patterns over time. Between 4-6pm, departure gates fill up with suit-wearing men and women headed home from their meetings in time for dinner. Not surprisingly, prices are highest at this time. Later on, prices drop, planes get a bit emptier, and the suits get replaced with casual clothes. By the end of the night, most of the people who want to get home have gotten there, and for a price that they’re willing to pay.

Occasionally, this means that somebody decides not to go to a Madonna concert. But that’s not a flaw with supply and demand – that’s how it’s supposed to work! If the man quoted in the Stuff article didn’t go, it’s only because someone who valued being there more bought the ticket instead.

Finally, I have to ask: Why are people outraged when the principles of supply and demand are applied to airfares? Perhaps it’s because we routinely ignore those principles everywhere else in our transport system.

As numerous economists have observed, we manage our roads like a Soviet supermarket. The price to use roads is set at a single, low value – i.e. NZ’s comparatively low petrol taxes – and thus people queue up for ages to drive on them every morning and evening. The same thing happens with parking, where we have regulated to make it abundant and free and ended up in a situation where people can never get enough parking.

In economic terms, there is no difference between this:

SH16 traffic

And this:

latvian-bread-line

They are both situations in which scarce resources, including people’s time, are misallocated due to poorly-functioning price signals. So rather than asking “why don’t we price air travel as inefficiently as roads?”, we should ask “why don’t we price roads as efficiently as we price airfares?”

A failure to price roads efficiently badly distorts our supply decisions. We are forever pouring more asphalt and concrete that accommodates a few more slowly-moving cars at peak times and sits idle much of the rest of the time. By contrast, congestion pricing would allow us to avoid many of these expenditures by giving people an incentive to travel differently.

What do you think about airfares – and transport pricing in general?