Govt silly to reject Regional Fuel Tax

Last Thursday Finance Minister Steven Joyce announced that the government was “ruling out” using a regional fuel tax as one way to fill the $4 billion transport funding gap that was identified by ATAP. He noted a few reasons for this decision:

And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.

In some respects it wasn’t particularly surprising that the government made this decision. They have long had a somewhat bizarre hatred of regional fuel taxes, not only cancelling Auckland’s proposed fuel tax in 2009 that was going to pay for the electric trains (a decision that probably delayed electrification for a year or two) but then also changing the Land Transport Management Act in 2013 to remove the possibility of Councils even applying to the government for such a tax.

Many of these “concerns” were addressed in a report (page 15 onwards) that the Council commissioned in 2012 to inform their submission on the LTMA changes. Looking first at the issue of cost-spreading (which basically means the risk that petrol companies will raise prices around NZ rather than just in Auckland to pay for the regional fuel tax):

With the level of scrutiny in this sector it seems pretty unlikely that we would see this happening. Furthermore it seems like there are good checks and balances that could be put in place to ensure it doesn’t happen. So, not really a valid excuse.

Now for “leakage”, which is the likelihood of people travelling outside Auckland to “fuel up” and therefore avoiding the regional tax:

Once again it seems like these issues are marginal and can be easily addressed. This led the commissioned report to conclude that concerns that were raised in relation to a regional fuel tax at the time (which seem very similar to those mentioned by Joyce last week) can be easily addressed.

Of course Joyce’s final point – about accountabilities between central and local government, is probably the real reason for the opposition. Essentially government doesn’t want to give up the power it has through collecting fuel taxes. But this seems a bit petty and I’m sure in relation to such a high profile issue in Auckland (the funding of transport) and the broad agreement between Council and Government on what the priority investments are, there would be clear accountability with the public.

This rejection of the regional fuel tax now puts the ball back in the government’s court to come up with some other ideas for addressing the funding gap. They’d better hurry up as the clock is ticking to get this sorted in time for the 2018 transport funding plans.

Draft Government Policy Statement 2018-28: Roads Roads Roads

Yesterday the Ministry of Transport released for consultation the Draft Government Policy Statement (GPS) for 2018-2025. The GPS is refreshed every three years and as the name implies, it sets out the government’s policies and spending for transport over a 10-year horizon.

The single most important aspect of the GPS are the funding ranges for each of the 10 activity areas. The funding ranges set an upper and lower limit of how much money will be spent on each activity every year. These ranges are then used by the NZTA in conjunction with regional councils in setting the more detailed National Land Transport Programme (NLTP) and Regional Land Transport Plans (RLTPs) which will list specific funding levels. This is how the various transport documents are tied together and as you can see, other regional and national plans have to be consistent with or give effect to the GPS, meaning there aren’t a lot of options to stray from what the government wants.

In total, over $11 billion is expected to be spent over the six years from 2018 to 2024 but depending on circumstances that could be as high as over $12 billion.

And importantly, here are the individual funding ranges as a graph. This looks at the total range over three years and I’ve included the 2012-15 and 2015-18 figures as a comparison to show how they’re changing. Some notable things you can see:

  • There is another significant increase for state highway improvements. Many of the big Roads of National Significance projects will be winding up over that 3-year period but other expensive projects, such as the East West Link and Northern Corridor are expected to getting underway.
  • They’re lowering the bracket for local road projects saying it was consistently under spent but that the opposite is true of local road maintenance.
  • On top of the State Highways fund, there is a separate activity for regional projects which they admit are mostly state highway projects too.
  • Public Transport gets some improvements in range but it’s worth noting that this covers both services and infrastructure. Also with NZ’s weird funding rules, it isn’t allowed to be spent on rail infrastructure.
  • Walking and cycling does get a little boost but not a significant one.

To give an idea of where investment has been in the past, this shows the funding ranges for the 2015-18 NLTP and where within those ranges funding was allocated.

Much of the text within the document feels like it has just been copied and pasted from previous versions of the GPS but I went through (most) of it anyway and a couple of things stood out.

The document states that the GPS takes into consideration a range of government policies relevant to transport, this includes the Kaikoura earthquake and tsunami recovery. But oddly it makes multiple references to the fact it doesn’t fully take into account the ATAP work agreed between the government and the council as it’s waiting on funding decisions. This makes me nervous that the government are planning on picking and choosing from ATAP.

30. The Auckland Transport Alignment Project is a collaborative exercise between Auckland local government and central government officials. It has provided analysis to inform the development of the GPS. The Auckland Transport Alignment Project identified four key strategic challenges and a strategic approach to investment for Auckland. The strategic approach looks to make better use of existing networks, target investment to the most significant challenges, and maximise new opportunities to influence travel demand.

31. The draft GPS 2018 recognises the Auckland Transport Alignment Project and Kaikoura earthquake but does not fully take the funding implications of Auckland Transport Alignment Project into account. There is expected to be changes to the final GPS 2018 once funding decisions have been made.

Previous GPS’ have talked a lot about getting value for money from transport investment while at the same time promoting programmes like the RoNS and other government initiatives that assessment has shown to perform poor economically. Now they’re starting to drop the charade government projects will be good value and saying they’ll be done anyway, simply because the government like them. This is a massive double standard from the government who have for years berated Auckland for projects they claim have a low economic value.

36. It is expected that maximising value for money will automatically advance economic growth and productivity and road safety. However, there will be investments with a low benefit cost return that are necessary to advance Government policies. In these cases there will need to be a strong policy alignment (as expressed in the GPS) with Government policies and transparency about the reason for the decision.

……

61. For many investments it will be possible to obtain good benefit cost returns while providing the right infrastructure and services at the best cost. However to sufficiently advance some government policies, investments may require a lower than normal benefit cost return (i.e. less than the average Benefit Cost Ratio (BCR) for the National Land Transport Programme (NLTP). Even in these cases, in general it is expected that the benefit cost ratio will at least exceed one.

One thing to remember about the GPS is that it only covers some areas of transport which seems short-sighted, even if they claim there will be integration with other modes.

39. Investment in movement of freight by road is covered by the GPS, but investment in movement of freight by rail, sea and air is not. However, coordination between the GPS and those responsible for different modes of transport can help to maximise the benefits of transport to the economy.

There are a few positive things to say about public transport and the role it has to play, such as:

115. Significant increases in public transport capacity have seen more people using and relying on public transport in the main metropolitan areas. These increases have occurred alongside increasing fare box recovery, indicating that the investment is resulting in more efficient outcomes.

116. The GPS will support this result by:

  • continuing to invest in public transport, including modal integration where appropriate
  • continuing the momentum set by GPS 2015 to increase the efficiency of public transport investment

Yet at the same time, they make some odd statements such as that forecasts are overly optimistic.

Passenger numbers have increased recently and are forecast to increase in Auckland and Wellington over the short term (and in Christchurch in the medium term). Although forecasts of increased passenger numbers have typically been overly optimistic. Auckland and Wellington public transport plans are based on an increased public transport task.

Fare box recovery rates have improved in Auckland and Wellington. Currently expenditure is in the middle of the funding range.

The proposal is for a gradual increase in the funding range to cover forecast passenger growth and for some public transport infrastructure work (such as park and ride facilities).

There is a need to keep focus on value for money, and ensure fare box recovery rates are at the expected levels.

Over optimistic forecasts, that’s a bit rich coming from the MoT, for example remember this graph showing actual vs forecast vehicle travel.

Of the big investments in PT in the last decade, the rail network and the busway, in both cases they are performing ahead of expectations. In the case of the rail network, we are ahead of those expectations despite the trains taking about 2 years longer to fully enter service like the earlier assessments had identified. We’re also performing ahead of the MoT’s expectations when it comes to ridership for the CRL. At one point, they claimed we wouldn’t meet the 20 million trips by 2020 yet at current rates, we’ll hit it this calendar year.

Consultation on the GPS is open till the end of March.

Agreeing with Joyce

Last week Finance Minister Steven Joyce gave a speech to Massey University and Auckland Chamber of Commerce about the economy and this year’s budget. There were some notable elements related to transport in it worth highlighting, especially those in relation to demand management.

The demand management part of the speech came after a decent amount of chest puffing and back slapping over all the major transport projects underway in Auckland including motorway projects, local road projects and the CRL.

However as this work comes to fruition over the next five years, Auckland as a city is going to come up against a hard constraint, and that’s one of geography.

There is no getting away from the fact that central Auckland is built on a narrow isthmus which makes it hard to get around – and the available land transport corridors are rapidly being used.

So beyond the current building programme we are going to have to look at demand management to reduce the reliance on the road corridors, in favour of buses, trains and ferries.

That was one of the conclusions of the joint Government/Auckland Council ATAP process last year.

To have this being acknowledged by Joyce is hugely positive given many of the comments he’s delivered over the years about transport issues in Auckland, especially during his time as Transport Minister. Quite how he’ll act on it could be another thing entirely though and so we’ll need to wait to see if as Finance Minister he delivers any money for PT projects.

If in the future we were to look back on what ATAP achieved, getting the government to finally acknowledge that we can’t just rely on more roads in Auckland will surely be near the top of the list.

Another big outcome from ATAP was the general acknowledgement between government and the council on the need for demand management, including the use of road pricing to achieve that. One positive of ATAP was that it assessed the need for road pricing outside the need to raise additional revenue to pay for infrastructure but even so, it found that just in the next decade alone an additional $400 million per year is needed.

The Government is developing a work programme to look at demand management tools including electronic road tolling in the medium to long term.

But to be clear, we see this primarily as a way to make the roading system work better – and not as a revenue raising exercise.

And today, I can confirm the Government’s position is:

First, we would expect that any road pricing initiative on existing motorways and highways would predominantly be a replacement for petrol taxes and road user charges not in addition to them.

We’ve suggested for many years that if introduced, road pricing should initially done so in a revenue neutral manner by replacing existing rates and/or taxes. While some would pay more and some less than they do today, the idea is that overall revenue gathered remains about the same which would help improve acceptance of any road pricing scheme. So in this case too it feels we’re roughly aligned with Joyce. This isn’t to say there still shouldn’t fuel taxes though, we still want to encourage moves to more fuel efficient vehicles after all.

The next part to note relates to his response to Mayor Phil Goff who had been pushing for a regional fuel tax.

And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.

However we are keen to have a more detailed discussion about demand management tools, and explore further options for longer term funding for new infrastructure, including the use of private finance for certain projects, such as Penlink for example. Mayor Goff and I have agreed to work together on those.

Finally something to disagree on, I honestly can’t see how regional fuel taxes would be administratively difficult. I’m sure fuel companies know how much they sell at each of their stations and how many people are realistically going to drive outside the Auckland to get fuel. With the exception of a few people, most would probably spend more on the fuel to get out of the Auckland region than they’d save on petrol prices. Fuel taxes certainly may be a raising additional revenue in the short term till other solutions are put in place – and remember ATAP suggests we need to raise $400 million extra each and every year on top of what we’re already spending.

This announcement disappointed Mayor Phil Goff who claimed that without a new funding source, rates would need to rise by 16% – although that also includes covering for the special transport levy which we (and the AA) feel should be retained.

The last comment quoted above is concerning though, Penlink has long been proposed as a toll road but the problem with it has always been that tolls would only cover a small fraction of the costs. Waiving the PPP phrase around doesn’t suddenly make it more viable, in fact it is likely less so as PPPs require significant contracting work by agencies and are ultimately just a private loan which ratepaters would be paying back.

Exports, prosperity, and cities

What does New Zealand do to pay its way, in the global context? And what could it do differently?

These are an important questions because New Zealand is a small, trade-exposed country. We produce some of the things that we need locally, but many other things must be imported, which means that we need to export something in return. For instance, I’m writing this post in a flat built from bricks that were (probably) fired in New Lynn and timber that was sawn locally, sitting on a chair that was made in Auckland. But the computer I’m writing it on was assembled in China using parts and patents from all over the world.

I’ve previously taken a look at what Auckland exports, both internationally and to the rest of New Zealand. This time, I want to look at the picture for NZ as a whole, and see how we compare with a number of similar countries using data from the World Bank’s excellent World Development Indicators dataset.

The following table summarises some economic and population data on New Zealand and nine other small OECD countries. New Zealand is one of the smallest (4.6 million people, equal to Ireland), with the second-lowest GDP per capita ($37,800 USD, just ahead of Israel). In terms of urban development, we have a mid-pack urbanisation rate (86% of us live in towns or cities) and quite a lot of land per person (second only to Australia and Norway, which have much more hostile climates).

Country 2015 population 2015 GDP per capita (current US$) 2014 exports as a percent of GDP 2015 urbanisation rate 2015 and per capita (ha/person)
Australia 23.8m $56,311 20% 89% 32.3
Denmark 5.7m $51,989 53% 88% 0.7
Finland 5.5m $42,311 38% 84% 5.5
Ireland 4.6m $61,134 100% 63% 1.5
Israel 8.4m $35,728 34% 92% 0.3
Netherlands 16.9m $44,300 94% 90% 0.2
New Zealand 4.6m $37,808 28% 86% 5.7
Norway 5.2m $74,400 39% 80% 7.0
Sweden 9.8m $50,580 42% 86% 4.2
Switzerland 8.3m $80,945 61% 74% 0.5

As this data shows, New Zealand also exports a comparatively low share of its GDP – only 28% in 2014, second only to Australia (20%). Other small OECD countries tend to export a considerably higher share of their GDP, indicating that they are more engaged with global trade patterns and potentially more successful in carving out economic niches for themselves.

The composition of exports can teach us something about how countries’ economies work. I’ve broken down exports into nine broad categories – five types of goods exports, and four types of services exports – to understand what these ten countries trade. That’s shown in the following chart.

We can immediately see that New Zealand doesn’t export much, on a per capita basis – around US$12,000 per person. (I’m ahead of my quota for the year!) Interestingly, we’re on par with Australia, which has a considerably higher GDP per capita.

As you can (hopefully) see, New Zealand’s exports are very heavily weighted towards food – almost half of our exports fall into this category, reflecting our specialisation in agriculture. But we’re not the biggest food exporter. The Netherlands actually exports more food per capita than New Zealand, in spite of the fact that it’s much more densely developed, with an average of 0.2 hectares of land per person compared with 5.7 hectares per person in New Zealand.

Clearly, density is not destiny: an increasing population doesn’t have to crowd out agricultural exports, provided that farmers and food processors are willing to specialise in higher-value products rather than just extruding tonnes of cheap commodity cheddar, and cities are allowed to go up in order to minimise demands to develop farmland.

However, the big difference between New Zealand and most other small OECD countries isn’t agricultural exports: it’s manufacturing and knowledge-intensive service exports. Notice the size of manufacturing exports (the blue bars) and computer, information, and communications services (the dark grey bars) in many of the other countries. Denmark, Finland, Ireland, Israel, the Netherlands, Sweden, and Switzerland all outperform us by a large margin in both areas.

What this data shows is that if we want to raise our standards of living, we will have to do different things than we’ve done in the past. We can undoubtedly get more value out of our agricultural exports – but, as the example of the Netherlands shows, the best way to do that is to invest in higher-value products, rather than increasing the dairy herd at great cost to water quality.

Ultimately, a transformative increase in New Zealand’s exports will require us to develop new products and services. For that, we need well-functioning cities. Manufacturing and knowledge-intensive services tend to be exported from cities, rather than rural areas. Increasingly, both industries benefit from agglomeration economies, such as the increased ease of sharing and generating knowledge in cities. They don’t necessarily occupy much land, but they do depend upon having a critical mass of skilled people and the right international connections.

What do you think of New Zealand’s export performance?

Do economists think we should build more infrastructure?

Should we spend more money on infrastructure?

That’s a good question. Recent posts on Transportblog have looked at the case for a greater focus on providing better transport choices in Auckland, the need to start discussing rapid transit provision in smaller but growing cities, and the need for better connections between New Zealand’s cities and towns.

A key theme running throughout those posts is that there are opportunities to spend money better, rather than just spending more money on the whole. There may be a case to spend more, but before we get to that we should see where we can do things more efficiently.

I mention this because I’ve been thinking about a piece that StrongTowns’ Charles Marohn wrote in early January, in which he critiqued arguments for spending more on infrastructure:

Your road have potholes? Commute congested? Know a guy up the street that is underemployed? Want to make the country greener? Macro economists have the perfect response to all of this: infrastructure spending. Lots of it.

Spending on infrastructure is seen as the consequence-free way to boost the economy. It’s the rare thing a pickup-driving blue-collar worker and a tree-hugging PhD candidate can both agree on: America would be better off if we spent a lot more on infrastructure. Just look around! Is there anything more obvious? Economists even have nifty equations with fifty year projections that prove it. Who could be against that?

Sadly, those applying equations from the top of America’s economic ivory towers misunderstand the impact of infrastructure spending on cities, towns and neighborhoods. Whether or not a policy of borrowing money to build infrastructure really works at the national level — and there are really smart people who question whether it does — it’s not without consequence for local governments.

Marohn’s got some valid critiques. I particularly appreciate his argument that cities need to ensure that their investments are financially sustainable as a prerequisite for achieving their other aims:

Economics is a social science that often concerns itself with the well-being of people and things like environmental impacts, social justice and quality of life. These are admirable pursuits that can benefit from economic thinking and the work of economists. There are very good reasons for macro economists to study, quantify and pursue policies aligned with social objectives.

It is also perfectly acceptable for local governments to pursue similar aims. The difference is that local governments face hard financial constraints that the federal government does not. As we say at Strong Towns, financial solvency is a prerequisite for long term prosperity for local governments..

This means that cities have to #DoTheMath. Projects must pencil out, today and into the future. If something is done at a loss for a purely social aim, that’s perfectly acceptable so long as everyone understands that the ongoing revenue must be accounted for from somewhere else. Financial solvency is a prerequisite for local governments in a way that it never will be for the federal government.

However, I also think that Marohn’s being a bit unfair to economists! As I discussed in a post last year, there’s disagreement within the discipline about whether (and how) we should spend more money on infrastructure. And the economists who do make the case for spending more most strongly tend to come at it from a Keynesian perspective – ie spend a bit more during recessions, when there are unemployed people and machines to do the work.

Moreover, economists have researched the economic effects of more infrastructure spending in quite a bit of depth. A range of papers have investigated whether building more roads (etc) leads to increases in economic output (GDP) or increased employment, either at a local or a national level. They have generally found that building more transport infrastructure had strong positive effects in the 50s and 60s, and smaller or even negligible impacts since.

For instance, a literature review on the relevant evidence undertaken by the Ministry of Transport concluded that:

In developed countries that already have a high quality, well-connected transportation infrastructure network, further investment in that infrastructure will not on its own result in economic growth. However, where the potential for economic growth is present, lack of investment can inhibit the potential growth… Evidence for a ‘special role‘ for the effect of transport infrastructure investment on economic growth is limited.

In a similar vein, a 1999 paper by US economist John Fernald investigated the impact of road spending on economic productivity in the US, finally concluding that:

In essence, the evidence suggests that the massive road-building of the 1950’s and 1960’s—which largely reflected construction of the interstate highway network— offered a one-time increase in the level of productivity, rather than a continuing path to prosperity.

There’s less New Zealand-specific evidence, but one paper by three OECD researchers (Balázs Égert, Tomasz Koźluk, and Douglas Sutherland) that I reviewed in a post last year found that in New Zealand over the 1960-2005 period:

  • Road investment had a positive impact on economic growth throughout the period
  • So did rail investment, although the effect was not quite as strong
  • However, motorway investment had a negative impact on economic growth.

Basically, anyone arguing for a systematic policy of building heaps more roads (or infrastructure in general) isn’t taking the economic evidence seriously. At this point, there are unlikely to be abnormally high economic returns from building more infrastructure.

It isn’t hard to understand why. The first bridge, first decent road, or first rail line you build is likely to be transformational, just as the Auckland Harbour Bridge transformed the North Shore. But the third, fourth, or fifth bridge will make an incremental difference, at best. They may even do harm by ‘crowding out’ routine maintenance or pushing up construction costs across the economy. So we need to keep a close eye on how we’re spending our money and what we’re trying to accomplish.

What do you think about the economic returns on infrastructure spending?

Sunday Reading 12 February 2017

Welcome back to Sunday reading.

From the Devonport Ferry. If your commute has tourists taking selfies on it then I’d say it’s probably pretty good:

Devonport Ferry ©Patrick Reynolds 2017

Here is a clipping from yesterday’s Herald Commercial Property section. It neatly encapsulates the value of sorting out planning restrictions [Unitary Plan] and making high quality Transit investments [City Rail Link], naturally, given the context, through a property value lens:

I wouldn’t get too hung up on the salesman’s boosterism in the second paragraph, as the main point is that the only way for tatty low value (in the broadest sense) parts of the city, like the current low rise commercial city fringe, to attract investment and therefore improvement is through value uplift. Outside of large scale direct public investment, that is, which is no straight forward business in these kinds of areas. This is happening in other parts of the city, Tamaki etc, but it is very hard to do everywhere, and anyway is probably not desirable as the only means of development anyway. There is a good role for the private sector in city building. The city and its citizens are winners through either this process, after all no one can live in an apartment that doesn’t get built, nor use or work in a retail or commercial property that isn’t there, so more is certainly more in a thriving city.

All transport infrastructure investments provide opportunities for different groups, and after 65 years of only rewarding ex-urban land bankers and detached house volume builders with tax funded transport investments (motorways) it is good to see a better and more efficient urban form being incentivised here.

And particularly good to see both levers, planning code and Transit investment, being pulled at once, and in the same direction. This is absolutely something that Auckland is getting right. Those interested in these city shaping issues globally will know that it is surprisingly difficult to achieve such obvious coordination. The main barriers to this are fractured governance in cities, so we can put this success down to the amalgamation of Auckland’s previously hopelessly squabbling and disunited political organisation, and subsequent weakness in the city’s dealings with the much more powerful central government.

April sees the Waterview tunnels open. Print media is starting to look forward to the project. I see NZTA are already trying to play down expectations of congestion reduction. As well they might:

It is not a means of removing congestion altogether, especially in peak periods, which is no different to other major cities across the world,” Gliddon [NZTA] said.

Perhaps we should be expecting them to spend our money in smarter ways, like on actual alternatives to everyone always driving for example, then?

Plus some thoughts from this fellow:

Here’s a ripper from the ‘surprising things that generate big efficiencies’ department, here:

UPS drivers don’t turn left—and it saves them 10 million gallons of gas a year

If there is one thing I do like about American traffic management in cities is their enthusiasm to restrict cross traffic turning. Left in their case, right in ours. Our agencies seem obsessed with making horrible oversized intersections with individual lanes and light phases for every possible turn, including the most lethal and disruptive of them all; cross traffic ones. I have long called for the removal of right hand turns into and out of most Queen St intersections for both safety and efficiency reasons. And we all know that AT are just plain wrong on this issue in Mt Albert. Note to traffic engineers; heritage isn’t a thing in your profession; just cos you’ve always done it one way it doesn’t you should keep forcing it on us (actually almost certainly the reverse is true).

UPS have moved away from trying to find the shortest route and now look at other criteria to optimize the journey. One of their methods is to try and avoid turning through oncoming traffic at a junction. Although this might be going in the opposite direction of the final destination, it reduces the chances of an accident and cuts delays caused by waiting for a gap in the traffic, which would also waste fuel.

So now there’s evidence that Traffic Engineering has been wrong all along anyway, as the standard argument for keeping dangerous and delaying right hand turns is that to remove any decreases vehicle efficiency. Busted again Traffic Engineering: I sometimes wonder if there is a discipline with less intellectual curiosity about its habits than this branch of engineering?

Note to AT: MacKelvie St/Ponsonby Rd. So often there is broken glass here, being so close to the Richmond Rd intersection right turning both into and out of this street are seriously disruptive, dangerous, especially with the volume of other road users in this busy retail area (and the bus stop). Stop the right -hand turns and the very wide MacKelvie could be narrowed with widened footpaths and street trees on the southern, sunny side, and the road space on Ponsonby currently as a wide painted median for this manoeuvre used more productively.

This is undeniably true: Decisions about transport investments are really about what kind of future city we desire. For a quick overview, with lots of links, of this claim head to this CityMetric article.

The article questions reliance on cost benefit analysis, where as I think that they are an important part of the evaluation process. I guess the issue really is one of balance. For example we have for many decades had far too much priority given to the results of traffic modelling, whereas these outputs should be of a secondary value in city design, not primary. Because if we build for traffic first, all we get is traffic, and much less city.

Thinking City has a nice post up on cultural representations of cities.

Breaking Bad is amazingly powerful drama, but who thought it would also turn out to be positive for Albuquerque? Not the local authorities, for one. But there were wrong:

The funny thing is, even when a place is portrayed in a negative light, it can actually end up having a positive impact on that area. Take the US city of Albuquerque, New Mexico’s largest metropolis, home to roughly half a million people. It is also home to the fictional characters in the hit TV show, Breaking Bad, about a teacher with cancer who turns to drug dealing. Following the success of the show, tourism to the New Mexico city was massively boosted – turning around struggling businesses, generating new ones and contributing hugely to the local and state economy.

From the ‘the whole world is an integrated economy’ file, Bloomberg has the fascinating tale of one tiny widget in a nice interactive, click though to the the link for the full experience:

 

Related:

I have always like the line: ‘California must exist for even America needs an America’.

Immigrant Shock: Can California Predict the Nation’s Future?

So it’s interesting to read an article calling California as showing the direction the rest of the US will follow. Is California just America’s dream of its own future? After all in the long run everything follows demographics; economics, politics…

Thank’s for reading, see you next week…

Mr. Bridges, open this gate. Mr. Bridges, tear down this wall!

In 1987, President Ronald Reagan stood by the Brandenburg Gate in West Berlin and called on Gorbachev, the leader of the Soviet Union, to take down the wall cutting off Berlin’s east and west halves.

A photo of a photo which also includes a photo. The black and white bit is the Brandenburg Gate at the end of World War Two. The colour bit is what the gate looks like today.

In 2017, I’m calling on the Minister of Transport, Simon Bridges, to take action. I could have called this post “let’s get rid of mandatory helmet laws in New Zealand” (and I’m not sure comparing Simon Bridges to Gorbachev, or me to Reagan, does either of us any favours), but let’s roll with it for now – at least it gives the post titles some variation.*

Back in September/ October 2016, I took a holiday to Europe, visiting Germany (Munich and Berlin) for the first time.

Germany is the country that gave the world Mercedes, Volkswagen, BMW, Audi and Porsche. It’s the country famous for its no-speed-limit autobahns, which I remember being told about in reverent tones growing up – probably one of my strongest wired-in memories to do with Germany.

Germany today has a very different zeitgeist. I was struck by the popularity of cycling in both cities (and also by the great quality, well used public transport, but that’s a story for another day). I found the contrasts so striking that I started writing this post while I was still in Berlin, and I’ve stuck with the title that came into my head then. Because if Germany, this famous automotive country, can make cycling so popular then New Zealand can do the same. Because in Munich, Berlin, and every other great cycling city around the world, hardly anyone wears helmets.

People on bikes by the East Side Gallery, one of the few remaining remnants of the Berlin Wall and decorated with street art.

Berlin today is ranked as one of the top cycling cities in the world, #12 in the Copenhagenize index. Munich is now outside the top 20 of that index, but still regarded as a very cycle-friendly city. There are bikes everywhere in Berlin, at least in the more tourist-friendly inner parts of the city. There’s a widely available bike share scheme, run by DB Bahn (who also run the public transport).

100 metres from where I stayed in Berlin, there was a cycle school – a little cycling track, mocked up with miniature street signs, cycle lanes and different turning scenarios. In Berlin, all primary-school children take a cycling safety course.

People on bikes in Berlin

People on bikes in Munich (where helmets seemed a bit more common than Berlin)

Cycling in New Zealand

New Zealand, of course, has more vehicles per capita than almost every other country in the world (712 vehicles per 1,000 people; Germany has 572). Germans make the cars, but they don’t drive them anywhere near as much as Kiwis do. Cycling in New Zealand has become a fringe, marginalised activity, although this is getting better. Cycling rates have dropped precipitously since the 1980s – they’re now climbing again, but off a very low base. With cycling, there’s safety in numbers. The lack of cyclists in New Zealand means that drivers aren’t looking out for them, so our accident and fatality rates for cycling are well above those of European countries, despite our policy of mandatory helmets.

New Zealand’s government has been quite forward-thinking on cycling in the last couple of years, launching the Urban Cycleways Programme and also spending more on cycling out of the National Land Transport Fund (of course, it’s still a tiny percentage of the overall fund). The cycleways programme was an inspired piece of policy: it provided some funding, but also leveraged this as a way to encourage councils to invest in cycleways. Costs now get split between the Urban Cycleways Fund, the NLTF, and the local council.

I think it’s quite appropriate that the cycleways programme uses funding from outside the general transport funding sector. Looking at the costs and benefits from cycling, the biggest benefits are actually health-related, and nothing to do with transport. Ideally this could be recognised by funding some cycling initiatives out of the health budget, but at least they’re coming from outside of transport.

Of course, if we make helmets optional, we’ll get much better value out of these cycleway investments – there will be more people cycling and using them. Plus, there’s much less need for helmets on cycleways – serious cycling accidents are overwhelmingly caused by collisions with cars and other vehicles, not falling off the bike.

Cycling and Health

The direct costs of cycling are pretty straightforward – it’s the amount being spent on infrastructure, whether it’s cycleways or token splashes of paint on the roads. As for indirect costs (externalities), cycling arguably has less than any other travel mode. Cyclists aren’t hurting anybody.

The benefits are a bit more complex. Like public transport, cycling helps to mitigate congestion – so car users benefit from having faster, more reliable travel times. Cycling also reduces greenhouse gas emissions.

Then there are the health benefits of cycling. Quoting from a 2014 paper which modelled potential cycling investment in Auckland (emphasis added):

Our findings suggest that the most effective approach would involve physical segregation on arterial roads (with intersection treatments) and low speed, bicycle-friendly local streets.

We estimate that these changes would bring large benefits to public health over the coming decades, in the tens of dollars for every dollar spent on infrastructure. The greatest benefits accrue from reduced all-cause mortality due to population-level physical inactivity.

Overall, the authors estimated that a $630 million investment in cycleways and “self-explaining roads” (traffic calming etc) would get cycling mode share to 40% by 2051, and give benefits of more than $13 billion, with a benefit:cost ratio of 24:1. Pretty good really. And we’ve found so far that the benefit:cost ratios for cycleways, at least the ones getting funded by the Urban Cycleways Programme, are often an order of magnitude higher than what we get for roads.

So, riding a bike is good for fitness and keeps you healthier for longer. At the New Zealand level, if more people cycled we’d have a healthier population, with lower mortality.

The next step: making helmets optional

Now, let’s have the conversation around helmet laws. Looking at the international picture: New Zealand’s compulsory helmet laws make us an international outlier. The evidence on their effectiveness has been mixed at best. Yes, helmets can reduce the severity of head injuries; but they’re also a barrier to cycling uptake.

We don’t know for sure in New Zealand, because the research hasn’t been done. But here’s my personal view. If we got rid of the law that says you have to wear a helmet while cycling, we’d have more people on bikes. This means car drivers will pay more attention to them, and drive more carefully. As such, it’s not clear whether the rate of serious head injuries (and in the worst case, deaths) would rise or fall. It depends on which effect dominates – cyclists being less likely to wear helmets so getting more severely injured, or drivers being more alert around cyclists. I wouldn’t be surprised if the latter effect wins out.

But here’s the thing – even if the latter effect doesn’t win out, it’s probably still a good idea to get rid of the law. Because there are all the other benefits from cycling to consider too – a healthier, fitter population, plus the congestion and emissions benefits. Those benefits are likely to be much greater than any ‘net’ cost from having more cyclists injured.

We’ve got an unusual split of powers in New Zealand:

  • The Accident Compensation Corporation (ACC) funds the costs of accident injuries. Every time a car slams into a cyclist, it’s ACC who pays for it. Understandably, ACC is all about doing things that reduce the risk and severity of injury (helmets can help with the latter, and don’t help and may even hurt the former). As noted above, it’s not clear whether making helmets optional would be better or worse for this.
  • The Ministry of Health handles the remainder of the public health system. They should be very interested in things which boost the general state of health among New Zealanders, such as cycling.
  • The police are responsible for enforcing the helmet law. It’s positive to see that cops aren’t fining cyclists as often as they used to, but ultimately they’re still giving out fines because that’s what the law says.

ACC and the Ministry of Health are more or less separate, with separate departments and different Ministers. The police are also separate, of course. These different organisations may have differing views on cycling and helmets, given their different responsibilities. We need a consensus-builder (a Gorbachev or perhaps a Bridges?) to bring the parties together and make, the right decision to give the best outcome for society.

Mr Bridges, it’s time to open this gate, and let the cyclists through. In order to get the most from the Urban Cycleways Programme, to encourage cycling as an everyday activity, and to unlock the health benefits, we need to get rid of the helmet law and make helmets optional.

* It also seems kind of unnecessary to have gates, walls and Bridges all mentioned in the title, but such is life

Are regional towns and cities too small?

Last week, I took a look at the question of whether Auckland is too big. (Answer: Probably not.) However, there’s also another, related question that I didn’t discuss: Are other New Zealand towns and cities too small?

“Too small” is obviously a subjective concept – what’s just right for one person will be painful for another. So I’m going to return, briefly, to the theoretical model I discussed in the last post, which analysed city size as an interplay between agglomeration economies and congestion/crowding costs.

Most New Zealand towns and cities are not large enough to be congested or crowded in any meaningful way. They are more likely to face challenges with the sustainability of local businesses and the affordability of maintaining infrastructure. Even a reasonably-sized growing city like Hamilton has experienced struggles in this area. Fortunately, it seems to be improving, but it could still do with more customers within walking distance and more people starting up businesses

But it’s not just about the number of people – productivity also matters. When businesses are more productive, they tend to pay higher wages, which increases demand for local goods and services and strengthens the local tax base. This also makes it easier to address the challenges faced by many regional towns and cities.

Unfortunately, New Zealand has a lot of issues with poor productivity, and, as Motu Institute economist Dave Maré has shown, these issues are worse in smaller towns and cities even after controlling for differences in firm and worker characteristics:

Population growth in smaller towns and cities can enhance their productivity performance, if it’s managed well. Agglomeration economies also apply in smaller places. For instance, a town with a large enough population to sustain three restaurants rather than two will also tend to have better restaurants, as increased competition forces them to raise their game.

However, towns and cities also trade with each other. A factory in Hamilton may buy parts from an importer in Tauranga. A family living in Dunedin might take a day-trip to Oamaru to check out their steampunk society. And so on and so forth. When this happens, it expands the market available to firms in each location, giving them more opportunities to benefit from agglomeration economies.

In other words, good transport links between towns and cities can enable increased productivity (and in doing so, make them more desirable for new residents and businesses). There is some evidence that this process isn’t occurring in New Zealand towns and cities. In a new research paper from the Productivity Commission, economist Guanyu Zheng investigates “geographic proximity and productivity convergence across New Zealand firms“. It offers some important insights on what’s happening at the ground level of the NZ economy.

Zheng’s key conclusion is that:

The speed of convergence to the local frontier is greater than the speed of convergence to the national frontier. This indicates that geographic proximity is important in the diffusion of technology. One possible reason is that much information and technical know-how is tacit and non-codifiable. Geographic proximity facilitates information exchange between firms and enhances the capability of firms to absorb tacit technology.

Shorn of the economese, this means that firms in Wellington tend to compete with (and catch up with) other firms in Wellington, and firms in Nelson tend to compete with other firms in Nelson. There’s less competition and catch-up between firms in different cities, which impedes New Zealand’s productivity performance. However, there are a few industries, like agriculture and professional services, where convergence happens more rapidly. These industries differ in a lot of ways, but they are both relatively knowledge-intensive, with high returns for adopting new ideas, with outputs that are relatively easy to trade across distance.

What can we do to address this?

The first step is correctly diagnosing the cause of the problem. Aside from New Zealand’s long and hilly geography, the main reason that it’s so difficult to trade between cities in NZ is the perverse legacy of the 1930s-1980s approach to industrial and transport planning. As I’ve written before, this had two main components:

  • First, there was a deliberate policy of making freight transport between regions costly and difficult. The Transport Licensing Act 1931 banned trucks from moving goods more than 150 kilometres until its repeal in 1982, while the Railways Department had all sorts of obscure rules about train loading and unloading to guarantee employment in rural depots.
  • Second, industry location was regulated and subsidised to ensure a stable and “equitable” distribution of economic activities throughout the country. For instance, there were regulations that virtually prohibited the opening or closing of meatworks and other rural processing plants between the 1930s and 1980s.

These policies appear to have a long-lasting negative legacy. Firms that were required to locate in small towns, paying high transport costs to sell to the rest of New Zealand, have been at a disadvantage since then. They don’t have scale in their local market, and it’s excessively costly to ship freight to the rest of NZ. As a result, they’ve struggled to stay alive, let alone to grow.

Overcoming high costs to distance within New Zealand could potentially have large economic benefits by enabling faster productivity convergence between local towns and cities as well as between them. The problem is that there is no single “Think Big-esque” thing that we can do in order to sort these problems out.

Viewed from a certain angle, the Roads of National Significance were an attempt to reduce high costs to distance between regions. They’re likely to be successful in some cases – for instance, the Waikato Expressway will make travel between Auckland and the Waikato considerably faster, and boost the Waikato in the process. However, as a strategy for addressing a system-wide issue they are likely to fall short for two reasons:

  • First, too much money has been spent on urban and urban fringe motorways that will have minimal impact on inter-regional connectivity. Puhoi to Warkworth and Transmission Gully motorways are prime examples.
  • Second, they leave a whole bunch of other problems unsolved. For every kilometre of RONS, there are probably twenty kilometres of roads with dangerous curves, a lack of passing lanes, or other issues. And there are also opportunities to improve the speed and reliability of the freight rail network.

In other words, we can’t rely upon the RONS to sort out our problems with geography. In some locations, they may contribute to the solution, but in others they may crowd it out.

By way of illustration, the following chart shows the last decade’s worth of spending on new and improved roads in the Northland Region. This is an area where better internal road links could be quite beneficial, as travel speeds are slow. Between 2007 and 2016 a total of around $420 million was spent within the region. This is only around half of the cost of the Puhoi to Warkworth motorway, which means that you could cancel that, double funding on road links within Northland, and still have money to spare.

So, returning to the question that I started the post with: New Zealand’s towns and cities could benefit from more agglomeration and higher productivity levels. Population growth would help, in many places, but an equally important priority is to improve connectivity between towns and cities to enable more competition between places.

What do you think about the cost of distance within New Zealand?

50 Years of waiting for an Auckland Rapid Transit system.

Ian Reynolds 1946 by Brian Brake

My father, Ian Reynolds 1922-2005, was an architect (as was my mother). He was also a what was then called a Town and Country Planner. After returning from working in England after the war he spent the rest of his career as partner in a big multidisciplinary practice in Auckland (missing the city of his youth: Wellington. Office in Wakefield St, where the AUT business school is now). There he was responsible for a chunk of our post-war modernist heritage, as well as a lot of planning work. Especially at the University of Auckland, master-planning the campuses and involved in the campaign to retain the city one, which thankfully won out. Notable design work includes the School of Engineering and the Thomas Building both on Princess St, his practice also designed the School of Architecture while he was head of the architectural division.

In 1967, which is of course now 50 years ago, he was interviewed by the Herald about transport in Auckland (in full below). And it makes for a pretty interesting read, surprisingly relevant still, perhaps alarmingly so. I’m pretty sure his 1967 self would be very surprised that we are only now getting round to building the Rapid Transit Network he describes from the De Leuw Cather report. Although later of course he witnessed the defeat of Robbie’s Rail, and much else that should have given life to the 1960s plans for balanced transport networks. The interview shows a clear vision of that possibility, and how that would have led to a different more urban pattern of development for Auckland than we currently have:

Readers will no doubt feel that indeed; some apples don’t fall very far from the tree, yet re-reading this I am amazed now at how little I ever discussed these issues with Ian. I think on his side that was because of a sorrow felt by the idealistic modernists of his generation about the development of Auckland in the later part of the last century. Interestingly for many there was a move into environmentalism from urbanism (not that either phrase were current at the time) as centrally directed motorways and private land speculation took over completely from state planning and housing investment. Perhaps that is where this generation’s lasting legacy can be seen. Especially evident in the careers of two of Ian’s colleagues; captured perfectly in this obituary of planner FWO Jones (known even to us kids as ‘Fwo’) and the just recently deceased KRTA partner Dave Thom, who was very active in the national parks programme, and in making the theoretical case for environmentalism as a core practice of engineering internationally.

But it must be remembered that the denser city was always considered the necessary corollary to the protected wilderness, as this keeps the city from spreading so much into the country. The term sprawl is after all the shortened version of urban sprawl. His generation did achieve much in protecting key wild places, but I think Ian keenly felt that on urban form they suffered a life long defeat. So it would be good to show him Auckland now, the last ten years since his death have seen a profound change. I think he would be gratified by many of the trends; the full return of the university to the city, the strong revival of inner city living (though not so much the design of many of the buildings), the rail revival (he was a dedicated train user; taking the overnight train to Wellington regularly instead of flying, which he loathed, he was also an equally dedicated pipe smoker; which got him in the end).

There is so much that is still accurate in the document, both happily and otherwise, I think he is right both about our relative lack of corruption and waste, but also the dominance of political expediency over good policy in transport and urban form:

Here he refers to the ‘Morningside Deviation’ the 1940s version of the CRL suffering the same fate (see here for earlier schemes):

It is important to remember that at the time of the interview the population of Auckland was around half a million, so the arguments then are even more pressing now there’s another million souls living here. And some concerns have disappeared completely, such ‘inner city decline’. Of course had the described bus/rail system been developed alongside the motorways the pattern of the city’s development would be different; less sprawl, more complexity, not radically different just less monotone. A city of greater variety and one less entirely dominated by traffic. One that pushes less aggressively into the surrounding countryside… Instead we have built one network entirely, the motorway system, and largely one developmental typology, low density dispersal, and the city is poorer for it. And now we must urgently add the missing complementary Rapid Transit Network, as those 1960s planners quite correctly foresaw would be required to prevent a road only system choking to death on its own overuse. At least as the city is three times the size it is so the cost is now affordable; if only we would stop so expensively adding to the one now complete system….

Sketching in Kendal 1950

A future for Auckland’s transport network

Lately I’ve been thinking about how to better join the dots between Auckland’s housing challenges and its transport challenges. We’re all familiar with the common stories about Auckland’s problems: Housing is too expensive, pricing young people out of the market and forcing low-income households into crowded or unhealthy accommodation. The transport system isn’t working as well as it could – key roads are congested, public transport is often unreliable due to our mid-century decision to eschew a rapid transit network, and walking and cycling often feels unsafe, again due to policy choices.

But it strikes me that we aren’t yet telling a clear story about how we could solve Auckland’s challenges. This is an attempt to tell some of that story.

It all starts with the street. When Auckland’s suburbs started to get built in the late 1800s, people did a few things to cut costs. One of those was providing long, narrow residential sites without back alleys or many cross streets. This left behind more saleable land while avoiding the need to provide stormwater or sewerage – people simply dug long-drops at the back of their long sites.

The result was a city that has a dearth of streets. The following map compares my neighbourhood in Auckland with my brother’s neighbourhood in Denver, Colorado – his is a bit further from the city centre but otherwise similar. Note the fine mesh of cross-streets and the closely-spaced arterial roads in Denver, and the spidery mesh in Auckland:

When we zoom out the map, the comparison gets even starker. Not only does Auckland lack a Denver-style street grid, it also has a regional transport network full of gaps and pinch-points caused by its position on two harbours.

This is exacerbated by the fact that we have recently built out most of the space in most designated motorway corridors. Once the Waterview Connection opens, the motorway network will be largely complete and will probably never be significantly expanded again, at least within the city. Contemplate that, for a moment.

In short, we are a growing city that lacks street space and has extremely constrained ability to add more transport corridors virtually anywhere in the city.

This brings me on to the second part of the story: Cars. Cars are wonderful things. They are the best way to get to the West Coast beaches, and the second-best way to get to urban beaches, after cycling. If it weren’t for home delivery, they would be the only way to buy a refrigerator or a tonne of compost for the garden. But we’re not going to be able to fit an ever-growing amount of them on Auckland’s roads at peak times. We don’t have the space for it.

In saying this, I’m not arguing that we should necessarily fear congestion. Auckland’s existing performance isn’t terrible: the aggregate cost of congestion is right about what you’d expect based on data from large Australian cities, and average commute times are reasonable. But the constrained nature of our street grid and regional motorway network leads me to think that it will tend to increase more rapidly as the city grows. Consequently, we will need to do something differently.

[A brief digression: We will face this problem regardless of where new residents end up living. Banning growth in your neighbourhood and insisting that all newcomers move to Drury will not solve the problem: many of those people will simply hop on the road to commute to jobs in the city or in the growing Auckland airport business park. Similarly, banning growth on the fringes won’t fix the problem either: many newcomers will still need to drive to get to jobs spread around the city.]

This leads directly to the third part of the story: What can we do instead, if the current approach won’t keep working?

Basically, there seem to be three things we can do.

One: We can implement congestion pricing – or, as Jarrett Walker calls it, a decongestion charge – to take the edge off peak-period delays on busy corridors. I’ve discussed this extensively in the past so won’t rehash this discussion here. One point that many people raise, though, is that congestion pricing should be paired with a strong focus on improving alternatives to driving, to allow people to avoid the charge.

Two: We need to improve Auckland’s regional rapid transit network to ensure that it is possible to travel longer distances within Auckland both quickly and reliably. Setting aside congestion pricing for a moment, rapid transit is the only way that we can reliably achieve this. If you want to travel 20 kilometres and get to work on time most days, you’re better off being in a train or a busway service than a car.

Rapid transit improvements are likely to be especially important for making greenfield growth work well. People who will soon be living in Dairy Flat, Whenuapai, and Drury can benefit from the option to access fast and reliable transport options.

However, good rapid transit isn’t simply a matter of building a busway out to the wops. Service integration is also essential. What that means is that buses or trains need to connect with each other at key points, offering easy and reliable transfers between services and access to a wider range of destinations. Interchanges like Otahuhu and Panmure are important, but the city centre is even more important, as it will always be the place where most of the lines converge.

In other words, if we want to make rapid transit work well for greenfields, we also need to sort out what’s happening to buses and trains downtown and in the inner urban areas.

Three: We need to improve Auckland’s urban cycleway network to give people new options for short- to medium-distance trips within the existing urban area. Cycling has a lot of unrealised potential in Auckland (and most New Zealand cities): At peak times on congested roads, a bicycle can get you to your destination faster than a car, and technological improvements (ebikes!) are flattening out the hills as we speak.

Getting more people cycling for everyday transport would go a long way to sorting out the transport challenges associated with new housing development in a city with a fragmented street grid. Every person who rides to the shops or to work is one who isn’t competing for road space and parking space. We will value those people more in the future.

A key barrier to cycling in Auckland is the perception that it is not safe. This doesn’t necessarily dissuade the mid-30s bloke in lycra, but it will keep many schoolkids, middle-aged women, and a whole bunch of other people off their bikes. We can fix this – and get people from ages 8 to 80 cycling – by designing streets better and providing safe cycling infrastructure where it’s most needed.

To summarise: Auckland’s built itself into a bit of a hole, and in order to meet the needs of a growing city, it will have to do things differently. That means congestion pricing (to make the road network work better), a really good regional rapid transit network (to ensure fast and reliable journeys throughout the urban area), and a safe, joined-up network of urban cycleways (to give people more options for shorter trips). This shouldn’t be seen as an alternative that we could pursue once we’re done building motorways: it is now the most realistic way forward for the city.

What do you think Auckland should do in order to address its growth challenges?