Two new images from Auckland Transport on what we can expect the Aotea Station to look like.
The first shows what the entrance to the station will look like from Victoria St.
A few things is you can see this will result in a significantly narrowed down Victoria St, the rest o which is meant to eventually be turned into a linear park. The image also shows there will be a cycleway along Victoria St and is obviously fairly realistic as like Beach Rd, it has a lot of people walking on it. In the distance you can also see escalators back up to Victoria St on the other side of Albert St. I think this route will become quite popular as a way of avoiding waiting at the lights. This can also be seen in the image below which was released a few months ago.
The second image is a more fleshed out version of what we’ve seen the station look like from the platform
AUT’s Briefing Papers initiative has kindly allowed us to syndicate their recent series on housing. I wrote the ninth paper in the series:
The decisions that individuals and societies make about housing are deeply linked to decisions about transport. The ways in which people get around are affected by where they live and how their neighbourhoods are designed. And transport, in turn, has a host of broader effects. It affects our happiness and wellbeing, the efficiency of our economy, our expenditures on infrastructure, how clean our air is, and how much of our public health spending is consumed by diabetes and cardiovascular disease.
In recent years, the policy debate about housing has focused largely on prices and aggregate supply dynamics. Transport usually only enters the frame when asking when roads will be built to enable greenfield areas to be subdivided. In my view, this is too narrow a perspective.
A more holistic perspective on housing policy would ask further questions. First, how does the built environment, including housing, influence people’s travel choices? Second, does it matter how people get around? And third, are we offering people the housing and transport choices they desire?
The “Five Ds”
In her 1961 book The Death and Life of Great American Cities, Jane Jacobs observed that “dense, diversified city areas” were full of people travelling on foot, in contrast to the suburbs and “grey areas”. Half a century later, transportation researchers Reid Ewing and Robert Cervero (2010) reached the same conclusion, with added statistical rigour, after reviewing hundreds of academic papers.
Ewing and Cervero concluded that there are “five D’s” that influence people’s travel behaviour: density, diversity, design (of street networks), destination accessibility, and distance to public transport. The denser the neighbourhood, or the greater mix of uses within it, the more likely people are to walk, cycle, or take public transport. By contrast, single-use areas with disconnected street networks are amenable to cars and not much else.
Another way of putting this is that proximity matters. Being close to more destinations gives people more opportunities to make trips in a variety of ways. People respond to the availability of choices by, in many cases, choosing alternatives.
This isn’t simply a result of selection bias, in which car-loving people live in car-based neighbourhoods. The characteristics of the place you live can in fact change the way you travel. Consider the results of a recent study in Vancouver, which found that people who prefer an auto-oriented neighbourhood, but live in a walkable one walked twice as often, took public transit twice as frequently, and drove nearly two days less per week than those who prefer and live in an auto-oriented neighbourhood.
What happens to us when we travel?
But does it matter if people live in places that lack the “five D’s”? In other words, should we care how people get around (and how far they must travel)?
In a word: yes. When people live in places that offer them better transport choices – i.e. the option to walk, cycle, or take public transport as well as the option to drive – it’s better for them and better for society.
There are three key advantages to living in a place that offers proximity and transport choices.
The first is that proximity can save people time, money and stress. When I used Census data to analyse household expenditures on housing and transport in New Zealand’s three main cities, I was surprised to find that financial savings from lower rents further out of the city tended to be fully offset by added commuting costs. When you factor in the added time that people must spend on the roads, living further away starts to look like a false economy.
To make matters worse, longer commutes can be psychologically costly – a 2014 study by the UK’s Office of National Statistics found that, all else equal, longer commutes were associated with lower and lower levels of happiness. As Charles Montgomery observed in Happy City, people buy houses once but must commute every day.
The second reason to appreciate proximity is that it can be more economically efficient. Longer distances between people increase the “spatial transaction costs” that they must bear to socialise, trade ideas, and do business. By contrast, the “five D’s” give people greater opportunities for interaction. This is important, as economies ultimately rely upon people’s interactions and transactions – between workers and businesses, entrepreneurs and investors, shoppers and retailers, and students and educators.
We have a good idea of how these effects may play out in Auckland. Land-use and transport modelling undertaken for the Auckland Plan (and subsequently presented to hearings on Auckland’s Unitary Plan) shows that developing a more compact, mixed-use city will give workers much better access to jobs, and businesses much better access to workers and customers. Interestingly, it is also expected to result in lower congestion, suggesting that people who would prefer to drive also benefit from increased transport choices.
Finally, enabling people to live in areas with better transport choices can make us healthier. This wasn’t necessarily the case a century ago. When New Zealand’s cities were being established, urban planning aimed to mitigate diseases of proximity. In his history of city-building in Australia, New Zealand, and the Pacific coast of North America, Lionel Frost observes that suburbanisation began as a public health panacea: it made people “safe from the deadly miasmas of the inner city” by allowing them to “dig a simple cesspit at the back of a relatively deep lot”.
But things have changed since then. Instead of struggling with cholera and other diseases of proximity, we are now afflicted by diseases of inactivity, such as diabetes and cardiovascular disease. According to a study commissioned by Auckland, Wellington and Waikato councils, physical inactivity caused 246 premature deaths in 2009 – roughly equivalent to road deaths in more recent years. Nearly 50% of New Zealand’s population is physically inactive.
Public health agencies are acutely aware of the social costs associated with living in neighbourhoods that do not offer people transport choices. But although they are responsible for addressing the health issues arising from housing and transport issues, they don’t have a lot of influence over how we build neighbourhoods. Perhaps that should change.
Unmet demand for transport choices
But are we simply getting the housing and transport choices that we choose? After all, most Aucklanders drive most of the time. Data from New Zealand’s Household Travel Survey indicates that Aucklanders did 94% of their travel (measured in kilometres) in cars, either as drivers or passengers. Other transport modes barely featured.
However, surveys consistently suggest that people would like to have more choices than they do. Take, for example, Auckland Council’s recent “Housing We’d Choose” study, which surveyed Aucklanders to find out how they weigh up the price, quality, and location of housing. When considering how convenient a location is, 38% of respondents ranked easy access to public transport as important, well ahead of access to a motorway as important (29%).
However, only a minority of Aucklanders actually live within close distance of good public transport services. According to PhD research by my colleague Saeid Adli, less than one in ten Aucklanders lives in a neighbourhood where they can access more than 50,000 jobs in a thirty-minute public transport commute. This is significantly below the share that say they would like to live in such a place, which indicates significant unmet demand.
In a similar vein, the Vancouver research I cited earlier finds that 20% to 30% of people living in “auto-oriented” neighbourhoods would prefer the opportunity to live within walking distance of more destinations. Meanwhile, only 3-12% of people living in walkable neighbourhoods would have preferred to live somewhere auto-oriented.
How can we get the choices we want (and need)?
In other words, people want to live in places that give them transport choices, but can’t. How did this happen, and what can we do about it?
Historically, the disciplines of urban planning and transport planning have adopted a “one size fits all” approach to meeting people’s needs and desires. If the average commuter drove a car, policymakers responded by building lots of roads, and neglecting public transport, walking, and cycling. If the average business provided a parking lot for customers and employees, policymakers responded by regulating to require every business to provide a similarly-sized carpark. If the average household needed three rooms and a backyard, policymakers responded by subsidising the construction of many standalone houses – and regulating the alternatives out of existence.
This is an absurd approach and it must change. Housing and transport policies must recognise the diversity of needs and desires that different people have, and respond by providing or enabling choice. While not everyone wants to live in a neighbourhood that offers the “five D’s”, many people would quite like the opportunity. Why not give them that choice? It’s good for them – and it’s likely to be good for the rest of us too.
As of today it is exactly one year away till the end of voting for the next local body election. That means talk about who will and won’t stand is only going to increase in coming months.
Unlike in central government elections, transport tends to be one of the key issues at the local body level which in many ways is unsurprising because voters see and experience the issues locally and it’s an area that councils actually have a large influence over – unlike topics such education, health, the economy or welfare.
For the next election we expect transport to continue to be one of the key topics and as such want to see candidates better informed about transport and what’s happening regardless of their political views. Our hope is to raise the level of the debate higher than it has been in the past. To do that we want to create a resource that all candidates can use to learn more about what’s happening with transport in Auckland and what’s being done overseas. Given the amount of issues to discuss this will be a multi part series.
The last decade has seen fundamental shifts in how Aucklanders travel. For many decades Auckland has developed in a way that has made it very difficult to get around without driving. As such metrics like vehicle ownership and how much we use private vehicles showed a near constant increase. The increase was such that transport planners and engineers felt confident in predicting this would continue indefinitely into the future.
Around 15 years ago the way Auckland developed started to change as proximity to the city centre returned to being valued. Changes in our urban form combined with a number of key transport strategic investments as well as cultural changes – particularly from younger generations – are completely upending transport models that predict how Aucklanders travel.
The distance we travel in vehicles has flat-lined despite a rapidly rising population and on a per capita basis is the same as it was over a decade ago. The chart below shows how this has changed over time compared with the results per capita.
A good example of just what impact the change in demand is having is seen on the Harbour Bridge. Traffic volumes today are lower than they were a decade ago. This means they’re well short of the growth predictions the NZTA made as part of the last assessment into another harbour crossing. One strong factor in the change in demand has been the Northern Busway which I’ll cover off later in the post.
The change in demand for driving is something that has been seen all over the world and has thrown out transport models. The example below from the Ministry of Transport shows how we’ve continued to predict growth in travel that hasn’t been realised.
As a result of the changes being seen the MoT have started to think about what might happen in the future. Below is a brief summary of the four high level scenarios they think could expect. As you can see the modelling in three of the four scenarios expect driving to decrease over time.
The changes in driving trends raise questions about whether we’re investing in the right projects for the future.
Over the same time that growth in vehicle travel has stalled, travel via public transport has increased dramatically – albeit off a much lower base. In the last decade the number of trips on PT have soared from 50 to 80 million and a large chunk of that growth has come from some of the key investments that the council and government have been making.
On an average weekday there are now over 200,000 bus trips and around 50,000 rail trips
Patronage growth is occurring at levels well ahead of population growth which also has meant that the number of trips taken per person per year has risen from around 37 in 2005 to over 51 in 2015. This is a significant improvement however it remains well short of many of our comparator cities.
One of the stars of the show over the last decade has been rail patronage which has risen from less than 4 million to around 14.5 million. This growth has been generated as a result of investment in Britomart, double tracking, station upgrades, service improvements and most recently electrification. It is currently growing at over 22% per year and on track to reach the 20 million target set by the government for the City Rail Link in around 2017/18.
Another huge success has been the Northern Busway which didn’t exist a decade ago. Figures from Auckland Transport show it now carries at least 3.5 million trips per year with many others benefiting from the investment. Now during the morning peak up to 40% of people crossing the harbour bridge are doing so on a bus which is more than double what it was in the early 2000’s.
One area the growth in public transport use been considerably noticed is in the city centre. Research conducted in 2014 showed that the number of people accessing the city centre in the morning peak had increased considerably however the number doing so by car had remained the same. The two biggest contributors to the growth in PT trips to the CBD have been the work to improve the rail network and the creation of the northern busway.
These results are also similar to the census data from 2013 which shows that the modeshare of cars is slowly declining. The question only asks about trips to work however we would expect the change to be more pronounced if it also compared others such as those travelling for education purposes.
What is clear is that transport trends are changing and it’s already having a profound impact on the way Aucklanders choose to get around.
In addition to this there are also changes in trends of what people want to see invested in. In numerous surveys and consultations from council and independent organisations including the AA the general public have strongly supported much greater investment occurring in public transport and cycling. One example is the feedback from the council’s recent Long Term Plan consultation where a huge number of people made it clear they wanted more investment in alternative modes.
There are a number of other examples here.
In future posts I’ll look at aspects such as what’s currently being done in transport, what the current plans for the future are and what are some alternative ideas including case studies from overseas.
Some beautiful videos from our friends Chris and Melissa Bruntlett at Modacity Life have made for Arlington, Virginia.
In the Spring of 2015, the Modacity team was invited to Arlington, VA, for a very special project. Working closely with BikeArlington, a division of the county’s transportation department, we had the privilege of following six Arlingtonians around for the day by bicycle. Each of the individuals and families profiled have unique stories, but one thing connects them – the humble bicycle. Edgar uses his past experiences as an immigrant to help those new to the country, while also understanding the importance of passing on his knowledge to his own daughter. Natalie has combined her passion for sustainable change with her business knowledge to become a successful bicycle real estate agent. Grant and Gillian break convention not only with family roles but also by living car-lite. Annie, as a way to adjust to relocation and change, uses dance to connect to the audience and the people around her. Nonie is a new empty-nester rediscovering her adventurous spirit with her sister by her side. And finally, Chris and Rachael use bicycles as a way to not only overcome Rachael’s Leukaemia but also to strengthen their father-daughter bond. It was an honour to be able to share each of their stories and showcase what it is that makes Arlington a beautiful place to live and ride.
One of the biggest news stories this last fortnight has been the Volkswagen emissions cheating scandal. In a “wildly illegal” strategy spanning many years, Volkswagen deliberately ‘cheated’ on emissions tests of its diesel vehicles, with software which could identify when the car was undergoing a test, and activate emissions controls only during those times. 11 million vehicles were affected, across a number of brands (including Audi and Skoda). The fallout has included the CEO resigning, a 30% drop in share price, and huge cost to the company (they’ve set aside €6.5 billion for starters).
The “emissions” at issue were nitrogen oxides, which are local air pollutants, contributing to smog and respiratory diseases. I don’t think they’re considered greenhouse gas emissions (correct me if I’m wrong) – nitrous oxide certainly is, but it’s not emitted by diesels.
Diesel cars have been popular in Europe (more than 50% of the car fleet in some countries) because they create less greenhouse gas emissions than petrol cars. They use 30% less fuel, but diesel has about 10% more energy, so on the whole they’re 20% more efficient. The downside is that they tend to produce more pollution – nitrous oxides, microscopic solid particles and the like. “Clean diesel” cars supposedly have plenty of hardware and software in place to help reduce their polluting.
These pollutants are supposed to be tightly regulated, since they can have such a big impact on air quality in cities. But that’s not much help if manufacturers figure out ways to beat the system.
And whether or not it’s being done deliberately, many cars from other manufacturers don’t meet the standards when they hit the roads either:
Road tests of more than a dozen popular models from several manufacturers showed that the raw nitrogen oxide emissions from the cars were on average seven times European standards, according to a little-noticed October report from the same outfit that flagged the VW problems.
Indeed, experts said it could very well be that the high levels of real-world emissions reflected in the ICCT report show not that firms are cheating, but only that it’s all too easy to design a car that passes governmental lab tests for emissions. Once outside the lab, those cars fail in real-world conditions.
Nick Molden, chief executive of Emissions Analytics, a British firm, said that in recent years, Europe had put in place two new standards for tailpipe emissions, each one stricter than before.
“But there was no improvement in air quality,” Molden said. “That was the alarm bell. These results suddenly explained why every major European city has an air quality problem.”
The problem, he said, is that the governmental certification test in Europe “is so gentle. It’s 20 minutes in a lab.”
It’s hard to replicate real-world conditions in a lab, and it’s no surprise that when manufacturers know how they’re going to be tested, they design cars that are designed with those tests in mind – with less consideration to what happens on the road.
Plus, the gap between theoretical performance and on-road performance is an issue for greenhouse gases as well. I wrote a post last year based on a Ministry of Transport presentation:
“Essentially, vehicles have always tended to use more fuel on the road than they do when they’re being tested. But the performance gap has gotten larger [for Japan and a number of European countries]. Car manufacturers are becoming very adept at designing cars to do well in the tests, but not on the road”.
As an aside, NZ has a much higher proportion of diesels in the fleet than the US, but we’re much lower than Europe. 8.3% of our ‘light passenger vehicles’ (i.e. cars) and 68.4% of ‘light commercial vehicles’ (i.e. goods vans and small trucks) are diesels. Looking at the number of diesel vehicles which have entered our fleet in the last few years, I would have guessed that there are probably thousands of VW-made vehicles in New Zealand which are affected, but the head of Volkswagen New Zealand has said ‘hundreds’ and plans to give more info this week, so he will probably provide a more precise figure.
Madness has set in over changes a bus stops in Grey Lynn
Public transport upgrades in Auckland’s Grey Lynn have residents and business owners worried.
Auckland Transport is planning to upgrade the bus stops at the Surrey Cres shops to make them more accessible for public transport users.
However members of the community are concerned about the village becoming a bus hub.
Business owners and residents Darryl Ojala and Soala Wilson say the new stops will have a negative effect on the town centre.
Both are campaigning to move the bus platforms out of the village.
The proposed upgrades will see the extension of the stops outside 586 and 531 Great North Rd, which would provide space for two bus routes.
At the public meeting in April 2015 business owners voiced their concerns, which included the loss of parking for their customers.
However AT spokesman Mark Hannan says the new bus stops will have greater benefits for the village and points to the “public transport strategy of having public transport to places where people do business”.
Hannan says three car parks will be lost as part of the redesign.
Ojala and Wilson formed a working group with other business owners and residents. They have drawn up alternate options for AT which would see the platforms moved 35 metres out of the village towards the Surrey Hotel.
“We are definitely not anti-buses and we encourage people to use buses but we want our area to be kept as a village,” Wilson says.
Yes they definitely are anti-bus as moving the bus stops out away from the shops has about as idiotic as it gets. For more there’s also this column in the Ponsonby News on page 22. The whole thing seems ridiculous so here’s a bit more information about what’s going on.
The whole thing began in February when AT originally proposed making changes. They want to improve safety particularly at the intersection with Surrey Cres and want to cater for a greater number of buses that are expected to use the route in the future. AT say that a minimum of 8 services per hour per direction will travel along Gt North Rd and pass through Grey Lynn. They also need to move the bus stop that’s outside 134 Williamson Ave as that’s the location of a new fire station.
To improve safety they want to add a new pedestrian crossing across Gt North Rd and for buses they proposed to extend the existing main bus stops, close one outbound stop and move the 134 Williamson Ave stop closer to the town centre. All of this would have resulted in the removal of 12 car parks.
It’s the removal of those carparks that first got some in the community upset and making comments such as none of their customers use buses. Some even said they want more vehicle lanes and traffic sped up.
In terms of bus usage HOP data show that over a six month period which includes the slow Christmas and New Year period over 7,000 people boarded at the city bound stop.
Following the initial feedback Auckland Transport have even taken the step of conducting a parking survey and pedestrian intercept survey – which asks pedestrians how they got to the area. The results are quite interesting.
For the pedestrian survey they had over 1,000 responses over four different days including weekdays and weekend days. They found that despite the retailer’s claims, over 50% of people in Grey Lynn got there not by driving. This is similar to many other studies which have confirmed that often retailers have no clue about just how their customers arrive.
The report also states:
It is worth noting that on Saturday a surveyor overhead a retailer encouraging respondents to complete the survey and state that they travelled to the Grey Lynn town centre by car.
Most who left Grey Lynn did so via the same mode they arrived on with the biggest difference being over 20% who arrived by foot departing on a bus. Given the low car and bus share the results suggest there isn’t that much hide and ride going on.
When it comes to spending there are some differences with drivers having a slightly share of spending in the higher brackets but not considerably higher.
For the parking occupancy survey they found that the area seems to be and well below parking thresholds.
So the short outcome of these two bits of research is that parking isn’t an issue and most people to the area don’t drive.
Following all of this AT have come up with a new version of the plan that while largely still the same makes a few minor changes and means that there will only be a net loss of three carparks as mentioned in the article at the start.
As I understand it most retailers and the local board are happy with this outcome however there is a select group who continue to fight it and as mentioned in the article want the existing bus stops pushed out of area. I’m quite not sure where things are at right now but in situations like this at what point to AT keep consulting?
Auckland Transport have announced that construction will start next year on an upgrade to the Pukekohe Station, turning it into an interchange with the buses that will serve the area.
Construction will begin in the first half of 2016 on the upgrade of Pukekohe Station to a new bus-train interchange.
The project, being delivered in partnership with the NZ Transport Agency, is expected to cost about $13 million.
The upgrade will feature a park and ride for about 80 vehicles, a six-bay bus interchange, cycle parking, a covered walkway and a new canopied pedestrian over-bridge linking buses to trains. Auckland Transport is about to begin work on detailed design.
The new bus-train interchange is at the heart of the new public transport network to be rolled out across Pukekohe and Waiuku by October 2016. New bus services, operating every 30 minutes, seven days a week from 7am to 7pm, will connect to trains at the interchange.
Temporary bus stops will be in place during construction to allow the new network to operate smoothly until the interchange is completed in mid-2017.
The new public transport network is designed to maximise the efficiency of the entire public transport network between buses and trains and provide more frequent journeys to get around south Auckland and the rest of the region.
Franklin Local Board Chair, Andy Baker, welcomes the proposed changes to Pukekohe Station.
“We all know about the pressures of growth in the wider Pukekohe area and the challenges we currently have with our rail based public transport.
“The upgrade of Pukekohe station is incredibly important as we try to make travelling by rail more attractive to people and this is actually something that we can control.
“Creating the ability for people to transfer between buses and trains, together with the improved bus networks in Pukekohe will hopefully reduce the need for people to park their cars in and around the station.
“Similarly, we want to really promote the use of bicycles to get to and from the station, especially with Pukekohe being a relatively flat and easy place to bike around. I am keen to see additional things like a coffee cart or café at the station and a reflection of our history there as well.”
Councillor Bill Cashmore says it’s great that improvements are on the way for Pukekohe commuters.
“It’s a huge growth area and I’m pleased to see we are finally getting a transport interchange that will be able to cope with the increased demand.”
Auckland Transport Project Director, Nick Seymour, says the new interchange will make it easy to use the new bus services being introduced with the new Pukekohe public transport network.
“Pukekohe Station will be at the heart of the area’s new public transport network, so one of our priorities is to provide a modern and accessible interchange that connects commuters both locally and to the wider region.”
Key features are likely to include:
- A six-bay bus interchange
- A covered walkway between the new bus stops and station over-bridge
- A new canopied pedestrian over-bridge, linking the buses with the rail platform and Station Road with stairs and lifts thereby making it more accessible
- A park and ride facility for approximately 80 vehicles
- Cycle parking facilities
- Plans to provide public toilets within the interchange area
- Improved pathways leading to the interchange
- Improvements to the Manukau Road and Custom Street and Harris Street intersections to aid bus movements.
A public information day has been organised on 14 October 2015 at Pukekohe Station from 5 to 7 pm for members of the public to speak with the project team and get their questions answered.
Auckland Transport will also be engaging with mana whenua, Franklin Historical Society and the Franklin Local Board to identify possible opportunities to incorporate cultural and historical connections into the design.
Here is the confirmed bus routes that will serve the Pukekohe area
Now if we could also get some wires strung up between Puke and Papakura along with some additional trains to run on the tracks that would make things even better.
Every month we report on what’s happening with public transport patronage however Auckland Transport also report on many other metrics too such as how roads are performing. In this post I’ll look at some of those other metrics.
Instead of just measuring traffic volumes, AT use a measurement called Arterial Road Productivity which is a based on how many vehicles, how fast they’re travelling and how many people they have in them. To me this seems like a very bad metric primary because it only seems to count people in vehicles. It could also be interpreted as encouraging bigger and faster roads as a way of improving the metric which goes against many of the city’s wider goals. In saying that another way to improve the result could be improving vehicle occupancy so therefore bus lanes which speed up buses carrying more people will improve productivity. Regardless it seems that AT is performing quite well and is above target.
The second metric is AM Peak Arterial Road Level of Service and as you can see even then around 80% of arterials aren’t considered congested.
The next set of charts look at how a number of key freight routes are performing. For each of these routes AT have a target for how long it should take to travel. As you can see for almost all of the routes the target has been at least met and some such as on Kaka St/James Fletcher Dr/Favona Rd/Walmsley Rd the target has been significantly exceeded. If the results here are indicative of other parts of the road network then they certainly don’t support calls from the freight industry for significant projects such as the East-West link.
Parking obviously plays a big role in transport and AT measure occupancy rates for both on street and off street carparks. On street parks are only measured quarterly and the result is based on top four busiest hours of the day at each of the three sites around the city centre. The last survey occurred in August and as you can see at the upper level of AT’s target. This suggests there’s possibly room to increase prices to better manage demand.
Occupancy at AT’s off street carparks have dropped quite a bit recently which is almost certainly attributed to the change in parking prices at the beginning of August.
One area that isn’t looking great is road safety with the number of deaths and injuries 6% above target.
While AT don’t publish monthly traffic volumes, the NZTA does for some selected state highways. The one we look at closest is the Harbour Bridge which is currently experiencing a growth rate of around 1% p.a. Compared to the other state highways that the NZTA publish this appears incredibly low as most are experiencing growth of around 5% annually – although off a lower base.
Overall – with the exception of road safety – it seems that our local roads are not performing too badly.
Transport evaluation, and urban policy in general, invariably requires us to make trade-offs between the present and the future. When we invest in the built environment – roads, rails, buildings, etc – we are expending today’s resources on projects that will primarily benefit people in the future. Conversely, decisions we make about resource use today – e.g. how much greenhouse gas to emit – will impose increasing costs on future generations.
Individuals also make decisions that involve trade-offs between the present and the future. For example, most home-buyers take out a mortgage, which allows them to spread the payments over a long period of time in exchange for paying a bit more in interest charges. For the borrower and for the bank, the interest rate paid on the debt reflects the trade-off between repaying the debt today or repaying next year.
Of course, there are also other ways that individuals make trade-offs between the present and the future. They may, for example, spend money on their children’s education, even though the “returns” from doing so are long-term and indirect. Or they may vote for policies that cost them money now but return long-term benefits, such as environmental protection or pre-funding of superannuation.
The trade-offs that governments make between present and future are codified as discount rates, which describe how much of a “discount” we place on future outcomes relative to present outcomes. For example, a discount rate of 10% means that the government would value a benefit of $100 in a year’s time as being equal to a benefit of $90 today.
Transportblog’s previously taken a look at the discount rate issue here, here, and here. But others are also engaged with the issue. Back in August, University of Michigan economics professor Miles Kimball, who had been visiting the Treasury, strongly criticised its approach to discount rates. The key point in his critique is that the Treasury’s discount rates don’t accurately reflect the financial market returns currently available to the government:
There is an extremely strong argument against using an 8% real discount rate in evaluating government projects. I think the argument below can be sharpened to become institutionally relevant.
Basically, an 8% real discount rate makes no sense to use unless the New Zealand government is actually getting an 8% real return on funds that it saves. It is not enough for someone to claim that the New Zealand government theoretically could get an 8% real return on funds it saves when that is not true or is only theoretical because the New Zealand government would never actually do that with funds saved by not doing a project.
Just to be clear, my view is that (a) all projects that are better than putting the money in the Superfund should be done, and (b) if someone claims that a project is worse than putting money in the Superfund, then money should be put in the Superfund instead, and (c) if a project looks better than paying off some of the debt by buying bonds–or, almost equivalently, good enough that borrowing at the bond rate to do it looks like a positive present value–it should also be undertaken UNLESS the government is willing to issue additional bonds to put more money in the Superfund invested in risky assets.
I’ve skimmed over a lot of the substance of Kimball’s argument, which I encourage you to read. (Warning: it’s wonky.) After Kimball’s blog post, former RBNZ economist Michael Reddell wrote a blog post defending the Treasury’s policy. Reddell’s counter-argument is that financial returns to government is the wrong measure of the time value of money:
I was struck reading Kimball’s material that the cost of the government’s equity did not get a mention. There was a strong tendency to treat the government as an autonomous agent (like a household) managing its own wealth, whose low borrowing costs depends only on the innate qualities of the government and its decision-makers. But that is simply wrong. A government’s financial strength – and ability to borrow at or near a conceptual “risk-free” interest rate – rests on the ability and willingness of the government to raise taxes (or cut spending) as required to meet the debt commitments. That ability to tax is implicit equity, and it has a cost (an opportunity cost) that is considerably higher, in most cases, than 2.5 per cent real. So long as the government will raise taxes as required, the bondholder bears none of the downside if a project goes wrong. But shareholders – citizens – do. Bearing that risk has a cost, and that cost needs to be taken into account by government decision-makers.
There is a related argument sometimes heard that governments should do infrastructure projects rather than private firms simply because the government’s borrowing costs are typically lower than those of a private firm. But, again, that rests on the power to tax, and the ability to force citizens/residents to pay additional taxes has a cost from their perspective (even if the government never chooses to exercise the option). As citizens, the possibility that the government will raise taxes (or cut other spending programmes – eg NZS) impinges on our own ability and willingness to take risks, and hence to consume or invest in other areas. That often won’t be a small cost. The opportunity cost of the government not undertaking a project is not what, say. the NZSF might be able to earn on the funds, but what citizens themselves might prefer to do if that risk-bearing capacity was freed up.
Again, I’ve skimmed over Reddell’s argument, so I’d encourage you to read it in full if you’re interested. He throws in a brief jab at road projects with low BCRs:
We have too little disciplined analysis of the costs and benefits of most government projects, and too little willingness to allow decisions to be guided by the results of the analysis when it is undertaken (did I hear the words “Transmission Gully”?).
I can see some truth in both sides of the debate. Kimball’s got a good point, which is that current government borrowing costs (and financial market returns in general) are at historic lows, which should lead to lower government discount rates. But Reddell’s also correct that it’s appropriate to set discount rates based on wider social decisions about consumption and investment.
One issue that neither of the two grappled with in detail was the question of how risky government investments actually are. Kimball touched on that briefly, arguing – essentially – that the benefits of projects will inevitably rise in the future due to people’s greater willingness to pay for public goods in the future:
A good method of risk adjustment for projects is to think seriously of the real dollar value they will have dependent on the level of real consumption in the economy. One virtue of thinking about the adjustment this way is also that it provides a reminder that the dollar value of the flow of benefits from many projects will tend to increase in the future simply because trend increases in per capita income will raise the willingness to pay for those benefits.
Frankly, I don’t think this is correct. Changes in technology, changes in prices, and changes in preferences mean that infrastructure that’s useful today can easily become a stranded asset tomorrow. Look at Los Angeles: in the 1950s it was rushing to rip up its rail lines, and now it’s rushing to build a new rapid transit network. Or look at San Francisco: several of the elevated expressways it built in the 1960s have been torn down.
In short, things change. Sometimes they change quite radically. When the Ministry of Transport looked at future transport demand last year, they found that they couldn’t settle on a single forecast for future transport demand. Instead, they arrived at four scenarios, three of which entailed a decline in vehicle travel:
In other words, there can be considerable uncertainty in returns from transport investments. While it might not necessarily be appropriate to try to account for this in discount rates, it’s surely an important consideration for project evaluation more generally.
What do you think about discount rates?
A quick reminder that this is the last day to submit on the Nelson St cycleway. I’ve written about the issues with Auckland Transports proposals here and here. I’ve suggested that one option would be to keep the cycleway on the western side and to use Market St as a way to access the Waterfront and beyond. A few others have also suggested using the oversized Hobson St viaduct and reader Jonty has created some images of what that could look like. Here’s his view.
As a cyclist and city dweller who this cycle lane affects directly, I’m concerned about the plans for the connection between Nelson St and Quay St.
As you already know, Sturdee St is heavily used by cars, buses and heavy trucks. Putting crossings all over it is not only going to slow cyclists down while they wait for the green bike, but it will slow down this major road as well.
Market St as an alternative would require changes to nose-in parking to become parallel to make more space, to the detriment of The Parc residents’ parking spaces.
If Market St was used, the Viaduct area in front of the bars and restaurants wouldn’t be a good option for cyclists as they would constantly be running into pedestrians (although some cruisers might like to go that way). Customs St West is earmarked for trams, so there may not be room for cycle lanes here (possibly why you suggested the Viaduct option?).
This fugly thing should be removed. It takes up heaps of space and turns the whole area into a horrible dodgy carpark waste of space. If the flyover was removed it could be a nice, open-air place for all the modes to get though. However that means redirecting all traffic that goes up it to somewhere else.
Those massive support poles are wide enough for a cycle lane on their own. But let’s assume for now that the council doesn’t want to go ahead with this plan yet, although they have talked about removing it previously. Maybe it is in their long-term plan. So what about now, how should the Nelson St cycle way connect to Quay St?
What about this option? Take one lane away from the flyover and turn it into a cycle lane.
Cars coming off Princes Wharf would only get one lane to go straight. The other one would need to be a left turn only lane. Cars coming from Quay St still have their normal 2 lanes to go up the flyover. Their 3rd lane, the slip lane, can stay and the pedestrians can manoeuvre around the air-bridge poles like normal. No expensive changes. Just paint and some concrete separator things. Cyclists would need to have their own crossing lights for the intersection, like at the Beach Road diagonal, but this would be the only lights needed that AT haven’t already budgeted for.
The cycle lane would continue up the flyover on the right hand side, separated from the 2 road lanes with a raised thing like on Nelson St. By the way, I’ve made these cycle lanes classic green, I’m not sure about the pink yet.
At the top of the flyover the cycle lane would turn free right onto the footpath that is currently there and extremely under-used. Most pedestrians walk along Sturdee St where the many buses drop them off/pick them up, or they walk along the Southern side of Fanshawe St where there is a nice new wide footpath.
Cars coming off the flyover still have 3 lanes as it widens at the top. Currently they have 4 lanes but this is overkill, as there are only 2 options from this intersection; turn right or go straight. So with 3 lanes the left lane goes straight, the middle lane can go either way, and the right lane turns right.
At the end of this cycle lane it would join up to Nelson St and there are no carparks lost, no extra intersections to encounter and no extra crossings in front of buses, trucks, etc.
These are great images from Jonty and really highlight an opportunity that AT seem to be missing. Given the dual needs to connect Wynyard and Quay St I think both this and better connections to Market Place are needed.
What do you think and if you haven’t already, don’t forget to submit as it closes at 5pm today.