Accelerated Project Costs

The government aren’t the only one discussing budgets today as the Auckland Council are holding a session of their budget committee. It will see the council discuss the recently approved Accelerated Transport Programme which has been brought about by the introduction of a $99 levy per residential property to pay for transport. I’m not sure if the councillors who have since written to Len Brown asking to discuss the levy again will be able to do so or not. As we know the Transport Levy allows for around $170 million a year worth of extra investment in Auckland for three years. We already have a rough idea of where the money will be spent, this is shown below.

interim-programme

We also had a decent idea of what projects will be funded and it looks pretty good – although for most of it we didn’t know just how much money had been assigned to individual projects. One part of the agenda for today’s meeting finally gives us that detail. The most interesting parts are in Attachment A & B.

The first attachment lists each project in the council’s overall Auckland Plan Transport Network (APTN). Three separate columns list how much the was budgeted for the project over the next ten years based on the APTN, the do not much Basic Transport Network (BTN) and a third column what will the outcome is under the levy funded Accelerated Budget.

The tables show there has been quite a bit of change among some projects, presumably reflecting additional thinking that has gone one since the LTP analysis was done. As an example some projects have been re-scoped which has resulted in increases or decreases in costs or changes in timing has brought funding forward that was previously outside the 10 year horizon of the LTP. An example of some of the changes are below.

LTP Accelerated Plan project changes example

However changes over the 10 year plan are in some ways a bit meaningless as there will be another LTP in three years that will likely rehash the priorities and also have to deal with changes in funding that will likely result from the proposed Transport Accord. As such it’s only really worth focusing on the next three years and the tables below show just how much funding is proposed for each project over that time. Unfortunately it’s not the highest quality but if needed click through to the PDF linked earlier to get a slightly better version.

LTP Accelerated Plan Budget

LTP Accelerated Plan Budget 2

By the time you read this the council will likely have already discussed this item so feel free to add to the comments if any changes happen.

Thoughts on a Transport Accord

Over recent days and weeks the suggestion of an agreement between the Council and the Government – a Transport Accord similar to the Housing Accord agreed to in 2013 – have grown stronger and stronger. It’s easy to see why an accord would be desired from both parties. The council want a secure source funding from the government to help address the city’s growth. Similarly the government seem keen to have more definition around the cost implications but also there seems to be some political motivations at play. I think they want to be seen to be doing something and I suspect they may also want to get an accord signed before the main local body elections heat up as it’s likely transport will be a major talking point.

While there’s a lot of talk that an accord there’s not a lot of detail about just what it may entail. That’s because what work that has already happened is firmly behind closed doors and will likely stay that way for some time. The media so far have largely being playing the idea that an accord is primarily about agreeing on a set of projects and this has focused a lot around Simon Bridges interview on The Nation just over a week ago when he said he dismissed rail to the airport. I increasingly think that his comments reflect more of an ideological hiccup than any serious discussion that’s been had. By that I mean that when pushed to name projects that shouldn’t be on the list he retreated to the only one possible. For ideological reasons it had to be a rail project as criticising road or bus projects would have just made the rest of his comments seem absurd and it couldn’t be the CRL as the government have already committed to that – albeit not in the time-frame it is needed.

Thinking through what’s actually been said about the accord so far it seems that perhaps it’s not so much about specific projects but instead something more fundamental. Below are a few excerpts from recent articles. First from the interview on The Nation

What would a transport accord do exactly?
First and foremost, alignment. It would mean that— I think the questions you’re asking me would be answered. We’d have a sense of agreement on the problem, on the congestion numbers. We’d have a sense of the priorities and what we’re trying to achieve. Is it that fewer big projects, more projects around the city, or what is it? And then it’s that mix of projects that at the moment we don’t know.

And from Saturday in the Herald.

“It’s really about seeing if we can get better alignment between Government and council on transport priorities,” Mr Bridges said. “We’re conscious that we don’t want to make this too pointy-headed but it will be a quite complex, involved process, taking at least a year. We want to test each others’ assumptions and see if we can get alignment on the numbers.”

What we appear to be seeing is a continuation of the same kind of response from the government that was seen in the wake of the City Centre Future Access Study. Basically the government and it’s ministry’s don’t even agree with Auckland Council/Transport on key inputs into the decision making. That includes assumptions like how fast the city will grow (i.e. population or land use etc.), how costs and preferences will change and likely many other areas. They also don’t agree on the outcomes we should be focusing on i.e. should we be discussing congestion or access and how should the outcomes be measured.

The reason those aspects are so important is that sometimes even small changes in the assumptions you use or the outcomes that you need to achieve can significantly change the types of projects that will be needed. What’s more the less agreement there is between these fundamental issues the more changes there is for politicians to swing priorities without basis. An example is like the ruler in this video below. The ruler represents transport policy with the tip being specific transport projects while the finger represents the impact that politicians have. Currently we’re like the fourth example and swinging around like mad from even a little political pressure. Where a transport accord should hopefully be useful is to move us more towards the first example where there political pressure doesn’t exert that much change in policy

Essentially the process sounds like it’s doing a back to basics approach first and justifying each and every step and this time ensuring that all groups agree on the details. While that’s not necessarily a bad thing it does kind of seem like redoing much of the planning work that AT have already been doing over a number of years. Given the amount of work AT have already done I’d then expect the results to come out similar to what they have already shown in planning documents like the RLTP. I covered whether Auckland has an effective transport plan just over a week ago. Here’s one of the outcomes showing a substantial lift in public patronage over the 30 year window from the more expensive plan.

pt-patronage-modelling

Just how the transport accord will end is unknown however I would hope that at least at a technical level there would be some fairly close alignment in most of the inputs and outcomes needed.

In saying all of this I think that in any criteria there also needs to be recognition from the government as to just what Aucklanders say they want for their city. This is especially important if the people making these decisions are sitting in a desk in Wellington. We have a good idea of what residents want from the LTP consultation as shown below and it is backed up by other surveys that have been conducted over the years. Just measuring outcomes based on impacts of a few measures such as congestion or required vehicle flows could lead to distorted and negative outcomes such as removing pedestrian, cycle or PT infrastructure in a bid to find more space for cars, the very things Aucklanders say they want more of.

2015 LTP Final Changes in transport Investment

Lastly I also hope that a Transport Accord could lead to innovation in how we plan for transport in Auckland. I think it’s absurd that given the interrelated nature of the regions transport systems that we have different organisations planning local roads/PT, state highways and rail projects. While I know the various organisations do work together there still seems like there’s a disconnect that leads each organisation of focus on their specific areas rather than seek the best overall solution to Aucklands issues. Perhaps it’s time for at least the planning and financing functions to be joined into one team – even if physical implementation is left with the various organisations.

Council/Government battle heating up

It seems the fight between the council and the government is turning into an all-out war. The first front was on housing where Building and Housing Minister Nick Smith threatened to override the council who are refusing to approve three SHA’s in rural Kumeu because of a lack of supporting infrastructure. The second front was opened up by Transport Minister Simon Bridges on Saturday who attacked the council’s transport plans saying they don’t have the right mix of projects to deal with congestion well enough in 20-30 years-time. When pressed the only project he could think of as a project that he didn’t agree with was rail to the airport. I’ve already covered off how the refinements that AT have been making to their plans appear to be making them more effective.

Yesterday Prime Minister John Key joined in the battle.

The jump in rates is due to the council’s decision to implement a flat levy on households to fund the city’s future transport needs. Households will fork out an extra $114 a year over the next three years for cycle and bus lanes, regardless of the value of their home.

The Government has ruled out giving the council the power to implement a fuel tax.

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

The Government has also called on the council to rethink plans to build from the airport to the CBD.

“If they want more tools for funding, I think they have to demonstrate to everyone they have the right strategy,” says Mr Key.

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

Firstly I’m not aware of many houses that don’t have access to a road. By talking about people needing roads to where they live it seems as if he’s trying to bring in some reference to the special housing areas issue. If so then he’s quite off the mark as people aren’t living in those places (yet). It also seems he’s getting his housing and employment figures for the CBD mixed up however some of that kind of be excused, he was talking in the heat of the moment. The things that concerned me the most are:

The short term thinking – we’ve spent decade after decade doing the quick, easy and cheap options for building suburbs and it’s left the city a mess with poor public transport, walking and cycling options. One of the key reasons given at the time for having a single council was to break through the short term thinking and why the government required a 30 year spatial plan which is meant to provide a more strategic approach to how the city develops. By just quickly throwing in roads it’s likely we’ll have to go back in 5, 10, 20 years and retrofit everything to fix up the mistakes that will inevitably be made.

The ‘We know Best’ attitude – Auckland is no small rural town, in creating a single council the government set up an organisations with access to a lot of expertise and resources. When it comes to transport expertise I suspect AT is on par with staff from the NZTA and the two work very closely together. In fact they are so close the CEO from the NZTA sits on AT’s board and the NZTA have their logo on AT’s plans. Given all this it’s hard to fathom how exactly government staff conducting any rational investigation would be able to come up with any radically different solution.

The lack of an alternative plan – So far it seems the government just want to sit on the side-lines throwing rocks Auckland without actually presenting any alternative vision for the future. As mentioned just above it’s hard to see how the government could suddenly find a massively different solution to Auckland’s needs. Perhaps the timing and state of some projects such as rail to the airport might not be right but the project is 10-20 years away which is plenty of time to make adjustments if they are needed. It seems that the real reason behind the governments stance is simply for some political power game.

It’s not just about the CBD – The government and the media have talked a lot about how the councils plans are very CBD centric however it’s clearly untrue. One of the key purposes of the New Network and integrated fares is to make it easier to travel across town and transfer between services. It significantly boosts frequency all across the urban area and is shown best in the maps from yesterday showing the difference in frequent services from now to 2018. Yes there are projects in the CBD however they’re also projects that have regional scale impacts.

RPTP Proposed 2015-2018

If the government is playing some form of power game it would help if they got their numbers right. Yesterday Radio NZ’s Todd Niall published this excellent piece about the figures both Bridges and Nick Smith were brandishing around in public. In essence both have been caught out using wrong or misleading figures to push their arguments.

Another good piece on the issue has come from Tim Watkin over on Pundit.

If Key holds this line and refuses Auckland the power to act, he’s very much at risk of getting on the wrong side of the politics heading into 2017. The biggest bit of feedback from the recent council submissions was “get on with it”. Aucklanders may have run out of patience with Brown, but they (especially those under 40) will quickly run out of patience with a government that’s stopping the building of better public transport.

And as we all know, lose Auckland and you lose elections.

But worse, you can forget flags and surpluses. If National doesn’t let Auckland get on with it, Key’s government will have a legacy (like National governments of the 1950s and 1970s) of stopping Aucklanders getting the transport networks – and therefore quality of life – that the country’s biggest and only international city needs.

At this stage it’s very much looking like we’re heading down the road of another government leaving a nasty transport legacy in Auckland and if the previous ones are anything to go by, future residents will not be impressed.

John Key and Simon Bridges, show us your plan.

Does Auckland have an effective transport programme?

Yesterday the Council made a fairly momentous decision to adopt the ‘Interim Transport Programme‘ that enables significant extra investment in public transport, cycling and safety over the next three years. While this decision means a good transport programme can be pursued in the short-term, it doesn’t yet solve the longer term transport funding issue that Auckland faces. I haven’t yet seen the ‘line by line’ budget detail, but I imagine that in years 4-10 of the LTP there are still some significant funding issues (although not as bad as under the Basic, which was particularly light in the first three years).

Many organisations are now saying the Council and government need to work together to agree on a long-term funding solution for transport in Auckland – be it a motorway user charge or something else. This has led to a number of questions for transport minister Simon Bridges in the past few days. Last night’s Radio NZ interview provides a pretty good summary of his response:


Or listen here.

This mirrors comments the Minister made in the NZ Herald a few days ago:

Transport Minister Simon Bridges said the Government did not believe the council had an optimal transport plan for the medium and long term.

“We are not going to be putting in place funding tools where we don’t think there is a good plan and at the moment we just don’t see that in terms of congestion and public transport,” he said.

He would engage with Mr Brown over the next year or so to come up with a plan that would satisfy the Government.

We have long criticised the 30 year Integrated Transport Programme that Auckland Transport published in 2013, as both unaffordable and ineffective at achieving many of the Auckland Plan outcomes that were supposed to guide it. In fact that criticism led us to create the Congestion Free Network, a plan that would better deliver on the outcomes sought by the Auckland Plan at a far lower cost than what was in the first version of the ITP. To Auckland Transport’s credit, it seems like they’ve spent a lot of time in the last couple of years reconsidering the first ITP and trying to make it deliver more at a lower cost. Their rapid transit network (from here) looks remarkably similar to the CFN – for example. A full update to the ITP must be coming along at some point (presumably after the LTP is finalised), which will offer the opportunity to assess the 30 year programme in a bit more detail.

However, the final section of the draft Regional Land Transport Plan provides us with some initial information about the extent to which the transport programme might be considered effective or optimal over the next 30 years. Some modelling outputs of key performance measures are shown, looking at PT patronage, access to employment and freight travel speeds. Firstly in the area of PT patronage:

pt-patronage-modelling

The Auckland Plan network is modelled to have an increase in PT use from around 77 million trips at the moment to what looks like around 230 million by 2046. Depending on what Auckland’s population is at that time, we may not be far off 100 PT trips per capita, double what we achieve now. We know from experience that our transport models tend to underestimate patronage so in all likelihood I think patronage will grow faster than this. Either way it’s clear the plan will deliver massive PT growth, and also that there’s a material difference in the use of PT under the Basic and Auckland Plan networks.

Next, looking at access to employment by car:

pt-patronage-modellingSo much for the Minister’s insinuation that the Plan leads to massive growth in congestion levels and a terrible transport future for those who continue to drive. From this modelling we can see a high proportion of jobs accessible within a half hour car commute in 2046 than was the case in 2006, despite huge population growth over those 40 years.

As for public transport:

pt-access

There’s a huge improvement in the proportion of jobs accessible by a reasonable length PT commute, from under 15% to nearly 30%. With population growth this is likely to mean a ‘many times over’ increase in the number of jobs people can access within a 45 minute PT trip (presumably including wait times etc.) While the level of access is still below private vehicles, meaning that PT is not yet a true “mode of choice” under this plan, it’s clear that investment from 2006 to 2046 will make things a lot better.

The graph for freight travel speeds I think mistakenly shows percentages rather than average speeds, but highlights that in the AM peak under the Auckland Plan network speeds stay roughly the same over time, a pretty impressive accomplishment with so much growth projected over this time period:

freight-speeds

Overall many of these modelling graphs included in the RLTP appear to tell quite a different story to what Simon Bridges is going on about. I wonder whether his advisors are still reading the 2013 Integrated Transport Programme, rather than the more recent version? I also think it’s about time that rather than say there’s something wrong with Auckland’s Plans he actually gives a vision for how he thinks the city should develop.

Council and Government fight over sprawl

The Auckland Council and the government have locked horns over the council rejecting three greenfield Special Housing Area (SHA) developments in the North West of Auckland. At the heart of the matter is who should pay for the infrastructure needed to support the development. There is already a lot of pressure on existing infrastructure as well as council budgets and the council have (in my view) rightly chosen to focus on fixing or at least improving the existing transport network first. Increasing rates by the amount likely to be needed is almost certainly not going to impress existing ratepayers and nor is cutting much needed projects in other parts of the region.

Auckland deputy mayor Penny Hulse is defending the council’s decision to reject three special housing areas proposed for the city’s rural north-west under the Auckland Housing Accord.

The council maintains that before there is any further growth in the rural area the Government needs to commit to much-needed transport infrastructure.

The government-driven accord with the council is half-way through its three year life. It has the goal of accelerating home building and creating new residential sections.

The rejection of the three special housing areas is the first manifestation of growing tension between the accord partners over the burden on ratepayers of providing services to large rural housing developments.

Ms Hulse chairs the council’s development committee and told Morning Report that with the Government cool on council ideas such as motorway charges and a transport levy, it needs to help build projects such as a dedicated busway on the Northwestern motorway.

“It’s quite appropriate for us on council’s behalf to stand our corner and our ground for the people of Auckland,” she said. The refusal did not mean future growth would never be allowed.

The council have instead said they will focus on SHA’s in existing urban areas “which already have good levels of infrastructure service”.

UP - North West growth

The proposed “Future Urban” area around Whenuapai and Kumeu is is shown in yellow

 

In response Building and Housing Minister Nick Smith is threatening to override the council

“The Government also the power to create special housing areas without the approval of the Auckland Council, if they choose to overplay their cards and demands for money,” he said.

“The legislation makes plain that the Government’s strong preference is to work in co-operation with the Auckland Council, and to work on these issues together and those arrangements are still robust.

“If the Auckland Council overplays its card the legislation does make provision for the Government to approve SHAs without the approval of the Council.”

As reader Liam Winter pointed out on twitter, the legislation states that there needs to be confirmation that sufficient and appropriate infrastructure will be provided to the development.

Nick Smith also said

Dr Smith said the council could recoup infrastructure costs from the developers and once the houses were built $1 million of income is created for every 300 new ratepayers.

He said if the Government was to create special housing areas on it own, under the legislation it too could levy developers for the cost of infrastructure.

“Now I’ve got developers in Auckland who are willing to meet the cost of the infrastructure, who are wanting to get on and build their homes who feel frustrated with the Auckland Council that they won’t get on and deal with them, and that is why we’re going to continue to put the pressure on the Auckland Council.”

Auckland is already getting more than a third of the Government’s capital expenditure for transport infrastructure, but Dr Smith said the Government would consider spending more.

In some ways the government taking on the infrastructure burden and levying developers could be a good way for them to understand the pressures councils (and not just Auckland) are facing. Of course balancing that out is the thought that they would likely push for the cheapest and most auto dependant infrastructure they could.

As for developers willing to meet the costs – I wonder if that’s the full costs or just the ones directly inside their development. It’s an important distinction as developers have always been required to fund infrastructure inside their developments however it is up to the council to build the infrastructure leading to the development. To make matters worse development contributions only cover a small portion of the actual infrastructure costs. As an example the massive Mill Rd project in South Auckland is expected to cost up to $800 million yet there are only planned to be about 24,000 new dwellings in the area. The council’s draft development contributions policy states that in the South they can only collect about $3,500 for transport infrastructure. That means all up to build Mill Rd to support that growth existing ratepayers and taxpayers could end up subsidising the developments to the tune of around $30,000 per dwelling.

It’s that massive subsidy from ratepayers/taxpayers as to why the council is right oppose the government on this issue

Prior to this it also appeared the council were in a no-win situation. The government has long made it clear by their words and actions that they don’t like Len or the council. Further no matter what the council do the government have continued to shift the blame for housing to the council. By fighting back I guess the council see there is a more of a chance of getting a better outcome.

It seems to me that no one (other than the developers) will really benefit from this stouch. As such below are a couple of quick thought experiments as to the outcome.

  • If the government do help to fund more infrastructure do they then open themselves up to more calls for assistance not just from Auckland but other regions too. In addition they have recently been focusing on trying to shore up their regional support following the Northland by-election. Giving Auckland more money won’t be too popular with the regions.
  • If the council backs down other projects will need to be cut or rates increased to pay for the infrastructure. That’s not going to be popular with ratepayers.
  • If the government overrides the council and also forces the council to pay for the infrastructure then not only would ratepayers probably be unhappy but it could affect the next local government election.

After the initial bluster from both sides it’s now likely we won’t hear too much more publicly with both sides likely to take their bickering behind closed doors. I just hope the council continue to have the courage to stand up to the government for what is right for Auckland.

The “Interim Transport Programme”: a game-changer

The big news to come out of last week’s Long Term Plan announcements was a big boost to transport spending over the next three years to be funded through a “transport levy” of $99 per household and $159 per business per year. As Friday’s NZ Herald editorial noted, this was a somewhat inevitable outcome given the Basic Transport programme outlined in the Draft LTP was terrible over the next few years (interchanges to support the new PT network were delayed till 2021, there was no walking and cycling funding for the next five years etc.) while the Auckland Plan network required government agreement on new funding tools, something that wouldn’t be possible in the timeframes of setting the budget from July 1 this year.

The “transport levy” enables an additional capex spend of approximately $523 million over first three years of the LTP period – approximately $170m per year with a bit of inflation for years two and three. This is being called the Interim Transport Programme. Budget Committee documents released on Friday highlight where that extra money will be going – still at a summary rather than project by project level of detail. It generally looks pretty good – here’s a quick overview by part of the budget:

interim-programme

The increase to public transport, walking and cycling is very significant. The report goes on to provide a bit more detail in what can be achieved with the extra funding. Firstly for public transport:

PT-interimSo the new PT network can be rolled out successfully – no more need for stupid compromises like we saw with consultation on the western network. ATs bus priority works can go ahead which should also see significant length of new bus lanes added, the ability to run double-deckers on much of the network and a major programme of improvements to bus stops. What the report says about light-rail is also quite interesting, that further planning and investigation is required before budget can be allocated.

The next area to see a big boost in investment is walking and cycling taking advantage of the Government’s Urban Cycleway Fund:

WC-interim

A $124 million walking and cycling investment over three years is a huge increase on what we’ve been doing in recent years (around $10 million per annum) and a huge opportunity to make a step change in the quality of infrastructure provided for cycling in particular. This should mean sufficient funding is available to fund Auckland Transport’s exciting cycling programme that was discussed a couple of weeks ago. Together with solely government funded projects, or cycling as part of other major projects, more than $200m is proposed to be invested over the next three years.

Increased funding for eliminating the Sarawia Street level crossing, advancing rail to the airport (SMART project) by making sure the new Kirkbride Rd interchange as allows for a rail line in they future (it’s insane that this wasn’t part of the project from the start), ensuring AMETI can maintain momentum (it was essentially paused for five years in the Basic programme) and providing a major boost to safety funding are also big winners from the extra money that’s now available.

CRLmajorprojects-interimBeyond the first three years of the LTP the funding drops back to what was in the Basic – as the transport levy is meant to be a “stop gap”. However, because some projects have been brought forward from the outer years, there’s now some capacity to add in a few more projects to years 4-10 of the budget. These are listed below:

outer-years-LTP

Probably the most interesting addition here is the $43 million for the Northwestern Busway, which is excellent news and responds to the clear need for this project sooner rather than later. With the bulk of the busway likely to be funded by NZTA (as per funding of the Northern Busway), it seems quite possible the busway could start construction within the next 10 years.

Overall, and without yet seeing all the details of the updated transport budget, it seems that there has been a good prioritisation of “what gets added in” with the extra money available. The extra investment in making the new PT network a success and making a step change to the level of walking and cycling funding are clear highlights and mean that this really is a game-changer of a transport budget for Auckland.

A Transport Levy for a more balanced Transport Plan?

Yesterday the Mayor Len Brown presented his amended proposal for the council’s Long Term Plan (LTP) which follows on from the public submissions and surveys. The most significant change from the draft that was consulted on is in the area of transport. Len seems to have heard the message that the government isn’t about to agree to tolling or regional fuel taxes to pay for the council’s massive transport wish list and that if it is going to happen, it will need a lot more discussion and work between the two parties.

As an interim step he’s proposed a three year targeted transport levy of $99 for residential properties and $159 for business properties – that’s roughly $2 & $3 per week respectively. That levy is said to be enough to fund just over $170 million worth of extra investment a year or about $500 million over three years.

As a comparison the LTP documents that talked about either motorway tolling or a combo of regional fuel taxes and rates was to raise enough money to cover around $300 million in extra investment a year. As such Len’s proposal represents just over the half of that.

We frequently criticised the council for its build all plan that would have required all that extra funding and called for a middle ground to be found that prioritised the projects that Aucklanders have repeatedly said they want more focus on – public transport and cycling. And of course we weren’t alone in this suggestion with Generation Zero creating the Essential Transport Budget (ETB) that explained this idea in more detail. Both the AA and the NZ Council for Infrastructure Development  (NZCID) also called for a middle ground to be found although they didn’t specify what projects should be included. The table below shows the transport area’s submissions to the LTP said should have more or less focus.

2015 LTP Final Changes in transport Investment

I think that aiming for enough money to fund $170 million and doing so through a targeted levy is probably a good outcome. It means there should be enough money to build the good projects we need while retaining some pressure to ensure the council and Auckland Transport focus on high value projects that will actually deliver good outcomes. I think one area there could be some contention with the transport levy is in the fact it’s the same flat rate for all residential/business ratepayers. That means there’s no differentiation based on property capital value like there is with rates and as such is likely to hit lower income households more than higher income ones.

The council haven’t released the full details about what extra projects will go ahead however Len did mention these ones specifically were included. All figures are over the next three year period

  • Busways to the North and Northwest
  • Increase walking and cycling funding from $14 million to $124 million (including $75 million from the Government and NZTA).
  • Increase the network wide safety programme from $28 million to $111 million
  • Bringing forward some PT interchange projects
  • Electrification to Pukehoke
  • Park & Rides at Papakura, Westgate and Silverdale
  • Tamaki Dr and Ngapipi Rd safety and amenity improvements
  • Improvements to Lake Rd
  • Road sealing budget in Rodney to increase from $3 million to $10 million

That seems like quite a good list but as mentioned we will really need to see the full details first before commenting further. Some of these – such as busways to the North West – don’t seem practical to be built in the next three years so any funding is likely to be around the planning work needed.

Now that some of the council meetings are also being recorded and published online you can now see the debate if you’re interested. The two video’s below include Len presenting his proposal however you can also see the councillors questions in the other video’s available here (Governing Body – Item 11). The transport part is in the first video and as part of it Len also confirms the government is open to working on a transport accord.

The second video above is also interesting as it contains the comments from Councillor Cameron Brewer. I say interesting as Brewer has a history of being quite hostile towards Len and his priorities however he now appears to be quite supportive and even called on Bill English to add a line into the governments upcoming budget for their 50% share of the City Rail Link (from about 17 minutes). He also put out this press release on his support for Len’s rates proposal and the transport levy.

As mentioned earlier the transport levy have given the council three years to work on getting the government over the line. It seems to me that once ratepayers have adjusted to the extra money on their rates bill that the levy is something we could see stay much longer than three years as an easier alternative to implementing other funding mechanisms such as tolls. This wouldn’t necessarily be a completely negative thing either as the reduced funding compared to the tolling/regional fuel tax options would hopefully help AT remain focused on high value projects that will improve accessibility by all modes.

Not everyone is happy though, Michael Barnett from the Auckland Chamber of Commerce has called the levy a lazy way to raise money.

“I would hope that the capital raised will go to fast-track the big inter-generational Auckland projects that will make a measurable difference to reducing congestion.”

“The last thing Auckland needs from this proposal is for the ‘interim levy’ – really a targeted rate – to become a permanent fixture in Council’s revenue provisions,” said Mr Barnett.

Auckland still needs to see serious action by Auckland Council to seek new revenue sources other than ratepayers, make smarter innovative use of its $40 billion-plus asset base and achieve efficiency savings by focusing spending on core activities.

“The use of ratepayers this way – while an interim measure – is outmoded and will be seen as unfair to the many property owners who make little use of the transport system or are retired and asset rich but have little spare cash.

It also seems that Transport Minister Simon Bridges isn’t happy with the mix of projects the council has planned based on his responses in Parliament yesterday. He repeated variations of the text below a few times, just which projects he thinks should be prioritised is unknown though.

What I certainly can say is that we are always interested in ways to reduce congestion in Auckland and ways to improve public transport. In fact, what we have seen so far in terms of Mayor Brown’s preferred plan in Auckland does not do that sufficiently in the 2030s and 2040s. We want to work with him, with the council, and with Auckland to make a better, more optimal plan that does deal better with congestion and public transport.

There are also some more comments by Bridges in this article.

Overall the Mayor’s announcement yesterday is a good outcome however as mentioned we really need to see a list of just what projects are in and which aren’t.

Monte Cecilia (car) Park

With housing such a hot topic right now this article in the Herald on Sunday highlights a situation of the council removing houses for that most Auckland of things, a carpark.

About 40 residents of Auckland’s council-owned properties face being kicked out of their homes to make way for 44 carparks.

Residents of a quiet Royal Oak cul de sac in Auckland have been told their council-owned flats and houses backing Monte Cecilia Park could go, possibly by December.

Eight properties – including blocks of flats – will be cleared to make way for 44 carparks to access a new playground, shown on plans for the reserve. Currently park users have to rely on streetside parks.

Letters have been sent to residents in homes and flats in Korma Rd telling them their properties will feature on park maps.

“Inclusion of this property on the map does not imply the public has access to your property but as the land has been purchased by Auckland Council and will become part of the park in the future it has been included in the map,” said the letter.

“We don’t have a firm date for the house removals but it is likely to be at the end of 2015 or during 2016.”

Auckland Council sports and parks manager Mark Bowater said the council had bought homes in Korma Rd between 2006 and 2011 under a strategic plan to develop the park. He said it could be some of the properties would be needed for carparking and a new playground. All residents would receive formal notification from the council to move out either later this year or next year.

It baffles the mind that the council would even consider doing this and given the size of the park at over 11 hectares even a playground should easily be able to fit within the existing footprint without anyone feeling like space is being taken away.

Monte Cecilia Park

I suspect there’s much more to this than the Herald have just said in their article however I did want to point out a couple of specific aspects that caught my attention.

If parking is such an issue then instead of demolishing homes then why not come to an agreement with the church across the road to use their car parking when it’s not being needed. That would help get better utilisation out of that space. Of course there’s the issue of the church wanting their own parking but I’m sure arrangements can be made (also even if the council did build a carpark what’s the chance they too would they be used up by church goers?)

Korma Rd - church parking

On the other side of the park, car parking was added a few years ago. How much parking does this park need?

Monte Cecilia Park new parking

I understand some consultation about the park has only just closed – and unfortunately the council have taken the documents down already so it’s hard to see just what they are proposing for the site but at a first look it seems crazy to even think of demolishing those houses for a (presumably free) carpark.

Toil and trouble; economy burn and housing bubble #1

Auckland’s house price “bubble” has been in the news a lot lately. Stories such as this one suggest large profits are being made in Auckland’s property market. And this one, which suggests growth in house prices is outstripping growth in salaries.

The first story suggests that if you’re an investor, then you’d be a mug not to invest in property in Auckland. The second story suggests that if you’re looking to buy a home, then don’t delay because you will only see you get left further behind. Either way the message is the same: Get out and buy now.

Even if I find it unconvincing, many people do seem seem to believe this narrative. House prices have almost doubled since 2006, and the rate of increase has accelerated since circa 2012, as shown below. This also highlights how it’s a uniquely Auckland phenomenon.

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The Reserve Bank seems to think this is an issue, and I tend to agree with their judgment. The reason the RBNZ are concerned, of course, is because rapid escalation in asset prices can be followed by rapid falls, which can in turn threaten financial stability.

In this post I want to look at some of the fundamental drivers of Auckland’s house prices. The key question is whether price rises are being driven by demand, supply, or both?

In this recent video John Key suggests that the Government views lack of supply as the primary issue. That is, the escalation in prices is being driven by a lack of new house supply, partly due to local government restrictions. Someone close to him may want to show him the graph below, as I think it might prompt a rethink (credit to Peter Nunns for pulling this together).

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That is, we do not find a relationship between the elasticity of housing supply and changes in house price for 17 OECD countries in the period from 2000-2014. This suggests that increasing the responsiveness on the supply side hasn’t necessarily been able to reduce prices elsewhere in the OECD.

Now don’t get me wrong: I think a more responsive house supply is worth pursuing nonetheless, because it will result in more houses being brought to market when they’re demanded, and vice versa. But there’s going to be a lag between this policy changes designed to increase supply side and that supply becoming available. So while I support efforts to make our house supply more responsive in the future, this does not seem unlikely to keep a lid on prices right now.

Instead, it seems fairly clear that if (and it’s a big “if”) we want to prevent house price escalation now, then we need to address the demand side of the equation. In a future post I’ll look at potential policy measures, but let’s first identify and discuss some of the different demand drivers:

  1. Population growth is driving increased demand for owner-occupied dwellings: Auckland’s population is growing rapidly and this is largely good news, i.e. more locals are having babies, fewer locals are leaving (or coming home), and more migrants are choosing to live in NZ, especially Auckland. Reducing population growth is not really a viable proposition, as it basically means either making it less desirable to stay here and/or harder to migrate here. And it seems likely to be the sort of thing that risks over-shooting and heading into negative territory. Population growth does cause problems, but from what I can tell a lack of population growth would be even more problematic, and harder to turn around once it got started.
  2. Investment this seems to have two components, domestic and international. Domestically it seems like Auckland is attracting capital from around the country. This might be caused by some capital flight from Christchurch and/or a lack of population growth in many rural regions. International investment is likely being driven by increasingly liberalisation of capital flows, NZ’s open economy, low rates of property taxation (see below), and Auckland’s persistently high ranking in international liveability indices. Reducing demand for investment properties really requires policies that reduce the investment returns from property. This applies equally to domestic and international investors.
  3. Renters: The demand for houses is also affected by the number of people who are prepared to rent. Data suggests more people are opting to rent, which is indirectly serving to take demand out of the market for houses. In comparison to other countries NZ seems to lack long -term protections for tenants. It may be that increasing protections for tenants, or creating a more long-term market for tenancies, would make renting more attractive and in turn help to take heat out of the house market. In this context, it seems to be an odd time for the Government to use KiwiSaver to deliver subsidies to first home buyers (and thereby stoking demand).

For now it looks like the Government is not prepared to make a move on demand; I find their reluctance perplexing for one main reason: New Zealand collects a relatively low share of tax revenue from property compared to other OECD countries. Research by Arthur Grimes and Andrew Coleman (usefully summarised by Interest.co.nz) suggests New Zealand collects 5.7% of our taxes from property versus 8.3% for the OECD. In this context, it seems highly plausible to suggest that some of the demand Auckland is experiencing may stem from relatively low rates of taxation on property.

In my next post I’ll look at potential demand-side policy responses in more detail. But for now I’d like to hear your thoughts; these issues are complex and I don’t pretend to have a monopoly on knowledge and ideas, in fact far from it.

 

City Centre Investment Map

The last five years have seen Auckland change dramatically for the better. If you were in the city then you wouldn’t have found any of the shared spaces, much of the area surrounding Britomart was still run down and unused and Wynyard Quarter as a people place didn’t exist. While we’ve already seen a lot of change the next 10 years promises even more and much of it – such as the CRL – will fundamentally alter Auckland for the better.

In fact there is so much going on in Auckland’s City Centre right now that it’s starting to resemble a sand pit. There are a huge number of publicly and privately funded improvements happening. Importantly they are leveraging off each other to make Auckland a more liveable and attractive place. That’s good for Auckland’s economy which in turn is good for the entire nation. It also bears reminding that the changes and growth that’s occurred in recent years hasn’t spelt doom on the regions roads as all the growth in travel to the centre has happened not on in cars but via PT and active modes.

To highlight all of the known changes that are planned or desired for the next decade the council have created a map showing all the ones they know about (there are bound to be more appear over that time – especially private developments). Note: not all of these projects have funding confirmed yet so not all might happen. Click to enlarge the images or go here for the PDF version (2.6MB).

City Centre Projects April 2015

City Centre Projects April 2015 Legend

There are of course a few things missing from this map. A few I noticed quickly are AT’s Light Rail plans, Cycle lanes on Pitt St as part of the Nelson St Cycleway and cyclelanes on Karangahape Rd as part of the city centre priority routes.

The major criticism I can see in all of this is that the map is focused on the city centre. That’s understandable seeing as it’s come from the city centre integration group however perhaps the council should create an interactive version for the entire region. It could show what’s going on and how projects like the CRL benefit the entire region.

I’m looking forward to the changes that planned. It should make the city centre a much more vibrant and interesting and liveable place.