There was an excellent op-ed in the Herald yesterday by Auckland Chamber of commerce chairman Michael Barnett related to the Integrated Transport Programme as well as the debate surrounding the issue of funding. The herald piece missed off the last few paragraphs so here it is in full from the Chamber of Commerce website.
If a business plan was signed off by the Board of a listed company knowing that it set out an investment programme that would deliver a negative result, there would be one outcome – they would lose the confidence in their investors.
The just released Integrated Transport Programme predicting worsening congestion in Auckland even if we find the extra $400 million a year needed to finance the Auckland Plan’s transport projects falls into that category. It charts an unacceptable future for Auckland.
The document that was signed off by the Boards of both Auckland Transport and the New Zealand Transport Agency (NZTA) should concern Aucklanders and have them look at our political masters, who signed off a 30-year Auckland Plan from which the transport programme has been compiled. Isn’t their job to provide the leadership for building a thriving Auckland, and for which transport is set out in the Plan as an enabler?
The one saving grace of the Programme is that it is honest. It plainly states that even with the $25 billion invested to build by 2021 projects like the Central Rail Link in the central City and AMETI and East West Link in south Auckland, within 30 years Auckland’s road congestion will be worse than current levels in cities like Sydney and Melbourne, which already have much larger populations.
But it offers no solutions. At the moment Auckland cannot even fund the transport infrastructure investment programme we have agreed and want to do, let alone the further initiatives needed to head off the worsening congestion long-term.
Auckland needs and deserves the certainty of knowing we have a transport plan for the long game.
As I view our situation, at all levels, the decisions that need to be made right now are business-like leadership decisions – and the ground has never been as well prepared as it is now for a leader to step up to the plate and make the big calls required.
There are four things that need to happen – and fast.
First, while Aucklanders debate how to fill the $400 million a year shortfall needed to finance the immediate Auckland Plan transport projects, Auckland Transport and NZTA – our transport infrastructure and service providers – need to be demanding and seeking a much improved business-like performance from the existing transport system.
Train and bus services must be re-organised to run on time and become reliable; they must lift their game and not leave passengers waiting at stations and stops. Auckland Transport must quickly introduce integrated timetables between train, bus and ferry services, provide secure parking for cars at suburban bus and train stations, and ensure train fares are paid. They must micro manage a much improved performance from the bus and rail systems.
With some trust and certainty that these micro improvements make a real difference, I am confident thousands of Auckland commuters would leave their cars at home – and would be keen to do so.
Second, the funding shortage debate must be brought into the real world.
The debate has quickly revealed a preference for a user pay approach – network tolls or a cordon – rather than increasing rates. There are two parts to the debate – to find revenue to ensure major projects are built within the Plan’s timeline, and to bite the bullet with congestion management scheme by 2021 to head off the predicted worsening gridlock.
However, we are starting this debate without knowing what we are going to invest in or what level of return we will get from making this investment. We are not planning the funding solution in a business-like way.
The business case for the major projects has not yet been done, so there is no informed way to confirm what the measurable benefits of the projects will be.
It is remiss, surely, to promote a debate on options to raise the $400m/yr to invest with no idea of the likely return. It is like going to a banker seeking a loan for a million dollars without disclosing what the money will be used for.
Of course, the first question the bank will ask is: What do you want the money for? And the next question will be to determine whether the return on the investment is sound – does it stack up?
Third, there is no way of knowing what the rate of return to the economy has been from the billions of dollars invested in Auckland transport infrastructure in recent years – either roads or public transport – the work to make this assessment has not been done.
In general, returns on investment will depend on the nature of the projects themselves.
Judging from improved traffic flows where new motorway links have been built, suggests that the investment has been value for money. The Western Ring Route corridor benefits were calculated to be $1.40 for every $1 invested and something in the order of 1500 jobs.
Similarly, shifting Auckland’s main railway station into Britomart has seen a big jump in passengers regularly using rail.
But even though some $1 billion a year has been invested in improving Auckland transport infrastructure since about 1990, there is no firm, quantitative basis for claims about the impact of this investment on Auckland’s economy and growth. We don’t really know what it has done to boost Auckland growth and productivity.
Fourth, we must stop talking about the cost of transport infrastructure and manage it as an investment.
Auckland’s contribution to New Zealand in dollar terms is significant. A 2006 study indicated that some $18 billion in revenue being paid from Auckland against which about $14 billion was returned to Auckland in services and investment.
There is no argument from Auckland about the huge central government investment going towards the Christchurch rebuild. But when you look deeper into the NZ Inc performance, you see that its economic engine room – Auckland – which generates a third of the nation’s GDP and provides a third of its employment, is still performing well below the bottom line.
Next week’s Budget is expected to confirm NZ Inc is on an official track to budget surplus by 2014/15, a stable government (i.e. business-like leadership?), and low-levels of public debt compared to our peers in the Northern Hemisphere.
And if we deduct the cost of the investment NZ Inc is contributing to the Christchurch earthquake recovery, then the country as a whole is doing fairly well.
Assuming the business case for Auckland’s major transport projects show a positive return for the Auckland economy, it is then reasonable to ask why central government shouldn’t underwrite a fair share of the investment – which is what it is, an ‘investment’ in Auckland and New Zealand’s growth-led future.
The scale of the investments required is clearly beyond Auckland Council’s rate payers. A substantial central government input will be required, and that is the call our Mayor and Councillors should be focusing on – encouraging government to do what it is obviously going to have to do.
They have a choice. They can let Auckland’s transport congestion get progressively worse and only act when the problems become intolerable, or they can take a business-like response and plan, invest and advocate for investment in delivering a long-term solution.
We all know the problems. We all know the solutions. We all know what actions are needed. And we know who should be in charge of taking the decisions.
And dare I say it again – it’s urgent!
As Michael kind of notes, the real problem and funding gaps stem from the Auckland Plan. The Auckland Plan is meant to be the vision, the document that lays out the out level outcomes that we want to achieve and rough strategy we need to get there. For the most part it does this very well however when it comes to transport, the politicians couldn’t help but fall out of the sky and start naming individual projects that needed to happen. This left us with a massive wish list and more than a few projects that are likely never to be justifiable and/or that actively work against many of the goals set out in the plan. Because these projects were specified in the Auckland plan, they were then fed into the Integrated Transport Programme unsurprisingly poor results.
Those same projects also created a funding gap of $10-$15 billion. This led to the creation of the consensus building group (CBG) who were tasked with finding the best solutions to bridge that gap however the CBG were unable to question the projects on the Auckland Plan wish list. To me that leaves the entire exercise seeming almost like a waste of time.
As Michael suggests above, we need to actually go back to the start and work out which projects we can build that will lead to a positive outcome. It is likely to mean that many projects on the existing list simply get chopped off or replaced by different ones that provide a better overall outcome. We also need to acknowledge that we simply cannot solve congestion by building more roads. That doesn’t mean that there aren’t improvements to the existing roads that we could make to make them more efficient but it won’t solve the long term issue, as Patrick said yesterday what we feed grows. Only with a proper reassessment of our transport projects can we really then start to have a conversation as to how much extra funding, if any, is needed. At that point the work already done by the CBG will come in handy.
Overall I think it is an excellent piece from Michael and there is only one small part that I don’t agree with him on which is the part about ensuring carparking at train and bus stations, an issue Stu addressed last week.
Peter Nunns is an economist working in Auckland with an interest in transport past, present, and future. (Disclaimer: The opinions expressed here are his personal views and do not reflect upon the position of any organisation with which he is associated or constitute professional advice.)
The recent discussion document released by Keep Auckland Moving states that Auckland faces a transport funding gap of $10-15 billion over the next three decades. This reflects the difference between expected funding and the projected costs of the projects identified in the Integrated Transport Plan.
Previous analysis published on Auckland Transport Blog (links) has found that the lion’s share of these costs are related to a few high-cost road projects like Puhoi to Wellsford and the Additional Waitemata Harbour Crossing that duplicate or upgrade existing routes.
I’d like to go a step further and suggest that the supposed funding gap does not need to exist at all. Auckland doesn’t lack for road capacity – in the most car-dependant parts of the city it would be physically impossible to devote further space to cars – but it does not manage road space very efficiently. We are dealing with an infrastructure productivity problem here, and proposing to fix it by spending more money on further infrastructure that we will then use equally inefficiently.
Several recent international studies have found that the best way to improve road transport outcomes is not to add capacity but to implement mechanisms to manage demand more efficiently. In particular, they single out road pricing as a way to minimise congestion and keep roads clear for higher-value traffic.
One is from the McKinsey Global Institute. It argues that better use and management of existing infrastructure could deliver large savings relative to projected investment needs. Like the Integrated Transport Plan and the Keep Auckland Moving discussion document, it surveys global infrastructure requirements over the next several decades – and finds that planned spending falls short by trillions of dollars.
Unlike the ITP, however, the McKinsey report goes a step further and considers how we could avoid or forestall this investment by using existing infrastructure more productively. It estimates that better management of demand and infrastructure delivery would reduce the need for investment by 40% – a massive saving when you consider the cost of building infrastructure.
These interventions are far more cost-effective than adding additional capacity – as the comparison chart below shows, the benefit-cost ratios of demand management projects tend to be an order of magnitude higher than merely adding capacity.
A second study from Australia’s Grattan Institute examines the state of Australian cities and identifies congestion as a major impediment to improved productivity. But, as with the McKinsey report it argues for road pricing as a less expensive and more beneficial alternative to adding capacity.
A third, earlier study, the 2006 Eddington Transport Study from the UK , concluded that road pricing would be a cheaper and more economically beneficial alternative to a massive investment programme. It concludes that road pricing could deliver economic benefits of GBP28 billion a year by 2025.
In the words of the report:
Ironically, the Keep Auckland Moving discussion document is on the verge of a sensible answer to Auckland’s infrastructure productivity problems. The second option identified in the report includes road pricing as a revenue raising mechanism. It envisages raising over $250 annually by 2031 using a charge of around $2 on parts of the road network.
However, as the document goes on to note in passing, “charges at this level also achieve significant travel benefits” and that they could be “adjusted over time to help manage transport demand”. In other words, road pricing would help to reduce congestion and hence reduce the need to fund additional road capacity. If that’s the case, why not just implement smart road pricing, reap the rewards of reduced congestion, and save on the billions of dollars of road projects in the ITP that would no longer be necessary, or wouldn’t be needed so soon?
The transport funding “Consensus Building Group” released its discussion paper on the different ways to raise extra money for transport spending on Monday. As I noted at the time, it’s a pity that the group was forced to limit itself to how to find the money rather than prompting a more detailed discussion around whether the Auckland Plan has the right mix of transport projects or whether the future traffic growth projections are correct. One thing that is worth noting though is one of the graphs in the document which compares the available funding over time with the required level of expenditure:
While a gap between available revenue and “required” expenditure starts to grow almost immediately, the biggest “lump” in the gap is created by the very large level of spending in the mid 2020s – presumably on the stupid Waitemata Harbour Crossing project. It would be extremely interesting to see this entire debate recast with that project excluded to see the deal with the funding gap then.
Nevertheless, setting the issue of whether projects make sense or not aside for a moment, perhaps the most interesting thing to come out of the report’s findings is a comparative analysis of the impacts of the two ways in which the additional funding could be raised: either by continuing to hike up existing funding tools or by adapting to new fundings tools like congestion charging and what’s called “motorway network charging”. Here are the proposals of the Group in a nutshell:
Looking first at “option 1″, this is largely a continuation of existing revenue raising tools – although it also looks at the (re)introduction of a regional fuel tax. One of the big question marks about this option is the extent to which it’s feasible or desirable to keep ramping up fuel taxes, rates or a combination or the two. Another question mark is whether you really get significant improvements to the transport network because this options has a bit less of a travel demand management focus than option two:Turning to option 2, this is a greater level of change from the current ways of raising transport revenue and include a variety of “sub-options”: different types of road pricing or a motorway network charge. The big advantage of this option is that, depending on the details of the scheme eventually chosen, it’s quite possible there will be a greater impact on travel demand and therefore the option could lead to much greater levels of benefit in the longer run:Perhaps what is most frustrating about the way in which this debate is happening is that it would be really interesting to have a discussion about road pricing and other alternative transport funding tools (I still like the off-street parking levy, for instance) as a partial replacement of the current ways we fund transport – rather than in addition to them. It’s just too easy to see the public not being prepared to pay yet another tax to support a series of transport projects which won’t actually make things any better.
Campbell Live has been running a lot of stories on Auckland issues recently which has been nice to see and has obviously also provided us with a heap of material to talk about. Last night the entire episode was devoted to transport in Auckland. There were three parts to the show, the first was the kind of story done by news organisations from time to time where various staff members try to reach a specific location using various transport methods.The second section was the most interesting as involved Gerry Brownlee actually giving an interview on Auckland transport issues while the third section was about a lady who was having trouble topping up her daughters Snapper Hop (SNOP) card. I’m not going to look at the third section primarily because the SNOP card will hopefully be phased out soon although you can watch it here if you are interested. Here is the first two sections.
The First Section
If you haven’t watched the video, a bunch of staff were tasked with reaching their office in Eden Terrace by 9am using only public transport and it it seems the first mistake they made was by using the Maxx website to plan their journeys. To be fair there isn’t a lot of other options, yes there is Google and some apps but MAXX is what Auckland Transport provide. However the planner seems so woeful and doesn’t seem to ever have improved, AT really needs to put the thing out of its misery and replace it with something more modern. That said the results were not unexpected but also show how vital it is to communicate the benefits of the high frequency new bus network and that a lot of effort is made to make transfers easy. Further not all of the journeys were practical to take by PT, Lachlan Forsyth’s trip for example shows the benefits of commuting by bike and it would be better to encourage more people to do that where appropriate.
The Second Section
This was of course the most interesting and the part where I at times felt like pulling my hair out. To cover this I’m just going to go through bullet point my thoughts.
- At least Brownlee admits that Auckland is growing and that the transport problems will only get worse. It also seems that he has now read the report, something he hadn’t done before ruling out some of the options in the funding proposals a few days ago..
- Brownlee repeats quite a few times that Auckland is getting $1billion in transport spending annually. The emphasis he places on it makes it sound like Auckland is gobbling up the spending but in reality, it is less than 1/3 of the total transport spend in the country. It would have been good for Campbell to ask him how much Auckland provided in fuel taxes annually.
- I actually agree with Brownlee when he questions whether the suite of projects in the Auckland Plan are the appropriate ones and if they are timed right. However I don’t think that we would agree on what projects should be dropped or having their timing changed.
- Brownlee is asked his thoughts on the CRL and he is either trying to be deliberately misleading or has been badly informed. He suggests the project is about a short little loop that goes around in circles. This is exactly the kind of reason why it is so important that Auckland Transport actually publicly state the routing pattern that trains will use so that people can see it is about opening up the entire rail network. To put it another way it will have the same impact on the rail network that the Central Motorway Junction does for the motorway network.
- Brownlee talks about how the cost of the project is $3 billion which of course is an inflated and then rounded up figure. He also repeats the lie that Steven Joyce loved to use, that the government is spending $1.6 billion on the rail network. The reality is $600m was approved and budget for from before this government came into office while half of the remaining amount is a loan that Auckland is having to pay back.
- I’m really glad that Campbell actually asked him where he would spend $3 billion differently, as I pointed out yesterday, it is really important that people who oppose what is being planned actually say what they would do differently (not that Brownlee did). It was almost comical that Brownlee then went on to list a whole suite of road projects the government has already built or is building.
- At first I thought it was really odd the way that Brownlee talked about AMETI and whether that would happen as it is well under way and he has even visited the construction site. Re-watching the video, it then becomes clear that he is talking about a reviving of the eastern motorway. Did Brownlee just let slip that the government is now considering building it? It would certainly fit in with some whispers I have heard.
- Brownlee’s comment that “Aucklanders like roads” really does take the cake. For 60 years this city only ever invested in roads at the expense of almost everything else, it isn’t surprising then that most people drive when that has been made the easiest thing to do. The recent and comparatively modest investment in realistic alternatives has had a big impact and stronger investment in them is likely to see big changes in behaviour. As Stu pointed out yesterday, on a per capita basis people are already driving less.
- Brownlee is correct that we do need to sort out our bus routes and information systems. The good news is that is under way with the new bus network and should be completed by 2016, well before the CRL is suggested to be opened.
- The comments from Simon Lambourne are very rational and in line with what I feel. The big question of course is how many would still chose to drive if some good quality alternatives were in place.
- Brownlee is also correct when he states that the documents released on Monday about funding transport are really just the start of the discussion. This was actually something mentioned quite a few times by the CBG themselves. They suggest that a decision doesn’t actually need to be made on how to fund transport till 2015.
- Once again Gerry sidesteps the question of what the government are actually going to do to improve transport issues in the city.
- After the video from Len Brown, Brownlee goes on to talk about tolling new roads. The reality is that there aren’t that many new roads proposed that could be tolled. We have the Puhoi to Wellsford motorway, Penlink, An additional Harbour Crossing and The East West Link. Effectively every other roading project is an upgrade of an existing road, adding a lane here or there and under the criteria, they couldn’t be tolled.
- Brownlee talks about how they have had to put up fuel excise taxes due to falling revenues and gives a couple of reasons but misses the biggest one that vehicle use is dropping, both in real and per capita terms.
All up most of the comments Gerry made were a bit frustrating but not all that surprising given his previous statements. The more I think about it though, the more it seems as though that he let slip that the government is looking at reviving the Eastern Motorway proposals.
What were your thoughts on the video. Did I miss anything?
Nerd alert; this post is chock-full of graphs. Plus a few “hypotheses”, just to keep things exciting. And a dog, because I like dogs.
For those of you who are new to the data game but want to participate in the nerdy excitement, let me first explain the rules. The game starts when an economist, such as myself, formulates a “hypothesis”. In doing so we’re basically statistical crystal-ball gazing. Not only is this fun, but it’s actually essential.
It’s essential because formulating a hypothesis sharpens/hones subsequent analyses. It’s also essential because of what it reveals about our own internal biases. Economists have long recognised that we’re at least as biased as anyone else (and typically more selfish) – so it just seems kosher to clearly state our biases from the outset. That way other people know what game we’re playing.
I’d encourage you to play the economics game sometime, with just one word of caution: Be prepared to be wrong. I’m 100% certain, for example, that I will – at some point in the near future – be wrong. Keep that in mind whenever you are tempted to believe your own EBS (economic BS). I might also add, however, that economists don’t care much for being right, we just try and make damned sure we’re less wrong than the engineers.
Professional happiness is, after all, largely a relative frame of mind.
The primary hypothesis (it’s not really “mine” – we’re all standing on the shoulders of nerdy giants here) is something that has been articulated in previous posts here and here. Kent recently talked about it again here, where he also came up with the crazy notion that I should write a follow-up post. Thanks for that hospital pass. But other people have also asked for it, so I finally pulled finger and cranked this out. Unfortunately the cacophony of requests for follow-up posts misses an important issue: Not much additional data has been released since my last posts on the topic. Nonetheless, even in covering well-trodden ground I did find some interesting new nuggets.
The hypothesis is this: The demand for vehicle travel in NZ (when measured in terms of vehicle-kilometres travelled per capita) is falling in response to powerful wider forces, including:
- Demographic trends, such as an ageing population (which has both age-related and income-related effects)
- Socio-economic preferences, such as reduced attachment to private vehicles or increased awareness of health/environmental impacts of driving
- Technological developments, such as smart phones, PT journey planners, tablets (which help to demystify public transport and lower the perceived costs of in-vehicle time)
- Trends in transport costs, most notably sustained higher fuel prices but also reducing costs of air travel (Air New Zealand recently launched $29 late night fares between AKL-WGN)
Stylized facts support this hypothesis. In the graph below, for example, I’ve plotted VKT per capita p.a. in New Zealand over the last decade (source). You can see there was a trend towards higher VKT per capita until circa 2004, after which the trend turned negative. Since it’s peak VKT per capita has fallen by about 6% (NB: I’ve base-lined results to 2001 levels, so the graph measures the % change from that year onwards. Doing so makes it easier to identify and compare trends, which will be useful later in this post).
The good news is that this graph suggests I’m not a complete moron. But nor does this mean my hypothesis is necessarily correct.
An alternative hypothesis, which has been advanced by the Government, is that the drop in VKT per capita that has occurred since 2004 is a temporary aberration caused by post-GFC economic malaise (which sounds suspiciously like a budget form of mayonnaise). Well, let’s investigate what I call the “budget mayonnaise” hypothesis by adding (indexed) real GDP per capita to the same graph (source).
Hmm. On the basis of this evidence it’s fair to say that the Government is more wrong than me: Budget mayonnaise does not seem to explain VKT per capita trends very well. The data actually contradicts their hypothesis; unless they’re going to suggest that drivers started preparing for the 2008 GFC way back in 2004. Now it is true that the GFC has a negative impact on GDP per capita, but this impact was relatively slight and has since been more than wiped out. In fact, since 2004 – which was the peak in per capita VKT – our GDP per capita appears to have increased by about 12%, whereas per capita VKT fell by about 6%.
At this point, ardent purveyors of the budget mayonnaise hypothesis might suggest GDP per capita is not the only indicator of economic activity, and dog-yarned it they’d be right. Wages, in particular, tend to “lag” movements in GDP, such that it is possible that post-GFCNZ is experiencing suppressed wages. But why bother asking when we can get busy answering – in the figure below I’ve added inflation-adjusted hourly earnings (source).
Here we see earnings rising steadily from 2001 to 2009, since which time they have fallen. This drop probably reflects the lagged effects of the GFC plus the Christchurch Earthquakes. I should say that 2012 data shows earnings rebounding back up to 2009 levels, which is good news. But overall these indicators do not provide much evidence to support the view that a slowdown in economic activity is primarily responsible for declining VKT per capita. It seems fair to conclude that the budget mayonnaise hypothesis does not cut the mustard (how does one actually cut mustard?).
That’s not to say economic activity in general does not impact on VKT per capita; I definitely think it does. And I certainly expect that as the economy gathers momentum (as it seems to be) VKT per capita should “rebound” somewhat. Whether this rebound is sufficient to counteract factors that are causing it to decline is hard to say. My hunch is that if fuel prices stay low then we may see some VKT growth, but that’s not really something the Government can point to and say “we told you so”; that just strikes me as getting lucky.
So for now at least, I’m sticking to my story – even if I look forward to the MoT updating their vehicle fleet spreadsheet with 2012 VKT data so that I can finally be proven wrong, and in turn get to start the game again with a new hypothesis (plenty more where that came from).
But I’m also sticking to my story because, in writing this post, I uncovered another little piece of data that seems to support my hypothesis. But it does so in a somewhat unusual way, in that it suggests that VKT per capita should have actually grown in the last decade. The source of this indicator is this delicious data set from Statistics NZ,which presents New Zealand’s population from 1991 to the present. You might think that’s not particularly exciting or novel. Think again – because in this data set Statistics NZ has split the population by their precise age at the time. It’s rather useful I think.
Using this data you can estimate the number of people of driving age (which I’ve defined to be 16-70 years). You can then calculate the ratio of people of driving age per capita, which measures the proportion of the population who are of an age where they could get a drivers license, if they were so inclined. I’ve plotted this ratio below for the period from 1992 to 2012.
Holy bandages. What this graph shows (if the Statistics NZ data and my calculations are correct) is that the proportion of people of driving age in New Zealand is now at the highest level it’s been for two decades. Moreover, most of the growth in this ratio has occurred within the last decade. The very same decade that has seen a fairly significant decline in VKT per capita.
Thus in the same decade when the proportion of people of driving age appears to have increased, we have witnessed declining VKT per capita.
Fairly interesting stuff. And well worth chucking into a regression model, if we have more than 10 years of data.
Where this ratio may head in the future I just don’t know, although Statistics NZ might be able to tell us. Perhaps I’m over playing it’s importance – after all the ratio only changes by 2.5% over a period of ten years (note the graph’s truncated vertical axis). But I would have intuitively thought (here we go again with the same old EBS) that the proportion of people of driving age would have a relatively large impact on VKT per capita. Actually, in a situation where young people behave exactly like their parents you might even expect an elasticity approaching 100% (i.e. a 1% increase in the proportion of people of driving age would cause a 1% increase in VKT per capita).
Of course, the proportion of people of driving age is only one part of the VKT equation. One useful (albeit incomplete) way to visualise the VKT equation is to consider a Russian doll of overlapping circles, where each circle captures related but distinct demographic and socio-economic variables, which ultimately combine to determine VKT per capita in any given year, like I’ve shown below.
The outer-most circle is population, which is important only in a “multiplier” sense. That is, we can forecast total travel demands by multiplying VKT per capita by NZ’s total population. What the previous graph showed is that the lilac-coloured circle has increased in size relative to the outer circle, i.e. a greater proportion of the total population are now of driving age per capita.
We also know from our previous analyses that the inner-most (orange) circle labelled “DRIVE” (i.e. VKT per capita) is currently declining. These two results thus suggest that the reduction in VKT per capita is most likely to have arisen in response to either 1) a reduction in proportion of people with drivers license per capita (green) and/or 2 ) a reduction in vehicle ownership per capita (blue circle).
The graph below shows the latter (per capita vehicle ownership) superimposed on top of the previous VKT trend.
So it has declined, by not by much. And what is most interesting about this graph is that the peak in vehicle ownership occurs a couple of years after the peak in VKT per capita. Does this suggest that travel demands are actually the egg and vehicle ownership is the chicken? Could it be that NZers are choosing to reduce their VKT first and only subsequently reducing the number of cars they own? Or maybe it’s both – maybe lower VKT results in lower vehicle ownership, and lower vehicle ownership results in lower VKT. I should say that 2012 data shows a small rise in vehicle ownership per capita back to 2010 levels, but it’s still down on the 2005 peak.
The final piece of my little diagram is the proportion of the population with drivers’ licenses. I don’t have this data on hand, although I’m sure it’s out there (please point me to it if you know of good data sets). Anyway, I think that’s quite enough statistics (and lies) for one day, so let’s finish with something that is 100% certain: Puppies that try to chew tennis balls even when lying down are 100% adorable.
For the last 6 months or so, a group of people representing organisations from all corners of society have been looking at the issue of how we will pay for all of the transport projects on the councils massive wish list that is the Auckland Plan. Here is the press release:
Tough decisions needed on Auckland’s transport future
A six-month process involving 17 of Auckland’s key transport stakeholders reached a significant milestone today with the release of a public discussion document on the future of transport funding in Auckland.
‘Funding Auckland’s Transport Future’ is the consensus view of community, transport, environment, and business representatives, each with a stake in finding the best solution to Auckland’s transport funding problem.
The Consensus Building Group (‘the CBG’) have concluded that additional revenue of $400 million each year for the next 30 years is needed to help fund the transport projects in the Auckland Plan.
The CBG found that existing funding tools are sufficient in the short-term, however by 2021 Auckland needed to follow one of two possible options capable of generating the required money.
Option 1 identifies a continued reliance on existing revenue sources. This would mean large increases to rates and fuel taxes, tolls to fund major new roads, further government contributions and small fare increases for public transport users.
Option 2 would require a new source of funding, known generally as road pricing. Road pricing can be implemented in a variety of forms and they have identified a motorway network charge or one or more single cordons as the most likely. Option 2 would be supplemented by small increases to rates, fuel taxes and public transport fares, alongside further government contributions.
The CBG has not expressed a preference for one option ahead of the other. However, it concluded that unless Aucklanders are prepared to accept higher rates increases and heavier congestion, it will be necessary to introduce some form of road pricing by 2021.
The CBG has identified population growth as Auckland’s greatest transport challenge.
“In order to cope with population growth at twice the rate of the rest of New Zealand, Auckland’s transport system must undergo change across all modes – roads, public transport, walking and cycling,” says the report.
“If we do nothing, the result will be transport congestion that is excessive, disruptive and costly.”
Research conducted by the CBG shows that introducing a road pricing scheme would help to reduce the level of congestion on Auckland roads, and improve travel speeds and journey times for motorists and freight. However, road pricing must be supported by viable, attractive public transport alternatives.
The CBG is asking Aucklanders to submit their feedback on its initial proposals. Electronic copies of the report and an online survey are available at www.keepaucklandmoving.org.nz. Printed copies are also available at Auckland Council Service Centre’s and Libraries. Public feedback will help shape the CBG’s recommendations to Auckland Council, scheduled for July 2013.
The CBG has said that this is the beginning of a longer conversation. “If Auckland Council and the government wish to progress our recommendations, they will need to hold separate formal consultation with Aucklanders on the detailed impact and design of any new funding package,” says the report.
As mentioned in the release, there are two options being presented for how to bridge the funding gap.
Personally I was a disappointed that the group weren’t allowed to consider whether the projects marked on the Auckland plan would actually be effective or were the right mix. It is quite possible that changing priorities, and mix of projects may allow us to deliver the same level of benefits for a much smaller overall cost removing part of the funding gap.
We will take a much deeper look at the funding options in time but this post is really just to get the discussion going. There is more information on the website set up by the group (which has been updated today) including their report.
A Herald article last month highlighted strong support for more Government spending on public transport improvements in Auckland. It included the following quote:
But a spokesman for Transport Minister Gerry Brownlee said that with $890 million budgeted for public transport in Auckland over three years “it would be grossly unfair to suggest the Government hasn’t given this mode of transport the priority it deserves”.
The story was analysed in a bit more detail in this post, but the question of where the $890m figure came from remained unresolved.
It is a figure that is repeated on the NZTA fact sheet, and in a press release from Transport Minister Gerry Brownlee’s office in relation to the opening of the Newmarket viaduct replacement:
A total of $3.4 billion is being invested in the Auckland region’s transport system between 2012/15 through the National Land Transport Programme alone, including $1.6 billion for state highways, $968 million for local roads and $890 million for public transport.
In the above context it looks like NZTA is investing $890m in public transport in Auckland, funded through fuel excise and road user charges. I sought clarification from Gerry Brownlee’s office on how the $890m figure was arrived at. My request was referred to the NZTA, who responded earlier this week:
So almost half of the $890m figure actually comes from Auckland Council ratepayers, and the remainder also includes public transport service operating costs as well. (From memory I think the transport services figure includes repayment of the EMU loan). Very few people would know that the National Land Transport Programme includes local council contributions.
This leaves an actual public transport infrastructure spend of $39m from fuel taxes and road user charges over the next three years in Auckland. This really is a pitiful amount compared to the hundreds of millions being spent on new roading projects. It would seem more than fair to suggest that central Government hasn’t given public transport the priority it deserves.
Edit: Sacha suggested a simple column graph would add some clarity. Here it is:
Despite the rhetoric, one of the biggest disappointments about the Auckland plan was in the area of Transport. Seemingly unwilling to say no to anyone, the Council included in it almost every single transport project ever conceived, effectively creating a massive, and expensive wish list. The mainstream media, the government and others would have you believe that the council under Len Brown was planning to spend up large on public transport but nothing could be further from the truth.
The plan proposed spending over $30 billion of new capital expenditure for transport alone and a similar amount on top of that for operating/maintenance costs. As we saw in the an early view of the Integrated Transport Programme, which was shaped by the Auckland Plan, from being a revolutionary focus on public transport, over 70% of new spending is going on roads. Sure that may be a better split than what has we have seen in the past, but it’s hardly revolutionary. One of the biggest supporters of this scheme is unsurprisingly the NZ Council for Infrastructure Development (NZCID), a lobby group for the infrastructure construction, and finance industry.
The biggest problem is that based on current funding, there simply isn’t enough funding to pay for this wish list with estimates suggesting that we will be $10-15 billion short. This led the council to start thinking about alternative ways to raise funds to pay for these projects with a list being identified for further investigation:
- general rates
- targeted rates
- development contributions
- tax increment financing
- regional fuel tax and road user charge/diesel levy
- tolling new roads
- road pricing on existing roads (i.e. some form of network charging or congestion charging)
- additional car parking charges
- visitor taxes
- airport departure tax
Following on from that the council created what they called the Consensus Building Group. It was formed by representatives of a range of organisations and groups and tasked with coming up with some agreement on the way forward. We still don’t know exactly what they have been looking at, what if anything has been agreed. About all we do know is that despite initially agreeing to be involved, government agencies decided to boycott the process (although I believe some may have become involved later on). It does appear that things are getting a bit closer though as the council put out this press release yesterday suggesting that if we don’t invest, transport problems, like we experienced a few weeks ago, will only get worse.
The most interesting part is that a discussion document will be coming out at the end of next month with more info however in advance of that, a website has been created to discuss more about it. http://www.keepaucklandmoving.org.nz/
While it is pretty, it’s not a very user friendly site for those trying to access it on mobile devices, perhaps best to leave it till you are using a more traditional device. As you scroll, and scroll, and scroll, and scroll, the page attempts to explain the problem. If you make it to the end, you are presented with a survey that amongst other things wants to know what you the focus of transport spending should be.
No I haven’t selected anything, this is just how it defaults
While it is good that we may be coming closer to having a consensus on transport funding, one thing still really bugs me about this entire process. The is still yet to be any debate as to the need of projects. Do we need all of the projects on the massive wish list or can we cull it down? Are there options for us to reduce the scope of some projects? e.g. Operation Lifesaver and improved local road links could cut back dramatically the amount that is proposed to be spent on Puhoi to Wellsford or the East West Link while still delivering most of the benefits.
I think that there is potential for billions of dollars of expenditure to be slashed off the wish list and that would dramatically change the debate. Instead of needing $400 million extra in spending each year, we might only need $50 million, or perhaps nothing extra at all. By not first culling and prioritising the list, we end up short changing the debate and potentially discounting options that would otherwise be realistic. For example if we know we need $400m per year then we are likely going to ignore an easy to implement option that only provides $20m in extra tax. Yet if it turned out we only need an extra $15m per year then that option might have been a more legitimate choice.
Whether you agree with me or not, go though and have your say on how any extra money should be raised and where it should be spent.
Note: I also predict that we will hear a lot more from the CEO of the NZCID, Steven Selwood telling us just how much we need every single one of the projects on the list, and possibly more.
Yesterday the NZ Herald picked up on the UMR research poll on transport spending preferences – that Matt did a post on a few days back. Here are some of the key points in the Herald article:
Popular support for spending on public transport has almost doubled over 20 years, according to a poll of 750 New Zealanders.
The poll by UMR Research shows a reverse from 1992, when 43 per cent of those surveyed preferred Government money to be spent on motorways and other public roads, compared with 25 per cent support for public transport as the priority spending candidate.
By September last year, when the latest poll was taken with a 3.6 per cent margin of error, the tables had turned.
Those supporting priority spending on public transport had grown to 48 per cent, compared with 37 per cent favouring roads.
The portion who were unsure or supported equal spending on both categories fell to 15 per cent, from 32 per cent in 1992.
Survey participants were asked by phone of UMR’s wide-ranging annual Mood of the Nation review: “If you had to choose, should Government funds by used to improve motorways and public roads, or should funds be used to improve public transport?”
I’m always a bit sceptical of polling on issues like this, because you never quite know what slant is being put on the question to elicit a result one way or the other, but what is of most interest to me is how the results have changed over time because the same question is being asked. And between 1992 and 2012 there was a big increase, 25% up to 48% of people who would choose for funding to go into public transport, a noticeable decline from 43% to 37% favouring roads and quite a big decline in those choosing “both” or “neither”.
What’s really interesting is then looking at the extent to which funding is following the preferences of the public, which the Herald article touches upon:
Its policy directives have seen the Transport Agency allocate just under 14 per cent of a $12.3 billion land transport investment problem over the next three years to public transport…
…Although an allocation of $1.7 billion in the coming three years to public transport represents a 21 per cent increase on spending from 2009 to last year, about $700 million of that will come from local councils and much of the Government’s money will be spent on new electric trains in Auckland and Wellington.
There’s a bit of debate over these numbers because, as the article notes, a significant chunk of the public transport funding actually comes from local government rather than from Central Government. There’s also the issue of whether we’re talking about transport funding as a whole or whether we’re really focusing on where the money is being spent in terms of building new infrastructure.
If you look at NZTA’s spend over the next three years you get a better idea about where the government feels its transport priorities lie:And take that one step further to just look at where the spending on new infrastructure is going to go and things become even clearer:The disconnect between what we are getting and what we want in terms of transport priorities is simply startling. Aside from the fact that people really don’t tend to vote in national elections based on transport policies, I’m pretty stumped as to how a government can get away with 97% of its new transport infrastructure investment going on roads when a greater proportion of the general public want to see the transport budget spend on public transport than on roads.
I suppose at the very least this should give opposition parties huge confidence that once there’s a change in government they should have broad support for an extremely radical change to transport spending priorities.
EYE CANDY WARNING: This post contains no pictures.
In a recent post I penned an “ode to demand-based transport pricing”. The main suggestion was that incorporating “time” into our transport pricing would be beneficial because it would help us to allocate our limited transport capacity to people who valued it more highly.
I also proposed a distinction between what I called “strategic” and “operational” issues. This distinction is useful, I think, because it encourages us to step back and examine some pertinent issues with more focus and clarity. That’s not to suggest the issues are fully separable, and in many situations they are not, but more that our understanding of the “whole” can be improved by an understanding of the “parts”, even if we at some point have to stitch them back together to form a “whole”.
The distinction between strategic and operational issues can be understood as answering the following two broad questions: 1) What are we trying to achieve from a time-of-use pricing scheme? and 2) How might we go about implementing such a scheme to achieve the desired outcomes? The following sub-questions seem to stand-out as being strategically important, i.e. they help us to answer the first question posed above:
- What are we trying to achieve through time-of-use transport pricing? Time-of-use transport pricing schemes seem to have two over-arching objectives, namely they can raise revenue and/or manage demand. In my opinion demand management should be the focus, because there are many more efficient ways we could raise revenue if required, e.g. fuel taxes and general property taxes. This suggests to me that the main advantage of time-of-use pricing lies in its ability to influence demand, rather than raise revenue.
- What should we do with the revenue? Even if raising revenue is not the focus, it is a unavoidable outcome. This in turn raises the issue of what to do with the revenue? Some people on this blog have called for it to be ring-fenced for public transport, but I think that’s unnecessarily provocative. What we could do is simply tip the extra funds into an Auckland specific transport fund that could be used to fund whatever was the highest priority project of the day. Of course, time-of-use pricing in itself will reduce the need for major road capacity expansions and increase demand for public transport and walking/cycling, so you would expect more money to flow towards these alternatives. The other thing to consider is that how revenue is used is the major determinant of whether a pricing scheme is progressive or regressive, i.e. its distributional impacts, which is discussed below.
- What is the process for investigating, developing, trialing, and potentially implementing a time-of-use transport pricing scheme? If there’s one lesson we can take from Stockholm’s experience with time-of-use road pricing, then it’s the potential benefits associated with pro-active public engagement. In Stockholm, time-of-use road pricing was initially implemented as a trial, which was then subject to a public referendum. Over time, public support for Stockholm’s scheme increased from circa 30% to 70% and the scheme has subsequently been permanently retained. Bork bork bork.
- What transport modes should be considered for time-of-use pricing? Previous conversations about time-of-use transport pricing, such as ARPES, have had a relatively narrow focus on applications to road pricing (aka “congestion charging”). But are not the general principles of time-of-use pricing also relevant to public transport, even if the pricing differentials would vary between modes depending on their individual demand/supply characteristics? I would have thought that implementing time-of-use schemes for both road and public transport would provide a fairly strong riposte to the claims of unfair treatment that might be put forward by road user groups, such as the AA.
It seems that we could work to gain agreement on the answers to these “strategic” questions, without time-of-use transport pricing being a fait accompli. But it seems to me that until we get agreement on those high-level strategic questions it’s not really worth delving too deeply into the details. Answers to the questions posed above seem to be necessary but not sufficient to implementing a scheme.
Now what can we also say about the aforementioned “operational issues”? From where I’m sitting the main operational questions seem to be:
- How can we balance precision and simplicity? Singapore and London, for example, have relatively simple pricing structure, but this in turn limits their ability to shape demand. In general, it seems that the simpler the pricing scheme the more one gets away from the objective of demand management and instead it becomes more about revenue raising. In contrast, Stockholm has a more precise pricing structure where costs are allowed to vary in half-hourly increments. This enables those crafty Swedes to price the “peak of the peak” higher than other periods. Bork bork bork.
- What are the efficiency/distributional impacts of different pricing structures? For example, a gantry-based cordon around the Isthmus, as considered in ARPES, would tend to drive a wedge between the central city and peripheral suburbs. In contrast, putting a charge on all trips into and within the central city (irrespective of whether they cross the cordon) would seem fairer and more effective. Thus the design of the scheme can have a large influence on its efficiency/distributional impacts, as you would expect.
- How might we manage the efficiency and/or distributional impacts? This is quite straightforward really – it’s basically about investigating whether any of the operational issues raised in answering the previous question can be resolved or mitigated and how those measures might change over time.
I’m sure there are many other operational issues that I have not touched on. But in the interests of keeping this post to a reasonable length I’ll leave those to others to highlight. Before finishing up I wanted to tackle one final issue in more detail: Namely the often-raised concerns over the distributional impacts of time-of-use pricing schemes (aka “equity impacts”).
But first I want to place two important caveats on this discussion. The first thing is that I place a high value on equitable social outcomes. So much so that I would say that child poverty and inequality of opportunity, rather than transport , is the #1 issue facing New Zealand. The second caveat is that the distributional impacts of time-of-use transport pricing is sufficiently important to deserve their own post, so I hope you’re not too disappointed with a quick discussion now.
Nonetheless, there is one concept that I have been pondering that I think is worth raising, namely the issue of “transient distributional impacts” (for lack of better jargon). What I mean by this is that the distributional impacts of time-of-use transport pricing may in themselves vary considerably over time. This might occur because:
- Our current transport pricing is (on the surface at least) relatively regressive. This is because low income households tend to own less fuel-efficient cars and travel more regularly at off-peak times. So they tend to pay more fuel tax per kilometre, and pay more for capacity expansions they probably should. Thus, shifting the costs of major capacity expansions more onto the people that are creating the need for them may be broadly progressive compared to the status quo.
- Low income households are more sensitive to prices and also tend to occupy less specialised and more dispersed jobs. So in the long run, low-income households may be more responsive to time-of-use price signals, even if there are some households that are adversely affected in the short run. Low-income customers tend to have more flexibility about when and where they travel and thus benefit more, on average, from lower off-peak prices.
For this reason I would encourage those who are concerned with regressive distributional impacts in the short-term to think very carefully about whether they are potentially forgoing progressive distributional impacts in the long-term (and perhaps forever). Put another way, while time-of-use transport pricing may potentially have adverse distributional impacts on a small number of households for a few years following implementation, it may also have large positive impacts for many households for many years into the future (if not permanently).
If this is indeed the case, then the distributional impacts of time-of-use transport pricing may be best managed by implementing some targeted transitional measures to support adversely affected low-income households, at least for a few years after the scheme is implemented, rather than not implementing it at all. The challenge becomes one of managing the negative distributional impacts in the beginning, knowing that in the long run the distributional impacts are likely to be positive.
So my takeaway point is this: As a society let’s not stop thinking about time-of-use transport pricing even if the “right” answer is not immediately obvious. Or put more succinctly “we haven’t got the money, so we’ve got to think.”
P.s. If you would like to read more about time-of-use transport pricing then here’s some links you may find interesting: