The latest report on alternative transport funding for Auckland, prepared by the Independent Advisory Board (formerly the Consensus Building Group), has just been released. The report will form a critical part of the Council’s public consultation on the next Long Term Plan (the 10 year budget), essentially asking Aucklanders two key questions:
- Are you willing to pay more for a better transport network?
- If so, then should that extra money be from existing sources (rates, fuel taxes etc.) or from a “motorway user charge”?
We have been highly skeptical of past proposals that request more money to be spent on transport – in particular the first version of the Integrated Transport Programme as well as the initial report on alternative funding prepared last year by the Consensus Building Group. In fact, the Congestion Free Network came into being as a result of our frustration with the transport programme being a “build everything” and we felt a large part, if not all of the $12 billion funding gap could be resolved through removing poor value projects, rather than by requiring additional funding.
Overall, the new report is a clear step in the right direction and combined with the work being done as part of the next LTP and the next ITP it seems as though quite a lot of effort has gone into removing the more idiotic projects included in the original ITP, although there isn’t a huge amount of detail in the information that has been provided. There are, however, still many unanswered questions that the report doesn’t seem to address – plus its key recommendation of suggesting a “motorway user charge” is fraught with problems. But I’ll get onto that in a moment – first to summarise some key points from the report.
A comparison between what is in the two programmes – known as the “Basic Transport Network” (that which can be afforded under the 2.5-3.5% rates increase proposed in the LTP) and the “Auckland Plan Transport Network” (the preferred network, which requires additional funding) is shown in the series of tables below.
Firstly, for bus and ferry investment:
The main difference between the two networks seems to be in the scale of the bus lane programmes and the provision of additional busways in the second and third decades, supported by service frequency improvements. The proposed Botany to Manukau busway appears to be extended to the airport like we suggested as part of the CFN however more interesting is to see a new proposal for a “cross isthmus” bus RTN between New Lynn, Onehunga and Otahuhu. I wonder what route and form that would take.
Next for rail:
The difference between the two networks is fairly stark in the second and third decades, with no investment at all in rail over this period in the Basic Transport Network. I must say the complete lack of rail investment in the Basic Transport Network after 2025 is a bit surprising and raises some questions about the prioritisation process that determines what’s in and what’s out of the Basic Transport Network after 2025. Importantly, CRL is in the Basic Transport Network and therefore does not require alternative funding.
Next, for roads:
Looking at arterial roading projects first, it’s clear that even the Auckland Plan Transport Network is much smaller than what was proposed originally in the first version of the Integrated Transport Programme. In fact it seems like billions upon billions have been shaved off the previous ITP’s numbers, which included crazy things like nearly a billion dollars on upgrading Great South Road. We’ll take a more detailed look at this in a future post, but credit where it’s due to Auckland Transport who have responded to criticisms of the first ITP by ensuring the Auckland Plan Network has been significantly refined to deliver much better value for money.
Unfortunately the same cannot be said about the state highway programme, which doesn’t vary much between the two networks – aside from some rather optimistic “widening to reduce congestion” in the final decade (haven’t they heard of induced demand?) A whole bunch of very dodgy projects (Additional Harbour Crossing, SH16 Port Access, SH1 Warkworth to Wellsford etc.) have been included in the Basic Transport Network for some unknown reason, as well as of course being in the Auckland Plan Transport Network. This is important to keep in mind when considering the resulting “funding gap” – which of course could be a whole heap smaller if we stripped out the $5.5 billion Harbour Crossing and multiple billions on these other unnecessary projects.
Components of the walking, cycling and safety programmes for the two networks are shown in the table below:It’s not clear what the cost difference for walking and cycling is between the two networks, but it’s clear that only the Auckland Plan Transport Network goes anywhere close to delivering on the Auckland Plan vision for active transport.
Now for miscellaneous other stuff, like maintenance, renewals and supporting sprawl:
The shortfall in funding maintenance and renewals under the Basic Transport Network is a real concern, as the last thing we want to do is end up like the USA where infrastructure is falling to bits because politicians want to “cut ribbons” rather than look after what we already have. The lack of funding for developing the greenfield sprawl areas may not be such an issue as this could force the developers themselves to come to the party a bit more.
Overall, as I noted above it’s clear the Auckland Plan Transport Network is vastly improved from what was in the first ITP. A lot of the really poor investment in the arterial network appears to have disappeared, although there are still a few remaining remnants like Penlink and Mill Road, although even with these projects it seems like the bulk of spend has been pushed out into the future. However, the big remaining issue is that a similar exercise doesn’t seem to have occurred with the State Highway network and there are still billions upon billions of dollars in poor value for money projects – most particularly the Additional Harbour Crossing but also other duplicative projects like SH20B, Warkworth-Wellsford and others. NZTA have really dropped the ball on this one and unfortunately I suspect part of this comes about because the under the current situation motorway projects get full government funding while every other transport project has to beg for a slice of the funding pie. More than once I’ve heard council people say we should build certain projects simply because the government are paying for them.
Cut out what I estimate to be around $8 billion in very poor value for money state highway projects and we’re left with a $4 billion funding gap. If we push $8 billion of state highway projects out of both the Basic Transport Network and the Auckland Plan Network, it means we can afford $8 billion more of good projects before we have to turn to Alternative Funding and it means that we only need to find ways of raising an additional $4 billion. Over 30 years, that’s not a particularly huge issue to overcome.
So if we think back to the two questions at the top of the post, it seems as though the answer to the first one is there may well be value from paying a bit more to get a better transport network, but the actual requirement for additional funding might be around a third of what the report highlights. Now let’s turn to the second question of which would be the best way of raising this additional funding.
Essentially the two options proposed are:
- Increasing existing funding mechanisms like rates, fuel taxes, development contributions, central government grants etc.
- Introducing a charge for entering the motorway network
Some more detail on the “Rates and Fuel Tax” option are shown below:
I must say I was pretty surprised to see how low the additional rates and fuel tax increases would need to be in order to close the funding gap. A rates increase of between 3.4 and 4.4% is actually lower than what was assumed in the 2012 Long Term Plan (that had 4.9%) while a 1.2 cent per litre annual fuel tax hike would probably get lost as a rounding error in typical price fluctuations. It’s a credit to Auckland Transport’s project prioritisation that they’ve managed to develop a network that could be fully funded under the funding assumptions of the 2012 Long Term Plan, and it’s only the political decision to have a much lower rates increase that’s essentially “re-created” the funding gap.
Combine this with the above observation that the “funding gap” could be further reduced to around $4 billion instead of $12 billion and we could see the gap closed by rates increases only 0.3% higher than otherwise or fuel tax increases of a mere 0.4 centre per litre compared to what would otherwise occur. That’s starting to look like a pretty compelling option.
The other funding option is called a “Motorway User Charge” and is summarised below:
There’s a lot of discussion in the document around the relative costs and benefits of the two approaches – with the report seeming to express something of a preference for the motorway user charge scheme, based on its travel demand management effects of discouraging some trips and encouraging higher levels of public transport use. We’ll look at the details of this analysis in further posts, but note that this option does come with some fairly significant set up and operational costs (~$110 million set up with opex costs of 24c per trip) as well as potentially diverting quite a lot of traffic off the motorway network and onto local roads – which seems quite counter-productive.
To summarise, there’s quite a lot to like in the Independent Advisory Board’s report. It seems like some hard work has gone on by Auckland Transport (although sadly not NZTA) to optimise their desired transport network so it’s far more realistic than what was proposed in the first ITP. Take out a few of the dumber motorway projects and we’re left with a pretty damn good 30 year transport network that can almost be funded from existing sources (just requiring 0.3% higher rates increases and 0.4 cents per litre higher fuel tax increases) or from a very low motorway user charge. Or from other ways we might think up of to find $4 billion over 30 years.
Update: unsurprisingly the government has once again poured cold water on the idea of tolling or fuel taxes.
An article in last Friday’s NZ Herald provided an interesting insight into where the investigations into additional transport funding options are at. This is the second phase of the project to close the supposed $12 billion funding gap over the next 30 years. The article highlights that effort has been focusing on analysing different forms of road pricing and is perhaps leaning towards a motorway charging scheme:
Evaluating road tolls and fuel-tax rises and traditional funding methods such as rate rises and targeted rates is the job of the group due to report to the council next month.
The Herald understands that the independent alternative transport funding group is leaning towards motorway tolls. It will also provide options for targeted rates and extra rates rises.
On Wednesday, Transport Minister Gerry Brownlee reiterated the Government’s pre-election position that there would be no regional fuel taxes or tolling of existing state highways in Auckland.
Auckland Council cannot introduce motorway tolls or a regional fuel tax without government approval.
I think tolling motorways could have some benefits but it also could have considerable downsides and we’ve outlined some of these before. The main problem with them is the potential for traffic diversion from motorways onto local roads. What also can’t be ignored is that a fairly high proportion of money raised from schemes like these goes into the administration of the system itself, this means it’s a fund-raising system that’s likely to be quite a lot less efficient than fuel taxes and rates. Some of the strongest proponents of motorway tolling has been the NZ Council for Infrastructure Development (NZCID) and I suspect this is two fold,
- their members want to build, maintain and operate any tolling system
- their members want the additional funding that flows from the tolls to help build more infrastructure
One of the key problems with the alternative funding exercise right from the start has been the ignorance of whether we actually need to raise the additional funding for transport. The Integrated Transport Programme, which outlined the full transport programme over the next 30 years, included a huge number of incredibly costly and stupid projects included within its project list:
Knocking out $12 billion from the project list above is a pretty simple exercise – as we highlighted in our detailed analysis of the Congestion Free Network‘s financials. Therefore, based on the Integrated Transport Programme’s list of projects outlined above there is a very valid question about whether any form of additional funding is necessary. In addition even if a funding deficit still exists, if it was considerably smaller it might have allowed for some of the earlier dismissed funding options to be viable once again.
Another major flaw in many tolling proponents arguments that could have a significant impact on what projects get built is that any tolling or road pricing schemes are going to change demand substantially and as such it is likely to reduce or remove the need for many roading projects. Conversely it is likely to shift many PT projects up the priority ladder.
I guess the big question that we will all need to grapple with over the next few months, as the alternative funding group makes a recommendation to the Council, who then decides what they want to include in the draft Long Term Plan, is whether anything has changed since the ITP came out last year. It’s possible that two things have changed, which could mean a greater need for extra transport funding than we had previously expected.
- We know from the agendas for Auckland Transport closed board meetings that a lot of work has been going on to update the Integrated Transport Programme and the list of projects. Hopefully this means a lot of the crazier projects (like $665m on Albany Highway or around $900m on upgrading Great South Road) have been removed or the figures corrected.
- We know from the LTP Mayor’s Proposal that a lower level of rates increase means less money available overall for transport from normal funding sources compared to what’s in the current Long Term Plan. At first glance, it seems like most of the good projects can be funded over the next decade but there’s still no word on how much can be spent on things like walking and cycling, or the timing of various bus lanes and interchanges needed for the new network.
So given we know motorway tolling is an idea with many flaws and that the government isn’t going to approve new funding sources like this anyway, but there might be a need for a bit more money for transport, it seems sensible to be looking at other options. Which, returning to Friday’s Herald article, seems to be what’s happening:
Aucklanders could pay a new charge on top of rates to fund transport projects.
A “targeted rate” is one option being considered by an independent group looking at alternative funding measures to plug a $12 billion-plus transport funding gap over the next 30 years…
…Auckland Council cannot introduce motorway tolls or a regional fuel tax without government approval.
The National-led Government changed the law in 2009. Acting Mayor Penny Hulse said the $2.4 billion city rail link had been included in a new 10-year budget and did not need a targeted rate.
It will certainly be interesting to analyse the details of the transport budget as they emerge in the coming months, to see what can be afforded in the baseline transport programme and whether any additional money is required.
This morning the mayor released his proposal for the Long Term Plan, which outlines the 10 year budget for the city. This is the first stage in a 9 month process.
Long-term Plan timeline
- August 2014 – Mayor’s LTP proposal
- December 2014 – Auckland Council adopts draft LTP
- January and February 2015 – Public consultation on the draft LTP
- April 2015 – Public hearings
- June 2015 – Local boards adopt local board agreements and governing body adopts final LTP.
The proposal is available on the council website here. The proposal does not have a huge amount of detail, and more based around funding outlines with some major projects mentioned. Today I will just do a quick outline of the document, and we will follow up with more analysis tomorrow.
Rates increases are 2.5% for the first two years, and 3.5% after that.
Here is what the document has to say about transport. Note that capital expenditure of $469 million, compared with $826 million in the 2014/15 Annual Plan. However this is going to be cut back by $150 million as we noted yesterday. This seems to be a mixed bag. Great to see City Rail Link still included. On the positive side good to see Penlink, other arterial roads and most of the oversized Park and Ride strategy cut back. However difficult to see how Lincoln Road is such a priority for upgrading, it is hardly lacking traffic lanes at the moment! Disappointing to see the North-Western busway pushed back even outside the 10 year timeframe. I’m sure this can be staged appropriately so we can see some good progress over the next few years.
Transport represents the most significant proportion of our total budget – almost a third of our operating costs and over 40% of our capital budgets. The funding envelope in the baseline budget is a significant reduction in the capital programme in the current LTP and has an even more significant shortfall on the aspirations reflected in the Auckland Plan.
This baseline proposal includes major projects such as:
- The City Rail Link
- North Western Growth Area projects
- Warkworth SH1 intersection improvements
- The East – West connections
- Lincoln, Te Atatu and Dominion Rd upgrades.
The full detail of the list will be the subject of discussion between Auckland Transport and ourselves over the next couple of months as part of fleshing out the draft LTP for consultation. The basis of that discussion will be the criteria by which we rank projects and getting a shared level of comfort with that process. Naturally I would want to see our strategic shifts towards public transport active modes strongly reflected in those criteria. However, the basic transport option is not what I believe Auckland wants or needs. It is an investment programme that will not solve our existing transport problems and in fact will see them get worse. Under current funding arrangements what we can afford involves foregoing a significant amount of transport investment that Aucklanders have told us they wanted through the Auckland Plan. We wouldn’t be able to deliver a range of projects including:
- A majority of local and arterial roading projects across the region
- Almost all of the park and ride projects currently programmed
- The North-Western busway
- Strategic projects such as Penlink and rail electrification to Pukekohe. I beleive Aucklanders want all of these projects and have an expectation that the entire transport programme contained in the Auckland Plan be delivered in the 30 year timeframe.
The plan also outlines a number of projects that will proceed as are needed to support growth including Special Housing Areas. That is something we have noted previously so is good to see this mentioned. Seems to be a little bit of a grab bag of projects though. Will need more than the Te Atatu busway station to support growth in the North-West, and not sure Drury station is a priority amid other capital cuts as will only be served hourly when Papakura station is so close and will have 10 to 15 minute frequencies.
Some examples of these projects are:
- Watercare’s central interceptor project
- Grade separation at Avondale
- Tamaki Drive shared walking and cycling path
- Work with mana whenua on redevelopment of Ruapotaka marae
- Otahuhu aquatic centre and library
- Improved public transport between Mangere/Otahuhu/Sylvia park
- New Takanini library
- Grade separation at Walters Road, Takanini
- Te Atatu bus interchange
- Westgate stormwater ponds
- Lake Road, Takapuna streetscape
- Train stations at Drury and Paerata
- Manukau transport interchange
- Ormiston library and community centre.
Grade separation at Walters Road has been the hold up for Addision/Glenora station so hopefully that should allow that station there to proceed.
Overall I think need to wait for more detail to see effect of transport projects, and it will be interesting to see if Auckland Transport prioritises public transport within this reduced spend or keeps building lots of lower value roading projects.
So what do you do when you’re told you have to cut some of your $826 million budget for capital projects and that in choosing what to cut it can’t apply to public transport projects?
Well it seems if you’re Auckland Transport you start by cutting PT and active mode projects.
Back in May when the council was discussing their budget for this year it was decided that Auckland Transport should reduce capital expenditure spend. At the time Chris Darby managed to get this amendment passed saying that the cuts won’t impact on PT.
MOVED by Cr C Darby, seconded by Cr PA Hulse:
Cr Darby moved by way of amendment, seconded Cr Hulse.
That the Budget Committee:
i) agree that the $5.1 million transport opex increase is dedicated to public transport and the $50 million reduction in transport capex will not be applied to public transport.
But it seems the $50 million isn’t enough if the council wants to keep to Len Brown’s goal of having rate rises next year average 2.5%.
- On 26 March, staff provided the results of financial modelling in response to the mayoral direction for the LTP 2015-2025. One conclusion from this analysis was that it is not possible to reduce the average rates increase for 2015/2016 down to 2.5 per cent solely by reducing or deferring capex in that particular year.
- The lagged impact of changes in the capital programme on operating budgets means that reducing or deferring capex in 2014/2015 will have a greater impact on rates for 2015/2016. The Budget Committee therefore agreed on 8 May 2014 to request the Chief Executive undertake an immediate review of 2014/2015 capex programme with a target of reducing or deferring $300 million of capex.
The cuts mean Auckland Transport has to find $100 million (which goes up to $150 million once NZTA subsidies are included). They don’t say all the items they’ll cut but the ones named are all PT projects.
The targeted reduction can be achieved via the reduction of budget across all transport activities. Projects such as Parnell Station, the Pukekohe Station upgrade and bus and transit lane improvements may have to be deferred to the LTP period. The Auckland Transport Board will consider the current capital programme to confirm which projects may be stopped, reduced or deferred to the LTP in order to minimise negative impacts on Auckland Plan outcomes. An updated 2014/2015 capital programme will be provided to the CCO Governance and Monitoring Committee in November.
It seems the only projects specifically named as being deferred are those that PT projects which goes against what the council asked for in the first place. Further projects like bus and transit lane improvements are often some of the cheapest and highest benefit projects. An example of this is the recent extension of the Fanshawe St bus lanes resulted in lots of full buses being sped up in the evening for what I understand was a fairly minor cost. In saying that I can live with the Silverdale Park and Ride (which is having issues of it’s own to sort out first) and can also live with Parnell to a degree.
Here’s the total list of capital projects in the current annual plan.
It seems to me there are a lot of other projects on the list that should be being cut before $2.5 million bus lane improvements, for example Lincoln Rd or Penlink.
For their part the council passed a (much weaker) resolution saying that AT should take into account the councils priorities around PT and active mode outcomes however based on past performance I wouldn’t hold up hope of AT actually listening to that.
Some great news yesterday with the National Party releasing one part of the transport policy which is actually semi decent. They’ve said they will invest an extra $100 million into building urban cycleways over the next four years.
Prime Minister John Key has today announced $100 million in new funding will be made available over the next four years to accelerate cycleways in urban centres.
Transport Minister Gerry Brownlee says an Urban Cycleway Investment Panel will investigate opportunities to invest in urban cycleways that would expand and improve the cycling network.
Mr Brownlee says National recognises that commuting by bike has health benefits and takes pressure off other transport networks, but says cycleways in our largest centres are fragmented and offer varied levels of service.
“This funding builds on significant investments the government is already making, with projects in Hastings and New Plymouth showcasing how cycling can be a safer, more reliable and realistic transport option.
“Many people cite safety concerns and a lack of infrastructure as reasons for not cycling, so we’re going to begin building cycleways to a standard that delivers real incentives for commuters to make a change.
“Building more comprehensive cycling networks will require new infrastructure to connect existing routes and expand the network into wider urban areas.
“And as these connections will be a mix of local roads and State highways, we’ll need a strategic approach and collaboration at central and local government level.
“Some councils are well advanced in planning and constructing local cycleways, and we want to ensure we do what we can to complement them and make them capable of being used by the widest number of people possible.
“This funding package also strongly complements other aspects of the government’s ambitious transport infrastructure programme, which is designed to ensure people and freight can reach their destinations quickly and safely,” Mr Brownlee says.
The Urban Cycleway Investment Panel will include representatives from central government, local government and other organisations. Draft terms of reference for the panel will be presented to Cabinet by 31 October 2014.
I think this is fantastic news and In my view the most important thing about the announcement isn’t so much the amount of money being spent – as the Greens propose to spend more – but that we now seem to have an acknowledgement from all sides of the political spectrum that improving cycling in our cities is a worthwhile thing. Getting that agreement is the key first step and addressing the level of funding can happen separately.
One other aspect I like is the comment that they’re “going to be building cycleways to a standard that delivers real incentives for commuters to make a change“. I can only hope that means building infrastructure to the 8 to 80 rule which basically means designing it so that an 8 year old child or 80 year old adult cycle can feel comfortable to cycle on. It would also be fantastic if this meant requiring the NZTA and local authorities to up their minimum standards for what can be built.
One aspect I do find puzzling is the creation of an Urban Cycleway Investment Panel. I would have thought decisions on which projects should get funding would be best handled through the existing NZTA/local government processes. The only advantage I can see is if this group is intended to be some sort of advisory group for smaller councils who don’t have the experience needed to develop better cycling networks. In our large cities in particular there are already lengthy lists of projects just waiting to be funded.
As a comparison with existing spending, according to the draft 2015 GPS, over the next four years approximately $100 million is expected to be spent. As such this investment represents a doubling of existing spending although it won’t be spread out evenly over that timeframe with this new money estimated to be split out as
2014/15 – $10 million
2015/16 – $35 million
2016/17 – $30 million
2017/18 – $25 million
All up it seems like a fairly decent policy for National and it’s one that hopefully represents one small step towards a more balanced transport policy in the future.
It’s also possible we might hear more transport announcements from the government today with John Key talking at an NZCID conference ominously titled “Mega Projects: From Vision to Reality”.
In June the Draft Government Policy Statement (GPS) on transport was released by the Ministry of Transport. The GPS outlines where transport funding will go over the next 3 years. Sadly it considered the business as usual of focussing on the handful of Roads of National Significance projects, with everything else left to pick up the leftovers. Cycling funding was miserable with funding at set at between $15 and 33 million, and rising at $1 million per year. The midpoint of this figure is a miserable 0.7% of the total annual budget.
This led the cycling advocacy community around the country to get together to campaign for cycling to get a fairer share for cycling. They have launched a website called “On Yer Bike” making it really easy to make a submission on the Draft GPS. This has the support of at least 17 cycling advocacy groups across the country, so the aim is to get tens of thousands of submissions as a real show of force.
The petition is calling for the cycling budget to be at least tripled to somewhere between $45 and $90 million per year, with the wording as follows.
Dear Minister Brownlee,
I would like to see the walking and cycling budget in the 2015 Government Policy Statement on land transport increased from $15-30 million per year to $45-90 million per year for the next 3 years with progressive increases after that. This is a small increase relative to the total budget of $3.5 billion per year, but would start to make a real difference for cycling. The NZ Transport Agency should take an active leadership role in improving cycling, and should help kickstart local councils by funding more than the usual amount for cycling-specific projects.
More and more people are taking up cycling despite the risk, and surveys conducted in Auckland, Dunedin, and by the Automobile Association all say the same thing: more than 60% of Kiwis would cycle around town if it were safe. Recent investment in the New Zealand Cycle Trails has been great, but people like me also want to be able to cycle safely around the cities and towns in which they live.
Cycle networks and safe infrastructure like protected cycle lanes are being proposed around the country. These have the potential to give people a viable choice about cycling and are the way of the future, but we’ll never get there without some real investment. Despite the clear demand, the draft Government Policy Statement proposes to spend well under 1% of the budget on walking and cycling. Please triple the cycling budget for all New Zealand.
Note that if you have more time please consider writing a fuller written submission, which can be emailed to GPS.email@example.com. We outlined some of the other issues with the GPS when it was released if you are looking for hints.
There have been a few suggestions recently that international tourists should be paying more to drive in New Zealand, or have to pass a driving test, or things along those lines. Winston Aldworth, the Travel Editor at the Herald, wrote a column last week suggesting that we should charge a fee for tourists who want to drive on our roads, along the lines of a new scheme in Germany (which was also described in the Herald last week, although the article doesn’t seem to be online).
Would this scheme be fair in New Zealand?
Winston writes: “many tourists on these shores rely on (and clog up) the roads from Cape Reinga to Bluff. It seems fair they should chip in for maintenance and improvements”. It does indeed seem fair, but tourists already do pay for these things. It’s built into the cost of the petrol they use, or the Road User Charges if they hire a diesel vehicle. That money goes straight to the National Land Transport Fund, where it pays for all state highway costs and around half of local road costs (the rest comes from rates). So I don’t think it’s reasonable to suggest that international tourists aren’t paying their way.
Based on data from the Retail Trade Survey and Tourism Satellite Account, it seems that international tourists account for around 5-6% of sales in petrol stations. Clearly, most of the long-distance trips around the country are being done by Kiwis, not overseas visitors. It’s also likely that most of the trips taken by international tourists are on roads which aren’t particularly congested, and not really in need of upgrades. Most of these visitors don’t make it up to Cape Reinga or down to Bluff. International tourist spending is fairly heavily concentrated in just a few parts of the country, including Auckland, Queenstown, Rotorua and so on.
How much would this scheme raise?
Winston suggests that international visitors buy a $50 permit, which lets them drive for up to a year. “The money raised could go into a protected fund, ring-fenced from other spending… [and used] to kickstart funding on our most important roads”.
2.8 million visitors arrive in New Zealand each year, and when you take out those who won’t be driving and those who visit several times in the same year, you might be left with around half that number (just a guess). So, 1.4 million visitors times $50 gives $70 million – and I think I’m being generous with the figure, with not taking GST out of it, and not allowing for administration and compliance costs. Even so, it’s a drop in the bucket in terms of transport funding.
The Cook Islands
Winston points out that, for many years, the Cook Islands charged tourists $20 for a driver’s license, although they have recently gotten rid of the system. The situation in the Cooks is a bit different from NZ. They’ve got an economy which is almost entirely dependent on tourism. Their system was a way to get that little bit extra out of the tourists and into state coffers, and encourage tourists to visit the Avarua town centre (the police station is centrally located, and visitors will hopefully spend some money in the shops while they’re at it). It also gives the tourists a nice souvenir, which was a big part of not making them grumpy about the charge. Although, it seems, plenty got grumpy anyway – especially when they had a long wait for the license – and this seems to have been a big reason for dropping the system.
The other interesting thing about the Cook Islands is that it clearly doesn’t raise enough tax revenue to maintain its roads, or its other infrastructure for that matter. It relies on international aid to make up the difference. But every time a New Zealander drives around Rarotonga, they’re being subsidised courtesy of that system.
Now, if we’re really wanting to earn more money from overseas visitors, we can either invest in our tourism offering (and we do), or ramp up our marketing (and we’re doing that too), or we can raise money for the government in a cheap-to-administer scheme like a departure tax or similar. But let’s not stick the poor buggers with some kind of overpriced driving permit.
The issue of how we fund transport projects has been in the news a lot recently with discussions of the council’s Long Term Plan (LTP). The Herald have been running a campaign basically suggesting the council finances are perilous and almost saying are bankrupt and trying to shift a lot of the blame on to the City Rail Link. The part about the council’s finances being in trouble was well debunked the other day by David Shand who was a member of the Royal Commission on Auckland Governance and chaired the 2007 Independent Commission of Inquiry into Local Government Rates.
Aucklanders should have an informed debate about the state of the city finances, given the $1.4 billion of rates collected annually and the total assets of some $40 billion managed by the council. However, the debate has not been well served by Herald articles which blithely use terms such as “spending spree”, “spending beyond its means” and “crisis point”.
This has led to the usual spate of letters from aggrieved ratepayers who are only too willing to believe that the council’s finances are in a “mess” and that we may be facing “bankruptcy”. There is no “crisis” in the city’s finances at the moment but there are major issues to be addressed.
He goes on to discuss 6 key points about the council’s finances and the heralds coverage and afterwards he notes:
While there has been no spending spree, the city’s finances are not in a mess and we are not presently at risk of bankruptcy, there are some big financial issues to be addressed.
The Herald has referred in the past to the “infrastructure deficit” Auckland faces over the next 30 years based both on coping with future expansion and addressing the past neglect of infrastructure expenditure.
The real problem is the sheer amount of projects the council has on the books from legacy councils. Many of the projects are good and critically needed – like the City Rail Link – while others like Penlink are at the other end of the spectrum. As a result there are two separate but combined issues at play when it comes to the next LTP. We need to:
- Make sure we’re building the right stuff – that means we need to review every project to see if it’s actually worthwhile building as what we don’t build can be just as important as what we do.
- If there is an funding deficit we need to work out how we address that which will likely mean new funding sources need to be found.
Ultimately the solution is likely to be a bit of a combination of the two however unfortunately in ways similar to the density debate with the Unitary Plan talk only seems to coalesce around one option. Len Brown falls in to the second camp of wanting to find new funding sources but not wanting to make some hard decisions about what should be funded and he reiterated that again yesterday when speaking at the annual conference of the Road Transport Forum.
Auckland needs to work “shoulder-to-shoulder” with the Government if it’s to find a way out of a massive budget deficit and fund its much needed transport plans, Mayor Len Brown says.
The city was gearing up for “one of the most important funding debates Auckland has ever seen, and maybe even the nation”, he said today.
It needed to find $300 million-$400 million a year to fill a $12 billion funding gap, which would mean the difference “between steady-as-you-go typical Auckland or whether or not we’re going to seriously invest in infrastructure to deal with the shortfall and to deal with the growth coming at us to build this city as a real economic powerhouse”.
“Bluntly, we need to decide do we want a transport package based on current funding sources, which is not at all appealing and won’t deliver the city that we’re aspiring to and we know we need. Or do we find new sources of funding and deliver the transport programme Aucklanders asked for through the Auckland plan and in successive elections.
“Current funding sources would deliver us a transport system that’s half-way there. We need to be bold, innovative.”
A similar story was told by the Head of the New Zealand Council for Infrastructure Development (NZCID) which is a lobby group for the construction and infrastructure financing industry’s.
Note: we’ve also pointed out in the past the odd situation where the Council are a paid up member of a group who exists to lobby the council to spend more. Also the councils outgoing CFO happens to be on the board.
Head of the New Zealand Council for Infrastructure Development, Stephen Selwood, said the investment plans for Auckland’s public transport and roads are not great and the city must move quickly to avoid massive congestion within 30 years.
He believes a motorway charging regime is the best option for raising money to cover the $300-400 million annual cost of developing Auckland’s roads and public transport. He said users should pay about $3 a trip.
Mr Selwood told the Road Transport Forum’s annual conference on Thursday that he favours motorway tolls rather than the ring road option used in London.
He said a toll would also help clear congested roads by encouraging some commuters onto public transport while others would car pool.
But Mr Sellwood warned that authorities need to move in the next two to three years or Auckland will face much bigger congestion problems by 2040.
Stephen Selwood has been pushing this idea for some time now. Personally I’m not opposed to using road pricing, in fact quite the opposite in that if done right it could be quite useful for managing demand however there are a number of problems with what Selwood keeps pushing.
- Tolling only the motorways is likely to push a lot of trips that currently use the motorway on to local roads which aren’t tolled likely putting a lot more pressure on them. It’s also those local roads that carry the bulk of our bus services so there could be quite a substantial impact to PT reliability.
- Would our PT system be able to cope with such an increase in demand. Even with the new network and new electric trains there isn’t likely to be enough spare capacity to be able to cope if significant numbers of people suddenly change modes. If we decide to go down the path of road pricing then we really need a concerted effort to get our PT improvements rolled through faster to help in giving us that capacity.
- Perhaps most importantly is impact road pricing might have on travel demand. The likely result is that traffic volumes (on motorways at least) are likely to fall as people shift to PT or reducing the amount of travel they do. This could be significant as reducing traffic also reduces/removes the justification for many of the roading projects currently on the plans. With those roading upgrades no longer needed it reduces the overall amount we have to spend upgrading our roads and there reduces the funding deficit. There’s a bit of an irony about an infrastructure lobby group pushing a solution that will end up reducing the amount of infrastructure we need – not that they’re probably thinking that far ahead.
I think all three problems have solutions or provide us with good opportunities. Rolling out the new bus network supported by a large network of bus lanes could keep local roads flowing and as well as providing more attractive services. Before introducing such a charging scheme effort can be made to increase the size of the bus fleet and get started on projects like the City Rail Link while the changes in travel behaviour as a result of tolls can help us work out exactly what projects are needed.
The council today are starting to get serious about the next Long Term Plan (LTP) which will shape the councils spending for the next decade. We’ve long criticised them for blindly holding on to legacy projects from before we had a single council and it appears a key feature of this LTP is that they will finally start making some difficult decisions over which projects to keep. I’ve had it suggested that this will see blood on the floor as they wield the knife cutting out projects.
Just what projects and services get cut is being discussed today in a closed session of councillors.
Aucklanders will be given clear choices, including tolls and congestion charges, to pay for big transport projects in a black budget being partly unveiled today.
The Herald understands the new 10-year budget will slash up to $2.8 billion of new spending at Auckland Council to put the brakes on soaring debt and rates.
Nothing will be spared from a review of council services, even the $2.86 billion city rail link, which has no funding certainty.
Budgets for services like new libraries, swimming pools and playing fields are under the microscope.
Councillors, local board members, council agency staff and directors, and members of the Maori Statutory Board will be taken through the first draft of the new 10-year budget today.
They will be told the post-Super City spending spree is over, replaced by a new era of “prudent financial management” and “affordability”.
It will be interesting to see just what projects get cut. I suspect the CRL will still go ahead but perhaps with the K Rd and Newton stations delayed along with some of the other aspects like extra trains. Either way it’s something we will keep a close eye on.
If there’s one thing – more than anything else – that annoys me about the government’s approach to transport, it’s the double standard they apply between state highway projects (particularly RoNS projects) and public transport investment. Getting any public transport funding requires analysis after analysis, proof that the timing of the project is optimal, proof that it’s definitely the most viable and cost-effective option, links with triggers around the level of use or growth in the area the project is located – the list goes on. This would not be a problem if the approach was applied consistently, after all transport projects are expensive and we should be careful when it comes to the use of public funds.
Yet the same level of analysis is never applied to state highway projects, and even less analysis when it comes to the Roads of National Significance (RoNS). Despite major concerns around the cost-effectiveness of many of these projects and a complete lack of analysis when it comes to triggers for timing, the assessment of alternatives or even basic cost-benefit ratios the projects plough on ahead.
This double-standard is carried on through to the latest version of the Government Policy Statement (GPS), which was released recently. The justification for an $11b spend on state highways is fairly general:
Following more than a decade of increasing concern about under-investment in roading infrastructure, in 2009 the Government began a significant improvement programme. With an intention to invest nearly $11 billion in New Zealand’s State highways over the 10 years to 2019, the Government focused on enabling economic growth rather than simply responding to it, providing high quality connections between key areas of production, processing and export.
Continued funding under GPS 2015 (draft) for State highway improvements will bring benefits for national economic growth and productivity, particularly given that State highways carry most freight and link major ports, airports and urban areas.
This clearly leads to a number of questions that could be reasonably asked to check whether this is the best way of spending $11,000,000,000 of public money:
- What proof is there of recent under-investment in roading infrastructure – what’s the major problem the investment is trying to solve?
- To what extent does investing in state highway infrastructure actually boost economic growth – where are the international examples of state highways being a better investment than other transport, or investing in education, or just letting people keep that money and deciding what to do with it themselves?
- How will success of the investment in state highways be measured?
- How do we know we wouldn’t have achieved the same outcomes (or nearly the same) with a much smaller spend?
- What other options for this level of investment were considered and how did they perform on a relative basis?
- Has the investment been working (and how might we measure that), has it achieved its local goals (like reducing congestion) and has achievement of those local goals (if it’s even happened) contributed to greater economic performance to the extent we would hope from an $11b investment?
In some shape or form, these questions have all been asked of public transport investment (either recent or proposed) by government over the past few years – but surprisingly we don’t seem to have seen the same questioned asked of the state highway programme. You’ll also notice the comment about the investment enabling economic growth rather than responding to it. The only vague reference to the impact of billions spent on state highways in recent years comes in the section on Auckland:
Since 2009, the Government has undertaken a major programme of investment in Auckland’s transport infrastructure. By 2017, Auckland will have a completed motorway network and an upgraded and electrified metro rail network. This investment programme is delivering significant results, helping to hold congestion steady despite population growth.
But if we back up a bit, we see the GPS noting that VKT hasn’t grown in recent years:
It seems like the GPS is saying “despite flat traffic volumes and massive investment in state highways, we haven’t managed to reduce congestion at all“. That seems to be a pretty massive elephant in the room signal that the current approach isn’t working. Yet despite some pretty obvious questions about whether we’ve got any value at all from the billions in recent state highway projects, the GPS doesn’t question ploughing billions more into future state highway spending.
Contrast that with the much more cautious approach to spending on public transport improvements:
Considerable investment has been made in the public transport network to build patronage. Much of this investment has been ahead of patronage demand, particularly in metro-rail services. A period of consolidation is needed where the focus is on securing the patronage gains anticipated from measures such as integrated ticketing, reconfigured bus networks, and metro rail investments.
No “period of consolidation” to see whether the gains from state highway improvements are realised though? No checking whether the billions spent on state highways in the past decade has led to improvements in economic performance or even reduced congestion – as per their stated goal? If we were to compare the per capita use of public transport against the per capita use of the roading network in recent years, we find quite a compelling story:
I’m kind of struggling to see how one can interpret the above graph as “we’re not sure whether the PT investment is working but clearly we need to keep spending billions on roads”.
Which is what the GPS does, showing its hypocrisy.