Yesterday Radio NZ aired a panel discussion Len Brown, our Patrick Reynolds and 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. The discussion was focused on the issue that is likely to occupy a lot of space for the next six months or so, alternative transport funding.
or listen here
In the past we have been critical of the giant wishlist the council have been aiming for. Since then and as Patrick states in the piece, Auckland Transport has actually done a decent job of cutting it must of the crap projects. That’s left us with a much more realistic list of what’s needed however the big issue that remains is the same process doesn’t seem to have occurred at the NZTA who are plowing on with many very expensive motorway projects. A more realistic view of what motorway projects we actually need – i.e. having a proper discussion about projects like the Additional Waitemata Harbour Crossing – is needed. While I don’t think we can completely remove the funding gap, such a process and changing the way we think about funding transport on Auckland could reduce the gap significantly which might in turn change what funding options are best.
Over the next few weeks and months it’s an issue we’ll look at in much more detail along with some proposals of our own.
Simon Bridges has released the final version of the 2015/16 – 2024/25 Government Policy Statement (GPS) following on from the draft version earlier this year. The GPS is effectively the top dog when it comes to transport funding and policy as in the words of the minister:
The Government Policy Statement on land transport (the GPS) sets out the Government’s strategic and policy goals for land transport, as well as the funding direction necessary to achieve them. It guides not only an investment of $3.4 to $4.4 billion per annum from central government, but around $1.0 billion a year from local government.
The GPSs relationship to other key planning documents is shown below.
Very little has changed from the draft version we saw with the Ministry of Transport saying some of the changes are:
- The upper ranges of funding available for public transport have increased, so up to $115 million more will be available for public transport projects between 2015/16 and 2024/25. This takes the potential spending on public transport to a total of $4.585 billion.
- The objectives set down in the final GPS 2015 have been amended to ensure they are clearer and more well-defined. A new ‘efficiency’ objective has been added, while the ‘demand’ objective has been clarified so it refers to access to social and economic opportunities.
- A definition of major metropolitan areas (reflecting the Statistics New Zealand definition) has been added, clarifying those areas which are eligible for funding under the Regional Improvements activity class.
- The Auckland Transport Package (announced by the Government in 2013), Accelerated Regional Roading Package (announced in August 2014) and the Urban Cycleways Package (announced in September 2014) have been referenced throughout GPS 2015. While funding for these will be provided in addition to funding for activity classes, the packages will be considered and undertaken in a way consistent with other projects funded under the GPS.
- The role that technology and innovation can play in managing network access and capacity has been reflected throughout the document, including the new crosscutting reporting line which will ensure technology investments (and the returns on these investments) will be transparently recorded.
In other words there’s been some tweaking around the edges but no significant change. That means there is still some massive hypocrisy and double standards contained within the document. As a quick example, while noting that vehicle travel has basically flat-lined and will “remain more muted than in previous economic cycles“, the maximum possible funding for state highways increases by 4%. By comparison almost all talk in the document about improving PT services comes with the caveat of “if justified by demand“. Simplified you could say PT investment has to justify its existence but road investment doesn’t.
Related, the maximum possible funding for PT increases by 3.5% per annum and the MoT say “This rate of increase reflects current and projected patronage growth“. Of course that level of projected patronage growth only exists because of the level of funding being made available limiting services. If Auckland Transport had more funding they could roll out the new network much faster and of course by doing so we would see stronger patronage growth much sooner.
One of the key things about the GPS is the funding ranges it sets. These funding ranges are meant to give the NZTA some (small) amount of flexibility when setting the National Land Transport Programme (NLTP) which sets out the projects that are likely to be funded. The NZTA could theoretically use the maximum funding ranges in some categories at the expense of others however overall the exact amounts selected tends to be closer to the midpoint between the upper and lower figures.
And using the mid-point between the two figures, this graph highlights where the money is going over the next decade.
In terms of the maximum extra $115m possible for PT, for the next three years the difference between the draft and the final version over the next 4 years are compared to the draft are just $5 million in 2016/17 and $10 million in 2017/18.
In addition to the table above the GPS also lists the funding outside of the categories above, in other words money the government is paying directly for transport projects such as the governments $100m Urban Cycleway funding that they announced in the lead up to the election. One of the things that’s odd about that particular funding stream is it seems to be broken up into state highways and local roads elements which is something that hadn’t been mentioned before.
Overall the direction of transport policy has changed little since 2008/09 and the focus remains on building massive state highway projects – most with low value outcomes – while the areas of the transport system that are seeing the most growth get ignored.
Last week Auckland Council announced that it would be combining two of its council-controlled organisations, Waterfront Auckland and Auckland Council Properties Limited, into a new urban development agency:
The new entity, called Development Auckland, will have a key role in helping deliver the council priority of quality urban living and will have the mandate to deal with the challenge of Auckland’s rapid growth through regeneration and investment. The agency will have the capability to deliver public and private development and infrastructure, including housing, across the region.
Development Auckland will see the merger of two CCOs: Auckland Council Property Limited and Waterfront Auckland. It will allow the council to play a much stronger role in urban development through greater economies of scale, enhanced commercial capability and the ability to partner with others.
Deputy Mayor Penny Hulse, who chairs the CCO Review committee, said Development Auckland will utilise the existing scale of the Auckland Council Group to provide a total urban redevelopment package.
The Auckland Council’s Governing Body accepted recommendations that will see the concept of a new urban regeneration CCO go out for public consultation through the council’s Long-term Plan.
The Long-term Plan will be finalised in June 2015. If approved, Development Auckland could be established by 1 September 2015.
It will be interesting to see how this plays out – there are definitely reasons to be optimistic. Waterfront Auckland is, in my view, one of the world’s best waterfront development agencies. In its brief existence it’s galvanised the redevelopment of Wynyard Quarter with a mix of public and private investment. There are the occasional misfires – the tram loop, the design of the new waterfront hotel – but all in all they’re delivering an interesting precinct with good design, reasonable density, and a good mix of uses and public spaces.
Waterfront Auckland has brought people – and businesses – to Wynyard in increasing numbers (source)
So we should get some good urban outcomes by extending the Waterfront Auckland model to a broader property portfolio. But could Development Auckland also help to solve some of the broader challenges facing Auckland?
One of the biggest questions we’ve got is this: How can we build houses and infrastructure for a growing population? This is one of those questions that sounds simple at first – surely we can just get some nails and wood and concrete and slap it all down in a paddock in Pukekohe? However, it’s quite a lot more complicated than that.
It’s not enough to just construct houses in some random field – before the studs start going up, they need to be serviced with transport and water infrastructure. This can be expensive, especially in greenfield areas, and Auckland Council’s not got a lot of money to throw around wildly.
Recent decisions on the Long Term Plan budget and the work done on alternative funding for transport investment make it clear that there’s a bit of a funding squeeze on. While there are opportunities to manage Auckland Transport’s and NZTA’s budgets more efficiently by prioritising high-value public transport and walking and cycling projects, this can only go so far.
Development Auckland could, in principle, ease some of these funding constraints by using land development profits to pay for new infrastructure. US engineer Charles Marohn explains how this system worked in the past:
Once they had the land, private railroad companies then built the railroad lines. They paid the enormous capital costs by issuing bonds – borrowing the money – and then paid back those loans through a value capture mechanism. When the railroad stopped somewhere, that somewhere became a town, and the land in the vicinity of that stop became vastly more valuable. The railroad companies owned, or acquired, the land at each stop before it was built. Thus, by selling that land once the railroad line was constructed, the railroad company captured the increase in value their investment had created.
So in addition to operating the railroads, these private companies were also land developers. Without developing the land and capturing the value their investment created, few railroad lines would have ever been built.
Once the railroad was built and the capital costs recouped through sale of the appreciated land, then the private railroad company could switch to operating the line. They charged fares to move freight and people along the railroads they had built. While some borrowing costs were retired through the fare box, most of the money collected went to covering operations, maintenance and profit.
Marohn goes on to point out that “in the automobile era, the risk taking is reversed. For all but the most local of transportation improvements, governments front the investment capital and take the risk.” Private developers, on the other hand, reap the profits from land development that is facilitated by massive public investments in roads. Building expensive roads to serve low-density areas can be really bad for ratepayers and taxpayers, as Kent has previously highlighted.
Due to New Zealand’s small scale, there aren’t any developers who have balance sheets large enough to fund major infrastructure development and then build houses on the new land that’s been opened up. When land development and transport investment have been integrated, it’s been done by the government. That’s how the Hutt Valley was developed – central government built the railways and then built houses on publicly owned land.
Development Auckland could fill that gap in the market. It would require Auckland Council and other CCOs to give up a little – e.g. by allowing Development Auckland to change planning rules to allow it to intensify its land or by prioritising the construction of supporting infrastructure – but the payoff could be large. If it succeeds, it could mean a win-win for ratepayers (who wouldn’t need to pay for every bit of new infrastructure) and future residents (who would benefit from more housing choices).
What do you think about Auckland Council getting into the development game?
Last week the Briefings to government ministers (BIM) were published. I’ve already looked at what the Ministry of Transport (MoT) and NZTA have said about transport in Auckland and so in this post I’m going to look at some of the other points mentioned in the documents. In particular what they say about long term trends and funding issues.
Perhaps the most significant aspect in the BIM from the MoT is that they are finally starting to acknowledge the transport world is changing. That demographics are shifting and people are starting to think and use transport differently to the trends that have persisted for around 60 years. Of course these are the same issues we regularly talk about and previously the ministry seem to have taken “it’s a blip” approach the the real world results. As such it was a pleasant surprise to finally see such an acknowledgement from them.
The MoT have split the changes into three areas:
- A growing and ageing population
- Uncertain demand for personal travel
- New technologies driving improvements in safety, efficiency, and environmental outcomes
A growing and ageing population
Along with the talking about the huge population growth expected in Auckland the briefing notes this important point about the biggest demographic group in most western countries.
By 2036, the number of people in New Zealand aged 65 and over is forecast to double to 1.2 million. The ageing population is more pronounced outside of the major urban areas and international data suggests that individuals halve their vehicle kilometres travelled when they retire. This is likely to radically change transport demands in the regions and reduce the revenue base available to maintain the transport network and meet social expectations for levels of service.
Our large older generations halving their car travel would have a massive impact on the demand for new roads in particular. As that happens the demand for Super Gold cards is going to soar. The next section almost had me falling of my seat when I first read it.
Uncertain demand for personal travel
Around 96 percent of personal travel in New Zealand occurs in private vehicles. Historically, the total distance travelled by private vehicles has increased consistently over time. This consistent growth has been driven by an increase in population and the number of vehicles in the fleet, and an increase in the distance travelled on a per capita basis. However, as shown in figure 2 below, this growth has stalled in recent years.
The average distance travelled per-person in light passenger vehicles has fallen by around 8 percent, from a peak of about 7,600km in 2004, to around 7,000km in 2013. The total distance travelled over the same period has increased marginally (from 39.3 billion kilometres in 2004 to 40.4 billion kilometres in 2013) as a result of population growth. This trend is not unique to New Zealand – it has been observed in a number of developed countries.
There is some debate as to whether this trend is the result of economic factors or a more structural shift in attitudes towards personal transportation. The fact that this trend emerged before the onset of the global financial crisis gives cause to believe that social, behavioural and lifestyle factors (such as the proliferation of smart phones, social media, online shopping and video conferencing) may also be having an influence. A related trend is a reduction in the number of driver licences being issued. In particular, fewer young people are choosing to drive. This suggests that in some groups, the perceived merit of car ownership and use may be declining.
Strong population growth means that overall demand for transport across all modes will continue to increase. Motor vehicles are and will continue to be the predominant mode of transportation in New Zealand for the foreseeable future. However, the rate of growth in motor vehicle travel seen in the twentieth century is unlikely to continue. An ageing population, rising fuel prices, increasing urbanisation, improved mobility and accessibility options, growing health and environmental concerns, and changing consumer preferences all appear to be contributing to reduced per-capita travel in motor vehicles and an increase in demand for alternative transport options
To me this is a huge admission from the MoT and I guess they could only go on so long ignoring the data that was in front of them. I really hope this means we can start to have a more rational discussion about our transport future along with an acknowledgement that we can also shape that future, especially in our urban areas. The last section touches on this future a little however it once again shows the ministry (and we’ve seen it repeated by the Minister) seem to think driverless cars are going to magically change everything.
New technologies driving improvements in safety, efficiency, and environmental outcomes
Technology is everywhere, and it is changing the way we live our lives. It is changing how and when we communicate with each other, whether we travel to purchase goods or have the goods come to us, and where we work. It is changing the demands that we, as a society, place on the transport system and our need for it.
Modern transport systems are becoming increasingly reliant on technology, with increasing levels of automation delivering improvements in safety and efficiency. In the long-term, the use of fully autonomous or driverless vehicles has the potential to revolutionise the transport system. In the more immediate term, the increased availability and reducing cost of information technology will offer improvements in efficiency, safety, and social experience. Technology will play an increasingly important role in helping to improve service levels while managing costs.
Moving on, the long term future of the current funding model is raised and it’s clear the MoT is concerned about the future funding stream for transport. Here are some high level predictions for what the MoT say we may see.
In the next ten years:
- The historic link between the rate of economic growth and the level of demand for transport will continue to weaken. We will achieve economic growth without an equivalent increase in transport demand.
- As our population becomes more concentrated in urban areas, local councils with stagnating or declining populations and low growth prospects will find it increasingly difficult to meet the cost of maintaining their existing networks.
In 20-30 years:
- Gradual improvements in the fuel efficiency of cars will slowly erode the effectiveness and fairness of Fuel Excise Duty as a means of collecting revenue from transport users.
- Solutions to congestion in cities are likely to become increasingly expensive. This could increase the tension between cities’ and regions under a national funding system.
- Greater demand for public transport and active modes could put pressure on the National Land Transport Fund, which is collected from motorists.
The first point about the weakening link economic growth and transport demand is something we’ve highlighted a long time ago. This is quite important as the Roads of National Significance are largely based on the idea they will improve the economy. The last point is also an odd one as we know that investing in PT infrastructure can really help bring down operating costs while also boosting revenue due to more customers using the services.
The briefing says impacts of changing trends could have these impacts on the government.
- We will need to answer difficult questions around the amount that should be collected from transport users, what it can (or can’t) be used for, and how it should be distributed around the country.
- As expenditure rises and the amount collected from motorists at the pump decreases, regular increases in fuel taxes will be required. This could prompt changes to the way we collect revenue from transport users.
- Measures to contain costs and transition towards a more sustainable expenditure path will be challenging, particularly for transport providers that are accustomed to continuous improvements to network standards.
- The government should expect increasing pressure for more funding from both larger cities (especially Auckland), which are struggling to pay for the investments required as a result of population growth; and smaller regional centres, which are facing rising costs with fewer rate-payers to fund them.
There are some serious issues in there and it seems the third one could be aimed at large infrastructure builders hoping for continuous large projects like currently seems to be happening. The current set of projects are already putting large pressure on the National Land Transport Fund (NLTF) and this is highlighted in this graphic below where expenditure is greater than the revenue being generated.
Lastly it’s interesting to see the current transport spend in the context of New Zealand’s history. It’s currently at 1.3% of GDP which is the highest level it’s been for decades and well above the OECD average of around 1%.
Overall it’s good to finally see some sense starting to come through from the Ministry but the question is, will the government listen?
This is a guest post from Donna Wynd who was part of the Independent Advisory Body tasked with looking into how to raise funding for transport in Auckland.
Myself and a range of others representing organisations from across the Auckland region have been working on a way to find the funds for Auckland’s so-called transport funding gap – in the order of $12 billion over 30 years (about $300 million per annum) – for close to two years now. The organisations represented included my organization, Child Poverty Action Group (representing the region’s ‘poor’, whatever that means), the AA (in the first phase), the business community (in various guises), tangata whenua, unions, and transport nerds Campaign for Better Transport, Cycle Action Auckland and Walk Auckland. I was the only woman on the group (a major blooper) and there was no Pacific representation which was also an oversight. While I held my ground reasonably well (I think), I cannot possibly claim to represent or speak for all the region’s women and low-income households.
Initially called the Consensus Building Group, we changed our title in the second phase that commenced in April this year to ‘Independent Advisory Body’. This was because we felt that when we got to the nuts and bolts of the funding decisions, it was unlikely that we would agree, much less arrive at a consensus.
Before getting to the group’s considerations, it is important to note that we were specifically precluded by our terms of reference from examining the merits or otherwise of the transport projects in the Auckland Plan that the Council is seeking to fund. Given the significant ideological differences within the group, this was probably a good thing. Also important is that the underlying driver of our future congestion is population growth. Two-thirds of that growth is internal (births and internal migration) and one-third is external migration. While we have some control over external migration, there is little we can do about the other two-thirds.
The final report of the group has recommended three possible ways forward for Auckland. The first is the low-cost ‘basic’ option. The other two were a package of either rates and fuel excise duty increases, or a motorway user charge. Unsurprisingly (for the readers of this blog, at least) the projects that would be dropped under the basic option are mostly public transport projects and arterial upgrades.
The decision to put forward the two funding mechanisms outlined in the report was made after a great deal of research into other options, including a cordon charge such as that operating in London. The point was not to maximize revenue, but to find a way to plug the $300 million per annum gap. Under the models used, both options generate the same revenue.
With respect to the rates and fuel tax pathway, it was considered that an additional general rate based on the value of the property was fairer than an annual general charge. Given the general distribution of the benefits of the additional investment in the transport network, it was also felt there was little justification for a geographically targeted rate. Under this option, businesses would pay less but be the major beneficiaries of the investment.
The motorway user charge option includes the option of a flat charge or a variable charge depending on when people travelled. Although our mandate did not include considering demand management, there is little doubt that building in a demand management component through variable pricing would provide the option to implement this at a later stage if desired.
So how much of an improvement to the performance of the network can Aucklanders expect for the additional $300 million per year? Not much, as it transpires. What the additional investment does is arrest the rate of deterioration in the performance of the network. The motorway user charge provides better performance as the charge will change people’s behaviour – there is no reason a rates increase will change anyone’s driving habits.
The graph below shows the percentage of time spent in severe congestion on the Strategic Freight Network (basically the motorway network) at the AM peak. Under all the options drivers are spending more time in traffic by 2036. ‘Flat Rate’ here refers to a flat rate motorway charge and ‘Peak Demand’ refers to the variable charge.
The flip side to this is passenger transport. We would expect to see PT use increase if a motorway user charge was introduced if it provided a cheaper, viable alternative (see graph below). The main reason PT boardings are lower under the low-cost option is that some PT projects will simply not go ahead. One of the key findings is that PT investment and investment in alternative modes such as the regional cycling network need to be brought forward to ensure that these alternatives are available. As a matter of equity, this is an absolute necessity; as a matter of politics none of this will work if the Auckland public does not see significant upgrades to the PT system.
My concern with much of this is that transport is about access and mobility for all, while most of the focus of the group’s work was on peak traffic congestion. Motorways do not improve travel options for much of the population whereas better PT does.
Back to the revenue: while the two options generate the same revenue, the incidence of the additional charges on households and individuals is very different. The average cost per household is about the same for both options. The key difference is the incidence on vulnerable (ie low-income, approx. $25,000 per year income) households. Strangely, the rates and fuel tax package affects a greater proportion of vulnerable households (12% as opposed to 7%). Equity considerations were given a great deal of deliberation throughout the process, and several options were rejected on equity grounds.
The single biggest problem in trying to think of a way around the uneven impact of the motorway user charge is linking an income with a number plate. While the research used by the group focused on household income, there are plenty of singles for whom this is an inappropriate measure. Given the existing complexity and fragmentation of New Zealand’s system of social assistance, there is no easy solution to this. Indeed some families interviewed as part of the background research commented that they would have to move out of Auckland if a motorway user charge was introduced given their current income.
At this point it seems fair to ask (as the group couldn’t) exactly what Aucklanders will be funding with their increased rates/petrol tax/motorway tolls? The central rail link is in, although the focus remains on roading. Aucklanders have been very clear that they want improved PT and cycling facilities and unfortunately some projects including rail to the airport are not within the ‘basic funding envelope’. With the Long Term Plan and its associated transport plan coming up for public consultation, this is the chance for Aucklanders to scrutinize where their money is going, and tell the Council what they would like it spent on if they are to be whacked with additional costs. And this is the chance to get in and plug the congestion-free network as an alternative model. It costs less and in these tough times that must make it an attractive option.
Lastly, I’d like to take the opportunity to thank all those who participated in the CBG and IAB. I think that for the most part members made a genuine effort to come up with a result most of us could agree on, and that would be of benefit to the region as a whole. This involved many of us putting aside our ideological differences, and I’d like to commend my fellow group members for managing that. I’d also like to thank the Council staff who provided technical and other support, and Peter Winder’s team for their assistance and hard work. Whether or not you agree with our conclusions is up to you, and I would encourage anyone who is interested to make your views known through the LTP process.
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”.