Light Rail by-election stoush

On the weekend, the Labour Party, as part of the Mt Roskill by-election campaign, announced their intention to fund 50% of the cost of the proposed light rail line from Wynyard to Mt Roskill via Dominion Rd, one of the routes Auckland Transport first suggested in January last year.

The government have responded with both barrels, accusing Labour of pork-barrel politics but also quite worryingly, reverting to with many of the same arguments and contempt they showed for the City Rail Link – and we know how that worked out.

The Spinoff were clearly thinking of many of the same things I was on the issue yesterday but here are a few others in no particular order.

Government already agreed improvements were needed

One of the oddest aspects of this whole debate is that the government, through the recent Auckland Transport Alignment Project (ATAP), have already agreed an upgrade of the road is needed. The main report says this about central access:

Access to this area is physically constrained, and there is competition for limited street-space between vehicles, pedestrians, cyclists and public amenity. This means it is imperative over time to move more people in fewer vehicles. This requires a continued modal shift towards public transport, walking and cycling.

Although bus efficiency improvements can help cope with increased demand in the short term, there are limits to the extent to which such improvements can continue to provide sufficient capacity. A mass transit solution will be required in the medium term. Key criteria for determining the best long-term solution should be the ability to meet projected demand in a way that integrates with the broader strategic network, provides for and stimulates ongoing growth along these corridors and in the city centre, and delivers value for money.

In the supporting information they also say:

Based on current forecasts, we concluded that the constraints in central Auckland can be managed through bus efficiency improvements for the next 10 years. Efficiency improvements over the next decade include continuing the roll out of double decker buses, changes to bus stops, and improving the routes taken into the central city.

On that basis, we concluded that a higher capacity mode, possibly light rail, is likely to be required on the central isthmus in the medium-term (2028-2038), and subsequently extended to Auckland Airport.

So the report talks about the need to move more people to catching PT and that more buses are only short term solutions.

Perhaps the biggest problem with ATAP, and what is reflected highly in this situation is the timing. As we’ve discussed before, ATAP relies heavily on old school transport modelling, the same stuff that has regularly over estimated driving demand and well underestimated the growth in PT use. That means many of the PT projects are likely to be needed sooner than ATAP suggests and light rail down Dominion Rd is probably the most likely of the proposals to be pulled forward. This is also partially confirmed by the table below showing the two main packages assessed as part of ATAP. Light Rail is teetering between decade 1 and 2 depending on the package suggesting at the very least it will need to be near the start of decade two.

atap-major-package-differences

Rapid Buses

In his interview with Radio New Zealand yesterday morning Prime Minister John Key was trying to pour as much cold water on the project as possible. He did highlight that Mass Transit was listed in ATAP as a second decade project that could mean light rail but that the Transport Agency are also looking at bus options. The term Mass Transit as used in ATAP is deliberately ambiguous as the reality is, some members of the government and their various agencies have an almost allergic reaction to the term rail. Some believe that whatever a train can do, a bus can do too, and do it cheaper.

The reality as it’s always been. is that we’ll need a mix of modes and it depends a lot on the route. In some. cases heavy rail is needed, in others light rail will be fine but in most cases buses will do the job well.

Dominion Rd is already the busiest bus corridor outside of the Northern Busway. The issue is that just chucking more and bigger buses on Dominion Rd – and other roads on the isthmus – isn’t a long term strategy for the simple fact is that there’s only a limited capacity on city streets to be able to handle those buses plus all the rest from other parts of Auckland. According to the Central Access Plan, the business case for Light Rail, Symonds St is already over capacity and that only gets worse as more buses and demand get added over time.

Symonds St Bus Numbers

Symonds St Bus Numbers

Unless the government and their agencies address how putting more buses on an already over capacity routes, they’re just wasting everyone’s time.

“Buses use roads”

John Key also reverted to this old chestnut during his talk on Radio NZ to defend his government’s investment in so many roads. It’s a line they’ve used many times before but as with previous times it is fundamentally flawed. The issue is that buses need to be able to pick up and drop off passengers and that happens on local roads, not motorways like the government have focused on. As such you’re not going to see any AT services running through the Waterview tunnels, or on any of the widened motorways. The big exception to this is along State Highway 16 west of Pt Chev however there, the government and their agencies refused to build a busway to enable buses to work properly. The upgrades aren’t even finished and not building the busway at the same time is already looking to be a massive and costly blunder.

The real reason for the government opposition?

I’ve long wondered if the real reason the government have often been so reluctant to support rail projects is they know they’ll actually be too popular and everywhere will want one. This is a point Stephen Joyce himself raised in his opposition to the plan – which has also served to see it discussed much more than it probably would have otherwise.

To say nothing of every other electorate in Auckland looking for multi-billions in new railway lines.

It’s not just Auckland that will want them either, I can imagine Wellington, Christchurch and maybe a few other cities wanting rail investment.

Why only half Labour?

A key part of Labours policy of supporting Light Rail is that they’ll pay for half of the costs with Auckland paying the rest. This is the same as what’s now happening with the City Rail Link. Yesterday Mayor Phil Goff raises a point I’ve been meaning to write about since ATAP, why should Auckland pay half. I’ll discuss this issue in greater detail in a separate post but there are a couple of key issues I have.

First, the government’s contribution would come from either general taxes or from a reformed National Land Transport Fund. Even based on that 50:50 arrangement Auckland actually contributes about 68% of the costs because an approximately 36% of the governments contribution would also come from Auckland, as that is Auckland’s proportion of the national economy  economy. So while paying for 68% of these urban Transit project Auckland will still be contributing 36% of the cost of every State Highway everywhere else in the nation. In effect this is using transport capex funding as a kind of city penalty; a way of redistributing from Auckland rate payers to the rest of the nation.

Second and a point also raised by Phil Goff yesterday, why should Aucklanders be stumping up 50% for a national scale project. Auckland’s Strategic Road network (the motorways) are all paid for, 100% by the government. ATAP also agreed on a Strategic PT network as shown below with the Dominion Rd route clearly visible. I’d argue that the strategic PT network should for the most part be funded the same way as the strategic road network.

atap-future-strategic-pt-network

 

The project is a PPP

One aspect missing from the current conversation is that the project isn’t expected to be funded like most transport projects. It has been previously discussed that this would be built and operated as a PPP, something the government have said they want more of. While in most cases PPPs are just another name for debt, with transit systems and the right incentives it might help encourage the private operator to also boost development along the route to make the project even more successful.

Some certainty is needed

Upgrading Dominion Rd has been an on again, off again discussion for the last 20 years and upgrading it is way overdue. As the local business association pointed out yesterday, they need some certainty as to what’s happening

The Dominion Rd Business Association has today called on both the National and Labour parties to stop playing politics over the future form of mass transit along Dominion Rd, saying that businesses along the 7km iconic strip want certainty over what transport will look like over the coming years, not political posturing.

….

Mr Holmes says the uncertain future for Dominion Rd has been a constant source of worry and confusion for businesses and landlords alike, holding back any significant investment in the area.

It’s time that Mayor-elect Phil Goff, Auckland Council and Auckland Transport work constructively with political parties across the political divide to come up with a definitive answer for mass transit in Auckland.

Given the history I don’t think that’s too much to ask

 

 

Regardless of whether light rail or some other form of better buses happen on Dominion Rd in the future, as ATAP points out, some improvements are needed to happen now. The bus lanes have too many gaps, especially through the town centres, they don’t run for long enough each day and double deckers are needed.

Govt Offers a $1b Infrastructure Loan

Yesterday the Government announced its latest policy on addressing the housing crisis in Auckland and increasingly in other centres, a $1 billion infrastructure fund to pay for the bulk infrastructure needed to support *some* of the new houses needed in greenfield areas.

The Prime Minister today announced a new $1 billion Housing Infrastructure Fund to accelerate the supply of new housing where it’s needed most, Finance Minister Bill English and Building and Housing Minister Dr Nick Smith say.

The contestable fund will be open to applications from councils in the highest growth areas – currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland.

Mr English says the Housing Infrastructure Fund will help bring forward the new roads and water infrastructure needed for new housing where financing is a constraint.

“The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.”

As we know Auckland is growing at rate faster than any other region in the country – there are a few districts growing faster, such as Selwyn following the Earthquakes but they are also off a much lower base. The Q&A suggests that the high growth areas are defined as the areas expected to see a 10% growth in the 10 years to 2023. In that time frame, Stats NZ predictions suggest that Auckland will see 58% of the country’s population growth. That figure is even higher if just comparing the five areas listed with Auckland taking around 70% of that growth. As such we can expect the lion’s share of that $1 billion to be used in Auckland. Auckland’s growth over the following years doesn’t slow down either and in the 30 years to 2043 over 60% of all growth in NZ is expected in Auckland.

NZ Regional Population Growth

One big issue right from the start is that for those other cities, a share of $1 billion would go a long way. But in Auckland with its infrastructure needs on another scale, it would be gulped down so fast it would barely touch the sides. The recent work that AT and the NZTA have been doing on Transport for Future Urban Growth suggests that over 30 years around $10 billion is needed in the greenfield just for transport infrastructure. On top of more funding is needed for other physical and social infrastructure that will be required to ensure these new developments have the level of amenity that will be expected/required such as parks, community facilities and much more.

Future-Urban-Land-Stategy

There is of course a lot more infrastructure that’s needed in Auckland but seems that only the greenfield stuff counts for this funding.

Dr Smith says the fund will be available only for substantial new infrastructure investments that support more new housing, not to replace existing infrastructure.

“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.

“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government.”

Mr English says infrastructure, and its financing in particular, is one of the three key constraints to building more houses – alongside land supply and consenting requirements.

“Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions.”

Depending on the number and timing of applications, it will require the Government to temporarily borrow up to $1 billion, which will increase net debt until it is repaid.

Only funding new infrastructure is kind of understandable but it does raise some questions, such as just what constitutes new infrastructure. In many cases building new roads or pipes also requires upgrading existing infrastructure to cope with the demands of new areas. We know we can’t just build tens of thousands of dwellings on the edge of town and expect the motorways to work. We also know that there are plenty of areas within the existing urban area for which replacing existing infrastructure is likely to be needed to enable new development. One such example would be the NW Busway which enables growth in existing urban areas such as Te Atatu but also will be critical in enabling growth in the entire North West.

I guess that if councils can assume this fund will pay for some of the greenfield growth they would have otherwise needed to build, it enables them to re-prioritise budgets to focus their normal funding on improving existing infrastructure.

One aspect I do like is the idea of linking funding to developments, the last thing we want is the council or government spending precious funds building infrastructure to an area only for a developer not to build anything and then profit off the increased land value. That of course also raises the question of why the government doesn’t just build a heap of homes themselves.

Perhaps the biggest issue with this announcement is that it’s not going to have any real short term impact. Even if the funding tap was turned on tomorrow – and it seems the details are yet to be worked out – the types of infrastructure projects that this fund will help deliver are not quick things to enable. They normally take years of planning, consenting and construction before any house can be built and so it will be many years before any housing this fund enables will have any impact on our current crisis.

Overall the fund seems useful but not quite as useful as the government’s headline suggest. A lot of it is going to end up coming down to the details and rules put in place and those have yet to be worked out. Ultimately the whole thing just seems like a way of loaning money to councils in a way that sits on their books differently. It will also be critical to see just what projects get built with this funding. If it just results in trying to quickly build a pile of auto-dependant sprawl that would be a terrible outcome but if it also is focuses on good quality outcomes such as decent walking, cycling and PT facilities it could be quite useful.

In addition to the infrastructure fund, the government have also said they’re looking at setting up urban development authorities.

Dr Smith says the Government is also considering establishing Urban Development Authorities (UDAs) to help further speed up the supply of new housing.

UDAs have streamlined powers to override barriers to large-scale development, including potentially taking responsibility for planning and consenting and other powers.

In some form or another we already have a few of these with the likes of Panuku Development Auckland, the Tamaki Redevelopment Company and the Hobsonville Land Company. How will a government UDA be different from these, with the possible exception of having the power to compulsory acquire land. If they did allow for compulsory acquisition it would be interesting to see if they also extended that to at least Panuku.

 

Subsidies for Electric Vehicles – How do you like them lemons?

*** Note: This post has been updated to correct errors in the initial version. Correcting these errors has not, however, affected the conclusions ***

Imagine, for a moment, that I was trying to sell you a bag of organic lemons. Now imagine that my bag of organic lemons costs 25 times the normal price. They’re very good ***organic*** lemons, I would say, while flashing a Simon Bridges smile. Well-fertilized by a lovely labradoodle called Lexie, I might add.

When confronted with such a scenario, I imagine (hope) that most of you would tell me to stick my organic lemons somewhere nice and dark. Like Norway.

P1000993

View of Bergen, Norway

How is this relevant to EVs? Well, the Government has just announced policies to subsidize uptake of electric vehicles (EVs). The Government is subsidizing EVS so as to reduce carbon emissions. A noble objective, you might think. Except for one small problem: My analysis suggests the Government’s is paying 25 times more to reduce emissions via EVs than what it’d cost to reduce emissions via other channels. Put another way, if we took the money being used for EV subsidies and instead used it to offset carbon emissions elsewhere in the economy, then we’d be able to buy 25 times more for our money.

Doesn’t sound like a very good deal does it? Let me first present some numbers to support this conclusion.

First, let’s consider the benefits side of the EV subsidy equation. Information available on the MoT website suggests (from my reading) that the main objective of the Government’s EV subsidies is to reduce emissions from transport. To achieve this outcome, the Government is proposing a suite of measures (subsidies) that are designed to increase the number of EVs on New Zealand roads from approximately 5,000 now to 64,000 in 2021. Of course, under a counter-factual (do-nothing) scenario the number of EVs on NZ roads would also be expected to increase, simply because EV technology is improving over time. For the sake of this analysis let’s say that under the counter-factual scenario (i.e. in the absence of the Government’s subsidies for EVs) we’d see an additional 10,000 EVs on NZ roads. From this we can deduce the Government’s subsidies cause a ***net*** increase of 50,000 EVs.

Second, on the cost side of the equation we find that two of the nine policies are costed at $42 million per annum in 2021. However, we’d expect the cost of the subsidies to start off low and ramp up progressively over the five year period, as more people buy EVs. Let’s assume the subsidies amount to an average of $20 million p.a. over 5 years, or $100 million in total. Let’s also keep things simple and use undiscounted monetary values. To sum up, the Government’s subsidies for EVs amount to spending approximately $100 million over 5 years, which is expected to result in an additional 50,000 EVs on NZ roads. This subsidy can be broken down further: $100 million divided by 50,000 EVs equates to $2,000 per EV, which over five years amounts to $400 per EV per annum. If we further assume an individual EV will be driven an average of 12,000km p.a., then we find the subsidies amount to approximately $0.03 per kilometre travelled.

So what do New Zealand taxpayers get for this investment? Or more specifically, how much of a reduction in CO2 emissions do we get from this investment? The Government’s analysis suggests that EVs will save 0.15 kg CO2 per kilometre traveled compared to a normal car. At 12,000 km p.a. this equates to 1.8 tonnes of CO2 saved per vehicle per annum. If we then apply the current carbon price of NZD $10 per tonne, then we find the Government’s EVs subsidies cost approximately 25 times more per year than the market value of the carbon emissions that they save.

I want to pause for a second to let this sink in: The Government’s EV subsidies cost 25 times more than what it would cost to reduce emissions in other ways. Oh. Dear.

Some of you may argue that a carbon price of NZD $10 per tonne of Co2 is too low – and I’d most definitely agree. Recent research suggests a carbon price closer to $200 per tone would be more accurate. However, I think it’s worth keeping in mind that the current carbon price is the direct consequence of deliberate policy decisions implemented by this Government over the last 8 years. Specifically, the Government has chosen to give out large volumes of free carbon credits, which have suppressed the price of carbon. Hence, I’d argue that the current carbon price at least reflect the Government’s views on how much New Zealanders should be paying to reduce carbon emissions.

Other people who are reading this may be thinking that I simply can’t be right. That somewhere I’ve missed out some zeros, or got a decimal point out of place. Perhaps I’ve been doubling-down on a few too many space-cakes here in Amsterdam, and/or skipped a few too many economics classes.

To try and get an independent perspective on my calculations I undertook some further research into the impact of EV subsidies in other countries. In doing so I stumbled across a very interesting paper titled The Norwegian support and subsidy policy of electric cars. Should it be adopted by other countries?, which was published in 2014 in Environmental Science and Policy.

This paper evaluates Norway’s subsidies for EVs and concludes (pg. 167; emphasis added):

Our main conclusion is that the Norwegian EV subsidy policy should be ended as soon as possible, and that this policy certainly should not be implemented by other countries. The solution to the GHG problem of the transportation sector in the next few decades in a world in which the GDP and population growth are the main drivers of the road traffic volume (Bosetti and Longden, 2013) is not to offer subsidies making it cheaper to buy and run EVs, or other alternatives, but to introduce more taxes and restrictions on car use. There are simply too many social costs associated with car transportation (Sterner, 2007). The subsidization idea, which informs so much of environmental policy today, not least within Europe, is ineffective, has several unintended consequences and will in many cases be counterproductive (Helm, 2012). The Norwegian policy for the support of EVs is an example of this.
Reading further, one finds that the authors have reached this conclusion based on an analysis of emissions savings from Norway’s EV subsidies. And guess what? They find the cost of the subsidies was approximately 2,700 times higher than the equivalent cost of offsetting the same amount of carbon (pg. 167; emphasis added):

Under certain reasonable assumptions, we then find that the EV subsidy package that the single EV owner gains amounts to about 13,500 USD/tCO2. As pointed out, this is about 2700 times higher than the current CO2 emission price. Therefore, under similar assumptions, subsidizing 20,000 EVs adds up to the value of more than 50 million permits, or about the present yearly GHG emission in Norway. Rather than supporting EV owners, the Norwegian Government could have bought emission rights in the same amount in the quota market and kept these rights unused, meaning that the quota supply would actually have shrunk. This would have driven the quota price up and possibly contributed to a technology push along different lines. At the same time, this measure would have made Norway ‘carbon neutral’.

Also contained in the paper is some interesting information on who seems to benefit from EV subsidies (pg. 167; emphasis added), with the authors commenting as follows:
It is widely believed that this EV policy will result in less energy consumption based on fossil fuels and a reduction in the local emission and noise problems. However, our discussion and analysis show that unfortunately the issue is not that simple. One of the most worrying aspects of the current EV policy incentives in Norway is that they motivate high-income families to buy a second car. At the moment, two-car households make up a minority. However, if two cars per household become more common, they will pose an environmental challenge across several dimensions and will doubtless mean that the EV policy as a GHG emission reduction instrument is totally missing its point.

“Totally missing its point” is not something you read in academic papers everyday. It’s worth mentioning that political parties in Norway recently reached consensus on rolling back EV subsidies, by removing EVs’ ability to use bus lanes and lifting their exemptions from tolls.

If you’re looking for a sound-bite from this post then this is it: The Government is proposing to spend $100 million to subsidize wealthy households to buy electric cars in order to achieve a relatively paltry reduction in emissions.

At this point I should point out that the Government is not alone in proposing that the New Zealand taxpayers subsidize EVs. The Green Party, for example, has also proposed removing FBT from EVs. While I haven’t evaluated their policy in any detail, on the basis of the numbers I’m seeing here I’d be ***extremely*** skeptical about the effectiveness of such a policy, especially when considered from an environmental and social justice perspective.

To finish, I want to make two moderating comments in relation to my criticisms of EV subsidies.

The first caveat is that I think EV technology is really cool and has a lot of potential to make our lives better. However, observing something is a “cool technology” is not sufficient reason to implement subsidies. Call me square if you will, but I personally believe that good policy should try to 1) achieve its stated outcomes and 2) to do so in an effective manner. Spending $100 million for what appears to be little gain seems to fall outside of this definition of “good policy”..

The second caveat is to acknowledge that EVs have benefits which extend beyond carbon emissions, and include things like air quality and noise benefits. These benefits should definitely be considered as part of a detailed benefit cost analysis. However the onus for demonstrating these benefits, I would argue, lies with the Government / MoT – not some strawberry-blonde punk blogger like myself. Specifically, the Government should really be doing detailed benefit cost analysis before announcing policies. For this reason I think it’s fair for us to evaluate Government policies in terms of their stated objectives.

Notwithstanding these moderating comments, my conclusion is that the Government’s is spending about 25 times more on EVs than they should.

Personally, I feel like this is a shame because I would love to see New Zealand take some serious steps towards reducing carbon emissions. The EV policies announced by the Government, however, do not qualify as a serious step. I’m left with the distinct impression that these EV subsidies are a superficially attractive way (“greenwash”) designed to distract New Zealanders from what is a very real problem: Our carbon footprint is too damned high.

P1000846

Government CRL announcement imminent?

Auckland could be about to get a late Christmas present. It’s appearing more and more likely that the government will agree to start to the City Rail Link in 2018, two years earlier than the 2020 date they set back in 2013 when they first agreed to the project. To go with the what, we also know the where and when, Stuff reports:

Prime Minister John Key is expected to announce the Government will help fund Auckland’s $2.5 billion inner city rail link two years earlier than originally promised.

It’s understood the PM will make the commitment in a speech to the Auckland Chamber of Commerce on January 27.

….

Auckland Chamber of Commerce chief executive Michael Barnett confirmed Key would address its membership on the issue of infrastructure funding for the city.

It would be similar to his announcement in 2013 in that he would outline the government’s future commitment to the city “and I think give some clarity and certainty to some of the investment in infrastructure that needs to be made”.

Asked if that would include a statement on the timing of the CRL funding, Barnett replied: “If they put a stake in the ground and then there’s clarity, then everyone can work around that.”

The Chamber of Commerce supported a 2018 start for the rail project, he said.

CRL - Early Works Jan-16 2

Early works are underway but are we about to get a Go for the rest of the project?

As I pointed out in my year ahead post last week we’ve been hearing noises that an agreement between the council and government is close for a while so it hasn’t come as a surprise that something may be about to happen. In fact I think the main thing stopping it from having been made earlier has been the Christmas/New Year holidays and lead up to them putting a dampener on the level of political credit the government will want to bask in.

Pressure has been mounting on the government to do something for months and one reason has been the stellar patronage growth that we’ve been witnessing. It has risen an impressive 23% over the last year Auckland is on track to reach the 20 million target by 2o20 around three years early.

2015-11 - Rail vs Govt Target

As I also mentioned in my year ahead post, the announcement be the council funding their share from 2018 with the government still not committing any cash till 2020. If this occurs perhaps they’ll off some sort of deal.

Making the announcement to the Chamber of Commerce is significant for a few reasons.

As I understand it, Auckland’s various business lobbies have been quite active behind the scene, pushing the government to commit to an earlier start date. They see the value in the project and also the value in minimising disruption. Waiting till 2020 leaves roughly a two year gap during which many businesses in the city – but particularly those along the route – will be in a state of limbo. Delaying the project also affects more than just the rail network as it also delays other projects to improve Auckland that are dependent on the CRL being completed, one example is the proposed Victoria St linear park but there are a heap of others.

It was to the Chamber of Commerce back in 2013 that the government first announced it would support the CRL after years of bitter opposition to it. Again back then the business lobbies were also a key factor in getting the government to change their position on the project. Of course as part of the same announcement the government also launched their accelerated Motorways package that fast tracked projects such as the Kirkbride Rd grade separation, southern motorway widening and the big package of works planned for the area around where SH18 joins SH1.

It raises the question of whether John Key will announce support for the CRL alongside any other projects. As we know the Reserve Bank of NZ has already said the government should consider accelerating infrastructure projects in Auckland. As such it’s entirely possible any announcement could also contain funding for other projects too (including non-transport projects). The concern would be if the announcement also included a number of projects designed to encourage significant growth on the urban fringe at the expense of enabling greater housing supply closer to the city.

Lastly an announcement would be a significant win for Mayor Len Brown. When he first became mayor the project was in its infancy and he has pushed it as the number one project for the city since that time with the backing of the council. To Len, if the government support the project starting sooner, then thank you.

CRL - Early Works Jan-16

I’ve already been counting the days till January 27 to see just what is announced.

 

CRL Funding Agreed?

PM interviewed at EMU celebration

In what looks like a sign that the ‘alignment’ project between the Auckland Council and the Government on transport may well just be falling in the right direction, the following data line was discovered by Luke in a Treasury funding ‘pipeline’ spreadsheet:

Treasury CRL funding

The full document is here.

Matt and I certainly were subjected to a veritable barrage of winks and nods from senior people from both sides of the alignment conversation at the recent EMU delivery celebration so perhaps this is what they were hinting at. And, as I commented earlier the PM was unusually unequivocal about the ‘loop’ in his speech too. And Len was both very upbeat and didn’t, unusually, mention the CRL from his turn at the lectern despite the PM’s presence.

PM speaks at EMU celebration

Has Luke found a scoop?

I am not clear on the status of this pipeline spreadsheet, but it just may be that Luke’s diligence has unearthed something interesting.

[champagne is on ice]

John Key up the transport tax creek without a paddle

A wee while back Auckland Council adopted an interim “transport levy”. The levy amounts to $100 per household has been adopted as an interim measure for three years to accelerate a range of transport improvements that would otherwise be unfunded, e.g. public transport, walking/cycling, road safety, and rural seal extensions.

You can read about the specific types of projects that are funded by the transport levy in this post.

The reception to the levy was interesting. At the positive end of the spectrum was this Herald editorial, which acknowledged 1) Aucklanders wanted better transport; 2) the improvements had to be funded somehow; and 3) the Government wouldn’t allow other revenue raising initiatives.

At the other end of the spectrum were these (rather extraordinary) comments from John Key (source):

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

Key goes on to say:

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

This is an extraordinary statement for several reasons.

First, John Key’s views seem to contradict the choices which Aucklanders are making. Census data shows that from 2006 – 2013 “growth in car use has been pretty anemic – a mere 2.3% increase” while “demand on all other modes is growing like crazy. There have been double-digit increases in bus trips (up 18.8%), train trips (up an astonishing 67.3%), and bike trips (up 26.4%). Ferry and walking trips have also done extremely well.” Absolute growth in non-car transport JTW travel exceeded growth in car JTW travel at the last census. More recent patronage data suggests the growth in demand for non-car modes has, if anything, accelerated since the census. In a nutshell, the absolute demand for non-car transport is growing much faster than the demand for vehicle travel – especially at peak times.

Second, John Key’s views seem to go against what Aucklanders say they want. The results of this 2014 survey show “improved public transport” receives the highest support, whereas this Stuff poll shows Aucklanders want Central Government to focus more on public transport than roads. Then there’s this Herald poll which found over 50% of Aucklanders supported better public transport – which is much higher than the level of support for road improvements (including highways). And an UMR survey which found New Zealanders as a whole supported PT improvements rather than roads. In a nutshell, there’s overwhelming evidence that Aucklanders want greater investment in public transport.

Third, John Key’s seems to be unaware that Auckland Council has been consulting on transport issues for circa 5 years. Key’s comment suggests Council is not prepared to “talk”. This, however, doesn’t acknowledge that in the ~5 years since Auckland Council/Auckland Transport were established, they have been consulting almost constantly on transport issues. We’ve had the Auckland Plan, the Unitary Plan, the Regional Public Transport Plan, the Parking Discussion Document, and the Annual Plan, among other documents. Almost all of these consultation exercises – in which Central Government agencies and MPs have always been welcome to participate – have found strong support for public transport and walking/cycling. In a nutshell, Auckland Council and Auckland Transport have consulted far more extensively on transport issues in Auckland than Central Government.

Fourth, John Key misunderstands what the transport levy will be used for. Let’s note from the outset that John Key gets his figures wrong (or is mis-quoted) when he suggests “only 15% of people live in the CBD”. He must have meant to say only 15% of people work in the CBD. This mistake, however, belies a bigger issue: How is the proportion of Aucklanders working in the city centre even relevant to a levy that funds improvements across the whole region? Such as road safety upgrades and rural seal extensions? Bearing in mind the CRL was included in the base capital programme, and would have been funded regardless of whether the transport levy was ultimately adopted by Council. In a nutshell, John Key seems to misunderstand what the levy is to be used for.

There is another reason why I thought John Key’s statement was quite extraordinary. This is not because of what it says, but instead because of what it fails to mention about the Government’s own transport tax raising efforts. More specifically, the impact of Auckland Council’s $100 transport levy pales in comparison to the extra fuel excise taxes raised by John Key’s Government since it came to power in 2008. The increase in fuel excise taxes which has occurred under John Key’s watch is clearly illustrated in the figure below (source data).

NLTF revenues

 

In 2008/09 there was a big jump in fuel excise revenues, which is subsequently followed by a gradual rise.  My rough calculations suggest NLTF revenues have, under this Government, increased by approximately $450 million p.a.  If we apportion one-third of this additional revenue to Auckland, and divide the result by 1.5 million Aucklanders, then we find that every person in Auckland is paying approximately $100 p.a. more transport tax under this Government than they were under the last. Put another way, John Key’s Government has, for seven straight years, increased the transport tax burden on Auckland’s households by approximately $200 to $300 p.a.

Wow. So let’s get this straight:

  1. After five years of almost constant public consultation on transport priorities and funding, Auckland Council chooses to increase household rates by $100 p.a. for three years to fund a bundle of transport improvements which seem to align fairly well with Aucklanders’ (revealed and stated) preferences; while
  2. Since coming to power, John Key’s Government has – with very little consultation – increased transport taxes by approximately $200 – $300 p.a. to fund a bunch of highways and bridges that National thinks are important, but which really don’t seem to matter that much to most NZers.

And then John Key has the temerity to turn around and criticise the transport priorities of Auckland Council and Auckland Transport?

To this I say “pot, kettle, black”; John Key and his Government are well and truly up the transport tax creek without a paddle on this issue: Transport taxes are approximately half a billion higher each and every year since National came to power, which is a much larger financial impost (and one applied to the whole country) than the transport levy adopted by Auckland Council. Problems with transport “tax and spend” exist much more at the level of Central Government than Local Government, and much more with National than Labour.

Which brings me to one final point: In his statement, John seems to imply the “experts” employed by Central Government agencies (e.g. MoT and NZTA) would agree with his Government’s preferred transport investment strategy. This is an interesting presumption, given that one of the key characteristics of New Zealand’s Westminster system is an “independent, non-partisan civil service“. I personally have not seen any surveys of what the experts at the NZTA and MoT think about this Government’s transport investment priorities.

The MoT’s own analysis suggests Government’s spending, especially the RoNS, has been spectacularly ineffective from an economic perspective – and much less effective than the transport investments made by the last Labour Government. Then there’s a surprising number of business commentators, like Rod OramBernard Hickey, Richard Prebble, and Don Braid who, from my reading, aren’t particularly supportive of the Government’s priorities either. These commentators instead seem to prefer less investment in RoNS and/or greater investment in alternatives, especially rail.

So where does this leave us? Well, based on the evidence I’d wager a bottle of John Key branded wine (2015 vintage) that the transport priorities articulated by Auckland Council and Auckland Transport would receive much more support from the so-called “experts” than the priorities of John Key’s Government.

What do you think?

P.s. This may be my last post from “down under” – as of next week I’ll be moving to Amsterdam to start a PhD in Economics. Catch y’all on the flipside!

Close the (freight) rail network?

Yesterday the Treasury released documents related to the government’s budget announced a few months ago. One that has gained a lot of attention is the suggestion from Treasury that the rail network – with exception of Auckland and Wellington – be shut down. The paper can be found here and contains quite a bit of information – although a lot of the actual details such as how much funding Kiwirail want in the future are not shown.

NZ Rail Network

The current New Zealand rail network

The paper discusses how Kiwirail have undertook a nine month study into its operations last year and the key findings were

  • rail’s high fixed costs are spread across the network and do not materially vary with changes in volumes being transported
  • revenue earned from train movements on most parts of the network is interdependent with other parts of the network because most freight movements travel across multiple network segments, and
  • as a result of the high fixed costs and interdependence of revenue between the different network segments, it is challenging to reduce costs as fast or to the same extent as a reduction in revenue.

In other words this isn’t just a case where you can trim off a few dead limbs and carry on but that those limbs all combine to contribute to the overall network. For example trains carrying milk powder from Taranaki also use and contribute towards the busy Hamilton to Tauranga section on their way to the port. Just like has happened in the past here and overseas in places like the UK, cutting back the network can do more harm than good. As such it was recommended that one of two main options be pursued.

  • retain most of the freight network and rationalise unprofitable services and some lines on the fringes of the network, or
  • close most or all of the freight network, with the option of retaining the upper north island section only (Auckland to Hamilton to Tauranga) as this part of the network carries the most freight volumes and covers most of its costs.

Treasury’s preferred option was to close the network and in their argument for doing so they say that over the last 5 years earnings haven’t really changed. They do however note that Kiwirail have been hit by a huge number of external factors which even they suggest the magnitude of and extent of which have been greater than the company could be expected to deal with. These include the Canterbury earthquakes, the Pike river mine explosion, Solid Energy’s financial difficulties, extreme weather events and the Aratere being out of service for a period earlier this year. What’s more the hits keep coming and now it seems the next issue will be looming trouble with the dairy industry.

One aspect the paper does highlight is that Kiwirail are really running a shoestring operation. As part of Treasury looking for ways to reduce funding they note that there is no evidence of “gold-plating” infrastructure or inflating funding requirements. They also highlight the results of an independent assessment by AECOM who say that in comparison to Australian systems, planned spending on infrastructure per kilometre was low. They also couldn’t find opportunities to reduce what was planned without significantly impacting levels of service. This doesn’t surprise me as I frequently get the impression the company is running only on fumes after being institutionally and politically beaten up.

The report claims that shutting the rail network down

During 2014, the Treasury, the Ministry of Transport and NZTA undertook an assessment of the economic and policy considerations for continuing to fund KiwiRail at the levels required. The key findings from this work were:

  • if all the freight currently transported on rail was transferred to road, the additional road user charges (RUC) earned by NZTA from the additional trucks on the road would be sufficient to adequately address road capacity and safety issues (resulting from the additional trucks) in most areas
  • the estimated environmental and safety benefits from transporting the current volume of freight by rail of ~$10 million and ~$20 million per annum respectively do not outweigh the costs of continuing to fund rail, and
  • a national cost benefit analysis estimated the net social cost of continuing to fund rail at the levels sought in this paper at between $55 million and $170 million per annum, which takes into consideration all the costs and benefits associated with funding rail at the levels required (another interpretation is that there is a shortfall in benefits of between $55 million and $170 million per annum at the current levels of funding).

I find it interesting the claim that shifting all rail freight to truck would pay for itself and any capacity and safety upgrades. According to the MoT there are currently around 900 freight trains around the network each week which probably equates to more than 3,000 trucks worth of goods being moved each day. The trucking lobby will be rubbing their hands with glee.

Treasury wanted the government to only provide one more year of funding during which public study would be carried out before what they assume would be a closure of the network. They do say that if the government didn’t agree to that, that they should provide Kiwirail more certainty by way of a three year funding package – something the Ministry of Transport supported. Thankfully the government didn’t agree with Treasury and agreed to keep funding Kiwirail – although only on a two year package.

I personally have no issue with Treasury looking at the issue of whether we should fund something, that is after all a key part of their job. What I do have an issue with is that there doesn’t appear to be a consistency in advice. Where’s the questioning of the RoNS businesses cases – some of which are as low as 0.2, where’s the questioning about why we’re pouring so much money in to new roads when people are travelling less and the assessment of many projects showing major flaws. Then there’s the absurd notion that the rail network should be a profitable business while ignoring the road network elephant in the room. For example the NLTP announced last week shows around $3 billion of funding from outside road taxes to build and operate the network.

 

NLTP 2015-18 revenue and investment flows

In my view Kiwirail should stop being treated like a business and instead the government should stop the madness of the NZTA not being able to fund rail improvements. That would allow rail projects that meet certain requirements e.g. improve safety and/or capacity to compete on a more even playing field. The NZTA should also be required to consider and allowed to build rail projects as part of any other improvements they make to get the best transport network outcome regardless of mode. They are after all the transport agency, not just the road building agency.

Supergold changes good

The government have confirmed the outcome of their review of the Supergold Card and the outcome appears quite good.

The changes are below.

  • Lift the moratorium on new services entering the scheme from 1 September 2015, and apply criteria for new services
  • Cap Crown funding for the scheme at $28.129 million per year for the next five years, with annual Consumer Price Index adjustments to account for inflation
  • Replace individual fare reimbursements for councils with bulk funding
  • Cap Crown funding for exempt services at their current levels, adjusted for CPI
  • Allow tendering on the Waiheke Island route where there is competition
  • Require SuperGold Card holders to purchase smartcards, such as the AT HOP card, as smartcard ticketing systems become available.

The lifting of the moratorium on new services and allowing competition for the funding on the Waiheke route is just logical so it’s good they’re being made. I actually think the biggest change will be that HOP cards will be required and that’s a really good change as it will give AT better stats as to trips being taken and should speed up bus boarding. It will likely require a bit of education on ATs part though. I would still like to see a Supergold branded HOP card with the concession pre loaded to make it even easier for card holders.

Government Says No to Road Pricing

How Auckland’s transport system develops and how it is paid for is probably something that will be debated until the end of time. That doesn’t mean we should just sit back and endlessly debate it though. Almost everyone agrees that something needs to be done to and it seems many are even prepared to pay extra for it.

If there’s one thing that’s been clear for many years now it’s that Aucklander’s want more choice in how they get around. Many have either travelled to, lived in or come from other cities around the world that provide residents with greater transport choices and have therefore seen first-hand the benefits greater options provide residents. However in Auckland they primarily turn to the car as for most that’s the only realistic option for getting around. The car might be preferred by many but a lot of people would love to have options and that’s come through in survey after survey. The most recent case of this was the Long Term Plan where the feedback was overwhelmingly in favour of focusing more on public transport and cycling. The desire for more transport choice was something the AA noted too in their survey.

2015 LTP Final Changes in transport Investment

It’s this strong feedback that is almost certainly a factor in the majority of the council’s Interim Transport Programme – which is possible due to the new transport levy – going towards PT and active modes.

interim-programme

However the transport levy is only meant to be an interim step until a longer term funding solution can be found. During the LTP the council consulted on taxes and rates or tolls on motorways. I was quite surprised that just over half supported the tolling options in some manner – although that could also be an outcome from the binary choice that was presented.

 

2015 LTP Final network and funding preferences

To be honest I’m not a huge fan of motorway tolling – or at least not what was proposed. That’s because I feel that just targeting motorways is likely to have a number of large side effects such as pushing a lot traffic that would otherwise be on the motorway onto arterials and then making it more difficult to roll out PT and cycling initiatives. A road pricing scheme that was more focused on getting the most out of our entire road network by better managing demand rather than a scheme focused primarily on raising revenue seems like better option to pursue.

Unfortunately it doesn’t seem like any kind of alternative funding method is going to get much support from the government. They’ve previously signalled they don’t like the idea of tolling or other ways of raising taxes which is why the council adopted a transport levy. Now it seems they are ruling out the toll idea completely with Radio NZ reporting that Transport Minister Simon Bridges has written to Mayor Len Brown saying the government is unwilling to even consider the idea.

This stance is really quite absurd. It’s not like Auckland was just asking for a huge wad of cash the government but instead just to be allowed to raise funds in a new way to pay more projects itself and the political risk in doing so sits firmly with the council, not the government. It makes me wonder what the government is so afraid of, that it will be so successful that Auckland improves faster and better than they’d like.

I’m not sure if this is just the reporting or if it actually reflects Bridges/the government’s views however if it’s the latter it’s concerning that he seems to be suggesting that the only role in PT is in reducing congestion rather than it enabling greater access to the wider city. It reflects that the government seem to see PT only as an option of last resort for the poor or those that can’t stand congestion rather than it having the ability to be a mode of choice. One such example is the Northern Busway which now gets high usage all across the day thanks to the investment to give it a congestion free and therefore a time competitive route.

He’s proposing a year-long negotiation with the council on an agreed 30-year programme focusing on reducing congestion, and boosting public transport where that reduces congestion.

Of course Len Brown seems to be acting like nothing’s ever happened with Radio NZ reporting that he still thinks the government might eventually change their mind and approve it. I think he’s dreaming if he thinks that and also if he thinks the government is going to respect the council’s transport plans. In fact given the time-frames involved it seems more like the transport accord is more of a way to buy some time on making a decision.

This news comes hot on the heels of a report from the OECD suggesting that Auckland/the government needs to consider road pricing but to help manage the congestion. They also note that more PT would be needed to give people more options and the ability to avoid the costs. Note: there’s quite a number of concerning aspects of the OECD report which I’ll cover in a separate post.

 

Building on Government Land

The Government are announcing their budget today and one of the surprises in it slipped out yesterday. The government plan to open up to 430 hectares of of publicly owned land in Auckland to be developed.

3 News can reveal a major part of tomorrow’s Budget will be a plan to develop housing on parcels of Crown land in Auckland.

A work tender mistakenly placed on a government website today details how the programme aims to deliver housing developments “at pace”.

Finance Minister Bill English and Prime Minister John Key are keeping quiet on tomorrow’s Budget.

The problem is one of the big secrets is out, bizarrely, with a tender advertised on the Ministry of Business, Innovation and Employment website for development of housing on Crown land, including residential land parcels and government land parcels.

It’s looking to: “Identify suitably qualified parties or consortia with the capability and capacity to deliver housing developments at pace in Auckland.”

After 3 News saw the advertisement, the Government gave over a document (see below) admitting more details. The Government will open up 430 hectares of public land in Auckland for affordable housing – that’s more than 50 rugby fields of land.

Housing Minister Nick Smith said he expected “thousands” of houses would be built on the land by private companies.

Dr Smith said money from the Budget would be provided for the Government to buy some of the land off universities.

Dr Smith said the private companies that built houses would not have to pay for the houses upfront, instead paying the Government once the houses were sold.

That is likely to be controversial, as it will be seen as the Government giving a leg up to private companies.

So the Government wants to start building houses and put them on public land, like that owned by the University of Auckland on its Tamaki campus.

“I’m having a pretty close and hard look at where there are land holdings that will help deal with the challenges over housing that we have in Auckland,” says Dr Smith.

Dr Smith is talking about land owned by universities, schools, tertiary institutions, health boards, defence, Housing New Zealand, the New Zealand Transport Agency and Department of Conservation reserves.

“You’d be quite astounded by some areas of reserves, and when you say the word reserve you assume that’s a park or land that is effectively vacant or being under-utilised,” says Dr Smith.

Making better use of the land we already have within the urban area is of course a far better strategy than carte blanche opening up of land of land on the edge of town. We’ve even talked before of places where we could do that, such as the Grafton Gully Multiway Boulevard idea which would improve transport and open up development opportunities on a decent chunk of government owned land.

Grafton Gully Blvd - Development

We don’t have full details yet however overall I think the idea from the government is the right one – although I’m not sure about the part where developers only have to pay once a house is built and sold.

To give an idea of just how much land the government are talking about, 430 hectares is about the same size as the land within Auckland’s Motorway collar.

Auckland CBD area

Of course that area will be spread throughout the city across many different sites. That leaves the question of just where the government has land. The answer is in a surprisingly large number of places. The map below is a couple of years old but shows all land owned by Housing NZ or listed as owned directly by the Crown. That still excludes a lot of land such as that owned by the NZTA but it does give a sense of of just how much there is out there.

Govt Land in Auckland

 

 

As you can see there’s a lot of government land around, especially Housing NZ land in clusters around Tamaki, Otara, Mangere and Mt Roskill. There are also some large individual chunks although they are unlikely to be involved as some include the likes of Paremoremo and Wiri Prisons, scenic reserves and schools. What all this means is the 430 Hectares are likely to come from freeing lots and lots of smaller sections for higher density developments. That’s not a bad thing at all although the reaction from locals to changes in Tamaki shows it might not be a straightforward change. Below is a closer look at the Tamaki area showing just how much government land there is there.

Govt Land in Auckland - Tamaki