There seems to have been a bit of a “passive aggressive ding dong” going on between Mayor Len Brown and Prime Minister John Key over the City Rail Link in recent months. Back in February, Mayor Brown proposed to “kick start” the CRL by building the first section under the downtown shopping mall and some way up Albert Street. Then shortly after the Elliott Street tower was announced, bringing further pressure on starting the project sooner rather than later.
Yet so far it seems the government hasn’t taken the bait, although critically in the PM’s official response to an earlier start he noted the following:
Your letter also outlined some projects, many being undertaken by the private sector that could be affected by the City Rail Link and raised the question of whether an opportunity existed to reduce disruption to the CBD and some of these projects.
I indicated in the meeting with you that I would be getting some advice on the issues you raise. I am in the process of receiving advice including on the possible impact on some of the projects you cite.
That seems like a fairly deliberate effort on behalf of the PM to leave the door slightly ajar for a change of heart. So let’s look at the major issue, which is the relationship between the timing of any redevelopment of the current Downtown Shopping Mall and the CRL project. Originally Auckland Transport was to buy this site, because construction of the CRL requires the demolition of the entire shopping mall as it passes through the area as a “cut and cover” tunnel. However, a deal was done between Auckland Transport and the site owners – Precinct Properties – so that the site wouldn’t need to be acquired, there’d just be some good co-ordination so that the tunnels could be built and Precinct’s redevelopment could occur.
The map below shows how the CRL tunnels pass directly underneath Precinct’s site, with the area shaded red indicating where a consented high-rise tower is proposed:
It doesn’t take a genius to work out that the tunnels need to be built before any development can take place. It seems simply impossible to build the tunnels without completely destroying everything on the site above – which means that essentially any redevelopment is delayed until the tunnels are completed. Let’s just say if I were Precinct Properties I’d be pretty pissed off with the government’s attitude at the moment.
So what’s a way to work around this issue? As proposed by the Mayor in February, it seemed like the Council’s plan was to fully fund the initial section of the project (potentially including going under Customs Street perhaps?) at a cost of around $250 million. Given the Council plans to spend close to $200m on CRL in the 2014/15 year it appear like such an outlay is fairly affordable. The government doesn’t want to spend money on CRL until 2020, but it’s not like they’re being asked to in this plan so I struggle to see the problem.
Perhaps the Mayor is concerned that government’s rough promise of a “50/50 split” in the cost of the project only applies to any money spent after 2020 – as that’s when they think the project is required. The risk of building the first section without government support seems to be a worry that they don’t front up with their $125 million come 2020, which is an understandable concern. But surely a bit of clever negotiation could resolve this and both parties can come away happy – Len Brown because he’s finally put a spade in the ground and started his flagship project, and the government because they don’t hold up a major redevelopment, don’t have to spend any money yet and bask in a bit of election year good press over not standing in the way of a very popular project.
It seems Len Brown is trying to rebuild his image in part by being a man of action and getting things done. Now that in itself isn’t necessarily a bad thing, especially if focused in the right direction and while Len is pushing some things well, like the City Rail Link, in other areas I think he seems almost desperate to do something that he could end up doing more harm than good. His “Transforming Auckland’s Economy: State of Auckland” speech this morning had a number of interesting points, some I thought were good, others not so. Bob Dey has the full speech here.
Thirdly, we need to build a reputation as a modern, wired city. In this regard, there have been too many excuses & delays in rolling out ultra-fast broadband and providing decent wi-fi.
Auckland Council will be developing a Digital Auckland – kick start programme so we are playing an active role in picking up the pace in this area. My intention is that this will include working with business partners to roll out free wi-fi in public places & public transport and finding commercial partners to help expedite the rollout of ultrafast broadband.
I see connectivity is increasingly important and rolling out wi-fi to more areas, especially in public areas and on PT is a good idea. Already increased communication is being seen as a critical element in some of the changes we are seeing with transport as young people who want to spend more time online can do that on a bus/train much easier than they can behind the wheel and was cleverly picked up for this AT ad.
Fourthly, we need to begin to make public-private partnerships part of how we deliver largescale projects. At the end of last year the council & I agreed a way forward for the SkyPath project – a walk & cycleway across Auckland’s harbour bridge.
The SkyPath will be Auckland’s first PPP, and will eventually enable a great vision – a cycle & walking path stretching from St Heliers to Devonport. This will act as a real game changer for building pedestrian & cycleways around our city. This is a chance to cut our teeth on PPPs and show that we can deliver real value for money and better outcomes for ratepayers.
PPPs are not a free ticket to be clipped by the private sector. We need to use our considerable scale & position to nail down the best possible deals for Aucklanders, learning the lessons from international experience and retaining public ownership.
Beyond the SkyPath, there will be major opportunities for transport projects, including the city rail link, better waste management & other major transport projects.
This is where I have the biggest concern with Lens push. Many of the projects he’s talking about like Skypath and the City Rail Link are critical but the reality is most of the funding shortfall is going to require additional funding sources is being created other large roading projects. Just because you could build them as a PPP doesn’t suddenly make them a better project. That’s one of the reasons behind why we are so focused on the Congestion Free Network. Before we consider how we fund projects it’s important that we go through a process and actually work out what we need to build i.e. what will work. After we have done that we can start looking at how to fund stuff and PPPs might be part of that. In fact of all of the projects on the list perhaps the one most likely to succeed as a PPP would be the CRL as it does allow private business to work in with the construction through activities like additional retail.
In all of this it is pleasing to see Len becoming increasingly positive about Skypath, something he had been a bit quite on for a while.
Auckland Mayor Len Brown is offering $250 million of the city’s money to kick-start the $2.86 billion underground rail project before the Government starts contributing.
He has told Prime Minister John Key his council will pay for an “early works” programme from next year to get the project out of its starting blocks at Britomart and under much of Albert St.
The council, through Auckland Transport, has already spent more than $100 million on property purchases and other route preparation work, and has included $193 million for the “transformational” project in its draft budget for 2014-15.
This is exactly what I have predicted might happen for some time and I first suggested it might have been a good idea back in July last year when it was announced that Precinct Properties were planning to get started on redeveloping the Downtown Shopping Centre and that they would build the section of tunnel under their site at the same time. The reasons the council/AT might want to carry on with the CRL work are simple in that there are a huge amount of public and private sector projects, both announced and unannounced that are currently being worked on. All of them would benefit from the construction of the most disruptive elements of the CRL being completed earlier. It’s the private sector ones that Len is rightly focusing on as they are the ones most likely to get the governments attention.
In his letter to Mr Key, he listed a string of private sector projects likely to be affected by construction of the 3.5km rail link from Britomart to Mt Eden.
They included a $300 million-plus redevelopment of the Downtown shopping centre above the route, and the convention centre which Sky City intends building for the Government in return for being allowed to install extra gambling machines.
Mr Brown said an early start to the rail project would minimise disruption and provide “a more effective and investment-friendly approach to the overall development of Auckland’s CBD”.
Precinct Properties wants to start rebuilding the Downtown centre next year into a possible 41-storey tower. It will co-ordinate foundation work with excavations for a “cut and cover” section of two rail tunnels between Britomart and a new underground station near Aotea Square.
Mr Brown said Aucklanders had shown overwhelming support for the rail project, and the private sector was making investment plans around it.
“We are saying to the Government, there is a big head of wind coming in behind this project from the private sector, and do we want to hold them up while we continue to dally, or do we want to move.”
As mentioned earlier it is more than just Precinct Properties that have plans in motion, many of which aren’t public knowledge yet and I doubt none of the private developers want to have just completed a massive investment and have their gleaming new buildings almost inaccessible due to the CRL construction just getting under way. I wonder how many jobs all of the planned projects would enable and interestingly how much they would contribute towards achieving the government’s condition of a 25% increase in CBD employment to agree to an early start to the project as a whole.
There are also a number of council projects dependant (or at least very much affected) by the need for the CBD parts of the CRL to be completed. These include:
Quay St Upgrade – Quay St will probably need to be available to handle Customs St traffic while the tunnel is built under the Customs St/Albert St intersection.
Customs St – We’re likely to need a proper bus priority on Customs St but that can’t happen until the CRL tunnel disruption has been completed.
Victoria St Linear Park – Again while some parts of it can be built without the CRL, some of the key parts can only happen once the CRL has been built under Victoria St
Wellesley St – The Victoria St linear park will reduce Victoria St to one lane each way and so all buses through the middle of the CBD are likely to shift to Wellesley St which will require proper bus priority, probably even a full busway.
There are a number of other potential street upgrades in the CBD that will be on hold they will be needed to help handle the disruption caused by the CRL construction. We know Len really likes focussing on the big projects but the reality is that without the most disruptive elements of the CRL construction being completed then many of the smaller but vital projects to make Auckland a more liveable city simply can’t happen.
So the interesting question is how much will $250 million get us? Well because much of the property acquisition and design has already taken place then it will get us quite a bit really. Here are the project costs from the original business case in 2010 (so they are bound to be slightly different now).
It can be a bit hard to read but the Britomart to Aotea section of cut and cover tunnel is costed at just ~$81 million while the Aotea station itself is costed at ~$138 million, about $220 million all up (not including rails or other fit out costs). It’s these two parts of the project that will be most disruption to the CBD and $250 million would get them out of the way. Here in orange the section that AT have been seeking a surface designation for to allow for the cut and cover tunnels (as opposed to a sub-strata designation where the bored tunnels will be in blue to the upper right hand part of the image).
And here’s how the cut and cover section would be built.
I’m not sure if this would allow for the Aotea Station to be used by trains or not. If it did it might crucially allow for a couple of extra services on the network during peak times giving some crucial extra capacity earlier than planned.
It will be interesting to see how the government responds.
Here’s a really thought provoking and very funny talk by Mikael Colville-Andersen, who tweets as @copenhagenize. It looks initially at how cycling has a potentially very significant role in achieving improved liveability – which after all is the vision of the Auckland Plan – before going on to analyse how a ‘culture of fear’ undermines trying to achieve these goals:
I think it’s pretty clear there’s a step-change happening at the moment in the way we think about cycling – as shown by the various responses to the tragic death on Stanley Street earlier this year, not all of it good of course, but even the thoughtless reactions were indeed that; reactions, which is new for cycling in Auckland. This Listener editorial is fairly typical of a number of media articles in recent times:
First, we must aggressively add cycle lanes to the main thoroughfares of our cities and complete the half-finished ones we have. The gold standard in cycle-lane design comes from Copenhagen. Lanes should be bidirectional, separated from cars and inside parking spaces, so as not to have cyclists fall prey to cars pulling out or doors being opened unawares. Narrow or convert car lanes, move parking spaces to side roads, slim those wide centre strips. Take out berms if you have to. The faster the vehicle speed limit, the better the separation needed, through painted lanes, grade-differentiation or dividers on slower streets to full-on median barriers for motorways. Bus lanes are not bike lanes: the two do not mix.
The key point here seems to be a growing recognition that cars and cycling don’t mix – especially not if we want to get more than a tiny fraction of the population cycling. We need to tackle the ‘culture of fear’ around cycling by making it safe and by making it feel safe. People need to feel like they could let their kids go for a bike in the local area, people need to feel safe and comfortable cycling around in their normal clothes, people need to feel that cycling is something easy to do – not something that you need to attend a myriad of “courses” in order to participate. Clearly this means, more than anything else, a big investment in infrastructure is required. Not just green paint on a road, but the proper cycling infrastructure described in the Listener editorial.
But not only that but also that it is clear that for the good of all of society this is something we must do. The advantages for us all in the bike-able city are countless. In many ways the degree to which a place is rideable is synonymous with its liveability. Cycling is the canary in the coal mine of city building.
Fortunately, a charitable interpretation of the Mayor’s appearance on Campbell Live last week could be that he sees the need for around $30 million a year in spending on cycling – compared to the current $10 million that would be a gigantic improvement. But there will also need to be tough decisions around the allocation of street space – as referred to by the Listener. If Auckland wants to take cycling seriously that means in places we will lose median strips, it means we will lose on-street parking, it means we will have to narrow lanes.
Analysis published in the The Journal of Transport Studies on cycling rates across all cultures, geographies, and weather patterns concludes with this simple summary:
“The presence of off-road and on-street bike lanes are, by far, the biggest determinant of cycling rates in cities.”
As they have a handy knack for, Generation Zero sums up the required step-change that’s becoming increasingly clear in a single image:
For small selection of previous discussions of what’s holding Auckland back from this urgent and relatively inexpensive improvement see these posts on Tamaki Drive, Ponsonby Rd, and the Harbour Bridge.
Late addition: This article showing that US business is now behind the cycling revolution because it adds more value than auto-dependency:
“Cities are driving the US economic recovery, and as they do, Americans are getting on their bikes. In 85 of the 100 largest metro areascycling is increasing. All part of a deeply healthy – and profitable – reshaping of urban economies.”
When all you do for transport is drive (or get driven around) it can be hard to appreciate the value that others place on good quality walking, cycling and public transport infrastructure. It doesn’t tend to go the other way that much though as most people walking, cycling or catching PT are also drivers or have been driven around at some point too. The reason this is important is that those that make the decisions on transport in this city/country often don’t tend to fall particularly into the cycling or PT categories. Thankfully when it came to the issue of hi-vis gear the associate transport minister does happen to be a cyclist and so can appreciate the arguments from both sides.
Getting a brief understanding of the issues that cyclists face appears to have been one of the goals of Campbell Live last night who managed to get the Mayor on to a bike for a tour around the city’s streets.
There were are couple of points in the piece that really caught my attention.
The biggest one was him saying that he wants $900 million, 1000km cycle network completed over 30 years. Now this is interesting for a few reasons. The first it equates to about $30 million and 33km per year. Thankfully Auckland Transport recently provided us with figures on cycling progress. They said that they have/are budgeted to spend:
2011/12 – $7m (prior to 2012-15 RLTP)
2012/13 – $9.967m spent
2013/14 – $10.3m planned
On top of this they say about $15 million is being spent as part of other roading projects. so perhaps about $25 million a year. For the distance measurement we have
In 2012/13 delivered 7.4km of new cycle lanes and shared paths and 8.7km of new footpaths
In 2013/14 plan is to implement 15.4km of new cycleways and 6km of new footpath
So well short of the 33km per year needed but even then it’s going to be a long time till we see a near completed cycle network. Just as a reminder, over 6 years from 2007 New York City managed to build 590km of their cycle network showing that if we want to build large parts of the network then we can, providing we put the focus on doing just that.
Further a 1000km cycle network is a bit longer than the currently planned 900km network AT has on their website, although they have said they have revised the network but we are yet to see it. The one below is from Integrated Transport Programme.
The other major thing that caught my attention was his discussion on the use of berms. I agree that they are largely under-utilised and in many cases it would be good to make better use of them however there’s two problems I see with it. One is it would require shifting the kerb and channel which is bound to add some decent costs. In many places there are also large established trees that might prevent the kerb from being able to be widened unless they were cut down, something bound to be unpopular with locals.
The suggestion also seems to be based on the idea that we can only get cycling facilities that doesn’t impact on the existing road resource. Just because our streets are the way they are now doesn’t mean that they are ideal. There are often huge amounts of space set aside on the road for parking and median strips so we should also be having a discussion about the value of those, especially as they can often be changed with just paint. The parking issue is especially the case in newer parts of the city were minimum parking requirements have required huge amounts of off street parking.
So while Lens talk sounds good, I can’t really see it as anything of a change from what’s already happening – which is not enough and not fast enough.
Len Brown was on Radio Live with Wallace Chapman yesterday in a fairly lengthy interview which covered a whole range of issues. If you want to listen to it you can here and it started just after midday. What I want to focus on is one particular is the section where he talked about transport and the Congestion Free Network as there are a number of parts to it that need to be addressed. I’ve cut that part of the interview out and it’s below:
There is a seemingly simple question that needs to be answered in the debate on the future of transport in Auckland. Is spending $60 billion after having implemented a raft of new taxes and things still getting worse than they are now a good investment?
To me the answer is a resounding no. Yet that’s the situation we’re faced with if we continue down the road we’re currently on – which is to build heaps more roads.
Forecast congestion based on ITP
Len claims that the council spent two years debating the issues and that has determined what is in the transport plan but the reality is there was very little debate about the merits of most projects. What’s more there was certainly no analysis done to determine if the projects on the list would actually help make things better.
At the start of the Auckland Plan process the council came out with a wish list of transport projects that seemed in include every project from around the region ever considered, many of which were nothing more than an idea. That wish list carried through to the final plan with some priorities being added to the projects but from memory not one was cut. One of the changes brought about by that prioritisation saw the East-West link catapulted to the top of the list despite not even really being on the plans a year before. I suspect the explanation for this sudden change in importance is the project was being pushed strongly by the business groups and Len did a deal with them to increase its priority in return for support on the City Rail Link. It has been suggested that the business groups were instrumental in changing the governments mind on the CRL last year.
Coming back to the Auckland Plan, how would Aucklanders have responded if they knew the projects on the list would cost $60 billion and make things worse? Would they have demanded something better or some different thinking? To me Len saying the council spent 2 years debating the issue is dishonest because the public simply weren’t given the right facts to be able to have a proper debate.
I also suspect that part of the reason there wasn’t a proper debate is simply down to how PT was discussed and the maps presented. The map below is meant to highlight individual projects that are in the plan but to me it does nothing to really show people a vision for what the transport system could be, especially in the case of PT. Sure most the projects that make up the CFN are on the map but everything appears to be a jumble with no real thought to how it would all work together.
As Wallace points out the current plan will add huge amounts of debt to pay for everything and one thing not often discussed is that it is the younger generations that will still be paying for it in 30 years-time. In my opinion we certainly don’t want to be paying extra rates and taxes for unnecessary transport projects that don’t solve the issues.
Its many of these issues combined that compelled us to come up with the congestion free network. I’ve long thought that if something like the CFN had been included in the Auckland Plan debate it would likely had a very different result. Bear in mind that the Auckland Plan is meant to be the 30 year vision, not the implementation plan so compare the map above to the one below tell me which one you think provides more vision.
About halfway through the audio clip suggests that we we don’t want spending on roads. That is simply not true and in many cases we fully support roading improvements but often we disagree on the specific solution. For example we completely agree that improvements are needed in the East-West Link corridor, what we disagree on is there needed to be a full on motorway solution potentially saving hundreds of millions of dollars. In fact we even want to see a much greater emphasis on projects that look to connect up our street network and provide new connections. Unfortunately as these are usually only small projects they often slip through the cracks and never get done.
Perhaps the thing that frustrated me the most about Len’s comments was just after the section above where he suggests there won’t be much change in travel patterns regardless of what we do with public transport, walking and cycling. To me this statement suggests that perhaps Len has lost his vision for the city, it’s him saying we can’t make that much of a difference so why really try. What he fails to realise is that people respond to what you build and are focused on improving. What you do build is just as important as what you don’t build. Further the models that predict how we will travel in the future are based around us constructing all of the roading projects currently on list creating a loop i.e. majority of people drive so more money spent on roads then which encourage more driving .
There is some good news though. Auckland Transport are currently working on the next version of the ITP which should hopefully look more critically at which projects actually help and which ones hinder us. It’s quite possible we will end up seeing some changes to the project list as a result. We’ve also seen in the last few days the announcement that the East-West Link will no longer be a motorway. If AT end up going with one of the scaled down versions it has probably saved hundreds of millions of dollars meaning a little less future debt to pay. Now we just need to do that to a heap more roads (and some PT projects too).
Len Brown has announced that the city will be looking at using Public Private Partnerships (PPPs) to help fund building some of Auckland’s infrastructure. Here’s the press release.
Public-private partnerships an option for Auckland
Auckland needs to take a good hard look at public-private partnership models for funding infrastructure says Mayor Len Brown, to relieve the financial burden on ratepayers and taxpayers.
Len Brown today released a position paper on PPPs that may be suitable for civic projects in Auckland.
“As the country’s largest and fastest growing city, we have the need for both major investment in infrastructure and finding new, innovative and fiscally responsible ways for this to be delivered,” says Len Brown.
“Every dollar we invest in capital projects – and there will be many billions – needs to make economic sense and be backed by a robust business case. But the traditional procurement and delivery models cannot deliver the infrastructure Auckland needs, which is why I am not inclined to rule out any options that will help us.”
The Mayor says one of the benefits of the Auckland amalgamation was creating the scale to make PPPs at a civic level possible for the first time, and with the Government pursuing greater private sector involvement in infrastructure and services, the public also have a better understanding of PPPs, and why they are distinct from privatisation.
“We have a large and growing body of international experience to draw from – many successful, some not so successful. While PPPs seek to take advantage of private sector expertise and efficiency, a key difference – and a lesson learned early on in the UK’s experience – is that in most successful PPP models, ownership is retained by the public sector, while the risk falls to the private sector.
“That is important for a city like Auckland, where we are seeking to deliver on social as well as economic aspirations through our infrastructure investments.”
Len Brown says with his position paper he aims to kick-start a process of looking at options that might work for Auckland, that would clearly define PPP models and what they can – and can’t – deliver.
“I wanted a realistic, warts-and-all assessment of PPP models. I wanted to know exactly what value PPPs can deliver – both so that we don’t miss opportunities, but also so we don’t trip up.
“PPPs will seldom if ever deliver lower capital costs. We can borrow money at least as cheaply as the private sector. For a PPP to make sense, the prerequisite equation is the value that it delivers – whether it be through applied expertise, commercial synergy, improved service delivery or risk allocation – is greater than any additional cost of finance.
“If Auckland is to be ambitious and prudent, we need to be smart too. While our balance sheet is strong, it cannot sustain the pressure of the magnitude of investment Auckland needs. And the same is true of the Government.”
The position paper includes international examples of where PPPs have or haven’t worked and why. It also lists dozens of projects in Auckland as large as the City Rail Link and as small as the upgrading Auckland’s parking meters that might benefit from PPPs.
Len Brown will now ask council staff to use the framework presented in his position paper to create a work programme through which the council and wider community can have a good hard look at all the options and apply the ones that will deliver real benefits for Aucklanders.
Now I obviously haven’t had time to go through the entire position paper however here are just some initial thoughts on it and the press release.
1. Work out what we actually need
Yes if Auckland is to grow as expected then it will obviously need to invest in more infrastructure and I don’t think anyone doubts that. This isn’t just from a transport point of view but also covers other infrastructure like water and community facilities. However on the issue of transport I think that before we start rushing ahead and working out how to pay for the massive wish list the council is proposing we first need to actually work out what projects re needed.
The list of projects and in the Auckland Plan and their priorities were largely decided at the political level and the modelling in the ITP showed that despite spending $68 billion that measures like congestion would still get worse. So let’s start by actually working out what projects and priorities will deliver the best outcomes for the city. I’m almost certain that if we did that, there would be some substantial changes to what is current planned and of course this is one of the key ideas behind the Congestion Free Network.
2. Different types of PPP
While we work out what is needed in 1. we can of course have a discussion about funding options and I guess that is where this release from Len Brown comes in. The press release does at least acknowledge a couple of key points in that building with PPPs will almost always be more expensive and risky. The question really becomes if the private operator is able to deliver other benefits that would not normally be available to the council/government.
Further not all PPPs are the same and there are different types and it’s important to marry the right type to the right project. The main types of PPP are shown in the chart below.
I have had a number of people from within different parts of the industry tell me that when it comes to just building infrastructure, that pretty much all of the benefits associated with a PPP from private sector innovation can be obtained through an alliance that sees risks shared. That type of model is already used in New Zealand on a number of projects including the likes of Waterview. An example of the type of innovation often talked about is that with more traditional contracts the client (e.g. council) may award a contract to a company that offers the cheapest price. As the project goes one and cost pressures come in they may substitute some materials for cheaper ones but that have higher maintenance costs. By comparison the alliance model apparently allows the builder and client to work though the longer term implications as issues invariably come up.
In short it’s incredibly important that if we go for a PPP that we get the right model for the right project (or part of the project).There may be opportunities for PPPs in some specific parts of projects but if it is just to build infrastructure then our existing contracting methods can likely do that much better.
As an example with the City Rail Link you might find that the council/government pay for the tunnel portion and the basic station box but do a PPP for actual station construction and operations. That might allow for the private partner to buy surrounding properties and integrate that with the station itself to maximise its use through the likes of providing retail and office space, similar to what is done in places like Hong Kong. If that were an option and the council structures the deal right it could significantly reduce the long term costs of building that part of the CRL.
Of course the council or government could do that itself however over the last few decades we have them shift away from these kinds of activities.
Of course when it comes to transport the biggest issue of all is that of demand risk. In Australia the high profile failure of numerous toll roads due to woefully wrong projections on traffic volumes – especially when a toll is involved – has burnt the PPP sector strongly and now it seems they aren’t prepared to take on the demand risk. As such they have ingeniously worked out that they can push that risk back to the public sector which is why we are now seeing projects like Transmission Gully about to be built using an availability contract. That effectively means the private company builds it and the client (NZTA in this case) pays a fee to use it providing it is up to a certain standard. This kind of project is almost certainly a waste of time and money as it presents virtually no risk to the private sector yet is being paid for by more expensive private sector debt. The table below shows where the risk would site under a PPP with the council
It’s also worth considering what the shifting of the demand risk says about various projects. It basically confirms that we are in a period of change and we can no longer just assume traffic growth will always happen. If the private sector isn’t prepared to take on the risk on motorway projects themselves then perhaps it’s a good indication the government shouldn’t be either.
4. Deal Structure
When a PPP deal is put together the banks financing it will go through each aspect and work out how much risk it creates. Just like insurance the more risky you are to the company, the higher they charge you just in-case something goes wrong.
That means if we put out to tender vague documentation, we could end up paying a lot more over a 30+ year period compared to if we had just used more traditional methods. Any variations to the contract along the way can also lead to much higher costs. It also needs to be noted that the private sector can be incredibly tricky and will do anything to find loop holes to get out of deals. The paper notes the case of the Araat Prison in Australia where there were two building companies who set up a joint venture to build the project. However as the project hit difficulty the joint venture split up leaving little opportunity to tie any recourse back to the two parent companies.
Lastly it will be really important for the council to consider the reputational risks and its citizens expectations. For example if we were to build the CRL as a PPP and that involved the operation of the trains too then if something were to go wrong the trains would likely stop running. That could have serious impacts for the economy until the issue is resolved.
I think that in conclusion there might be some specific cases where a PPP might actually work for some projects but we are going to have to be extremely careful about how we do them. I have to imagine the NZCID has been pushing extremely hard for this announcement behind the scenes. Their members list contains most, if not all of the organisations involved in PPP industry in NZ. There is probably a lot more to talk about but I’ll end it with this.
At the end of the day PPPs are just another form of debt which is a way of spreading the costs out over a long period of time. It means those that get benefit in the future also contribute towards the cost. The millennials (1980-2000) like myself are the generation that will still primarily be paying for this infrastructure in 30 years-time. So perhaps we should also be considering a focus on the projects that enable the kind of city this group wants to be living in, not the infrastructure that reinforces the ideals of their parents.
For the last two days both Patrick and I have attended a conference on Auckland Transport Infrastructure that was even chaired by the founder of this blog. The agenda included talks on a wide variety of topics related to transport there were a number of quite good ones that I will post about in the future.
Naturally the highlight being the presentation of the Congestion Free Network at the end of day one ;-). The good news is that many of the people in the audience, representing a wide range of the industry are very supportive of it. This included people heavily involved in the design, funding, construction and operation of roads and even heavy users like the freight industry. The general feedback we get from people within the industry when we present the CFN is that people really like it as an idea for fixing Auckland which really highlights to us that the key problem is one of leadership – primarily from a political level but also from senior management.
For this post I’m primarily going to focus on one particular part of Len Browns opening address. The primary theme of his talk was about how infrastructure providers and operators need to improve how they understand and deal with communities, both from a compassion and communication perspective – cue comments about the East-West Link. He cited both the Victoria Park Tunnel and now Waterview as projects that have engaged with the community well during construction.
He also talked about the need to keep an eye on costs and noted that as part of the upcoming review of the Long Term Plan the council would be going through the transport projects on a line by line basis to decide if projects were really needed. That shifted his discussion on to the issue of funding as based on the current wish list of projects which we simply won’t be able to afford everything without raising more money somehow. However this is where things started to take a strange turn as Len started talking quite a bit about PPP’s and how the council will be using a lot of them to help fund that wish list. He even told the attendees that they would need to help in selling the benefits of PPP’s to the wider public.
But just when it couldn’t get worse he then confirmed that the Council/Auckland Transport are planning on fast-tracking Penlink and that they are looking to do so by tying it in with the PPP that the NZTA will use for Puhoi to Warkworth. So with this post I thought I would look at Penlink and explain why it is such a crappy project.
What is Penlink?
Just in case you’re not fully aware of what Penlink is, it’s a new road that would connect the Whangaparaoa Peninsula to SH1 as shown in the map below. All up it includes:
a new 6.8 km stretch of road
a new 540-metre bridge spanning the Weiti River
a new motorway interchange at Redvale which also require some modifications to East Coast Road
widening of Whangaparaoa Road between Brightside Road and Arklow Lane. Penlink will intersect with Whangaparaoa Road through a new roundabout
Penlink – a road we don’t think is needed
As you can see it’s a fairly sizeable project and one that has the potential to save a huge amount of time over travelling through the existing route at Silverdale. But as you would expect, the big question is if its really worth it especially as this isn’t going to be cheap. The cost from a few years ago was $175 million however that is almost certainly going to be over $200 million now however it could be significantly higher than that. It’s worth noting that the road has already been consented and the former Rodney District Council had purchased the land needed.
To help pay for the road the plan has always been to toll the road – suggested to be somewhere between $1.50 and $2.50 – yet despite that, the toll was only expected to pay for about 29% of the cost with the rest coming from taxpayers and ratepayers. If the construction cost has increased we can likely expect the percentage covered by tolls has reduced further.
Is Penlink worth it?
This is where things get interesting. As mentioned it is a shorter route off the peninsula and for those to the east of where it joins Whangaparaoa Rd the saving is less than 4.5km with those to the Northwest of the route the saving will less depending on their location. Based on the last census there were roughly 21,500 people living to the west of Penlink that would benefit the most with just over another 9,000 on the peninsula up to where it connects to the Hibiscus Coast Highway. Not everyone on the Peninsula will be trying to get to town either, especially with an increased number of businesses around Silverdale.
However critically there is little growth that is left available on the peninsula. There will be a few sections here and there that are yet to be built on but according to the Unitary Plan then by and large the areas highlighted in red on the map below show the only locations left which are able to be developed. They are generally Mixed Housing Suburban but I would be surprised if there was able to be more than 2,000 dwellings build on here. Further many of the sites may end up being developed as retirement villages which have quite different travel demands to other dwellings. Further as you can see there has been almost no intensification allowed on the Peninsula with only a few pockets of THAB or Mixed housing allowed.
As such there is very little potential growth that will occur in the area so that removes the argument that we need to build the road to cater for future growth. Instead the project is more about moving the existing population. This is also confirmed in the results from the traffic modelling done in 2011 to support tolling which shows that by 2021 without Penlink there is almost no change in traffic west of Whangaparaoa Rd and only small increases in traffic east.
You might also notice another key point from the numbers above, the toll road is only expected to make a difference of about 7,000 vehicles per day. Most single lane arterials in the city carry considerably more vehicles than that yet not cost $200 million plus.
Lastly it doesn’t seem to do anything to address where the main future residential and business growth will occur which is in the new greenfields developments around Silverdale including Millwater. Yes it would remove some traffic from the Hibiscus Coast Highway which would free up space for vehicles from these developments but there are other ways we could deal with that.
To me it seems the main aim of the project is to provide a super expensive new road that would only be useful for a very small segment of the population in a part of the city that has almost no growth left. For those people all it does is serves to reinforce driving as the only realistic option yet as it only connects to SH1 southbound its only purpose is to get people to the end of the motorway queue a little bit faster. I don’t know about you but I can certainly think of a better way to spend $200 million. Of course if it’s built as a PPP we won’t have to pay for it upfront but it will end up costing us considerably more than $200 million as we will be paying a company who will be building the project with private financing.
In a separate post I will look at what alternatives there are to Penlink to improve transport in the area.
With the East-West Link, the various motorway projects, Puhoi to Warkworth and now this it really does feel like someone is pushing to double down on road building. Who’s behind it (because I know it’s not the construction industry) and is this all just a part of a last gasp being pushed by the road lobbies who are seeing the writing on the wall that public want change? I also note it’s on the close agenda for today’s Auckland Transport board meeting.07
On Tuesday night the new Council was officially sworn in and the Committee Structure announced, best covered here. We will discuss the Committee Structure further in future posts – because it is interesting to consider the slightly different approach that has been taken to transport compared to under the previous Council. In this post though it’s worthwhile touching on a few interesting elements of the speech given by Len Brown on Tuesday evening – which can be read in full here.
One element touched upon early in the speech is how the creation of Auckland Council truly has enabled us to finally tackle the really big issues facing the city in a holistic sense:
We live well here in Auckland, but not as well as we could. We have jobs, but not as many as we could. We have houses, but not as many as we need. We have a transport system, but not nearly as good as it should be.
Some people believe that the less councils do, the better off we are. That is not a point of view I hold.
A council can, if it dares, be bold. It can imagine remarkable things and then it can find the way to make them real. We know what needs to be done.
The work began three years ago, and we start this new term today with many of the most important building blocks in place.
If you think about it, without the councils coming together the City Rail Link could have never advanced to the extent that it has – the project is simply too big and scary for any one of the previous Councils to have tackled, especially with a sceptical government. Having a single Council has enabled us to be bold and do things that simply weren’t possible before. But of course there is still a long way to go.
It’s also becoming increasingly evident that cities and their councils are far better at tackling many of the issues that impact people who live in them compared to central governments. A point made quite well in this piece.
Everywhere we look we see national governments struggling vainly to tackle the challenges of the modern world. Washington, hopelessly partisan and dysfunctional, is an extreme case. But Whitehall is in many ways clearly over-stretched. The Civil Service remains organised around silos and with a poor record of innovation. Insiders say relations between ministers and mandarins have never been as fraught.
Cities’ governments by contrast tend to display a pragmatic, can-do ethos. Their leaders are often personable mavericks — we know Ken and Boris by their first names — and good at brokering deals and forging unlikely partnerships. The remarkable improvement in London schools — once the worst in England, now the best — has been driven at least partly by the way schools, councils, businesses, charities, arts organisations and others have worked together.
Cities have always been crucibles of invention and their governments are likewise showing increasing signs of inventiveness. Think Ken’s Congestion Charge, bike rental schemes first pioneered by Paris, or the way the Brazilian city of Porto Alegre gave citizens the lead role in setting the city’s budget. Nations hang onto old identities and everywhere struggle to adapt to migration and globalisation. Cities are much more welcoming and forward-looking.
Further on from Len’s speech, there are some more fairly general statements about transport:
And linked in to that programme, at every driveway and every bus stop and every train station and every cycle path will be a transportation system that works as it should.
We are now delivering on an integrated transport system that balances quality public transport, roads, and walking and cycling.
Already we’ve revolutionised bussing, and ticketing, we’re electrifying the trains, and we have the government backing our key priorities, including the City Rail Link.
We have moved the discussion about the CRL along from “why?” to “when?”.
That’s a vital building block, and it’s a reason for Aucklanders to feel very pleased, because CRL is the precursor to everything that cures this city’s sclerosis.
If we can rebalance the transport system, with more people in trains and buses and ferries, on foot and on bikes, and with roads working as they ought to, we will all move freely.
Other cities have done it. So can Auckland.
In a 21st century economy, connectivity could not matter more. The money we invest in transportation – and more than half our entire budget is allocated to it – is an investment for generations to come.
I wouldn’t quite go as far as saying we have revolutionised bussing and ticketing just yet. If AT can get the new network rolled out and HOP working then maybe – but that still seems some way off yet. It’s interesting to note mention of “balancing modes”. Brent Toderian last night said that’s just a sneaky way of saying “business as usual” as in that situation the roading planners/engineers always manage to get their projects to the top of the list as needing to happen before the balancing can occur. The jury is still out over whether the Mayor is willing to sacrifice some of the many stupid roading projects in our current plans to help balance the budget better.
The other mention of transport is in relation to finding new ways to pay for infrastructure:
And I will be looking to alternative sources of funding – for example to help pay for investments in our transport infrastructure.
With that in mind, it’s my aim to lead a debate across New Zealand about the way we fund local government.
If it’s possible to do that in ways other than rates, let’s explore them.
As we’ve said on many occasions, raising money for transport in different ways potentially makes a lot of sense – especially if that process can cleverly manage demand. However with so much fat in the current transport budgets I think it will be a pretty tough ask convincing Aucklanders to pay an additional tax for transport infrastructure we don’t actually even need.
Overall the speech is perhaps a little disappointing in the lack of detail about what key goals the Mayor has over the next three years – a lot of general ‘fluff’ about how great Auckland is or could be. Perhaps that’s not surprising for this kind of speech, but there are many many unanswered questions that remain – particularly around how we’re going to afford the gigantic transport wishlist and when we’ll finally see someone taking a good hard look at whether the projects really deliver on making Auckland the world’s most liveable city.
Before last week’s distractions, there was an NZ Herald article which discussed key issues with Len Brown over the coming three years. Perhaps the most interesting part of that article was the focus that Len put on looking again at the Council’s budget.
You said your first focus was next year’s budget and taking on board some messages from the campaign. What were they?
The community embraces the need to genuinely address … under- investment in infrastructure and particularly transport, but they want to balance that against the issues of affordability and within a budget that is sustainable. One of the key concerns was to keep a real close eye on debt levels and how much we borrow to achieve that. I have got that message.
You have forecast to borrow $2.8 billion in your first three budgets and a further $2 billion in the next three years. Is that wise?
It’s important for everyone to take stock. We have just received the community’s view in terms of the outcomes. The budget is an important part of it. I will be assessing that first budget and need to present that to council on November 17 … I will certainly be reflecting on that. Secondly, we are down against projections on [capital spending] on this year’s budget, let alone the 10-year budget which is a crystal ball-gazing exercise, quite frankly, and we will be assessing our debt levels and budgetary management every month of every year.
During the first term as Mayor there was obviously a lot of pressure to ensure that rates didn’t increase very much – particularly as combining the rates system was always going to mean serious winners and losers (funny how we only ever hear about the losers). Yet there continued to be some big spending items: fixing up the electric trains deal after the government got rid of the regional fuel tax, getting started on AMETI and many other non-transport projects. It seems like the “out” in the equation for the first three years was for the Council to increase its debt levels – taking advantage I suppose of the greater financial muscle the new combined Council now has.
If there is an increased desire to limit the growth of Council’s debt during the next three years, some pretty tough calls will need to be made around what projects happen and what projects don’t (since it’s capital expenditure rather than operating expenditure that is funded from debt). While that applies to all types of Council spending, as we know transport is by far the largest area of Council capital expenditure.
This is where the Congestion Free Network comes in. We first created this network because we were horrified by how expensive the transport plan outlined in the Integrated Transport Programme is and by how badly it missed achieving the goals and targets set by the Auckland Plan. Remember that for $68 billion in the current plan you get:
A heap more transport greenhouse gas emissions (rather than the sought decline):
Basically no increase in the proportion of people catching public transport into the City Centre:
Nowhere near the PT, walking and cycling modeshare target set in the Auckland Plan:
I could go on but this is getting boring. The basic story the Integrated Transport Programme tells is that if you spend a lot of money on stupid projects, you don’t actually achieve what you want to achieve.
As we explained recently, the real beauty of the Congestion Free Network is that because you’ve provided a complete rapid transit network that is free of congestion, you can stop wasting money on unnecessary roading projects which aim for (but of course never deliver thanks to induced demand) reductions in congestion. This means you can build the Congestion Free Network and still save at least $10 billion from what’s in our current 30 year transport plans.
$10 billion of course sounds like a LOT of money. And it is. Surely ripping $10 billion out of a transport budget – even over 20 years – is going to hurt due to what can no longer be done? Well only if your transport budget isn’t full of excessive projects to begin with. The table below outlines our initial thoughts about how you can reduce the spend on new roading projects over the next 20 years from $21.6 billion to $7.0 billion:
To show the savings a bit clearer it’s quite useful to look at them in pie chart form:
As you can see the biggest chunk of the savings just comes from not doing a project that’s not only a waste of money but will actually make things worse. Then we shave money off big slush funds highlighted for motorways to sprawl that won’t be required (unless someone truly is planning to build the Karaka-Weymouth bridge) or widening arterial roads which don’t need to be widened (they probably just need a bus lane). Puhoi-Wellsford gets chopped back to Operation Lifesaver, AMETI’s cost gets fixed so it doesn’t double-count the East-West Link, we scrub out the unnecessary six laning of the Northern Motorway between Albany and Orewa (why would you six lane when you’ve just built a busway?) and many other projects which are generally not completely stupid ideas but where the solution proposed is vastly bigger than the problem that exists (e.g. East West Link). I suspect the only people who really want everything on that list built are the NZCID and their members who stand to benefit hugely from it all.
The scary thing about ripping nearly $15 billion out of the roading budget was just how easy it was. We barely felt mean at all with many of the cutbacks. We’re still proposing Penlink to happen some time before 2030, we still propose to spend money on widening the southern motorway south of Manukau, we’re still spending $1.3 billion on AMETI, we’re still completing the Western Ring Route, we’re still grade separating the Kirkbride Road/SH20A intersection, we’re still spending $800 million on upgrading arterial roads, $700 million on new arterial roads in greenfield areas, $350 million for rail grade separations – the list goes on.
Auckland Transport is supposed to be preparing a second version of the Integrated Transport Programme in the upcoming months – including consideration of the Congestion Free Network as one of the scenarios looked at in this process. We await with great interest to see whether the Mayor’s enhanced focus on the budget extends to chopping out some of the extraordinary waste of money proposed in the first version of the ITP.