Can new roads pay for themselves?

It’s common to hear people say that because roads are paid for by their users (fn 1), we should build more roads. After all, the new roads will fund themselves!

At first glance, this seems convincing. But a closer look reveals that the “new roads pay for themselves” argument is based on a logical fallacy. Basically, the fact that the average road pays for itself does not mean that the next road will also pay for itself. In fact, there’s a large amount of recent evidence from the transport market that the next, or “marginal”, road will cost taxpayers more than it brings in revenue.

Economists understand the importance of marginal analysis when making decisions about what to build and how to charge for it. Businesses typically make pricing and production decisions “on the margin”. In other words, they look around for the next potential customer and ask: “Can I produce one additional unit and sell it to that person for a profit?” If the answer is yes, they produce it; if it’s no, they don’t as it would reduce their overall profits.

So what is the market telling us about demand for new roads? As always, it’s best to go and look at the empirical evidence. Over the last decade or two, there have been a number of efforts to get users to pay for new roads. Australia, the US, New Zealand, and a variety of other places have built toll roads – sometimes privately financed, sometimes publicly financed. In most cases, revenues from users were expected to pay the cost of the roads.

These costly investments have almost all failed. Toll roads have suffered from low traffic and low toll revenue. They have often required expensive taxpayer-funded bailouts. It looks as though people are not willing to pay for the marginal road.

In Australia none of the toll roads built after 2000 have been profitable:

Australia has some of the finest highway tunnels in the world, but for the private investors who trusted traffic usage projections from leading and respected consultancy firms the story has been a tale of insolvency and disappointment. Most of the privately owned toll highway projects constructed in the last 15 years in Australia have fallen into receivership or administration within a short time of opening to traffic when it became clear that toll revenue from actual traffic usage would be well short of covering its contribution to the construction costs.

The failures include the A$1bn Sydney Cross City Tunnel, which has seen traffic volumes less than half of forecasts, and the Brisbane Clem 7 and Airport Link tunnels, where traffic volumes have fallen short of forecasts by over 75%.

traffic avoids clem 7 tunnel

People would prefer to queue in traffic than pay the Clem 7 toll

In the US, an academic paper reviewing toll roads financed by Australia’s Macquarie Bank found that:

The record for these projects is abysmal.

Two of the projects declared bankruptcy. The assets of one, Pocahontas, were written down to zero by its new owner, and two were bought by the government jurisdictions where they were located. Another is in negotiations to be bought by the state of Virginia. None of these projects fulfilled their initial plans to operate successfully as profitable, private companies. Macquarie’s most substantial U.S. project, the Indiana Toll Road project, is near insolvency and attempting to restructure its loans.

In New Zealand, private finance has been slower off the mark, but there have been a couple of experiments with toll roads. In Tauranga, the Route K toll-road has been a financial millstone for the council since its opening in 2003. This year, NZTA agreed to pay off its remaining debt at public expense:

The New Zealand Transport Agency will take $62.5m of the remaining Route K debt from Tauranga City Council, it has today announced.

The council signed off the agreement with NZTA over the ownership of the debt on Route K in a meeting today.

The agency had already agreed to take ownership of the road from July 2015, but at a council meeting this afternoon, councillors discussed the agency also taking on the debt, less $1 million which the council would still owe.

The removal of the debt would see the council’s credit rating upgraded from A+ to AA-.

This is a clear market signal about the financial viability of new roads. It should not be surprising. After a half-century of road-building, Australia, the US, and New Zealand have extensive and mature road networks. There are seldom opportunities to dramatically improve the network by building another road. (Which is not to say that there are no opportunities to do so – it’s just that they’re bloody hard to find!)

In this context, it makes more sense to invest the marginal transport dollar in providing better transport choices. After half a century of underinvestment in public transport and walking and cycling facilities, there’s a lot of latent demand. As a result, every time Auckland has built a new piece of public transport infrastructure this century, demand has outstripped projections. Here, for example, is a graph from a few years ago that shows that Britomart met its 2021 patronage targets more than a decade early.

In other words, people aren’t willing to pay for new roads, but they are queuing up to get on the bus or train. Transport policy should recognise these market signals and invest in choice.

Britomart Projection Numbers Graph

The market has spoken. It wants some more trains.

Footnote 1: This is factually incorrect. Since 2004, the National Land Transport Fund, which consists of fuel taxes, road user charges, and vehicle license fees, has paid 100% of the cost state highways. However, it only pays 50% of the cost of local roads, which account for the majority of vehicle kilometres travelled. The remaining 50% are paid for by local council rates.

Toll road manual kiosks to go coin only

The NZTA has announced that it is changing the machines that some people use to pay for the Orewa to Puhoi toll road to accept coins only citing reliability issues with the note and card options.

The NZ Transport Agency says it is converting the Northern Gateway Toll Road manual kiosks at the Dairy Flats service centre to accept payment by coin-only in order to reduce the risk of kiosk breakdowns and shorten queuing times at busy periods.

The changes will take effect from Wednesday 4 September.

Stephen Town, the Transport Agency’s Regional Director for Auckland and Northland, says moving to a coin-only at the two Dairy Flat machines will standardise payment options at both ends of the toll road, following the change to coin-only in mid-2011 for the manual kiosks at Puhoi.

“It’s more than four years since the toll road opened, and more than 90 percent of drivers are now choosing non-cash payment options that don’t require them to stop and interrupt their trip. The roadside kiosks are now an old technology, spare parts are no longer available, and the cost of maintaining them is rising,” Mr Town says

“The majority of faults involve the bank note and card payment options. Breakdowns leave people frustrated, and that is something we want to eliminate by making the machines coin-only and streamlining the payment process.”

An average 5 million trips are undertaken each year on the toll road. The number of people paying for trips at the kiosks has declined from around 30% when the toll road opened in January 2009 to less than 10% of all trips between July-December 2012. (Cash purchases accounted for approximately 8% of kiosk transactions during that 6 month period).

People will still be able to buy single or multiple trips when the Dairy Flat kiosks become coin-only next month.

Buying trips at www.tollroad.govt.nz remains the best option for casual and regular travellers because they do not need to stop before using the highway and no administration charge applies.

For those travellers who still prefer to pay manually, however, the Transport Agency will have staff on duty at the Dairy Flat Centre service station for the first few days to help make the switch to coin-only kiosks as smooth as possible.

“We hope the coin-only kiosks will operate more reliably and make journeys a little more enjoyable for those who like to pay their tolls this way,” says Mr Town.

As the NZTA say, only 8% of people are now paying using these machines so it shouldn’t affect too many people. I must say though, I have always found it weird and incredibly stupid that people would exit the motorway to pay the toll. The reason for that is the amount of time that people take to do this is about how long it would take them just to stay on the motorway and then use the old free route. This is even more so as the cash payment options cost 40c more per trip.

On a similar note, while the number of people paying using the kiosks declined, a significant number still use the old route for what I’m sure are a variety of reasons. The NZTA used to release the traffic volume data for both routes monthly however at the beginning of this year they stopped doing so as they handed the road over to Auckland Transport. Before the monitoring stopped around 28% of all traffic was using the free route. I assume the traffic counters are still in the road so it would be handy if Auckland Transport could start releasing the traffic volumes monthly like the NZTA do.

Orewa to Puhoi

HOT Lanes

No. Not anything about the temperature, spicyness or physical attractiveness. High Occupancy Toll Lanes are a fairly recent phenomenon becoming increasingly widespread throughout the USA. A recent Atlantic Cities article covers the introduction of a pretty large scheme, implemented by way of a public private partnership (PPP) in Washington DC:

The expanded roadway – two lanes in each direction, from the I-95 interchange to Tysons Corner – will be made of High-Occupancy Tolls, or HOT lanes. Carpools of three or more, buses and motorcycles (but not hybrids) can drive them for free. Anyone else who wants in will have to pony up according to a dynamic pricing scheme, and there’s no limit to what that could cost.

The $2 billion system was built in a public-private partnership between the state and Fluor Transurban, an engineering and construction conglomerate. Virginia put up about $400 million. The private firms paid for the rest (with the help of a hefty federal loan) in exchange for the right to collect the toll fees for the next 75 years.

Fluor Transurban is guaranteeing a minimum speed on the HOT lanes of 45 miles an hour. That means the toll price will vary according to demand to maintain the steady flow of traffic. The companies estimate that the average ride will cost between $3 and $6 (tolls will be in effect at all hours of the day, not just during rush hour). But there’s no ceiling to what the system may charge drivers to achieve that goal, if it turns out everyone heading to Tysons Corner is willing to pay a ton of money to get there.

These lanes are an interesting convergence of trying to both increase car pooling (the high occupancy bit) as well as being some form of congestion pricing (the toll bit). Proponents of the schemes cite the lanes as not only providing a congestion free option for those using the lane, but also reducing congestion in the general traffic lanes (presumably due to the car pooling). But the scheme comes with its challenges:

If this infrastructure is now managed by private companies, will their interests always align with the public good? Fluor Transurban, for instance, stands to lose money with every carpool that enters the lanes for free. And isn’t there something ethically dubious about enabling drivers who’ve got the money to pay for faster commutes, while low-income commuters continue to pay for transportation with their time?

These toll lanes will offer the equivalent of driving in first class. But some public money did go into providing that premium experience, and the lanes will be patrolled by publicly funded state police.

For transportation engineers, the project poses just as many logistical questions as philosophical ones. Will people really use this system the way Fluor Transurban expects them to? How much will they be willing to pay? And how long will it take drivers to catch on to the new infrastructure? The technology itself is so complex the Washington Post even published a user’s guide for its readers (no, the price of the toll won’t change on you while you’re driving; yes, you will be caught – and pursued by collectors – if you try to beat the system).

I think I’d feel reasonably comfortable with HOT lanes being implemented in Auckland as long as they were done so in a relatively inexpensive way by converting an existing lane – rather than spending megabucks to add additional lanes. Though there’s still something a bit queasy around forcing lower income commuters to pay for transportation with their time. The fact that everyone gets stuck in congestion, no matter how rich or poor they are, has always seemed something of a leveller. But perhaps I’m being too ideological there?

What are your thoughts? Could something like this work in Auckland? Would it reduce congestion? Is reducing congestion really that important? So many interesting questions.

Another Australian PPP fails – will we learn from it?

Some interesting news coming out of Australia today, with yet another transport public-private-partnership (PPP) on the brink of collapse, due to over-optimistic traffic forecasts. This time it’s the Airport Link toll road in Brisbane:

THE operators of Brisbane’s Airport Link have gone into a trading halt, amid increasing speculation about the company’s financial future following much lower than expected traffic volumes…

…It comes as the operator struggles to achieve even 50 per cent of its forecast traffic volumes of 135,000 vehicles a day.

Since a discounted toll took effect in late October, Airport Link carried 53,172 vehicles a day down from 85,000 in its first six weeks of operation when motorists were able to use the tunnels for free.

BrisConnections had projected a figure of 135,000 from the end of the toll free period, rising to 160,000 within 18 months of opening.

A retired Sydney academic notes that this failure is far from unusual and all comes back to that same vexed issue that we discuss so frequently in blog posts: overly optimistic traffic predictions:

Professor John Goldberg has written a complex 24-page analysis of the project and his findings are unswervingly grim. He says that Brisconnections, the listed company which oversaw the $4.8 billion project, faces “inevitable financial collapse”.

Skewed traffic forecasts, poor cash flow and unmanageable debt will prove its undoing, he believes.

Until recently, the listed company had insisted that everything was fine.

That reassurance came even though vehicle numbers have fallen far short of expectations since the 6.7km road opened in late July with an introductory free tolling period which ended last month.

But Brisconnections acknowledged on November 2 that its bankers had appointed insolvency and restructuring firm PPB Advisory to conduct an independent business review. Investors were warned that there may be “adverse implications”.

Is Brisconnections heading for the same fate as RiverCity Motorway Group, which collapsed about $1.4 billion in debt less than a year after the 2010 opening of Brisbane’s cross-river Clem7 tunnel?

That’s what Prof Goldberg thinks. Normally, such a dire forecast might be met with skepticism.

But Prof Goldberg, who taught at Sydney University and worked as a senior researcher at CSIRO for 30 years, has form.

He correctly predicted the failure of the companies operating the Cross City and Lane Cove tunnels in Sydney. That foresight earned him a place before a 2005 NSW Parliamentary inquiry.

“The public-private partnership concept has failed in Australia and should serve as a warning to superannuation funds of the high risk of investment in road infrastructure,” he writes in his current paper.

Investors have poured more than $23 billion into 11 toll roads across Australia since 1994 and the net return on equity has been small or negative in each case.

On the one hand I’m not fan of PPPs for transport because I think they’re just a form of “creative accounting” that benefits nobody but the lawyers drawing up the complex contracts. However, on the other hand if these high profile PPP failures in Australia had just been public sector roads we may well have never known about them, because the horribly inaccurate traffic predictions wouldn’t have been an issue. So it seems that – perhaps by learning the hard way – the PPP system might end up bringing a bit more rigour to the process of assessing whether projects are actually needed or not.

But that will be too late for the Airport Link, where it seems the process of working out how many vehicles were going to use the road each day was based on a rather convoluted process:

A common flaw in the failed tolls roads and, notably, Airport Link, is the use of a “work back” philosophy to forecasting traffic numbers, Prof Goldberg says.

The promised return on equity to investors is a starting point used to work back to how much revenue must be generated from the expected daily flow of vehicles, which has been inflated to wildly unrealistic targets, he says.

Brisconnections had forecast 135,000 vehicles a day would use Airport Link from the start and the numbers would eventually climb to 195,000 daily.

The most recent average traffic count showed a dip to just 66,203 a day in October, a period when the road’s use was still free for more than half the month.

The Clem7 traffic performance has been equally dismal, with an average of just 24,000 vehicles a day, less than a quarter of expectations.

The ‘work back’ philosophy seems utterly bizarre, to say that least.

Given the numerous failures of PPPs in Australia, for reasons which seem to be happening in New Zealand too, it is interesting that our government seems so keen on pursuing them for projects such as Transmission Gully and perhaps the future Puhoi-Wellsford road. The worry I have is that if private investors in PPPs are so burned from the Australian experiences then all the “demand side risk” (i.e. whether the road will have enough use and generate enough toll revenue to make it worthwhile) is likely to end up sitting with the public while the private investors make out like bandits through ‘creative accounting’. Pretty much the worst of both worlds.

Why do we never learn from the mistakes of others?

Strong support for motorway tolls?

An article in today’s Herald notes the results of a survey undertaken by the NZ Council for Infrastructure Development, which looks at different levels of support for different ‘alternative’ funding mechanisms for paying for Auckland’s transport system.

Pollsters have found almost two-thirds support from Aucklanders for motorway tolls to ease congestion and raise extra transport money.

A finding of 63.8 per cent support in principle for tolls – published today after a survey of more than a thousand Super City residents – comes amid Government resistance to imposing tolls or raising fuel taxes to plug a $10 billion to $15 billion funding gap.

Some further details are available in the NZCID press release:

To fund transport improvements, respondents were given a choice of increasing rates, fuel taxes, cark park charges, an airport tax on international travellers, a charge on all traffic entering the CBD, and an average $2 toll on the motorway network. Of these, the $2 average toll was the only option attracting more support than opposition: 46% support a $2 average toll; 33.4% oppose and 18% are neutral.

Motorway network tolls were then explored in more detail. It was explained that higher tolls in busy periods would incentivise commuters to drive at different times, use different routes, car pool, take public transport or walk or cycle. This would reduce traffic on the motorways, meaning faster journeys for users of the tolled network, and tolls would also raise revenue for investment in new transport solutions including roads and public transport services.

Under this scenario, 64% of respondents gave in principle support to tolls on Auckland’s motorways varying in price and times at which they are charged, if this reduces congestion and helps fund major transport projects. 36% did not support this idea.

Majority support remained strong regardless of household income or political party support. Tolling in principle was supported by 47% of those who use the motorway system twice a day or more.

Of the four pricing packages surveyed, the option of a $2 charge in peak periods (7am – 9am) and $1.50 between 4pm and 6pm, was given the most support overall.

The point at which tolls cross over from being seen as “fair value” to “expensive” overall was: $0.76 in Off-Peak for travel between 7pm and 7am; $1.25 in Inter-Peak for travel between 9am and 4pm; $1.70 in Peak traffic 7am to 9am and 4pm to 6pm. Price tolerance varies according to frequency of motorway use: Less frequent cross over point $2.70 at peak, 2 x per day users $1.50.

Among frequent motorway users who were prepared to pay tolls, the average maximum was $4.75 per day for cars and vans and $5.80 for heavy commercial vehicles. These levels apply regardless of the frequency with which respondents use the motorway system.

Accuracy of polling methods is something I’m not an expert at, but I know that Horizon Polls have often been criticised in the past for the method chosen. I’m not going to go into that issue in too much detail.

Overall I must say that I’m rather surprised how much support the concept has with the general population, if the poll is reflective of that. Overseas cities have generally struggled to implement any sort of network/congestion pricing scheme – even in cities with much better public transport systems than we have here in Auckland. I guess the general feeling amongst the population is that something really needs to be done about the transport system – and there is perhaps a greater willingness to pay for that improvement than we had previously thought.

I still have significant reservations about the motorway tolling idea, even if it is found to have an acceptable level of public support, largely because I think it’ll push traffic from motorways onto local roads. But I suppose closer analysis will explore the extent to which that’ll happen.

For other forms of congestion charging/road pricing, it seems there’s a tension between the effectiveness of the scheme at reducing congestion and the effectiveness of the scheme at raising revenue. To be effective at reducing congestion requires a lot of complexity (charging different rates depending on the time of day, the road chosen and probably charging all travel) which comes with a huge administration cost – eating away at the money actually available for improving the transport system. Simpler methods, such as cordon schemes (like London’s congestion charging system) are likely to have unintended consequences (like killing off the city centre) and aren’t likely to be as effective at reducing congestion where it’s most severe.

It’s a useful debate to be having though. I just wonder whether this support will remain when people imagine themselves paying $2 every time they drive along a motorway onramp.

Motorway tolling is a stupid idea

The Auckland Council’s business advisory group has decided, based on what wisdom I don’t know, that the best way to raise the supposedly necessary additional funding to build Auckland super-expensive motorways like an Additional Harbour Crossing and the East-West Link, is through tolling people who travel on the motorway network. It sounds a lot like an idea that was proposed by the NZ Council for Infrastructure Development last year. With the briefest of analysis, the tolling idea seems like it might have some merit because of the large amount of money that could be raised – with (NZCID estimate) 915,000 vehicles joining the motorway network each day, even a fairly low toll for each vehicle would raise a lot of money that could be spent on transport projects. Compared to other revenue raising systems, the idea is also relatively simple: just toll gate every motorway onramp.

Here’s how it was described in a  NZ Herald article earlier this week:

The council’s business advisory panel believes a toll of about $2 a day would be fairer and more effective than 12 other options raised by Auckland Mayor Len Brown to fill an $11.7 billion transport funding gap.

Councillor Cameron Brewer, who chairs the forum, said yesterday that there could be some variation in the toll according to time of day and location but an average of $2 would raise about $700 million a year.

“That would go a long way to servicing and making inroads into the $11.7 billion funding shortfall,” he told the Herald.

However, the idea has a number of significant flaws – one of which really kills the whole concept. Firstly, the ‘non-fatal’ flaws:

  • The system is likely to disproportionately impact upon lower income Aucklanders by pricing them off the motorways (at least at peak times). While the system seems like it’s designed to raise money as its primary purpose, rather than to reduce congestion, clearly adding a charge to driving on the motorway will dissuade some from doing so, who by definition will be priced off the road (the big question is ‘where do they go). Set against that argument is the reality that this is how markets work, and we live in a market economy for most things – why not roadspace? We can, arguably, achieve social equity in other ways such as a progressive tax system and through the social welfare system.
  • The next flaw, as pointed out by Brian Rudman’s column yesterday, relates to the efficiency of these tolling systems at raising money. As a way of raising money, tolling is far less efficient than – for example – simply whacking up fuel taxes. You need to build a whole pile of infrastructure to capture people getting onto the motorway, you need to set up a very large and complex computer system to process it all, you need to send out a lot of letters reminding people to pay their bills, you need to take a few people to court to ensure they pay their bills. It’s just complicated and costly, particularly when compared to fuel tax which is just done through sending the petrol companies a bill once in a while. Set against this argument is that perhaps, even despite the massive collection costs, the system could raise enough money to still be worthwhile.

These issues aren’t necessarily fatal to the concept as a whole. If Auckland’s population can be convinced that we need to waste billions more on additional motorways, to the extent that we’re willing to pay $2 each and every time we get on the motorway, perhaps with different pricing schemes to reward those travelling outside the peak for shift-work, maybe we can get past the social equity issue. And perhaps, if the operating costs for this system could be minimised – in comparison to the amount of money raised, then the efficiency argument becomes a bit less critical.

However, there remains a flaw that I don’t think has a solution – and that is a little thing called diverted traffic. If motorways are tolled but not adjacent arterial roads (and the system’s complexity would be increased hugely if we included non-motorway roads), then surely a fairly significant chunk of traffic is going to shift away from the tolled routes and onto the free routes. This has a number of rather perverse results:

  • The big, wide and fancy new motorways that we’ve spent billions on will be largely empty, except for rich businessmen to drive along (maybe that’s why they like the idea?)
  • The arterial roads which people actually live in, where we run our buses, where we have pedestrians, cyclists, driveways, where we want to improve the balance between movement and place functions, will become horrendously busier and more congested as people use these roads to avoid having to pay the motorway tolls.
  • In short, we shift traffic away from where we want it (on the motorways) and into places where we don’t really want much through-traffic (the streets and roads where we live, work and play).

The only way to get around this flaw is to also start charging for travel along local roads. In which case we’re really shifting to a GPS-based congestion pricing scheme which, although probably more sensible in terms of avoiding problems like the above, is likely to be much much more complicated and expensive to implement and may well face significantly greater political opposition.

In short, tolling motorways to raise money (in isolation) may sound like a good idea in theory, but when you look at it in reality, it’s pretty damn stupid.

Northern Gateway Toll Set to Rise

The NZTA has announced that the toll on the Northern Gateway toll road will rise from 1st March 2012. They say:

The NZ Transport Agency says tolls on the Northern Gateway Toll Road (NGTR) on State Highway 1 north of Auckland will increase on 1 March by 20 cents to $2.20 for cars, motorcycles and light commercial vehicles, and by 40 cents to $4.40 for heavy commercial vehicles.

The increases are the first since the toll road opened three years ago.

The NZTA’s Regional Director for Auckland and Northland, Stephen Town, says the increases are regrettable but necessary to ensure the toll road remains viable and on-track to repay its debt as planned within 35 years.

“Although the legislation covering the toll road allows for the tolls to be annually adjusted in line with increases in the Consumer Price Index (CPI), they haven’t increased since the road opened in January 2009. Inflation and the 2010 GST increase have both impacted on the NZTA’s ability to maintain its debt repayment level, so it has become necessary to adjust the tolls,’ Mr Town says.

Transaction charges introduced in August 2011 to some toll payment methods will not increase. They remain at 40 cents for payment by kiosk and $3.70 when payment is made by phone. Transaction charges apply each time one or more tolls are paid for. For example, from 1 March the total cost of purchasing one toll trip at a kiosk will be $2.60 – a $2.20 toll plus a 40c administration charge – and the total cost of purchasing 10 trips at a kiosk will be $22.40 – $22 for the ten trips plus a 40c administration fee.

There is no administration fee for tolls paid on-line at www.tollroad.govt.nz, or for ‘set and forget’ toll accounts.

‘To minimise cost and time for road users, we encourage customers to pay by toll pre-pay account or via the website as neither of those payment options attract extra cost,’ says Mr Town.

The toll road is a 7km section of SH1 between Orewa and Puhoi which provides road users a shorter, quicker option to its free alternative – SH17 through Waiwera. Borrowing $158M of the total $372.5M construction
cost, meant the NGTR was built ten years earlier than it would have been under traditional funding methods.

As at the end of December 2011, the NZTA had repaid $17.5M of the debt.

I personally don’t have a problem with the cost rising as I think it is important that the toll reflects the benefits that people get from the using the road but I know there will be a number of people out there that will complain about it. I’m sure the question will also be asked of some if this increase is related to the cash flow troubles the NZTA is having at the moment.

They have also put out some FAQ’s on the increase here.

Northern Gateway Toll Road

Tolling the Harbour Bridge

Everyone knows that the price tag for a future harbour crossing is eye-watering. For a tunnel option (which really is the only option in my opinion) we’re looking at something north of $5 billion – which is significantly more expensive than any other project we’ve ever seriously considered (over twice the price of the City Rail Link, for example). Normal funding mechanisms won’t come close to paying for the additional crossing – so different options will need to be looked at. My suggestion is to simply not build another crossing, of course.

One funding option that seems to have found a bit of limelight in recent days is the suggestion that the crossing could be tolled – but not only the new crossing, also the existing harbour bridge. The NZ Herald reported on this yesterday:

The spectre of tolls on the Auckland Harbour Bridge to help to pay for a new traffic crossing has re-emerged in a council report, days before the election.

Auckland Council staff say, in a report prepared for a transport committee meeting tomorrow, that a proposed law change would allow an application for a toll on the existing bridge as well as a new harbour crossing to be considered by the Government.

Legislation prohibits tolling existing infrastructure unless it is near or integral to a proposed new road.

Neither can a new toll road be built unless a feasible alternative route is available to those who cannot or do not want to pay extra for trips.

Somewhat unsurprisingly North Shore politicians are jumping up and down, yelling and screaming:

The suggestion that tolls may be reintroduced to the existing bridge to raise money for a new harbour crossing expected to cost up to $5.3 billion within the next 20 years raised hackles yesterday among North Shore members of the Auckland Council.

Ann Hartley, a former Labour MP and Deputy Speaker of Parliament, said she could not understand why tolls were being contemplated for certain sections of Auckland’s transport network rather than more widespread and fairer revenue streams.

Fellow North Shore councillor George Wood said he did not see why Aucklanders should have to pay for a new harbour crossing when the Transport Agency was about to spend up to $3 billion on completing the western ring route, including the Waterview motorway.

But Steven Joyce says that this simply isn’t the case – and the “toll free alternative” (which obviously wouldn’t exist if both crossings were tolled) will remain in legislation:

But Transport Minister Steven Joyce said last night that proposed changes to the Land Transport Management Act would not alter the legal test of whether a toll could be charged for using an existing road.

He said the council was “completely wrong” to say legislative changes were needed to enable him to consider an application to impose tolls on the harbour bridge.

A Cabinet paper covering various other changes to transport legislation included an agreement to retain current tolling requirements, including that tolls could be charged on an existing road only if it was near and integral to a new road.

A toll-free alternative route must also still be available.

So what does the Council report actually say on the matter: The immediately adjacent road issue seems to have popped up a bit out of nowhere, as the Question and Answer section on the Ministry of Transport website about the LTMA changes seems fairly concrete about the requirement for a toll-free alternative route.

I’m not opposed to tolls in principle, just as I think that congestion charging is – in principle – a good idea. Tolling has a few issues though, including distorting traffic patterns away from the tolled route and towards the untolled one, unless there’s a pretty compelling reason to pay for the tolled route. This would make it difficult to only toll the new crossing, as you may struggle to attract enough traffic to the new crossing (away from the old harbour bridge) for the project to be worth it.

But in my opinion, that more calls into question the economics of the new crossing rather than making a case for tolling both the new and the existing routes. In the end, tolling arises as a necessity because the whole crossing project is something we really can’t afford – and perhaps we’re better off simply realising that and looking for cheaper alternatives.

Tolling motorways to fund City Rail Link?

An article in the NZ Herald yesterday talked a bit further about the different options being looked at to fund Auckland’s transport projects over the next 10-20 years.

Aucklanders could pay between $1 and $3 to drive on the city’s motorways to pay for the inner city rail loop and a new harbour crossing.

Mayor Len Brown yesterday praised a “simple and straightforward” proposal for a regionwide toll on every on-ramp to the motorway of $3 in peak hours, $1 in the off-peak and $2 at other times.

It seems as though Len Brown’s caught onto a proposal that the NZ Council for Infrastructure Development have been pushing really hard over the past few months. You can read the presentation they’ve given to a lot of the different local boards from page eight of this document onwards.

The Herald article offered a bit more detail:

The “network charge” proposal, from the New Zealand Council for Infrastructure Development, would cap the charge at $6 a day.

NZCID chief executive Stephen Selwood said the charge would cover the repayments of $600 million a year to pay for the $2.4 billion rail loop and a new harbour crossing, costed at $5.1 billion for a pair of motorway tunnels or $3.9 billion for a new bridge…

…Mr Selwood said Mr Joyce clearly had political apprehensions about funding options for the rail loop, but he admired the courage of Mr Brown for raising the question with Aucklanders.

Mr Selwood said he had visited 12 of the 21 local boards and sensed 60:40 per cent support for a network charge. Some of the 40 per cent were not opposed but “just not quite there yet”.

There’s a useful description of how the system would work, taken from the NZCID presentation, below:

Before I get on to discussing what I think about this funding option, I think it’s worthwhile to first look at the number of projects that the NZCID think are “necessary” for Auckland over the next decade or two. Here are the PT projects (count the errors):

 And the roading projects that the NZCID consider necessary: Now personally I don’t think many of these roading projects will ever be necessary (like another harbour crossing, the tunnel under Hobson Bay and many of the most expensive bits of AMETI) and I think many of the public transport projects are unlikely to be necessary for quite a long time.

So really, the NZCID are trying to create a bit of a panic that doesn’t exist about all these supposedly necessary projects. But as they represent a bunch of companies that spend their time planning, designing and building infrastructure projects, this is not particularly surprising. Fundamentally I therefore question the extent to which we need to look at raising additional transport revenue because I don’t buy the argument we need so many new transport projects within the next 10 years or so. Furthermore, if we simply spent our existing transport revenue smarter we may not need to raise any additional revenue to build the projects that we actually really need.

But putting that issue aside, what do I think about the idea of tolling motorway onramps to help raise extra money? There’s one good element of the proposal: the differential pricing for peak time and off-peak travelling. I’m also not fundamentally opposed to the idea of tolling. But the idea does have a fatal flaw in my opinion – and that is by tolling the motorway network you are likely to push traffic onto local roads, causing congestion, stuffing up public transport routes and overwhelming roads that are located right next to where people live, work, go to school and so forth. It would be interesting to see NZCID’s response to this pretty massive flaw in their plan.

I also worry that talking too much about road tolling to help fund rail projects, when that probably isn’t necessary, will also undermine public support for the City Rail Link, which is pretty strong at the moment. I hope Len Brown keeps this in mind.

Tolling for a new harbour crossing

An article in the NZ Herald today raises the typical old debate of whether tolls should be introduced to fund another harbour crossing. If any issue was ever likely to raise the heckles of the North Shore, this is it:

Transport Agency consultants believe tolls of $6 to $8 could pay for a new Auckland harbour crossing. The tolls would be charged on the new crossing and the existing harbour bridge. The figures are in a report which the Auckland Council has circulated to local boards on options for building and paying for a $5.1 billion pair of motorway tunnels, or a new bridge for up to $3.9 billion. Preliminary investigations suggest a new bridge could be fully paid for with a toll of $6 each way to use it and the existing bridge, and an $8 toll would be needed to pay for the tunnels.

I have no issue with tolling roads in theory, although the obvious problem here with tolling both the new and existing crossing is that you wouldn’t really have a viable free alternative available. Even with the Western Ring Route completed, it’s a bit of a stretch to call the Upper Harbour Bridge an alternative for most of the trips. What the tolling issue does, in my mind, is simply point out how utterly extremely expensive both the bridge and tunnel options are for an additional harbour crossing. One would think that it would be essential for a project that’s so extremely expensive to be justified by a cost-benefit analysis that shows a very high return on the investment. Of course, in this case it simply isn’t true, with the bridge option having a BCR of 0.6 and the tunnel option have a BCR of 0.4. Even then I think the cost-benefit ratios are probably too high, as they’re based on the assumption of increasing levels of traffic: How does this assumption of growth compare with what’s been happening in recent years: The 2010 to 2011 jump is largely because they’re different months of the year. If we take a look at NZTA’s May 2011 traffic report, we see that flows across the harbour bridge are down 4% on last year: But many will argue another harbour crossing is needed because the existing one is coming to the end of its useable life – particularly the clip-ons. This is outlined in the article:

The agency believes a new crossing will be within 20 years as the existing bridge’s clip-on lanes start wearing out.

That’s actually not really what they said. What their report actually said in regards to the clip-ons is this: So in other words, the clip-ons are fine indefinitely, except for the fact that it might be necessary to restrict some heavier trucks from using them in the longer term. Considering we’re spending billions on the Western Ring Route, largely so that freight can bypass the central part of the motorway system – I really don’t see what the problem is. Unsurprisingly the tolling has got North Shore politicians being grump as anything:

The bridge consultants’ report has horrified some North Shore local politicians. The Kaipatiki Local Board, covering a large area including Glenfield and Birkenhead, has passed a resolution opposing any tolls on the existing 52-year-old bridge. Board member Vivienne Keohane said yesterday that the toll suggestions were “absolutely outrageous”. “A lot of people wouldn’t be able to travel to work – imagine paying $60 to $80 a week out of your wages.” Mrs Keohane said North Shore residents such as herself, who had lived in Glenfield since 1968, had paid for the bridge during its first 25 years, and would not accept a new toll.

I completely agree Mrs Keohane. But please, don’t follow this up by repeating how supposedly important another harbour crossing is.