Last week’s opinion piece by Transport Minister Steven Joyce started out well enough.
“Having the right transport infrastructure in place is an important part of the export job,” he stated. “We need to get our goods to market more effectively and efficiently, we need to cater for more tourists (who bring money here), and we need to make it easier to get around our largest cities (so our people can get to work).”
“Therefore we need to invest our roading funds,” the Minister continued, “paid for by our petrol taxes and road user charges, strategically to deal with the biggest issues in our land transport network.”
So far so good. After all, a record $2.5 billion dollars in the year to June 2010 was sourced from fuel excise duties and road user charges. With petrol currently at $1.84 a litre, excise tax accounts for 48c of this. So this means that for every $100 spent at the pump, $26 goes to the New Zealand Transport Agency to spend on transport. So it is good the Minister has his eye on this money being well spent.
Then the very next sentence read “That’s why the government developed the Roads of National Significance.”
At this point the Minister’s argument falls apart. Minister Joyce does not attempt to explain the reasoning why the Roads of National Significance strategically deal with big transport issues. Nor does he explain why roads such as the Puhoi to Wellsford toll road should be built even though, as Rod Oram points out, the standard benefit-cost formula reveals that less than half of the nearly $2 billion dollar construction cost will be returned in economic benefits.
However, even that benefit-cost ratio of a 40c return for every dollar invested may be out of date, with the recent announcement that the new highway will be a toll road.
The fact that the road will be tolled (for an amount as yet unspecified) will have a dramatic negative effect on the number of people willing to use it. A study for the Waterview connection in Auckland, for example, concluded that if that new $1.6bn motorway is tolled at $2, then just 50% of motorists would consider it economically worthwhile to use.
Without any statistical evidence, the Minister maintains that these projects are “crucially important to our country’s economic future.” Yet in 2008 another report commissioned by the NZTA on the Puhoi – Wellsford motorway concluded that, “the economy of Northland is relatively weak” and that “regional economic issues are unlikely to make a significant contribution to the viability for implementing the strategy.”
That roads are self-financing is another erroneous ministerial argument. Just because $26 out of every $100 goes to the NZTA does not mean this money is well spent.
Furthermore, a report commissioned by the New Zealand Transport Agency (October 2009) found a shortfall of $1.5 billion per year between what is collected from the state highway network and what is being spent on it. Local roads require another $1 billion per year of ratepayer funding.
There is no reason why petrol excise tax should not be spent on public transport projects, provided, of course, that the costs and benefits stack up, in particular for motorists. The Northern Busway in Auckland is a good example where NZTA funds have been successfully applied – motorists have benefitted greatly from 1.8 million passenger trips now being made annually, largely at peak times, and the Harbour Bridge now carries more people than ever before.
The CBD rail tunnel will provide extremely positive economic returns as identified in the recent $5m independent business case. Depending on the discount rate applied, the benefit cost ratio lies somewhere between 3.5 and 6.6. In practical terms, for example, the journey from Morningside to Mid-town Auckland will take a mere 8 minutes.
The Minister is found of repeating the statistic that 84% of people in Auckland use a car to get to work. What he doesn’t say is that for trips to the CBD at peak times, less than half of all commuters use a car, according to a recent survey by the ARC. And the Minister’s implication that future transport funding should be in proportion to how people currently travel is a rejection of the huge growth currently occurring in Auckland rail – with over 9 million trips now being made annually, a figure which has quadrupled in recent years.
So far in his term as Minister of Transport, Steven Joyce is yet to commit any new funding to passenger rail capital projects in Auckland. All spending to date on Auckland’s rail network has been from budgets established years ago now. New electric rolling stock is to be purchased via a loan at commercial interest rates from the Government.
The Minister questions why “some people get so wound up about investing in roading projects”. The answer to this is that “some people”, including expert transport advisers and economists, can see that some roading projects are simply uneconomic. Some projects are economic, of course. The Victoria Park tunnel has a good benefit cost ratio, and as such has a good economic basis to be funded. However, over the next 2009 – 2012 funding period alone, some $3 billion dollars will be spent on new state highway infrastructure. Minister Joyce owes it to the economy, as well as motorists and ratepayers, that this money is well spent.