Funding Transport In Auckland

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In a Herald article last Friday, Transport Minister Steven Joyce came out with the following straw man argument:

“I don’t think anyone would buy the suggestion that that very, very expensive project should just be paid for by road users,” he said.

In response, Transport Minister Steven Joyce is right,  but no-one is suggesting that the CBD Rail Link should just be paid for by road users.

However Minister Joyce must be aware that public transport infrastructure can significantly benefit road users, and on that basis some level of funding commitment from the National Land Transport Fund, which raises $2.8bn annually from petrol excise and road user charges, is entirely appropriate.

The precedent for this is the Northern Busway. This quarter billion dollar project was jointly funded from the National Land Transport Fund and the North Shore City Council and has eased congestion levels across the Harbour Bridge to the significant benefit of motorists.

Similarly the CBD Rail Link will not only double capacity of the entire rail network and offer significant travel time saving benefits to public transport users, but it will also benefit road users as well by taking a significant number of cars off the roads at peak times.

Contrary to what Minister Joyce says, Auckland City has already established that no roading based solution will offer anywhere near the benefits of the CBD Rail Link.

If Minister Joyce insists on having sole discretion on how our fuel taxes are used, he needs to work constructively to find alternative transport funding solutions for Auckland.

Govt: Case for Auckland CBD Rail Link not yet made

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The Government has done a press release on its review of the CBD rail tunnel:

The review of the Business Case for the CBD Rail Link finds that the case for funding and building the rail link has not yet been made, and that the mix of options for meeting transport needs in the CBD have not been sufficiently explored.

Transport Minister Steven Joyce has today released the review which was conducted by the Ministry of Transport and the Treasury in conjunction with the NZ Transport Agency.

“In short, the review says more work needs to be done to determine the full future transport needs of central Auckland before proceeding with a project like the CBD Rail Link,” says Mr Joyce.

“However, the review suggests that in the meantime, it makes strategic sense for Auckland Council to move to protect the route, and I agree with that.”

Specifically, the review found:

• That the estimated construction costs for the CBD Rail Link are largely sound – at a total of $2.4 billion
• That the transport benefits of the project are estimated at $387 million rather than the $1,319 million assessed in the business case
• That the project would have only a modest impact on traffic volumes and likely remove up to 1,400 cars (2,000 people) of the estimated 29,000 cars (41,000 people) travelling into the CBD during the morning peak in 2041.
• That the wider economic benefits of the project as estimated in the business case ($3.3 billion) were very significantly over-stated and were in fact more like $305 million – which was still high relative to the transport benefits when compared with similar large international transport projects
• That the re-calculated BCR consistent with the NZTA Economic Evaluation Manual used for roading projects was 0.3; with the additional wider economic benefits taking it to 0.4

The review suggested that the following steps could be taken by Auckland Council to improve the future case for development of the CBD Rail Link:

• Finalisation and implementation of the Auckland spatial plan and City Centre Masterplan to establish achievable growth projections for the CBD and to quantify where the growth projected for the CBD will occur
• Development of a robust multi-modal plan for future transport into the CBD, which includes a thorough analysis of all the alternatives
• Begin implementation of large scale residential developments along the rail corridors to capitalise on the current upgrade and electrification.
• Implement additional park and ride sites and bus feeder services to drive further increases in public transport demand

The review noted that, late in the process, Auckland Council and Auckland Transport provided a new alternative policy case which provided a range of new assumptions and policy considerations to the previous business case.

Mr Joyce says officials did not assess the new policy case provided as there was insufficient time.

“It appears to contain some things that are specifically related to the CBD Rail Link, and some things that would improve transport in Auckland, regardless of any decision to build the CBD Rail Link.”

“I think the timing of the latest policy proposal underscores the need to go carefully through the spatial plan process and the various transport options; to make sure that together we make the right investments in future Auckland transport projects at the right time.

“In the meantime, we continue to invest $1.6 billion to electrify and modernise Auckland’s commuter rail network to provide for the next stage of growth in rail patronage. This Crown investment will help deliver a modern, fast and superior commuter rail experience from 2013/14.”

Hopefully we get to see the MoT’s report. It looks like the Government’s solution is 29,000 cars.

[Update] Full review here: http://www.transport.govt.nz/ourwork/rail/AucklandCBDRailLinkBusinessCaseReview-main/

Highway Upgrade Cheaper, Safer

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Bob Scott has done a brilliant article summarising the folly of the Holiday Highway:

A headline like “80 New Zealanders Sentenced to Death” would bring an outraged reaction if resulting from the actions of a Third World despot.

But the reality is, that’s not the case. Rather it’s what could happen if Transport Minister Steven Joyce gets his way with the ridiculous and hugely expensive scheme to classify the Puhoi to Wellsford motorway extension as a “Road of National Significance”. And to press on with its construction with a completion date of 2032…

He goes on to push for alternatives:

Among the schemes was one that was put forward by the Campaign for Better Transport. Known as “Operation Lifesaver”, it suggested urgent safety upgrades to the existing State Highway 1 at the known accident blackspots and bypasses for Warkworth and Wellsford to ease the congestion at these points.

The benefits of this scheme are many, including an estimated cost of between $160 million and $320 million. A fraction of what the Government is proposing to spend.

The chief benefit, however, is the work to improve the road could be started right now.

If the safety improvements were completed within the next three years, then saving lives would begin in 2014.

That alone could save at least 80 lives between now and 2032 that would otherwise be needlessly lost.

How can anyone possibly justify jeopardising so many lives on a piece of political ideology?

Incidentally, the only feedback we received on our proposal from central Government was that our figures were out of date.

Joyce: Central Govt to Review CBD Business Case

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A Beehive media release has announced:

Transport Minister Steven Joyce has asked officials from the Ministry of Transport, the Treasury and the NZ Transport Agency to work with Auckland Transport, Auckland Council and other agencies to review the business case for a CBD rail link ahead of any further discussions between central government and Auckland Council next year.

The business case, released last month, provides a capital cost of $2.3 billion for the rail link in 2010 dollars.

Mr Joyce says the business case was a first step but it leaves a number of questions unanswered.

“It would be irresponsible for the government to even consider being involved with a project of this size without being confident about having the full facts.”

Mr Joyce says he wants a number of questions answered as part of the review, including:

  • Does the business case include the full capital and operating costs needed to realise the project?
  • How many additional passengers will the rail tunnel attract over the $1.6 billion electrified network we are currently building?
  • What impact will the rail tunnel have on car travel and congestion?
  • When will the tunnel be needed?
  • How does the tunnel project relate to the growth and productivity of the CBD and Auckland more widely?

Mr Joyce has today spoken with Auckland Mayor Len Brown who has agreed that a formal assessment of the business case by central government agencies is a necessary step.

“The findings of this review will help us determine if, how and when to progress with the CBD rail link project and will give both central and local government the certainty needed,” says Mr Joyce.

I had thought most of these questions had been answered. I wonder if Auckland Council will have the guts to ask for a review of the business case for the Holiday Highway:

  • How much is the toll, and what impact will this have on traffic volumes?
  • What safety improvements will be made to the existing State Highway 1
  • How does the CBT’s Operation Lifesaver alternative compare?
  • etc

Factual Errors

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Steven Joyce responded to my article in the Sunday Star Times last week, as well as Rod Oram’s:

Rod Oram’s second opinion piece on Auckland transport issues contains a further significant factual error, which results in him again overstating his case.

It is simply incorrect to say that the proposed CBD rail loop and the Puhoi to Wellsford Road of National Significance have different benefit cost ratios (BCRs). If you use the same calculation – that is the standard transport BC including wider economic benefits – then the BCR for both projects as the same 1.1.

The associated opinion piece by Cameron Pitches also contains factual errors.  It is incorrect to say that the government has not committed any new money to rail capital projects in Auckland. In fact, we have provided $581 million in new funding and loans to support Auckland metro rail, as well as reinvesting $50m to complete Project Dart and a new $500m appropriation for the Auckland Electrification Project.

The previous government planned to fund these projects through an additional 9.5 cent regional fuel tax.

Of course, Minister Joyce is making a few factual errors of his own here.

Starting with the regional fuel tax, this was never going to be 9.5c per litre.  The ARC press release here summarised how the fuel tax was to be applied:

As a result of consultation, it is proposed that the fuel tax commences on 1 July 2009, and is phased in over three years at 1 cent per litre on petrol and diesel from 1 July 2009, rising to 3 cents per litre on 1 July 2010, and 5 cents per litre from 1 July 2011.

So initially the tax was going to be 1 cent per litre, rising to 3 and then 5c. The additional 4.5c was to be at central Government’s discretion.

In the end, government repealed the regional fuel tax and replaced it with a nationwide increase in excise tax last October of 3c per litre.

As to the Minister’s contention that the BCRs are equal for the Holiday Highway and the CBD rail taunnel, Josh Arbury has an in-depth analysis here, which concludes:

In short, while the CBD tunnel is definitely the more expensive project, its benefits – no matter which way you measure them, are enormously greater than the benefits of the Puhoi-Wellsford road. Under none of the scenarios for including wider economic benefits does the holiday highway make economic sense, just as under all the scenarios we see the CBD Rail Tunnel making economic sense.

There are other matters that make me think Puhoi-Wellsford’s cost benefit ratio is enormously inflated (like the unrealistic time savings and the fact that the effects of tolling haven’t been considered), but even with the most generous interpretation of that project’s economic benefits, it simply can’t compare to the CBD Rail Tunnel on all measures.

Holiday Highway Doesn’t Stack Up

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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.

Steven Joyce Defends Roads Of National Significance

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Last week SST columnist Rod Oram wrote an excellent piece on the economic folly of the Government’s Roads of National Significance. It was well researched and argued, and supported by a number of statistics.

Today, Minister of Transport Steven Joyce has responded. In contrast this opinion piece is completely devoid of any meaningful research, but it does reveal more behind his thinking:

Having the right transport infrastructure in place is an important part of the export job. 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, paid for by our petrol taxes and road user charges, strategically to deal with the biggest issues in our land transport network.

That’s why the government developed the Roads of National Significance. They are the seven strategic projects most necessary to reduce congestion, improve journey times and improve safety across New Zealand’s highway network.

The problem for Minister Joyce here is he presents no linkage between the need to deal with the “biggest issues in our land transport network” and “that’s why the government developed the Roads of National Signficance.  He goes on:

These projects are not plucked out of thin air. They are crucially important to our country’s economic future. They are the most urgent large roading projects New Zealand has. And, like it or not, our roads carry about 70% of our freight.

Well, the Puhoi to Wellsford toll road did not feature on transport plans at all until the Minister came to power. And Rod Oram’s analysis exposes the lie that they are crucially important to the country’s economic future. So did the Minister respond in kind with statistics to support his argument?

And for Rod Oram’s benefit; they are not cooked up as part of a grand political conspiracy about cost benefit analyses. The two reports he spent so much newsprint on reading ulterior motives into last week were simply the result of the progressions of business cases as the knowledge of each project improved; and they were completely devoid of political input. That’s a factual reality that he was informed of before going to print.

So he doesn’t deny the really poor cost benefit for the RoNS, but instead attempts to personally attack Rod Oram, who is a trained economist.

So why do some people get so wound up about investing in roading projects?

The reason, Minister, is that they represent poor value for money. The Puhoi to Wellsford toll road will most likely lose money.  And without telling us how much the toll will be it is hard to see how a meaningful cost benefit analysis for this road has been conducted.

There’s a limit of course – it’s called our international debt levels, as I said at the outset. So local body wish lists for $2.3b CBD rail tunnels on top of all this need to be fully tested; and someone else besides taxpayers (and international moneylenders) will have to put their hands in their pockets if they want to bump those sort of projects up the queue. We also should be wary about putting too much faith in a mode of transport that currently carries less than 2% of Auckland’s commuters to and from work each day, even after some quite spectacular growth.

Just as well the $5m study into the CBD tunnel has confirmed economic returns of between $3 and $6 for every dollar invested then. And why shouldn’t the petrol excise tax contribute toward the cost? Surely petrol taxes should fund the projects that give the best value for motorists?  The CBD rail tunnel falls into this category.  Why should the NZTA have all the say on where it should be spent?

Some people believe the way our cities have grown is wrong. They think the quarter acre section is a fool’s paradise. People should live more in apartment buildings and less with a backyard, or heaven forbid, in a small town outside of the city.

Straw man argument. Who are these “some people”?  Who said a quarter acre section is a fool’s paradise?

It’s a philosophy that argues that urban planners should have much more say about how we live our lives; and it’s an agenda that the old ARC had in Auckland for a long time: have a cast-iron metropolitan urban limit, force up the price of sections, increase the density of our suburbs, have people live in high-rise apartments, don’t let people get off the highway at Puhoi. And so on. If you follow that logic too far, the Auckland Harbour Bridge would never have been built, and the North Shore would still be a couple of seaside villages.

Now he’s getting really silly.  What’s the linkage betwen the MUL and ”forcing up the price of sections”?  Any statistical causal evidence?  It’s the NZTA that don’t want to let people of at Puhoi… what on earth is he on about here? Besides, its not his job to decide urban planning – its the role of the new Auckland Council.

But we also have to understand that people like to live where they want to live, and provide cost-effective transport options (roads even!) for those people too. Amusingly, Auckland has increased in density in recent times. But largely not where the central planners said it would, (along the transport corridors) and instead in the beach-side suburbs. Fancy that.

Oh, how amusing! Got any statistics to back up what you are saying, Minister? There is far more apartment construction going on in the CBD than in Murray’s Bay, from what I observe.

In my view, it reflects poorly on Oram for buying into a political agenda, complete with unfounded conspiracy theories, and calling it a business column. We need less of that sort of “business” thinking, and more sound practical ways where governments can support New Zealand’s trading firms to grow faster. Providing value-for-money transport corridors they actually use is one way of doing that.

Yeah, get another dig in at Rod Oram, because you can’t refute his statistics. Conclude with baseless drivel. Good luck in the next election, because believe it or not Minister, value-for-money transport corridors are what everyone wants.  In Auckland, though, these corridors don’t look like toll roads.

Letter of the Week

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The Weekend Herald’s letter of the week is from Frank Hoffmann, and it sums up the current situation on transport funding:

Transport Minister Steven Joyce should remember his Government has usurped Auckland’s planned method of funding transport.

A surcharge on motor fuel was designed to make the road-user contribute a fair share towards the cost of public transport, which would ease pressure on roads.

After he deprived Auckland of its source of revenue, it is therefore ironic and audacious to demand that it pay an even greater share towards the overdue development of its transport needs. How?

Auckland has at last shown a willingness to break out of its hitherto timid approach with a bold plan. But a crafty ploy passed control into Government hands and forces Auckland to approach Wellington with a begging bowl.

Every detail is subject to scrutiny by people miles away, and approved if it does not conflict with the minister’s love of road building.

This outdated bias is based on a blind faith that building more roads will fix problems created by building more roads.

Love the last bit.


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