Some pretty big announcements about KiwiRail were made today by the government, and overall they seem to be pretty good (surprisingly enough). Here’s the government’s press release:
Government investment for rail turnaround
The Government’s commitment to invest $250 million to support the KiwiRail Turnaround Plan will help increase New Zealand’s economic productivity and put us on the path to faster growth, Transport Minister Steven Joyce says
The Budget 2010 appropriation is the first round of Government support for the objectives of the $4.6 billion Turnaround Plan.
The Government has committed in principle to a total package of $750 million over the next three years, with final decisions on funding subject to individual business cases.
“The KiwiRail Turnaround Plan is designed to see the rail freight business become sustainable within a decade by getting it to a point where it funds its costs solely from customer revenue,” says Mr Joyce.
“In fact, the lion’s share of the $4.6 billion will come from the business itself.
“The government investment reflects the fact the amount of freight being moved on New Zealand’s transport network will double by 2040 and all transport modes need to become more efficient to meet this demand.
“The government is committed to retaining and improving the rail freight network and is providing KiwiRail the capital investment to demonstrate it can become commercially viable and make a valuable contribution to the New Zealand economy.
“To do this, it will need to focus on the areas where it can increase revenue, become more efficient and carry more – primarily bulk and long distance freight.”
Mr Joyce says stringent conditions for government funding will be set to make KiwiRail accountable to taxpayers.
“Funding, while committed in principle, will depend on meeting the government’s performance measures.
“Achieving this turnaround will be a challenging process and requires the support of every KiwiRail customer and employee,” says Mr Joyce.
Those are certainly fairly significant chunks of money to be invested in rail, which is certainly a good thing. It’s all mainly about freight though, we have to look to the Questions and Answers on the Ministry of Transport’s website to hear more about commuter rail (after a huge amount on freight).
How much Budget 2010 funding is being appropriated for metro rail?
$7 million for the 2010/11 year as a contribution towards appropriate track access charges.
Why is this funding required?
This is a one off Budget appropriation to potentially meet a funding shortfall for metro rail renewals in 2010/11.
The funding will allow KiwiRail to undertake work to ensure the safety and reliability of metro rail networks in the Auckland and Wellington regions and allow scheduled services to continue operating until longer-term funding arrangements are confirmed.
Why is there a funding shortfall that needs to be covered?
Until now, KiwiRail has been unable to recover the full costs from its regional customers of maintaining and renewing the track network and the costs of providing train control and other services in the metro areas of Wellington and Auckland.
While costs associated with providing access to the metro networks have risen over the years, track access charges paid by the metro rail operators (in turn funded by the passengers, regional councils and New Zealand Transport Agency) have not kept pace. This has mainly arisen because the various parties involved, through a period of mixed ownership objectives, have not been able to reach agreement on the fair apportionment of costs.
The Government has agreed to provide a one off appropriation to cover part of this shortfall while agreement on the future apportionment of costs is reached. A Track Access Charge Project is underway, and when completed will require significant changes for KiwiRail, Auckland and Wellington regional councils and the NZ Transport Agency that cannot be put in place in time for the 2010/11 year.
What is the new metro rail operating model?
The government has confirmed a model for the delivery of metro rail services in Auckland and Wellington. This enables regional councils to competitively tender rail delivery. It also requires regional councils and KiwiRail to agree levels of service and costs for the rail network and rolling stock to be provided.
At present the costs of the metro-related infrastructure and services that KiwiRail provides to the regions are not being fully met by passengers, regional councils, and the New Zealand Transport Agency. This shortfall has been disguised over recent years by the significant government capital funding provided in Wellington and Auckland for rail upgrades, and operating losses for the old ONTRACK division of KiwiRail.
Who is going to pay for the real cost of providing metro rail services?
Longer term, a fairer share of the costs of the metro rail networks should be borne by the passengers who use the services, the regional councils who are responsible for providing public transport services to their rate-payers, and the New Zealand Transport Agency, who subsidises public transport activities in New Zealand on behalf of the Crown.
To the extent that KiwiRail’s freight business also uses parts of the metro network, it will pay the full and fair cost of that access.
Will this mean fare increases?
Longer term regional council contributions and fare prices will need to be adjusted to meet a fairer share of the cost of using services.
It is the government’s expectation that these increases would be gradual and reflect the better service that current investment in infrastructure and new electric trains in Auckland will deliver in the coming years and the greater reliability and service timeliness in Wellington.
How are fare increases justified?
By the time the rail upgrade projects in Auckland and Wellington are completed, the government have spent more than $2 billion, in partnership with the regional councils, improving the metro rail services in both regions.
This includes new fleets of electric trains for both cities, improvements to the tracks (including double tracking the western line in Auckland and the line to Waikanae in Wellington, new branch lines to Onehunga and Manukau, improvements to the Johnsonville Line, and electrification of the entire Auckland network), and new and improved stations, including significant projects in New Lynn and Newmarket.
The Government acknowledges that this important work has caused disruptions for commuters but it is confident that the resulting improvements to service levels will more than justify any corresponding increase in fares.
Both freight and metro services use the same track network – how will costs of maintaining and upgrading this be met?
Costs need to be shared fairly between different business users. In the past this has not happened because of the difficulty in agreeing what a fair share of costs should be.
The Ministry of Transport is leading a working group made up of the key stakeholders on track access charges in order to bring about agreement on renewal costs and new track access charges and agreements between KiwiRail and regional councils. Negotiations are expected to finish later in the year.
Why has this funding issue come about in the first place?
There have been big changes to the Auckland and Wellington metro rail systems funded by the government in recent years. Previously KiwiRail was funded for this work from one off, ad hoc and short term funding provisions.
No real surprises there, although it will be interesting to see what the final breakdown of rail costs between NZTA, the regional councils and KiwiRail when it comes to supporting the passenger rail network. But if we get back to the main announcements, a question that immediately comes to my mind is “what is the money going to be spent on?” There’s not much detail, but a summary of the turnaround plan does give us some clues: 
So I guess we’ll see some of the money go into the Interislander ferries, we’ll see a pretty decent chunk go into upgrading basic parts of the network, like locomotives, wagons, bringing up the tracks to standard and so forth. All of this is certainly necessary but not exactly exciting.
One part of the plan that is quite new is the inclusion of the entire North Auckland Line in the same bunch as the Napier-Gisborne Line, the Stratford-Okahukura Line and the North Wairarapa Line as ones which desperately need to attract more business or will otherwise be at risk of closure. While I have no idea of the level of use this line gets, it does seem quite a strategic line that you wouldn’t want to lose – linking Auckland with Whangarei and also with the deep-water Marsden Point Port. If I were cynical, I might suggest that this route has been suggested for closure because it competes with the Puhoi-Wellsford holiday highway, but I’m not cynical am I?
Nevertheless, it’s not every day the government commits this much money to rail. So I can’t complain too much can I?
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What I really like about the proposal is the plan to focus on the little things, track easements etc, these are the kinds of little improvements that equal real economic gain…
Ironically because Joyce wants to throw as little money as possible as rail they are focussing on these while when it comes to roads any old waste of money is the go…
Closing the NAL would be a boneheaded mistake and I think has everything to do with Puhoi to Wellsford…
I’m all in favour of metro railways. I think they’re necessary to enable cities to grow and become “world class”. I think the sooner the CBD rail tunnel is built and other Auckland rail projects completed, the better.
But rail freight has never been sustainable in NZ. The first commission of inquiry in to railway viability was held in 1878. If the rail system is still failing 132 years later then we should face the fact that it will never be sustainable. Most of the $750million will be wasted when there is no shortage of metro rail projects that the money could be spent on. Like the CBD tunnel.
Apart from Hamilton and Palmy, all major NZ cities are on the coast and have ports. Coastal shipping is cheaper and better for the environment than rail. Most of the $750million will be spent trying to make coastal shipping non-viable. Why?
I’ll give the government a fail on this one. I get a sense that having wasted nearly a billion dollars buying a couple of hundred million bucks of Kiwirail assets then they need to try and make it work. But it is just throwing good money after bad.
I think what matters is how success of rail freight is measured. If you look at the Auckland-Whangarei corridor, perhaps if we spent $100 million on the railway line to improve freight then we’d achieve the same gains that spending $1.4 billion on State Highway 1 achieves….. then hey that’d be a pretty smart investment right?
The main gains of investing in inter-city rail, in my opinion, is that we get trucks off the road. Trucks that cause congestion, destroy the roads, cause accidents and so forth. The problem is, in a situation where the costs and benefits of each mode of transport are “siloed” off from each other, those huge benefits get ignored.
The rail system in this country is looking more and more like the system that the Booz Allen Hamilton crowd envisaged back in the 80’s.
AKT has other extracts from the Q&A – http://www.aucklandtrains.co.nz/2010/05/18/govt-rail-will-help-oil-price-shocks/
Relevant to the ongoing discussion of siloing, do the govt’s statements “As modes of transport, rail and road should be set on a level playing field for the companies that move freight” and “The Crown also funds investment in roads, and recovers this investment from road users” mean that we can expect to see the *full* costs of their road network usage recovered from the trucking industry to avoid market distortions that affect decisions by potential customers.
Despite the strong subsidy it has enjoyed for many decades, this re-balancing might be generously phased in over say 5 years to get the industry “to a point where it can fund all of its own operating costs and capital expenses through customer revenue”.
It would also require “strong commitment” from all parties including wealthy private investors, shareholders and other financiers. Quarterly performance monitoring would satisfy the government that its huge subsidy to trucking is being spent prudently over the period while it reduces to zero. Major customers might also be consulted and the trucking industry directed to focus their efforts on what those customers say they need most – including more services on the crucial Auckland-Wellsford route, no doubt.
Sacha, reference to needing the rail network to help cope with oil shocks is certainly one of the best things in the Q & A. I wish someone would do a study into whether the trucking industry really pays for its full costs (including hidden externalities). I suspect it fails by a long way.
Short answer, no. This is what pisses me off about this whoopied doo announcement: the trucking lobby gets a subsidy in excess of $750m. Do you think Granny H will mention this? No. Cause they will be so wrapped up and tickety boo about the OMG did you see that?? OMG $750m for rail AND fares will rise!
Damn it, I’ve just written a post and lots of what I talk about is in the comments here… Lol…
Most people don’t read the comments so it’s worth posting anyway 🙂
So let me get this straight Northland apparently has “huge ecomic potential” that needs to be “unlocked” by spending 1.5 billion dollars on a strip of road currently only used by 10,000 vehicles a day but at the same time this huge economic potential is not enough to justify keeping an existing rail line which could easily be linked to a major port in the area?
“All of this is certainly necessary but not exactly exciting.”
All those “not exactly exciting” improvements allow longer trains, no speed restrictions, cut minutes off journey times, helping to incrementally put KiwiRail in a position to be competitive
Cam, yeah it seems that’s right. What trucking freight company has a strong base in Northland and how much did they donate to the transport minister I wonder?
Paul, yes I don’t mean to denigrate small but necessary improvements. In fact I wholeheartedly agree that it’s often the small stuff which can make the biggest differences. I was just trying to find some mention of specific projects which the money was going to and struggling a bit.
Hm, I smell a rat or two. The crunch lies in the threatened abandonment or at the very least mothballing of the ‘minor’ lines, so while there is a lot of public money, it is going to be very much focussed on the core routes. That’s what is meant by language like ‘robust business cases’. In practice, this would not mean much for the line south of Christchurch, for example.
Knowing something of the countryside between Whangarei, the Kaipara and Helensville – the line is quite limited as a result and my guess is that the investment needed to make it viable would be stymied by the massive costs that would be imposed by the geography.
Separately, while they have allowed $7m for ‘appropriate track access charges’ for Metro, this is a harbinger of the extra money that they want to screw out of the Auckland and Wellington regions.
Ross, yes while I think it’s useful for KiwiRail to highlight the amount they’re subsidising the metro rail systems, I agree that $7 million will probably eventually be passed on to the regional councils and NZTA. I don’t necessarily think that’s unfair, as if you invest some pretty big bucks in upgrading the metro networks it is fair enough that track access charges would go up.
Admin: “I think what matters is how success of rail freight is measured. If you look at the Auckland-Whangarei corridor, perhaps if we spent $100 million on the railway line to improve freight then we’d achieve the same gains that spending $1.4 billion on State Highway 1 achieves….. then hey that’d be a pretty smart investment right?”
The proportion of trucks in total traffic is small enough that it won’t make any difference to the need for SH upgrades. Even a massive increase in rail freight won’t take more than a percent or two of traffic off the road. And 132 years of rail freight failure suggests that the $750million won’t achieve even a slight increase in rail freight volume.
Running freight trains through Auckland makes it a lot more difficult to run metro rail. Wellington suffers delays operating 30min services on some lines due to the need for commuter trains to wait for freight. I’d like to see Auckland operating commuter services on a 10 minute frequency, and it’ll be almost impossible to do that if you’re moving freight from Whangarei to Wellington or Christchurch through the city rather than sending it via a ship.
Similarly, we freight coal from the West Coast to Canterbury and run it right through the center of Christchurch in order to load it on to a ship at Lyttelton, instead of just loading it on to a ship on the Coast. This was a political decision to support rail, but it makes no sense economically or environmentally and I’d rather not pour more money in to subsidising this sort of madness.
Jeremy, please do put your post up and feel free to quote any comments from here that fit – have seen that done elsewhere.
Done…
The NG and the SOL lines are not minor lines though, the SOL especially is a very important link line
Obi, I think you under-estimate the effect that rail freight has on truck numbers along certain routes. If we take the West Coast to Christchurch route, some of those coal trains probably carry as much coal as a heck load of trucks. A few more hundred trucks movements on that road every day would make a big different to its maintenance costs, as well as potentially causing delays and other costs for others who drive on that road.
Doesn’t 300 trucks = about 24,000 cars worth of damage?
Okay, why does, according to Joyce, growth in freight transport throughout NZ automatically require greater efficiency for rail? I am not seeing him improve efficiency of motorways because of traffic and freight growth, even though they guzzle money (also called subsidies) like a parched desert. No, for motorways he is simply building more motorways (or more motorway lanes) instead. But on rail, the old double standard, even when money is invested: “Improve your wicked ways or suffer”.
Curious that the network that is to be retained matches entirely what I said two years ago:
http://libertyscott.blogspot.com/2008/03/so-where-is-rail-viable.html
I’m fascinated at the enthusiasm for the railway north of Helensville, you can all engage in the defamatory action of claiming conspiracies to justify evading some rather brutal facts about that network.
1. It is one of the oldest networks in the country, as a result everything from the weight of the track, to the alignment, to loading gauges (tunnels), to bridge weight restrictions, severely restricts the rolling stock able to use all of the lines. The cost to rectify all of this to standards matching other lines (e.g. Palmerston North-Napier) is going to be in the hundreds of millions of dollars. It is telling that this has never been worth doing over many many decades, it is unlikely to be worth doing now. The Marsden Point rail link project (which is so unviable that Northport doesn’t think it’s worth paying for) isn’t worth doing because of all of this.
2. Even if nothing is ever done to improve State Highway 1, it remains significantly shorter in distance to the NAL for the same trip. So there is another inherent disadvantage in the line. It will always be slower than road, and the fuel efficiency of rail for trips/volumes of a certain size is eaten away significantly by this.
3. The NAL network doesn’t serve the bulk of the freight movements in Northland because the distances are too short, and the origins of most of the forestry traffic are too diverse (and not served by rail in many instances).
The cost of rectifying what is wrong with the NAL would easily be around a billion. Now you might think taxpayers, who tend to prefer their money spend on health and education, should spend this, but then you might also ask why only a relatively small number of businesses deserve this enormous subsidy for their transport costs.
The only future for NAL is to run it into the ground and close it, unless a customer wants to buy it and use it. A network that has in many cases only 1-3 freight trains a day is simply not viable for the long run costs of capital.
Oh and Puhoi-Wellsford? I don’t advocate replacing a questionable highway project with a clearly nonsensical rail project. However, if Puhoi-Wellsford can be paid for by tolls and the marginal revenue from RUC/FED from those using it, then let it be.
Admin: The RUC study outlined whether RUC recovered its share of road costs and is on the MoT website. The updated Surface Transport Costs and Charges study is underway. However it is generally accepted (much to the chagrin and disbelief of many rail enthusiasts – of which I am one), that the revenue from RUC overrecovers road costs on state highways and underrecovers on local roads (on average it does recover). Yet even if RUC was doubled (and there is no evidence to justify that), it would make a marginal difference to the viability of rail on these sort of routes because, despite the belief of many, rail and road transport by and large does not compete in most of its business. On other externalities, the STCC report in 2002 demonstrated in the three rail freight case studies that in one case rail had lower impact than road, in another rail had a higher impact than road, and in a third it was fairly even.
For example, for coal movement rail always road as long as supplier-customer have railheads and the distances are sufficient, but road always beats rail for any consignments that are a wagon load or less (which are most). Road doesn’t really compete on long haul bulk container movement (sea does).
If you really want to know more about this area, then it is worth discussing with one of the economists who has spent years studying it. One of the best is currently doing this http://www.transport.govt.nz/research/understandingtransportcostsandchargesuttc/
“And 132 years of rail freight failure”
What nonsense. Obi, you are just repeating the National/Act anti-rail partyline. Some people have always disliked rail (or been in the employ of its competitors – coastal shipping, at the time you cite for your first inquiry in the “failure” of rail). Some people have always felt that governments spending money in a way that does not generate new $$$ = wasted money. Don’t give me that stuff about rail failing automatically. Sure, rail got less competitive in comparison with trucks. But that doesn’t mean it has a level playing field, or that it will remain automatically non-competitive, or that in our “all eggs in one basket waiting for the drop” situation, investment into rail won’t have huge benefits.
As for your interesting comments, LibertyScott, I find those much more realistic, if a bit depressing. What are your feelings on mothballing, as a backup in case of serious peak fuel problems? (of course many lines aren’t electrified, so it may be moot in a peak fuel scenario).
Good to see you back commenting here Liberty. I have never quite managed to read through much of that STCC report, but I have heard it being used to justify both sides of the argument – ie. both the argument that trucks to seem to pay their way and also the argument that they nowhere near pay their way. Hopefully one day I’ll have the energy to read the study myself.
In terms of the North Auckland Line, I think it’d be interesting to undertake a “what could be done with $50 million, $100 million etc.” exercise, and then see the benefits compared to investing similar amounts in the Puhoi-Wellsford Road (looking at both wider economic benefits and also wider economic/social/environmental costs of course). If that comes out in favour of Puhoi-Wellsford, then so be it – but I just don’t see that analysis being undertaken. So I remain skeptical.
Max: Yes mothballing is perfectly sound, although difficult where terrain is harsh and subject to slips and the like. I am strongly in favour of retaining the corridor, even if ultimately it becomes a tourist trail (which i would enjoy personally, and which has been a roaring success in central Otago). A comprehensive mothballing plan (with options to rehabilitate or convert into a tourist trail when the future becomes clearer one way or the other), would be excellent.
Admin: Thank you, STCC didn’t complete the job, hopefully the updated study will shed more light on it. I found the case studies in STCC enlightening about how peak urban transport is grossly underpriced for all modes, and off peak is overpriced for public transport but not for car users (in Auckland and Wellington). On freight though it seemed to show much of a muchness between them. The update will be interesting though.
I would simply write off the NAL and focus on the core, that is where rail competes with road and rail has a future to thrive. NAL does not feed the network going south, so there are no network benefits in keeping it. I do agree with the comparative analysis on corridors, and for NZTA to allocate rail funding (but it must also receive taxpayer money for that, road users should not pay for that).
Liberty, surely there’s a logical justification for NZTA money to be spent on rail where there’s a benefit to the road user though? For example, the most recent analysis of the Onehunga Line shows a BCR of 3.1, of which 85% of the benefits were to car users through congestion savings. Now my skepticism of the cost-benefit analysis process is well known, but the point is that it is road users who are (apparently) primarily benefitting from this rail project – so surely it makes sense for road users to contribute to its cost?
I imagine the same thing will be true of the CBD rail tunnel when its cost-benefit analysis is completed, that a significant amount of the benefits will be to road users. Therefore I do think that NZTA should chip in a pretty big chunk of the cost of the CBD rail tunnel. That seems logical to me.
Thanks, Libertyscott. If the comparative figures are still being put together and the old ones are questionable, what has the government been basing their decisions on about investing 11,000,000,000 in new highways at the expense of local roads, maintenance and public transport?
Does sound like coastal shipping should also be on the table for any proposed freight/urban passenger routes. And why not just have a single transport agency for all modes? It’s the same people and goods that needed to be moved, after all.
That’s the moral issue with a fuel tax based system of transport funding. The roads lobby can always claim “but it’s OUR money!” and have the average punter say “Yeah, that sounds kinda right.”
Amusingly, this could be countered easily enough: Rail freight DOES pay fuel tax as well, don’t they (or is the diesel fuel for locomotives not taxed?). Electric rail freight pays taxes on their power too, I’d assume.
If the punters then scream “But that’s a drop in the bucket, in comparison!”, we are back at the “If you don’t invest anything into rail, why do you think it has such a low share in the first place?” argument.
Sacha, I think it’s based on an OECD paper which actually says that building motorways isn’t related to boosting economic growth, although in parliament Joyce has claimed it says the opposite.
More: http://greaterakl.wpengine.com/2010/05/06/rons-in-parliament/
http://greaterakl.wpengine.com/2010/02/18/does-building-motorways-really-generate-economic-growth/
Glad your back Liberty, I hope my commenting regularly on your blog had something to do with it…
I had never heard of the STCC before, so makes me calling for one in my recent post redundant… I’ll have to have a read…
Interestingly the major trucking company in Northland are United Carriers, and they were bought by Toll a few months after the govt purchased Kiwirail.
Also it infuriates me why the media find anti-rail commentators who can come across as experts. Today it was Dave Heatley who has a well known vendetta against rail, normally its the awful Luke Malpass.
Joshua, saw that when you first posted it – great paper – and noticed you having to point out its wilful misinterpretation recently.
Admin: Yes, that was the ATR funding category. Bear in mind that unless upgrading infrastructure also comes with a very high likelihood of a service actually carrying something (Onehunga had that), then it is deadweight money. So NZTA WILL spend money on efficient alternatives to roads, it is just that these are damned hard to find. You can imagine I’d be extremely sceptical of Onehunga having a BCR of 3:1 (would happily go through the report to see how that is achieved), given the Northern Busway in the latter years only got 1.8:1. In urban locations, road user benefits can be seen. On intercity locations, the primarily benefits of transport projects are safety. It takes a lot of freight to go from road to rail to get anything from that (although the Wairarapa-Wellington log traffic did get funding justified on the basis of safety and marginal road infrastructure savings). So it IS possible, but I strongly suspect NAL will be too high on the cost side for benefits to remotely come close, especially since rail is a longer route than road.
Sacha: I am a strong supporter of recreating Transfund as a dedicated transport funding agency, and putting the state highways into an SOE (which can toll and borrow as it sees fit against that). Certainly there should be a common appraisal framework.
Max: Diesel is not taxed with fuel excise duty, the only tax is GST and local authority petroleum (inc diesel) tax which is only 0.33c/l for diesel.
Jeremy: Digest STCC in pockets, be careful to read it all before drawing conclusions. None of it is as obvious as it seems, which is why all interest groups on this are quick to use it to claim “victory”, when the truth is that none really can. However, a lot has changed since STCC which dramatically affects results (e.g. rail funding, significant improvements in fuel standards, road taxes).
When I once worked in this area in NZ, my friends at Treasury and MoT concluded the main thing STCC says is that traffic congestion is by far the source of the worst externality issues (delays and environmental), and that intercity freight and passenger movements are not really an issue in terms of modal neutrality.
Dear Libertyscott
I did my porridge at the old Transit NZ (1989-1996), then at Tranz Rail (to 2005). I am in the UK as well, with one of the devolved Governments. I suspect we know all the usual suspects!
@Liberty: This relates to my post rather than Josh’s but under your scheme Transfund would receive all transportation income (taxes, track access charges etc) and then the SHs would be a SOE and Ontrack an SOE which would then compete for capital funding..?
Ross: Yes I suspect so!
Jeremy: I’d envisage Transfund would receive road user taxes and any Crown appropriations (but you could never stop the Crown from simply injecting money into Kiwirail to buy trains, for example). However, I would let the “National Highway Company” (or whatever) and Ontrack retain their own revenue generated from directly charging customers (tolls and track access charges). In other words, if the network providers can directly recover revenue from their customers then let them do so and invest on that basis (local authorities too). I’d put all local authority roads into similar structures, but allow local authorities (and the National company) to charge property access levies (instead of rates) to recover the access component of local roads, including footpaths (given that remote rural roads are really about that). Local road companies, the national highway company, regional councils subsidising public transport and Ontrack would then compete for funding from Transfund.
Sounds like a good way to ensure a good infrastructure spend… I think, dealing in the realm of the politically possible for a moment, that moving Ontrack to the NZTA and introducing competetion for NLTF funding is a good start and should lead to more robust projects…
Liberty, the problem now is that NZTA is effectively banned from putting money into rail capital projects. That was a significant change in the 2009 Government Policy Statement. So even if a rail project will have significant benefits for road users, NZTA money cannot be used.
+ 1 on it being good to see Liberty back.
I don’t always agree with you sir, however you certainly make everyone here think about what they’re saying and advocating.
It is the line mainly north of Whangarei where most of the other lines have closed since deregulation.
It is generally a fact that most of the lines slated for closure have severe geographical disadvantages that have contributed to their marginality. In turn, the majority were not completed until the 1930s or 1940s. This is also true of the West Coast of the South Island which would have closed years ago except for the coal traffic (in turn due to the lack of any suitable ports in the area). Population is the main driver for these lines because they generally serve small towns.
The media find people who know the true picture, like the Institute at Victoria University which has panned the economics of rail, as LS says they are about to be bailed out for the fifth time in the last 30 years (and they were bailed out a lot more times before then).
Roads are used by a lot more people and are a lot more practical in many cases and that is why rail in some of these areas is basically unviable.
In reply to the comment about West Coast coal and ports. The development of suitable ports on the Coast would be extremely expensive, but every so often plans do surface to barge the coal off to other ports for shipping. The latest two examples were Shakespeare Bay near Picton, and Port of Taranaki (the latter for Pike River’s coal).
Solid Energy does barge some coal to Lyttelton, where the wharfies have got a nice little overmanning rort going in the unloading operation (have to pay crossing keepers to man those level crossings around the port in case a coal truck hits a train) which probably helps their fellow brethren in the Rail and Maritime Transport Union to keep their jobs bringing the trains through the Great Divide.
Swampy I certainly agree that in many cases roads are more practical. However, I think it is necessary to keep in mind situations where that isn’t the case, or where there’s a good chance that won’t be the case in the future. An interesting thing that came out of yesterday’s announcements was mention that shifting freight by rail is six times more fuel efficient than shifting it by road.
That might not make the world of difference when diesel is $1.20 a litre. But if it’s $3 a litre, it’s going to be damn expensive trucking our stuff around, and we could very much regret closing down some of the lines.
All of that freight has to be moved on road at some point of its journey. The lines we are talking about are not stopping any freight from being moved from any major economic source. If the cost of doing business becomes too great, industries will close down or relocate to centres where transport is better. Personally I believe Scott’s views about the supposed efficiency gains. You will only get the maximum for long heavy unit trains of stuff like coal over long distances, and there aren’t many of those around. These lines being discussed are all fairly short in reality.
So the point is I think that there isn’t any substantial freight that needs to be moved in those areas to be affected significantly by such things and if there is a sustained rise in cost then people will move away to the big centres.
I think that is where mothballing comes in but I’d say the evidence for peak oil raising oil rices to the levels you are talking about within a decade is likely enough to ensure them remaining open is a good option…
Interestingly enough libertyscotts solution would actually help rail freight. This is because road prices would soar.
Road demand is fairly inelastic, therefore the incentive for the Kiwiroads SOE would be to say increase prices by 50% say. Demand may drop by 10% but they would be brining in much more money for much reduced maintenance.
I guess it doesnt matter that economic growth and social wellbeing would suffer because that would not be Kiwiroads concern.
However as this alternative is clearly (to all but libetarians) unacceptable rail needs to be put on an even playing field some other way.
Why should raising the cost of road transport be unacceptable? Road pricing may be unfashionable politically, but it is neither idiotic or unfeasible.
I do mean politically unacceptable. Roading is of course of natural monopoly so conditions necessary for efficient competition will never exist. Putting up fuel prices by 5c is hard enough unless the govt is in a major honeymoon period.
I do agree with some form of road pricing eventually, however if it is done by a purely commercial body then they will have a huge incentive to price gouge thus reducing overall economic performance.
I think unsubsidised SOEs are perfect for natural monopolies…
Luke: Well that is why there may be room to consider either splitting up a “Kiwiroads” (remember I’d keep local authority roads separate so there is scope for some competition with some of them) or to introduce the kind of price control applied to privatised monopolies elsewhere (CPI cap on total revenue). There is a strong incentive to operate very cheaply at off peak times simply to attract new business, but I’d also think Ramsey pricing would occur. This means that road freight would be marginally priced, based on network costs. Some highways (State Highway 1) might be cheaper because the volumes of traffic and standard of the route means that there is a clear surplus, and competition from rail (and sea on some routes e.g. WLG-CHC) would put adequate pressure to reduce charges. Car users are most likely to be hit at certain times because generally they have no modal alternatives (seriously, outside main centres there will never be public transport that will remotely serve the needs of motorists).
What I am suggesting is not that far removed from Better Transport Better Roads, which was the previous Nat government argument to road-rail neutrality and the complexity of introducing road pricing. Government agencies are not good at dynamic or innovative pricing, let alone high tech revenue collection systems (which is what is needed), but allowing companies to do it would change things dramatically.
The other point is it gives scope for private sector innovation where gouging might occur, which is likely only in cities. As long as interconnection is required, competing roads may be built in a handful of cases (e.g. eastern motorway Tauranga). After all, there IS an incentive to not gouge transport to a town if it results in a long run decline in demand. You don’t see serious gouging in the retail energy sector or retail telecoms sector which have some similar characteristics. Bear in mind that an alternative would be to allow third party onselling of road space with the infrastructure provider offering a basic wholesale rate.
There is enormous scope for thinking very differently about main roads (local roads will be about access fees and some basic charges for use), which could change dramatically how people move about. In fact the simplest step (moving everyone onto a form of RUC, paying by distance) would do more to slow down urban sprawl than any public transport. A study I recently heard of in the US said that even if motor insurance (which means property and what we have as ACC) was all by distance, it would reduce vehicle-miles by around 5%.
In other words, just making any vehicle trip a matter of “it will cost x to drive y kms” changes how people think about car use. It already does to some extent for trucks.
Anyway, if all we are arguing about is details about pricing, then we will have gone a LONG way. The current government wont consider pricing beyond tolling new roads, and the last lot considered it and ignored going further. The simple truth that will become apparent in due course is you can’t fix traffic congestion by either simply adding road capacity and adding public transport capacity (or cutting public transport fares). The UK Royal Automobile Club is supporting road pricing, which tells you how far the debate has moved on in the UK – the problem is trusting politicians to use it to replace current charges, not just add them on top! THAT is what will always be politically unpalatable.
Cant see how anyone could build a competing road in a place like NZ. Unless a corridor had been reserved by govt then it would just be too expensive to develop a new road. I don’t think Tauranga eastern would be built for a while yet if it had only private funding. A $2 toll only covers about a third of the construction costs, never mind the extra financing costs that private involvement brings.
With private involvement in natural monopolies so much regulation is required that you lose any efficiency gains that could be made. The charging scheme itself would need to be standardized across the country or it would be a nightmare for users, however they wouldnt have a choice of course.