Flashback Saturday: Alternative Transport Funding Report Released

Every weekend we dig into the archives. This post by Matt was originally published in October 2014.

The latest report on alternative transport funding for Auckland, prepared by the Independent Advisory Board (formerly the Consensus Building Group), has just been released. The report will form a critical part of the Council’s public consultation on the next Long Term Plan (the 10 year budget), essentially asking Aucklanders two key questions:

• Are you willing to pay more for a better transport network?
• If so, then should that extra money be from existing sources (rates, fuel taxes etc.) or from a “motorway user charge”?

We have been highly skeptical of past proposals that request more money to be spent on transport – in particular the first version of the Integrated Transport Programme as well as the initial report on alternative funding prepared last year by the Consensus Building Group. In fact, the Congestion Free Network came into being as a result of our frustration with the transport programme being a “build everything” and we felt a large part, if not all of the $12 billion funding gap could be resolved through removing poor value projects, rather than by requiring additional funding.

Overall, the new report is a clear step in the right direction and combined with the work being done as part of the next LTP and the next ITP it seems as though quite a lot of effort has gone into removing the more idiotic projects included in the original ITP, although there isn’t a huge amount of detail in the information that has been provided. There are, however, still many unanswered questions that the report doesn’t seem to address – plus its key recommendation of suggesting a “motorway user charge” is fraught with problems. But I’ll get onto that in a moment – first to summarise some key points from the report.

A comparison between what is in the two programmes – known as the “Basic Transport Network” (that which can be afforded under the 2.5-3.5% rates increase proposed in the LTP) and the “Auckland Plan Transport Network” (the preferred network, which requires additional funding) is shown in the series of tables below.

Firstly, for bus and ferry investment:

The main difference between the two networks seems to be in the scale of the bus lane programmes and the provision of additional busways in the second and third decades, supported by service frequency improvements. The proposed Botany to Manukau busway appears to be extended to the airport like we suggested as part of the CFN however more interesting is to see a new proposal for a “cross isthmus” bus RTN between New Lynn, Onehunga and Otahuhu. I wonder what route and form that would take.

Next for rail:

The difference between the two networks is fairly stark in the second and third decades, with no investment at all in rail over this period in the Basic Transport Network. I must say the complete lack of rail investment in the Basic Transport Network after 2025 is a bit surprising and raises some questions about the prioritisation process that determines what’s in and what’s out of the Basic Transport Network after 2025. Importantly, CRL is in the Basic Transport Network and therefore does not require alternative funding.

Next, for roads:

Looking at arterial roading projects first, it’s clear that even the Auckland Plan Transport Network is much smaller than what was proposed originally in the first version of the Integrated Transport Programme. In fact it seems like billions upon billions have been shaved off the previous ITP’s numbers, which included crazy things like nearly a billion dollars on upgrading Great South Road. We’ll take a more detailed look at this in a future post, but credit where it’s due to Auckland Transport who have responded to criticisms of the first ITP by ensuring the Auckland Plan Network has been significantly refined to deliver much better value for money.

Unfortunately the same cannot be said about the state highway programme, which doesn’t vary much between the two networks – aside from some rather optimistic “widening to reduce congestion” in the final decade (haven’t they heard of induced demand?) A whole bunch of very dodgy projects (Additional Harbour Crossing, SH16 Port Access, SH1 Warkworth to Wellsford etc.) have been included in the Basic Transport Network for some unknown reason, as well as of course being in the Auckland Plan Transport Network. This is important to keep in mind when considering the resulting “funding gap” – which of course could be a whole heap smaller if we stripped out the $5.5 billion Harbour Crossing and multiple billions on these other unnecessary projects.

Components of the walking, cycling and safety programmes for the two networks are shown in the table below:It’s not clear what the cost difference for walking and cycling is between the two networks, but it’s clear that only the Auckland Plan Transport Network goes anywhere close to delivering on the Auckland Plan vision for active transport.

Now for miscellaneous other stuff, like maintenance, renewals and supporting sprawl:

The shortfall in funding maintenance and renewals under the Basic Transport Network is a real concern, as the last thing we want to do is end up like the USA where infrastructure is falling to bits because politicians want to “cut ribbons” rather than look after what we already have. The lack of funding for developing the greenfield sprawl areas may not be such an issue as this could force the developers themselves to come to the party a bit more.

Overall, as I noted above it’s clear the Auckland Plan Transport Network is vastly improved from what was in the first ITP. A lot of the really poor investment in the arterial network appears to have disappeared, although there are still a few remaining remnants like Penlink and Mill Road, although even with these projects it seems like the bulk of spend has been pushed out into the future. However, the big remaining issue is that a similar exercise doesn’t seem to have occurred with the State Highway network and there are still billions upon billions of dollars in poor value for money projects – most particularly the Additional Harbour Crossing but also other duplicative projects like SH20B, Warkworth-Wellsford and others. NZTA have really dropped the ball on this one and unfortunately I suspect part of this comes about because the under the current situation motorway projects get full government funding while every other transport project has to beg for a slice of the funding pie. More than once I’ve heard council people say we should build certain projects simply because the government are paying for them.

Cut out what I estimate to be around $8 billion in very poor value for money state highway projects and we’re left with a $4 billion funding gap. If we push $8 billion of state highway projects out of both the Basic Transport Network and the Auckland Plan Network, it means we can afford $8 billion more of good projects before we have to turn to Alternative Funding and it means that we only need to find ways of raising an additional $4 billion. Over 30 years, that’s not a particularly huge issue to overcome.

So if we think back to the two questions at the top of the post, it seems as though the answer to the first one is there may well be value from paying a bit more to get a better transport network, but the actual requirement for additional funding might be around a third of what the report highlights. Now let’s turn to the second question of which would be the best way of raising this additional funding.

Essentially the two options proposed are:

1. Increasing existing funding mechanisms like rates, fuel taxes, development contributions, central government grants etc.
2. Introducing a charge for entering the motorway network

Some more detail on the “Rates and Fuel Tax” option are shown below:

I must say I was pretty surprised to see how low the additional rates and fuel tax increases would need to be in order to close the funding gap. A rates increase of between 3.4 and 4.4% is actually lower than what was assumed in the 2012 Long Term Plan (that had 4.9%) while a 1.2 cent per litre annual fuel tax hike would probably get lost as a rounding error in typical price fluctuations. It’s a credit to Auckland Transport’s project prioritisation that they’ve managed to develop a network that could be fully funded under the funding assumptions of the 2012 Long Term Plan, and it’s only the political decision to have a much lower rates increase that’s essentially “re-created” the funding gap.

Combine this with the above observation that the “funding gap” could be further reduced to around $4 billion instead of $12 billion and we could see the gap closed by rates increases only 0.3% higher than otherwise or fuel tax increases of a mere 0.4 centre per litre compared to what would otherwise occur. That’s starting to look like a pretty compelling option.

The other funding option is called a “Motorway User Charge” and is summarised below:

There’s a lot of discussion in the document around the relative costs and benefits of the two approaches – with the report seeming to express something of a preference for the motorway user charge scheme, based on its travel demand management effects of discouraging some trips and encouraging higher levels of public transport use. We’ll look at the details of this analysis in further posts, but note that this option does come with some fairly significant set up and operational costs (~$110 million set up with opex costs of 24c per trip) as well as potentially diverting quite a lot of traffic off the motorway network and onto local roads – which seems quite counter-productive.

To summarise, there’s quite a lot to like in the Independent Advisory Board’s report. It seems like some hard work has gone on by Auckland Transport (although sadly not NZTA) to optimise their desired transport network so it’s far more realistic than what was proposed in the first ITP. Take out a few of the dumber motorway projects and we’re left with a pretty damn good 30 year transport network that can almost be funded from existing sources (just requiring 0.3% higher rates increases and 0.4 cents per litre higher fuel tax increases) or from a very low motorway user charge. Or from other ways we might think up of to find $4 billion over 30 years.

Update: unsurprisingly the government has once again poured cold water on the idea of tolling or fuel taxes.

http://www.beehive.govt.nz/release/govt-responds-auckland-transport-report

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