Thursday, March 09, 2006

Politics and roads don't mix

The political reaction to the Hearings Committee report on Transmission Gully is not unexpected. The media has failed miserably to note that the Committee was a consultation exercise, not a project evaluation, just as the politicians have. I raised some doubts about the project in my post yesterday already.

The Greens aren’t happy because they don’t like motorways or cars. They would rather spend your money on a very expensive rail option. The Hearings Committee supports a cheaper rail option (although delaying a much needed upgrade of Porirua station – the second busiest in Wellington so money can be spent on the Gully), which is probably the most that is worth doing for rail. The Greens should acknowledge that there should be roading improvements along the corridor.

The Nats, local Labour MPs and United Future are all ecstatic, since they panned the last officials reports, and agree with this one. All are claiming that no more needs to be done, just Transit should “build it” and the money should somehow just appear to do this. The NBR quotes Dunne wanting the private sector to build the road - ummm Peter, Transit has no bulldozers, everything is contracted out, has been since 1989 when you voted to set up the organisation with your Labour colleagues.

All of them are anxious to spend your money, bugger the consequences, it’s popular so it must be done. It doesn’t matter WHOSE money it is – it is just taxes after all, and politicians are elected to spend them, so as long as people want it, it’s ok. Democracy is ok, isn’t it?

Well the Greens do have a point in that Transmission Gully will encourage urban sprawl – fine, I say. If people want to live on Kapiti Coast and pay for the cost of commuting, I wont object – but they wont be. Transmission Gully is proposed without a toll, and that means the money for it either comes from general taxation or by diverting funds from other projects in the Wellington region. In other words, Kapiti commuters will only be paying a fraction of the cost of commuting by car. If there was a toll of around $15 each way, then you’d be talking, but funnily enough none of the advocates for Transmission Gully would pay that, I doubt if most of the property owners along the existing route would pay either (Porirua City Council was unwilling to rate them for it).

That is my first fundamental point – I’d support Transmission Gully, wholeheartedly, if the people who will use it would be willing to pay for it. They wont though, and neither National nor United Future believe in user pays for roads. Arguments about diversion of petrol tax don’t wash either: Wellington contributes about $68 million a year in petrol tax to the Crown account (the petrol tax and road user charges to the National Land Transport Fund are already committed to road maintenance, some modest construction and maintaining public transport subsidies). Labour has already pledged $885 million of Crown account money towards Wellington transport in the next 12 years – MORE than the $68 million a year, not taking into account the $800 million of Crown account money going on projects funded from national allocations, not taking into account money for rail infrastructure!

In short, Wellington transport is already being subsidised by the rest of New Zealand. Just because several thousand Wellingtonians think that it should be, doesn’t make it right – and the National Party should know better.

Secondly, the cost of Transmission Gully is far from certain. Let’s be real here, the road wont be able to start to be built for around 4 years, as it has to go through detailed investigation, design and remaining properties have to be purchased. The cost of major roading projects around the country has gone up enormously, over 100% in some cases, as contractors demand higher prices to upsize their capacity. In the case of Transmission Gully, it is a one-off enormous project – so contractors will have little use for the equipment after it is built – this adds a premium to it. The Avondale extension of SH20 went from $600 million to $800 million to $1.1 billion within 3 years. Transmission Gully faces the same risk. This project has been rated as having very high risks of cost escalation – so talking about the money is very important – the figures the Hearings Committee put together don’t add up, because they don’t take into account inflation. This is why Transit’s latest draft State Highway forecast has less projects that previously envisaged. It’s not politics – it’s the market!

Thirdly, Transmission Gully remains inefficient and one of the worst investments in roading that could be undertaken in the Wellington region. Transmission Gully will make any upgrade of the rail link pointless, as the road will be faster, knocking around 15 minutes off of the car commute time – until you get to Ngauranga, or the Terrace Tunnel. You see it isn’t politically popular to call for a proper bypass of Wellington city – with a second Terrace Tunnel, second Mt Victoria Tunnel and a cut and cover 4-lane arterial bypass (the original Wellington motorway plan abandoned in the early 90s) – it would cost $450 million, have more than double the benefits of Transmission Gully and make a huge difference to inner city Wellington. It would take cars out of Te Aro and remove one-third of the traffic from the waterfront – enabling Jervois Quay to be narrowed to a 4-lane boulevard as has been proposed.

So why? It is politics. Politicians like Peter Dunne, Jenny Brash, Chris Turver, Mark Blumsky, Marian Hobbs, Chris Finlayson, Darren Hughes – deciding on the basis of what pushes people’s buttons. They are not concerned about who pays, as long as it isn’t the people whose votes they are clamouring for. They are not concerned about whether it will deliver net benefits, they want net votes. It’s called porkbarrelling, and if the government agrees to Transmission Gully getting taxpayers funds – it will be the biggest slice of transport pork handled down to Wellington in decades.

The biggest disgrace is that the National Party has hopped on this bandwagon. Politically, it would because it gets the party votes and because voters have short memories. You see Labour is in a position little different to the one National was in when it was in power – a decision on a popular but very poor quality project - objectively speaking, if you had to choose between spending taxpayers money on Transmission Gully or on other projects, you’d choose the other projects almost without fail.

The Nats have abandoned user pays and economic efficiency. Have the Nats also abandoned using statutorily independent boards to weigh up the best way to spend road users money? Let’s use politicians because they know best, after all Mark Blumsky and Chris Finlayson have extensive backgrounds in road engineering, traffic modelling and transport economics…. Not.

In fact, Land Transport New Zealand is required to make decisions on funding projects outside the realm of politics – so that important but unsexy activities like maintenance, widening intersections and bridge replacement get funded because they are worth doing, instead of big politically important projects that aren’t really worth it. Guess who set up that independent funder originally? National. National established Transfund to ensure road user funds were spent on the best projects first, so that, unlike the USA and the UK, road maintenance would come first, followed by small high value projects, then by large projects ranked according to their net returns (measured by benefits) to road users. Those benefits are time savings, fuel savings, reduced accidents, vehicle wear and tear etc.

National did not progress Transmission Gully when it was in government, because it didn’t stack up as a worthwhile project to fund. National supported a major change in the funding system for roads, that would have changed Transit into an SOE – and had the then Transfund buy services on behalf of road users from Transit. Transfund would use petrol tax and road user charges to reflect what motorists were willing to pay for, and Transit could institute tolls or means by which motorists could opt out of petrol tax, and pay for road use directly. Transit would also have been allowed to borrow to build new roads and pay off the cost over time using direct charging. National’s policy was that Transmission Gully would stand or fall on its merits under that system.

Now the National Party believes that roads should be funded on a pork-barrel basis – now don’t get me wrong, Labour’s special funding for Auckland, Bay of Plenty and Wellington transport isn’t that much different.

So what SHOULD politicians say? Well, in the short term, let Transit and Land Transport NZ get on with their jobs. The best solution will never be determined politically, and will not be determined by consultation. Imagine if you ran Air New Zealand politically – well, don’t imagine, think about the late 70s, early 80s. Imagine if you ran Air New Zealand on the basis of public consultation, it would go bankrupt with all of the bright sparks wanting flights from Wellington to LA, or wanting business class seats for everyone on long flights or whatever.

It is, as Hayek said, the fatal conceit. Politicians don’t know any better than consumers, and consumers aren’t deciding this because all you are hearing is noise from people who don’t want to pay for a very large construction project.

How about this comparison? You have three options for $1 billion (lets assume inflation is covered):

1. Build Transmission Gully; or

2. Build a cut and cover tunnel bypass from the Terrace Tunnel (with a second one for 2 lanes southbound) to Mt Victoria Tunnel (also with a second one) and 4 lanes to the airport, plus upgrade Rimutaka Hill Road to a 70km/h standard highway with a continuous passing lane up each side, plus flyovers to eliminate every traffic light controlled intersection on SH2 from Petone to Upper Hutt, and an underpass for Paekakariki and bypass for Pukerua Bay (with a median barrier along the length of the coastal stretch of SH1); or

3. 30,000 more cardio-thoracic operations per year nationwide; or

4. $11 a week tax cut for every employed Wellingtonian (including public servants).
Which one would you like? Remember the fourth options allows you to choose any of the others as well, if you think about it.
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UPDATE: Dominion Post misreports yet again. "It found the proposed four-lane inland motorway would cost $96 million less than the original $1.1 billion estimate". Ok so that makes it $1.04 billion, not $955 million like it says at the top. In fact $955 million is what is in the report, but there is easily a 10% risk premium on any project - the key is that it still costs $300 million more than upgrading the coast. What ELSE do newspapers report inaccurately that only people who have been closely involved know about?
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"Land Transport NZ chief executive Wayne Donnelly said four years was the longest funding period for a new road project in the past, but nothing legally constrained funding projects over 20 years. ".
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Indeed, although if done you would have to wonder how much the Board of Land Transport NZ would be willing to fund any other major new projects in Wellington over that time. That is what councils in the Hutt, Kapiti, Wellington and Wairarapa ought to be thinking - does it mean that there will be little new roading work in those cities? Is Wellington stuck with Mt Victoria Tunnel/Basin Reserve congestion getting ever worse?
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"United Future leader and Ohariu-Belmont MP Peter Dunne said the decision to go with Transmission Gully had been made and it was time for Ms Prendergast to move on. "I think it's all over frankly. This was the step that was needed . . . the rest is all procedure." "
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Sorry Peter, only Land Transport NZ can make the decision to fund it, and Transit to proceed with submitting a funding proposal for the project. The Inner City Bypass was approved by Wellington City Council in 1993, and didn't start work until 2004 - following the Environment Court, High Court, Historic Places Trust, Transfund peer review, Major Projects Review, Transit Board, Transfund Board.
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One other minor point - once four lanes of motorway reaches the Raumati straight, then what? The Hearings Committee is "funding" Transmission Gully by not proceeding with a bypass of Paraparaumu, despite Kapiti congestion being the fastest growing in the region. Never mind, all hail the God of Transmission Gully - fixer of all congestion, solution to all our woes - all bow down to the cargo cult.
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UPDATE TWO: ACT's Heather Roy is cheerleading Transmission Gully on too - surely Roger Douglas doesn't believe in inefficient public expenditure? Vapid nonsense like ""Until Transmission Gully is built, Wellington remains without a second main access route in the event of bad weather or a natural disaster." The current road was closed once due to flooding from rainfall which saw a culvert overflow - so let's spend $955 million +? In a natural disaster, Transmission Gully is only slightly less vulnerable, and um, why would I want to take a drive out to the coast in any case? By the way, Auckland's North Shore doesn't have a second main access route either - care to volunteer $3 billion of other people's money to help them out?
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"Wellingtonians know that something needs to be done about road access into the region." So if taxes were cut to 25% and 15%, you really think you could afford this Heather? Road users aren't going to pay for it.

2 comments:

Seamonkey Madness said...

I'll take door number 2 thanks. =)

With that in mind, the NIMBY rule still applies. People will say it will cause too much short to medium term congestion in the city while it is under construction, without stopping to think of the bigger picture (not ThinkBig!). These projects will ease congestion not only at the tunnel chokepoints, but at Ngauranga as well.

If those projects are tabled in the future (insert Tui slogan here), I would be a betting man and say that there will be an inner-city parking building construction boom. =)

Anyway, as I said in the comments of your previous post, politicians should stay the f*ck away from Transmission Gully, and leave it to the professionals who have the experience and expertise to make this sort of decision.

And Dunne is laughing if he thinks he can get any international company to submit a tender for it. They'd run a mile when they saw the risks involved.

Also the shortage of labour in the construction industry. Gee, thats not going to make things expensive. And I'm not just talking your average bro on a shovel either. I'm talking the project managers, site engineers etc. Recently I was at a friends going home (not permanently) party at a pub. He was in my engineering class at uni. I saw 1/2 a dozen other classmates there, all with no intention of going back to NZ in the near future. If certain circumstances allowed, I wouldn't be going back either, but thems the breaks. A symptom of the 'brain drain' I guess? Thats what you get when you have one of the highest tax rate in the OECD courtesy of our kleptomaniacal government.

libertyscott said...

In the early 1990s, the cost/benefit ratio of the covered trench bypass of Wellington city was 2.3:1. The investigations for this 1.6km route were far more robust than for Transmission Gully - which then was costed poorly and had a similar cost/benefit ratio.

Wellington REALLY needs a proper bypass to take traffic around the edge of the CBD, for the region to access the hospital and the airport - the bypass being built now was meant to be enough for 10 years from 1995. You can see Wellington roads pulled in two insane directions - the Greens have made the bypass into a pathetic little one-way system, and Dunne will mean an enormous motorway is built to the north. No consistency at all.