Tuesday, April 24, 2007

Regional petrol tax (sigh) again?

So a regional petrol tax is proposed for Auckland, a really stupid idea.
^
Why?
^
1.Last time it was tried (early 1990s by National, but don’t expect them to remember it) to help fund Auckland and Wellington public transport, the oil companies levied the tax across the country at a level equivalent to what it necessary to raise the same revenue from only Auckland and Wellington. Why? Because petrol is taxed at the “border” it is the equivalent of a customs duty, and it is was administratively simpler to simply apply it to all petrol sold across the country. Unless a new retail sales tax is applied to petrol on top of fuel excise duty, and oil companies are legally forced to charge it in Auckland alone (better define that), this tax is likely to be applied to the whole country at a lower rate.

^
2.Even if it IS applied to Auckland only, it will kill off service stations not far from the Auckland “border”, after all, why would you fill up in Pokeno if you could go to Mercer and pay 10c a litre less?

3. If you have a diesel or LPG vehicles you pay NOTHING extra. Why? Because diesel vehicles don’t pay a fuel tax (because the majority of diesel is not actually used on the roads, and a diesel tax for road use would mean a refund scheme for that diesel), but instead pay road user charges (which charge according to distance and weight). Since road user charges are bought in advance, and there is no way of detecting where in the country they are bought (or used), expect sales of diesel cars to go up in Auckland to avoid the new tax.

4. The money raised isn’t to be spent on roads, but on a rail electrification scheme that at the very best could serve perhaps 10% of Auckland commuters (though so could improved buses at a small fraction of the cost). 87% of Aucklanders don’t work downtown, and around 40% of the remainder wont be anywhere near a railway station. Perhaps an additional 2% work near a station outside the city, but in short this project will do next to nothing for most Aucklanders – except those living near a station who work in town and would rather ride a train than a bus.

This tax is to force you to pay for most of the cost of their journey to work, because the fares raised from these trains pay around a third of the operating costs, and they wont pay a cent towards the capital costs.
^
This idea is going ahead, despite official advice, because Helen Clark wants to electrify Auckland rail – it’s like a toy, a big expensive toy she wants to leave for Auckland and be remembered for it. Despite record levels of transport funding through both road user taxes and Crown funding through Land Transport New Zealand (LTNZ), it is telling that LTNZ is NOT willing to fund electrification of Auckland rail. This tells me it is an inferior project to all of the other road and public transport projects that it funds, remember it is spending $2.3 billion this financial year, this is 2.5 times the funding it allocated in the year Labour got elected, and this is after Labour changed the legislation around LTNZ so that public transport projects could be funded at a lower threshold for appraisal than road projects.
^
The Greens will support it because they have a fetish for electric trains – the economics don’t matter, it is a matter of pure faith that forcing people to pay hundreds of millions of dollars for trains they will never use is “good”. It is a matter of faith that this will reduce congestion, even though there is a not a single city in the new world that has electrified an existing railway service and seen traffic congestion reduce on the parallel corridors because of the electrification. If you can find, please show me the report on the marginal congestion costs for the parallel corridor before and after the electrification – because I actually would like to see the conditions necessary for that TO work.
^
This is about totems – Helen Clark and Michael Cullen are building a electric network of totem poles in Auckland, paid for by a stupid tax that is probably going to be paid for by all petrol motorists, but not paid for at all by around 15% of Auckland motorists who don’t use petrol. Setting aside the foolishness of heavy subsidies for public transport, a network of bus priority lanes across Auckland and luxury buses could do nearly the same job for a fraction of the price – but no, we must bow down to the altar of the railway.
^
Auckland is not London, Paris or New York, where new electric metropolitan railways can make a difference (in a few cases). Auckland’s entire rail network carries 3.8 million trips a year with around 70 carriages, in London the Waterloo and City tube line (perhaps one of the least used) alone carried 2.5 times that with 20 carriages (and no the tube cars do not have 3.5 times the capacity of the Auckland ones, they would be lucky to be able to carry double).
^
That gives you some indication of the difference in economics.

By the way, you already pay a 0.66c a litre tax to every territorial authority in the country (it's the same for them all making it easy to distribute), you might ask Auckland City Council and all of the others whether they spend their share on transport? Go on, few of the so called journalists in the New Zealand media can be bothered to research these things you see.

^

Oh and why are Auckland roads congested? Simple. Everyone pays the same to use them regardless of demand - it is tragedy of the commons. Singapore charges according to demand and congestion is kept at a low level - but no doubt most of you think public ownership and funding of roads works, even though virtually everywhere it happens you get chronic congestion in major cities.

12 comments:

john-ston said...

Liberty Scott, I must disagree with you on the idea that electrification is not needed.

First of all, your suggestion that an electric network is not needed is absolutely ridiculous. Electric trains, as a person as well informed as yourself should know has faster acceleration rates. Why is faster acceleration so important? Simply because Britomart is proving to be a bottleneck - according to the ARC, Britomart can only handle 18 trains in each direction in an hour at the present - between 7 and 8 in the morning, 12 trains enter. Between 8 and 9 in the morning, 14 trains enter. Doesn't seem like many, however, once the Onehunga Branch re-opens with half hour frequencies, those figures will become 14 and 16 respectively. Then consider the duplication of the Western Line and bang, you hit the magical number of 18 - electric trains faster acceleration will increase that total closer to the 24 trains per hour that was originally envisaged when Britomart was first built.

Furthermore, as rail loads continue increasing, we are going to need to transform Britomart into a through station as opposed to a terminus - that will require a CBD tunnel that will need; you guessed it; electrification. There is no way that you can run a 1.5 kilometre long tunnel with diesel trains - the amount of electricity that would be used extracting the fumes would power the electric trains.

Furthermore, you suggest that bus priority lanes and a luxury bus service will attract people to public transport - forget it; for most people it is a matter of speed. Allow me to demonstrate.

To get from Papakura to the City in inter-peak periods takes an hour and a half; the train takes 51 minutes via Glen Innes and 53 minutes via Newmarket. To get from Manurewa to the City in inter-peak periods takes an hour and fifteen minutes; the train takes 41 minutes via Glen Innes and 43 minutes via Newmarket - these are of course a mere couple of the potential combinations that can be looked at.

A car is faster than the bus in both those scenarios and although a train may be slightly slower than a car as well, bear in mind that we are using forty year old DMUs (ADK), twenty-five year old DMUs (ADL) and forty year old locos (DBRs and DCs) hauling forty year old carriages (SX and SA sets). Once we have electric trains, then the rail speeds can be cut by five minutes from Papakura and four minutes from Manurewa making the train that little bit more competitive.

In short - buses are ideal for feeders and shorter routes (e.g. Dominion Road Route). Once they go longer distances, they become slower and slower until only the desperate use them. Of course, you guessed it, rail lines are ideal for those longer distances.

I must also correct your figures. In 2006, there were five million rail commuters for the first time since the 1950s - these commuters were carried on one hundred carriages (9 pairs of ADK/ADB, 10 pairs of ADL/ADC, 10 four carriage SA sets, 4 three carriage SA sets, 1 five carriage SX set and 2 two carriage Silver Fern Railcars).

Also, you have commented that cities have electrified their networks and not seen congestion decrease; well, I find it interesting that across the Tasman, use of the networks has increased after electrification. I will use Perth as a classic example. In 1991, the last year before electrification, the Perth network carried 7 million passengers; six years later, the Perth network carried 30 million passengers per annum. At the same time, Adelaide continued using its diesel network and in that same period patronage on its rail network declined from 9 million passengers in 1991 to 7 million passengers in 1997.

An increase in passenger counts has to be beneficial Liberty Scott. You have also criticised the fact that rail cannot meet its above rail costs; well, of course it will not do so as long as we continue using the archaic system of conductors - it is time for Auckland to dispense with conductors and move to Smart Cards like what is seen in London and Hong Kong - that will definitely slash costs and make you happy.

My final word has to be about Singapore. Fair enough that Singapore charges for road use, however there is at least a viable public transport option there. In Auckland, our public transport is one word - crap. It is an embarassing and electrification will help us emerge from our position as the public transport laughing stock of Australasia.

libertyscott said...

OK...

So for the sake of acceleration you want to force everyone else to pay half a billion dollars for something they wont use?

Who is this "we are going to need" to spend around another $1 billion on a tunnel in the CBD? Have you ignored the fact that more than 4 out of 5 Aucklanders do NOT commute to the CBD?

You are justifying spending half a billion because it will allow spending of another billion, without any quantification of why spending that is better that spending it on something else.

The benefit/cost ratio of electrification is less than 1, in other words you cannot demonstrate a net economic gain for the nation in making people spend money on this. Have you thought of why?

Car will always be more competitive because most people don't live within walking distance of a station, and their destinations are the same. Rail enthusiasts ignore that people care about end to end journey time.

I know about the increases in rail patronage in Perth, traffic congestion has not gone done, the share of people travelling by bus and walking/cycling has gone done though. In Auckland rail patronage has increased while bus has gone done, hardly surprising since heavily subsidised rail makes unsubsidised bus services uneconomic.

An increase in rail trips does not have to be beneficial, except to those who have their travel paid for by other people. The only net benefit is if a car trip shifts to rail, and the evidence is that this is marginal - which means it is a very very expensive way of trying to reduce congestion (and of course fails because roads remain average priced).

Rail can't meet above OR below rail costs, it loses an absolute fortune. If it were commercially viable (as in Hong Kong) I'd be happy, but I am not opposing rail per se (I love trains), just the enormous subsidy for something that isn't efficient.

Realistically speaking, public transport wont be viable unless enough people want to use it and pay for its costs.

Road users pay the full costs of highway construction and maintenance, public transport users don't (except commercial bus services).

Railways are expensive to build and maintain, grossly underutilised corridors unless they are for freight between cities, or very high density passenger operations (London, Paris, New York, Hong Kong). Auckland will never have the numbers travelling between destinations to make rail add up.

john-ston said...

"So for the sake of acceleration you want to force everyone else to pay half a billion dollars for something they wont use?"

Let me ask you a question. How do you propose we deal with the Britomart bottleneck? Train patronage has been increasing by 25% per year since Britomart was opened from two million passengers in 2002 to the five million passengers of last year.

"Who is this "we are going to need" to spend around another $1 billion on a tunnel in the CBD? Have you ignored the fact that more than 4 out of 5 Aucklanders do NOT commute to the CBD?"

I have not ignored the fact that a majority of Aucklanders do not commute to the CBD, but you have ignored the basic fundamental problem - only 18 trains can go into and out of Britomart per hour - between 7 and 8, 12 trains enter; and between 8 and 9, 14 trains enter - once the Onehunga Branch Line is re-opened and the Western Line duplicated, then we will be hitting that 18 train mark. With the CBD tunnel, there will be more room for more trains; trains that are almost guaranteed to come on stream.

"You are justifying spending half a billion because it will allow spending of another billion, without any quantification of why spending that is better that spending it on something else."

I am justifing it because there is a bottleneck at Britomart. Perhaps you need to look at the junction between the Eastern and Southern Lines at eight in the morning and see that trains are being forced to wait; in some cases up to five minutes, because a train from the other line is entering. I have not seen a single comment from yourself about how you are going to solve this bottleneck.

"The benefit/cost ratio of electrification is less than 1, in other words you cannot demonstrate a net economic gain for the nation in making people spend money on this. Have you thought of why?"

Who says that the cost/benefit ratio of electrification is less than 1. I would like to see that report and possibly tear it to shreds.

"Car will always be more competitive because most people don't live within walking distance of a station, and their destinations are the same. Rail enthusiasts ignore that people care about end to end journey time."

I know that people care about end to end journey time; that is why I am also in favour of certain roading projects. In saying that, your earlier suggestions about buses were absolutely ridiculous. If trains can never compete with cars in your opinion, then how the hell will buses do so?

"I know about the increases in rail patronage in Perth, traffic congestion has not gone done, the share of people travelling by bus and walking/cycling has gone done though. In Auckland rail patronage has increased while bus has gone done, hardly surprising since heavily subsidised rail makes unsubsidised bus services uneconomic."

Hold it; you say that traffic congestion may not have gone down, however, even if it stays constant with an increasing population, then you still have a benefit.

Also, you display complete ignorance about bus patronage. Bus patronage has only decreased along routes where there is direct competition with the rail line, why do you ask?

Because the rail line is much quicker - I would choose the quicker option to get to my destination. Bus patronage has increased significantly in areas where there is no rail competition, such as in East Auckland. Bus services only become uneconomic because they can only go at 50km/h - an electric train can go at up to 120km/h.

"An increase in rail trips does not have to be beneficial, except to those who have their travel paid for by other people. The only net benefit is if a car trip shifts to rail, and the evidence is that this is marginal - which means it is a very very expensive way of trying to reduce congestion (and of course fails because roads remain average priced)."

An increase in rail trips means more revenue for the operator - more revenue means that there is less need for subsidies. Also, why don't you look at any of the stations; the Park n' Rides are full - what does that say? It says that people, instead of driving, are using the rail network to get around. Also, please explain about your average pricing comment on cars.

"Rail can't meet above OR below rail costs, it loses an absolute fortune. If it were commercially viable (as in Hong Kong) I'd be happy, but I am not opposing rail per se (I love trains), just the enormous subsidy for something that isn't efficient."

I understand where you are coming from and of course I am not assuming for a minute that you are opposed to rail per se, however, you must agree that the reason for the 'inefficiency' of rail is due to a lack of investment over the last fifty years; had the investment been in place, then chances are, we would not be facing extreme inefficiency.

"Realistically speaking, public transport wont be viable unless enough people want to use it and pay for its costs."

Agreed - however, who honestly wants to ride in a noisy ADK or have to put up with smelling the strong diesel fumes at Britomart. In saying that, we must begin somewhere, or else we end up with a vicious cycle of loss of investment in public transport = fewer passengers = even more loss of investment in public transport, a cycle that has been in existence for the last fifty years.

"Road users pay the full costs of highway construction and maintenance, public transport users don't (except commercial bus services)."

Not anymore, roading projects over the last couple of years have been state subsidised as well.

"Railways are expensive to build and maintain, grossly underutilised corridors unless they are for freight between cities, or very high density passenger operations (London, Paris, New York, Hong Kong). Auckland will never have the numbers travelling between destinations to make rail add up."

Who says that Auckland will never have the numbers travelling between destinations to make rail add up. Certainly it will take a great deal of investment. Of course, it would take many years and it was investment that should have been done back in the 1950s.

My last word has to be that the ADKs are going to need to be replaced soon; they are approaching forty years of age and they are unlikely to last much longer; furthermore they are becoming very unreliable. The SX set is leased from Macquarie Bank and will be reclaimed one of these days, while the Ferns will probably be reclaimed by Toll when the lease ends in 2009. What are we going to viably replace them with? Numerous reports have said that electric trains are only marginally more expensive than new diesels.

libertyscott said...

Ah I'm working late so this keeps me awake more :) so thanks for the robust debate.

1. The Britomart bottleneck would be solved if Auckland rail passenger services were subsidised per passenger at the same rate as bus services - fare would need to rise or services cut, eliminating the problem. The problem is caused by undercharging passenger rail - it is not solved by making others pay even more for something they don't use. Your argument about electrification providing more capacity is specious given this capacity is not being paid for by those using it, why are people who work downtown who catch the train so special that other motorists and indeed retired ratepayers have to pay for their choice of job and residence?

2. Remember I'd price the roads efficiently, so rail would have a chance - but then fares would have to treble to break even. A bottleneck exists because those using the service don't pay enough to get rid of the bottleneck, if they did, of course, the bottleneck would not exist. There are numerous road bottlenecks around Auckland as well by the way, same problem - the road isn't priced sufficiently at that point.

3. I know for a fact the cost/benefit of electrification is less than 1 because Land Transport NZ told me so. Where are the $0.5 billion of benefits going to come from? Seriously, have you ever done transport economic appraisal?

4. I think you'll find traffic congestion continues to be an increasing problem in Aussie cities with rail. An early copy of the CS First Boston report into the Auckland rail plan indicated that at best Auckland rail would increase motorway speeds by less than 0.5 km/hr - hardly worth nearly $1 billion capex, with tens of millions of annual opex.

5. Yes rail is quicker, but it costs a helluva lot more. Subsidised rail replaced unsubsidised buses - the same people who travelled paying their own costs now are subsidised by others. That, in itself, is not a gain. Express on motorways, or motorway shoulders can be as quick as rail of course. It is simply a matter of providing the road space or pricing the roads properly.

6. I don't deny Park and Rides are full, but then nobody using them is paying for them, and don't start to claim more rail trips reduces the subsidy after you've taken $500 million from taxpayers to set it up - rail passengers pay NONE of that back. You can't argue huge capex for a modest reduction in opex.

7. Roads are average priced because all cars pay roughly the same to use all roads regardless of demand - through (mostly) petrol tax. That is the heart of the traffic congestion problem, roads are poorly priced.

8. Well rail in NZ has been bailed out financially four times in my lifetime (1982, 1990, 1993, 2004), there may be 50 years of underinvestment, but the money not spent on rail has gone on other things. You could debate endlessly on the merits of that, but now you must debate rail vs other spending - and the economics don't look good. You could argue supersonic aircraft would be viable now if billions had been spent on the Boeing 2707 in the late 60s - but it doesn't justify doing it now. You can invest in efficient projects now or you can invest in inefficient ones, I don't want to throw money at rail endlessly when there are better things to spend money on.

9. Yes the two years of state subsidised road construction I disagree with, but then again, motorists have been throwing billions over the years into other Crown spending. Two wrongs don't make a right though, and I think road spending needs to be more carefully rationed.

10. You argue for a "great deal of investment". An investment is money you spend on something that gives you a return, a financial reward greater than what you spend. There is no evidence that Auckland rail will deliver this at all. Seriously, Auckland rail can't have the numbers to make it add up because there aren't enough people travelling between routes served by rail to make it add up. Aussie commuter rail loses a fortune and only on some routes in Sydney and Melbourne does it appear to be worthwhile - as legacy systems. The newest commuter rail links in Aussie bleed a fortune financially (airport rail in Sydney and Brisbane), Auckland is likely to be worse.

Finally, yes electric trains themselves are only marginally more expensive than diesels, but the overheads and substations are enormously more expensive. I'd simply replace those trains with whatever other secondhand trains can be economically procured in the short term, and then let the operator do what it sees as commercially viable.

If Aucklanders want to ride on trains or some people think they will ride on nicer trains, let them all pay for it themselves. Why is another person's choice of transport an imposition of cost upon everyone else?

Londonkiwi said...

Firstly, only 1/3 of the tax will be going to the rail projects, 2/3 will be to 1950s style vast roading schemes that will of course be totally congested immediately when completed.

Secondly, the Chinese and Indian economies are growing oil consumption at double digit rates. As oil production has barely increased at all, the price is 400% higher than 1999 levels. If this increase happens again over the next eight years, we will need to have some public transport options available post-haste,
or we will face a transportation nightmare.

Thirdly is the developmental effect of having a fast electric train link-- over time you get clusters of high density housing, and high density business development near the rail stations. Thus while currently the
under-used lines have little population coverage, and little effect on property development, this will change with a reasonable service.

Also I question that electric trains are more expensive that diesels amortized over their lives- the infrastructure seems to be very resilient, given that some of the wellington units are from the 1940s...

With regard to your obsession with road pricing, I'm sure it is great
if you can choose your hours, however the vast majority of the
workforce has absolutely no say.

Given that most low income earners are forced to live in orbital
suburbs an hour or two from work, and must work 8-5, under a road
pricing model they would be much worse off; and to cap it off they
would have no public transport options either!

What is your solution for these lower paid workers (75% of the workforce)? Let me guess: tax
cuts will solve everything?

Matt B said...

An increase in passenger counts has to be beneficial Liberty Scott.

Excuse me, but why? Is it beneficial if a half billion dollars in investment gets me 1 more passenger? Obviously not. But what about 10. Or 100. Or 20,000.

More is not necessarily better, and it's loose thinking like that quoted here permeates your posts.

Anonymous said...

LondonKiwi

When you say oil prices are 4 times the 1999 price you omit to mention that that was basically the historic low of prices. They are still well below the more recent highs of the early 90s and 80s, when prices were about $2.20/ltre in today's money, which we all survived.

Production has gradually been increasing year on year, stability is not unusual and might reflect a natural balance between supply and demand.

Why would you trust the ARC with all that money on this given their impact on house prices

I'm with Scott - if it is so great an idea let the customers fund it.

libertyscott said...

“1/3 of the tax will be going to the rail projects, 2/3 will be to 1950s style vast roading schemes that will of course be totally congested immediately when completed”

Which are mostly uneconomic as well, I don’t support uneconomic roads either, I am neutral on transport modes. It’s nonsense they will be “totally congested” when completed, have you noticed the extension from Albany to Orewa ever gets congested? How about the East Tamaki arterial, or the South Eastern connector? All these have been built in Auckland in the last 10 years and are not congested.

If, as you say, oil prices will continue to rise then the economics of extracting harder to reach oil increase, but so do the economics of alternatives to oil (many of which exist but are not economic yet), as do the economics of transport modes that use less oil. There is no need to pillage the pockets of those facing ever higher oil prices to subsidise the provision of public transport.

You say “we will need to have some public transport options available post-haste”, who is this “we”? There already are options, all of the routes served by rail have parallel bus services, most of them operating commercially, with no subsidies. The “options” this is subsidising are for at best 10% of all Auckland commuters.

“the developmental effect of having a fast electric train link-- over time you get clusters of high density housing, and high density business development near the rail stations. Thus while currently the under-used lines have little population coverage, and little effect on property development, this will change with a reasonable service”

Been largely a monumental failure in the rest of the new world, visit Portland – the pinup child of the “new urbanists” and witness the empty clusters of buildings built around light rail stations – funnily enough people in the suburbs of new world cities largely don’t want high density housing, and don’t want to live near rail lines. This isn’t London where demand for housing is so high, and the tube is unobtrusive well out into the suburbs. Auckland HAD commuter trains for decades, had a tram network that went out into the suburbs, and people moved away from using it and they both became uneconomic (and as a side note were both run by different arms of government – bus patronage in Auckland was only revived as of late after it was commercialised and privatised). Again you’re expecting people who work downtown to live in high density housing near railway stations – what if they don’t want to? (people don’t do it now and what is stopping them or developers supplying the demand, especially since the ARC has been encouraging it for years).

“I question that electric trains are more expensive that diesels amortized over their lives- the infrastructure seems to be very resilient, given that some of the wellington units are from the 1940s.”

You are correct Londonkiwi, electric trains do last longer, but electric infrastructure is very expensive and is only economic when the price of electricity is significantly lower than diesel. You might ask why trolley buses in Wellington are not economic in their own right, or why the entire debt raised to pay for electrifying the central part of the main trunk line had to be written off? Again, like I said before, if it is a good economic case Land Transport NZ would fund it.

“With regard to your obsession with road pricing, I'm sure it is great
if you can choose your hours, however the vast majority of the
workforce has absolutely no say.”

A lot of the workforce do work different hours, and in different places. Road pricing would charge people more on congested roads at congested times, and less at other times. It would also replace fuel tax, so retired, unemployed, working at home (including parents) and others who drive at off peak times would pay less – or maybe you like how everyone pays for big roads that get largely used only at peak times?

“Given that most low income earners are forced to live in orbital suburbs an hour or two from work, and must work 8-5, under a road pricing model they would be much worse off; and to cap it off they would have no public transport options either!”

Forced by whom? I think you’ll find most low income workers in Auckland don’t work in downtown Auckland, so rail would be useless to them, how would rail help your average Otahuhu assembly line worker living in Onehunga, or Mangere or Otara? Great a train that goes Papakura-Manurewa-Otahuhu-Remuera-Newmarket-Auckland City – very relevant is it? Why under road pricing would there be no public transport options? Buses become much faster and more economic compared to cars because they take up less road space per person. Road pricing would simply be applying the same principle to road use as everyone understands for electricity, telecommunications, food, clothing, housing and everything else people take for granted – or perhaps you think vehicles gridlocked in traffic emitting fumes going slowly is good for low income earners, and the laws of economics that have worked in London, Singapore and Stockholm wont work in Auckland?

londonkiwi said...

"When you say oil prices are 4 times the 1999 price you omit to mention that that was basically the historic low of prices."

You are correct, the average historical price is around $20-25 a barrel. Therefore it is only running about 300% above long term average! The oil shocks you mention were caused by geopolitical factors, none of which are in evidence now- it is simply demand driven by China's incredible growth. And sure NZ survived, but it seriously damaged Muldoon's command economy.

Also going by EIA figures, oil extraction is flat to declining over the last two years. Supply constraints mean rapid price shocks are possible. A hurricane in the US or a collapse in the NZD could put prices easily that high.

"Road pricing would charge people more on congested roads at congested times, and less at other times."

Again I ask what about the large number of workers that MUST work 8-5? Given that there is no reasonable, speedy transit alternative as in London, Singapore and Stockholm, or a similar sized city like Perth; they really have no option but to drive. Do they simply get to pay significantly more for the privelege of working?

I do like the optimism that road pricing would replace fuel tax- governments of any stripe are loath to give up a source of revenue!

In reality workers are forced to live in distant suburbs by the wisdom of the market, that now prices even above-average earners out of closer suburbs. Much like they are forced to work 8-5 because those are the opening hours of the business.

"Buses become much faster and more economic compared to cars because they take up less road space per person."

Buses are totally pointless in traffic jams, unless you have bus lanes or dedicated rights of way. Which should definitely also be built! However the fuel costs are high and increasing; and buses only last a few decades before replacement is necessary.

In any case the point still stands, Aucklands train network is there, it serves several million trips each year and is in urgent need of either upgrading to modern standards, or complete abandonment. If it is a clean modern service, people will use it more- many people are worried about the financial, environmental and social effects of car dependency, and may be priced out of the market for commuting soon if oil prices rise. Public transport of all stripes will need large increases in capacity if this occurs.

Will Auckland make the same mistake as the 1960s all over again?

libertyscott said...

"Do they simply get to pay significantly more for the privelege of working?" I guess you consider time and fuel wasted in congestion to be ok, but you want everyone, old young employed and unemployed to pay for a train to serve workers downtown, who tend to earn more than those elsewhere - you can't have it both ways.

"I do like the optimism that road pricing would replace fuel tax- governments of any stripe are loath to give up a source of revenue!" True, Labour wouldn't but it DID happen when road user charges replaced diesel tax and high heavy vehicle registration fees.

"Buses are totally pointless in traffic jams, unless you have bus lanes or dedicated rights of way."

Um, congestion charging would fix those jams - the buses get an inherent advantage, buses also can go closer to where people work and live and can cheaply increase capacity. Buses last less time, but they are around a third of the price of a railway carriage that carries the same number of people.

"many people are worried about the financial, environmental and social effects of car dependency, and may be priced out of the market for commuting soon if oil prices rise. Public transport of all stripes will need large increases in capacity if this occurs."

Many = 5% I suspect, most own a car and happily use it, many people love their cars and love the freedom of motoring. If you are right about oil prices, then more fuel efficient modes will prosper, without you having to make everyone subsidise them. That's why 5 out of 6 public transport trips in Auckland every day are by bus - but buses aren't as sexy as trains to environmentalists who often regard transport economics as a neo-Thatcherite conspiracy against the great god of rail.

Londonkiwi said...

"Um, congestion charging would fix those jams - the buses get an inherent advantage, buses also can go closer to where people work and live and can cheaply increase capacity."

How would congestion charging fix those jams if people have no other option but to drive? You need a clean, modern, reliable, integrated public transport network (bus and rail) before you can introduce any road pricing, simply charging commuters will not do much at all. Auckland's public transport at the moment is none of these things.

"Many = 5% I suspect, most own a car and happily use it, many people love their cars and love the freedom of motoring."

There isn't much inherent freedom in sitting in a traffic jam due to lack of alternatives! If even that 5% of people switched to public transport there would be a large decrease in congestion.

john-ston said...

"The Britomart bottleneck would be solved if Auckland rail passenger services were subsidised per passenger at the same rate as bus services - fare would need to rise or services cut, eliminating the problem. The problem is caused by undercharging passenger rail - it is not solved by making others pay even more for something they don't use. Your argument about electrification providing more capacity is specious given this capacity is not being paid for by those using it, why are people who work downtown who catch the train so special that other motorists and indeed retired ratepayers have to pay for their choice of job and residence?"

Personally I do agree with you that rail fares need to be increased, however, not so much because of the bottleneck at Britomart but more because bus fares for the same distance are more expensive than rail fares - if we have any hope for integrated ticketing, the fares will need to be equal.

In saying that, let us say that we increase fares to stop the bottleneck at Britomart. There will obviously be a decrease in demand. Where does the demand go then? Alright, they may try buses, however, given that the buses are slow, they will say stuff it, I will go back to my car and we have even more congestion. Of course, you even have a solution for that - charge them for using the road; what you end up with is the grumbling masses that will complain about being charged for using roads without a viable alternative.

Of course this does not take into account the increases in inflation that this will cause, the natural impact on interest rates and the political implications on getting on the wrong side of Auckland voters. Congratulations, the economy is down in the gutter and your party has been thrown back into third-party status.

"2. Remember I'd price the roads efficiently, so rail would have a chance - but then fares would have to treble to break even. A bottleneck exists because those using the service don't pay enough to get rid of the bottleneck, if they did, of course, the bottleneck would not exist. There are numerous road bottlenecks around Auckland as well by the way, same problem - the road isn't priced sufficiently at that point."

There is certainly room for rail fares to increase; however, you must also ask yourself what about all the subsidised bus fares? Are you also suggesting that we must also increase bus fares on the subsidised routes? You forget that only 25% of Auckland bus routes are commercial.

Also, a bottleneck is not caused by a lack of payment - in systems such as roading and railways it is merely caused by a sudden decrease in supply and then a subsequent sudden increase in supply; such as after the Harbour Bridge where the motorway goes from 5 lanes down to 2 and then increases back to 3. What would be more logical is to stop these bottlenecks from occurring. I do agree, however, that some congestion on any network is caused by excess usage - that I would deal with in an appropriate fashion.

Most of the roading bottlenecks around Auckland are caused by decreases in lane capacity followed by increases in capacity - the more logical solution would be to even out the capacity.

"3. I know for a fact the cost/benefit of electrification is less than 1 because Land Transport NZ told me so. Where are the $0.5 billion of benefits going to come from? Seriously, have you ever done transport economic appraisal?"

No, but my trusty ARC report suggests several flaws in the LTNZ cost/benefit analysis of electrification. First of all, LTNZ uses a discount rate of 10% over 25 years - this is very high according to international standards. In the United States, discount rates of between 3% and 7% are used; Canada uses 5% and 6%; Queensland uses 6% and NSW 7%; the British use 3.5% discount rates. Also, LTNZ does not take into account that rail infrastructure is fairly long lasting.

If the cost/benefit analysis is altered to a 7% discount rate over 40 years, then we get cost/benefit ratios of between 1.5 and 2.3 depending upon what you include as benefits.

Also, where do you get these $600 million in benefits? There is less noise for both passengers and people living in the vicinity of railway lines - instead of having to tolerate 40 noisy trains daily, there would only be 3 or 4. Also there is the improved performance of EMUs (especially compared with the loco hauled SA sets), the improved reliability.

Also, you have lower per unit costs ($4 million as opposed to $4.5 million for DMUs), and lower maintenance costs to the tune of a saving of 30 cents per kilometre.

Add all these up and you get your $600 million in benefits quite quickly - especially when you factor in the biggest factor favouring electrification - the reduction in pollution.

"4. I think you'll find traffic congestion continues to be an increasing problem in Aussie cities with rail. An early copy of the CS First Boston report into the Auckland rail plan indicated that at best Auckland rail would increase motorway speeds by less than 0.5 km/hr - hardly worth nearly $1 billion capex, with tens of millions of annual opex."

There is a problem, however, you must agree that it is not as bad as it would otherwise be. Take away the rail networks of Brisbane and Perth and you would end up with thousands of extra vehicles on the roads each morning. Even a 0/5km/hr improvement in speeds is better than nothing. Furthermore, the tens of millions of annual opex that is currently incurred would be decreased by electrification - shutting down the network would incur similar costs to electrification.

"5. Yes rail is quicker, but it costs a helluva lot more. Subsidised rail replaced unsubsidised buses - the same people who travelled paying their own costs now are subsidised by others. That, in itself, is not a gain. Express on motorways, or motorway shoulders can be as quick as rail of course. It is simply a matter of providing the road space or pricing the roads properly."

Not really - rail only costs more in the present because the ARC has been forced to use an inefficient temporary solution in the form of loco hauled suburban trains. By 2016 if everything goes to plan, the subsidy paid for carrying a rail passenger would be equal to that for carrying a bus passenger at an average of $4. Providing the extra road space you propose will be costly and pricing roads without a viable competitive option will not go down well with the public. Furthermore, Express Bus runs would have limited impact - essentially you would be trying to accomplish with buses what rail systems are designed to do - carry masses of commuters into the CBD.

"6. I don't deny Park and Rides are full, but then nobody using them is paying for them, and don't start to claim more rail trips reduces the subsidy after you've taken $500 million from taxpayers to set it up - rail passengers pay NONE of that back. You can't argue huge capex for a modest reduction in opex."

Yes I can - it would cost the same amount in capital expenditure to close down the rail network based on ARC calculations. A reduction in opex to a point where buses and trains have essentially the same subsidy for the same amount of capital expenditure is beneficial. Bear in mind also that these figures are only based upon increasing passenger loads - rail still has to ditch most of its excess staff and modernise its fare collection systems.

"7. Roads are average priced because all cars pay roughly the same to use all roads regardless of demand - through (mostly) petrol tax. That is the heart of the traffic congestion problem, roads are poorly priced."

Maybe, however, you must agree that you cannot have properly priced roads without a viable alternative; and I am afraid that buses that take an hour and a half (in off-peak conditions) to get from Papakura to Auckland is not a viable alternative.

"8. Well rail in NZ has been bailed out financially four times in my lifetime (1982, 1990, 1993, 2004), there may be 50 years of underinvestment, but the money not spent on rail has gone on other things. You could debate endlessly on the merits of that, but now you must debate rail vs other spending - and the economics don't look good. You could argue supersonic aircraft would be viable now if billions had been spent on the Boeing 2707 in the late 60s - but it doesn't justify doing it now. You can invest in efficient projects now or you can invest in inefficient ones, I don't want to throw money at rail endlessly when there are better things to spend money on."

Rail was bailed out in the 1980s and 1990s because of poor management decisions made as early as the 1950s and government policies of the 1970s. Chances are that rail would not have faced a significant crisis had the branch lines been mothballed sooner and steam locos not replaced as quickly (the replacements only lasted twenty years anyway). Also, had the fare schedule not been capped by Muldoon, then we would not have had that problem.

In terms of the 2004 bailout; that was simple - Tranz Rail were not maintaining the network and it was getting to the stage where it was becoming a safety hazard. Why were they not maintaining the network? Simple - because they could use the subsidised roading network (I mean that in the sense that many rural roads are subsidised by urban drivers).

The truth of the matter is that closing down the rail network will be just as expensive as improving it. If the government decided to close down all railways tomorrow, then most of the money spent on railway maintenance will need to be spent on road maintenance as trucks from the dairy farms of the Waikato and the coal mines of Westland will wear down the roads in that area far more easily.

"9. Yes the two years of state subsidised road construction I disagree with, but then again, motorists have been throwing billions over the years into other Crown spending. Two wrongs don't make a right though, and I think road spending needs to be more carefully rationed."

Agreed - personally I believe we have entered a period where new roads should only be built where there is a bottleneck (i.e. 3 lanes to 2 to 3) or where there is a safety issue.

"10. You argue for a "great deal of investment". An investment is money you spend on something that gives you a return, a financial reward greater than what you spend. There is no evidence that Auckland rail will deliver this at all. Seriously, Auckland rail can't have the numbers to make it add up because there aren't enough people travelling between routes served by rail to make it add up. Aussie commuter rail loses a fortune and only on some routes in Sydney and Melbourne does it appear to be worthwhile - as legacy systems. The newest commuter rail links in Aussie bleed a fortune financially (airport rail in Sydney and Brisbane), Auckland is likely to be worse."

The airport rail may be presently making losses in Sydney and Brisbane, however, remember that a railway line lasts a very long time - that is the nature of natural monopolies, you have huge marginal costs at the beginning, however, as time goes on, your marginal costs decrease - especially as fixed costs get spread out over more units of output.

Auckland rail may not get a huge financial benefit, but being a student of economics, you have the social benefit - the reduced noise, the reduced pollution, the improved speed and reliability. If we considered all things in equality, then electrification would be beneficial. Australian commuter rail may lose a fortune, however, what would happen if it all suddenly closed down - you would have a million commuters daily seeking another form of transport - that is enough to fill 20,000 buses - certainly a large number if you consider it.

"Finally, yes electric trains themselves are only marginally more expensive than diesels, but the overheads and substations are enormously more expensive. I'd simply replace those trains with whatever other secondhand trains can be economically procured in the short term, and then let the operator do what it sees as commercially viable."

Actually, I discovered that electric trains are marginally cheaper than diesels ($4 million/unit compared with $4.5 million/unit). Also, pray tell, where will these magical second-hand trains come from? There is no other Cape Gauge commuter system that uses diesel, so if we bought from them, we would need to electrify. We could buy more British Rail Mark 2 carriages, however, loco hauled suburbans are not only inefficient, but Toll is running out of locos to lease to the ARC and GWRC, plus we have used up most of the old passenger carriages bogies for the present lot of S carriages; so we have no bogies, no locos, and no electrification - in short, second-hand is no longer an option and we got to replace the ADKs at some stage before they die.

"If Aucklanders want to ride on trains or some people think they will ride on nicer trains, let them all pay for it themselves. Why is another person's choice of transport an imposition of cost upon everyone else?"

Because it will take time for the benefits to get through and many of the benefits are non-cash; you could apply the same argument to buses, why should non-users of buses pay for the people that use them, remembering that only 25% of bus routes are commercial.

"Excuse me, but why? Is it beneficial if a half billion dollars in investment gets me 1 more passenger? Obviously not. But what about 10. Or 100. Or 20,000.

More is not necessarily better, and it's loose thinking like that quoted here permeates your posts."

How about ten million extra passengers per annum by 2016? Is that beneficial - or an extra twenty-five million passengers per annum by 2030?

"When you say oil prices are 4 times the 1999 price you omit to mention that that was basically the historic low of prices. They are still well below the more recent highs of the early 90s and 80s, when prices were about $2.20/ltre in today's money, which we all survived."

We have been extremely lucky that the dollar has remained this high for this long - if the dollar had to fall back to US$0.50, then petrol prices would definitely hit $2/litre, then we face a sudden surge in demand and yet again we are faced with public transport capacity issues.

Also, bear in mind that by being too reliant on oil, we are reliant on the benevolence of tinpot dictators and other geopolitical problems. The world's second largest possessor of oil reserves is on the verge of falling to pieces, the world's third largest possessor of oil reserves is obsessed with uranium and then there is Venezuela with its dictator. Of course, there is the worst possible scenario and that is that Saudi Arabia falls apart.

"Production has gradually been increasing year on year, stability is not unusual and might reflect a natural balance between supply and demand."

Production may be steadily increasing, however, we are still leaving ourselves vulnerable - the Swiss were able to survive without any oil for six years during the Second World War - we certainly would not survive; I doubt we would even survive the petrol rationing that we got in New Zealand.

"Which are mostly uneconomic as well, I don’t support uneconomic roads either, I am neutral on transport modes. It’s nonsense they will be “totally congested” when completed, have you noticed the extension from Albany to Orewa ever gets congested? How about the East Tamaki arterial, or the South Eastern connector? All these have been built in Auckland in the last 10 years and are not congested."

That is because development takes time to follow transport corridors - it took ten years after the Southern was built before Manurewa became a suburb of Auckland.

"If, as you say, oil prices will continue to rise then the economics of extracting harder to reach oil increase, but so do the economics of alternatives to oil (many of which exist but are not economic yet), as do the economics of transport modes that use less oil. There is no need to pillage the pockets of those facing ever higher oil prices to subsidise the provision of public transport."

You are putting your faith rather strongly in technology - let us say that we do not get this technology, then what do we do? Let us say that we only get this technology when oil is $200 - $300 a barrel. I would rather utilise existing technology and ensure that we have no problems.

"You say “we will need to have some public transport options available post-haste”, who is this “we”? There already are options, all of the routes served by rail have parallel bus services, most of them operating commercially, with no subsidies. The “options” this is subsidising are for at best 10% of all Auckland commuters."

Yes, back to that idea again; the everlastingly slow bus - it certainly will not draw commuters out of their cars even if roads were priced. In saying that, remember that number one, only 25% of bus routes are commercial and number two the rail and bus routes serve different markets - the bus route is for those odd journeys, while the rail route is for heading into the CBD.

"You are correct Londonkiwi, electric trains do last longer, but electric infrastructure is very expensive and is only economic when the price of electricity is significantly lower than diesel. You might ask why trolley buses in Wellington are not economic in their own right, or why the entire debt raised to pay for electrifying the central part of the main trunk line had to be written off? Again, like I said before, if it is a good economic case Land Transport NZ would fund it."

The electric trolley buses of Wellington are not economic in their own right because of the use of old technology in the form of DC power; same with the Wellington rail network. In saying that, the trolley buses have been largely retained due to the very hilly nature of Wellington and their speed advantage in such an environment.

Electrifying the Main Trunk Line debt had to be written off because it would have been impossible otherwise to sell NZR; given that the rail line is still transporting freight along today chances are that the debt would have been paid off.

Again, LTNZ use flawed formulae that are biased in favour of roading projects; they use discount ratios that are higher than international standards and they even the value of a motorist stuck in traffic is valued more than that of a bus or train user. If things were more even, then the case would stack up as the ARC report on electrification indicated.

"Why under road pricing would there be no public transport options? Buses become much faster and more economic compared to cars because they take up less road space per person. Road pricing would simply be applying the same principle to road use as everyone understands for electricity, telecommunications, food, clothing, housing and everything else people take for granted – or perhaps you think vehicles gridlocked in traffic emitting fumes going slowly is good for low income earners, and the laws of economics that have worked in London, Singapore and Stockholm wont work in Auckland?"

Buses will not become that much faster; if they are severely slow during off-peak, then they will still be severely slow with road pricing systems - private motor vehicles would still have a speed advantage and it would take a massive road charge to get people to use buses, then of course you ignore the impact on the economy as a whole.

Also there is a big difference between London/Singapore/Stockholm and Auckland - all three of them had established rail networks before they placed road charges. Would any of these cities been able to place that if there were only buses? I highly doubt it.

"Um, congestion charging would fix those jams - the buses get an inherent advantage, buses also can go closer to where people work and live and can cheaply increase capacity. Buses last less time, but they are around a third of the price of a railway carriage that carries the same number of people."

First of all, you have completely underestimated the number of passengers that fit on a railway carriage. An ADK carriage can fit 120 at crush, an ADB carriage can fit 96 at crush, an ADL & ADC carriage can fit 130 at crush, while the SA carriages could easily fit similar numbers.

The EMUs used in Brisbane can accomodate 150 passengers per carriage crush. Simply put, you can fit twice the number of passengers in a railway carriage that you can on a bus. Therefore, the bus and railway carriage (once you consider economic life) cost about the same.

Also buses get a pricing advantage, but there is still no speed advantage - buses cannot get a speed advantage; an EMU can potentially travel at 120km/h, speeds not legally attainable on New Zealand roads.

"Many = 5% I suspect, most own a car and happily use it, many people love their cars and love the freedom of motoring. If you are right about oil prices, then more fuel efficient modes will prosper, without you having to make everyone subsidise them. That's why 5 out of 6 public transport trips in Auckland every day are by bus - but buses aren't as sexy as trains to environmentalists who often regard transport economics as a neo-Thatcherite conspiracy against the great god of rail."

People own cars and I am not for one minute suggesting that people should be forced from their vehicles, however, you have to look at reality. If oil prices increase suddenly, then you will have problems as it takes some time for fuel-efficient modes to get through the system - the SAs took two to three years to build after the initial order was made and in that time period the old DMUs had to run at crush capacity at peak times. Look at what happened in New Zealand last year when petrol hit $1.80/litre; buses and trains were running at crush. Personally I am of the opinion that a slightly modified version of the Thatcherite model is needed; one where the need for co-operation is acknowledged as well as a reduction of costs to the user; I don't see transport economics as a conspiracy against rail.

In conclusion, it might pay for you to read this http://www.arta.co.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=A99C6001-BCD4-1A24-9CDE-FCF8BDB29DC8&siteName=arc - this was the business case for electrification.