Monday, January 26, 2009

Roads under National

So the excitement in Auckland has been with the opening of the “Northern Gateway” toll road, previously known as ALPURT B2 (Albany Puhoi Realignment) which basically means State Highway 1 bypasses Orewa. All good stuff, although we will soon see whether the financials as a toll road stack up. You see, oddly, the motorists using the toll road wont actually pay a cent to pay for the systems installed to charge them. Fuel tax and road user charges paid for the tolling system, because (shhh) the finances behind tolling under the last government didn’t exactly stack up. Nevertheless, it is good to see a road where users actually will pay directly, as well as indirectly. Don’t worry, half the cost of the new motorway has been paid for by fuel tax and road user charges, like all the others.

However, the opening was marred slightly by the chronic congestion on the highway NORTH of the new motorway. So what will National Minister Steven Joyce do? Well, as you’d expect, I have a hoard of advice for him, far too much to put on this blog (thank god! You all say), so just about roads and just about now, here are some thoughts. No it’s not libertarian, but within the confines of what’s likely under this government.

1. Do some reading. Ask your officials for a copy of the Roading Advisory Group reports, and a report called the Land Transport Pricing Study. It will explain to you why, fundamentally, running roads and funding roads in a bureaucratic, tax and spend model, will ALWAYS mean significant inefficiencies, including congestion, overspending in some areas and underspending in others. It also foretold of many of the problems of the last ten years. Quietly talk to Maurice Williamson about it. In 1998 the Economist said “If roads continue to be operated as one of the last relics of a Soviet-style command economy, then the consequence will be worsening traffic jams and eventual Bangkok-style gridlock.” New Zealand is experiencing that.

2. Cut back on greenplating. Some of the big road projects that are in the pipeline have been grossly overdesigned, and are gold plated (or green plated) solutions to bottlenecks. The big ones that need your attention are:
a. Waterview extension of SH20. It no longer goes through the Prime Minister’s electorate. It doesn’t need to be a bored tunnel, you could save hundreds of millions by delaying this another 6 months to get it scaled back to something sensible.
b. Victoria Park Tunnel (SH1 central Auckland). This was once going to be simply a duplication of the Victoria Park Viaduct, but the ARC demanded it be a tunnel (local government again!). Diving into a tunnel before rising at quite an incline to spaghetti junction is madness. You can save a good hundred million or so by getting rid of the tunnel. An Auckland Harbour Bridge toll could pay for this of course.
c. Transmission Gully. You already know this one. The problem has largely gone with much cheaper improvements, the bigger problem north of Wellington is through Kapiti and north to Levin. You need an independent review of this as it is one thing that gets Peter Dunne’s knickers in a twist, but basically you’ll save around NZ$400 million by developing the current route. However, more kudos by looking to Kapiti and the north, it needs attention that has been neglected.

3. Think local. One of the biggest areas of neglect is local roads. Local authorities are often tight on spending ratepayers’ money on roads. It needs care as your problem is making councils accountable for spending road taxes central government collects. So longer term you need reform of the Local Government Act and for local roads to be run by commercial entities, partly funded by property access fees (instead of rates), but in the meantime you need to increase the Financial Assistance Rate for local road improvements with a high benefit cost ratio (over 3:1). 75% would make a big difference. Don’t forget, most congestion in Auckland is on local roads.

4. Cut subsidising slow modes. Your easiest tool to change spending are the priorities you can set for the National Land Transport Programme. There are lots of pet diversions Labour introduced into it that should go. This includes regional development, community focused activities, domestic sea freight and the way passenger transport is subsidised. Look at how you can slash much of this, and consider a more fundamental review of the role of government in public transport. The subsidy per passenger carried has been soaring under Labour, you might want to cap this in real terms at least.

5. Bring back efficiency. You know you don’t know what road projects should come first, local government doesn’t know much better. Get the NZ Transport Agency to change its funding allocation criteria to more strictly apply economic cost-benefit analysis. Projects with a cost-benefit ratio less than 2:1 shouldn’t go ahead. You’ll find that the best new road spending is on small projects to straighten bends, passing lanes, widen existing roads and fix bad intersections or bridges. You’ll find some big new roads you CAN advance that are worthwhile. In Auckland that means Newmarket Viaduct, in Waikato it means Te Rapa Bypass, etc.

6. Be creative with the private sector. Don’t get tied down to the acronym PPP. You’d be better off leasing off a stretch of state highway to the private sector for a very long period, such as the Northern Motorway from Spaghetti Junction to Constellation Drive, with the ability to toll, and let it finance improvements and a second crossing. In other words it will happen when it is worth doing, not when politicians think it is worth doing. Beyond that, simply tell the private sector it can build a new road and toll it as it sees fit, and government will allow its roads to interconnect with them. It works in the US, and in France, yes France, most highways are built and financed by commercial road companies.

7. Let priorities be set nationally not locally. Get rid of R and C funding for future NLTPs and reallocate future funds on a national priority basis. Local government shouldn’t be setting priorities with centrally collected taxes. Consultation is enough, and Labour used R and C funding to vote buy. A good funding system allocates funds where they are best spent.

8. Consider ways of letting motorists contract out of road taxes to pay directly. The trucking sector wants it replaced with diesel tax, but that’s because government doesn’t enforce it well and charges could be applied more fairly by weight and location. However, to address this properly you need more private sector involvement, and for highways to be run more on commercial lines. You should let local authorities approve heavier trucks than currently allowed, as long as they charge them for it and use the money to offset maintenance costs.

9. Funder and provider shouldn’t be the same. Start planning to split up the NZ Transport Agency back into a Highways Authority and a Funding Agency. It makes it easier to hold the Highways part accountable, and then make sure the Highways part seeks funds, and doesn’t expect funds. You can also allow it to borrow, toll and enable truck operators to opt out of paying road user charges to government, and pay them directly to road operators.

Finally, most of all, consider almost everything the Greens say about transport and remember almost always the opposite is true. Labour did, to be fair, boost spending on roads enormously in the last nine years. Now you can go open some of the roads funded under that regime and people will think things have improved. This is the part of the transport sector needing the most attention, and one which Labour spent not enough time on.

Oh and the other modes? Here's a quick and dirty guide:

Rail? A disaster ready to suck money from the state. Once you've got a few more months under the belt, then worry about this bottomless pit for money. Some hard decisions are going to have to be made about this one. Auckland will be first in line begging for a fortune to gold plate its system, you might want to get some independent review of its business case figures, just to see how bad it really is. Wellington's rail is already funded, you needn't worry about it.

Air? It's pretty much ok, maybe the big challenge is that Air NZ could do with some capital longer term, but at the moment it wont be coming from anywhere. Don't worry too much about this mode.

Sea? Ports and shipping will tick over nicely, Labour spent too long trying to placate protectionist moves from unions and shipping firms over foreign competition. Throw anything about that in the bin.

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