Friday, February 06, 2009

Waterview connection business case

The Minister of Transport has kindly released a report on the business case of the Waterview Connection of SH20 in Auckland - the NZ$2.8 billion motorway that the New Zealand Transport Agency (NZTA) wants in a bored tunnel, even though the two other sections under construction are of standard surface level cutting design - surely not because it partly goes through the former PM's electorate. Current legislation, heavily influenced by the Greens, probably means the tunnel makes sense if all that matters is to minimise environmental impact. Anyway, the main points I got are:

- While this is only for four lanes, having six lanes would add another NZ$390 million to the project. Given growth in Auckland traffic in recent decades you'd be mad to assume that a four lane route is all that will be needed in the medium term.
- The benefit cost ratio is 1.15/1, which means it is barely worthwhile doing. However, if delayed ten years that goes up to 1.7/1. Cutting costs from the project would do a lot more.
- The appendix at the back of the report shows you could do a six lane cut and cover tunnel for 10-15% less than the four lane bored tunnel. Better yet you could shave 20-25% off the cost if it was built just like the other sections of SH20. Doing this of course makes the project worthwhile.
- Pushing the project forward at current costs will delay many many others which are more worthwhile.
- A toll could only hope to pay around NZ$400 million of the cost, suggesting that those who would directly gain from the road wouldn't be that interested in directly paying for the time and operating cost savings. That should in itself set off some alarm bells.

There is some analysis that is missing that could enlighten further of course. First, it would interesting to see what "shadow tolling" would say about the revenue the road would generate from those using it, that is from fuel tax and road user charges, which are "paid" whenever any road is used. If you combine that with a toll (or even on its own), would enough be paid over 35 years from users to pay? THAT is the true "toll" from a financial perspective.

Secondly, what would the toll revenue be if the parallel route was also being properly tolled. In other words, if the local roads the motorway would bypass were charged by a company seeking to maximise revenue. You see, many more may pay to use the toll road if the slower local streets were priced at peak times also.

Anyway, the NZTA has been sent back to find ways to trim the cost of the project, and I think this has to mean at least going partially cut and cover, if not abandoning the nonsensical tunnel idea altogether.

Personally, I'd prefer it a decision on whether to proceed were delayed until the other sections under construction are completed. Then we will know how bad the congestion is between SH16 and SH20, and for how long. It can also exploit the recession to get a better price for construction. (Steven Joyce might also consider the removal of the Avondale to Southdown railway designation, because frankly that railway wont ever be built, isn't worth building and can provide some of the land for the motorway).

The bigger truth is that the government is operating in a non-market mode, with roads priced as taxation, so the roads parallel to this motorway are too cheap to motorists (as around 60% of the cost of maintaining them comes from ratepayers), and inadequate analysis of revenue generated from road taxes from use of the road. Most of all, the pressure to build the road comes from planners and politicians.

What this doesn't tell you is that the primary blame for the problems around this project is the stupidity of Auckland City Council in the 1970s in abolishing motorway designations, on unbuilt land.

Designations were retained for the Mt Roskill to Manukau section, but not beyond. Without it, the land has been built on, unlike the designated land which always has temporary use (and little property purchase was needed). That's local government failing again. There was a designation for a motorway from Upper Queen Street parallel to Dominion Road to Mt Roskill as well, but all you see of it today is a cheaply built section from New North Road to Upper Queen Street. See how good planners are? The country is full of examples like that by the way.

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