Thursday, February 15, 2007

Borrowing to pay for roads

Now that, in itself, is not a bad thing, as long as there is revenue generated to pay back the loans with interest.
The problem is that the government is spending all revenue it gets from road users, plus $300 million more over the next five years, on roads and public transport. There is no longer money “diverted” from road taxes onto non-transport spending, so no money to pay back the infrastructure bonds.
Borrowing to fund transport is common in the private sector, but you have fares and charges to pay for it. Borrowing to fund roads is also common in the private sector, which is why Sydney and Melbourne have had some excellent new highways built in recent years – and those highways are tolled too.
So a government in the future is going to have to hike up road taxes to pay for this borrowing, or take it from you some other way. An alternative would’ve been to allow Transit to borrow and then toll, taking the risk itself – but funnily enough, most of the major roads the government wants to fund have enough people willing to pay to use it to pay for it.
That might tell you something…
There is an alternative, but it is funny that the Greens are now propping up a government embarking on New Zealand's most ambitious road building programme since the early 1970s.


Eric Crampton said...

Christchurch-based folks interested in road tolls as a solution to congestion problems might be interested in an upcoming talk we'll be having.

The University of Canterbury's third annual Condliffe Memorial Lecture will feature Professor Mark Blaug of the University of Amsterdam; he'll be talking about why economists love congestion charging. Details on the event are here.
Any Christchurch folks interested in hearing him should be sure to attend!

Callum said...

^^Hehe, you posted the same thing on my blog as well.

Eric Crampton said...

Guilty as charged... :>

I do like the idea of tolls of tolls being set to optimise on the congestion margin, with the money so derived then being used to pay off some of the bonds though.

Libertyscott said...

Commercialising the roads, which was government policy until 1999!