and so Transmission Gully?

Martin Kay from the Dominion Post is interviewing his PC by speculating that "The potential for private investors to pick up the $470 million shortfall for the planned motorway is firmly on the table"

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Given that the legislation to do this has been around since 2002, and that there has been some private interest in this, it is hardly a surprise. However, Martin Kay has clearly missed a major point. The proposal for the Waterview project is (presumably) that the full cost of the project is financed by the private sector. Suggesting the private sector finance less than half of the cost of the project, while taxpayers subsidise the rest means that taxpayers are subsidising the return to private shareholders. Indeed, the noise from potential "investors" (nice to invest some money and get a return from the money "invested" by the state too) a few years ago was that they would happily help with financing, building and operating Transmission Gully, if the government coughed up the majority of the cost.

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The truth still remains that Transmission Gully has low traffic volumes, is not viable as a toll road (even if the current highway is also tolled) and the $955 million putative cost is about to undergo the same type of inflation that Waterview Connection has. Let's not pretend that a costing that is now nearly 3 years old remains accurate in todays money, it is $1.04 billion based on inflation alone. The current detailed investigation phase will probably uplift that by another 20% I suspect. The $485 million "promised" hasn't increased to compensate for that. Again it's a road that the users wouldn't pay for if they had to, nor would those who directly benefit from it, so why make others pay for it?

What do the "anti-war" left think?

I’d have thought the leftwing blogs that claim to care so much about death and destruction in Iraq would be outraged that the Islamist insurgency is training children and using people with Down’s Syndrome to bomb civilians.

However, I have yet to see a single post from the left outraged by it. Surely it can't be because the insurgency is fighting the USA? Surely that doesn't justify using innocent people to bomb innocent people?

My question is this. Do those who opposed the invasion of Iraq and overthrow of the Saddam Hussein regime support or oppose the Islamist insurgency there?

Quite simply, if you have strong views on waging war against the Ba’athist Iraqi government, presumably you should also have views on waging war against the current one.

Emirates first to fly whalejet into NZ

Those looking forward to flying on the "superjumbo" new Airbus A380 from a New Zealand airport look like they'll have to wait a year. Emirates is the first airline to announce flights with the A380 to/from Auckland. According to Business Traveller, Emirates daily flight EK 412 from Dubai to Sydney (and EK 413 in reverse) will be flown by an A380 from February 2009, and the flights will be extended onto Auckland (the flights currently continue to Christchurch). Emirates will be the third airline to fly the A380 starting September 2008.

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Presumably there will be some rejigging of flights between Auckland and Christchurch, unless Emirates is dropping Christchurch, but anyway Emirates does promise its A380s will introduce new first, business and economy class products on board. That will be interesting given the world beating Singapore Airlines products on its A380s, although the number of seats Emirates is installing on its A380s will range from 489 to 600, whereas Singapore Airlines only has 471. I suspect Emirates will be flying the low density long haul version on this route though, as it seeks to compete with Singapore Airlines, Qantas, BA and Virgin Atlantic for the lucrative Sydney-Europe routes.

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Anyway it will be good to see the whalejet flying regularly to and from NZ. This will undoubtedly put pressure on airfares in all classes. Frankly, the odds are that no other airlines will be flying A380s to NZ in the near future. The other airlines that have ordered A380s that currently fly to NZ are Qantas, Singapore Airlines, Thai, Korean and Malaysian. Out of them only Qantas and Singapore Airlines currently fly their biggest aircraft (747s) into NZ, and in both cases the majority of their flights are on smaller aircraft. I doubt it is worthwhile either Qantas or Singapore Airlines flying such large planes on any of their services to NZ.

Private road or expensive folly?

Earlier reports that the government was going to bribe Auckland voters by using taxpayers money to fund the hienously expensive and greenplated "Waterview extension" motorway link have proven to be only partially correct. It appears, amazingly, according to the NZ Herald that the government is looking to use private capital to fund, build and operate it. The full details are here in the government press release.

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Firstly, it makes sense to do this. It makes sense for the private sector to raise capital and pay it off, using revenue collected from road users. It also makes sense for the private sector to not only build it (all roads in New Zealand are built by private contractors in essence), but operate it and although discussion is about a "lease" this in effect means it is a private road. The talk of Annette King that it is "not privatisation" is a fudge. In effect, even if it is a traditional BOOT operation (build own operate transfer) it is a privately built road that gets nationalised at the end of the lease period. This is not much different from similar private roads in Australia, or shouldn't be!

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However there are still some significant issues:

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1. Why must only the section of SH20 that goes under the PM's electorate be placed underground in a tunnel that adds well over NZ$1 billion to the cost? If the people of Mt. Roskill, Manukau, Albany-Puhoi, Greenhithe, Hobsonville and Waiouru Peninsula can have motorways built at ground level or in trenches, why is the PM's electorate special?

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2. Should Transit do more than complete investigations on this project, and let the private sector take control of the design, route selection and property purchasing as well as construction? In Melbourne, the Citylink tollway saw the private company responsible for it determining the route, producing a design, engaging in consultation and negotiating with property owners for building the road. Why not let the private sector be incentivised to do all of this, so the road is built quicker, with more public acceptability and lower cost? Transit is clearly poorly incentivised to keep costs down.

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3. How should the private sector recover the costs of building the road? The only fair, modally neutral and economically efficient way to do this is:

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• Allow tolls to be charged on the highway, at a rate of the choosing of the private sector (it will charge at rates to maximise use of the route, and is likely to vary by time of day. There are easily two alternative for potential users of the road);
• Land Transport NZ should pay shadow tolls to the private owner to reflect the fuel tax and road user charges collected from road users as a result of using the road.

Of course, a combination of these and the ultra high cost tunnel option wont work. It simply isn't enough money to pay for the road. That is why the private sector must be involved in the design stage, and lower cost alternatives be developed. However, even then there may still be a gap, which the government will be tempted to fill. The question is whether non-users should pay.

The only way this could be justified is to charge other road users for the benefits the road will bring in relieving roads they travel on (such as the parallel Great North Road, and Central Motorway Junction). This could be calculated and be part of a shadow toll (recognising that you could recover this if the roads were properly priced according to demand/supply), but that's it. I'd be wary about calculating this as well, because assessing economic benefits to non-users should not go beyond road users, so that the benefits of the project are not double counted.

If the project cannot be financed from tolls and shadow tolls that reflect what the users pay, it should not proceed. The road is not good "at any cost", it is only worthwhile if those who will benefit from it are willing to pay for it.

4. Finally, the question of the period of private involvement is important. Labour's legislation limits it to 35 years. I'd argue it could be indefinite (in fact the whole of SH20 could be privatised), but that wont happen. In the interim it would be preferable to have a 99 year lease and for the private lessee to have full control over that period. By then maybe people will not be scared of private roads.

Fundamentally the government COULD do this right, as long as it doesn't write a blank cheque, doesn't subsidise the road from revenue from those who wont directly benefit from it and allows the private sector to innovate and bear the risk. After all, if the forecast traffic levels are wrong the private sector should bear the risk/benefit depending which way it goes. This is a chance to see how things COULD work, but I suspect the main reason private involvement is being sought is to do off-government balance sheet borrowing. In other words, while the private sector finances it, the state effectively guarantees it and will almost certainly be willing to bail out a failed private invetsment. If that IS the case then all of the criticisms by the Greens and others on the left about Public Private Partnerships will be true.

The Waterview connection MIGHT be a good investment for a private company, it might not be. The government should simply allow the opportunity to be presented on terms that don't mean it is subsidised and do not mean failure is protected by the government. If the private sector is not interested, because the revenue from those who will benefit directly from it is insufficient to pay for the road, then it should NOT proceed at present. It might be worthwhile in the future, especially once the other sections of motorway are completed and there is further traffic growth, but if it can't be paid for by users then others should not pay for it.

Meanwhile I have to laugh at John Key saying "it represented a "massive flip-flop" after years of opposing private sector involvement in roading". Pot calling the kettle black surely, John Key ought to know a flip flop or ten.

UPDATE: No Right Turn makes the nonsensical claim that PPPs have been a "complete disaster". You may as well claim that government funded roads have been as well, because some of them have not generated the economic returns that were promised (although thats not very transparent). The truth is that many have been a roaring success, Melbourne Citylink is one, as is the Dartford Crossing in the UK, Chicago Skyway and on and on. His example of the Sydney Cross City Tunnel (which was also about improving the on street environment) shows it went into receivership, but it is still private debt and being privately managed. The road is there, it wouldn't have been there otherwise. The point is though that he isn't talking about fully private roads, and frankly if no taxpayers' money is involved and it is a new facility, why should he care?

UPDATE 2: Further reactions are curious:

Peter Dunne is cheering it on, and even seems to not care if it is all privately owned. This is good news, although I don't think he is that agnostic about whether it gets built. After all, Transmission Gully being an economic dud hasn't stopped Dunne cheerleading it.

The Greens are jealous that the government doesn't want to piss more of your money down a drain into the faith based initiative of rail based public transport saying "A couple of billion dollars could pay for a rail line to the airport, turning the Britomart line into a loop - with an underground extension to Mt Eden - and connecting Onehunga with the western line at Avondale". Yes but whose money is it Jeanette? When you build you trainset you want hundreds of millions every year to subsidise its operation too!

ACT's Rodney Hide has turned his back on user pays and economic efficiency in saying the government is dithering without saying what he would do. An empty statement at best, at worst he wants taxpayers' money ploughed into it without any concern about value for money.

The NZ Contractors Federation want this to be part of a Think Big style massive taxpayer funded build of infrastructure, which their members could profit from building. They claim it can be built on time and within budget. Which budget? The cost keeps shooting up year after year! Most concerning is the belief in Soviet style planning saying "We would like to see it become part of a 20-year national infrastructure plan. At present infrastructure planning for this country is ad hoc. To get the best from our scarce resources in the future, New Zealand needs to better co-ordinate projects, particularly very major ones like this".

So you want to nationalise planning for telecommunications, electricity, water, sewage, stormwater, airports and ports as well? Sheesh.

Perhaps the best comment came from IPENZ Director of Policy Tim Davin who says the current legislation is flawed "We are already hearing in the media today, members of the community opposing the project. Because the Act’s ‘high degree of support’ clause it may make any large roading project difficult to proceed as a lot of communities may take the NIMBY (not in my back yard attitude.) ".

National backflips on Maori seats

I was slightly heartened by John Key's comment that, according to Stuff that (paraphrased) "the National Party would have no second thoughts about abolishing the Maori seats once the historical treaty settlement claim process had been resolved".

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Well only that the policy remains, except for the bizarre linkage between the seats and treaty settlements. This significantly incentivises the prolonging of that process. Why do those seats assist that process? The only people assisted by the Maori seats are the members of the Maori party

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John here is a new concept, it is called a principle.

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In New Zealand, as in all other liberal democracies, all eligible people 18 and over have the right to vote. This right should not have any limits or privileges. In a modern 21st century secular liberal democracy, race based seats have no future. Only one political party benefits from these, and it is racist itself. Only one political party benefits from winning constituencies defined in part by race, and by doing so gets a notably higher proportion of seats in Parliament from those race based constituencies (3.3%) than it would win based upon nationwide party vote (2.1%). MMP was partly advanced on the basis that it would allow party lists to comprise a more representative variety of people from different backgrounds, and this has happened.

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The Maori seats should go. It is NOT racism, it is NOT Maori bashing. It simply reflects that constituencies in the New Zealand Parliament should be based on geography - nothing else. It will mean National wont always win Northland (because most of the votes for that constituency are non-Maori), and it might never win seats in East Cape/Gisborne, but it wont mean Maori representation is over.

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However I suspect John Key wants to reserve the right to "do a deal" with the Maori Party after the next election, as he can't be sure of National getting 47-48% of the vote. No different than Helen Clark with Winston Peters and Peter Dunne - but how do we know John Key wont sell out National voters? We DO know Helen Clark does deals but tends not to sell out Labour voters (throwing a new bureaucracy, getting rid of tolls on a road and other baubles are nothing compared to what National might do).