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Tolls have advantages over petrol taxes

media release
14 November 2006

Tolls have advantages over petrol taxes to fund the western ring route

Using tolls to fund early completion of Auckland’s Western Ring Route has advantages over the traditional pay as you go petrol tax approach being advocated by some says NZCID Chief Executive Stephen Selwood.

Mr Selwood was commenting on reports that Auckland some local government politicians favour a regional petrol tax instead of road tolls to fund completion of the Western Ring Route.

“While there are administration costs in collecting a toll, there are numerous benefits that offset this cost:
1. Tolls are dedicated to funding the new connection and will not be diverted for other purposes
2. Tolls encourage more efficient use of the new road by encouraging people to travel off peak or chose public transport alternatives
3. Tolls provide people with choice – pay a toll to get there quicker, go the old road for free – you choose
4. All motorists who live in the west of Auckland will have an existing or parallel non tolled road available to them
5. The average toll of $2.00 per trip is relatively inexpensive
6. The economic benefit of completing the road early has been assessed at $840m per annum. This vastly exceeds the $20m annual administration costs.
7. Tolls stop, once the road is paid for

“These advantages are the reason why most countries in the world are debt funding their infrastructural development projects and financing them through tolls. The approach also allows limited public funding from petrol tax to then be applied to other worthy spending priorities like improved public transport.

“While petrol taxes are cheaper to collect, there are significant disadvantages which should not be ignored:

1. All road users pay the tax regardless of whether they will benefit from the new road
2. There are a lot of demands for transport funding including public transport and other roading needs – how can motorists be assured the increased tax will be used to fund the Western Ring Route?
3. Within the life of this new road, petrol tax is expected to decline as a source of transport funding as fuel efficiency in vehicle improve and hybrid and electric cars become more common – will this mean continued increases in petrol tax to help pay for the road or charges on alternative more environmentally friendly fuels as well?
4. Administering petrol tax is not without considerable costs. Administration of the Land Transport Programme is projected to cost in excess of $1 billion over the next 10 years[1]
5. The cost of petrol is expected to continue to rise over time in any case, without additional taxes added on top

“Public debate on the merits or otherwise of tolling the Western Ring Route is valuable, but it is important to consider the relative pros and cons of all funding alternatives and make a prompt decision.

“The bottom line is, there is no such thing as a free road. In the end the infrastructural needs end up costing you either in taxes, tolls, or time. We’ve paid too much in lost time already. It must not be forgotten this road has been 50 years in planning. Now is the time for action not continued debate.”

Ends

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