Auckland transport funding solutions must deliver dividend

Media Release
12 February 2012

Auckland transport funding solutions must deliver national dividend

"The Auckland Council today released a discussion paper outlining options for funding Auckland transport. The paper correctly acknowledges a deficit of at least $10 billion on Auckland's major projects and identifies 14 funding options the Council is considering. But of these, only one option answers the three essential questions required of any transport funding solution: does it raise sufficient revenue? does it incentivise the "right" behaviour? and, perhaps most importantly, does it add to productivity and better living standards", says Stephen Selwood CEO of the New Zealand Council for Infrastructure Development.

"It is pleasing to see the Council identifying for the first time the major city shaping projects which represent the bulk of Auckland's transport funding gap. The city rail loop, an additional Waitemata Harbour crossing and the AMETI (Auckland Manukau Eastern Transport Initiative) project are all familiar, but it is especially encouraging to see official momentum building for a south western corridor linking Onehunga and East Tamaki. This project, potentially delivered in concert with the more PT-oriented AMETI, is vital to ensure freight and other commercial traffic can continue to operate in and out of the Penrose-Southdown area.

"But major investments like these come with major costs and the Government's commitments to Christchurch and the council's limited funding mechanisms will not allow these projects to proceed in the absence of new funding tools.

"The funding options discussed in the paper include: greatly expanding three traditional council mechanisms (rates, development contributions and parking charges); two newer variations of council charges (targeted rates and tax increment financing); establishment of one or more of four broad-based taxes (regional income tax, regional payroll tax, regional fuel tax and regional GST); three tolling options (one focused just on new roads, one on the motorway network and another on congested points); and two new options (visitor charges to be levied on Auckland accommodation and an airport arrival tax). One omission from the list is the potential to raise funding through partial asset sales, such as Ports of Auckland and shares in Auckland Airport. This would only make sense if the returns from investment in transport exceed the dividends received from ownership of those assets.

"It is positive that most the options have been opened for public discussion - that's exactly why the Super-Council was established.

"The Ministry of Transport's most recent transport release, the Briefing to the Incoming Minister, establishes at the outset the importance of an efficient and productive transport system for economic performance. This emphasis is not yet strongly evident in the Council's discussion paper and the importance of freight, commercial traffic and of establishing a funding system which benefits the regional and national economy is not adequately addressed.

"Moreover, there are weaknesses in arguments for regional fuel, sales, income and payroll taxes. Most notably, these solutions will result in an almost immediate request from other regions for the same treatment.

"Several other options can only proceed in tandem with others - tolls limited to new projects and parking and rating options will be politically untenable given the size of increase required (for example, $6-$8 per trip will be required on a new harbour crossing).

"A low-level variable toll on the motorway network remains a simple and effective option. It has the potential to raise enough money to bridge the funding gap, it incentivises the right behaviour through higher tolls at peak and lower tolls off peak, and it is politically feasible if the benefits of investment and demand management achieve the efficiency and productivity goals that the Government is seeking. Any final decision is going to need the support of central government and this will not be forthcoming unless the solutions contribute positively to the national economy. These are the issues that must be resolved," Selwood says.
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