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Transport Investment Package – Questions & Answers

Transport Investment Package – Questions & Answers

How is the extra $1.3 billion to be used?

$862 million will go to addressing the shortfall in the National Land Transport Programme, which includes state highway construction and maintenance, public transport funding, and local road construction and maintenance.

$425 million will be used to accelerate important projects around the country such as Auckland's Western Ring Route, Waikato Expressway, and Wellington's Western Corridor.

Wasn't the shortfall $642 million? How does this relate to $862 million?

The two numbers are not directly comparable:

- $642 million was the previously estimated 10-year shortfall for State Highway activity
- $862 million is the more recently estimated 5-year shortfall for the whole National Land Transport Programme.

What has caused the shortfall?

There were three main factors:
- Around a third was due to escalation in road construction costs
- Another third was due to a reduction in the projected revenue from petrol levies and road user charges that go into the National Land Transport Fund
- Priorities, such as public transport, were also projected to increase in cost.

Where is the additional $1.3 billion coming from?

Funding will come from a one-off Meridian dividend (largely arising from the sale of Southern Hydro) and from a programme of infrastructure bonds of up to $1 billion.

$425 million has been committed to advancing projects but up to $1 billion in infrastructure bonds is available. What is the remaining $575 million for?

The additional funds create a buffer against further cost changes to ensure the State Highway programme is not subject to further uncertainty. Infrastructure bonds are long dated government bonds issued for the specific purpose of funding land transport projects.

How much is the government investing in land transport?

Annual land transport spending has increased by 134 per cent between 1999/00 and 2006/07 from $940 million to $2.2 billion. $13.4 billion will be spent on land transport over the next five years.

Annual spending on state highway improvements will increase from $248 million in 1998/99 to an estimated $750 million in 2006/07. $3.5 billion will be spent on state highway improvements over the five years between 2006/07 and 2010/11.
Annual spending on public transport has increased over 700 per cent since 1999 from $43 million to an estimated $360 million in 2006/07.
What does the $13.4 billion investment mean for petrol taxes going into the Crown account?

The investment means that the government will spend $300 million more on land transport over the next five years than it will receive through petrol excise tax, road user charges, and motor vehicle registration fees.

Why invest more money in transport?

A safe and efficient transport network is vital to New Zealand's economic transformation. Under-investment during the 1990’s left an “infrastructure deficit”, notably in transport, most obviously in Auckland but with problems in many areas.

The government recognises that building more roads is only part of the solution. The government has bought back the national rail network, is investing heavily in upgrading the track and is investing in public transport.

When will there be more detail on how the additional $1.3 billion be spent?

Land Transport NZ will decide the precise funding allocations under the new funding package. Details of the 5-year package of State Highway construction will be set out in the forthcoming Transit State Highway Forecast, to be published 30 June 2006.

What happens to the five years after that?

The National Land Transport Programme will be updated periodically, at which point funding for the 5-year programme will be updated.

How will the new funding system improve certainty about projects?

A revenue guarantee to the entire National Land Transport Programme will avoid cutbacks due to revenue being lower than forecast. A five-year funding guarantee for state highway projects will ensure critical infrastructure projects are not delayed due to cost escalation in the sector. This level of certainty will allow the New Zealand construction industry to plan with confidence about future capacity required and periodic updates will ensure planning horizons can be continually extended.

Does this extra spending remove the need for tolling?
No. Tolling will still be needed to advance some roads, including the ALPURT B2 state highway.

What is the government doing to address cost escalation over the next five years?

The government is focused on getting value for money. A Ministerial advisory group was established earlier this year to investigate ways of moderating cost increases in the roading sectors. It looking at construction costs, design standards and processes, tendering processes, and the cost of materials and other inputs. The group will also look at procurement processes.


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