PM Key welcomes discussion on Auckland transport funding, but is wary of higher insurance costs already faced by households. Your view?

PM Key welcomes discussion on Auckland transport funding, but is wary of higher insurance costs already faced by households. Your view?

Auckland's policy makers need to tread very carefully as they ponder raising petrol taxes, imposing road tolls, or even asking the government to raise GST in New Zealand's biggest city to pay for a NZ$15 billion shortfall for major transport projects over the next three decades, Prime Minister John Key says.

Auckland mayor Len Brown is today releasing a discussion document outlining possible ways to pay for the projected shortfall in funding for the city's desired transport projects, which also includes visitor taxes on hotel and motel beds, and a higher airport departure tax.

The central government acknowledged Aucklanders needed to have the discussion about how to fund the projects, but was wary that households were already facing higher EQC premiums and insurance costs Prime Minister John Key said on TVOne's Breakfast programme this morning. The government was already investing a large amount of money in Auckland transport, and Aucklanders needed to think about what priority to give each desired project.

The council would have to approach the government in order to make most of the changes, meaning the government could veto the council’s ability to raise money through these mechanisms, like raising GST in Auckland.

"We like user pays, but this may not be user pays. They may well put a tax on you for something you’re not going to use,” Key said on Breakfast.

The government had closed down regional petrol taxes because it thought the administration of them, and the amount that was going to be raised, did not warrant that type of tax.

“What we worry about is any tax sucks money out of the economy. There’s a limited amount of money in the economy. So when you put up a tax, or you tax people more, then it sucks that money out,” Key said.

He noted the Green Party’s call last year for a levy to be placed on people earning more than NZ$48,000 a year to help pay for the Christchurch rebuild – a policy he was against.

“Now we’re paying three times as much for our EQC levies, and the general increase in insurance across the country is very high. A lot of people are now saying, ‘I can’t afford to pay my insurance’. My point was, how would you have paid for the levy?" Key said.

“Whenever you put another cost on a household, you’ve got to think what have they got to give up to pay for that? If you’re a high income household, you might be able to meet that cost, but for a lot of households in Auckland, they’re not high income households. So I’m saying we need to tread very carefully through this stuff," he said.

'Cost of living is an issue'

Meanwhile, speaking on Newstalk ZB this morning, Key said he did not think consumers could afford a big increase in taxes at the present time.

“We’ve just gone through an election campaign where people said cost of living is an issue,” he said.

“At one level, let’s acknowledge that [Len Brown] is saying there is a shopping list of things that he would want to deliver in terms of infrastructure, and he is saying here’s some options to pay for it," Key said.

“I would say that the government has invested, and is investing a massive amount in that infrastructure at the moment...so whatever he’s talking about is some way off. We need to work our way through all of those things," he said.

"There is no free lunch here. Yes, we have to pay for infrastructure. [But] if we put on all of those costs there will be a significant impact on consumers."

(Updates with comments on Newstalk ZB)

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36 Comments

I would not let the Auckland city council spend any public money on large infrastructure projects without a very carefull look at their cost estimates.  They seem to be on another planet and totally out of sync with overseas experience.  
Drawing from overseas examples, consider the Oresund bridge between Sweden and Denmark.  http://en.wikipedia.org/wiki/%C3%98resund_Bridge
This cost a total of about NZ $7 billion in 2000.  It includes the main bridge which is 5.3 km or about 5 times our crossing.  Also included in this project cost is a 4 km under ocean road/rail tunnel, which is about 3-4 times under any harbour tunnel.  Looking on the net it appears that the cost estimate for our harbour tunnel is 4 -5.3 billion and 3 -3.9 billion for the alternative of a bridge.  These seen to be approaching about an order of magnitude at odds with the Oresund bridge even allowing for inflation.

Another example would be the Millau Viaduct in France.  http://en.wikipedia.org/wiki/Millau_bridge
This is 2.4 km long, i.e twice our harbour bridge length and is supported by skyscraper scale towers up to 250 m high.  It was opened in 2005 and cost the equivalent of NZ$650 million.
These are not low wage third world countries and one could be mistaken for expecting their contruction costs to be higher.  Something seriously does not add up. 
A cursory look at the Central City rail loop indicates that the costing is also very generously padded.
 
Could there be an agenda, as suggested below by Kiwidave, to scare us with hudge unrealistic costs, then hand the projects over to private builder/owners

Key: "What we worry about is any tax sucks money out of the economy. There’s a limited amount of money in the economy"
What? Surprising that a former money speculator would come up with such nonsense.
The money raised and spent on infrastructure projects is returned to the rest of the economy in wages and services. To justify a project it must return an economic benefit greater than it's cost, no matter whether it's borrowed from elsewhere or stolen directly from the unfortunate Aucklanders. It either stacks up or it doesn't.
The amount of money in the economy is not limited and has been growing exponentially for decades  (thanks to our ponzi fiat money system) so that can't be right either.
My guess; Key wants his Big Corporate buddies to own our infrastructure and be clipping the ticket on us ad infinitum. 

Brown is an idiot. Need to be re-educated on car use, blah blah blah. Get out of here. Decrease council spending as well is part of the answer and make people using public transport pay their FAIR share of the service instead of getting subsidies from my rates.

Presumably you think car drivers should pay their fair share too?  At the moment drivers are  heavily subsidised:
2011/12 tax take from all fuel tax 370M, motor vehicle fees 69M, RUC 435M (not payed by most motorists) =  874M + GST = $1B that drivers pay.
Some of the costs:  social cost of accidents 2007 $3.8B + cost of congestion in Auckland only $775M + road improvement, maintenece and renewals 08/09 $2.236B = $6.811B
That's $5.8B/$2600 per vehicle subsidy that you get from my tax.

bob
I'd be very wary of those figures as they are generally commissioned to an agenda, Social costs of road accidents? How about the Social benefits of freedom to travel? It reminds me that recently one of those 'studies' that calculated the social cost of Alcohol 'forgot' to include the benefits to peoples happiness which was billions!

The hypocrytical poster said that they want user pays for public transport while accepting a big subsidy on their car.  The 'social benefit of freedom to travel" is a private benefit - it doesn't reduce the tax I pay and would apply equally to walking, cycling, public transport so your comment is irrelevant. 
 
Exactly which figures are part of the 'anti-car conspiracy'? 
Tax figures from treasury?
Congestion estimate from Ernst & Young?
Road costs from NZTA?
Social costs from MOT?
 
 Cars are subsidised. 

 
 

Bob
Isn't accepting figures that suit your argument without question hypocritical when below you post "Is that the same Transit who have a vested interest in building roads?"
Tax figures from treasury? - Always so accurate
Congestion estimate from Ernst & Young? - Estimates the word whats their methodology
Social costs from MOT? So you'll accrue social costs but not social benefits?
Don't get me wrong, I promote walking and cycling, my main beef is with the autocrats who are selling public transport as a panacea. Its no accident that one of the most energy efficient forms of public transport per pax/km is an airbus A380, simply jumping on a bus or train does nothing for our future.
The answer is not substitution but conservation, simply use less.
Neven
 

Even if you only believe the Transit figure the point is that cars are heavily subsidised - fuel taxes and registration don't pay for half the cost of road build maintenace let alone any of the ACC costs etc. and I bet you 300-400 deaths and 4000 injuries don't cost the taxpayer nothing.
Therefore the arguement that it's only drivers who pay for the roads giving them the right to kill/maim any cyclist or pedestrian that impedes their progress is nonsense - some Auckland drivers even believe they have the right to run over children on footpaths if that child is impeding their progress into their driveway.
 

On Radio NZ this morning they were talking about a new rating system being implemented in Auckland that will limit rises to 10% in each of the next three years, as if 10% wasn't that high! Here it is & yikes. http://www.radionz.co.nz/news/regional/98242/councillor-welcomes-mayor%2...

As a one off to correct imbalances...so it seems the wealthier suburbs are under-paying....
 
regards

Under paying by 30%? Or is it just that they didn't, and are unlikely to, vote for Len?

I agree that people are dreaming when they believe that 4mil people are going to be able to fund all the bells and whistles of infrastructure enjoyed in more densely populated places. But which pie in the sky promise do you want to support? That we can fix all the leaky buildings (ongoing-  as they continue to be made)? Or that we can cash out every homeowner from the Chch earthquake, and the commercial real estate, at out-of-this world housing prices? Or expanding roadworks which have to be maintained constantly? 
So we are talking about economic triage. Tough decisions. I don't think its a question of can we do it, I think it is a matter of putting in place whatever is going to have the greatest effect for money spent. Everyone says Europe is in a better position transportation-wise because of its intact train system. NZ's was dismantled, unfortunately. 

Auckland just spent $54 mil on their SAP systems and it's not even finished so how much trust do we place on such huge projects proposed by Len?  I hope Len Brown doesn't have any desire to become any bigger role than mayor of Auckland - God helps NZ if he ever becomes a PM  because he'll bankrupt us!

Len's ambition is to make Auckland the most liveable city in the world.  Unfortunately, during this process he'll turn Auckland into the most expensive city to live in the world.  Will he get my vote at the next local election - well he can kiss my fat axxx

Len Brown always was and still is a Tax and Spend politician....a Billion here and a Billion there is small change for this council....white elephants, pink elephants...nice statues to himself.
 
I suggest before Mr Brown goes looking for money to rob he should first work harder to reduce living cost to Aucklanders....like Lower the cost of housing/rental and thus also interest payment...thereby freeing more disposable income for Aucklanders for him to rob !!
 
Next is to reduce the cost of his own couteriers and hangers on in the council so that whatever he has robbed from Aucklanders he has more to spend on his pet projects and then can crow louder about his suscess.
 
 

Huh?
The past 3 comments have been unduly harsh, it would seem some people just have an axe to grind. It is simplistic to blame the mayor for the problems inherent in the  Super City. Super City was designed by National to hobble the Auckland region and to kill the ARC, something they didn't get to do last time around. The infighting among Aucklanders plays right into the hands of central government.
...and don't shoot the messenger- the man is telling it like it is, He is not saying he supports any particular plan, he wants the community to look at it all and work out what is best.
It is just funny...it's not like he's Emperor Len, passing out decrees...you make it sound like he is singlehandedly doling out your money. The costs of this new travesty of amalgamation are built in. The mistakes, when they are made, will be exponentially more costly, due to the governance structure. Aucklanders will either pull together or they will find themselves on the losing end. 1st task- figure out who the real enemy is. 
I don't think you are evaluating the situation objectively, but merely using the article to make personal attacks and insinuations. Len was mayor of an area in Auckland where he had to stretch every dollar cos there wasn't much coming in. He hasn't changed, the only thing that changed were the rules to the local government game.
Please try to put forward credible arguments and not degenerate into taking potshots. 

ummm..the Super City was started by Labour and national finished the job.. so be fair and blame both of them. 
2ndly, Len seems to be the only one in his council promotes this rail loop, his councillors are quiet on this project - suggested that this is his white elephant!
"Len was mayor of an area in Auckland where he had to stretch every dollar cos there wasn't much coming in"..  Question: what was he doing looking at a Lexus ($160,000ish) for his mayoral official vehicle...

Brown is a fool, a phony.
Raising GST - very bad idea. That would make housing development even harder than it currently is.
I support rail, and enhancing Auckland's existing system, but the CBD rail loop is just dumb, and very expensive.
And those rates increases are exorbitant.
Auckland will soon be the least affordbale city in the world. Between them the council and govt sure are doing their best to kill the Auckland economy.
It defies belief
 

What is it that is 'dumb' about the CBD Rail Loop?

Correct me if i am wrong but last Transit feasibility study suggested that the rail loop will only reduce less than 10% of the number of cars coming into the CBD.. for  $2.6 billion, that's expensive.. cost vs benefits must be ultra low.   And also it will take another few more millions to make that Taniwha living underneath Auckland disappear, which they haven't budgeted for.
It's better to spend mney to enhance the existing Link bus and make Queens St buses only (like Melbourne CBD)

Is that the same Transit who have a vested interest in building roads?

Correction, the report was done by The Treasury and NZ Transport Agency..  A key conclusion was that the link was likely to remove up to 1400 cars from the roads into the CBD during the morning peak in 30 years' time compared with the estimated figure of 29,000.. that 4.8% of total traffic flow, bugger all if you ask me..
 

Further correction- the earlier report which made the case for the rail link was thrown out by the govt.  This is such a spin job. 

Could also be Len and his mini-mes are spinning the benefits of the rail loop

Actually the review of the CRL was done by the Ministry of Transport, a ministry who an independant review of thier policy adivce stated it was not consistantly good quality. The same ministry who also managed to not account for about $160m of spending which is part of the reason they are in a hole and having to get assistance from the Auckland Council.
There are some serious flaws in their review, two real clangers are that they have assumed that the cost of parking in the CBD will be the same in 30 years as it is now which is absurd but even worse is they have made the assumption that there is no limit on the capacity of roads into and around the CBD, something they have admitted when questioned on it. This means that they have forecast for unrestrained traffic growth (both private vehicles and buses) where as in reality that simply isn't possible. There are limits as to how many cars and buses can get into and through the city.
If the traffic has a maximum limit and parking costs increase that will mean not as many will be able to, or want to drive to the CBD and so they will need another way (and we won't be able to put more buses on because the roads are already full)
There are plenty of other errors in their review so it isn't something I would trust, especially when the business case was reviewed by a group of international experts and institutions with proven reputations and found it under estimated many of the benefits.

SK
Where do I start?
I think the benefits put forward by Council to justify the HUGE costs are quite simply BS.
One big problem is that a large part of the benefit justification is based on a "build and they will come" mentality. ie. build the CBD loop and that will be the catalyst for a whole lot more office and residential development.
this totally flies in the face of key economic drivers and situations in Auckland, as well as the decentralised form of Auckland     
I recommend Phil McDermott's excellent "Cities Matter" blog. Start with this article then link in to his other related articles:
http://cities-matter.blogspot.com.au/2012_01_01_archive.html
I've used plenty of CBd rail systems around the world and love them. Philosophically I'm supportive. I just think in Auckland's case its totally not justified.
 

Matt
I agree, in fact Browns autocratic philosophy is in a way simply encouraging BAU, i.e. you can live anywhere and work anywhere, buses, ferries and trains will make this possible.
We know this is not true.
If they are truly serious about reducing congestion where are the initiative to encourage car pooling? the website you find rides on? the HOV lanes? The autocrats argue that a vehicle has 1.1 occupants and a rushhour bus is 100% full which means there is almost 400% upside on car-pooling and none on public transport...do you see the irony?
Neven
 

Carpooling .. yes .. yes .. instant job creation for carpool-jockeys (see indonesia)

It's all well and good to want this service or that bit of infrastructure.
 
Affording it is the crux. The EU (most of it anyway)has a standard of living and services it simply can't afford. We are in the same situation,but it isn't as obvious,yet.Living beyond ones means.
 
 
Those who claim that taxes raised get spent constructively in the economy are also wrong. There is a huge amount of waste and a lot of our taxes simply keep alot of unproductive people ,unproductive. All spending is not "investment".
 

So the CBD rail loop is not actually dumb - it just costs a lot.

No problem ... issue Rail-Loop-50 year-Bonds .. every new migrant into new zealand who chooses to take up residence in auckland ... or within 50 km of the CBD .. be required to purchase $100k of 50-year-bonds .. if they leave the country .. or the area .. they get 50% of their money back .. the rest on maturity ... (shades of kimbe.dotcom buying his way in)

A more accurate term for it is a link- half of the loop was built on the expectation that the second half would be completed at a later date. Rail system really doesn't work deadending at Britomart like it does. 
If you don't spend it on the rail link, you will be spending it on further roading. It is one or the other. We are out of wiggle room. There are no cheap easy answers left, the can was kicked down the road and here we are.
We can build the rail link now- don't anyone kid themselves that it will be built at all later. Parliament's own white paper and related ministries have highlighted the difficulty going forward with car transport. So succeeding generations will struggle due to the dilly dallying of the current generation.
Sure it costs a lot now, mainly because National is playing a game of witholding support for the project Auckland needs. They are playing with the future ability of Auckland to function and none of them has their eyes on the road, they are looking in the rear view mirror.

no, its dumb (for Auckland) because the costs far outweigh the benefits. Any idea - no matter how appealing "in theory" - is dumb if the costs far outweigh the benefits.
The cost by itself is not so much the issue.  
As Neven911 says there are other far more cost-effective measures that could be undertaken.
This is a white elephant, pure and simple

Living and working in Auckland  ( no thanks,its bad enough visiting)    is getting to be One Big Fat Hassle - why dont they spread out a bit into the rest of our green and pleasant land ?
Its crazy to have half of our population squashed up one end of the country,plus totally inefficient dont you reckon Len?

Gonzo - no, according to the Productivity Commission and a few posters at this site, you just supply more land. I don't think that means you spread out, I think they expect to bring the land in.
 
Otherwise Roger Kerr's wee piece about fertiliser use being encouraging, is in a wee bit of trouble. Places to put it an all....

No, cities scale.....at about 0.8, or 20% more efficient, that means NZ is band Auclanders are better off.
regards

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