Sam Warburton assesses the new Government's steps to start pricing road use through fuel taxes, congestion pricing. He hopes high-value safety projects will get priority

By Sam Warburton*

I’ve been encouraged by several signals from the new Government around transport. Ministers appear to have given transport much thought in opposition and are, in many ways, ahead of their agencies.

With luck, this will lead to a lift in the performance of transport agencies (which has been lacking recently).

A focus on higher-value projects

James Shaw was first. In an interview with Morning Report, the not-Minister-nor-Associate-Minister-of-Transport said:

We’ve always said, and this shouldn’t come as a surprise to anyone, that we should treat all transport funding dollar-for-dollar, on an even playing field. And you apply the same benefit-cost ratio [threshold] to all projects. And if you did that, you would see a substantial reorganisation of the funding…

While benefit-cost ratios (the benefit generated per dollar spent) have always been one criteria projects are assessed by, they have been the least-important criteria since 2008. The most important criterion has been how well projects align with Government direction.

I previously wrote that ‘we must be concerned when so much of our expenditure is hand-picked by Ministers with an eye to cutting the sod or turning the ribbon while other, much higher-value, projects remain unfunded’.

My preliminary calculations suggest the focus on Government, rather than community, priorities have cost society hundreds of millions of dollars over the past three years in forgone benefits. (This will be elaborated on in a future piece.)

Shaw appears to reject past approaches and shifting towards pursuing more projects that communities and businesses want, rather than politicians.

Higher-value projects including safety improvements

Julie Anne Genter was second. In a story on Stuff, the Associate Minister of Transport said:

Transport safety needs to be a higher priority for the Government…The Minister [Transport Minister Phil Twyford] and I will be working closely on options to improve safety. It will be a high priority for me as Associate Minister of Transport.

This appears to be part of the ‘substantial reorganisation’ Shaw talked about. As I noted two weeks ago, Ministry of Transport analysis showed that:

Many unfunded road safety improvement projects exist. In general, these projects have higher benefit-cost ratios than other projects. This meant that more investment in road safety improvements, funded by deferring other projects, would increase the overall economic and social return of transport investment.

Overall, it seems like a renewed focus on the highest-value projects will drive a greater focus on safety improvements, rather than a knee-jerk reaction to safety concerns driving policy.

An interest in better understanding what communities truly want

Phil Twyford was third. In an interview on The Nation, the Minister of Transport said:

Our view is that the regional fuel tax is a short to medium-term interim measure. Some kind of road pricing or network charging will come in in the medium to long term…

The most important thing about road pricing is that it allows you to do demand management and smooth out some of the peaks, the congestion peaks in the system, allowing you to get much better value out of the transport system.

Again, there’s the talk about getting better value. Not just building more.

And Twyford touches on a vital point.

Value can never be truly demonstrated by just a benefit-cost ratio. Economists and advisors can do business cases and cost-benefit analyses and come up with a best estimate of the benefits and costs of a project, but the true value of a project is determined by whether those who benefit from it are prepared to pay for it.

This was the case of Clifford Bay – a proposal to move the ferry terminal from Picton and save 75 minutes on road trips between Auckland and Christchurch. A cost-benefit analysis put Clifford Bay’s benefit-cost ratio at 1.3 (benefits 30% higher than costs). However, when asked to contribute to the costs, industry baulked – considering the project not worthwhile – and the project collapsed.

Regional fuel taxes and, in future, road pricing help us understand whether transport investments are truly worth it.

Ask a region whether they want more projects in their region, with half the cost paid for by the fuel taxes of people in other regions – the current way we fund most of our transport – and you’ll generally hear a ‘yes’.

Ask a region whether they want more projects in their region but where they must make a greater contribution through a regional fuel tax, and you’ll get a more considered response. People and decision-makers will ask themselves whether they really need that last project or whether there are better uses for that money.

I support regional fuel taxes particularly as a step along the way to road pricing, as Twyford has suggested might be the case.

Twyford said he’s expecting a briefing from his Ministry this month on road pricing. The Ministry has been working on this latest road pricing project since late 2014. Three years is a long time to flesh out options and prepare advice.

In my next Interest piece, I’ll set out the advice the Ministry should be providing Ministers.


*Sam Warburton is a research fellow at the New Zealand Initiative, which provides a fortnightly column for interest.co.nz.

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20 Comments

Isn't it largely a function of population ramping up rapidly whereas road facilities are largely fixed? So the road transport system steadily deteriorates over time, improvements merely slowly the rate of deterioration. Travel times get longer and more variable, more pollution and more accidents.

I recently visited England and their transport system is markedly worse than it was when I left 25 years ago. It has become highly unreliable. Improvements in vehicle reliability and roading have been swamped by the sheer number of vehicles.

Is it the case that we have roading for 4 million kiwis not 5 million and we are unwilling to face up to this?

1992? I recall a piece in The Times suggesting that 'by 2000, the average road speed for traffic in London will be 0 mph". Given that at that time I'd just spent 4 hours in a traffic jam to go 5 miles just to try to get onto the M25, and turned around in exasperation, it didn't seem so far-fetched. Today? You probably saw 0 mph in action!

As far as safety is concerned banning cars over 10 years old ( because they have outdated safety measures) the way Japan and Singapore do, will likely be more beneficial than spending hundreds of millions more on road safety. Happy side effect is that newer cars tend to be more fuel efficient and as such are better for the environment!

I don't think large SUVs are particularly fuel efficient compared to small-medium sized old sedans.
The large diesels are not much better either. Other countries consider them to be polluting, but not NZ.

The environmental benefit is just the bonus. The goal here was safety. A car with forward collision mitigation, lane stay assist, autonomous parking, automatic stability control and/or other intelligent driver assist technologies is likely safer than a 15 year old vehiecal of any description.

So essentially you are advocating making car ownership virtually impossible for a huge proportion of lower income kiwis. Given that something in the region of 80% of pollution that a vehicle generates during it's lifetime is when it is built and when it is disposed of, I'm not convinced that scrapping a huge number of cars as they apprrooach their 10th birthday is a great environmental policy either.

Exactly, Sam. Lets hope they stop the rail tunnel project right now!

Why’s that? It’s about the only growth enabling transport project in Auckland! They’ll never improve congestion with more roads.

I'm interested in the cost/benefit ratio for moving the Auckland Port to Whangarei? (I'm guessing it is around 0.01.)

Is that ratio credible?

It all depends on the factors you cost:-
1. No dredging - ecological and tourism costs as well as the actual never ending dredging costs
2. It is seriously dependent on improving the railway line north - that has cost benefits for commuters, tourism and removing heavy logging trucks from SH1. Potential to make Helensville an effective satellite town.
3. Value of the land currently occupied by the POA
4. Reduction in city congestion with heavy trucks accessing the Port - hard to estimate what the cost is in terms of toxic diesel fumes, road safety, etc.
5. What happens when the Port reaches capacity?

Anyway although I hope it happens I'm not at all certain of the cost/benefit but it would be worth seeing a study that takes everything into account. And that is what Jacinda/Winston promise us.

Anyone who has been to Singapore knows the solution to Kiwi traffic congestion.
High costs to use your car backed up with an efficient, cheap public transport.

The advantage of a beneficial dictatorship but it works.

Some of their latest planning makes our efforts look p poor.

https://frontnews.eu/news/en/16110/Singapore-plans-to-abandon-new-cars-i...
http://sgforums.com/forums/3426/topics/460050

Auckland 1,100 sq klms. Singapore 700 sq klms.
Auckland population: 1.4 million Singapore 5.6 million

Singapore has more people to pay for a small area. It may not make for an ideal population density, but it sure is easier to pay for 'stuff'.
Tack on that Singapore has a Managed Exchange Rate System and New Zealand has a Free Float and even the financing part is easier in Singapore!

Good points BW but I think the main advantage Sing has is the beneficial dictatorship.

This enables long term planning without fear, whereas our team are always looking at the clock counting down to the next election whether it be council or government. Anyone who brought in some of the measures Sing uses would be at risk of disappearing stage left after their 1st term as Kiwi voters don't appear to have much inclination to think about the future.

And still litle thought as to when, repeat when not if, one or more volcanoes start radically changing the Auckland scenery. Having supply lines from both the north and the south would be very useful for what would probably be an immense recovery effort.

And here is another pleasant possibility for the next few generations. Ice kilometers thick melts on Antarctica releasing an enormous amount of downward pressure on the continent. Due to our planet's centripetal forces more of that meltwater will gather at the equator. Now how will that affect tectonic forces?

Oooh, ooh, I've got another Chicken Little possibility!

The Norks try out their ICBM on a southward track and accidentally EMP Godzone.........Or Gaia has another Carrington event (the last was 1859, a millisecond in geological time). Same result - no functioning electronics...

Science illiteracy is a very sad thing...

0) Sam, about Clifford Bay. A socioeconomic analysis (b/c = 1.3) shows the benefits to the country as a whole of undertaking a project. It doesn't imply that the private sector should therefore fund any of it - that is a financial analysis. (That said, it is possible to have 3rd party contributions to projects which therefore affect the publicly funded b/c by reducing c)

1) Review whether road users yet are paying the full costs of transport. This is unlikely as previous studies showed the answer was no. Fuel excise tax and RUCs should rise - rates would come down & leaves more rates for other infrastructure backlogs (underfunding by road freight and over payment by ratepayers & no congestion tolls)

2) Review the value of life. NZ's value is still below that of some other developed countries. If we want more safety works either the value of life has to be higher in socioeconomic analysis, or we adopt vision zero by default and set aside a fixed % of the transport fund for safety works irrespective of socioeconomic return.

3) Introduce congestion tolls in at least Auckland now. Review their levels every 3-6 months like Singapore - worlds best practice. We don't need a 3 year road pricing study. This means deferred capital expenditure on expensive infrastructure & mode shift to PT, cycle & walk with health benefits.

4) Government has a social obligation to provide public transport.
4a) Provide high frequency PT across the congestion toll cordons as part of the condition of implementing the tolls
4b) Ensure full coverage network wide PT coverage is provided with at max 30 min headways. This can include non-fixed route services (on demand transit serving door to fixed routes only & reverse, not door to door) where fixed route services are non economic. If needed revise regulations/legislation to allow.

5) Move the ETS charge on fuel to be dynamically priced (if it isn't already) to reflect the price of carbon

6) Add an air pollution excise tax on fuel proportionate to the health effects caused by vehicle pollution.

7) By ensuring the above will mean road users are paying the full costs of transport and cost gap between the capex+opex cost of electric vehicles vs fossil fueled vehicles will be minimized & electric vehicles on a capex+opex cost basis will become viable sooner without the need for government incentives.

8) Regional fuel taxes shouldn't be needed except as a short term fix with the above in place.

9) Eventually move to satellite based road pricing as Singapore is considering. This will be needed as electric vehicles become an substantial part of the fleet & fuel tax drops.

10) Eventually, as the likes of Chariot (dynamically routed 12+ person door to door transport services) eventually become commercial (initial trials aren't) the publically funded PT system can be reduced to the core system where it provides more capacity than Chariot like services.

Some other thoughts.

11) Free up the land use planning system so that land use can respond to transport demand. Have a national template of effects based zoning and ditch 60+ district plans. At the same time merge local and regional government and set up super cities. Who runs PT across the commuter catchment shouldn't need to be a political argument because of artificial administrative boundaries.

12) Require parking to be completely unbundled from building provision in dense areas like CBDs. (Idealistically the transport system provider should control all parking so that parking pricing can be used as a secondary demand management mechanism (after congestion tolls) in dense areas like CBDs. Vertical parking structures in the middle of CBD blocks would also be a much better use of expensive CBD land rather than parking buildings & very expensive basements in commercial buildings)

13) Safety - Set national minimum design standards for all transport infrastructure. For new all roads this would require the provision of footpaths, off road cycle lanes, flush or solid medians and traffic lanes (bus lanes where needed). Parking would be provided last as is optional. This means that the minimum road corridors would need to be more than the current 20m - this would be consistent with the one network approach.

14) Safety - Road retrofits - have to meet the new minimum road design standard above. If there is not enough space (i.e. too expensive to do) the parking goes first.

15) Safety - Adopt signal timings which show a flashing green before the solid green and yellow. This reduces the dilemma zone substantially as well as the likelihood of red light running

16) Safety - Adopt approach based traffic signal phasing for new roads (& require for retrofits). This means no filtering traffic and exclusive phasing for cyclist and pedestrians without filtering traffic. This design is optimized if left turn slip lanes are also provided & have speed tables or humps (Its going to be a long time before the full fleet is autonomous)

Thoughtful reply! Excuse the short replies. I'm exhausted.

1) Using the ferry terminal is a private good - you can't use it without paying. There are no wider economic benefits. It's all to freight companies and other travellers. They could levy a terminal and the terminal pass it onto users.

2) I'm unsure. Method for calculating is pretty well regarded.

3) Yep!

4) Agree on some social provision - but that (as compared to the congestion aspect) should come from general taxation rather than drivers.

5) Yes.

6) Yes.

7) Yes. And without expensive other policies like EV subsidies (something I'm not keen on from the new Govt...if it happens...or the old govt for that matter).

8) Yes.

9) Yes, but should be able to do that now. Road pricing doesn't need to be perfectly accurate.

10) Not familiar with this.

11) - 16) Not my area.