In the ongoing process that is the development of the Auckland CBD rail tunnel project, there’s a giant “elephant in the room” that nobody seems particularly willing to touch – I’m guessing because nobody really has much of a clue about what the answer would be. That question, of course, is “how are we going to pay for this?” Best estimates for the cost of the project are at around $1.5 billion – which would put it on par with the holiday highway, but less than the Western Ring Route completion. So while it obviously is an expensive project, it’s not an “out of this world” type of expense.

But unlike those other two projects, the funding stream for the CBD rail tunnel simply does not exist. Thanks to the May 2009 Government Policy Statement, the funds that will be used for the holiday highway and the Western Ring Route simply aren’t available for the CBD rail tunnel. Before I explain that matter a bit further, let’s note what changes were made in the May 2009 Government Policy Statement that make funding the CBD rail tunnel that much harder than it was before:I guess at face value the concept seems fairly logical. The National Land Transport Fund is funded by petrol taxes, road user charges, vehicle licensing fees and so forth. In short, it’s funded by road-users in one way or another. So there is a certain logic, at least at a very basic level, that all money raised from roads should be spent on roads.

However, there is a flaw in this argument, and it comes through in the very first paragraph of the extracts above: and that is that road users benefit from the ability of public transport (including rail transport) to reduced congestion, so therefore it makes sense for public rail transport services to continue to receive funds from the National Land Transport Fund. So we have a level of “roads paying for rail” already – and on a completely logical basis (ie. it benefits the road users).

Now the thing that I find odd to comprehend is why this very same argument doesn’t extend to rail capital projects. Surely just as subsidising a train’s operating costs helps reduce congestion, so would building a new railway line or upgrading some train stations to encourage more people to use the service – for example. Looking into the way benefits from public transport expenditure are actually calculated, my assumptions are confirmed: a pretty large proportion of benefits arising from public transport projects that generate additional patronage (which would obviously include new capital expenditure projects) are enjoyed by road users: If we look at rail in Auckland, each additional trip taken during peak time on the rail system has been calculated as generating a $17.27 benefit to road users. While I’m unsure about whether this table truly reflects induced demand or not, I’m guessing that if NZTA truly started taking into account induced demand it would probably impact fairly evenly on reducing the congestion easing benefits of new road and rail projects – so the argument would still hold.

The point is that spending money on rail clearly has massive benefits for road users. If we once again look at the CBD rail tunnel project, that project has the capability of doubling the capacity of Britomart – and therefore generally doubling the capacity of the whole rail system. Let’s say that the current system (post-electrification but not including the CBD rail tunnel) has a maximum capacity that would allow around 15 million rail trips per year, while the CBD rail tunnel would allow that to increase to around 30 million trips a year. You can start to get a feeling about how massive the benefits of that project to road users might be (I would do the sums but I don’t know what proportion of Auckland’s rail trips are peak and what proportion are off-peak).

Ultimately, as I have said before, there is probably only one agency in the country that really has the cash to stump up for a big chunk of the CBD rail tunnel’s project cost – and that is NZTA and their National Land Transport Fund. It will be very interesting to see if the business case for the CBD rail tunnel specifically identifies the level of benefit the project will create for road users, and I hope that figure is specified so a good argument can be made about why it is logical for NZTA to stump up a decent chunk of this project’s cost. However, unless the Government Policy Statement on transport is altered, it won’t be possible for NZTA to help fund the CBD rail tunnel – and if that’s the case I really can’t see it being built anytime soon.

The argument that NLTF funds should only be spent on roads is flawed in my opinion, largely because it is clear that road users themselves benefit significantly from investment in public transport – including rail. If road users are going to get greater benefit back from each dollar of NLTF funds spent on the CBD rail tunnel than they would from each dollar spent on the Holiday Highway (for example), then it is actually completely illogical for that money to be spent on the Holiday Highway. It just makes good sense, even for road users themselves, for roads to help fund rail.

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  1. However State Highway Users in 2009 also received an additional subsidy of $1.5 billion from the taxpayer. The logic that road users pay for their own use is flawed!

    Thats state highways, another $1 billion went to local roads from rate payers. All this on top of fuel excises, RUC’s, licences, etc. Over $2.5 billion road subsidy vs $700 million PT subsidy. See Mom the Earth is flat!

  2. Of course the main reason why New Lynn has been put into a trench is to benefit road users, without it traffic through New Lynn would have been a nightmare (it already was pretty bad at times). Also the main benefit group to benefit by reopening the Onehunga is cars through reduced congestion.

    I am really interested to see how they will fund the CBD tunnel, I can see the government begrudgingly putting in perhaps somewhere around $750 mil for it with Auckland made to pay the rest. Hopefully we can wrangle a decent amount of money out of some of the local businesses like Sky City to help as well leaving ratepayers with a bill of $300-$400 mil (of course I would prefer the government to pay for the lot). Also I hope the government will push hard on it like they are doing with Waterview to cut a few years off the build timeframe.

    1. Of course the main reason why New Lynn has been put into a trench is to benefit road users, without it traffic through New Lynn would have been a nightmare (it already was pretty bad at times).

      Very good point. So that part of Project DART (funded from general taxation) could actually be interpreted as a pretty big roading subsidy.

  3. This whole hypothecation scheme is nonsense.

    1) I’m a ‘road user’ and i’d like to see all road and petrol taxes i pay go into improving public transport so i don’t have to use a car as much.
    2) As an income tax payer, why aren’t all income taxes ring-fenced and used only to support the hard working job holding population?
    As a beer drinker, why aren’t my alcohol duties ring-fenced and use to provide more local pubs where the community can meet and socialise?

  4. As long as motorists are allowed to believe that their infrastructure is “free” and not subsidized, there remain good opportunities to educate them about the true costs of their chosen transportation mode, by imposing fees that become new revenue streams to fund transit. The justification can be framed in terms of how much a particular transit project benefits motorists by removing some cars off the road, or it can be framed in terms of the costs that driving generally imposes on society (like a VMT fee). People’s habits can change in response to price signals.

    1. Thanks for dropping by transbay!

      I think that’s the beauty of using petrol taxes to fund public transport – and rail in particular, as at least in Auckland the stated dollar benefits to road users of additional rail passengers is much higher than bus passengers (also, buses can benefit from general road expenditure). It offers both a carrot (better public transport) and a stick (the petrol tax) to help drive modeshift, which itself has significant benefits for all concerned.

  5. Things will be real interesting if Len Brown gets elected with some good pro PT people, and Celia Wade-Brown (Green) is elected Wellington Mayor – she wants a light rail network.
    Not sure about Jim Anderton, I know the Alliance and Progrssives were keen on PT.

  6. Just seen Murray McCully on TV re the Kingsland upgrade.
    Admitted he had a prejudice against rail but its worth for moving people to Eden Park had changed his mind somewhat.
    Looks like something good has come out of RWC.

    1. I think there’s a realisation that spending a rather large amount of money on rail means that you can’t really afford to ignore it anymore. I also think that there’s a growing realisation that once you get the ball rolling with rail upgrades, there are always more projects lining up to do!

  7. Just. One. More. Line upgrade. Then we can stop! We might end up sounding like the motorways crew 😉

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