Rod Oram on the holiday highway

A really interesting article by Rod Oram in the Sunday Star Times today, discussing the cost effectiveness of the government’s various roading projects. Here are a few sections:

The government told owners of 55 properties last week that their homes or other buildings could be bulldozed to make way for its $1.65 billion Puhoi to Wellsford motorway. It was a tragedy for the owners.

But what if the motorway was also a tragedy for 1.4 million Aucklanders?

It could well be. The motorway will significantly distort development patterns, thereby blighting the region. It will help push urban development out to 85km north of Auckland’s CBD over coming decades.

This will exacerbate Auckland’s weakness as a sprawling city, with dire economic consequences. Worldwide evidence shows lower density means higher infrastructure costs, favouring private over public transport and a weaker network effect. People living and working closely together generate greater wealth than those spread out.

This matter is one that made me originally opposed to the Puhoi-Wellsford project, even before I had a clue about how poor its cost-effectiveness was going to be. Over the past decade Auckland has tried really hard to change its pattern of growth from very expensive and inefficient sprawl to a more compact model based around maximising the efficiency of our existing infrastructure and reducing congestion through providing better public transport. The problem is that our transport policies haven’t changed, and have generally worked against these attempts. Building the Puhoi-Wellsford road would undoubtedly further undermine efforts to contain Auckland’s urban sprawl – bringing much of northern Rodney into the ‘commuter belt’. As an ARC study undertaken earlier this year showed, such development patterns are incredibly expensive, inefficient and generally achieve the worst economic outcomes.

Oram then turns to the economic cost-effectiveness of this particular project:

In fact, the government knew last year the motorway was uneconomic, according to the cost/benefit analysis done for it. Likewise, the Waikato Expressway and Wellington to Levin motorway were uneconomic under conventional analysis.

That was very embarrassing for the government. After all, the three projects account for almost half of its $11b, 10-year Roads of National Significance programme. And the analysis showed speeding up the projects, which the government promises, would reduce the benefits.

These were political problems it created for itself. It announced the seven roads in March 2009, nine months before it received the economic analysis. It didn’t like the analysis, so spent another seven months getting the answers it wanted, according to documents coming to light.

Transport Minister Steven Joyce is proud of the government’s work ethic. “No work had been done on this project prior to it being confirmed as a road of national significance last year so this is great progress,” he said last week when announcing the route for the first stage from Puhoi.

The government got its unwelcome news about its uneconomic road projects in the work it commissioned from SAHA, an Australian-based consultancy. SAHA’s December 2009 report, billed as its final one, showed the conventional cost/benefit ratio of the Puhoi to Wellsford project was 0.4, meaning for every $1 invested the return was 40c; the Waikato Expressway’s was 0.5 and the Wellington Northern Corridor 0.9.

These were very poor results, even by this conventional form of analysis which is notorious for underestimating costs (for example, the cost of owning and operating a vehicle on the roads is not included, neither is adequate analysis of the impact of rising fuel costs on road use); and the benefits are overstated (for example, vehicle emissions are deemed to fall thanks to free-flowing traffic, apparently delivering a saving in greenhouse gases versus vehicles stuck in traffic jams).

Moreover the analysis is very weak in its handling of induced growth – new roads create more demand so over time traffic slows, costs rise and benefits fall.

In total the ratio for the seven RoNS projects was 1.9 under the conventional analysis, thanks to the Victoria Park Tunnel and Waterview Connection in Auckland substantially bumping up the overall value. But under the accelerated programme the government is pushing, it fell to 1.5.

So there’s a study out there showing that Puhoi-Wellsford’s real cost-benefit ratio is actually 0.4, rather than the 0.8 that a decidedly dodgy SKM Business Case concluded? Why am I not surprised? I must try to get my hands on this SAHA report – as the only version I’ve seen amalgamates the BCRs of all the different projects – something that’s essentially meaningless.

After discussing matters related to the calculation of wider-economic benefits, Oram finishes his excellent article by saying this:

Auckland, Wellington and Christchurch are trying to cope with growth. They have just elected mayors and councils who believe some of the solutions are more public transport and more compact urban forms.

In contrast, the government has said bluntly it believes the opposite is true. It sees the future as a continuation of the past – more roads, more sprawl. And it is investing $11b to deliver that, not only straining government finances to do so, particularly between 2013 and 2018, but also grabbing funding from local roads and other forms of transport and skewing the analysis against them.

Thanks to the Waikato Expressway and Puhoi to Wellsford motorway, urban and peri-urban Auckland will spread 150km from north to south in coming decades. Yet, there is no room to build any more roads through the Auckland isthmus. Thus the region has to have more public transport, particularly rail. But lower density induced by $3b of uneconomic road building makes the case for it even harder.

The only solution is for the government to come clean, park its road prejudice and sit down with our three biggest cities to discuss how we can do urban development much better. If it doesn’t, our shambling cities will be to the Key government what Think Big was to Muldoon’s.

It’s pretty easy to think of better ways to spend that $3 billion.

Share this