In what is otherwise a fairly dark budget, it seems that transport – even rail – has got off reasonably lightly. Of course unsurprisingly there’s nothing in the budget about the CBD Rail Tunnel: the government’s review of that project seems to have gone on the back-burner – and the Ministry of Transport is even refusing to release to me any information on the work they’ve done in relation to the project so far this year.
All the roading expenditure is handled through the National Land Transport Fund structure, so effectively the budget announcement for that part of transport expenditure was outlined a couple of weeks back when the Draft Government Policy Statement was released. However, rail expenditure for some bizarre reason goes through the general government fund and therefore is very much dependent upon what ends up in the budget. So it was welcoming to read the following press release on transport funding:
Budget 2011 commits more than $338 million to improving commuter rail services and supporting KiwiRail to become more commercially viable.
A funding package of $88.4 million over eight years for Wellington commuter rail will help transform Wellington’s rail services, Transport Minister Steven Joyce says.
“This funding will go towards upgrading and renewing the remainder of the signalling and electric power equipment on the Wellington network.
“The Crown commitment, coupled with co-investment from the Greater Wellington Regional Council and previous investment from both parties, will transform the service into a modern reliable commuter option for Wellington.
“This work has been a long time coming and will go a long way towards easing the frustrations of commuters in our capital city,” Mr Joyce says.
The Budget also contains measures to help KiwiRail become a commercially viable rail freight business over 10 years.
KiwiRail receives the second $250 million tranche of the Government’s $750 million commitment to its Turnaround Plan over three years. The lion’s share of the $4.6 billion Turnaround Plan will be funded by KiwiRail itself from customer revenue during the 10 year plan. The money will be used to continue a range of projects, including new locomotives and wagons, and improvements to the network – particularly on the main trunk route and in the ‘golden triangle’ of Auckland, Hamilton and Tauranga.
I must say I have found it somewhat frustrating how little detail we have seen from KiwiRail on what this turnaround plan funding is actually going to: particularly in the Auckland area. One would imagine that the large sums being talked about could do useful things like triple tracks the North Island Main Trunk Line to separate freight trains from passenger trains in Auckland, or perhaps even electrifying the lines between Auckland, Hamilton and Tauranga – the electrification will go out to Papakura as part of the passenger system electrification project.
The other thing that’s interesting to note is how Wellington seem to do pretty well in getting central government funding to help upgrade their rail system, whereas in Auckland getting any money is like getting blood out of a stone. Wellington’s electric trains were fully funded by central government, it seems like Auckland will end up paying for ours through operating expenditure (fares, NZTA subsidies and council subsidies) dragging down rail farebox recovery rates and making the PT system look less cost-effective than it actually is.
But I guess overall things could have been worse for transport. It’s just a pity that the megabucks being spent on roads (often with very dubious economic justification) doesn’t go through the same value for money exercise as pretty much every other piece of government expenditure. Through the National Land Transport Fund Steven Joyce has his own money making machine collecting $3 billion a year in petrol taxes that he can single-handedly decide where to spend it. That’s a pretty shoddy system if you ask me.
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Separation of freight from passenger is a good idea. We run freight on our passenger tracks and it just creates a tangled mess over time.
Over here we run passenger trains on freight tracks!
Which is very strange. Rail moves logs to ports, coal to power stations, and dairy products to processing factories. Trying to design a commuter service over the same infrastructure is way less than optimal since the requirements of commuters is different to the requirements for moving logs. Spending $750million to try and make Kiwirail’s freight operation commercially sustainable is just throwing money away. Rail freight first needed bailing out in the 19th century and has never been profitable since then regardless of the amount of money poured in to it. If the government just let it go bust then they could concentrate on developing excellent services in metro areas as a primary focus, rather than as an afterthought.
Freight rail in the US makes money, I believe, or used to until the government got involved in making demands around passenger services having access to tracks.
Freight doesn’t care about timetables. If you have to shut a flat car or tank wagon into a siding for 30 minutes, the contents don’t complain. Try doing that with passengers and see how you get on. The only money to be made without subsidy is in freight, but unfortunately Labour blinked when Toll played hard ball and we’ve got the shitty end of that stick for another few years.
I tend to think of freight as a useful cog in the transport system. Let’s say there are situations where we need to shift stuff from Point A to Point B. Neither the road or the railway line are in sufficient condition to handle the freight (due to time taken, condition, congestion etc.) In some cases I’m sure the choices are to spend a little on upgrading the railway line and a bit on subsidising it each year – to alleviate the need to spend megabucks on a road upgrade.
The railway line between Auckland and Northland is a reasonably good example of this.
I don’t see why this situation requires any subsidy. If a company wants to move stuff from your Point A to Point B then they can either pay to upgrade the rail line or pay for the damage they create on the road. I don’t see any social benefit from subsidising a forestry company or a solid fuels company. It turns out that dairy farmers pay bugger all tax any way and I don’t see why I should subsidise the transport of their product.
Sorry obi I probably should have explained it more comprehensively. Let’s say I have to add 500 trucks worth of freight onto the road between point A and B. Those 500 trucks will create congestion problems and probably tear up the road quite a lot, they may also create safety problems, extra CO2 emissions and so forth.
I’m not saying that the railway service that could replace those trucks should be subsidised out of general taxation, but rather that petrol tax money that is raised (from all users of that section of road) plus any track access fees charged for the section of railway line should be combined and then spent where the most benefit would be gained. In that situation, because the railway line would take trucks off the road (thereby improving everyone else’s lot) it makes sense to direct the money towards keeping that railway line going.
It’s the same argument as why you should subsidise metro rail from petrol taxes – because it takes pressure off the roads.
“I probably should have explained it more comprehensively”
There is still no need for a subsidy. If the trucks damage the road then they should pay a sufficient amount to repair that damage. We don’t need to bribe them not to damage the road because damaging roads isn’t an inherent right that people are allowed to exercise for free.
Similarly, you can punish congestion by charging for it rather than subsidising congestion relief. However, while trucks might congest cars the opposite is also true. I suspect it all balances out and there is no need for the government to attempt to address this particular externality via subsidation. Should motorists subsidise airline tickets on the basis that flying takes vehicles off the road? Should bus passengers subsidise motorists on the basis that it reduces overcrowding on peak hour buses? I’m tending towards Liberty Scott’s view that this is an issue of pricing for use rather than subsidy.
The issue of whether to subsidise or to price properly is a much bigger ideological question. I am just saying that if we are going to subsidise, can we do it in the smartest way possible.
Obi – I believe that off their core routes like Auckland to Tauranga, Kiwirail actually make profit. The big problem for them is they have 3-4 decades of almost no investment as previous owners were just running down the assests rather than paying for repairs and upgrades. The new DL locos that Kiwirail brought are the first new Loco’s in 20+ years and most of remaining locos and wagons are pretty old. The money the government are investing is intended as a measure to get the company over the initial hump so that they can get core routes up to scratch and have the capacity to grow. From there Kiwirail is expected to fund the remaining needed upgrades themselves and I think it is worth remembering that this government has been pretty hostile towards rail, so for them to commit to funding like they have must mean they have some level of confidence that it can work.
From memory I think the first batch of turn around plan funding went to only a handful of projects. I think they were the new wagons they are getting from China ($29m), lengthening the Aratere ferry and lowering some of the tunnels just north of Wellington. At this stage I don’t think any of the turnaround funding has been spent on Auckland as most of the immediate things needed are covered by DART or Electrification.
Also included were the 20 DL locos, and the new Tranz Scenic carriages. Auckland to Christchurch freight transit time was the other focus, money has been spent on backdated maintenance and bridge renewals to remove many temporary speed restrictions. Auckland has already benefited from big rail investment, but a third track south of Westfield is on the cards.
I thought the DL’s and the Tranz Scenic carriages were planned and ordered well before the turn around plan was agreed to
Bris, if I’m not mistaken, there’s considerable third tracking where it needs to be, particularly on the lines up north and up to the port. With those coal trains, you need it (and you could argue a fourth is needed in places too).
Informative site of where our taxes are going in the Ministry of Transport.. http://wheresmytaxes.co.nz/
“Auckland will end up paying for ours through operating expenditure”
It also looks like this super city council is investigating rates increases for all those people living within a certain radius of new rail stations. Their argument is that the rail station increases property values and therefore people should pay more rates. On the surface this sounds like an interesting proposition but many of those people living around the new rail station may have had very little say in whether or not a station gets built and yet they will end up funding it and other stations. There is concern that this approach may dampen developers’ desire to build infill housing around new stations – thus confounding some of the assumed benefits.
BTW, the same super city council is proposing to rate farmers off their land because of a change in the rating base which rates land on its subdividable value. In Rodney this means that 4th generation farmers are now facing having to sell their land to developers – all because their land happens to be out on the eastern seaboard around Omaha and has a view of the sea. But the P2W freight road will give any new developments a fast access route into the metro areas of the city.
You could actually argue that those near stations already pay for it though increased rates, this is because rates are based on the capital value of land so it that value improves through infrastructure improvement then their rates bill will increase correspondingly.
You’d think so wouldn’t you! However this was in yesterday’s Herald:
“Homeowners whose properties benefit from nearby big transport projects could face higher rates or levies under new plans by the Auckland Council.
Chief planning officer Roger Blakeley says targeted rates or infrastructure levies are among several ideas being considered for paying for such projects under the proposed Auckland Plan.”
My take on the above is that there is a proposal that homeowners living near big transport projects shouldpay a levy on top of their standard rates. But I could be misundestanding the intent.
ARC already had a graduated transport levy, based on access to public transport. They could easily “enhance” that to charge more for properties close to the rapid transit corridors (rail or bus).
My understanding of yesterday’s herald article is that the additional rates would only tap into land value appreciation over and above what would have otherwise occurred without the railway improvements.
The interesting consideration is ensuring that doesn’t put off development around rail stations. I have talked to Roger Blakeley about all this and he’s well aware of the balancing act.
What amazes me is actually how much money Ministry of Transport does get (according to that pie chart). I mean, does that include the money from the NLTF? If not, then it is a huge amount.
Better to have some money in the budget for rail than none I would say. But it frustrates me immensely that the road tax is hypothecated and can’t be touched, even in a case like this where they are imminmently more sensible and deserving things we could spend our transport funds on than new motorways.
The $4b is mostly the NLTF (75%). The turnaround plan and some loan rollovers account for most of the rest.
oh yes, sorry, after asking that question I went and looked in more detail. I should have known it must – otherwise MoT would just be getting an incredibly disproportionate share of funds 🙂