How should we allocate transport funds?

With a general election later this year there should hopefully be some good debate about transport matters. A lot of this will inevitably revolve around projects: City Rail Link of Puhoi-Wellsford? In Wellington, Basin Reserve Flyover or light-rail to the airport? But should we perhaps take a step back from these debates and give a bit more thought to the fundamental way in which we allocate transport funding? What are the flaws with our current system and how could that be improved? These are all interesting questions that should be explored by the transport policies presented to us later this year – particularly by opposition parties.

Whether there are flaws in our current system of funding allocation obviously depends on what you think of the current government’s decision to prioritise roading projects, particularly building new state highway projects. The proposed Government Policy Statement shows how building new state highways will dominate funding allocation over the next six years:

At first glance, it doesn’t seem particularly smart for us to have one aspect of our transport funding so much higher than everything else – but maybe that is simply because I don’t think we should be spending so much on new state highways. Would I feel the same about such a huge focus on say public transport infrastructure? Well good question – these are all political issues, whether one thinks that we should have more of a roads-focus or a public transport focus.

Obviously one would expect political parties to have transport policies that reflect their particular political bent. But there are some elements of funding allocation which seem obviously open to improvement – regardless of our particular political position. At a broad level, I think these are:

• Giving the regions more say over how transport money is spent in their area. In other words, providing some level of “bulk funding” to local government and leaving them to decide how they spend it. The main justification for this is that local governments are likely to have a better idea about what’s needed for their area than central government and that people tend to vote on transport issues more in local government elections than in national elections (meaning that giving them more spending power is quite democratic).
• Allowing all transport projects to compete against each other for funding. At the moment the GPS splits transport funding into various “activity classes” as shown in the different bars of the graph earlier in this post. An upper and lower band of possible funding levels are outlined in the GPS, with projects within each activity class effectively competing against each other for funding – but crucially not allowing projects across the activity classes compete against each other for funding. So we can end up with very cost-effective projects missing out on money because that activity class has been exhausted, while other low-quality projects still get funding because they have a bigger allocation in the GPS. This seems fundamentally a very inefficient process, and I would prefer simply to see the whole National Land Transport Fund being available to any project each year, with the projects ranked for funding regardless of type.
• Ensuring that all project funding is adequately “risk assessed”: By this I mean that all projects should be assessed based on higher, lower and mid-level fuel prices in the longer term, as well as other sensitivity testing about slower or faster traffic/patronage growth than expected.

These three changes to the funding allocation system seem fairly obvious and independent of political ideology, except perhaps the issue of how much direction central government should give to transport policy and how much should be decided on by local government.

What other changes could we make to the process of allocating transport funding? Obviously some decisions will always depend on the political situation (as it should in a democracy, hence the desire to give more power to local government as that’s often where transport is more of an issue in voters’ mind) but there are probably other ways of improving the effectiveness of how we spend transport dollars. NZTA spend around $3 billion a year on transport, how can we better make sure that money is allocated in the smartest possible way?

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