Peter Nunns is an economist working in Auckland with an interest in transport past, present, and future. (Disclaimer: The opinions expressed here are his personal views and do not reflect upon the position of any organisation with which he is associated or constitute professional advice.)

The recent discussion document released by Keep Auckland Moving states that Auckland faces a transport funding gap of $10-15 billion over the next three decades. This reflects the difference between expected funding and the projected costs of the projects identified in the Integrated Transport Plan.

funding-gap-analysis

Previous analysis published on Auckland Transport Blog (links) has found that the lion’s share of these costs are related to a few high-cost road projects like Puhoi to Wellsford and the Additional Waitemata Harbour Crossing that duplicate or upgrade existing routes.

I’d like to go a step further and suggest that the supposed funding gap does not need to exist at all. Auckland doesn’t lack for road capacity – in the most car-dependant parts of the city it would be physically impossible to devote further space to cars – but it does not manage road space very efficiently. We are dealing with an infrastructure productivity problem here, and proposing to fix it by spending more money on further infrastructure that we will then use equally inefficiently.

Several recent international studies have found that the best way to improve road transport outcomes is not to add capacity but to implement mechanisms to manage demand more efficiently. In particular, they single out road pricing as a way to minimise congestion and keep roads clear for higher-value traffic.

One is from the McKinsey Global Institute. It argues that better use and management of existing infrastructure could deliver large savings relative to projected investment needs. Like the Integrated Transport Plan and the Keep Auckland Moving discussion document, it surveys global infrastructure requirements over the next several decades – and finds that planned spending falls short by trillions of dollars.

Unlike the ITP, however, the McKinsey report goes a step further and considers how we could avoid or forestall this investment by using existing infrastructure more productively. It estimates that better management of demand and infrastructure delivery would reduce the need for investment by 40% – a massive saving when you consider the cost of building infrastructure.

These interventions are far more cost-effective than adding additional capacity – as the comparison chart below shows, the benefit-cost ratios of demand management projects tend to be an order of magnitude higher than merely adding capacity.

Peter Nunns - MGI 1

A second study from Australia’s Grattan Institute examines the state of Australian cities and identifies congestion as a major impediment to improved productivity. But, as with the McKinsey report it argues for road pricing as a less expensive and more beneficial alternative to adding capacity.

Peter Nunns - Grattan 1

A third, earlier study, the 2006 Eddington Transport Study from the UK , concluded that road pricing would be a cheaper and more economically beneficial alternative to a massive investment programme. It concludes that road pricing could deliver economic benefits of GBP28 billion a year by 2025.

In the words of the report:

Peter Nunns - Eddington 1

Ironically, the Keep Auckland Moving discussion document is on the verge of a sensible answer to Auckland’s infrastructure productivity problems. The second option identified in the report includes road pricing as a revenue raising mechanism. It envisages raising over $250 annually by 2031 using a charge of around $2 on parts of the road network.

CBG options

However, as the document goes on to note in passing, “charges at this level also achieve significant travel benefits” and that they could be “adjusted over time to help manage transport demand”. In other words, road pricing would help to reduce congestion and hence reduce the need to fund additional road capacity. If that’s the case, why not just implement smart road pricing, reap the rewards of reduced congestion, and save on the billions of dollars of road projects in the ITP that would no longer be necessary, or wouldn’t be needed so soon?

Share this

60 comments

  1. Good points. NZTA’s brief is to operate the state highway network efficiently, alllowing single occupant cars to congest the network at peak times, and building additional capacity to cope runs counter to this.

  2. Good to know NZTA is already on to this and have been doing so for a number of years with their Traffic Demand Management system.

    1. They’ve been doing road pricing, huh? I don’t remember seeing this. Apart from things like the traffic lights as you enter motorways, and sporadic campaigns to encourage people to carpool, I don’t see what NZTA has really been doing to influence traffic demand.

      1. I said they are doing TDM, I never made any mention of road pricing. My understanding is that NZTA and the government are principally opposed to a discriminatory tax on assets that have already been paid for.

        What they have however are the ramp meter signals, tidal flow lanes, variable speed limits, real time traffic information, active monitoring of road conditions, adaptive traffic signals and so on.

        1. The thing with that, snow flake, is that this discriminates against public transport. Since we have a massive built infrastructure with our roads, if the government is opposed to taxing them because they’ve “already been paid for”, how are we supposed to encourage a shift towards public transport, which has been substantially under-invested in and therefore does have to be paid for? This really favours the road network.

          That probably wasn’t what you meant when you said “discriminatory”, and maybe you were talking about equity for lower-income road users, which is also an issue. But that’s a different kettle of hoki.

          1. Where does the discrimination come in, is PT being penalised in some way by all roads being treated as equal? Or are road users getting some special benefit.

            The only road I know of in the country that discriminates is the northern busway, but I wouldn’t call that a road in the general sense.

          2. The Southern Rail Line, or Western, or Onehunga, or Eastern, or Manukau.

            I realise that they aren’t roads, but the are paid for transport infrastructure that people are charged to use through line charges from kiwirail. This is no different to NZTA charging for vehicles to use the motorway.

          3. I’m quite certain that all rail lines have usage charges, not just the ones in Auckland Sailor Boy.

        2. We already collect fuel taxes and RUCs on roads that have “already been paid for” and spend a huge chunk of that money building new roads, so I don’t think that principle is one the government actually follows.

          1. Fuel taxes and RUGs are applied on a level playing field regardless of time of travel or what road you choose to use. The are also used to help maintain the roads you use and keep them operating at the intended level of service.

          2. Yes, I’m aware some of that money also goes to maintaining existing roads, which is why I said “a huge chunk of that money” goes to building new ones, rather than “all of that money”. Whether it’s a “level playing field” or not, the government currently charges people to use the roads we have at the moment, and spends a significant fraction of that money building new roads (about 40%, from here – http://www.nzta.govt.nz/planning/nltp-2012-2015/report-allocation.html).

            I’m also aware that the government doesn’t support tolls on existing roads, congestion charges, and so on, and that might be a weirdly specific stand on some mysterious principle, but the more obvious explanation is because it’s politically unpopular. Which is a fair enough reason itself, this being a democracy.

            As for whether it’s “discriminatory”, I think you’ll have to be a bit more specific. Discriminating between what? Our current system discriminates between road users on the basis of the type and number of vehicles they own, fuel efficiency, fuel type, vehicle weight, and the distance driven. It doesn’t discriminate on the time of the journey, type of road, the number of occupants in the vehicle, the volume of traffic, the cost to build or maintain each particular stretch of road, or the opportunity cost of using that land as a road rather than something else.

            What makes that in particular a “level playing field”, but not tolls, a cordon, or a network charge? In fact, since new roads are built to cater to increases in traffic, it seems just as fair to pay for them with a levy on new and imported cars.

            I would actually like to know, though. Road pricing is unpopular – a lot of people agree with you that charging people more to use congested roads is unfair. Some people do because they think that tolls etc. will be in addition to current fuel taxes and they oppose paying more. Some people are worried about privacy. But some people oppose the whole principle. Why?

        3. What they have however are the ramp meter signals, tidal flow lanes, variable speed limits, real time traffic information, active monitoring of road conditions, adaptive traffic signals and so on.

          The problem with every one of these is that they only manage demand in the local sense. That is, they manage the cars that are already on the road. On ramp lights just make you wait at the ramp instead of the actual motorway. Road pricing gets actual cars off the street.

          I’m slightly confused with this statement I often hear – “the roads are already paid for”. If the new roads have been paid for in advance, why are we waiting to build them? Or do you actually mean “the money for paying these roads has been reserved from the taxes to be collected in the future” which to me is completely different and requires many big assumptions to come true in the future. And we all know how good people are in predicting the future.

          1. Roading projects tend to be paid for out of an annual budget. So they may get a few billion each year but they need to plan out how to spend it. We have only seen a few exceptions to this being the northern toll road and the TG being a PPP.

      1. All the above examples have been successful in reducing congestion.

        If such things had not been done we would be in really bad shape right now.

        There is still plenty of scope for improvement however.

        1. NZTA have developed means to keep their assets more free flowing, particularly control at on ramps. But these are network specific and do not by themselves reduce congestion nor inaccessibility for the city as a whole.

          1. How do these assets manage to flow more freely if there has been no reduction in congestion and no additional road space added?

            Also what’s this inaccessibility you talk about? Are you referring to mobility impaired users?

          2. I think what Patrick means is that the ramp controls improve the flow and congestion on the motorway network, but at the expense of some of the feeder roads so perhaps little net change for the city as a whole.

  3. The billions we save by -finally- accepting that endlessly increasing road space does not improve accessibility or efficiency can be -need to be- directed to plug the critical gaps in Auckland’s ‘missing modes’.

    And in this we are extremely lucky as it won’t take much. Auckland Transport [with the Council and NZTA with some funding] are already on the way to building the foundation: New bus network and Integrated Ticketing. The previous government funded the rail network upgrades of Project Dart and electrification, and the current government have kindly loaded AT the money to buy the new trains for the existing network.

    So now all we need to do is build a short 3.5km tunnel at the heart of the network and we will unlock access to the 100km existing rail ROW and suddenly have a Metro system. No other city in the world is as well placed to spend such a relatively small sum of money and end up with such a useful network!

    Additionally a network of busways or bus routes with considerably improved priority needs to be added, especially in the further out suburbs, and along with more efficient use of the road network as outlined above: Boom! Suddenly a city with great options; the lavish motorway network functioning better, and more than one joined-up system to choose from.

    The city-wide cycle network is also an urgent and extremely cost effective use of these funds.

    1. Agreed Patrick, the ROI on the CRL is insanely high when compared to the other motorway projects we are doing. It is an equivalent to the CMJ in the transformational effects on the system.

  4. Funding gap? Planning gap! Time
    For our politicians and planners to get serious about spending money efficiently and drop the kitchen sink approach. Their transport programme reads like an all in wish list drawn by a comittee of squabbling factions, each hedging one grandiose dream against the others.

  5. But Patrick, thats going to need an out break of maturity, sensibility and fiscal understanding. Anyone really believes this might happen under this current country party.

    1. No it won’t happen, it will only happen with a change of government and hopefully whilst in opposition National will have a clean out such that when they are re-relected in a subsequent election they have some people assigned the transport portfolio who aren’t ideologues.

      1. I think it’s party policy, isn’t it? I don’t think it’s Brownlee/Joyce alone. As has been discussed before, right-wing governments in other countries see the value in rail. It’s troubling that our lot do not. They really do seem to be the ‘country’ party.

  6. Road pricing is fine for the benefits discussed as long as effective alternative travel options are in place and in Auckland we’re a long way away from having them. You can’t price vehicles off the road until the PT infrastructure is properly in place as the alternative. The congestion charge works in London because it is. I haven’t seen enough discussion of this from the Keep Auckland Moving group.

    Interesting to note the different transport management systems. How many of these do we currently use in Auckland?
    I had a great run through the greenlane intersection this week, taking my car to work. The motorway on-off ramp was off! (sorry, couldn’t resist that).

    1. JeffT, that’s so true about congestion charging, and it also applies to ‘managing demand’ on roads. Most public transport users and car drivers have no say on the matter when it comes to the times they have to travel – it is usually to go to work, to school or university, and to other scheduled events like movies, sports etc. I suspect that there’s very little time flexibility for most trips, so there is no great benefit to be had in imposing a charge on people for travelling at the peak times.

      1. The charge is a mechanism to force people to change the mode they use to travel. In the case of congestion charging it makes PT more attractive in comparison to driving.

        This then reduces congestion potentially bringing some people off PT who don’t really care about the money. In effect you are shifting the equilibrium in favour of the poor using PT and the wealthy driving.

        1. That’s not true, it’s a mechanism to ration peak driving demand. The main purpose and effect of these pricing schemes overseas is to change when people drive (peak spreading, shift trips to off peak), where the drive (avoid strategic links in favour of local roads, avoid central city in favour of local centres), how much they drive (short distance instead of long), how much value they get out of driving (chain trips into one journey, share they cost by carpooling) and whether they drive at all (simply not make the trip). The shift to PT is actually minimal, in the case of London it was negligible where they had very high PT use anyway.

          It’s like power. We have peak and off peak power pricing to manage power consumption. It’s not about shifting people to gas heaters, candles or wood burners, it’s just about managing and rationing the resource itself.

          1. Nick, that’s pretty much a fictitious sales pitch. Here in the real world people are required to be at work during core business and therefore congestion pricing has no impact on them in the way you suggest.

            Ironically, due to the pricing forcing some users off the road you may actually encourage the wealthy to make more discretionary trips than before.

          2. How is that forcing? That is allowing.

            Also, I think that the argument regarding necessity of trips is a red herring. For most people only 2 trips a day are truly necessary all others are voluntary, and most can be done by PT walking or Cycling. I would like to see a system where charges only exist entering a central area, this will force people onto WRR or to not drive to Newmarket or town to shop, but to catch the train or bus instead.

          3. “Here in the real world people are required to be at work during core business and therefore congestion pricing has no impact on them in the way you suggest.”

            Actually in the real world there are a whole variety of work patterns and requirements. Pricing roads efficiently will incentivize both employees and employers to arrange employment in a more cost effective way with respect to travel. Remember, we only need a modest proportion of people to change their travel choices to make a huge amount of difference to congestion.

          4. Sailor Boy, how is charging a toll allowing someone not to drive?

            If there is no toll someone can already choose to drive or not, if you charge a toll however you may push them outside of what they can afford and hence forcing them not to drive.

          5. Swan, do you honesty believe that retail stores will change their operating hours to suit employees driving to work rather than maximising their sales potential.

            If that were really the case that would be another reason to not have tolls.

          6. Snow flake, read my comment. Are retail stores the only employer in Auckland? But yes, I am sure transport considerations will be one of the many things that employees will consider when finding a job in retail.

          7. My point was Swan, most people don’t have much choice over their work hours and they ones that do already shift them for various reasons such as traffic. A congestion charge is not likely to have much of an influence as to the time the vast majority travel.

          8. You seem to be very omniscient snow flake. Remember, elasticity of demand increases with increasing time horizions. It may not change peoples behaviour overnight, but in the longer term, people do choose where they live, work, their mode of travel etc.

          9. In the highly competitive housing and labour market here in Auckland choice is not something the average person has in spades.

            If there were to be a congestion charge between 6 and 10 and again between 3 and 7 there would be few people being able to negotiate travel outside of these hours.

          10. Those are very wide bands snow flake. That’s a straw man. In any case everyone I know has chosen where to live and work. Remember it is a choice to live in Auckland at all! So, yes, people do respond to incentives.

          11. Yes they are wide bands swan as we are talking about transport planning here. If you want there to be any measurable difference there is no point putting all your time and effort looking into the 0.1%, even talking about the 0.1% is largely a waste if time.

            Now I’m sure there are a few people who choose to not live in Auckland, just like I’m sure there are some people who choose to have a low paying job, who choose to work at night, who choose to live in a carp house miles from home and choose to not make sure there kids go to school. But when it comes to transport planning its more important to look at what the massed will do rather than what 0.1% of the population may do.

          12. Who is talking about 0.1%? A recent study on the second harbour crossing ( I don’t have it hand) indicated that if the crossings were tolled at $6, a large minority of people would stop driving at the peak to the point that the second crossing would be completely unnecessary. So a high degree of elasticity and far from 0.1%.

          13. Was that because they had shifted to bus or rail however, rather than deciding to turn up to work 2 hours late.

            On a similar note however, a few years ago when the traffic volumes got down to 140k they worked out there was no need to move the median barrier anymore.

          14. You are focusing on what might happen the day after implementing road pricing. Try to think about what might happen after a year or a decade – those are more relevant timescales when it comes to transport planning.

  7. Without reading through NZTA’s many links, does anyone know if in general terms NZTA gives greater weight to the statistic of ‘people numbers’ over ‘vehicle counts’ in it’s research and advice?

    The latter would tend to only support projects skewed towards road funding, whereas the former would see them deciding the most efficient developments to cater for growing numbers of people getting where they needed to go. This is more likely to see PT options ranked as being the most effective solution, particularly where heavy congestion is already a problem.

  8. In time petrol prices will rise so much that driving will become a luxury regardless. Let’s hope we’ve invested enough in PT by then. Also one of the alternatives to road pricing stated in Keep Auckland Moving is a higher increase in fuel taxes. This will also make it more expensive to drive and will be harsher on those who have to travel a greater distance to commute and who might not have PT as a real alternative.

    1. sorry, this was supposed to go under snow flake’s comment above. My script blocker did some funny business.

      1. Continuing on the replies to snowflake then, another reason not to adopt congestion charges if it creates different ‘classes’ of transport users, albeit along socio-economic lines. Being a young country, we like to think we have an egalitarian society.

    2. “In time petrol prices will rise so much that driving will become a luxury regardless”.
      Highly unlikely in my opinion. Petroleum-derived fuel is not a prerequisite for driving, present fuel economy figures can readily be improved on and large parts of the country and the economy will not warrant PT. Driving is likely to get somewhat more expensive in real terms but a luxury? I think not.

    3. Sorry for not getting to your post sooner.

      NZTA has 5 main goals on their website, two are about the quality and safety of their roads, then there is improving freight, improving PT and lastly delivering the RoNS.

      As we see with a number of on-ramps they do favour T2’s and trucks however looking at their priorities its mainly about providing safe and reliable roads than the actual movement of people.

      It does appear however that they should be looking into things like the CRL it seems.

  9. Just another push factor – along with high petroluem prices and RUC’s.

    But why should the poor be kept poor by having no other choice but to devote a growing percentage of their income to running a motor car?

    But the universe is not that black and white. I would prefer to use Transit rather than driving and we are far from “poor”.

  10. Yes as I said on the radio interview it is true that the poster cities for road pricing all had very mature Transit networks in place before the pricing mechanism: London, Stockholm, Singapore. So it is much trickier to introduced it here as it is undeniable that we only have an improving but hardly high functioning set of alternatives to driving for most journeys at most times. The proposal for Auckland is to introduce this system in order to fund the improvement of the missing modes. I guess we could do them both at once, but we run the risk of causing new problems. Say if we price the motorway network this may simply overburden local roads. Still, it would be great for business users of the motorway as they would no doubt happily pass on any charges and claim them as expenses. And for those for whom the cost is trivial….

    It is also true that in the absence of complete alternatives road pricing is more regressive, that is it is harder on the poor. But then so is petrol tax, and we already have that. The other point is that congestion makes everybody pay with time, which is a cost, though perhaps not so regressive? Though probably not, a poorer person rushing to their second job is just as held up as the high charge-out lawyer, and just as significantly inconvenienced….

  11. What everyone has ignored is the cost of the road pricing infrastructure, the ongoing operating costs, debt recovery costs etc. All this has to be borrowed, amortised overtime, built and depreciated. A huge expense and deployment of technology aimed only at extracting revenue.

        1. It isn’t about extracting revenue though, so all your points are moot. It is about increasing efficiency.

Leave a Reply

Your email address will not be published. Required fields are marked *