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.
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.
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.
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:
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.
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?