A couple of days ago I received a bunch of documents from an OIA request to the NZTA on the $212 million in regional road spending announced recently. I haven’t been able to look at them yet seeing as I’m away however it looks like I’m not going to have to go through them immediately as Rob Salmond is already on the case following a similar (but not exactly the same) request to the Ministers office.
Salmond devotes a bit too much time to partisan point-scoring, as he’s an advisor to the Labour Party, but his analysis unearths some worrying facts about the economic analysis of the projects. His analysis is definitely worth reading.
As a reminder, the majority of the $212 million in new road spending was to come from the Future Investment Fund – i.e. the proceeds from recent asset sales. According to the press release, five of the fourteen “critically important regional projects” are going to be progressed immediately at a cost of $80m, they are:
- Kawarau Falls Bridge, in Otago
- Mingha Bluff to Rough Creek realignment, in Canterbury
- Akerama Curves Realignment and Passing Lane, in Northland
- State Highway 35 Slow Vehicle Bays, in Gisborne
- Normanby Overbridge Realignment, in Taranaki.
In spite of their critical importance, Salmond finds that the projects almost all performed badly on NZTA’s cost-benefit analysis:
Five of the roading projects receive the worst kind of assessment from the officials at NZTA, an estimated benefit cost ratio of “0 to 2.” (see page 32) This means the officials cannot discount the possibility of these roads having no benefits at all, despite costing the taxpayer millions. More on this later. All the projects have a benefit cost ratio quoted as a range, partly to fudge against the public knowing the exact numbers.
Why would they want to do that? More on that later, too.
Officials estimate that up to $130 million of the highways money mooted in these projects and investigations would be wasted on roads with likely no net benefit. If some of those roads are not ultimately funded, that will represent less money wasted on roads, but more money wasted on unnecessary investigations to tell us what we already know – these projects are dogs.
NZTA considers a benefit cost ratio of 1 as an absolute minimum, as anything below that involves the country actually losing money by doing the project. Usually, of course, benefit cost ratios have to be much higher than that to attract funding, because there are so many possible good things a government can do with its limited money.
Salmond goes on to take a closer look at the analysis of one particular project, the widening of the Kawerau Falls bridge:
…the official cost / benefit ratio for the Kawerau Falls bridge was 1.1 (page 10). Officials said they have tried to recalculate this a number of times, and always come out around 1.1. So what range of benefit cost ratio appearedin the final package for Ministers to consider and promote. It looks like an obvious candidate for a “0 to 2” classification, right? 1.1 is pretty much rightin the middle of that range, yes?
No, no. Officials have instead been pressured into calling this a “1 to 3” benefit project in the summary documents (page 32). That is risible.
If a robust 1.1 becomes “1 to 3” in the sales pitch document, just imagine how dreadful the benefit cost ratios on the “0 to 2” projects really are.
There’s much more in the OIA documents that deserves careful examination and I’m keen to see what I’ve got from my requests, but it certainly looks as though many of the projects don’t add up. From the response I received it does highlight that some of the projects including the Normanby Rd Overbridge Realignment have had and Motu Bridge replacement have had no reports on them in the last 5 years.
It’s interesting to contrast this approach to roads spending with the Government’s decision to axe an extension of the highly successful Northern Busway that would have cost about the same amount.