Over the weekend I took a trip down to Paengaroa (about 30km east of Tauranga) to visit some family. After travelling through Tauranga, the fastest option for getting there is via only the second of the government’s Roads of National Significance to have been fully completed, the Tauranga Eastern Link (TEL) – the first was the Victoria Park tunnel.
This wasn’t the first time I’ve driven over the road and as with previous times, I was struck with the emptiness of it. So, I thought I’d look a little closer at it.
The TEL is a 21km, four lane motorway from Te Maunga in Tauranga (near BayPark stadium) through to the intersection of SH2 and SH33 just before Paengaroa. The first 6km upgraded the existing SH2 route to motorway standard and serves the ever expanding housing developments down Papamoa Beach. The remaining 15km is a completely new road bypassing the town of Te Puke and is tolled. The project was officially completed at the end of July 2015, about five months early. See below for a flyover of the road
It is also intended that eventually two additional interchanges along the route will be added, one roughly where the road turns away from being parallel with the coast to serve the continued residential growth in Papamoa (expected to be needed in about a decade) and the second for a proposed business park near the eastern end of the motorway. You can see the TEL to the right of the map below which is much straighter than old State Highway 2 through Te Puke which was rated as the second worst in the country for safety.
As mentioned, the project was designated a road of national significance by the government in 2009 and one of the reasons for that was in this cabinet paper outlining why the route should be tolled.
TEL has been specifically developed to generate economic growth within the Bay of Plenty region. The Western Bay of Plenty continues to be one of the fastest growing areas in New Zealand. The NZTA advises that TEL will contribute to economic growth by providing convenient, reliable access to areas of employment, and by improving access for freight to the Port of Tauranga and to new urban and industrial developments.
Currently, TEL is prioritised 45th in the NZTA‘s 2009/2010 State Highway Plan. Based on this programming, construction would not begin for an estimated 5–7 years if it were funded entirely from the National Land Transport Fund (NLTF). The NZTA‘s view is that borrowing, supported by tolling, would allow construction to commence in 2010/11. This approach requires Cabinet approval. A similar approach has previously been used in relation to the Northern Gateway Toll Road (NGTR).
At the opening of the road, Transport Minister Simon Bridges and then Prime Minister John Key praised the road as being a game changer for the Bay of Plenty.
The new Tauranga Eastern Link has been described as a “game changer” that will bring the Bay closer together and “ensure economic growth”, Transport Minister Simon Bridges told dignitaries at its official opening yesterday.
It was the “best road in New Zealand,” the largest in the Bay of Plenty and the most highly specced you could build, with four lanes, seven bridges and the biggest roundabout in the country – all completed five months ahead of schedule at $455 million, he said.
The 21km road, that heads towards the Port of Tauranga, would increase productivity and shave about 24 minutes off a return trip between Paengaroa and Te Maunga, creating quicker access for inter-regional freight to the Port of Tauranga and driving down costs.
Prime Minister John Key echoed those sentiments and said the highway had been designed to open up the region.
“This will help grow industry and jobs, improve safety and support economic development and growth.
“By improving links between centres of production and ports or airports, we can improve our international competitiveness and achieve the strong and growing economy that supports more jobs and higher incomes.”
The most highly specced is another way of saying the road had been gold plated and it certainly feels that way to drive on it. And Bridges isn’t kidding when he says it has the biggest roundabout, the whole interchange at the Paengaroa end is probably the most space hungry I’ve seen.
But when it comes to just how useful it is to the economy, it appears to be more like a movie that never lives up to its hype.
Historically most transport projects are paid for out of the National Land Transport fund but as quoted earlier, the NZTA, through the government, borrowed month to allow them to start the project sooner than otherwise would have been possible. the Cabinet paper referenced says they would borrow $137 million for the road. On top of that, interest would be capatalised to the loan and which had a potential range of $59-151 million. That $137 million would be paid for over 35 years by tolls – which are capped at $2 for light vehicles and $5 for heavy vehicles (in 2008 values), with only CPI increases allowed.
Now of course servicing that debt relies heavily on there being enough traffic. The NZTA predicted that 8,600 vehicles would use the road daily in 2016 rising to 21,200 in 2031. It’s also worth pointing out that SH2 at Te Puke never saw traffic volumes reach 21,000 and in 2006 were just over 18k per day and they peaked a few years later at just over 19k per day.
The monthly data from the NZTA only includes the TEL from March this year, ideally we’d have more results, but it shows traffic volumes are less than half of what was expected with an average of about 4200 using the road on a daily basis. Residential streets in Auckland move more people, plus in a lot less space. The results also show about 600 heavy vehicles using the road per day, only about a quarter of those using old road before TEL opened.
Lower volumes also mean lower revenues to help pay off the loan. We can see the difference between heavy and light vehicles, we can estimate what revenue would be for each month. Over the nine months we can see in the graph above, I estimate the average amount that was collected was just under $320k per month. Even with low interest rates, that’s about half of what would be needed to pay back that $137m loan. Here’s some what the Cabinet Paper says about should this situation arise.
One of the risks of any tolling proposal is that deviations from the traffic volumes forecast would have implications for revenue, and consequently on the ability of the project to repay the debt. To generate the traffic forecasts for this project the NZTA sought input from a third party, Beca Consultants.
In the event that there is a shortfall in debt repayment on TEL due to lower than expected toll revenue, the NZTA will be responsible for meeting this debt through planned risk mitigation measures.
The NZTA advises that these measures could include remodelling of the toll strategy, revisiting the toll collection strategy, identifying potential cost savings within the processing system, and potentially reconsidering the approach to managing the alternative route (while ensuring that this route remains a feasible option). If all of these measures are unsuccessful, the NZTA would then look to review the financing options (for example extending the tolling period)
I wonder at what point the NZTA push the panic button on this road. It is also probably a good example highlighting that people’s willingness to pay is often considerably lower than the perceived value of the time savings, which is important given how much importance time savings are given in project assessments.
Is it too early to call this a white elephant yet and will anyone be held to account for the wildly inaccurate traffic modelling and assessment? And yet despite its issues, it’ll look like a sane investment next the proposed motorway between Warkworth and Wellsford.
Update: it turns out the results the NZTA included in the data I used for this were only for one direction, not both directions like every other road in the dataset provided. I apologise for not picking this up.