As discussed in this morning’s post, the Labour/Green confidence and supply agreement will lead to major change in transport investment priorities going forwards. Especially the following:

National Land Transport Fund spending will be reprioritised to increase the investment in rail infrastructure in cities and regions, and cycling and walking.

This goes to the heart of the question of what currently can and can’t be funded by the National Land Transport Fund (NLTF). The NLTF is the pool of money from fuel taxes, road user charges and vehicle licensing fees and which the NZTA are in charge of distributing. Most transport projects can be funded by the NLTF, however, some rail infrastructure (but not other types – I’ll explain) gets funded from general taxation. Let’s take a look at what can and cannot be funded from the NLTF under current policy:

Can:

  • State highways
  • Local roads
  • Busways
  • Bus lanes
  • Train stations
  • Trains
  • Cycleways
  • Integrated ticketing systems
  • Ferry wharves and terminals
  • Public transport operating costs (including for rail services)
  • Light-rail (presumably)

Cannot

  • Railway tracks
  • Electrification wires, signals and other equipment
  • Footpaths

There is not an entirely logical distinction between the two lists. Money from the NLTF is not exclusively spent on roads – it goes on a whole pile of different elements of the transport system like rail operating costs, cycleways, bus interchanges, train stations, trains, ferry terminals and so forth. This makes sense because a functioning transport system is crucial to our success as a city and as a country. Furthermore, people who pay fuel taxes, road-user charges and the like benefit from other people using trains, bikes or whatever to travel around – because that’s one fewer person clogging up the road for them.

Unfortunately, over the past few years the roads lobby has created a myth that the NLTF is a simplistic user-pays pool and that as it is paid for by road-users it should only be spent on roads. Here’s the latest edition of that argument from the Road Transport Forum in their response to last week’s election result:

“The road transport industry is equally as adamant that the National Land Transport Fund must remain a ring-fenced, user-pays fund that is reinvested back into roading and not used to subsidise other transport modes that make no contribution to it.”

And again from the Road Transport Forum in response to yesterday’s announcement:

“Prioritising use of the NLTF towards rail infrastructure, cycling and walking shows contempt for the user-pays integrity of the fund,” says Shirley.

The National Land Transport Fund is currently ring-fenced for roading projects and paid for by road users through petrol excise and road user charges.

“Unless Labour and the Greens have plans to start making rail users and cyclists contribute to the fund then this deal is a real kick in the teeth to motorists and the road transport industry.”

These statements are full of lies. Fuel/road taxes may be hypothecated but the NLTF is not a “ring-fenced, user-pays fund” that only pays for roading. As highlighted above the NLTF is already used (quite justifiably) to help fund things other than roads.  However, the current division over what the NLTF can and cannot fund is pretty messy and inevitably means that funding for rail projects gets left behind. As an example, look at all the problems with getting the Third Main funded over the past year or so.

Furthermore, funding rail out of general taxation creates quite a few further distortions. Although road users are clearly beneficiaries of rail investment (less congestion on urban roads, fewer big trucks tearing up rural roads and crashing into people) it’s the general taxpayer that picks up what is actually a pretty big tab. Here’s the spending in the 2017 Budget on rail:

  • $436 million for the Crown’s share of costs for the Auckland City Rail Link
  • $220 million equity investment to finance capital expenditure on the national freight network
  • $163 million to roll over an existing loan from the Crown to KiwiRail. An appropriation is required for this transaction
  • $26 million for metro rail projects in Wellington
  • $12 million from property transactions by New Zealand Railways Corporation, reinvested in KiwiRail Holdings Limited, and
  • $4 million for public policy projects and rail safety.

Overall that’s $861 million spent on rail out of general taxation – although this is probably an unusually high year because of the CRL contribution. For a bit of context that’s nearly half the amount spent on all early childhood education in 2017/18. Clearly there is a huge opportunity cost to other areas of government expenditure from rail not being eligible for funding from the NLTF.

One of the most important tasks for our next Minister of Transport is to get rid of the stupid distinctions that have been created between rail and other transport modes. This doesn’t necessarily mean there shouldn’t be any funding for transport from general taxation (better transport clearly supports economic growth and a growing tax take), but means putting road, rail and all modes on a level playing field. There’s a lot to do in this space that could involve ownership of the rail network shifting from KiwiRail to NZTA as well as opening up rail projects to being eligible for NLTF funding.

Inevitably the roads lobby will scream about such changes, but they won’t impact on the integrity behind the NLTF. This is because the fund is already used for a very wide variety of different types of projects – as it should be.

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33 comments

  1. Hopefully, we can see transport as one network rather than discreet items. A transport network is intended to move persons and goods – the mode is irrelevant really.

    1. I guess there is always going to be friction when one mode thinks they are subsidising the other. The real problem stems from the belief that road users are paying their own cost which is very far from true.

  2. There was a time before the NLTF as we know it today when the various imposts on motorists went into the general consolidated fund. I presume Ken Shirley is referring to the public resentment against the spending of funds gathered from these imposts being spent on non roading-related issues that gave rise to the current situation where they now form the basis of the NLTF, and that somehow translates into a roads-only mandate?

  3. The roads lobby argue that as the NTLF is a user pays fund paid by road users and thus always must be spent on roading.

    Yeah. Right. As if all other user pays funds we have ever had work/worked that way.

    They do this because largely they want to be able to argue that road users (especially trucks) are paying at least 100% of their way now.

    A fact which we all should know is a complete and utter load of bullshit.

    But they adopt this argument as a way to try and head off more hikes in RUCs and fuel taxes etc.

    To protect their wallets they consistently argue that because they “fully fund” the NTLF – ergo they are fully funding the roads now – ergo no increased payments by them to the NTLF are needed.

    Of course, they’re happy that other road users – like private cars, even cyclists can and should contribute more to the NTLF, but trucks? no way – they argue they’re paying bugger all way too much now. For the damage they cause to the roads and the environment.

    But sometimes gullable ministers and civil servants swallow their story – for a time.

    But I expect incoming Transport Minister & Associate Minister Phil Twyford & Julie Anne Genter will see right through such protestations.

    And send all such lobbyists back to where they come from in short order.

    1. There was a comprehensive study and report in 2007 which looked at costs and subsidies across various transport modes in NZ. It concluded that the road freight industry actually only pays around 56% of its real costs.

      The remainder is covered by government, ie. public, subsidy.

      I’ll dig through my old files and see if I can find a link to it.

        1. Thanks for that Richard. I had a quick squiz and noticed
          1/ the costs of climate change have only been partly accounted for: “the level recognises the cost of the government of complying with the first commitment period of the Kyoto Protocol”
          2/ the costs to health have also only been partly accounted for: mode choice effects on physical activity levels and thus on health is an “externality [which] is acknowledged but is not assessed in this report”

          Those were just the two things I looked up. Suffice to say, the report sets a rather low lower bound for the costs of road transport that are met by the public.

  4. Fundamentally, what needs to change is a complete mindset change – from
    “What can we spend this money on?” to “What do we want to achieve and where can we get the money from?”

    1. Actually up to now the mindsets and related spending question has always been:

      “What roads can we spend this money on?”

      Other modes and/or all other networks other than roads?

      Well. They simply. Never. Got. A. Look. In.

  5. Excluding footpaths has been a sore point for years. We once tried to get Transit NZ to build a footpath beside SH18 to Paul Mathews Dr. They told us they were not allowed to under the then Transfund NZ rules. I asked who was stupid enough to write that rule and they smiled and said “We were when Transfund was part of Transit NZ”. Different organisations but same old stupidity. When it is wet I see people walking on the side of that road trying to balance on the kerb so they are not in the wet grass but not on the carriageway.

    1. Yeah footpaths really stood out when I read the list. It brought to mind all those times I have seen delivery trucks parking on footpaths, If they want to insist on user pays then perhaps the local council should be billing all the delivery companies for the maintenance cost of all those footpaths.
      But seriously, no wonder so many footpaths are is such a poor state. With local councils getting short changed on their maintenance costs with so much money from the fund going into the big road projects, they probably have precious little money left in their budgets for footpaths.

  6. Poor old Ken Shirley. I’m going to guess his organisation were generous donors to National and didn’t give a cent to the other guys.

    Well tough Ken, the taxpayer funded party is over, time for common sense to prevail!

    1. I imagine they would donate to all parties as governments inevitably change. However, it is clear Labour are not as influenced by these donations as National are.

      1. It’d be interesting to look at the donations that were recorded up to and including the election across all political parties. It probably provides an insight as to why there policies work in specific ways.

        1. Agreed. I would really like to see total transparency with political donations. Otherwise we’ll end up like the US if we aren’t headed that way already.

          1. I saw the figures once, and was blown away by what National and Act could play with, while Labour was in the cake sale figures. Would love to see the figures again if anyone knows where to find them.

          2. Thing is, as proven by National with their $5000 dinner date tickets to meet the PM, paid as the price of the dinner to the restaurant, laundering donations is not difficult and one remains very anonymous.

  7. It will be good to have the NLTF available to build strategic rail transport. Kiwirail only seem interested in building rail when it suits their freight business, and appear to have zero motivation to build lines to service new passenger service areas.

    1. In fairness the only new line build in NZ in the last 35 years was the short Manukau branch on the Auckland passenger network, so they can hardly be accused of running around building freight lines.

    1. Wellington’s trolleybus infrastructure to be permanently switched off and dismantled starting next week, unless the new government steps in and overturns this monumentally stupid decision.

  8. This is one of two critical changes I think that need to be made for a better future transport system in NZ. The other one was also touched on by Matt – How Kiwirail operates. To my mind, I think it should be split up into a non profit State owned service organisation for the infrastructure part, and that the Kiwirail freight and passenger ops are left as the for profit SOE paying TUCs like road based trucking firms pay RUCs so that there is a level playing field for the transport sector.

    I’ve always disagreed that the infrastructure and ops parts were put back together again by Cullen when Labour started up Kiwirail. Ontrack should’ve been left separate. We all know the ops part of Kiwirail makes a profit and that it’s the infrastructure part which is where Kiwirail struggles.

    Earlier this yearthe Greens JAG came out on Radio NZ saying they were looking at possibly doing the above. Even Simon Bridges acknowledged it would be something to possibly look at if they got back into power.

  9. Simon C – I disagree about separating rail operations and rail infrastructure. It does not work that well in practice, as I know all too well from my time in the British railway industry; both the governance and the operational co-ordination get very untidy. What the rail infrastructure needs is a clear public commitment to public money – probably for ever. Where the money comes from is not quite the issue.

    The other thing which is needed is, as I have argued before, joined-up thinking in the planning process. That is, that NZTA would have a unit dedicated to looking at co-ordination in rail & road planning. This is what the original Transit NZ was intended to do, before a massive budget cut in 1990 threw the whole idea under the bus.

  10. Were:

    “• Railway tracks
    • Electrification wires, signals and other equipment”

    the bits that were spun-off to KiwiRail and why they are separated out from the things that NLTF can pay for? Odd that trains weren’t.

    r

  11. Poor argument that trains should pay “rail user charges”. Electric trucks don’t have to pay RUC, so why should commuter trains in Auckland and Wellington?

    1. I’m pretty sure AT pays track access charges to Kiwirail, as Kiwirail have to cover the cost of track maintenance, signalling etc.

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