We’re approaching halfway through the consultation period for the Council’s 10 year budget and already 4,300 Aucklanders have provided feedback. This budget, technically known as the “Long Term Plan”, outlines where billions of dollars of Council investment will go over the next decade.
One of the big issues being consulted on in this year’s Long Term Plan is a regional fuel tax of 10c (plus GST) per litre, to help increase Council’s funding of transport. A brief explanation of the Regional Fuel Tax is outlined in the video below:
A Regional Fuel Tax is not a new idea for helping to fund Auckland’s transport needs. In 2008 the law was changed to allow applications for a Regional Fuel Tax and an Auckland scheme was developed in detail, which would have funded electrification, our electric trains, the Hop Card system, train station upgrades and Penlink. This scheme was quickly reversed in 2009 and ultimately the law was changed in 2013 to remove the ability for Regional Fuel Tax applications to even be made.
The new government plans to reverse this law change, once again making it possible for an application to be made.
The Long Term Plan’s “Consultation Document” lays out in detail the argument for the Regional Fuel Tax. Firstly, the key point that without substantial extra new revenue, funding for transport will be limited basically to completing committed projects (like the City Rail Link), running existing services and looking after current assets.
…it is clear that without additional funding we have little ability to do anything other than projects already committed and renewals of the existing network. The baseline budget for these committed projects is approximately $9 billion for 10 years. To start delivering ATAP projects we need additional funding.
Normally we would fund this sort of investment in long-life assets from borrowing but our capacity to borrow sustainably is limited. Therefore, we need to fund this from operational sources that can both fund directly and also be leveraged to create additional borrowing capacity.
Unfortunately, the mess Auckland Transport made of the draft RLTP means that we don’t yet know where the extra $2-3 billion of spend into transport that’s supported by the Regional Fuel Tax will go. This makes the consultation process a bit weird, because at the moment the Council is asking Aucklanders to support paying an extra tax without knowing what the money will be spent on. This may mean public support for the Regional Fuel Tax is lower than it would otherwise be. Once ATAP is updated and a new Government Policy Statement (which details priorities for government’s transport spend) is released, it should be a lot clearer how important the fuel tax is.
The consultation document goes on to compare the Regional Fuel Tax with what exists at the moment – the Interim Transport Levy:
Our preferred option is a regional fuel tax. The new government has indicated it is developing legislation that would allow Auckland to introduce a regional fuel tax in 2018, of up to 10 cents per litre plus GST, for both petrol and diesel, for a period up to 10 years. The estimated revenue from a fuel tax is $130 to $150 million per annum. The combined impact of the direct fuel tax revenue, matching funding from central government, additional borrowing enabled, and infrastructure investment in greenfields areas by Crown Infrastructure Partners would enable an $11 to $12 billion transport infrastructure programme for Auckland. The additional borrowing required is not likely to be significant if the assumptions of NZTA/central government funding and additional growth infrastructure charges are met. Any additional borrowing required can be managed within our prudential borrowing limits.
Another option is to continue with a targeted rate such as the Interim Transport Levy (ITL). In 2015 we introduced the ITL for a period of three years to provide dedicated funding for additional transport projects. The ITL is a fixed amount of $114 for non- business ratepayers and $183 for business ratepayers and is due to expire at the end of June 2018. There are two issues with this option – firstly the amount of funding raised by the current ITL is still far short of what is needed to deliver a significant number of the ATAP projects (the current ITL raises $60 million per annum and would only provide sufficient funding and debt capacity for a transport investment programme of approximately $10 to $10.5 billion). Secondly, the ITL costs fall equally on all ratepayers regardless of how much they use the transport system. We don’t believe this is the fairest option going forward and would only consider extending it we were unable to implement other, fairer options. If there is any significant delay to introducing our preferred option of the regional fuel tax then we will consider continuing the ITL as a temporary measure.
A further option would be to increase general rates. This is not considered a good option because of the significance of the increase across all ratepayers that would be required (to deliver an $11 to $12 billion programme an increase of around 9-10 per cent), and the lack of transparency to the community. Like the ITL, general rates would not reflect individual ratepayers’ usage of the transport system.
We think a regional fuel tax is the fairest option. Transport users would pay according to the amount they travel (estimated to cost about $140 per year for the average household) rather than every ratepayer – some of whom may be very low users of the transport system.
Personally I think there’s a pretty strong argument for continuing the transport levy as well as introducing the Regional Fuel Tax. There are a few reasons for this
- Aucklanders are already now accustomed to paying it and so the council are paying full political cost of bringing in fuel taxes anyway
- The vast bulk of the ATAP funding gap will remain unfilled, even with the fuel tax in place.
But if you were to choose, the Regional Fuel Tax is better because it raises a lot more money in a way that probably more fairly reflects how much people use the transport system.
It’s a bit difficult to know exactly what projects the Regional Fuel Tax will help to fund, but looking at the project list in the draft RLTP (with a bit of guesswork around how it might be rearranged to actually reflect the Government’s and the Council’s priorities), some clear candidates appear to be:
- The AMETI Eastern Busway, which has languished in various rounds of investigation for years now with little clear progress being made.
- The next set of electric trains, to allow better train frequencies once City Rail Link opens.
- A (presumably quite big) increase to safety projects.
- Network optimisation
- Road seal extensions
- City centre bus improvements
- More bus lanes
- A (presumably much larger) cycling programme
- The Council’s share (if there is any) of light-rail
A scenario where none of this can proceed and we are back to the $9 billion programme of current commitments and asset renewals would be a disaster for Auckland. While the government might still proceed with some of the big investments, like light-rail, there would be no money for the big changes needed to safety, cycling, bus lanes and very popular areas of investment like road seal extensions.
It seems like we can expect more consultation on the specifics of the Regional Fuel Tax, with the Long Term Plan consultation document’s section on transport ending by saying this:
There is still a high degree of uncertainty about the government’s priorities and how much flexibility the regional fuel tax legislation will allow. However, what we can say is that all funding from a regional fuel tax will be committed to transport projects and/or services and will improve the performance of Auckland’s transport network. After the ATAP review is completed in March, we will consult with you on the specific transport programme we would fund from the Regional Fuel Tax (and an assumed matching government contribution).
For now, it’s worth submitting that you support the idea of a Regional Fuel Tax – at least in principle. So far there’s a pretty narrow majority of submitters who support the Regional Fuel Tax and without it there’s no chance of making much progress at all on transport in Auckland over the next decade.
You can have your say here.