iab transport funding final

8/10/2019 IAB Transport Funding FINAL

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1cti on X

CONTENTS

02 EXECUTIVE SUMMARY

04 SECTION 1: Introduction

12 SECTION 2: Meeting the challenges of Aucklands growth

22 SECTION 3: The funding gap

26 SECTION 4: Proposed funding pathways

38 SECTION 5: Comparing the two pathways

48 SECTION 6: Key findings

50 APPENDIX: Glossary and supporting documents

AUCKLAND NEEDS TO PLUG A $12 BILLION TRANSPORT FUNDING SHORTFALL OVER THE NEXT30 YEARS. THE COST OF DOING NOTHING IS MORE SEVERE CONGESTION. THE PRICE OF ACTIONINCLUDES HIGHER RATES AND FUEL TAXES OR PAYING TO USE THE REGIONS MOTORWAYS.


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3

EXECUTIVE SUMMARY

Auckland faces stark choices. Over the next 30 years the performance of our transport systemrelies on securing additional funding. The question is: are Aucklanders prepared to pay more

for improvements to their transport system and, if so, do they prefer higher rates and fuel taxesor being charged to use the motorway?

With current funding sourcesat present levels our city needsan extra $12 billion to meet thetransport objectives of the 30-year Auckland Plan. In todaysdollars, this is equivalent to around$300 million per year over thenext 30 years. We could choosenot to spend that money, butthe impact of doing nothing isconsiderable.

The main pressure comes fromrapid population growth. Oncurrent estimates our population isprojected to reach two million by2035. Two-thirds of this growthis expected from our birth rateand internal migration, and one-third as a result of migration fromother countries. In order to cope,Aucklands transport system must

be upgraded across all modes roads, public transport, walkingand cycling.

The Auckland Plan highlightsthe challenges faced byAucklands transport system.Our incomplete roading systemand under-developed passengertransport system is reflectedby: heavily congested roads,particularly at peak times; aneed for significant and ongoinginvestment in maintenanceof existing infrastructure, an

unreliable passenger transportsystem that is not competitivewith private vehicles; and therestricted ability to move freightacross the city. At the coreof these issues is an historicaltrend of under-investment intransport infrastructure andsystem improvements relative toAucklands fast-paced growth,particularly in the provision ofreliable and convenient passengertransport services.

A higher level of investment isrequired to address current issuesand respond to future growth. Theanalysis indicates that, even withadditional funding, maintainingthe current performance of thetransport system is unlikely.

The first choice

Auckland Councils Long-termPlan 2015-2025 proposalintroduces two levels ofinvestment:

The Basic Transport Network,under current levels of funding

The Auckland Plan TransportNetwork, with additionalfunding in place.

The Basic Transport Network onlyincludes those projects availablewith funding remaining at currentlevels. This network involvesprogress on key public transportprojects but otherwise limits publictransport services to 2016 levels,other than minor investmentto relieve severe overcrowding.This network makes minimalimprovements to local and arterialroads, walking and cycling facilitiesand roads to service key populationgrowth areas. It also defers newcapital works and maintenance.

The Auckland Plan TransportNetworkincludes all the projectsidentified in the Auckland Plan,optimised to minimise furtherdeterioration and to provide bestvalue for money. This network is

designed to meet the aspirationsof the Auckland Plan, includingproviding public transport servicesthat meet demand and optimiseperformance, completing theregional cycle network and majorimprovements to the motorwaysystem and the arterial roadnetwork. The Auckland PlanTransport Network provides strongeconomic benefits compared tothe Basic Transport Network. Withbenefits exceeding costs there isa sound economic justification forthe higher level of investment.

Auckland will also face increasingpressure on other infrastructure

requirements including housing,water, wastewater, stormwater andother utilities, each competing forlimited funding.

To assess funding options, AucklandCouncil set up a group of Aucklandstakeholders. The first phase ofthat work to assess the full rangeof funding options was conductedby the Consensus Building Group(CBG) and took place in 2012/13.This new report by the IndependentAdvisory Body (IAB) goes a stepfurther, focusing on just twofunding pathways for the council toconsult on during the Long-termPlan 2015-2025 process.

The second choice

If Aucklanders commit to a higherlevel of transport investment,and we believe they should, thisdocument presents the twoalternative funding pathways.Both options are capable of raisingthe additional $300 million perannum needed to implement theAuckland Plan Transport Network.

The two funding pathways are:

Rates and Fuel Tax referredto in this document forsimplicity as Rates and FuelTax, this pathway uses allexisting funding tools (rates,development contributions,petrol excise duty, road usercharges, public transport farerevenue, tolls on new roads andgeneral government revenue).

Motorway User Charge acharge on motorists each time

they use the motorway networkwhich may vary by time of dayor day of the week.

Do Aucklanders favour higherlevels of Rates and Fuel Tax orthe introduction of a MotorwayUser Charge?

To meet the desired fundingtarget with Rates and Fuel Taxwould require average annual ratesincreases of around one per cent(in addition to increases signalledby the council) and annual fuel taxincreases of 1.2 cents per litre (inaddition to increases signalled bythe government) every year forthe next nine years. Under thispathway costs are spread broadlyacross households and businesses.After making any changes totheir travel behaviour the averagehousehold would pay increasedcosts of $348 in 2026. Thispathway can be achieved at lowimplementation cost with little orno legislative change required.

If Aucklanders opt for a MotorwayUser Charge they would payan average charge of $2 whenthey enter Aucklands motorwaysystem. Under this pathway, aftermaking any changes to their travelbehaviour, the average householdwould be paying an additional$345-371 per annum in 2026.A Motorway User Charge is morecomplex to introduce, expensive toimplement and requires legislative

change. However, comparedwith Rates and Fuel Tax, this

pathway provides greater abilityto manage transport demand. Italigns the costs with those whouse it, and delivers them benefitsin return. Implementation requiresinvestment but the economicbenefits of doing so significantlyoutweigh the costs. This pathwaywould provide economic benefitsmore than three times greater thanthe Rates and Fuel Tax pathway.

Under either pathway, a smallnumber of Aucklands mostvulnerable households would facegreater financial hardship. Themost effective ways to mitigateagainst the severity of eitherpathway are to keep new chargeslow and affordable and to ensureprovision of reliable, safe and cost-effective alternatives.

It is our collective view that Ratesand Fuel Tax is the more regressiveapproach, albeit simpler. On theother hand, a Motorway UserCharge provides a long-termfunding solution and has secondarybenefits as a demand managementtool, although it is significantlymore complex and costly toimplement. Although the primarypurpose of our work was to identifytwo schemes that can raisesufficient revenue, not managedemand, a scheme that achievesboth clearly has merit.


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7t ion 1 Sect ion 1

CONSENSUS BUILDING GROUP

In July 2012, Auckland Council committed to bringing together anindependent group of stakeholders who could build a broad consensus

on the funding sources needed to improve Aucklands transportsystem. It was called the Consensus Building Group (CBG).

The principal finding of the CBGwas that unless Aucklanders areprepared to accept significantlyhigher rates increases andheavier congestion, introducingsome form of road pricing by2021 will be required.

At the conclusion of its initialwork on Alternative TransportFunding for Auckland in July2013 the CBG made thefollowing recommendations:

1. That Auckland Councilmakes a decision by 2015 topursue one of the fundingpathways identified inrecommendation (2).

2. That Auckland Councilfurther investigates andintroduces one of twoalternative pathways forfunding the transport gap:

a) Primary reliance on rates,fuel taxes, tolls to fund majornew roads and significantgovernment contributionsand increased fare revenuefrom public transport, withagreed annual increasesto rates and fuel taxescommencing in 2015

b) Initial increases in ratesand fuel taxes and increasedfare revenue from publictransport commencingin 2015, followed by theintroduction of some formof road pricing and additionalgovernment contributions.

3. That this investigationincludes:

a) detailed work on the designand impacts of possible roadpricing schemes, focussingon the single cordon andmotorway network schemes

b) further analysis of theaffordability and socialimpacts of the fundingalternativesand ways to mitigate anyadverse effects

c) ana lysis of possiblegovernance and revenueadministration arrangements.

4. That the following shouldnot be pursued further as

funding tools:

Regional lottery, Regionalpayroll tax, Regional GST/sales tax, Visitor bed tax,Departure tax, A levyon vehicles registered inAuckland, New forms ofparking levies, Managedtoll lanes, Tax incrementfinancing/betterment, Doublecordon, Area charging, Full-distance charging.

5. That before imposingsubstantially greater transportcosts on businesses andhouseholds, there shouldbe increased investmentin affordable and reliabletransport alternatives inplace. These should includeimproved public transport anda connected network of safeand attractive walking and

cycling options.

6. That central governmentincreases its funding fortransport in Auckland,beyond what can be expectedfrom the National LandTransport Fund, to reflectAucklands growing populationand its contribution to thenational economy.

7. That mechanisms areestablished to achieve

ongoing agreement betweenAuckland Council and thegovernment to align thestrategy and funding oftransport in Auckland.

8. That Auckland Councilworks with AucklandTransport and the NewZealand Transport Agency(NZTA) to optimise thesequence and timing of theinvestment programme,and to ensure consistencywith the Auckland Plan, theUnitary Plan and the availablefunding.

Upon receipt of the report,Auckland Councils governingbody resolved that they:

a) receive the final report of theConsensus Building Groupon Alternative Funding for

Transport, entitled FundingAucklands Transport Future Alternative Funding forTransport

b) note that advice on the nextsteps is being prepared andwill be presented to theincoming Governing Bodyfrom November 2013.


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9ct ion 1 Sect ion 1

THE OBJECTIVES

The IABs task was to advise Auckland Council on how best toprogress transport funding options. We were asked to consider

the impacts of potential schemes from two alternative pathwaysand provide robust evidence-based advice on which fundingpathways to include in the Long-term Plan.

The council intends to make adecision on which path to followin June 2015 as part of adoptingthe Long-term Plan 2015-2025.To achieve this, the IAB was askedto refine its choice of fundingpathways and complete theanalysis, evaluation and reportingnecessary to enable the council tohave a set of informed and robustproposals to consult on.

The work we have done includesthe design and assessment ofthe impacts of two potentialfunding pathways. The first usedonly existing funding tools (rates,development contributions, petrolexcise duty, road user charges,public transport fare revenue,

tolls on new roads and generalgovernment revenue), referredto in this document as Rates andFuel Tax. The second was thedesign and assessment of a singlecordon (around the city and cityfringe) and a motorway networkcharging scheme in sufficientdetail to support the inclusionof one of these in the Long-termPlan.

Detailed consideration of theeconomic, social and affordabilityimpacts associated with eachfunding pathway was a criticalelement of the IABs decision-making and is explored in detailthroughout this report and in thesupporting documents.

INDEPENDENT ADVISORY BODY

On 12 December 2013, Auckland Councils Finance andPerformance Committee considered a report, which outlined

the proposed approach to the next stage of work on AlternativeTransport Funding. The report provided an over view of the scope ofwork and the Committee resolved to progress to the next phase.

On the basis of thisrecommendation, the Mayorappointed the IndependentAdvisory Body (the IAB).The IAB comprises thefollowing members:

f Stewart MilneIAB Chairman

f Andy SmithWalk Auckland

f Cameron PitchesCampaign for Better Transport

f David AitkenNational Road Carriers

f Donna WyndChild Poverty Action Group

f Gary Taylor

Environmental DefenceSociety

f Kim CampbellAuckland Business Forum

f Paul ShortlandCycle Action Auckland

f Robert ReidNew Zealand Council ofTrade Unions

f Shaun AwatereLandcare Research

f Simon LambourneAuckland Airport

f Stephen SelwoodNew Zealand Council forInfrastructure Development

f Tony GarnierAuckland Business Forum

The group was supported andreceived professional advicefrom: Peter Winder, MarkFleming, Nadia de Blaauw,Don Houghton, Steven Boyd,McGredy Winder & Co, JohnWilliamson, Deloitte, MarketEconomics, Gravitas, AucklandCouncil and Auckland Transport.

Funding was provided byAuckland Council.

This document reflects theconsensus view of the group onalternative transport fundingoptions. It does not necessarilyreflect the views of theirrespective organisations, boardof directors or chief executives.


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11ct ion 1 Sect ion 2

METHODOLOGY

To arrive at our preferred scheme design, we tested and comparedindicative schemes that met the desired revenue target. The list

of potential designs was filtered through a high-level evaluationof impacts, acceptability and practicability.

As the preferred schemeswere developed, outputs fromAuckland Councils AucklandRegional Transport Model (ART3)were used to estimate revenueand identify impacts on the roadand public transport networks.ART3 outputs were also used toidentify the social and economicimpact on transport users.

Within the road charging option,a number of potential schemeswere considered. These includedtwo potential cordon locations,charging for use of the motorwayand charging for the distancetravelled on the motorway. Foreach, parameters had to be seton the level of charge, whetherto vary charges by time of day,weekday, weekend, or vehicletype, and whether to provide anyexemptions, caps or discounts.

The method we used to arriveat a preferred scheme involvedthree rounds, moving fromcoarse screening to morein-depth evaluation, thendetailed evaluation of the finaloptions. All three rounds usedan evaluation framework whichincluded: strategic alignmentwith the Auckland Plan andgovernment transport objectives,revenue potential, administrative

simplicity, efficiency, fairness, riskand public acceptability.

To support and guide our findingswe commissioned specialistadvice that focussed on thedesign, cost and performance ofpotential schemes and the socialand economic impacts of theirintroduction. Our work involvedthe design, evaluation andrefinement of schemes

The conclusions presented herecomplete the refinement of thoseprevious scheme designs. In somerespects they are slightly differentfrom the material presentedin the supporting documents.This material is available onlineat www.shapeauckland.govt.nz/longtermplan.

Our work relied on revenue andcosts spread over 30 years, asestimated by Auckland Transport,Auckand Council and NZTA.All financial projections arepresented in inflation-adjusteddollars, unless otherwise stated.

We are confident our testingand research has enabled us topresent a refined estimation ofthe funding gap and the revenuerequirements for the AucklandPlan Transport Network.


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15Sect ion 2ct ion 2

TWO LEVELS OF INVESTMENT THE TWO NETWORKS

In preparation for the 2015-2025 Long-term Plan, Auckland Council has identified twopotential investment levels. The council is preparing to consult on whether transport

improvements should be constrained by the existing funding available or whether Aucklanderswould prefer a transport network that delivers on the promise of the Auckland Plan.

The key components of both networks are summarised below and in the tables on pages16-20. The details of the transport investment programme will be finalised through

consultation on the Regional Land Transport Programme, which forms the AucklandTransport (AT) component of the Auckland Council Long-term Programme (LTP.

These two options are referredto as the Basic TransportNetwork (no alternative fundingin place) and the AucklandPlan Transport Network (withalternative funding). Thesenetworks are the result of workby Auckland Transport andNZTA to optimise and prioritisetransport investment, in timing,impact and value for money. TheAuckland Plan Transport Networkis designed to meet the AucklandPlans objectives.

The Auckland Plan highlightsthe challenges faced byAucklands transport system.Our incomplete roading systemand under-developed passengertransport system is reflectedby: heavily congested roads,particularly at peak times; aneed for significant and ongoinginvestment in maintenance

of existing infrastructure, anunreliable passenger transportsystem that is not competitivewith private vehicles; and therestricted ability to move freightacross the city. At the coreof these issues is an historicaltrend of under-investment intransport infrastructure andsystem improvements relative toAucklands fast-paced growth,particularly in the provision ofreliable and convenient passengertransport services.

The councils proposed budgetover the next 10 years aimsto keep annual average ratesincreases to 2.5-3.5 percent, focus new investmenton transport and to limit theincreases to council debt. Withthis level of funding AucklandTransport would need to focusonly on the highest-priority

projects and delay approximately$1.9 billion worth of new capitalprojects and $1.5 billion ofrenewals until after 2025.Investment in operating areas,particularly public transport,would be constrained to2016 levels other than minorinvestments to relieve severeovercrowding. The Basic TransportNetwork is what can be deliveredwith this lower level of funding.

A higher level of investment isrequired to address current issuesand respond to projected futuregrowth. However, our analysisshows that expected growthexceeds the additional capacityof the Auckland Plan TransportNetwork and that maintainingthe current performance of thetransport system is unlikely.

The main elements of thetwo networks are:

The State Highway programmeis very similar for bothnetworks. State Highways arefunded 100 per cent throughthe National Land TransportFund and are not reliant onrates or other local funding.

The Basic Transport Networkshigh-priority public transportprojects will proceed but, oncethey are completed, very fewimprovements will take place.Service levels will only increaseto relieve severe overcrowding.

The Auckland Plan TransportNetwork will connectAuckland, metropolitan

centres and the city centrethrough Rapid Transit (eitherrail or rapid bus services). Inaddition, passenger transportservice frequencies, facilitiesand bus priorities will all besignificantly improved.

Arterial road improvements inthe Basic Transport Networkwill be limited to a smallnumber of priority projectsand a modest provisionfor other arterial roadimprovements. The AucklandPlan Transport Networkincludes approximately $1billion in additional arterialimprovements over the periodto 2045.

Safety improvements willcontinue in the Basic TransportNetwork but operationalimprovements, routeoptimisation, intersectionupgrades and intelligenttransport system initiativeswill be limited.

In the Basic Transport Networkthe Auckland Cycling Networkwill be only 70 per centcomplete by 2045 and otherwalking and cycling initiativeswill be very limited.

Maintenance and renewals inthe Basic Transport Networkwill be funded at 75 per centof the desirable levels. Someassets are likely to fall intovery poor condition.

The Basic Transport Networkwill fund only 40 per centof the desired transportinvestment to planned growthareas in the southern area(Pukekohe/Paerata/Drury);the Northwest (Kumeu/Huapai/Whenuapai) andthe north (Warkworth andSilverdale/Dairy Flat).


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OUTLINE OF BASIC NETWORK AND AUCKLANDPLAN NETWORK

FIRST DECADE2016 - 2025

SECOND DECADE2026 - 2035

THIRD DECADE2036 - 2045

BUS

AND

FERRY

BASIC

TRANSPORT

NETWORK

Busways - SH1 Northern Busway

Constellation to Albany - Panmure to Pakuranga

(AMETI)

Bus/rail and bus/businterchanges (essentialelements only)

Int egrated fares

Limited new bus lanes tosupport frequent publictrannsport network

Limited service increases toavoid severe overcrowding

Mangere Otahuhu Sylvia Park bus routeimprovements

Busways - SH1 Northern Busway

Albany to Silverdale - Pakuranga to Botany

(AMETI)

New bus lanes to supportfrequent public trannsportnetwork


New bus lanes to supportfrequent public transportnetwork


AUCKLANDPLAN

TRANSPORT

NETWORK

All Basic Transport Networkimprovements plus:

Bus/rail and bus/businterchanges (highlydesirable and desirableelements)

Additional new bus lanesto support frequent publictrannsport network

Service increases

Park-and-ride programme

Ferry terminal upgrades

Bus stop improvementprogramme

Improvements in busservice frequency andcapacity


SH 16 NorthwesternBusway

Continued roll out ofpark-and-ride programme



Rapid transit buses runningBotany Flatbush Manukau AucklandAirport


Rapid transit buses: - SH18 Upper Harbour

(Henderson Westgate Greenhithe Constellation)

- Cross Isthmus(New Lynn Onehunga Otahuhu)

Continued roll out ofpark-and-ride programme



FIRST DECADE2016 - 2025

SECOND DECADE2026 - 2035

THIRD DECADE2036 - 2045

RAIL BASIC

TRANSPORT

NETWORK

City Rail Link

Rollout of new electrictrains, and provisionof 10-minute peakfrequencies

Protection for airport railcorridor

Rail Network PerformanceImprovements *

Rail ResilienceImprovements *

Rail Network CapacityImprovements (includingthird main Otahuhu Wiri) *

*RailprojectsreliantonCentralGovernmentFunding

AUCKLAND

PLANTRANSPORT

NETWORK

All Basic transport networkimprovements plus:

Grade separation or roadclosure at high priority levelcrossings

Additional electric trains

Se rvice increases

New rail stations Parnell,Paerata

Electrification Papakura toPukekohe *



Completion of levelcrossing programme

Additional electric trains

Airport rail across ManukauHarbour to MangereBridge

Se rvice increases

Further rail networkcapacity improvements(Westfield junction,Papakura Wiri thirdmain) *



Mt Roskill rail spur

Airport rail from MangereBridge to Airport

Servi ce increases

Additional capacity onEastern Lline betweenPorts of Auckland andWestfield *


Sect ion 2ct ion 2

The table below outlines the twonetworks and identifies some

key projects and programmes.The complete programme will

be itemised in the Regional LandTransport Programme, which

will be consulted on by AucklandTransport in conjunction with

consultation on the AucklandCouncil LTP.


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FIRST DECADE

2016 - 2025

SECOND DECADE

2026 - 2035

THIRD DECADE

2036 - 2045

SAFETY AND

OTHER

BASIC

TRANSPORT

NETWORK

AT safety programmes($150 million)

- Crash reduction works

- Safety around schools

- Safety and minorimprovements

School and workplacetravel planning











AUCKLAND

PLAN

TRANSPORT

NETWORK


Enhanced funding forsafety programmes(additional $110 million)

Mino r intersectionupgrades

Route optimisation

Opera tional improvements

Int elligent TransportSystem initiatives

Enhanced funding forworkplace and community

travel planning



Mino r intersectionupgrades

Route optimisation

Oper ational improvements

In telligent TransportSystem initiatives


travel planning



Minor intersectionupgrades

Route optimisation

Operational improvements

Inte lligent TransportSystem initiatives


travel planning

WALKING AND

CYCLING

BASIC

TRANSPORT

NETWORK

Waterview shared path

Completion of 40% of theAuckland Cycle Network

Continued roll out of theAuckland Cycle Network

70% of the AucklandCycle Network completedby 2045

AUCKLAND

PLAN

TRANSPORT

NETWORK


Improved walking andcycling options to keydestinations

Additional funding toallow faster rollout of theAuckland Cycle Network(55% completed by 2025)



Additional funding toallow faster rollout of theAuckland Cycle Network



Completion of theAuckland Cycle Network

FIRST DECADE

2016 - 2025

SECOND DECADE

2026 - 2035

THIRD DECADE

2036 - 2045

ARTERIAL AND

LOCAL ROADS

BASIC

TRANSORT

NETWORK

Mill Road stage 1

East West Connections

Te Atatu and LincolnRoad improvements

Albany Highway upgrade(North)

Long Bay Glenvar RidgeRoad

Continuation of Mill Roadproject

Completion of Mill Roadproject

AUCKLAND

PLAN

TRANSPORT

NETWORK


Albany Highway (Sunset- SH18)

Long Bay southerncorridor

Silverdale transportimprovements

Arterial roadimprovementsprogramme ($65 million)


Penlink

Arterial roadimprovementsprogramme ($100million)


Arterial roadimprovementsprogramme ($210million)

STATE

HIGHWAYS

BASIC

TRANSPORT

NETWORK

East West Connections SH1 Puhoi Warkworth

SH1 Northern Corridorimprovements

SH1 Southern Corridorimprovements

SH20A airport accessimprovements

Start of AdditionalWaitemata HarbourCrossing

SH1 Warkworth Wellsford

SH16 widening Kumeu toBrighams Creek

SH16 port accessimprovements

SH18 eastbound widening

Completion of AdditionalWaitemata HarbourCrossing

SH20B airport accessimprovements

SH20 widening LambieDrive to SH20A

AUCKLAND

PLAN

TRANSPORT

NETWORK

All Basic Transport Networkimprovements:

All Basic Transport Networkimprovements:


Additional State Highwaywidening to reducecongestion


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FIRST DECADE

2016 - 2025

SECOND DECADE

2026 - 2035

THIRD DECADE

2036 - 2045

MAINTENANCE

AND

RENEWALS

BASIC

TRANSPORT

NETWORK

Partial funding of renewalsprogramme resulting indeferred major renewals,deteriorating assetconditions and increasedshort-term maintenance



AUCKLAND

PLAN

TRANSPORT

NETWORK

Full funding ofrenewals programme

Full funding of renewalsprogramme

Full funding ofrenewals programme

GROWTH

AREAS

BASIC

TRANSPORT

NETWORK

North west transformation

Partial implementation ofFlat Bush improvements

State Highwayimprovements

Funding for 40% ofplanned improvements ingreenfields developmentareas


Funding for 40% ofplanned improvements ingreenfields developmentareas


AUCKLAND

PLAN

TRANSPORT

NETWORK


Full implementation of FlatBush improvements

Wynyard Quarterimprovements

Strategic Housing areasand priority greenfieldsAreas


Full funding ofplanned improvementsin greenfieldsdevelopment Areas


Full funding ofplanned improvementsin greenfieldsdevelopment Areas


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23cti on X Sect ion 3

THE $12 BILLION FUNDING GAP

It is clear that the Auckland Plan Transport Network cannot be delivered without additionalfunding beyond currently available levels.

The funding gap is defined bya shortfall in the total fundingrequirement for Aucklandstransport system. The funding gapis estimated at around $12 billionover 30 years, shown in Figure 2.Thats around $300 million perannum in todays dollars.

Before seeking additional fundingwe expect that existing revenuewill be used in the most effectiveway, and wherever possible, newtransport expenditure will beaccommodated from existingbudgets. The Mayor has recentlyannounced a reprioritisation ofcouncil budgets so that transport

receives an increasing share ofrates revenue. However, it isclear that the scale of additionalfunding required is so large thatreprioritisation alone cannotprovide sufficient additional fundsto cover the entire gap.

$M

ILLION

7,000

2,000

3,000

4,000

5,000

6,000

1,000

02016 2021 2026 2031 2036 2041

Available funding from rates, NZTA,Government and development contributions

Total expenditure to be funded Expenditure (smoothed)

FIGURE 2 AUCKLANDS TRANSPORT FUNDING GAP

NB: A smoothed expenditure profile is also shown as expenditure is dependent on the timingof major projects, particularly an additional Waitemata Harbour Crossing, which is uncertain.


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AVAILABLE FUNDING AND TIMING

The funding gap reflects the shortfall Auckland expects to facefrom existing transport funding sources. Over 30 years it equates

to a $12 billion deficit.

The current forecast of the fundinggap is lower than the $400 millionper annum (in todays dollars)previously estimated by the CBG.We have based our forecasts onAuckland Transports optimised30-year programme for Auckland,which delivers considerable savingsand efficiencies compared toprevious plans. Since our earlierestimates, the government hasprovided Auckland Council withan assurance of part funding forthe City Rail Link. The Ministryof Transport has also signalledthrough the Draft GovernmentPolicy Statement on LandTransport Funding significantlyhigher revenue from national fueltaxes than was previously assumed.We have also accounted for thecouncils intent to constrain debtwithin prudent limits.

It is estimated that the totalinvestment required in transportover the next 30 years is $105billion after accounting for publictransport fares and tolls on newroads. Total funding is estimatedat around $93 billion from rates,NZTA subsidies, developmentcontributions, and governmentfunding.

The CBG recognised during itsinitial research into AlternativeTransport Funding thatAucklanders understand theneed for transport investmentand have expressed a willingnessto pay. Many of those whoprovided feedback expressedtheir frustration with Aucklandstransport system and sent astrong message in favour ofimmediate action.

In response to the CBGs publicdiscussion document, the majorityof respondents supportedmanaging demand throughroad charging so that thosecontributing to congestion bearsome of the cost. Road chargingalso incentivises the use of publictransport. A number of peoplealso wanted other measures, suchas ride sharing, walking schoolbuses and working from home tobe promoted. Concern wasalso expressed that any undueincrease in public transport fareswould be at odds with efforts toaddress Aucklands congestion.

Auckland needs a long-termfunding solution that achievesa higher level of transportinvestment. This should be

balanced by providing viable andattractive transport alternativesand carefully managing demandthrough disincentives.

We are anticipating theimplementation of one of thepathways we have proposed by2019 at the latest. Achieving thiswill require alignment between thecouncil and government.

Operating expenditure (Public transport subsidies, maintenance of local roads,footpaths and State Highways, offset by public transport fares, parking andenforcement revenue and tolls)

$32.5 billion

Interest and funded depreciation $24.5 billion

Total Operating Costs to be funded $57.0 billion

Capital costs $65.0 billion

Offset by Auckland Council funding ($17 billion)

Total Capital Costs to be funded $48.0 billion

TOTAL FUNDING REQUIREMENT $105 billion

Rates revenue for transport $32.5 billion

Development contributions $4 billion

Fuel Taxes and SuperGold Card funding $55.5 billion

Government contribution to the CRL $1 billion

TOTAL AVAILABLE FUNDING $93 billion

TOTAL FUNDING GAP $12 billion

COST BREAKDOWN


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PATHWAY ONE: RATES AND FUEL TAX

ct ion 3 Sect ion 4

RATES AND FUEL TAX - AN INTRODUCTION

The first of two potential funding pathways is referred to as Rates and Fuel Tax. This pathwayuses only existing funding tools (rates, development contributions, petrol excise duty, road user

charges, public transport fare revenue, tolls on new roads and general government revenue).

Rates are the primary source offunding for local governmentactivities in New Zealand andare levied annually on the capitalvalue of land within Auckland.Revenue from fuel taxes isalso used to subsidise localgovernment transport activities.Fuel taxes include the PetroleumExcise Duty (PED) and RoadUser Charges (RUC). PED is awholesale levy on all petrol salescharged on a cents per litre basis.It is a component of the retailprice of petrol paid at the pump

by motorists. Those road userswhose vehicles are not chargedat the source (such as dieselvehicles) contribute throughRUC.

Under this pathway, the fundinggap would be filled primarily byincreases to rates and fuel taxesover and above those alreadyproposed by the Mayor and thegovernment. This is supplementedby other governmentcontributions and increased farerevenue from public transport.

If tolled, additional revenuefrom new projects such as theadditional Waitemata HarbourCrossing and Penlink could alsobe included.

To set an appropriate balancebetween rates and fuel taxeswe have based our calculationson the current funding ratios(approximately half from eachsource). Table 1 shows the level ofadditional increases required eachyear for nine years from 2016/17.

TABLE 1 - TOTAL ANNUA L RATES AND FUEL TAX INCREA SES 2016-2025

AVERAGE ANNUAL RATESINCREASES

AVERAGE ANNUAL FUELTAX INCREASES (GST INCL)

Annual increases already signalled 2.5% to 3.5% p.a.(Mayoral proposal)

1.6 cents per litre per annum(Draft Government PolicyStatement)

+ +Annual increase proposed by theIAB for Pathway 1 (dedicated totransport)

0.9% p.a. 1.2 cents per litre p.a.

= =Total combined annual increases 3.4% to 4.4% p.a. 2.8 cents per litre p.a.

Total annual increase in dollar termsin 2026 (per household)

$348 (after any changes to travel behaviour)

NB: These increases are proposed for nine years from 2016/17 and reflect increases already signalled bythe Mayor and Government. This pathway requires increases to both rates and fuel taxes.


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PATHWAY ONE: RATES AND FUEL TAX

SCHEME DESIGN FOR FUEL TAXESSCHEME DESIGN FOR RATES

A national fuel tax increase that delivers to Auckland a fair share of the revenue raised ispreferable. However, there are other ways that increases to fuel taxes could raise the required

level of funding, including a regional funding mechanism.

A nationwide increase to fueltaxes is simple and capable ofgenerating substantial revenue forthe National Land Transport FundNLTF, provided this was allocatedproportionally and the rest ofNew Zealand was not being askedto pay for Aucklands transportsystem. Alternatively, a regionalfuel tax, set at the same level as anational increase but applied onlyto fuel sold in Auckland, wouldcreate a funding source specificto Aucklands requirements.

A regional fuel tax would requirethe introduction of enablinglegislation and does not align

with current government policy.Table 3 shows annual increases inPED at current levels set by thegovernment and the increasedfuel tax rate we are proposing.

It is our view that an increase tonational fuel taxes is the preferredapproach. With either option,a regional or national increase,there is a range of considerationsthat apply, such as:

whether a regional fuel taxwould be more appropriatefor solving a regional fundingshortage.

whether increases to fuel taxnationally (with Aucklandreceiving only a proportion)would generate too muchrevenue nationally

the extent to which aregional fuel tax creates pricedifferentials at the bordersufficiently large to createavoidance behaviours

the difficulty of applying aregional fuel tax to diesel fuelor regional road user charges.

Councils have the ability to levya rate on a specific activity or

group of activities. Rates may bebased on property value, or maybe a fixed charge. They may alsobe differentiated by geographicarea or property type to reflectthe degree of benefit. AucklandCouncil does not have a targetedrate for transport, although theformer Auckland Regional Councilused a targeted rate to help fundpublic transport, which raisedabout $60 million per annum.

Our preferred approachfor this pathway would

be to raise a region-widededicated Transport Ratebased on a propertyscapital value.

A Transport Rate based oncapital value is preferred overa fixed charge per property ora geographically targeted rate.A region-wide transport ratewould need to be dedicated totransport purposes and couldnot be used by the council tofund other activities. A fixedcharge per property would havea greater impact on residentialproperty rates - 9.5 per centhigher by 2025, versus around

three per cent higher for businessproperties. A fixed charge would

also increase the impact on lower-value properties making it moreregressive than rates charged oncapital value. The benefits of thetransport investments are spreadwidely across the region thereforewe see no benefit in targeting atransport rate geographically.

Rates increases per propertywould total up to 8.1 per cent overthe next nine years. This is on topof the existing annual increasessignalled by Auckland Councilof 2.5 to 3.5 per cent resultingin a total average increase of 3.4to 4.4 per cent per annum to2025. The annual rates profile perproperty is shown in Table 2.

TABLE 2 - A VERAGE RA TES PER R ATEABLE P ROPERTY

2015/16 2016/17 2024/25

Residential and non-business

Average rates signalled by the council $ 2,481 $ 2,575 $ 3,665Average increase proposed by IAB $ - $ 28 $ 296

Total $ 2,481 $ 2,603 $ 3,961

Total additional increase to rates $ 0.0% 1.1% 8.1%

Average annual additional increase to rates 0.9%

Business

Average rates signalled by the council $ 13,200 $ 13,174 $ 14,253

Average increase proposed by IAB $ - $ 143 $ 1,153

Total $ 13,200 $ 13,317 $ 15,406

Total additional increase to rates 0.0% 1.1% 8.1%

Average annual additional increase to rates 0.9%

TABLE 3 - FUEL TAX

2015/16 2016/17 2024/25

Fuel tax signalled by government (PED) 59.5 cpl 61.1 cpl 71.8 cpl

Increased fuel tax proposed by IAB - 0.9 cpl 9.2 cpl

Total 59.5 cpl 62.0 cpl 81.0 cpl

Average annual increase in fuel tax incl GST 1.2 cpl

NB: Under this pathway there would be an additional rates increase each year from 2016/17. The figures for 2024/25 show the cumulative effect of these annualincreases and are GST inclusive. We have used existing rating policies fo r our calculations. The impact of the recent revaluations has not been considered. Changes incapital values affect the share of rates between properties but do not increase the total revenue collected by Auckland Council. The annual increase in the table reflectaverage rates per rateable property, not by households as expressed elsewhere in this report.


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31Sect ion 4

PATHWAY TWO: MOTORWAY USER CHARGE

ROAD CHARGING - AN INTRODUCTION

We considered a variety of cordonand motorway charging schemes.

These can also be thought of ascongestion charging schemes(like those operating in Londonand Singapore) or road tolls (likeSydney and Melbourne). Theschemes we explored were:

a cordon around the isthmus(Isthmus Cordon Charge)shown in Figure 3.

a cordon bound by GreenlaneRoad, Balmoral Road, St LukesRoad and the WaitemataHarbour (Inner CordonCharge) shown in Figure 3.

charging for use of themotorway network (Motorway

User Charge) shown in Figure 4. charging for the distance

travelled on the motorway(Motorway Distance Charge).

During our analysis weconcluded that the proposedInner Cordon Charge had somemajor drawbacks, particularlycommunity impacts, complexityand fairness. The Isthmus CordonCharge had similar drawbacksbut with less community impactdue to the location of the chargepoints, but the position of the

cordon meant the burden ofpayment fell unfairly on low

income groups, which have fewtravel alternatives and less abilityto pay. The community andvisual impact of the numerouscharging points (and associatedinfrastructure) was a significantdrawback. Cordon schemesrequire all traffic crossing thecordon to pay a toll. There areno free alternative routes withthese schemes.

The motorway network is wellknown by Aucklanders andboth motorway options wouldbe relatively well understood.However, there would be majorissues in implementing theMotorway Distance Chargeparticularly due to the complexityof the scheme and the unfairnessof charging more to those livingin fringe areas who need totravel further. Unlike the cordonschemes there are generally freealternative routes available.

The process of evaluatingschemes and developing ourpreference is described inmore detail in the supportingdocuments.

On the basis of these findingswe focused our analysis on aMotorway User Charge.

ct ion 4

FIGURE 3 INNER AND ISTHMUS CORDON BOUNDARIES CONSIDERED

FIGURE 4 PROPOSED COVERAGE OF THE MOTORWAYUSER CHARGE

1

1

1

1

1

1

16

16

20

20

20A

ir n

AvondaleEllerslieGreenlane

Bayswater

l n

ir l

Burswood

Chatswood

r l l i

nn r

Devonport

Ellerslie

Epsom

FarmCove

Favona

FlatBush

Glen Innes

Glendene

Glendowie

Golfl n

Grafton

Green Bay

Grey Lynn

ur i

n r n

i ll r

illcr

Hillsborough

nvill

ic

u

Kelston

Kingsland

Kohimarama

Konini

Laingholm

Lincoln

Lynfield

Mangere

MeadowbankMorningside

NewmarketNewton

r c

r rOnehunga

Orakei

Oranga

r i

Otahuhu

Otara

Owairaka

Pakuranga

Panmure

Papatoetoe

r u

Penrose

Ponsonby

u inui

nui

Remuera

RoyalOak

Sandringham

rvill

Southdown

Stanley Bay

Sunnyhills

Sunnyvale

Tamaki

TePapapa

r n

ThreeKings

Titirangi

r i

Waikowhai

Waima

WaimanuBay

Waterview

Wesley

Westfield

Westmere

iri

MissionBay

MountRoskill

BlockhouseBay

GlenEden

MountRoskillSouth

NorthcotePoint

NarrowNeck

WestHarbour

MasseyEast

TeAtatuPeninsula Harbour

View

rn

li

c r nr

SelwynVillage

PointChevalier

HerneBay

SaintMarysBay

MountEden

BroadwayPark

EdenTerrace

SaintJohns

Wai OTaikiBay

rnc

BucklandsBeach ll n

Half MoonBay

i l nr

nn

in ir

u rin

HuntingtonPark

EastTamaki

MountWellington

MountAlbert

NewLynn

odlandsPark French

Bay

WoodBay

Glen EdenSouth

c l

nu ui

Ch lDo n

i

nur

ii

MangereBridge

MangereEast

OneTreeHill

v n

uc l nir r

PuketutuIsland

l v rr

u c n

SaintJohnsPark

i r

I l n

n it tI l n

StHeliersFreemans

Bay

PointEngland

nu un r l

AucklandCentral

Parnell

Mechanics Bay

Stonefields

TeAtatuSouth

WesternSprings

Balmoral

16

16

22

Orewa

Pukekohe

Whangaparaoa

Beachlands

Helensville

HuapaiKumeu

Maraetai

Omiha

Oneroa

OneOstend

Piha

Riverhead

Silverdale

Ahuroa

Anawhata

Araparera

Ararimu

Ardmore

Awhitu

BigBay

Bombay

BrookbyClevedon

Coatesville

Drury

Ellets Beach

l n r

Glorit

Helvetia

Hoteo

Hunua

KaiparaFlats

Kakanui

Kanohi

Karaka

aukapakapa

Kingseat

Kohekohe

Komokoriki

Mahurangi

Makarau

n ur

n

Matakawau

Mauku

c

ll

r iu

OruaBay

Paerata Paparata

rimu

r kai

Patumahoe

Pohuehue

Pollok

Ponga

Puhoi

Pukapuka

Ramarama

i

Runciman

Sandspit

Seagrove

Stillwater

Streamlands

Tahekeroa

Tauhoa

Taupaki

Tawharanui

TeHihi

u

TeToro

WaiauPa

Waimauku

Wainui

Waipipi

Waitakere

Waitoki

Waiwera

Waiwhiu

WattleBayWhatipu

Whitford

Woodcocks

ill

Albany

Alfriston

Cornwallis

Huia

LittleHuia

LongBay

Okura

Parau

Red Hill

Redvale

Swanson

Umupuia

Waiatarua

Whenuapai

Algies Bay

Muriwai Valley

Dome

Valley BuckletonBeach

SnellsBeach

HepburnCreek

MahurangiWest

UpperOrewa

DairyFlat

LochNorrie

WaikoukouValley

AlbanyHeights

PineHarbour

OmanaBeach

HendersonValley

AwhituCentral

GrahamsBeach

MissionBush

ClarksBeach

WaiauBeach

GlenbrookBeach

ll

RangitotoIsland

MotutapuIsland

KawauIsland

RainbowsEnd

LucasHeights

i h I l n

Devonport

Takapuna

Laingholm

Henderson

Pakuranga

Otara

Manurewa

HatfieldsBeach

WestHarbour

BucklandsBeach

ArmyBay

TeHenga(Bethells Beach)

Karekare

MissionBay

MountEden

ChurchBay

PineValley

HeraldIsland

Waiheke Island

Hingaia

Manukau

Warkworth

Inner CordonAucklands Motorway Network

Isthmus Cordon


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DESIGN OF A MOTORWAY USER CHARGE


Commencing in 2019, the proposed Motorway User Charge covers the motorway network andinvolves charging motorists each time they use the motorway, irrespective of the distance travelled.

The scheme would cover:

State Highway 1 (SH1) fromsouth of the RamaramaInterchange to Puhoi(extending to Warkworth onceconstructed). It would replacethe existing Northern Gatewaytoll

SH16 from the start of theMotorway in Grafton Gully tojust south of the roundabout atBrighams Creek Road

SH18 from SH16 to SH1

SH20 from SH16 to SH1

SH20A from SH20 to justnorth of Kirkbride Road.

We also saw the need to definethe parameters of the scheme. Inparticular:

time of day (and whether thecharge varies during the day)

days of the week

types of vehicles (whetherdifferent vehicles types arecharged different rates)

any exemptions, rebates, capsor discounts

level of charge.

Within these parameters weidentified various options thatcould generate sufficient revenueand deliver a level of charge thatmay be publicly acceptable. Weconcluded that two chargingscenarios with varied pricingoptions have their own meritsand were both worthy of furtherconsideration.

Both options provide some demand management benefits by encouraging motorists to avoidtimes of heavy congestion. The primary purpose of our work was to identify a scheme that can

raise revenue, not manage congestion. A scheme that achieves both clearly has merit.

TABLE 4 - MOTORWAY USER CHARGES P ROPOSED FOR ACCOUNT HOLD ERS

WEEKDAYS WEEKENDS/PUBLIC HOLIDAYS

6AM 7PM NIGHTS 6AM - 7PM NIGHTS

FLAT RATE(per use in 2015$)

$2.00 FREE $1 FREE

OR

WEEKDAYS WEEKENDS/PUBLIC HOLIDAYS

Shoulder6 7 AM

AM peak7 9 AM

Shoulder9 10AM

Inter-peak

10AM 3 PM

Off peak3 4 PM

PM peak4 6PM

Shoulder6 8 PM

NIGHTS 6AM - 7PM NIGHTS

PEAKDEMAND RATE(per use in 2015$)

$2.00 $2.80 $2.00 $1.30 $2.00 $2.80 $2.00 FREE $1.30 FREE

NB: Compared with cars and motorcycles, heavy commercial vehicles are charged double. The prices shown are the discounted prices charged to account holders, it isproposed that people are encouraged to get accounts which will attract a 15 per cent discount from the casual user charge.


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THE IMPACTS OPERATING A MOTORWAY USER CHARGE

Both options, the Flat Rate and Peak Demand Rate, add additional costs to vehicle tripson the motorway except nights. Our analysis shows this has the effect of reducing the amount

of car travel, increasing the use of public transport and moving vehicle trips off the motorwaysand onto other roads.

One of the impacts of aMotorway User Charge is toshift some vehicle trips from themotorway to the arterial roadnetwork. The impact is largestwhere motorists have realisticoptions for making trips withoutusing the motorway.

A review of traffic volumechanges on arterial roads has beenundertaken in order to identifyareas that may need upgrading.It is likely that additional capacitywill be needed on Triangle Roadin Massey, particularly betweenWaimumu Road and LincolnRoad; on Great South Road inOtahuhu, particularly betweenMangere Road and Bairds Road;on Bairds Road Otara betweenGreat South Road and HellabysRoad; and on Great South Roadbetween Takanini and Papakura.Further investigation is neededin some other locations todetermine whether traffic canbe managed or improvementsare needed.

In addition, some plannedimprovement works are likelyto need to be brought forward,

particularly widening StateHighway 20B (the AirportEastern Access) and upgradingMill Road (linking Papakuraand Otara). The reduction inmotorway flows might alsomean some planned motorwayimprovements are no longerrequired. Further work isnecessary to fully assess anyadditional public transportcapacity or service improvementsneeded for the commencementof this pathway.

For some people use of themotorway is their only realisticchoice. We considered howwe could devise exemptions,rebates or caps, particularly forthe most vulnerable low-incomehouseholds. However, linking anindividual or household incometo a vehicle number plate wouldrequire the introduction of acomplex system capable ofverifying and maintaining anaccurate connection betweenthe two. Such a system wouldbe simple to take advantageof, expensive to implementand operate, and raise privacyconcerns. Revenue forgone by

any exemptions, rebates or capswould need to be made up byincreasing the charge, potentiallycausing even greater impact onvulnerable households.

We concluded that no exemptionsshould be offered so that theimpact of the scheme is spreadwidely and the charge is set as lowas possible. Alternatives should beavailable through improvementsto public transport and arterialroads made possible by therevenue raised by the scheme.

We have recommended free useof the motorway at night so thatsome people may be able to avoidthe charge by changing theirtime of travel. We also recognisethat this would encourage use ofthe motorway at night when thesafety benefits of the motorwayare needed most and whentraffic is least welcome on localroads. For the small number ofvulnerable households for whichthe alternatives are not realistic,consideration should be givento assistance through socialwelfare policies.

We have based our evaluationand costing on Automatic

Number Plate Recognition(ANPR). Implementation ofANPR requires the placement ofcameras at locations that captureevery vehicle using the motorwaynetwork. The technology isthe same as that used on theNorthern Gateway and in similarschemes around the world. Thecameras will need to be locatedso they can photograph eachvehicle number plate withoutinterference from other vehicles.Provision is also needed forcommunications equipment sothe image of each vehicle canbe transmitted for processing,and space is needed for periodicmaintenance of the equipment.

The privacy of the personalinformation gathered must alsobe protected. We support theretention of information for onlyas long as is absolutely necessary

to receive payment, then the datawill be destroyed.

Global Navigation SatelliteSystem/Global Positioning

System (GNSS/GPS) technologymay well develop over time intothe preferred technology but isnot considered sufficiently robust,cost effective or practical to be arealistic option in the short term.This technology still requiresANPR for enforcement.

The report we commissionedfrom Deloitte (see supportingdocuments) identifies two optionsfor locating cameras eitherpoles located on each on-rampor on gantries placed across themotorway. The former requires anestimated 119 sites, for the latterwe estimate between 56 and 68gantries. For the purpose of thisproject the roadside equipmentcosts are based on on-rampinstallation only. Total roadsideequipment is estimated to beapproximately $25.9 millionwith back-office and other setup

costs estimated to be around$82.8 million.

Total operating costs have beenestimated at approximately 24

cents per transaction (2015$)or 10-12 per cent of revenue oncetake up of accounts has stabilised.These costs include: maintenance,image processing, customercontact centre, bank fees,marketing, account management,billing and collection.



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HOW WOULD YOU PAY?

We expect that the main customer payment channel will be on account, and that web paymentsand retail payment channels will all also need to be available, at least initially. Once the scheme

has been in operation for some time and customers become familiar with its operation, the numberof channels could feasibly be reduced.

Customer channels operate in asimilar way to the NZTA NorthernGateway operation:

Post-pay accounts forcommercial vehicles, througha monthly billing process.

Pre-pay for personal users,requiring a positive balancewith minimum top-up possibly aligned with the ATHOP Card ($5) or NorthernGateway Toll Road ($10).

Account top-ups would be madeas follows:

Over the web, potentiallyincluding a smart-phone app.

Linked to a credit card or bank

account through an auto-top up mechanism when thebalance falls below a threshold.

At retail outlets potentiallythose also serving theAT HOP card.

Through the call centre but subject to anadministration fee (proposedto reflect the additional costsof call handling).

Customer accounts cost muchless per transaction than otherchannels. We have worked onDeloittes assumption that whena scheme becomes operationalapproximately 20 per cent ofusers would open accounts, andthis would increase to 80 per centwithin three years, remaining atthat level thereafter. If accountuse falls below these percentages,the costs of operating the schemewill be higher than we haveassumed and revenue will be less.The proposed pricing structurerecommended in this reportquotes the discounted price.

It is proposed that enforcementfollow commercial processesrather than be treated as atraffic or criminal offence. NZTAcurrently allow Northern Gateway

customers up to five days to paya toll before outstandingpayments are escalated andenforced. It is proposed thatenforcement of MotorwayUser Charge would follow asimilar procedure. Alternatively,a procedure modelled on theparking enforcement processcould be followed.



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CONCLUSIONThe Rates and Fuel Taxpathway provides a moresecure source of revenue,

particularly in the short tomedium term. Revenuefrom the MotorwayUser Charge will beuncertain on introductionbut predictable oncepeoples travel behaviouris established. Dedicatingthe revenue to Aucklandtransport is easier for themotorway scheme than forfuel taxes.

ABILITY TO RAISE REVENUE

We assessed each pathway for its ability to raise revenue, andfor any risks to revenue that might undermine its acceptability.

Both pathways generate the required amount of revenue,however they differ in terms of risk. The revenue they raiseshould be dedicated solely for transport in Auckland.

RATES AND FUEL TAX MOTORWAY USE R CHARGE

Rates provide a predictable formof revenue. Fuel tax revenue is alsopredictable in the medium term, althoughless than expected has been receivedin recent years despite the governmentincreasing the level of PED. In the longerterm, the government may need todiversify its revenue sources to contendwith vehicle fuel efficiency improvements,hybrids and alternative fuels.

Revenue from a Motorway User Chargewill be less certain in the short term.A motorway charging scheme would benew and untested on Auckland roads,and accurately setting the level of chargecreates risks. A charge that is too highcould suppress demand and revenue,and if too low, any decongestion benefitsmay not be achieved. Making predictionsabout how peoples travel behaviour willchange in response to a charge is difficultas road users can take alternative routes,drive at different times of the day, walk,cycle, ride-share or take public transport,or can choose not to travel. Once peoplehave adjusted to a Motorway UserCharge revenue will be reliable.

P re se nt s n o t ec hn ol og y i ss ue s. T he s ch em e re li es o n t ec hn ol og yessentially the same as that operatingsuccessfully on the Northern Gatewayand around the world. This technology

is well-proven, however, the size of thesystem does present some IT projectrisks.

A transport rate could be dedicatedfor use solely on transport in Auckland,as could a regional fuel tax. However,under the current funding arrangements,an increase in fuel taxes is tagged fortransport, but not specifically for theAuckland region. As is presently the case,Auckland Transport, along with all otherregional transport agencies, would needto submit funding proposals that metgovernment-set criteria.

Revenue raised through a MotorwayUser Charge should be applied solelyto Aucklands transport. This will giveAucklanders an assurance that themoney they are contributing is used forits intended purpose, so they can reapthe benefits.


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23/29

43Sect ion 5

We recognise that introducingeither pathway would have wide

social and economic impacts inAuckland. The Auckland PlanTransport Network will providetransport and congestion benefitsfor Auckland, but the costs mustbe accommodated into businessand household budgets.

Households would be requiredto accommodate new costswithin their existing budgets orminimise the charges they incur.Many households would be ableto reduce their discretionaryspending or their contributions tosavings. Our research indicated

some low-income householdscould accommodate additional

costs of approximately $20 perweek, but not much more.

Research showed that forbusinesses, the benefits of theAuckland Plan Transport Networkoutweigh the costs that would beimposed on them under eitherpathway. For transport andtransport-dependent businesses,travel time is a significantoverhead - time lost in congestionis non-productive and comes ata high cost. As with households,businesses are likely to adjusttheir behaviour to minimise the

costs and exploit the economicopportunities that may arise.

Cost savings through reducedtravel time for businesses andtheir employees outweigh thecosts imposed.

The two pathways differ in theway the funding burden is spread,and in the ability of householdsand businesses to adapt theirtravel behaviour in response to theincreased charges.

In the following analysis costs andbenefits are from 2026 but areexpressed in todays dollars.

FAIRNESS

RATES AN D FUEL TA X MOTORWAY USE R CHARGE

The burden of Rates and Fuel Tax would be spread across alarger number of households. Therefore, the average costper household would be lower and the number of severelyaffected households would be reduced. On the other hand,rates increases do not directly reflect a households use of thetransport system.

The average household would pay increased costs of$348 per year in 2026. Households that change theirtravel behaviour to avoid paying more in fuel tax may alsosee changes in the amount of fuel they use, parking feesthey incur, or vehicle maintenance. A small proportion ofhouseholds (0.3 per cent) would face costs that equate tomore than 2.5 per cent of their after-tax income. The vastmajority of these would be low-income households.

Aucklands most vulnerable households would pay 15 per centof the additional charges. Overall, 1.5 per cent of low-incomehouseholds would experience a high financial impact. Theaverage low-income household would pay $251 extra per yearin 2026 under this pathway.

Superannuitants who have a low annual income, but live inrelatively high-value properties, would be affected by thispathway more than a Motorway User Charge, particularly iftheir travel was minimal.

A Motorway User Charge aligns the burden of costs withuse. Motorway users would pay more but would also bethe main beneficiaries from travel-time savings. Frequentmotorway users account for around 6-8 per cent of Aucklandshouseholds, but would contribute around 26-30 per cent ofthe required additional revenue from a Motorway User Charge.

Most households would alter their travel behaviour to minimisethe charges they incur. After doing this, the average householdwould pay motorway charges of approximately $345-371 peryear depending on the type of motorway scheme. Householdsthat change their travel behaviour may makes savings on fueluse, parking fees, or vehicle maintenance requirements whichwill partially offset the cost of motorway charges.Some households will pay significantly more than the average,while others will pay significantly less. Around 2.2-2.5 percent of households would experience a disproportionatefinancial impact, but the majority would experience a lowfinancial impact.

Aucklands most vulnerable households would pay 11 per cent ofthe additional charges. Around 3.4-3.9 per cent of low-incomehouseholds would experience a high financial impact under thispathway, possibly because they do not have a choice aboutwhen they travel, how they travel or the route they take.

The average low-income household would pay $140-160per year under this pathway.

The business sector would contribute 34 per cent ofadditional charges, facing additional transport costs of $106

million or 2.2 per cent of their overall transport costs. Newtransport costs will be offset by the travel-time savings on thetransport network. Under this pathway, businesses will benefitfrom savings of $256 million, although these savings are notdistributed evenly across all business sectors. The commercialtransport sector would save approximately $9 million.

The business sector would pay 41-46 per cent of additionalcharges, facing extra transport costs of between $125 and

$145 million. These account for 2.5-3.0 per cent of theiroverall transport costs. New costs will be offset by travel-time savings that result from transport improvements andthe effect of motorway charges on congestion. Under thispathway, businesses will benefit from savings of $303 $314million, although these savings are not distributed evenlyacross all business sectors. The commercial transport sectorwould save approximately $11 million.

Under this pathway, households have limited ability tominimise the amount they pay. Even renters are likely to feelthe impact if landlords pass new costs on. A small number ofpeople would reduce their car travel in order to reduce theirfuel bill.

If a Motorway User Charge was introduced, some householdscould change their travel patterns to avoid the charge. Manycould: make fewer car trips; travel on other roads; use publictransport, cycle, walk or ride-share; travel at night time forfree; or live, work and play locally. Some households woulddo this, but at a cost to their convenience or social life. Fora variety of reasons, some households will not be able tosignificantly alter their travel behaviour. Those who pay theMotorway User Charge will benefit from travel-time savings.Frequent motorway users (8 per cent of households) wouldpay 26 per cent of the additional charges.

ct ion 5


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45ct ion 5

FAIRNESS CONT.


Additional use of public transport services provides somealternative to paying fuel taxes. Additional use of public transport services and increased useof arterial roads would provide alternatives to paying aMotorway User Charge.

The impacts of this pathway are spread evenly acrosshouseholds in different parts of Auckland.

The impacts of motorway charging are likely to be moreconcentrated in areas that are close to the motorway orwhere the motorway is the dominant option for accessingother parts of Auckland.

Firms located in Aucklands industrial areas may experiencea larger effect - they tend t o have good motorway access(a key consideration affecting business location decisions)and may be more frequently exposed to motorway charges.These firms will be better off from a Motorway User Charge,with benefits exceeding their additional direct costs.

The only workable exemption available for Rates and Fuel Taxis through social welfare policies.

One option to reduce the impact would be to introduceexemptions. However, introducing exemptions raisesmany issues, not the least of which is administrative costs.Implementing daily charges without exemptions would makemotorway charges more affordable for the greatest numberof households. It also reduces the total number of low-income households severely affected.

Discounts for account holders could provide financial relieffor a large number of users. We have included a 15 per centdiscount for account holders, the cost of which would bemet by the operational savings associated with paying onaccount.

Some tolls on new roads could be included under the Ratesand Fuel Tax pathway. Implementing tolls on only some newroads treats some road users unfairly. For example, those thatuse a new Waitemata Harbour Crossing would pay higherrates and fuel taxes and a toll for using that piece of road.Other users would have the roads they use fully funded fromwhat they pay in rates and fuel tax.

The concept of a free alternative does not apply to Rates andFuel Tax as you cannot avoid the charge.

Under a Motorway User Charge there would be a freealternative to avoid paying the charge, although analternative to the Harbour Bridge is not practical.

CONCLUSIONThe most effective way to mitigate against the severity of either pathway is to keep new charges lowand affordable. Keeping implementation and operating costs down, spreading the cost to all motorwayusers, and providing households and businesses with convenient and high-quality transport alternativeswill assist those affected.

The Rates and Fuel Tax pathway spreads the cost broadly across households and businesses, which helps tominimise the cost per household and the overall number of households (including low-income households)severely affected. The Motorway User Charge better matches those who pay with those who benefit.

We have chosen not to include exemptions for low-income households in either pathway. Exemptions forseverely affected households would be costly to implement and administer. It would also increase the impact ofnew charges on everyone else. Most importantly, we struggled to identify a simple means of targeting relief atAucklands most vulnerable households. Every exemption scheme we explored provided significant benefits tountargeted households and required higher average charges.

There are some broad measures that could increase the ability of low-income, vulnerable households topay, such as: an increase to the minimum wage; supplements to Working for Families or the New ZealandSuperannuation Scheme. They would require a full assessment of the wider national policy implications. Thehigher the government contributions the less overall revenue required from either one of the two pathways.

Sect ion 5


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47

We considered the cost andcomplexity of both pathways to

determine their suitability. Ratesand Fuel Tax is an extension ofexisting legislation, organisationalresponsibilities and revenuecollection methods. It has lowcost and complexity. By contrasta Motorway User Charge wouldrequire implementation costs withassociated levels of risk.

COST AND COMPLEXITY


New legislation not required unlessmoving to a regional fuel tax. Theexisting tools could also be managedby those agencies with existingresponsibilities (Auckland Council andNZTA).

New legislation is required which couldlead to delays in implementation.The Land Transport ManagementAct 2003 provides for tolling onnew roads, but only allows tollingon existing roads where they arephysically or operationally integral tothe new road. New legislation can taketime to pass through Parliament andplaces a limit on how early a MotorwayUser Charge could be introduced.There is also a provision within theLocal Government Act 1974 underwhich the Minister may authorisea council to establish, by using thespecial consultative procedure, tollgates and collect tolls at any bridge,tunnel, or ferry within the district orunder control of the council.

Additional administration costs wouldbe low. An increase in rates wouldnot materially affect collection costs.Any increase in fuel tax, or even theintroduction of a new regional fuel tax,would not create significant additionalcosts. However a regional road usercharge scheme would be complex.

Capital and set-up costs are estimatedat around $110 million. Ongoingoperating costs are estimated ataround 10-12 per cent of revenue by2022.

Increases to rates and fuel taxes wouldbe relatively simple to implement.

A Motorway User Charge would becomplex to introduce. Accuratelypredicting the traffic impact (both onthe motorway and any diversion tolocal roads), administering technologyand operations, and communicatingthe scheme to Aucklanders are allsignificant issues.

conclusionThe Rates and Fuel

Tax pathway has fewimplementation costs. Bycontrast, the MotorwayUser Charge has highcapital and ongoingoperating costs (and placesan added administrativeburden on road users),for which there arecompensating benefits.

ECONOMIC IMPACTS

We undertook a high leveleconomic evaluation based on

the NZTA Economic EvaluationManual methodology. Wecompared the economicperformance of the BasicTransport Network with theperformance of the AucklandPlan Transport Network fundedby either pathway.

The Auckland Plan TransportNetwork (funded by eitherpathway) provides strongeconomic benefits comparedto the Basic Transport Network.With benefit cost ratios of1.2 there is a sound economicjustification for the higherlevel of investment. Bothpathways provide broadproductivity benefits toAuckland and New Zealand.

There are significant benefitsfrom the Auckland Plan TransportNetwork improvements. There

are also benefits that arise fromintroducing either of the fundingpathways. We have explored bothtypes of benefits.


The Rates and Fuel Tax pathway is alow-cost option and generates modestadditional benefits. This is becausehigher fuel prices encourage sometravellers to change their travel choices.

The Rates and Fuel Tax pathway is avery cost-effective way of collectingadditional revenue because of its lowimplementation cost. However, theRates and Fuel Tax pathway deliversless than one-third of the total benefitsthat can be achieved with a MotorwayUser Charge (net present value ofbenefits of $510 million compared to$1.6 billion).

Motorway User Charges are moreexpensive to implement than theRates and Fuel Tax pathway.

The Motorway User Charge generatessignificantly higher economic benefits,reflecting the effect of direct chargingon peoples travel choices. It generatesbenefits valued at around $1.6 billion more than three times the totalbenefits achieved from the Rates andFuel Tax pathway.

With a benefit cost ratio of 1.9,implementing Motorway User Chargeis a worthwhile investment andwould provide net welfare benefits(additional costs less additionalbenefits) of almost $750 millioncompared to $490 million for theRates and Fuel Tax pathway.

CONCLUSIONBoth funding pathways provide benefits because they impact onpeoples travel choices. The economic evaluation is consistent withthe transport assessment that a Motorway User Charge will deliversignificantly higher benefits than the Rates and Fuel Tax pathwaybecause it has a greater impact on travel choices.

Motorway User Charges are more expensive to implement and operatethan Rates and Fuel Tax, but the extra costs are more than offset byextra benefits. Motorway User Charges deliver more than three timesthe total economic benefits that can be achieved with the Rates andFuel Tax pathway.

ct ion 5 Sect ion 5


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49pendix

The Auckland Plan TransportNetwork provides strongeconomic benefits comparedto the Basic Transport Network.With benefits exceeding coststhere is a sound economicjustification for the higher levelof investment. A higher level ofinvestment is required to addresscurrent issues and respond tofuture growth. Our analysis

indicates that even with increasedfunding maintaining the currentperformance of the transportsystem is unlikely.

If Aucklanders commit toa higher level of transportinvestment, and we believethey should, this documentpresents two achievablepathways. Each is capableof providing the $300million per annum requiredto deliver measurableimprovements to ourtransport system.

The Rates and Fuel Tax pathwayis simpler to introduce, it can beachieved at low cost with little orno legislative change required andit spreads the financial burdenbroadly across Aucklanders. Therevenue it raises is predictable,at least in the short term, and i tprovides small but useful benefitsto the transport system.

A Motorway User Charge is morecomplex to introduce, expensiveto implement and requireslegislative change. However, itdelivers a comparatively bettertransport system and aligns thecosts with those who use it,and delivers them the benefitsin return.

Under either pathway, a smallnumber of Aucklands mostvulnerable households would facegreater financial hardship. Themost effective ways to mitigateagainst the severity of eitherpathway are to keep new chargeslow and affordable and to ensureprovision of reliable, safe andcost-effective alternatives.

It is our collective view that Rates and Fuel Tax is the more regressive approach, albeit simpler.On the other hand, a Motorway User Charge provides a long-term funding solution and hassecondary benefits as a demand management tool, although it is significantly more complex andcostly to implement. The primary purpose of our work was to identify two schemes that can raisesufficient revenue, not manage demand. A scheme that achieves both clearly has merit.

Sect ion 6


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51appendixpendix

GLOSSARY

Active modes Cycling and walking.

Arterial road network Roads which are not motorways or expressways, but link districts or urban areas, connect key facilities, and play acritical role in the movement of people and goods within the region.

Auckland Plan Transport Network A 30-year proposal for improvements to Aucklands transport system only achievable if the $12 billion fundinggap is filled.

Automatic Number Plate Recognition(ANPR)

A camera-based technology used to record vehicle registration plates as vehicles pass a charging point on a road.

Basic Transport Network A 30-year proposal for improvements to Aucklands transport system if no alternativetransport funding is found.

Cents per Litre (CPL) A unit of measurement showing the unit cost of fuel tax for every litre of petrol purchased.

City Rail Link (CRL) An underground rail line linking Britomart and the city centre with the existing Western Line near Mount Eden.

Consensus Building Group (CBG) An independent group of stakeholders asked by Auckland Council in July 2012 to build a broad consensus onthe funding sources needed to improve Aucklands transport system.

Development contributions Fees charged by the council on development projects, then used to fund the public infrastructure required tomeet additional demand created.

Fuel tax (includes PED and RUC) A tax (calculated as cents per litre) on the price of petrol and diesel.

Draft Government Policy Statement(GPS)

The engagement draft of the GPS on Land Transport 2015/16-2024/25

Independent Advisory Body (IAB) An independent group of stakeholders brought together by Auckland Council in April 2014 to consider theimpacts of two alternative transport funding pathways for Auckland, and to provide robust, evidence-basedadvice on which funding pathways to consult on in the Auckland Council draft Long-term Plan 2015-2025.

Motorway User Charge A type of road charging scheme. During the hours that the scheme is in operation, motorway users would becharged each time they use the motorway, this could vary by time of day and day of the week.

National Land Transport Fund (NLTF) The dedicated national fund for transport administered by the New Zealand Transport Agency.

New Zealand Transport Agency (NZTA) The crown entity responsible for the operation of the State Highway network and the allocation of the NLTF.

Passenger Transport (PT) Public transport, including rail, bus and ferry infrastructure and services.

Petrol excise duty (PED) A wholesale levy on all petrol sales that forms a component of the retail price for petrol paid at the pump bymotorists.

Rates A type of property tax levied on property owners and used to fund local government.

Road Charging (also congestioncharging and road pricing)

The practice of charging motorists for using congested roads that can vary by day, time or location.

Road User Charges (RUC) A charge paid by owners of vehicles that are not powered by petrol (for example diesel and electric vehicles), orthat exceed 3.5 tonnes. RUC is paid instead of PED.

Strategic Freight Network The motorway and a small number of key regional arterial roads (such as Neilson Street, the South EasternArterial and Highbrook Drive) that together accommodate the majority of freight traffic, and are importantfor the productivity of the economy.

Targeted rates A rate levy on some (but not all) property owners to fund a specific activity or group of activities provided by acouncil. A targeted rate may or may not be geographically targeted.

Transport Rate A property rate dedicated for transport purposes.

Tolls A charge on motorists who cross a fixed point along a roadway, and which is used to help fund that particularroad or stretch of road.

Uniform Annual General Charge(UAGC)

A fixed council charge applied to each separately used or inhabited part of a property, such as a shop that has aflat above, or a granny flat.


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pendix

PORTING DOCUMENTS

Analysis of the impacts ofalternative funding mechanismson Auckland businesses

MARKET ECONOMICS LTD

Analysis of the affordability andsocial impacts of alternativefunding mechanisms onAuckland households

MARKET ECONOMICS LTD

Road Charging Options Study:Scheme Design and Costing

Review of the Operationaland Business Requirementsof a Road Charging Scheme

Vehicle Detection andIdentification Technology

Revenue Collection,Enforcement andCustomer Channels

DELOITTE

Road Charging Options Study:Cost and Revenue Report

DELOITTE

Economic Impactof Funding Pathways

ASCARI PARTNERS

Evaluation ofThree Funding Pathways

PROJECT TEAM

Detailed assessment ofMotorway User Charge Scheme

PROJECT TEAM

Detailed assessment of theRates and Fuel Tax scheme

PROJECT TEAM

Estimating the funding gap

PROJECT TEAM

The following supporting documents are available online.Visit www.shapeauckland.co.nz/longtermplanfor more information.


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iab transport funding final

Documents