Guest Post: Fiscal prudence and transport priorities

This is a guest post by Green MP Julie-Anne Genter, initiated after some questions in Parliament last session on this issue:

Let me just start with what this post is NOT saying:

  1. I am not saying that people should not, or will not, continue to use cars for many trips.
  2. I am not saying that all existing roads should be turned into dirt tracks for carts and horses.
  3. I am not saying we should ban anything, or eliminate all car parking.
  4. I am not saying that you should give up your car, if it doesn’t suit you.

 When we get past the straw man arguments, there is something you and I (and all New Zealanders) can be very concerned about: The Government is planning to spend $14 billion over this next decade — which is more than this year’s deficit and 75% of all new infrastructure spending — on a few new state highways with very poor business cases.

Most of that is on 6 projects it calls the ‘ of National Significance’. (The 7th, Victoria Park Tunnel, the project with the highest benefit cost ratio, has already been completed.)

It is truly extraordinary that the Government considers the RoNS to be a key plank in their economic strategy, because there is actually no evidence to suggest the additional motorways will have a positive impact on the economy.

A compilation of the benefit-cost ratios carried out by the Parliamentary Library show that, in total, they are projected to return just $1.40 for every $1 invested (if you excluded Vic Park, it would be less). Several of the individual projects will cost more than their benefits, most notably Puhoi to Wellsford and Transmission Gully, which cost nearly a billion dollars more than the benefits they would create.

Moreover, the Government’s numbers are too optimistic. The traditional traffic engineering approach tends to overstate the benefits and understate the costs (PDF) of motorway projects. One of the basic assumptions in the modelling is that traffic volumes will always rise — irrespective of fuel prices and the economy. The RoNS business cases are no exception: Puhoi to Wellsford assumed 4% annual traffic growth from 2006-2026, though NZTA data now shows that didn’t eventuate from 2006-2011. Traffic and freight volumes on state highways aren’t growing because of the impacts of high oil prices and low economic growth—in fact, they’re back to 2004 levels.

We all know petrol prices are at record levels — up 50% in the past five years — and are likely to go much higher this decade. This is a very strong case for deferring the RoNS in favour of more cost-effective projects that also reduce the oil-dependence of the transport sector.

Road users, ratepayers, and the economy will benefit from projects that will move the most people and goods for the lowest cost in the coming decades. And we need to be realistic about the increasing cost of fuel to cars and trucks.

There are better alternatives: Making it easier and safer for kids to cycle and walk to school is one of the cheapest ways to reduce peak hour congestion. By adding capacity to train and bus routes that are already experiencing huge (10-15%) annual patronage growth in Auckland, we can ease congestion on the roads, reduce household petrol bills, and improve the cost effectiveness of public transport. Freight priority (think truck lanes) can be cheaply implemented on key routes at extremely low cost.

Even if you drive everywhere, you benefit when we make it easier for others to leave the car at home, because it’s a cheaper way to reduce congestion (plus it’ll be easier for you to find parking…).

Resources are limited, so we must make choices. Expanding the existing state highway programme is expensive for little gain – but it also means that every other transport category will be squeezed for the next decade: including road policing, local road maintenance, walking, cycling and public transport. So it will be harder for people to get where they need to go. That’s going to mean more congestion, or more lost money in high petrol bills.

If we choose to invest in modern, smart transport solutions, we can spend less on petrol, reduce our international debt, and have a transport system that is better for our economy and better for our people. But, first, we need the Government to honestly re-evaluate its transport priorities.

I think scrutiny of an annual $1.4b spend is a good thing, and JAG makes some reasonable points around the fact some of the RONS do not have a positive benefit to cost ratio. There can be reasons to look at factors beyond the benefit to cost ratio, but Government should generally be careful not to cherry pick “winners”.

I’ve actually advocated that rather than vary the level of benefit to cost ratio which determines a transport project gets funded, we should instead set a constant ratio (maybe 1.5:1) and adjust the level of petrol tax automatically to fund projects which qualify.

On the issue of future traffic volumes, the link provided by JAG is worth reading, showing the recent change in both NZ and global traffic volumes. However I would be cautious about jumping to conclusions over future volumes as I think the three factors are petrol prices, economic growth and population growth. Petrol prices may continue to increase but population growth will remain, and eventually economic growth will be higher (but perhaps not as high as when fuelled by debt).

Thanks to Julie Anne for the post. With $14 billion being spent over a decade, it’s an important debate.

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