How to pay for an uncongested Auckland

New Housing and Transport Minister Phil Twyford tells Bernard Hickey the Government has big plans to change the way Auckland's multi-billion dollar light rail projects will be paid for -- by motorists and property developers.

The new Labour-led Government will meet with Auckland Mayor Phil Goff later this week to discuss a massive shift in the way ratepayers and motorists will pay for $15 billion worth of new rapid transit infrastructure in New Zealand's fastest growing and most congested city over the next decade.

Less than a week into the job, new Housing and Transport Minister Phil Twyford has asked MBIE, the Transport Ministry and Treasury for advice on 20 different streams of work to kick off a mass planning programme to enable the building of tens of thousands of affordable homes and a transport network that can handle more than a million extra people.

Twyford told Newsroom in an interview that the Government and the Auckland Council are looking at ways to fill a $6 billion funding hole over the next decade that the previous Government had given no indication of filling. The Council is up against its debt limits for its current AA credit rating and each notch downgrade caused by extra borrowing increases rates by around one percent per year.

The new Government and the Auckland Council expect to work on using the National Land Transport Fund (previously dedicated to roads and motorways) to fund light rail, he said. The Council was also looking at using targeted rates on light rail and other rapid transit routes to capture the value uplift in property prices because of those plans. The Government would also introduce a 10c/litre regional fuel tax as an interim step to help fill the gap while a congestion charging system was being built over the next five to 10 years.

Twyford said he also wanted to use the National Land Transport Fund to help fund rapid transit systems in cities, including for light rail and busways. Previously, the fund (paid for from fuel levies and road user charges) was dedicated to road building and repairs. He said rapid transit systems such as the Northern Busway made existing motorway infrastructure much more efficient and reduce congestion for car and truck drivers. The move will be controversial with truckies and others reluctant to pay directly for infrastructure they don't use directly, even though they benefit indirectly from it.

Twyford has ordered an urgent rewrite of the Government Policy Statement (GPS) for the National Land Transport Fund to reflect the new Government's focus on investing in urban public transport infrastructure, rather than building more motorways. It would include new directions on the use of the National Land Transport Fund, which was forecast last year to spend $9.8 billion over the 2015-2018 period. He expects a new GPS within two months.

Tywford expects a first meeting later this week between Prime Minister Jacinda Ardern, Finance Minister Grant Robertson, and himself with Mayor Phil Goff to include the beginning of the start of a renegotiation of the Auckland Transport Alignment Programme (ATAP), which is the 30 year plan for Auckland Transport. The renegotiation was aimed at refocusing investment on light rail lines from the CBD to the Airport and from the CBD to West Auckland alongside State Highway 16, as well as cross-town buses and a new rapid transit bus system linking the Auckland Airport with train stations at Puhinui and Manukau.

"There's a six billion dollar funding gap there that the former Government never really explained how they were going to fund that," Twyford said.

He expected the Auckland Council to ask for a regional fuel tax, which would generate between $120 million and $150 million a year and $1.5 billion over the decade, or about 10 percent of the total build programme.

"It's tough to ask the rest of New Zealand to pay all of the marginal costs of Auckland's growth," he said.

"Most of this transport plan will be paid for out of the National Land Transport Fund that we all pay for through our petrol taxes and road user charges. There's no logical reason why rapid transit, like rapid transit busway or light rail infrastructure, shouldn't be funded out of the National Land Transport Fund, just as as state highways are.

"The logic behind that is that what we know is that good rapid transit allows you to get much more value out of the highway network by allowing the traffic to move much more freely at peak hour."

Twyford said the Fund's revenues from fuel taxes and road user charges were hypothecated, which means they cannot be used for other Government spending beyond transport, but the custom had been that the fund was only used for roads.

 'Look at the Northern Busway'

He pointed to the success of the Northern Busway to argue for the use of the fund for light rail. The central Government under the previous Labour Government paid for the bus lane on the Northern Motorway and over the bridge, while the Council paid for the stations.

"53 percent of the people going across the Harbour Bridge into the city are now on the busway. It's taken the equivalent of three or four lanes of traffic off the bridge," he said.

"It only cost a few hundred million to build under the Helen Clark Government. That's a really great example of modern rapid transit extracting huge amounts of existing value out of the existing roading network, and the same logic will apply on State Highway16 going to West Auckland and the rapid transit we're going to be building right across Auckland."

Truckies push back

Trucking industry group The Road Transport Forum is already pushing back against the shift in approach.

"Unless Labour and the Greens have plans to start making rail users and cyclists contribute to the fund then this deal is a real kick in the teeth to motorists and the road transport industry," forum CEO Ken Shirley said.
 
"The reason why trucking operators accept the high level of road user charges is due to the direct relationship the fund has to the provision and maintenance of our roading network. Using it as a slush fund to pay for other transport modes will breed a high level of resentment," he said.

Challenged on why car and truck drivers should pay to build railways and busways, Twyford said: "But they'll be paying to use a roading system that actually works because the traffic will flow more freely. The effect of the northern busway has been that a whole bunch of people choose to leave their car at home at peak hour and take the bus. The traffic moves relatively freely and the traffic that moves on the harbour bridge every morning is pretty good evidence of that."

"You can't have an urban transit system that works at peak hours without having rapid transit built in, acting as a kind of a pressure valve."

Value capture uplift

Twyford said there still remained a gap in the funding plans after the introduction of the regional fuel tax and the use of the National Land Transport Fund.

"Auckland Council believes that one of the ways that they can plug that gap is, for example, capturing some of the value uplift around the network. So when you put in transport, whether it's a motorway or a rail line, it causes a massive increase in value alongside that," he said.

"When you build a motorway, the land next to the interchanges and on-ramps goes through the roof. This idea that Auckland Council are working on is to basically establish an Urban Development Authority in the area around the line, around the stations, to coordinate to get the best possible development outcomes, and the light rail line going up Dominion Road will create fantastic development opportunities."

Twyford pointed to the successful use of value capture uplift mechanisms elsewhere.

"The light rail in the Gold Coast and Cross Rail in London have both operated similar approaches where they've been able to capture some of that value uplift with targeted rates," he said.

Other financing tools

Twyford said the new Government was also pushing ahead with plans for infrastructure bonds serviced by targeted rates in new areas. An infrastructure funding solution was needed before any removal of Metropolitan Urban Limit, which has now become the Rural Urban Growth boundary under the new Unitary Plan.

"It's that failure of urban growth that's at the heart of the problems we've got with gridlock on the roads and expensive housing. The highly restrictive planning system and the Metropolitan Urban Limit is the sharp end of that, but also infrastructure financing is critical," he said.

"The thing with the Metropolitan Urban Limit is you've got to fix the infrastructure financing first because the rural urban boundary is a proxy for the line between land that has infrastructure and land that doesn't.

"I want to tackle those two things together and I want to build on the work done by the former Government with special purpose vehicles, but we need to take it a lot further. What we need is a pipeline of finance that is available for the infrastructure for new urban developments.

"You can't rely on the minister rocking up every six months and writing a cheque. That's not a sustainable way to do it. You've got to be able to tap into debt finance. Make it available for developments that get the tick in terms of quality and reticulation, serviced by a targeted rate on the properties in a new development."

Twyford acknowledged that any system for infrastructure bonds issued by new authorities such as Municipal Utility Districts (MUDs), which are used in the United States to raise finance for suburban infrastructure, had to ensure that ratings agencies saw them as separate from Councils.

"Critically you've got to solve the question of where that debt sits and on whose balance sheet," he said.

A new airport bus

One issue likely to be discussed at this week's meeting on Auckland is the potential for an urgent new bus service from the Airport to connect up with train stations in Manukau.

"There's one really great project we're looking to roll out as urgent priority is rapid bus link between the airport and the Puhinui and Manukau train stations," Twyford said.

"This will give everybody who's got access to the western and southern rail lines access to the airport. This will give rapid transit access to the airport to everybody that has access to the rail network across the city so you'll be able to get on a train in Swanson in West Auckland or in Papakura in the south, and at Puhinui you'll be able to change and pick up a rapid bus service to the airport," he said.

"It's an early win and will be very popular.

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