Consensus Building Group Transport Funding Final Report

7/28/2019 Consensus Building Group Transport Funding Final Report

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ContentS 02 ExEcutivE summary 04 sEction 1: Introduction10 sEction 2: Meeting the challenges o Aucklands growth16 sEction 3: The unding gap24 sEction 4: Our anal sis36 sEction 5: Conclusions and recommendations38 appEndix: Funding sources


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3

eXeCutive Summary

a kl l e e g w ble he e he e new Ze l e he e 30 e . tw - h h g w h e e e b h e e lg , e- h g he e .

the e l w ll be ge h e ble,e l . We ee w.

In order to cope, Aucklandstransport s stem must undergochange across all modes roads, public transport,walking and c cling. A qualit ,responsive transport s stemdesigned to support the growtho New Zealands largest citwill not occur overnight.

Current sources o unding simplarent enough to pa or thetransport programme laid out in the30 ear Auckland Plan. Even witha signi cant increase in investment,the orecast per ormance o keparts o the transport s stem willbe worse rom 2031 than it istoda .

The challenges acing transportin Auckland are considerable,but our biggest ailure would beto do nothing.

F s e

Aucklands rapid populationgrowth is orcing us to act.The Auckland Plan containsthe Councils transport strategto respond to Aucklandsprojected growth and con rmsthat there is insu cient undingto implement it. As the rststep, Auckland Council taskedthe Consensus Building Group(the CBG) with coming to anagreement on our pre erredwa to meet the short all. Thisdocument sets out our ndings.

We considered a range o potential solutions romtraditional unding sources tosolutions that would be new orAuckland. The included increasesto rates, petrol tax and roaduser charges or diesel vehicles(re erred to throughout thisdocument collectivel as ueltaxes), public transport ares,development nancing, regionallotteries, sales and pa roll taxesand a visitor bed tax. In total weconsidered more than 20 possible

unding sources.

o e e

Man o the options ul lled theprimar requirement o being ableto raise enough revenue. Whilethe unding source chosen couldimpact on demand (use o thenetwork), managing the demandthrough other means will also becritical to the uture e ectivenesso the transport network. Simplbuilding our wa out o congestionwill not be su cient.

Earl improvements, particularlthe provision o a ordabletransport alternatives should begiven priorit . These include publictransport and active travel options(such as a connected networko sa e and attractive walkingand c cle wa s). The sequenceand timing o the investmentprogramme needs to be care ullconsidered to optimise theper ormance o our transports stem and refect the availabilito unding.

A decision is needed b 2015at the latest on how and when

the unding gap will be lled.Two alternative pathwa s areproposed.

Under the rst pathwa , theunding gap would be lled

primaril b increases to ratesand uel taxes, as these can beimplemented relativel quickl ,and supplemented b a signi cantgovernment contribution andincreased are revenue rompublic transport. Regular annualincreases would be needed,even be ond 2021, to meet theon going unding gap.

Under the second pathwa , theunding gap would be initialllled b increases to rates anduel taxes and increased are

revenue rom public transport asbe ore, but road pricing wouldbe introduced b 2021 at thelatest. This would remove the

need or on going large increasesto rates and uel taxes. Thepublic eedback to our discussiondocument strongl suggests thatAucklanders are not prepared toaccept signi cantl higher ratesincreases and heavier congestion.This leaves road pricing asan option worth o seriousconsideration.

Our principal nding is that unlessAucklanders are prepared to

accept signi cantl higher ratesincreases and heavier congestion,introducing some orm o roadpricing b 2021 will be required.


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n e whe e we l e a kl , l e j e l g w k g he e. F l g,

a kl l e l h bee ge , e e l , e e he

e , e e bl .

Without action, the problem isgoing to get much worse.One new Aucklander is addedto our cit ever 20 minutes,giving us a predicted populationo between 2.1 and 2.5 million b2041, compared to 1.5 milliontoda . In the next 18 ears alone,there will be another 500,000people living here. Two thirds o this growth is driven b our birthrate and internal migration, with athird rom immigration.

I we do nothing, moving aroundAuckland will be even more

rustrating than it is toda .The time to act is now.The rst step is to identi thebest unding sources to enable

critical transport projects.The second is to ensure that theseunding sources will be in place to

raise the unds as and when theare needed.

Auckland Council andgovernment must havecon dence in their abilit to

und new investments.Aucklanders also want certaint .Creating a stable plat orm oreconomic investment in our citrelies on a shared understandingo what will be built, and b when.Certaint cannot be achievedwithout rst securing the unding.

Ever Aucklander will be a ectedb increasing congestion andwill bene t rom the transportinvestments. Robust agreementb Aucklanders is a undamentalbuilding block or working withcentral government to put inplace an acceptable solution.

introduCtion


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the ConSenSuS Building group

i J l 2012 a kl c l e b g gge he e e e g keh l e wh

l b l b e he g eee e e a kl e .

Auckland Councils governingbod resolved:

That the Governing Body direct council ofcers to carry out investigations, stakeholder collaboration and system design

or selected alternative unding options or transport.

That the investigations,stakeholder engagement and system design primarily ocus onmore examination o :

i) regional uel taxes.

ii) congestion charging/network charging.

iii) additional car parking charges.

iv) airport departure and visitor

accommodation charges,as secondary sources and recommend involvement by the Tourism Industry in the Consensus-Building Group.

v) tax increment unding.

That the Governing Body note that the recommendations above do not exclude the use o existing land transport unding sources,including general and targeted rates, development contributions,public transport ares and government nancial assistance.

19 Jul 2012 GB/2012/105 107

On the basis o thisrecommendation, the Councilappointed the Consensus BuildingGroup (the CBG). The CBGcomprises the ollowing members:

f s ew m l e CBG Chairman

f a s h Walk Auckland

f c e p he Campaign or Better Transport

f d W Child Povert Action Group

f G t l Environmental De enceSociet

f J e B w Tournament Parking Ltd

f K c bellAuckland Business Forum

f p l sh l C cle Action Auckland

f ph l E New Zealand Propert Council

Auckland Branch f r be re

New Zealand Councilo Trade Unions

f sh aw e e Landcare Research

f s d gl New Zealand AutomobileAssociation

f s L b e Auckland InternationalAirport Ltd

f s W ll e Tourism Industr Associationo New Zealand

f s e e G New ZealandAutomobile Association

f s e he selw New Zealand Council orIn rastructure Development

f t G e Auckland Business Forum

o bje e w b l b e e e-b ee he e e e e e e g l ll g

a kl g g , h gh e eb e bl e g ge e .

We worked together or ninemonths, testing alternativesand developing a sharedunderstanding about Aucklandstransport unding needs and howthe should be met.

The Auckland Plan transportimprovements were the startingpoint or our deliberations.As individuals, all members o the CBG have personal viewson di erent projects withinthe Auckland Plan. Our jobwas not to re evaluate themerits o the Auckland Plan.Auckland Council has madedecisions on Aucklands uturetransport s stem ollowing adetailed political and publicconsultation process. We alsonote that individual projects inthe Auckland Plan will still gothrough their own evaluation andreview process.

We considered a wide range o potential sources o revenueto und these transportimprovements. In all we exploredover 20 di erent approaches.We considered increasesto uel taxes, rates, publictransport ares and developmentcontributions. From overseas,we examined unding sourcessuch as road pricing and taxincrement nancing (also knownas betterment levies). We alsoconsidered less conventionalsolutions, such as a regionallotter , visitor (bed) tax,and a departure tax(airport and seaport).

We then compared the relativemerit o these di erent undingsources against screening criteria(Table 1). A high level assessmentenabled us to set aside undingsources with signi cant faws ordisadvantages (see an expandedsection on the Potential FundingSources in Appendix 1).

As the list o potential sourcesbecame more manageable,our assessment became moredetailed. We used the Councilsstrategic transport model to

orecast uture travel demandsand s stem per ormance.Our indicative economicassessment ollowed NZTAseconomic evaluation ramework.Our nal recommendations takeinto account this anal sis and thepublic eedback that we received.

Our brie did not extend todesigning detailed undingschemes. That will occur oncethe Council, governmentand the people o Auckland havedecided which unding optionswill be pursued.

the oBjeCtiveS


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puBliC engagement

de el g a kl e h bee le h je . i e e g w ll

fe e e e. a e g e l be e el e he bl h he ll e eb e

he e .

Although the Council will ormallengage the public i it progressesour recommendations, we alsowanted to understand whatAucklanders thought about ourproposals be ore making our nalrecommendations.

To provide a sound basis ordebate, we elt it was necessarto in orm Aucklanders aboutthe inevitabilit o Aucklandspopulation growth and whatthat will mean or transport.To this end, in March 2013 weset up a website and circulateda document titled AlternativeTransport Funding Project. Thesecovered Aucklands growth and

unding challenges. Media andon road publicit was also used.

This was ollowed b publicengagement on our dra tproposals released on 29 Aprilin our discussion document,Funding Aucklands TransportFuture. This engagementincluded Local Boards, theIndependent Maori StatutorBoard and other interestedstakeholders.

The questions we askedAucklanders were:

1. Do ou agree that:

a. Securing additional undingor transport improvements

in Auckland is a priorit ?

b. A package o unding sourcesshould be used to raise theadditional $400 million per

ear required to meet thetransport unding gap?

2. We have set out two packageso unding sources rom 2021.Which do ou pre er:

Option 1

Increased revenue primaril romrates and uel taxes: or

Option 2

Road pricing supplemented brates and uel taxes.

We had an extremel positiveresponse to the report, and agreat deal o media interest.Overall, we had 9,735 visits bindividuals to our website andreceived 2,370 responses ontransport unding in Auckland.O these, 1,320 were in directresponse to the discussiondocument (see the assessmenton page 30).

We also reviewed commentar onpopular blog and media sites, aswell as responses to independentpolls prompted b our discussiondocument. It is worth noting thatthe themes that emerged romthose polls and blog sites wererelativel consistent with the

ormal responses provided to ourdiscussion document.

SCREENING CRITERIA ISSUES CONSIDERED

S c aContribution to Auckland Plan transport and urban orm prioritiesContribution to government transport strateg outcomesImpact on planned expenditure

revenue potential Revenue su ciencRevenue sustainabilit

adminiStrative SimpliCityImplementation costsCompliance costsOperating costsScheme complexitLevel o risk

effiCienCyEconomic e ciencEvasion/complianceFit with existing unding tools

fairneSSEqual treatment o like pa ers (horizontal equit )Distribution o burden/bene t between groups (vertical equit )A ordabilitMitigation o negative impacts

aCCeptanCeTransparencPublic acceptancePolitical easibilit

t ble 1


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Historicall , Aucklandspopulation has expanded asterthan estimated. I high growtheventuated, our population couldexceed 2.4 million b 2041. Thiswould equate to accommodatingthe population o greaterWellington in Auckland between2011 and 2031.

Figure 1 shows Aucklandsprojected growth in comparisonto other New Zealand cities

i a medium growth scenarioeventuates. One third o ournew residents will be internationalmigrants who are largel llingspeci c shortages in our labourmarket; the other two thirdswill come rom other parts o New Zealand or rom births inAuckland. That means we haveonl limited control over how astthe population is growing.

Our projected population growthwill place enormous pressure onin rastructure such as housing,water, wastewater, other utilitiesand services. All o these competewith transport or a share o public unding. Internationall ,other cities are struggling withthis issue and are putting in placea range o solutions that we havelearnt rom.

auCklandS growth Story

FIGURE 1: HISTORIC AND FORECAST POPULATION ESTIMATES By REGION

P O P U L A T I O

N

2,000,000

1,800,000

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

1935 1955 1975 1995 2015 2035

Source: Statistics New Zealand

Auckland Wellington OtagoCanterbur Waikato

a kl l je e be well e w ll b2041. s new Ze l e g w h e e

l 2.1 ll .


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13

key findings g

e e he

e e l ge . B

kee a kl e

g hee, we w ll

ee e ee h wh

e l e he a kl pl .

S c 2c 2

doing nothing iS not an option

the l e e e be e, e e w h he g e ee he a kl pl , ke e e

e e e. F l e el e he e ee e e ble.

Man Aucklanders alread knowthe rustrations o sitting in tra c,waiting or buses and travellingin congested conditions. Mano us also accept that, to someextent, this is part o living in a bigcit . But i the current situationdeteriorates much urther, it willhave an unacceptable impact onour dail lives and on the wa thatour cit and econom unction.

Our anal sis showed that, unlesswe make substantial investmentsin Aucklands transport s stem,congestion will be much worsethan toda . Large areas will beoperating at capacit , causingtra c jams and overcrowding,making it even harder to move

around Auckland.

Transport has an enormousimpact on our dail lives andour abilit to easil access jobs,education, social, recreational andessential services. A congestedtransport s stem decreases ourconnections with each other.It also contributes to carbonemissions and poorer air qualitbecause vehicles are sitting intra c or longer.

There are also some seriousimplications or all o New Zealand.Although people living outside o Auckland do not generall acethe prospect o spending largeamounts o time on Aucklandscongested roads, their prosperitis indirectl a ected because

Auckland is so important toNew Zealands overall economicdevelopment and productivit .

The transport investmentidenti ed in the AucklandPlan aims to minimise urtherdeterioration in the per ormanceo Aucklands transport network.Signi cant improvements to thetransport s stem are critical andurgent. We agree that man o the initial improvements identi edin the Auckland Plan are essential

or Auckland to cope withpopulation growth. The soonerwe complete these projects, thebetter. It will never be cheaper tobuild these major projects than itis now.

To keep Aucklands transports stem moving in the uture,we will need to do even morethan what is contemplated inthe Auckland Plan. Our anal sisshowed that the Auckland Planprojects will make a positivedi erence to Aucklands transports stem, but even with theseimprovements, we will still acegreater tra c congestion in the

uture than we do toda .

planned tranSport improvementS

key findingH ll ,a kl g w hh e ee e

e . Weee l

w e e ble

g w h.

m h e wh e ee b k e e e he w h a kl e e

g e ge e e . the e wl b h g e g he e e

he e g e w k.


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managing demand

Auckland cannot simpl buildits wa out o congestion weneed to care ull manage demandb balancing disincentives withviable transport alternatives. Thecomments provided to us duringthe course o this project suggest,a large number o respondentshave also reached this conclusion.

A range o non priced demandmanagement initiatives couldmake signi cant contributions( or example; more bus lanes,walking school buses, carpooling,working rom home, living closerto work initiatives). Improvedpublic transport services will alsopla a role in encouraging theuse o buses, trains and erries. Inaddition, pricing initiatives coulddeliver transport bene ts, orexample aster and more reliabletravel times.

Man o the respondents to ourdiscussion document, supportedmanaging demand through roadpricing so that those contributingto congestion should bear someo the cost. A number o peoplealso wanted other measures, suchas car pooling, walking schoolbuses and working rom hometo be promoted. Concern wasalso expressed that an increaseto public transport ares wouldbe at odds with e orts to addressAucklands congestion.

providing alternativeS

a kl e ee h e e l h e b h whe el.

Planned public transportin rastructure improvements needto be prioritised as the providebene ts to all transport users.Providing active travel options,such as a connected networko sa e and attractive walkingand c cle wa s, has the addedbene t o taking some pressureo the roads. Our own views, andthe eedback that we received,indicated that improved transportoptions need to be in place be orean signi cant additional chargesare imposed on Aucklanders.\\

i e l e e e e h w h he e e l he h be b l . a a kl he

h e l , we w ll ee e el ge hee l e e w k.

key findingB l g l

w ll be

e bel . m g g

ew ll l be l

he eefe e e he

e w k.

key findingBe e g

e e e e

a kl e ,f ble

l e e h lbe l e. th

l e ebl

e el ( h

e ee w k e

e w lk g le w ).


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the $12 Billion funding gap

de e he e e h e bl 30- e je , le h he g e he

a kl pl be el e e w h l gbe wh e l l ble. the a kl pl he

h ll $10-$15 b ll .

Based on current policies, we arecon dent that there is actualla unding gap o at least $12billion, with $3 billion alling inthe rst decade. Filling this gapwould require additional undingaveraging around $400 millioneach ear or the next 30 ears.

Our starting point or quanti ingAucklands transport undinggap was to identi the existingsources o unding or thetransport s stem as a whole. Wedid not make distinctions aboutwhether particular streams o

unding are tagged or speci ct pes o transport expenditure.

We identi ed the ollowingexisting sources o unding orAuckland:

f New Zealand TransportAgenc s (NZTA) StateHighwa construction andmaintenance programme is

unded rom uel taxes f Public transport in rastructure

and improvements to localroads and ootpaths are

unded rom developmentcontributions, NZTA subsidies(derived rom uel taxes),and debt unding romAuckland Council

f Road maintenance, publictransport services and other

operating costs are undedrom rates, NZTA subsidiesand public transport ares throughout this anal sis, thenet public transport subsidis used, a ter public transport

ares are deducted.

Be ore seeking additionalsources o unding we expectthat existing revenue will beused in the most e ective wa ,and wherever possible, newtransport expenditure will beaccommodated rom existingbudgets.

The public eedback that wereceived clearl indicated that,be ore the are asked or moremone , Aucklanders expectthe council and government toexamine their budgets closel to

nd savings that could help undnew transport projects. However,it is also clear that the scale o additional unding required is solarge that reprioritisation alone

cannot ield su cient savings tocover the entire unding gap.


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Note:1. The capital expenditure projections are

sourced rom Auckland Council, AucklandTransport and NZTA.


$ M I L L I O N

2,500

2,000

1,500

1,000

500

2013 2018 2023 2028 2033 2038 2042

Additional harbour crossingAirport link/ Warkworth Wells ord

CRL/ Regional Arterials/ AMETIEast West link/ Puhoi Warkworth

Transport to green elds areasAvondale Southdown rail link

the CoSt of projeCtS

Between now and 2042 the totaltransport expenditure in Auckland

is projected to be $68 billion.Capital expenditure on transportis projected at around $45 billion.Figure 2 shows the pro le o thecapital programme, and some o the priorit projects b decade.

We note that expenditure is lowerin the third decade due in part to

the di cult o identi ing andcosting speci c transport projectsso ar into the uture.

We used the best estimates o project costs currentl available,but the are onl initial estimates

(particularl or those projectsidenti ed a ter 2031). Experience

tells us that initial estimates tendto understate the actual costs o projects.

CoSt Breakdown

p bl b e( e e e h gh e ) $15.5 billion

m g l l h $4.5 billion

m g e h ghw $2 billion

of e b k g e e e e e e ($1 billion)

i e e e e e $21 billion

t l o e g c be e $42 billion

The unding gap results rom both

the capital costs o providing newin rastructure, and the signi cantongoing operating costs o thetransport s stem. To 2042,operating costs together withdepreciation and interest areestimated at around $42 billion.

Auckland Councils polic is tound its new capital expenditure

partl rom debt. The interestand depreciation rom thoseassets are unded rom rates andother sources, thus spreadingthe costs o those investmentsacross generations. The currentgovernments polic is to undnew assets on a pa as ou gobasis. Based on these respectivepolicies, o the $45 billion capitalexpenditure around $26 billionwould need to be unded up ront,with the remaining $19 billioninitiall unded b council.

c l $45 billion

of e b a kl c l g ($19 billion)

t l c l be e $26 billion

totaL FundinG rEquirEmEnt $68 b ll

FIGURE 2: PROJECTED CAPITAL COSTS 2012-2042


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the availaBle funding

r e e e e $21.5 $23.5 billion

de el e b $2.5 billion

F el e $28 $34 billion

Based on current policies, we estimate that the unding available rom existingsources until 2042 will be somewhere between $52 and $60 billion. We have

kept our estimates as a range to take account o uncertainties that ma a ectthese numbers.

Rates and developmentcontributions or transport in2013 are projected at around$460 million. We have assumedthat rates revenue will grow as theregions population grows. TheCouncils long term plan providesthat the proportion o that revenuededicated to transport increasesthrough the rst decade; be ondthis it is assumed constant.

Funding or Auckland rom ueltaxes in 2013 is projected at around$1 billion, and is projected to remainconstant in real terms over the30 ear period, once the

governments recentl announcedincrease o three cents eachear or three ears has been

implemented. The projection o constant revenue rom uel taxesrefects the o setting impacts o increased population and vehiclenumbers against the increased uele cienc o vehicles. Aucklandsshare o the revenue rom uel taxesis projected to remain constant.These assumptions would result inrates contributing a progressivellarger share o total transportrevenue, up rom 32 per cent todato around 52 per cent b 2042.

totaL FundinG avaiLaBLE $52-$60 b ll

CalCulating the funding gap

In the Auckland Plan, the Councilestimated the unding gap to be

in the range o $10 $15 billion.Our anal sis suggests the gap isbetween $8 $16 billion. Becausethe level o investment neededin the second and third decadesis likel to be understated, weconsider the unding gap to beat least $12 billion. More will berequired i Auckland is to attemptto halt the decline in per ormancethat occurs a ter the investmentin the Auckland Plan.

Figure 3 shows the pro le o the expenditure, alongside the

available revenue. B 2022,the unding gap reaches around$3 billion. B 2032, it increasesto around $10 billion, and b2042 it reaches $12 billion.

Available unding rom rates, NZTA and development contributionsTotal expenditure to be unded

FIGURE 3: TOTAL FUNDING GAP


2,500

3,000

3,500

2,000

1,500

1,000

500

2013 2018 2023 2028 2033 2038 2042

$ M I L L I O N

totaL FundinG Gap $12 b ll


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23 S c 3c 3

making 30-year projeCtionS

Clearl there are areas o uncertaint in these 30 ear

projections, and it is worthrecognising some o those thathave a major impact on the

nancial projections.

f The investment programmeanticipated b the AucklandPlan, in the rst 10 ears inparticular, is ambitious andwould require a considerablee ort to implement in thetime rames speci ed in theAuckland Plan

f Public transport subsidiesassume a signi cant increasein patronage which ma not beachieved

f It was di cult to accuratelorecast and provide costs or

projects that are well into theuture, and in some cases have

not been ull scoped f Rates revenue projections are

based on assumptions o highgrowth in Auckland

f Projections o revenue romuel taxes, and the share o

that revenue allocated toAuckland, are uncertain.

The orecasts were preparedon the basis o current policies,

including the governmentsapproach o ull undingstate highwa improvements.An alternative approach to

unding, such as a public privatepartnership or the additionalWaitemata Harbour crossing,ma not reduce the undingrequirement, but would changeits timing.

The Auckland Plans investmentprogramme is expected to gothrough some development andre nement. All major projectswill need to be supported b arobust business case. The abilitto deliver such a comprehensiveprogramme and the availabilito unding will require care ulsequencing and timing o theinvestment and regular review o the programme.

We are con dent that,

on average, an additional$400 million each ear overthe 30 ears is needed to meetthe expectations set out in theAuckland Plan (the actual annual

gure ma be above or belowthis number).

key findinga le e$12 b ll (

e ge $400ll e

) w ll bee e el e he a kl

pl g e e

he e 30 e .


14/26

25c X S c 4

potential funding SourCeS

The abilit to generate su cientrevenue to und the level o

transport investment in theAuckland Plan was the primarconsideration in our decisionmaking process. But given thecontinuing pressure on Aucklandstransport s stem, our ocus thenturned to whether some undingsources could provide additionaltransport bene ts (such asreducing congestion).

Our consensus was that onl oursources o ered the most practicalwa o addressing the undinggap. Man respondents to ourdiscussion document elt that ueltaxes, rates, road pricing, and tollswere valid options to consider.We also received strong eedbackthat increased governmentcontributions were needed andwarranted.

There was public support orunding sources that are user

pa s. The onl exception waspublic transport are increases.Some respondents believed thatall transport users, includingpublic transport users, shouldpa their air share. However,respondents also commented thatpublic transport are increaseswould be counter productivei Auckland is serious aboutreducing congestion.

We note that implementing thegovernments 50 per cent arebox recover polic will result inreal public transport are increasesover the next three ears.

key findingH g e e

he e lg e ,

he ll w ge e e

e e le

e : f F el e f r g-b e

e f r g f t ll

ew


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27 S c 4c 4

funding SourCeSwe diSmiSSed

SequenCeand timing

We recommend later in thisreport that the ollowing sources

should not be considered urther: f Regional lotter f Regional pa roll tax f Regional GST/sales tax f Visitor bed tax f Departure tax f A lev on vehicles registered in

Auckland f New orms o parking levies f Managed toll lanes f Area charging

f Double cordonf Full distance charging

f Tax increment nancing/betterment

These sources were assessedagainst the criteria in Table 1 anddismissed or one or more o

these reasons: f Raised too little revenue f Were too complex to

implement or ph sicallimpossible

f Cost too much to administeror the level o revenue that

could be raised f Targeted an activit that was

onl marginall associated withthe transport s stem

f Had signi cant issues o airness

For greater detail on our reasonsor dismissing certain tools please

re er to the Appendix.We considered the potentialapplication o unds romdividends and interest rom,or sale o , council assets. TheCouncils revenue orecastsanticipate the expected uturedividends rom Council assets.Selling the assets would broadlrealise the same total value o contribution as the orecast

uture earnings. Accordingl ,asset sales would not reduce the

unding gap be ond our currentestimates.

We also considered thepossibilit o ull distancecharging. However, internationalexperience told us that this wouldbe di cult to implement becauseo the technical challenges that itposes. We would not rule this outas a viable option in the long term,

and consider that our proposalscould eventuall evolve into amore comprehensive scheme,as the need increases andtechnolog allows.

Achieving certaint about whenadditional unding streams will

be in place is critical. Majorprojects have long lead times butthe cannot commence withoutcertaint o unding. Withoutcertaint , it will be di cult toprogress with construction o ke transport projects in theAuckland Plan.

In addition to assessing potentialunding sources against our

screening criteria, we also spentconsiderable time workingthrough the most appropriatetiming o an additional undingstreams and how quickl thecan be put in place. Obtainingadditional unding rom somesources could be achieved morequickl than others. For example,increases to rates and existing ueltaxes could be in place ahead o aroad pricing scheme or a regional

uel tax, both o which wouldrequire new legislation.

Our recommendations there oreocus on providing short termunding certaint or the

immediate investments, as well asproviding long term con dence.

a paCkage of funding SourCeS

deCiSionSBy 2015

To implement the Auckland Plantransport programme, a package

o unding sources is the bestapproach. Raising the revenuethrough one unding source alonewould make the level o chargeor tax excessive. Using a packageo unding sources, the burden o charges can be spread, reducingthe nancial impact on particulargroups. This approach also ensuresthat those who bene t willcontribute to the cost o unding,rather than one group pa ing whileothers enjo the bene ts.

A decision on how the unding gapwill be lled and when additional

sources o unding will be in place,is needed b 2015 at the latest. Aailure to make the right decisions

earl enough will leave Aucklandwithout the certaint that it needsto begin the necessar transportimprovements.

Without additional unding,Auckland Council and NZTAwould be unable to commencethe ull Auckland Plan programmeand some major projects would

all behind schedule. Be ore theCouncil and government cancommit to making the requiredinvestments, or take on debtto cover them, the will needcon dence that adequate undingwill be available or as long as it isrequired.

Certaint will also be neededor the private sector to invest

in appropriate intensi cation

o development and plannedgreen elds initiatives to meetuture demand or housing and

business. The private sectorneeds to know that transportinvestments will be made intime to support planned newdevelopments.

A decision b 2015 also providesthe time required to put an new

unding sources in place. Weestimate that it could take5 7 ears to implement some

orm o road pricing. This takes

into account the need or publicconsultation, legislation, detailed

scheme design, construction andtesting o necessar in rastructure.Securing the necessarcommitment b 2015 wouldprovide su cient time to haveadditional unding in place to supportthe Auckland Plan programme.

The vast majorit o submittersaccept that doing nothing is notan option, and that a combinationo unding sources would berequired to und Aucklandstransport improvements. Therewas limited eedback on whethera decision is needed b 2015.However respondents expressedtheir rustration that Aucklandis still talking about its transportproblems, rather than getting onand xing them. Taking this intoaccount, we remain convincedthat a package o unding sourcesis appropriate, and that 2015is the critical decision making

deadline or the Council andgovernment.

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29 S c 4c 4

interim funding

Our recommendations areconstrained b how quickl

additional unding sources can beagreed and implemented.The need or immediateinvestment means that, in theshort term, the unding gapwill have to be lled b sourcesalread available to us. Rates and

uel taxes are the main sourceso existing transport unding.We need to start increasing therevenue generated rom thesesources immediatel and sustainthat commitment over time.

The unding gap commences in2015 and progressivel increasesto 2021.

Rates and uel taxes would haveto match this increase. Small butregular increases are easier toaccommodate than large one o increases.

Rates increases o 0.5 0.6 per

cent above existing levels wouldraise around $7.5 million in 2015,but compounding increases at asimilar level would raise around$60 million per annum in 2021.Increases to uel taxes o around3.5 cents per litre would raisearound $35 million in 2015, whilecompounding increases couldraise around $200 million perannum in 2021. Annual increasesat those levels would provide amajor source o additional undingin the rst decade.

Income rom these sources islikel to be bolstered b increased

public transport revenue arisingrom patronage growth. Publictransport users will bene t romthe investments. A greatercontribution rom them could beachieved through increasing ares,however overl ambitious areincreases would have the perversee ect o encouraging people backinto private motor vehicles.

Man submitters expresseda willingness to take some

responsibilit or undingAucklands transport needs,but the also expect a greatercontribution rom the Counciland government. The believethat the Council shouldreprioritise budgets and increasesavings to pa or plannedtransport improvements.

Managing our existing transports stem more e cientl is alsoa priorit . Aucklanders wantto get the best out o existingin rastructure be ore proceedingwith new investments.

Auckland generates 38 per cento national GDP, while 46 percent o the countr s exports/imports (b value) pass throughAuckland Airport and Ports o Auckland. Time that Aucklandersspend sitting in tra c is timethat cannot be spent more

productivel elsewhere. Time thattrucks spend sitting in tra c iscostl or those doing businessin Auckland, and importers andexporters who need to movegoods through Auckland Airportand the Ports o Auckland.

International research shows thatmajor cities determine overallnational economic success.This is not onl because the arelarge domestic markets or goodsand services but the also improveproductivit . This is a direct

result o the bene ts that rmsand people can access b being

located close to one another.These bene ts rel on ensuringthat our most densel populatedareas ( or example, Aucklandscit centre) are connected andeasil accessible to emplo ers,emplo ees and customers.

Existing levels o governmentunding are insu cient to meet

Aucklands uture transportneeds. Increased government

unding would refect the growingproportion o national GDP andtax revenue rom Auckland.While Aucklanders seemto accept that as a cit weshould pa our air share thegovernment should also be reliedupon to meet similar obligations.This view was also expressedb submitters.

To achieve long term certaint ,Auckland Council and thegovernment will need to agree toongoing and increasing levels o

unding. The exact combination o rates and uel taxes is an issue orAuckland Council, the governmentand the people o Auckland to workthrough. Some considerations willbe the amount (and pro le) o the

nal investment programme, andthe unding available rom existingand an other sources. The Counciland the government could choosesmaller increases and greaterborrowing i the know that astrong revenue stream will soon beintroduced.

Together with reprioritisingexpenditure, increased governmentcontributions and some borrowing,these sources could close the

unding gap in the rst decade. I the necessar increases are notimplemented earl enough, arlarger increases will be required inlater ears or the programme o investment will not be delivered.

Both o these outcomes wouldpass substantial costs to uturegenerations.

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31 S c 4c 4

There were two options orunding Aucklands transport

improvements that we presentedin the discussion document. Wealso said either option would needto be implemented b 2021. Theoptions were:

Option 1

Larger increases to rates anduel taxes, tolls to und major

new roads, urther governmentcontributions and small areincreases or public transportusers.

Option 2

The introduction o road pricing,supplemented b smallerincreases to rates and uel taxes,

urther government contributionsand small are increases or publictransport users.

While raising similar levels o revenue, the two options had

distinct eatures. Continuedreliance on rates, uel taxes,the tolling o major new roadsand limited public transport areincreases, provide a relativelsimple wa to ll Aucklandstransport unding gap. These areexisting sources o revenue,and rates and uel taxes inparticular are inexpensive tocollect. No additional legislationis required to implement them.

aSSeSSment of the two optionS

We considered a regional ueltax was more appropriate than

increases to the national ueltax. However this would requirenew legislation and would costslightl more to administer thanthe existing s stem. It would alsoresult in a signi cant variation in

uel prices between Auckland andthe rest o the countr .

On the other hand, road pricingwould be a new unding source.There would be an up rontinvestment required to establishthe technolog and in rastructureand it would entail substantialongoing operational costs. Alaw change would be required.However, road pricing schemeshave the added bene t o impacting on travel demand,helping to reduce the level o congestion on the roads, andimproving travel speeds and journe times or motoristsand reight. We also concluded

that the must be supported bviable, attractive public transportalternatives.

Our evaluation o these twooptions against the screeningcriteria is shown in Table 2. O the various road pricing schemes(see Appendix), the single cordonand motorwa network schemesappear to provide the bestbalance o e cienc , airness andtransport outcomes, althoughmore investigation is required.

O the two options, submitterswere overwhelmingl in support

o Option 2. We received 1,025responses in support o Option2 and 187 responses in supporto Option 1 (108 submitterschose neither option). Weacknowledge that the responsesto our discussion document donot constitute a representativesample.

It is likel that lower socioeconomic groups and someparts o the region are underrepresented in the eedback wereceived. Notwithstanding this,the overwhelming eedback insupport o Option 2 suggeststhat Aucklanders are aware o ourtransport problems and supporta solution that raises revenue andhelps to manage congestion.

StrategiCalignment

option 1LEss impact onconGEstion

option 2GrEatErdEconGEstionBEnEFits

The unding sources in Option 1 have a limited impact on congestion, as onl uel taxand tolls on new roads have a direct e ect on peoples travel choices. Even then, theimpact is limited. Tolls on major new roads a ect onl a small proportion o the roadnetwork, and uel taxes do not require motorists to question the time or value o their journe as the make it.

Option 2 makes a stronger contribution to the Auckland Plan transport objectives,and to the National Land Transport Strateg , because it has a greater impact on

congestion.The impact o road pricing on travel demand will depend on t he level at whichcharges are set. A $2 charge would have a noticeable impact on travel choices.A higher charge could have a more pronounced decongestion e ect, but havenegative impacts on particular groups and individuals.

revenue potential

option 1GrEatEr uncErtainty But LoWEr coLLEctioncosts

option 2morE cErtainty But HiGHErcoLLEction costs

Both options have the potential to raise su cient revenue to close the unding gap,provided that the necessar annual increases in rates and uel taxes are implemented.

Under Option 1, the limited diversit o revenue sources presents some uncertainties,particularl i annual increases rom rates and uel taxes are not implemented. Option2 broadens the number o revenue sources and could o set reduced uel taxrevenue resulting rom more uel e cient and electric vehicles.

The amount o income rom Option 2 will depend on the level o charge and thevolume o tra c. Setting charges and projecting tra c volumes is di cult, as itinvolves a care ul balance between revenue generation, travel demand management,and the best use o network in rastructure.

Road pricing has higher administration costs than the sources in Option 1.The gross revenue collected under Option 2 will need to be higher to cover theadministration costs.

adminiStrative SimpliCity option 1EasiEr and morEcost EFFEctivE toimpLEmEnt andopEratE

option 2morE compLEx andcostLy to impLEmEntand opEratE

Option 1 is easier and more cost e ective to implement and operate than Option 2.The unding sources (and the technolog to support them) are alread widel used inNew Zealand. B contrast, Option 2 requires new in rastructure (such as a network o vehicle recognition sites).

Under Option 1, the costs o collecting additional rates, uel taxes and publictransport ares are virtuall zero, as the mechanisms alread exist to do this. The costo implementing tolls on 2 to 3 major new roads is around $9 million, with estimatedongoing operating costs o between 50 69 cents per transaction.

Under Option 2, the cost o implementing road pricing is $69 $94 million, dependingon the design o the scheme implemented. Based on international experience theongoing operating costs can be expected to be between 50 69 cents per transaction,but volume and e cienc savings could reduce these costs.

key findingthe ee b k

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33 S c 4c 4

eConomiCeffiCienCy

option 1morE EconomicaLLy EFFiciEnt duE to LoWcosts, But LimitEddEconGEstionBEnEFits

option 2EconomicaLLy EFFiciEnt andprovidEs noticEaBLEdEconGEstionBEnEFits

Option 1 has lower costs than Option 2, but does not provide as man travel bene ts.However, it is e cient because the costs are comparable to the bene ts received.The average household would ace increased out o pocket transport costs o around70 75 cents per da (could be higher or lower or individual households). In return,the would receive travel time savings valued at about 50 cents per da .

Option 2 is also economicall e cient and generates more bene ts than Option 1.However, it has higher costs, which mean that it is not as economicall e cient.The exact costs and bene ts o Option 2 depend greatl on the t pe o scheme.

Under Option 2, the average household would ace increased out o pocket transportcosts o between 80 cents and $1.10 per da (depending on the t pe and design o the road pricing scheme). Again, this gure could be higher or lower or individualhouseholds. In return, the average household would receive travel time savings valuedat around 95 cents per da .

fairneSS

option 1sprEads tHE BurdEn,But impact oFtarGEtEd ratEs andtoLLs WouLd vary

option 2aFFEcts FrEquEnttravELLErs andimpact oF scHEmEsWouLd vary

Both options increase the cost o living and o doing business. This will signi cantla ect low income households and businesses that cannot pass on additional costs toconsumers.

Both options have issues o airness. Both alter the proportions which di erent groupscontribute to transport unding. The total revenue collected is similar under each, butthe impact alls di erentl .

Option 1 will have a broad impact. All ratepa ers, motorists, public transport usersand tax pa ers would be a ected. These groups all bene t directl or indirectl romtransport improvements, but some more than others.

Option 2 has a more targeted impact. The burden alls mostl on motorists, althoughratepa ers and taxpa ers will eel some e ects. This refects the contribution o motorists to congestion, and the transport bene ts the will receive.

Option 1 has varied geographic impacts. Targeted rates would a ect onl some partso the region. Tolling will a ect travellers on tolled roads, but not those travelling romother parts o the region on roads which are equall congested.

Under Option 2, the geographic impact depends on which road pricing scheme isimplemented. A cordon scheme would mostl impact those who live and work closeto the cordon and need to cross it. A motorwa network scheme would have a moredistributed geographic impact. It would deliver travel time bene ts to those pa ing thecharges, but none or those who dont.

Within each package, individual unding sources have inherent issues o airness andun airness.

fairneSS (Continued)

Rates increases ma not refect a propert owners use o the transport s stem or theirabilit to pa but the do refect bene ts rom higher propert values and productivitbene ts that could result rom transport improvements.

Fuel tax increases will a ect some more than others. Some commuters and businessesma not be able adjust their travel behaviour to reduce the impact o higher uel prices.The people a ected most will be those whose livelihood depends upon multiple, lowerpaid jobs requiring travel at times o the da when public transport services are less

requent. The businesses most a ected will be transport and logistics businesses, andmobile service providers that routinel travel between multiple clients.

Road pricing will disproportionatel a ect requent travellers who need to travel acrossthe path o a road pricing boundar . This could be mitigated through the design o thescheme, capped dail charges, or reducing charges at some times o the da .

For man , the reduced travel times and increased reliabilit that road pricing can o erwill be worth pa ing or. For others (such as the time rich but cash poor), a lack o disposable income could see them taking longer but cheaper routes.

Whichever option is chosen the cost will be elt more b those on lower incomes.Auckland Council and the government will need to nd wa s to mitigate these impacts.

aCCeptanCe option 1onLy rEquirEsLEGisLation Fora rEGionaL FuELtax But rELiEs onsustainEd poLiticaLcommitmEnt

option 2rEquirEs LEGisLationand Has poLiticaL andpuBLic accEptaBiLity cHaLLEnGEs

Option 1 relies on a sustained commitment to annual increases to rates and uel taxesb the council and the government. This could impact on long term certainto unding.

Implementing a regional uel tax would be inconsistent with legislation beingconsidered b Parliament which is currentl set to abolish the regional uel taxprovisions in the Land Transport Management Act. However, it would ensurethat the rest o New Zealand does not subsidise Aucklands transport s stem.Increasing national uel tax would refect Aucklands growing share o the nationalpopulation and the economic bene ts that its transport s stem provides to the resto New Zealand. However, other regions could also perceive it as a subsid to Auckland.

Option 2 involves the introduction o a new unding source (road pricing) inNew Zealand and would present some political challenges. Although commonoverseas, the New Zealand public is not et amiliar with widespread road pricing

a signi cant shi t in public opinion would be required in order to achieve politicalsupport or this. However, a road pricing scheme that provides motorists with greatertravel bene ts ma gain some traction, provided charges remain at reasonable levels.

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35

Our process has not consideredwho should administer new

unding sources. We haveassumed that an new revenuewould be used where it is needed.

Care ul and air stewardship o an new unding mechanism isvital to retaining public supportand trust. Man o those whoresponded to our discussiondocument, or example, indicatedthat the expect an monecollected to be used or thepurpose or which it was raised.

The best stewardshiparrangements will dependupon the nature o the undingsource and the package chosen.However, we believe that the

ollowing principles should applto an unding package.

f No taxation withoutrepresentation

f Taxes must be used or thepurpose or which the wereraised

f Financial decision makingshould align with nancialresponsibilit and abilit tomanage risk

f Financial decisions should alignwith relevant polic

f Transparenc andaccountabilit should bemaintained

f High standards o integritand risk assurance shouldbe maintained, includingindependent audits

f Governance arrangementsshould be cost e ective and

simple f Clarit o roles is essential f Integrated or joined up

unding decisions are critical

We endorse the objective inthe Auckland Plan o managingAucklands transport network asa single s stem. The s stem is jointl unded; State Highwa sand the rail s stem are ownedb the government and thelocal roads are owned b theCouncil. Histor has taught usthat strategic alignment betweenthe government o the da andAuckland local government israre. To make an real progress,there needs to be ongoingalignment between AucklandCouncil and government tocoordinate the strateg and

unding o transport in Aucklandor the next thirt ears.

Transport is a ke enabler o growth i it is provided in a timeland e cient manner. Planning

or investment is guided b theCouncils Auckland Plan, LongTerm Plan, the Unitar Plan,Auckland Transports IntegratedTransport Programme, theGovernment Polic Statementon Transport, and NZTAsNational Land TransportProgramme. As these plansand programmes evolve, it isessential that the align to deliverintegrated transport and land usedevelopments or Auckland.

S c 4c 4

A signi cant number o Aucklandhouseholds are on or near the

povert line and even small dailincreases to transport costs willhave a signi cant impact on them.

Man submitters also expressedtheir concern about thea ordabilit o new undingsources, and the impact thatthese could have on:

f low income amilies f cit businesses and residents f businesses that are unable

to pass new costs ontoconsumers

f people who have a limitedabilit to alter their travelpatterns to minimise exposureto new charges.

We have kept the issue o a ordabilit rml in mind when

considering alternative undingsources. But more in depthanal sis is required to understandthe impacts that new or increasedcharges will have on amiliesand businesses. As the detail o

unding schemes is determined,close attention will need to begiven to mitigating negative socialand economic impacts.

Be ore deciding on the nalunding pathwa , it would be

prudent to anal se the impact o increased costs.

affordaBility

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37c X S c 5

reCommendationSOur recommendations are:

(a) That Auckland Councilmakes a decision b 2015to pursue one o the undingpathwa s identi ed inrecommendation (b)

(b) That Auckland Council urtherinvestigates and introducesone o two alternativepathwa s or unding thetransport gap b either:

(i) Primar reliance on rates,uel taxes, tolls to und

major new roads andsigni cant governmentcontributions andincreased are revenue

rom public transport, withagreed annual increasesto rates and uel taxescommencing in 2015, or;

(ii) Initial increases in rates anduel taxes and increasedare revenue rom public

transport commencingin 2015, ollowed b theintroduction o some

orm o road pricing andadditional governmentcontributions.

(c) That this investigationincludes:

(i) Detailed work on thedesign and impacts o possible road pricingschemes, ocussingon the single cordonand motorwa networkschemes

(ii) Further anal sis o thea ordabilit and socialimpacts o the undingalternatives and wa sto mitigate an adversee ects

(iii) Anal sis o possiblegovernance andrevenue administrationarrangements.

(d) That the ollowing should notbe pursued urther as undingtools: f regional lotter f regional pa roll tax f regional GST/sales tax f visitor bed tax f departure tax f a lev on vehicles

registered in Auckland f new orms o parking levies f managed toll lanes f tax increment nancing/

bettermentf double cordon

f area charging f ull distance charging

(e) That be ore imposing greatertransport costs on businessesand households, there shouldbe increased investmentin a ordable and reliabletransport alternatives inplace. These should includeimproved public transport anda connected network o sa eand attractive walking andc cling options

( ) That central governmentincreases its unding ortransport in Auckland, be ondwhat can be expected romthe National Land TransportFund, to refect Aucklandsgrowing population andits contribution to the nationaleconom

(g) That mechanisms areestablished to achieve ongoing agreement betweenAuckland Council andgovernment to align thestrateg and unding o transport in Auckland.

(h) That Auckland Council workswith Auckland Transportand New Zealand TransportAgenc to optimise thesequence and timing o theinvestment programme, andto ensure consistenc with theAuckland Plan, Unitar Planand the available unding.

c su le a kl e e e e e g l h ghe e e e he e ge , g e g b 2021 w ll be ep bl ee b k h e e ew h e h w b ge he g ee e b 2015.


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39

opoSalS appendi

xc 5

As part o our process, weconsidered in excess o 20potential unding sources. In thisappendix we provide greater detailabout our ndings in respect o individual sources.

The potential unding sourceswere assessed against high levelscreening criteria (Table 1, page 8),to rst eliminate those with majorfaws. The remaining sources wereconsidered worth o urtherconsideration. B emplo ingAuckland Councils transportmodel and an indicative economicanal sis ( ollowing NZTAseconomic evaluation ramework),our assessment highlighted thepracticalit o the unding sources,the di erences between them andtheir core issues and impacts.

We ound that a package o unding sources is required as no

new or existing unding sourcewould be acceptable on its own.Our nal assessment whichincorporates the eedback wereceived to our discussion paper,has resulted in two groups o

unding sources:

1. Funding sourcesrecommended or urtherconsideration prior to a decisionon which to implement.

2. Funding sources that shouldnot be pursued urther.

These unding sources arediscussed separatel .

1. funding SourCeS reCommended for further ConSideration

1.1 F el t e

Petrol Excise Dut (PED ormotor spirits excise dut ) is awholesale lev on all petrol salescharged on a cent per litre basis.It is a component o the retailprice o petrol paid at the pumpb motorists. The bulk o thePED goes to the National LandTransport Fund (50.524 cents),which (among other things)

unds state highwa activities,road policing, and is a source o

unding made available to councilsto assist with maintenance,renewals and improvements tolocal roads and public transportin rastructure.

The balance o the PED isallocated to ACC Motor VehicleAccount (9.90 cents), LocalAuthorities Petroleum Tax (LAPT)(0.66 cents) and Petroleumor Engine Fuels MonitoringLev (0.045 cents). The LAPTis a more direct source o

unding to local authorities andis levied at the wholesale levelon petrol and diesel under theLocal Government Act 1974.Road User Charge (RUC) is adistance based charge on dieselvehicles, set at a level relative tothe PED. Revenue raised is alsodirected to the National LandTransport Fund.

We considered three wa s thatincreased uels taxes could raisethe required level o unding: anincrease to the PED directedto unding Aucklands transportprogramme, an additional ueltax on uel sold in the Aucklandregion a regional uel tax andan increase in the LAPT. Both aregional uel tax and an increasein the LAPT would requirethe introduction o enablinglegislation and do not align withcurrent government polic .

As an existing unding source,

uel taxes are part o the undingmix going orward and are likel tocome under increasing pressureas technolog improves thee cienc o petrol and dieselvehicles and with the increasingpopularit o electric vehicles.An increase to the current PEDis easible, simple and capable o generating substantial revenue. Itwould also be possible to establisha regional allocation. An increasein the LAPT would achieve thesame outcome, either nationallor regionall .

1.2 r g-b e e :

1.2.1 r e

Rates are the primar sourceo unding or local governmentactivities in New Zealand. Ratesare a orm o propert tax leviedannuall on the rateable valueo land within local governmentboundaries. Having determinedtheir nancial requirements,councils strike the general rate aspart o their Annual Plan (or everthird ear or Long Term Planprocesses). Rates are calculatedbased on the value o land and/ora number o other actors. Ratescan be determinded b multiple

actors, and activit baseddi erentials (ie business andresidential use) can be applied.

The rates bill can be made upo the general rate and othercomponents such as a uni ormannual general charge and/ortargeted rates. The s stems thatsupport their assessment andcollection are long established.The associated operational andcompliance costs are low andconsiderable e ort is made toensure a ordabilit . S stems arein place or the provision o ratesrelie in the case o hardship.

We ound that rates can be set tobroadl match the spread o costswith the bene ts o transportinvestment. Their complexitand cost were low, although thedo not have signi cant demandmanagement impacts. Unless an

alternative unding source canbe ound, a greater burden o costs will all on rates. Based onthe public eedback we received,ongoing signi cant increases torates would be unacceptable.

1.2.2 t ge e e

Councils lev a targeted rate ona speci c activit or group o activities. These activities areidenti ed through the process

or setting rates. A targeted ratema be uni orm or di erentiatedto refect a service or bene t.


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41xx

For example, a uni orm targetedrate ma be set or all rateableland or de ned categories o land.Alternativel , a di erentiatedtargeted rate could be set acrossthose parts o the Aucklandregion receiving public transportservices where the level o ratesbroadl matches the level o service provided.

Auckland Council does not havea targeted rate or transport,although the ormer AucklandRegional Council used a targetedrate to help und public transport,which raised about $60m perannum. The level o the rate

varied across the region to refectthe level o public transportservices. The inner urban areapaid about 1.25 times more thanthe wider metropolitan area,and lower rates were charged inFranklin, Rodne and Waiheke.

There are other potentialunding sources that ma be

adapted to operate as a targetedrate. A targeted rate linked toparking levies ma be able to beimplemented, as could a targetedrate mimicking a visitor bed tax oran airport departure charge.

We ound that targeted rates arecapable o assigning the coststo where bene ts are received,while still enjo ing relativellow complexit and cost. Aswith rates, a targeted rate doesnot have strong tra c demandmanagement impacts and theiracceptabilit will reduce as their

nancial impact increases.

1.3 r g

Road pricing o ers signi cantpotential to deliver the additionalrevenue. The charge can be set ata xed rate per trip or at a variablerate, to refect the time o daor level o congestion. A xedposition camera automaticallscanning the license plateso vehicles as the pass wasconsidered as the basis orelectronic charging. Legislative

change would be required toenable their introduction and we

ound some acknowledgementrom the government (Treasur s

National In rastructure Plan,2011) that some orm o roadpricing will be required to manage

uture travel demand in Auckland.To implement some orm o roadpricing more detailed anal sis andassessment would be required.

1.3.1 s gle

Under this orm o road pricing,motorists are charged or passingthrough a cordon, or or travellinginto or out o a speci ed area.There is no charge or movingaround within the cordoned area.It is possible to cap the maximumamount charged within a 24 hourperiod.

We considered a cordon withtolling points covering approaches

rom the north, east, south andwest on major local roads/arterialsand the motorwa s. The cordonwould encompass the CBD andthe CBD ringe.

Depending on the level o charges, a single cordon couldraise signi cant revenue anddeliver substantial demandmanagement bene ts. Ourassessment showed that care ullpriced cordon charges canresult in the signi cant diversiono vehicle trips onto publictransport and improved peakperiod tra c fow on ke partso the network. Accessibilit tothe CBD increases with positiveimplications or productivit .Notabl , the rate o decline inmorning peak hour travel timesreduces, relative to the impactachieved rom other undingsources. The high administrativeand transaction costs arecontained relative to othert pes o road pricing schemes.Motorists travelling to the CBDwere the most a ected, howeverproviding suitable public transportalternatives could o set anadverse impacts. Fairness and

equit issues would need to beaddressed as part o the detaileddesign.

1.3.2 m w e w k

Under this orm o road pricing,motorists would be chargedupon entr to (or exit rom) themotorwa network. The chargecould be varied b time o daor to refect var ing levels o congestion. It is possible to capthe maximum amount chargedwithin a 24 hour period.

This unding source has highrevenue potential, providedoperating costs are kept toa minimum and the tra cvolumes likel to pass throughcharging points have beenestimated correctl . However,implementation could be morecomplex and costl than increasesto existing unding sources,because o the need or legislationand the logistics o design andconstruction. This would dela theavailabilit o revenue.

A motorwa network charge o erssubstantial transport bene ts. O all the unding sources that weconsidered, it results in the highestincreases in average speeds on themotorwa network during morningpeak tra c. It also slows the rateat which the fow o motorwatra c is predicted breakdown asAucklands population grows. O all the sources we considered, it isthe most likel to keep motorwatra c fowing reel well into the

uture and is also likel to providethe highest level o economicbene ts.

Motorwa network charges areuser pa s. The target thosewho contribute to congestionbut also provide demonstrabletransport bene ts to those pa ingthe charge. We have assumedimprovements to public transportand local roads to ensure thatmotorists have other high qualitand low cost travel choicesavailable to them.

1.4 t ll ew

A toll is a charge on motoristswho cross a xed point along aroadwa . Tolls generall relate toan individual road or stretch o road, like the Northern Gatewa .Tolling is currentl authorised onnew roads where an alternativetoll ree route is available andwe concluded that this undingsource could continue to pla aroll in uture.

2. funding SourCeS that Should not Be purSued further

2.1 reg l L e

Lotteries are commoninternationall with monies earnedbeing distributed as communitgrants or to supplement taxes.Mostl under the authorito government, lotteries areoperated b both governmentaland private operators. Under theAustralian, Canadian and USA

ederal s stems, lotteries havebeen established at the state/territor level. An Aucklandregional lotter could beestablished with the earningsand prize mone being appliedto unding the regions transportinitiatives.

Lotteries are a orm o gamblingand regulated in New Zealandunder the Gambling Act 2003.The New Zealand LotteriesFoundation (NZ Lotteries)operates a national ranchisewith seven o erings Lotto,

Powerball, Strike, Big Wednesda ,Keno, Bullse e, and Instant Kiwi.O total sales revenue o $903.8million or the 2012 nancial

ear, the sum o $190.4 million(or 20 per cent) was provided tothe NZ Lotter Grants Board orcommunit distributions a ter NZLotteries outgoings, (includingtaxes GST, gambling dut andProblem Gambling Lev ).

We anticipated that the costs o establishing and promoting a new,stand alone regional lotter would

be high and that the majorit o these costs would be incurredbe ore the rst tickets were sold.Signi cant revenue would need tobe generated in order to derive ameaning ul contribution towardsthe unding gap. There is also amajor risk that an new lotterwould either cannibalise therevenue o rivals, including Lottoand the other o erings o NZLotteries, or perpetuate problemgambling.

It is likel that local government,in e ect operating a gamblingoperation, would raise moral andethical concerns (particularl in

regard to social costs). There isalso the potential or a confict o interest where local governmentassumes a regulator role viaits own b laws. We oundno connection between themotivation to purchase a lotterticket and addressing Aucklandstransport issues there ore this

unding source provides no linkbetween those who pa and thosewho bene t.

For these reasons we agreed thata regional lotter did not merit

urther consideration.

2.2 reg l p ll

The closest examples o a pa rolltax are those levied b stateand territorial governmentsin Australia. The tax is paid bemplo ers on the total wages o their emplo ees once it exceedsan exemption threshold. Forexample, 2011 pa roll tax rates inAustralian states were between4.75 per cent (with a thresholdo $1,000,000 per annum inQueensland), and 6.85 per cent(with a threshold o $1,500,000pa in ACT). This equates to anaverage 5.5 per cent tax rate andaverage threshold o $912,250.

A pa roll tax is not a simple tax.Working out the relevant ratesand thresholds is a complex area.One o the ke eatures o New Zealand business is the high

number o emplo ers with verew emplo ees. For example,

there are more than 170,000rms and approximatel 691,000

emplo ees in the AucklandRegion1, averaging our emplo eesper rm2. Comprehensive anal siso Auckland businesses wouldbe required to devise a pa rolltax scheme that would raise thesort o revenue that is requiredwhile remaining simple enough toadminister. Given this complexit ,the potential revenue rom a paroll tax was not estimated.

Enabling legislation would berequired or a pa roll tax and

collection could onl be e ectivei undertaken in collaboration withthe Inland Revenue Department(IRD) in parallel with PAyE taxon wages and salaries. Such a taxis anticipated to involve moderateto high implementation costsand ongoing operating costswould also be considerable.Compliance costs could besigni cant depending on the taxrate, how it is applied and thelevel o the threshold. Labourintensive businesses would also bedisproportionatel impacted. Inthe worst case scenario, a pa rolltax could have a negative impacton the demand or labour.

We considered the introductiono a pa roll tax could holdimplications or the taxations stem, considerabl be ondtransport unding issues inAuckland. There would likel beimpacts on other ke governmenttaxes, including PAyE and apa roll tax would be inconsistentwith government polic . Potentialuneven impacts on businesses(depending on their labourcontent, establishment andongoing operating costs, togetherwith cross boundar issues),could give rise to distortions andine ciencies.

We concluded that a pa rolltax would have implications arbe ond Auckland transport b

1 Source: Household Labour Force Surve , September quarter 2012, Statistics New Zealand.2 Source: Business Demographics surve , March 2012, Statistics New Zealand.

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encroaching on governmenttaxation polic , imposingunintended costs and riskingperverse outcomes, and meritedno urther consideration.

2.3 reg l Gst/ le

Sales taxes are commoninternationall at di erent levelso government. The are collectedon individual transactions at pointo sale b the vendor. The ideainvolved two possible variations.An allocation o the governmentsGST revenue to Auckland basedon a share o retail sales, or theintroduction o an additionalregional tax or Auckland. Thoughtechnicall easible there arecurrentl no regional sales orvalue added taxes in NZ and itsintroduction would require a lawchange.

A regional GST could beadministered b individualtransactions being liable orthe tax based on the locationwhere the good or service waspurchased. In 2011, actual retailsales in the Auckland region were just over $23b3 excluding GST.A regional GST o just one percent would there ore representsigni cant revenue o around$230m. Broad base taxes likeGST are able to provide reliablerevenue over normal economicfuctuations and are relativelsimple, however a regionalapplication would introduce a levelo complexit .

The simplest approach would bean allocation o GST revenueto Auckland, based on a shareo retail sales. This would betechnicall eas to implement butwould erode the governmentstax base. A more complexsolution would be to implementa new regional tax that wouldoperate within the existing IRD

ramework. Implementation,compliance and on goingoperational costs o a regionalGST would be widel distributed

but all disproportionatel onbusinesses, with increasedcomplexit in GST anal sisand reporting. There would besigni cant costs to businesses toestablish s stems o accounting

or transactions b their locationespeciall those that operatewithin the Auckland region. It isalso likel that an rules requiredto determine whether a particulartransaction was liable or the taxwould be complex.

Government has not beensupportive o local or regionalsales taxes in the past as thecould undermine the national

consistenc o GST, raisepotential border issues, andincrease administration costs.The government sponsoredTax Working Group did notrecommend the introduction o local sales taxes, considering GSTto be an e ective s stem4.

We agreed that although aregional sales tax or regionalallocation o GST would bean e cient means o raisingrevenue, the issues raised bits introduction extend be ondAucklands transport issues,encroaching upon governmenttaxation polic .

We agreed a regional sales tax orvariation on GST did not merit


2.4 t e e g be e e

Tax incremental nancing (TIF)and betterment are examples o value capture mechanisms. Theseek a portion o the increase inthe value o land resulting rompublic investment in in rastructureor improvements, or rom thegranting o development rightsthat enable higher value land use.These mechanisms rel on theabilit to airl assess the changesin propert values resulting romthe investments.

TIFs are emplo ed in someoverseas jurisdictions5 where adiscrete area bene ts rom newin rastructure investment or otherimprovements, thereb increasingthe value o land. Under a TIFscheme the increase in valueis taxed, raising revenue to pa

or the in rastructure or otherimprovements. TIF schemes applto a de ned area, correspondingto the area o bene t (the areathat enjo s increased land values)where the bene ciaries o theinvestment or improvements bearthe burden o the increased landtax. TIF schemes t picall run or20 to 25 ears.

Betterment is a related approachwhere the increased value o land(due to either improvementsor the granting o developmentrights), is captured. Bettermentrefects the gain derived romland being allocated or granted anincrease in development rights.For example, rezoning o ruralland to urban or the upzoning o urban land to higher value landuses. This has been in use in theUnited Kingdom since the 1940s.

TIFs and Betterment schemescan be air and e cient, with theabilit to moderate operatingand compliance costs. We oundthat the neither support norundermine the Councils strategicgoals, and the have no directinfuence upon the demand ortransport. Their compatibilitwith existing tools would have

to be care ull considered in thecontext o their design and use.

The common issue withTIF/Betterment is the extentto which the increased valueo land can be estimatedand attributed to the publicinvestment. Although man

actors can infuence the valueo propert , the TIF orBetterment scheme needs toisolate the potential increasein propert value attributable

3 Source: Retail Trade Surve : June 2012 quarter, Statistics New Zealand.4 Victoria Universit o Wellington Tax Working Group ( Januar 2010), A Tax S stem or New Zealands Future.5 Primaril USA, though there has been interest in Scotland and Australia.

to the public expenditure onin rastructure or the granting o development rights.

Neither TIF nor Bettermentunding tools are currentl

available to local governmentunder New Zealand legislation,although some interest has beenshown6. In the absence o speci clegislation, Price WaterhouseCooper (PWC) suggest that acouncil could appl a targetedrate to a similar end with the rateestimated on the value o theincrease, using valuations pre andpost the investment.

We considered that thecomplexit o the approach, andthe di cult o estimating andattributing increases in propertvalues were important issuesthat would be need to be dealtwith care ull . We concludedthat this sort o tool would bebetter used to und urban renewalinitiatives, or de ned projectswith a particular geographicimpact, rather than broaderimprovements to the transports stem. For these reasons wewere not in avour o pursuingthese approaches urther,agreeing to consider possible useso targeted rates instead.

2.5 v be

A bed tax is a charge leviedon providers o commercialaccommodation within an areabased on the number o gueststhe have. This acts as a prox

or the amount o public servicesguests consume. The are mostcommonl charged on a pervisitor, per night basis ensuringthat visitors who spend more timein the area, and use more publicservices, contribute more. Avisitor bed tax could be chargedon accommodation providersacross the Auckland region orparts o the region, at xed orvariable rates.

Use o bed taxes overseas iso ten associated with a particular

development. It is common touse bed taxes to contribute tothe development and operationo convention centres wherethe commercial accommodationsector directl bene ts romthe activit that the conventioncentre attracts.

A visitor bed is a relativel simpletax, although it would all solelon commercial accommodationproviders. Implementation, as wellas operational and compliancecosts are anticipated to be lowcompared to other potential

unding sources, however wenoted that the introduction o a visitor bed tax would requireinvestment in accounting andreporting s stems.

There were approximatel6.26 million commercialaccommodation nights inAuckland during 2011.7I we wereto assume 70 per cent o thosewere in the CBD, a visitor bedtax o $2 per guest, per night,could provide revenue o :

f $12.5m per annum (regionwide)

f $8.7m per annum or the CBD

Commercial accommodationcharges var between a $20$30 charge that might appl toa backpacker, and hundreds o dollars per night at an exclusivehotel. The impact o such a bedtax varies greatl between t peso accommodation. Assuming

that the level o the charge willbe limited b the potential impacto the charge on the low costend o the market, the potentialrevenue rom a bed tax is lowin comparison with the otherpotential unding sources weconsidered.

We ound that revenue wouldfuctuate with the seasons(particularl inbound tourism),world events and the globaleconom . The e cienc o avisitor bed tax will var across thedi erent t pes o commercial

accommodation and betweenAuckland wide and/or areaspeci c applications. A signi cantcharge on visitors sta ing in an areacould also precipitate a changein behaviour in response to theincreased cost o sta ing there.

A visitor bed tax is not designedto achieve strategic, urban

orm related goals nor infuencetravel demand. Such a tax mabe contrar to Aucklands goalsas a tourism destination andis unlikel to nd avour withgovernment. Bed taxes are a

orm o sales tax and requireempowering legislation to enablelocal authorities to utilise thistool. While legislation wouldbe required to implement abed tax, it would be possible toapproximate a bed tax throughthe use o a targeted rate oncommercial accommodationproviders.

We were concerned aboutwhether the alignment o bene tswith contributions was strongenough, as a bed tax will targettourists rather than the primarbene ciaries o the investmentin transport. Noting therelativel low revenue potentialand the lack o alignment withgovernment polic , we concludedthat a bed tax to und transportimprovements did not merit


2.6 de e

A departure tax is levied onpeople leaving a speci ed area,t picall as a xed charge paidb ever person departing.We considered the possibleintroduction o a departuretax on passengers departing

rom Auckland InternationalAirport (AIAL) on domestic andinternational fights, and romPorts o Auckland (POAL) oncruise ships.

Local authorities are unable tolev a departure tax and enablinglegislation would be required.

6 Could Urban Renewal Funding Work here? J Langle , M Hali, Planning Quarterl , December 2011. Also, New Funding Strategies or UrbanRenewal, J Langle , accessed rom ww w.planning.org.nz.

7 Ministr o Economic Development, Commercial accommodation monitor: December 2011

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Assuming two million internationaldepartures per annum rom AIAL8 a $20 $25 departure tax couldraise $40 $50 million per annum.It could be urther supplementedb a domestic departure tax ($5$10), potentiall raising $8.8$17.9 million. A departure tax oncruise ship departures was oundto raise minimal revenue and bemore complex.

We decided not to proceedwith urther consideration o a departure tax (despite therevenue potential) because o thepoor alignment between thosewho pa and those who bene t.A departure tax poorl aligns withthe Councils strategic goals, andwould have limited impact ontravel demand across and aroundAuckland. Legislation would alsobe required, which could meetstrong opposition as recentindications suggest it is unlikel toalign with government polic . Wedid consider that to the extentthat the airport bene ts romspeci c projects or contributes tothe need or particular investmentit would be appropriate toconsider a targeted rate designedto refect that bene t. However,there is no reason to treat theairport di erentl rom othermajor business activities thatma bene t rom the transportprogramme. There is considerablefexibilit within rating legislationto use targeted rates to ensurethat those who bene t rom ordrive the need or expenditure

contribute nanciall .2.7 Le eh le eg e e

a kl

Vehicles used on New Zealandroads must be registered, requiringpa ment o Motor VehicleRegistration (MVR) ees. Underthis proposal an additional chargecould be added to existing MVR

ees, or vehicles registered inAuckland, with the additionalrevenue raised, being speci call

or unding transport initiatives inAuckland.

From Jul 2009 to June 2012the MVR contributed $516million (approx. $170 million perannum) to the National LandTransport Fund (NLTF) o whicharound one third was raised romAuckland. Not all mone raisedb the MVR is paid to the NLTF,as signi cant portion goes tothe Accident CompensationCorporation.

Collecting unding rom thissource would require theidenti cation o vehiclesregistered in Auckland, thetechnolog to charge di erentiallon the basis o geograph , andlegislative change. With some800,000 vehicles in Aucklandand an additional charge o $100per vehicle, theoreticall this

unding source could raise $80million per annum, assumingall vehicles are licensed andevasion is limited. There would beconsiderable scope or businessand those with residentialaddresses outside Auckland toavoid the charge b registeringvehicles outside o Auckland.There is little indication that thissource o unding would havean impact on travel demandmanagement. Conversel , itma result in those who travelregularl being charged adisproportionatel small share o the costs.

We agreed that a regionalvehicle registration lev orAuckland lacks alignment with

government polic , would besubject to signi cant avoidance,and provides a poor connectionbetween those who pa and thosewho bene t. There ore, we didnot consider this unding sourcean urther.

2.8 new F p k g le e

There are two versions o parkinglevies available or Auckland.The rst could be b increasingcharges or the use o AucklandTransports on and o street

parking. With this option,charges would need to increasesubstantiall to raise the amounto revenue required to have anreal impact on the unding gap.However, competition romprivate car parking providers islikel to limit the revenue raisingpotential o this option. There ore,we did not consider it urther.

The alternative approach wouldbe charging a lev on all parkingspaces within a de ned area,including all public and private carparking spaces in residential andcommercial buildings and on thestreet. This is similar to the modeloperating in some Australiancities. However, these leviesare primaril aimed at managingdemand and encouraging modeshi t in congested areas ratherthan raising revenue.

This approach has an associatedlevel o complexit . Dependingon whether it targets the ownero the vehicle or the owner o parking space, it still requiresthe processing o additionalin ormation through eitherthe existing rating s stem or anew s stem that would needto be established. Accordingl ,these variables will infuencethe establishment, compliance,en orcement and on goingoperational costs.

We decided that the level o complexit , operational anden orcement issues, the link to

parking polic and the modestnet revenue raised, meant thatthis potential source was not asattractive as the other undingsources we considered. Even so,it remains possible that urtherinvestigations o this optioncould occur within the context o targeted rates.

2.9 m ge ll

A orm o road pricing, managedtoll lanes are designated lanes(usuall on a motorwa or majorarteri

Documents

Consensus Building Group Transport Funding Final Report