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Note: The reports contained within this agenda are for consideration and should not be construed as Council policyunless and until adopted. Should Members require further information relating to any reports, please contactthe relevant manager, Chairperson or Deputy Chairperson.

I hereby give notice that an extraordinary meeting of the Governing Body will be held on:

Date:Time:Meeting Room:Venue:

Thursday, 19 July 201210.00amReception LoungeAuckland Town Hall301-305 Queen StreetAuckland

Governing BodyOPEN ADDENDUM AGENDA

MEMBERSHIP

Mayor Len Brown, JPDeputy Mayor Penny HulseCouncillors Cr Anae Arthur Anae Cr Richard Northey, ONZM

Cr Cameron Brewer Cr Calum PenroseCr Dr Cathy Casey Cr Dick QuaxCr Sandra Coney, QSO Cr Noelene Raffills, JPCr Alf Filipaina Cr Sharon Stewart, QSMCr Hon Chris Fletcher, QSO Cr Sir John Walker, KNZM, CBECr Michael Goudie Cr Wayne WalkerCr Ann Hartley, JP Cr Penny WebsterCr Mike Lee Cr George Wood, CNZMCr Des Morrison

(Quorum 11 members)

Mike GiddeyCommittee Secretary

16 July 2012

Contact Telephone: (09) 307 7565Email: [email protected]: www.aucklandcouncil.govt.nz


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ITEM TABLE OF CONTENTS PAGE

13 Alternative Funding for Transport 5


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Alternative Funding for Transport Page 5

Alternative Funding for TransportFile No.: CP2012/11810

Executive Summary

1. Officers from Auckland Council and Auckland Transport have examined the options forexpanding the transport funding toolkit so that Auckland's transport system capacityrequirements can be funded over the next three decades.

2. On 15 February 2012, the Strategy and Finance Committee approved the release of thediscussion document, Getting Auckland Moving for consultation purposes. Responses to thatdocument indicate that:

i. Aucklanders want to see improvements to the current quality and capacity of Auckland'stransport system, especially to deal with congestion

ii. improvements must be able to cope with the strong population growth forecast byStatistics New Zealand

iii. a mix of new and existing funding mechanisms is desirable

3. Based on responses to the Getting Auckland Moving discussion document and otherstakeholder input, officers recommend that further investigation on specific fundingmechanisms is approved with the aim of developing recommendations for consideration within12 months. This investigation will focus on the practicality, effectiveness, and fairness ofalternative funding mechanisms.

4. The focus on these mechanisms does not preclude Auckland Council or Governmentcontinuing to include traditional funding mechanisms, such as rates and vehicle registrations,in the land transport funding mix. Instead it provides an indication of current Council thinking inrelation to new funding tools.

Recommendation/sa) That the report be received.

b) That the Governing Body direct council officers to carry out investigations,stakeholder collaboration and system design for selected alternative fundingoptions for transport.

c) That the investigations, stakeholder engagement and system design focus oni) regional fuel taxesii) congestion charging/network chargingiii) additional car parking charges.

d) That the Governing Body note that the recommendations above do not exclude theuse of existing land transport funding sources, including general and targeted rates,development contributions, public transport fares and government financialassistance.

Background

The Funding Gap

5. There is growing acceptance that the current mix of transport funding mechanisms areinsufficient to meet Auckland's future transport investment needs.


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6. Petrol tax provides 35 percent of Auckland's transport funding, but has limited scope forincreases over the longer term. The Governments 2012 budget will see the fuel tax rate riseby 2 cents per litre in August 2012. Without this increase, revenue would be flat or slightlynegative between the 2011/12 and 2012/13 financial years. Road user charges (on dieselpowered vehicles) will also rise in 2012/13, by an amount to keep cost parity between fuellingdiesel and petrol vehicles.

7. Additional revenue generating opportunities are limited by positive developments in fuelefficient vehicles, which are seeing consumers use less fuel per kilometre driven. Ministry ofEconomic Development monitoring shows that there has been no growth in petrolconsumption since 2003 and that growth in diesel consumption peaked in 2007 and hasdeclined slightly since1.

8. At the same time, Auckland needs to make choices about large investments in transportinfrastructure and services to ensure that future growth in population and freight are notadversely impacted by corresponding increases in congestion.

9. Limits on existing funding tools are also driving difficult choices on prioritisation. To meet thegovernments focus on state highway development, the proportion of National Land TransportFund (NLTF) to be spent on state highways has increased in the 2012 GPS, while theproportion on local roads and public transport has fallen.

10. The GPS revenue and expenditure assumptions do not include funding for the AlternativeWaitemata Harbour Crossing, the City Rail Link, Penlink, or a link between State Highways 1and 20 in the Onehunga area. It is highly unlikely that any of the regions future large transportprojects could by supported within the NLTF if based on the NZ Transport Agencys currentpay-go system2.

Draft Regional Land Transport Programme

11. Auckland Transport also recognises the need for alternative funding for transport. Its RegionalLand Transport Programme (RLTP) puts demand for new transport system capacity in thecontext of increasing population and economic growth saying that the scale of investmentrequired is expected to increase rather than decrease.

12. The RLTP goes on to say There is a pressing need to examine potential new funding andfinancing mechanisms for transport in Auckland, building on the work that has been initiatedby Auckland Council.

Getting Auckland Moving Discussion Document

13. On 15 February 2012, the Strategy and Finance Committee approved the release of thediscussion document, Getting Auckland Moving Paying for Aucklands Future Transport.The Council received 161 responses. The complete consultation analysis report is attachedas Attachment A.

1Energy Data File, Ministry of Economic Development, 2011. This data series runs up to 2010. Fuel tax

projections in the Governments 2012 budget confirms that government expects no significant growth in fuel

consumption in 2011 and 2012.2 The National Land Transport Fund (NLTF) releases revenue for transport projects as it receives thatrevenue. That is, unlike councils, the government does not borrow for large transport capital items - it fundsthem from cash. The NLTF receives around $2.7 billion per annum. This becomes a problem when largecapital items costing billions need to be funded from the NLTF.


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14. The key themes from the input received were:

i The vast majority (85 percent) of submitters agreed that Aucklands congestion problemwas unacceptable, with many discussing the need for improved public transportinfrastructure and a focus on active modes of transport such as cycling and walking.Some felt that the problems would only get worse as Aucklands population increased.Others argued that while there was congestion in Auckland it was not as bad as manyother international cities.

ii Similarly, 80 percent of submitters felt that additional funds were required to addressAucklands transport problems. Some felt that it was important to invest in public transportand similar infrastructure sooner rather than later. Others felt that funding should comefrom re-prioritising existing council spending or choosing cheaper alternatives to help thecouncil live within its means.

iii The five most preferred funding options were tolling on new roads, regional fuel taxes,congestion charging, development contributions and additional car parking charges.

iv In addition to the options listed on the submission form, some submitters suggestedalternative methods such as public-private partnerships, asset sales, infrastructure bonds,a poll tax, and an Auckland transport lottery.

v A number of submitters noted that the funding mechanisms should be used not only toraise money but also to incentivise or reward desired travel behaviours (e.g. a movetowards public transport rather than single occupancy vehicles and private car use). Thiswas the primary reason behind many submitters preference for funding options such asroad tolling, fuel taxes, congestion and car parking charges.

vi There were a number of specific comments raised in support and opposition to each ofthe potential models and these are summarised in the table below.

Potential funding mechanism

(in order of preference)

Points raised in favour Points raised in opposition

Road tolling Charges applied directly tothose receiving the benefit.

Incentivises public transportusage / behaviour change

High overheads andadministrative costs

Regional fuel tax Proportional user pays system those who drive more pay more.

Incentivises public transport

usage / behaviour change.Low overheads / simple

Potentially expensive andinefficient.

Petrol already expensive

Congestion charges Incentivises behaviour change &motivates people to use activeand shared transport modesrather than cars in congestedareas

Would need a goodalternative beforeimplementing.

Unfair / inequitable for CBDresidents and businesses

Development contributions Equitable charge on thosedevelopments that add furtherpressure to the transport system

May disincentivise gooddevelopment such asbuildings close to transportnodes

Car parking charges Incentivises behaviour change &motivates people to use activeand shared transport modesrather than cars

Would make people andbusinesses less likely tocome into the central city


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Airport departure and visitortaxes

Used overseas Negative impact on tourismnumbers, tourism relatedbusinesses and Aucklandsinternational reputation.

Little relationship betweenthose paying and thosereceiving the benefit

Network charges Charges road users andtherefore provides an incentivefor private car users to switchmodes

A blunt instrument that doesnot sufficiently targetcongestion or incentivisebehaviour change

General and targeted rates Rates will always have somerole in infrastructure

Too high already

Tax increment funding Possible for large infrastructureprojects with clear benefits

Complicated.

Rates already incremental onproperty value

15. Stakeholder sessions on the alternative funding for transport have also been hosted by the

Councils Business Advisory Panel and the Committee for Auckland. Both forums agreed onthe need for alternative funding with a strong preference for network charging.

16. There have also been statements by Central Government agencies on the need for alternativefunding. For example the Treasurys most recent Briefing to the Incoming Minister of Finance(Treasury 2011) recommends Continue network infrastructure investment and management,with a particular focus on ensuring a realistic and confidence-building plan for Aucklandtransport, including use of network pricing and other demand management tools.

17. The Governments National Infrastructure Plan states on page 28 that " In the future NewZealand will require a more sophisticated road pricing system to enable management ofdemand through pricing". On page 52, the National Infrastructure Plan states (under fundingand explicitly related to Auckland) that "Not enough effort has been made to explorealternative options for funding and financing high value projects, including using pricing tomanage demand and raise revenue".

Next Steps

18. The Auckland Council 2012-22 Long Term Plan includes budget to enable the council to carryout investigations, stakeholder collaboration and system design for selected alternativefunding options for transport. This is to fund the work necessary for council to be in a positionto go to Government in July 2013 with a developed funding proposal.

19. The funding proposal is intended to become the basis for changing legislation to enableAuckland Council and other transport funding and delivery agencies to fund Auckland'stransport needs.

Evaluation of Funding Options

20. The range of possible funding mechanisms included in the discussion document wasdeliberately broad. Experience in other local authority funding exercises has shown thatmembers of the community tend to raise these options if the council does not. To ensure thatthere was sufficient information on the funding options likely to be raised, a broad list wasincluded in the discussion document.

21. The majority of the responses to the discussion document revealed support for a narrowerrange of funding options. The preferred options, that is, those receiving over 30 percentsupport, (see Attachment A, page 19) were:


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29. It is recommended that network charging be examined alongside congestion charging. Thismeans the next stage of the process for alternative funding mechanisms will be to investigate,stakeholder collaboration and system design for the following range of alternative funding fortransport options:

i regional fuel taxesii congestion charging/network chargingiii additional car parking charges.

Fairness

30. An important part of the process will be the comprehensive assessment of the equity, orfairness, effects of different funding mechanisms. Often the assessment of the equity effectsof new transport funding tools is undertaken without first considering the fairness of existingdistribution of transport costs across the community. To address this concern and ensure thatan informed assessment of alternative funding options can be undertaken, a key step will beto assess the fairness of the current reliance on fuel excise duty, road user charges, rates and

development contributions to fund transport in Auckland. This will allow the Council tocompare the fairness of the distribution of costs of any funding proposal with the fairness ofthe status quo.

The Role of Borrowing in Funding Transport Infrastructure

31. Much of the Business Advisory Panels discussion on transport focused on the role of debtand it appears from some submissions that the Councils position needs to be clarified.

32. Generally, the Council borrows for almost all of the costs of significant new physical assets3.The reason for doing this is that it would be unfair to current ratepayers to have them pay forall of the cost of assets that will be used by future generations of user. Having to pay for large

physical assets out of annual council revenue would mean that they would have to be builtpiecemeal (a bit each year).

33. To deal with these issues, Council borrows to build its physical assets. The alternative fundingmechanisms discussed in this report will be used to finance a proportion of the costs of thatborrowing, as well as funding part of the operating costs of running the transport assets.

34. Borrowing for long lived physical assets is generally accepted in public finance and economictheory. It should be noted that because Council borrowing is for physical assets, thecommunity gets a community owned asset, delivering community benefits, to off-set the debt.Council debt usually does not grow as fast as the value of community assets, making thecommunity better off over times in terms of community owned assets.

Decision Making35. The Governing Body is asked to approve the carrying out of investigations, stakeholder

collaboration and system design for the alternative funding options for transport listed above.This is to be achieved within the budget included in the Long Term Plan for this purpose.

36. The results of this process will be reported back to Council in July 2013. An interim report willbe prepared for the Strategy and Finance Committee for December 2012.

3Exceptions include those new physical assets that are part funded by development contributions, NZTA

capital subsidies and financial contributions under the Resource Management Act.


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Significance of Decision37. The decision at this stage is to carry out investigations, stakeholder collaboration and

preliminary system design. The issue of alternative funding for transport is highly significant.Therefore, consideration of options, assessment of benefits and costs and the views of thoseaffected will make up the majority of the workload and Council decision making effort of thisstage of the project.

Maori Impact Statement38. Engagement with Maori forms an explicit and significant part of the consensus building

exercise set out in Attachment B. The fairness of any proposed funding options on specificparts of the community will also receive rigorous attention as the investigations proceed.

Local Board Views39. As local boards are part of the Council and its decision making processes, their views will be

sought. At this stage of the process, specific localised impacts are not evident. If it becomes

clear that particular communities will be affected differently to other communities, then moreintensive engagement with the local board and community will be necessary. Local boardswill also be expected to engage in general consultation.

Consultation40. The consultative process on alternative funding for transport began with the release of the

Getting Auckland Moving discussion document. The results of this stage of consultation isattached. (Attachment A)

41. Council decisions around alternative funding for transport have been made in the knowledge

that further and considerable community engagement will be required as transport fundingoptions are developed.

42. The community engagement will need to involve:

i general community consultation, e.g. any proposals will need to be consulted on throughthe Councils Revenue and Financing Policy, Funding Impact Statement and Long TermPlan before they are introduced.

ii targeted community consultation, e.g. surveys of representative samples of thecommunity, community forums, focus groups.

iii stakeholder collaboration in order to engage groups that are likely to be particularlyaffected by any alternative funding proposals.

43. The legislated role of the Mayor of Auckland, includes leading the plans, policies and budgetsof the Council and to ensure there is effective engagement between the Auckland Counciland the people of Auckland4. To this purpose, the Mayoral Office has commissioned Mr GuySalmon of Ecologic Foundation to undertake initial stakeholder discussions and prepare astakeholder collaboration plan (Attachment B).

Financial and Resourcing Implications44. The Council has approved $1.1 million to fund this project. Aspects of the investigations and

system design are highly technical and require economic, engineering, traffic planning and

traffic modelling expertise. The budget is considered adequate to achieve therecommendations of this report.

4Local Government Auckland Council Act, s9.


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Legal and Legislative Implications45. It is expected that recommendations resulting from the alternative funding for transport project

will require amendments to existing legislation.

Implementation Issues46. Implementation will form a substantial part of the next stage of this process. This will be

reported back to Council in an interim report in December 2012 and final report in July 2013.

Attachments

No. Title Page

A Alternative transport funding: Paying for Aucklands future transport.Consultation feedback

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B Alternative transport funding for Auckland: Outline of a proposed

collaborative process for policy development

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Signatories

Authors Rory Palmer, Senior Advisor

Michael Quinn, Executive Officer

Authoriser Doug McKay, Chief Executive


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Documents

Governing Body Add a g 20120719