Governing Body Add A G 20120719

I hereby give notice that an extraordinary meeting of the Governing Body will be held on:
Date: Time: Meeting Room: Venue:
Thursday, 19 July 2012 10.00am Reception Lounge Auckland Town Hall 301-305 Queen Street Auckland
Governing Body OPEN ADDENDUM AGENDA

MEMBERSHIP Mayor Deputy Mayor Councillors Len Brown, JP Penny Hulse Cr Anae Arthur Anae Cr Cameron Brewer Cr Dr Cathy Casey Cr Sandra Coney, QSO Cr Alf Filipaina Cr Hon Chris Fletcher, QSO Cr Michael Goudie Cr Ann Hartley, JP Cr Mike Lee Cr Des Morrison
Cr Richard Northey, ONZM Cr Calum Penrose Cr Dick Quax Cr Noelene Raffills, JP Cr Sharon Stewart, QSM Cr Sir John Walker, KNZM, CBE Cr Wayne Walker Cr Penny Webster Cr George Wood, CNZM
(Quorum 11 members) Mike Giddey Committee Secretary 16 July 2012 Contact Telephone: (09) 307 7565 Email: mike.giddey@aucklandcouncil.govt.nz Website: www.aucklandcouncil.govt.nz
Note:
The reports contained within this agenda are for consideration and should not be construed as Council policy unless and until adopted. Should Members require further information relating to any reports, please contact the relevant manager, Chairperson or Deputy Chairperson.
Governing Body 19 July 2012 ITEM TABLE OF CONTENTS 13 Alternative Funding for Transport PAGE 5
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Governing Body 19 July 2012
File No.: CP2012/11810
Executive Summary
1. Officers from Auckland Council and Auckland Transport have examined the options for expanding the transport funding toolkit so that Auckland's transport system capacity requirements can be funded over the next three decades. On 15 February 2012, the Strategy and Finance Committee approved the release of the discussion document, Getting Auckland Moving for consultation purposes. Responses to that document indicate that: i. Aucklanders want to see improvements to the current quality and capacity of Auckland's transport system, especially to deal with congestion ii. improvements must be able to cope with the strong population growth forecast by Statistics 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 other stakeholder input, officers recommend that further investigation on specific funding mechanisms is approved with the aim of developing recommendations for consideration within 12 months. This investigation will focus on the practicality, effectiveness, and fairness of alternative funding mechanisms. 4. The focus on these mechanisms does not preclude Auckland Council or Government continuing 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 in relation to new funding tools.
2.
Recommendation/s
a) b) That the report be received. That the Governing Body direct council officers to carry out investigations, stakeholder collaboration and system design for selected alternative funding options for transport. That the investigations, stakeholder engagement and system design focus on i) regional fuel taxes ii) congestion charging/network charging iii) additional car parking charges. That the Governing Body note that the recommendations above do not exclude the use of existing land transport funding sources, including general and targeted rates, development contributions, public transport fares and government financial assistance.
c)
d)
Background
The Funding Gap 5. There is growing acceptance that the current mix of transport funding mechanisms are insufficient to meet Auckland's future transport investment needs.
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Alternative Funding for Transport
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6.
Petrol tax provides 35 percent of Auckland's transport funding, but has limited scope for increases over the longer term. The Governments 2012 budget will see the fuel tax rate rise by 2 cents per litre in August 2012. Without this increase, revenue would be flat or slightly negative between the 2011/12 and 2012/13 financial years. Road user charges (on diesel powered vehicles) will also rise in 2012/13, by an amount to keep cost parity between fuelling diesel and petrol vehicles. Additional revenue generating opportunities are limited by positive developments in fuel efficient vehicles, which are seeing consumers use less fuel per kilometre driven. Ministry of Economic Development monitoring shows that there has been no growth in petrol consumption since 2003 and that growth in diesel consumption peaked in 2007 and has declined slightly since1. At the same time, Auckland needs to make choices about large investments in transport infrastructure and services to ensure that future growth in population and freight are not adversely impacted by corresponding increases in congestion. Limits on existing funding tools are also driving difficult choices on prioritisation. To meet the governments focus on state highway development, the proportion of National Land Transport Fund (NLTF) to be spent on state highways has increased in the 2012 GPS, while the proportion on local roads and public transport has fallen.
7.
8.
9.
10. The GPS revenue and expenditure assumptions do not include funding for the Alternative Waitemata Harbour Crossing, the City Rail Link, Penlink, or a link between State Highways 1 and 20 in the Onehunga area. It is highly unlikely that any of the regions future large transport projects could by supported within the NLTF if based on the NZ Transport Agencys current pay-go system2. Draft Regional Land Transport Programme 11. Auckland Transport also recognises the need for alternative funding for transport. Its Regional Land Transport Programme (RLTP) puts demand for new transport system capacity in the context of increasing population and economic growth saying that the scale of investment required is expected to increase rather than decrease. 12. The RLTP goes on to say There is a pressing need to examine potential new funding and financing mechanisms for transport in Auckland, building on the work that has been initiated by Auckland Council. Getting Auckland Moving Discussion Document 13. On 15 February 2012, the Strategy and Finance Committee approved the release of the discussion document, Getting Auckland Moving Paying for Aucklands Future Transport. The Council received 161 responses. The complete consultation analysis report is attached as Attachment A.
Energy 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 that revenue. That is, unlike councils, the government does not borrow for large transport capital items - it funds them from cash. The NLTF receives around $2.7 billion per annum. This becomes a problem when large capital items costing billions need to be funded from the NLTF.
Alternative Funding for Transport Page 6
Governing Body 19 July 2012 14. i The key themes from the input received were: The vast majority (85 percent) of submitters agreed that Aucklands congestion problem was unacceptable, with many discussing the need for improved public transport infrastructure 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 many other international cities. Similarly, 80 percent of submitters felt that additional funds were required to address Aucklands transport problems. Some felt that it was important to invest in public transport and similar infrastructure sooner rather than later. Others felt that funding should come from re-prioritising existing council spending or choosing cheaper alternatives to help the council live within its means. The five most preferred funding options were tolling on new roads, regional fuel taxes, congestion charging, development contributions and additional car parking charges. In addition to the options listed on the submission form, some submitters suggested alternative methods such as public-private partnerships, asset sales, infrastructure bonds, a poll tax, and an Auckland transport lottery. A number of submitters noted that the funding mechanisms should be used not only to raise money but also to incentivise or reward desired travel behaviours (e.g. a move towards public transport rather than single occupancy vehicles and private car use). This was the primary reason behind many submitters preference for funding options such as road tolling, fuel taxes, congestion and car parking charges. There were a number of specific comments raised in support and opposition to each of the potential models and these are summarised in the table below.
ii
iii
iv
vi
Potential funding mechanism (in order of preference) Road tolling
Points raised in favour Charges applied directly to those receiving the benefit. Incentivises public transport usage / behaviour change Proportional user pays system those who drive more pay more. Incentivises public transport usage / behaviour change. Low overheads / simple Incentivises behaviour change & motivates people to use active and shared transport modes rather than cars in congested areas Equitable charge on those developments that add further pressure to the transport system Incentivises behaviour change & motivates people to use active and shared transport modes rather than cars
Points raised in opposition High overheads administrative costs and
Regional fuel tax
Potentially expensive and inefficient. Petrol already expensive
Congestion charges
Would need a good alternative before implementing. Unfair / inequitable for CBD residents and businesses May disincentivise good development such as buildings close to transport nodes Would make people and businesses less likely to come into the central city
Development contributions
Car parking charges
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Airport departure and visitor taxes
Used overseas
Negative impact on tourism numbers, tourism related businesses and Aucklands international reputation. Little relationship between those paying and those receiving the benefit A blunt instrument that does not sufficiently target congestion or incentivise behaviour change Too high already Complicated. Rates already incremental on property value
Network charges
Charges road users and therefore provides an incentive for private car users to switch modes Rates will always have some role in infrastructure Possible for large infrastructure projects with clear benefits
General and targeted rates Tax increment funding
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 on the 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 alternative funding. 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 Auckland transport, including use of network pricing and other demand management tools. 17. The Governments National Infrastructure Plan states on page 28 that "In the future New Zealand will require a more sophisticated road pricing system to enable management of demand through pricing". On page 52, the National Infrastructure Plan states (under funding and explicitly related to Auckland) that "Not enough effort has been made to explore alternative options for funding and financing high value projects, including using pricing to manage demand and raise revenue". Next Steps 18. The Auckland Council 2012-22 Long Term Plan includes budget to enable the council to carry out investigations, stakeholder collaboration and system design for selected alternative funding options for transport. This is to fund the work necessary for council to be in a position to 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 enable Auckland Council and other transport funding and delivery agencies to fund Auckland's transport needs. Evaluation of Funding Options 20. The range of possible funding mechanisms included in the discussion document was deliberately broad. Experience in other local authority funding exercises has shown that members of the community tend to raise these options if the council does not. To ensure that there was sufficient information on the funding options likely to be raised, a broad list was included in the discussion document. 21. The majority of the responses to the discussion document revealed support for a narrower range of funding options. The preferred options, that is, those receiving over 30 percent support, (see Attachment A, page 19) were:
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22. Tolling of new roads is already permissible under current legislation and is being used on the Northern Gateway south of Puhoi. Development contributions are also permissible under current legislation and are included as a funding source for new transport capacity and other growth driven infrastructure in the Councils proposed Long Term Plan. Both options are relatively well understood. Consequently, these two options do not need to receive the same level of examination as the remaining three options. They could, however, make up a significant component of the final funding package for presentation to Government. 23. The stakeholder sessions held by the Business Advisory Panel and the Committee for Auckland, as well as statements by the Treasury have focused on network charging. This option offers significant potential in terms of its ability to distribute costs widely across road users, reducing the costs on any particular group of road users. This feature makes it attractive where funding of additional transport system capacity is as much of a priority as congestion management through road (congestion) pricing. 24. Network charging and congestion charging are the same mechanism, insofar as they use the same technologies. This is technology that identifies vehicles on selected parts of the roading network, then delivers the vehicle, time and place data to a system that is able to charge the vehicle owner/operator. 25. Both network and congestion charging can affect how much, where and when people use different parts of the network. For this reason, both congestion and network charging are both often referred to as road pricing. 26. The two types of charging differ, however, in their purposes. Pure network charging is primarily focused on raising revenue for transport projects, although it will have some impact on congestion. Congestion charging is primarily focused on sending price signals to road users, to discourage them from using congested parts of the network during peak periods. 27. System design will depend on the relative strengths of the objectives for implementing either network or congestion charging. If network charging, in order to fund transport capacity, is the objective - then it is likely that recommendations will focus on charging relatively low amounts of money on many users, widely across the roading network. If congestion charging, in order to free up congested parts of the network, is the objective - then it is likely that charging significant amounts of money on congested parts of the network will be recommended. 28. Officers recommend the investigations address the interrelationship of both network and congestion charging. That is, the two aspects of the road pricing mechanism should be examined as a continuum.
Lesseffectiveatraisingrevenuefor transportsystemcapacityprojects Congestion Charging Moreeffectiveatreducingcongestion Lesseffectiveatreducingcongestion Network Charging Moreeffectiveatraisingrevenuefor transportsystemcapacityprojects
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i. ii. iii. iv. v.
tolling on new roads regional fuel taxes congestion charging development contributions additional car parking charges
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29. It is recommended that network charging be examined alongside congestion charging. This means 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 for transport options: i ii iii Fairness 30. An important part of the process will be the comprehensive assessment of the equity, or fairness, effects of different funding mechanisms. Often the assessment of the equity effects of new transport funding tools is undertaken without first considering the fairness of existing distribution of transport costs across the community. To address this concern and ensure that an informed assessment of alternative funding options can be undertaken, a key step will be to 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 to compare the fairness of the distribution of costs of any funding proposal with the fairness of the 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 debt and 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 for all 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 built piecemeal (a bit each year). 33. To deal with these issues, Council borrows to build its physical assets. The alternative funding mechanisms discussed in this report will be used to finance a proportion of the costs of that borrowing, 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 economic theory. It should be noted that because Council borrowing is for physical assets, the community 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 the community better off over times in terms of community owned assets. regional fuel taxes congestion charging/network charging additional car parking charges.
Decision Making
35. 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 will be prepared for the Strategy and Finance Committee for December 2012.
Exceptions 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 Decision
37. 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 those affected will make up the majority of the workload and Council decision making effort of this stage of the project.
Maori Impact Statement

38. 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 specific parts of the community will also receive rigorous attention as the investigations proceed.
Local Board Views

39. 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 more intensive engagement with the local board and community will be necessary. Local boards will also be expected to engage in general consultation.
Consultation
40. 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 is attached. (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 funding options are developed. 42. i The community engagement will need to involve: general community consultation, e.g. any proposals will need to be consulted on through the Councils Revenue and Financing Policy, Funding Impact Statement and Long Term Plan before they are introduced. targeted community consultation, e.g. surveys of representative samples of the community, community forums, focus groups. stakeholder collaboration in order to engage groups that are likely to be particularly affected by any alternative funding proposals.
ii iii
43. The legislated role of the Mayor of Auckland, includes leading the plans, policies and budgets of the Council and to ensure there is effective engagement between the Auckland Council and the people of Auckland4. To this purpose, the Mayoral Office has commissioned Mr Guy Salmon of Ecologic Foundation to undertake initial stakeholder discussions and prepare a stakeholder collaboration plan (Attachment B).
Financial and Resourcing Implications

44. 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 the recommendations of this report.
4
Local Government Auckland Council Act, s9.

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Legal and Legislative Implications

45. It is expected that recommendations resulting from the alternative funding for transport project will require amendments to existing legislation.
Implementation Issues
46. 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. A B Title Page Alternative transport funding: Paying for Aucklands future transport. 13 Consultation feedback Alternative transport funding for Auckland: Outline of a proposed 45 collaborative process for policy development
Signatories
Authors Authoriser Rory Palmer, Senior Advisor Michael Quinn, Executive Officer Doug McKay, Chief Executive
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I hereby give notice that an extraordinary meeting of the Governing Body will be held on:

Date: Time: Meeting Room: Venue:

Governing Body OPEN ADDENDUM AGENDA

Governing Body 19 July 2012

File No.: CP2012/11810

Alternative Funding for Transport

Alternative Funding for Transport

Governing Body 19 July 2012

Potential funding mechanism (in order of preference) Road tolling

Points raised in opposition High overheads administrative costs and

Regional fuel tax

Potentially expensive and inefficient. Petrol already expensive

Car parking charges

Alternative Funding for Transport

Governing Body 19 July 2012

Airport departure and visitor taxes

General and targeted rates Tax increment funding

Alternative Funding for Transport

Governing Body 19 July 2012

Alternative Funding for Transport

i. ii. iii. iv. v.

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Maori Impact Statement

Local Board Views

Financial and Resourcing Implications

Local Government Auckland Council Act, s9.

Alternative Funding for Transport

Governing Body 19 July 2012

Legal and Legislative Implications

Alternative Funding for Transport

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012

Alternative Funding for Transport

Governing Body 19 July 2012

Governing Body 19 July 2012