Tuesday, 14th May, 2013

If a business plan was signed off by the Board of a listed company knowing that it set out an investment programme that would deliver a negative result, there would be one outcome – they would lose the confidence in their investors.

The just released Integrated Transport Programme predicting worsening congestion in Auckland even if we find the extra $400 million a year needed to finance the Auckland Plan’s transport projects falls into that category. It charts an unacceptable future for Auckland.

The document that was signed off by the Boards of both Auckland Transport and the New Zealand Transport Agency (NZTA) should concern Aucklanders and have them look at our political masters, who signed off a 30-year Auckland Plan from which the transport programme has been compiled. Isn’t their job to provide the leadership for building a thriving Auckland, and for which transport is set out in the Plan as an enabler?

The one saving grace of the Programme is that it is honest. It plainly states that even with the $25 billion invested to build by 2021 projects like the Central Rail Link in the central City and AMETI and East West Link in south Auckland, within 30 years Auckland’s road congestion will be worse than current levels in cities like Sydney and Melbourne, which already have much larger populations.

But it offers no solutions. At the moment Auckland cannot even fund the transport infrastructure investment programme we have agreed and want to do, let alone the further initiatives needed to head off the worsening congestion long-term.

Auckland needs and deserves the certainty of knowing we have a transport plan for the long game.

As I view our situation, at all levels, the decisions that need to be made right now are business-like leadership decisions – and the ground has never been as well prepared as it is now for a leader to step up to the plate and make the big calls required.

There are four things that need to happen – and fast.

First, while Aucklanders debate how to fill the $400 million a year shortfall needed to finance the immediate Auckland Plan transport projects, Auckland Transport and NZTA – our transport infrastructure and service providers – need to be demanding and seeking a much improved business-like performance from the existing transport system.

Train and bus services must be re-organised to run on time and become reliable; they must lift their game and not leave passengers waiting at stations and stops. Auckland Transport must quickly introduce integrated timetables between train, bus and ferry services, provide secure parking for cars at suburban bus and train stations, and ensure train fares are paid. They must micro manage a much improved performance from the bus and rail systems.

With some trust and certainty that these micro improvements make a real difference, I am confident thousands of Auckland commuters would leave their cars at home – and would be keen to do so.
Second, the funding shortage debate must be brought into the real world.

The debate has quickly revealed a preference for a user pay approach – network tolls or a cordon - rather than increasing rates. There are two parts to the debate – to find revenue to ensure major projects are built within the Plan’s timeline, and to bite the bullet with congestion management scheme by 2021 to head off the predicted worsening gridlock.

However, we are starting this debate without knowing what we are going to invest in or what level of return we will get from making this investment. We are not planning the funding solution in a business-like way.

The business case for the major projects has not yet been done, so there is no informed way to confirm what the measurable benefits of the projects will be.

It is remiss, surely, to promote a debate on options to raise the $400m/yr to invest with no idea of the likely return. It is like going to a banker seeking a loan for a million dollars without disclosing what the money will be used for.
Of course, the first question the bank will ask is: What do you want the money for? And the next question will be to determine whether the return on the investment is sound – does it stack up?

Third, there is no way of knowing what the rate of return to the economy has been from the billions of dollars invested in Auckland transport infrastructure in recent years – either roads or public transport - the work to make this assessment has not been done.
In general, returns on investment will depend on the nature of the projects themselves.

Judging from improved traffic flows where new motorway links have been built, suggests that the investment has been value for money. The Western Ring Route corridor benefits were calculated to be $1.40 for every $1 invested and something in the order of 1500 jobs.

Similarly, shifting Auckland’s main railway station into Britomart has seen a big jump in passengers regularly using rail.

But even though some $1 billion a year has been invested in improving Auckland transport infrastructure since about 1990, there is no firm, quantitative basis for claims about the impact of this investment on Auckland’s economy and growth. We don’t really know what it has done to boost Auckland growth and productivity.

Fourth, we must stop talking about the cost of transport infrastructure and manage it as an investment.

Auckland’s contribution to New Zealand in dollar terms is significant. A 2006 study indicated that some $18 billion in revenue being paid from Auckland against which about $14 billion was returned to Auckland in services and investment.

There is no argument from Auckland about the huge central government investment going towards the Christchurch rebuild. But when you look deeper into the NZ Inc performance, you see that its economic engine room – Auckland – which generates a third of the nation’s GDP and provides a third of its employment, is still performing well below the bottom line.

Next week’s Budget is expected to confirm NZ Inc is on an official track to budget surplus by 2014/15, a stable government (i.e. business-like leadership?), and low-levels of public debt compared to our peers in the Northern Hemisphere.

And if we deduct the cost of the investment NZ Inc is contributing to the Christchurch earthquake recovery, then the country as a whole is doing fairly well.

Assuming the business case for Auckland’s major transport projects show a positive return for the Auckland economy, it is then reasonable to ask why central government shouldn’t underwrite a fair share of the investment – which is what it is, an ‘investment’ in Auckland and New Zealand’s growth-led future.

The scale of the investments required is clearly beyond Auckland Council’s rate payers. A substantial central government input will be required, and that is the call our Mayor and Councillors should be focusing on – encouraging government to do what it is obviously going to have to do.

They have a choice. They can let Auckland’s transport congestion get progressively worse and only act when the problems become intolerable, or they can take a business-like response and plan, invest and advocate for investment in delivering a long-term solution.

We all know the problems. We all know the solutions. We all know what actions are needed. And we know who should be in charge of taking the decisions.

Our leaders.

And dare I say it again – it’s urgent!

For more information contact Michael Barnett, mobile: 0275 631 150.
Michael Barnett, Chief Executive, Auckland Chamber of Commerce.