City Transport: A Taxing Matter

By   /   October 31, 2014  /   9 Comments

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Auckland is an emerging world-city, with many employment opportunities not present in other parts of the country. The externalities around both transport and housing can be resolved in orthodox ways that make full use of the price-mechanism that is at the core of economics.

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This week the prospect of paying tolls on Auckland motorways became a hot topic. (See Mathew Dearnaley:Motorway tolling could hit some hardNZ Herald, 30 Oct 2014.) As we might expect, the kneejerk response has been quite negative. But, as with most such matters, the issues around the problem are heavily nuanced, and the proposed solution (or something like it) may be a good idea if the circumstances are right.

So, what is the problem? It’s presented as a purely financial matter. Auckland must have projects x,y,z and the financial shortfall must be funded somehow by Aucklanders. In reality these projects are a mix of near-necessities and outright un-necessities. We dithered for 30 years on completing the western ring-road – a clear necessity – and may well dither on the two future projects that Auckland really does need.

In my view, Auckland needs the city rail loop, and it needs a second Harbour crossing, given the age of the present bridge clip-ons. The “holiday highway” from Wellsford to Boohai (Puhoi) is also an important project for the people of Northland, and should be funded as a national project, not as an Auckland project.

Other city roading projects are not needed, and that probably also applies for the next twenty years to other rail projects. So let’s just focus on these two: Rail LoopHarbour Crossing. (Other possible motorways are more likely to be ‘needed’ only if Government housing policy creates further ridiculous urban sprawl. Kaukapakapa – or Puhoi – could, I guess, become the new Botany!)

These two projects are public goods that benefit all Aucklanders, including those who will not use them. Thus they should be funded by a mixture of rates and taxes, spread out over the projected lives of these projects by Government and Council borrowing, and constructed during periods that would otherwise be recessions. Both of these projects should be ‘shovel-ready’ by 2018, about the time that the next bust in private sector construction is likely to occur. It’s not rocket-economics.

 

Congestion and Lifestyle

However, Auckland traffic has a very real problem, right now. It’s the congestion that occurs regularly in motorway system, and in suburban roads (especially roads close to motorway on-ramps). Economics 101 has a simple means of managing this problem, it’s called a congestion tax.

Congestion taxes should be introduced as soon as possible, but at a low rate (eg $2) initially, and only between7:30 and 9am, in the Spaghetti Junction area, in the Harbour Bridge city-bound lanes, in the Northwestern motorway citybound from St Lukes, and in the Southern Motorway citybound from Greenlane. (I would exempt unambiguous business traffic in vehicles such as busses, trucks, vans and utes; not company cars.)

The principal purpose of the tax is to change people’s lifestyle in both the short and the long term. As a strictly secondary purpose, revenue raised can contribute to the two projects identified, offsetting the need to borrow. (The Green Party has the right idea on congestion taxes, but should not seek to rely on taxing ‘bads’ for revenue. Taxing alcohol for revenue means that we have to nurture the alcohol industry.)

The first lifestyle change that such taxes facilitate is to remind commuters that there are public transport alternatives, and that the roads are there principally for business transport, not for commuting. The second lifestyle change is that such taxes encourage car-pooling. The third change is that employers – who we know are very fond of ‘flexibility’ – may facilitate in-bound commuting at other times of the day. Further, genuinely flexible employers will share any extra commuting costs incurred by employees who must come to work via these routes during the morning commuter peak.

Longer term lifestyle changes being signalled will be for the development of housing types that dovetail with public transport. Thus the issues of Auckland housing and Auckland transport are really a single issue.

Sadly, the housing issue is usually framed in terms of helping people onto the ‘property ladder’, rather than in terms of ensuring that people are securely and healthily housed in places that do not require excessive commuting. (The present government incessantly frames the housing issue as if houses were principally a financial asset, with the concept of an actual dwelling being a mere afterthought. The government should have no view about whether owner-occupation ghettos ‘up the boohai’ are or are not better than more practically located rented accommodation.)

A critically important part of resolving Auckland’s traffic issues is to facilitate the choice to live closer to work. And, it’s about recognising that cities like Auckland have (or should have) a young and mobile working population. (Today’s teenagers do not aspire to live independently in the suburbs and drive 9-5 to work. They don’t even aspire to own cars in the way that previous generations of young people did.)

So, in my view, both the Auckland Council and the Government should be promoting the concept of congestion tolls, set initially at low levels, but set to rise as alternative transport options improve and as alternative housing options emerge, in large part from the market forces created.

 

City Housing

My principal transport policy is, however, for Council and Government to reform the private sector urban rental housing market.

This reform means creating a mixture of carrots and sticks to ensure that houses and other dwellings within the Auckland isthmus are neither unoccupied nor under‑occupied. (I would love to hear – in the ‘comments’ below – anecdotes about houses recently purchased for megabucks that are presently empty, or are occupied by significantly fewer people than they were designed to house.) Housing supply is not just about building houses; it is also about making proper use of the stock that we already have. We have comprehensive statistics about labour supply; we likewise need good statistics about what happens to houses that are purchased more as financial assets than as dwellings.

The second part of this reform is to establish a warrant of fitness for all rental housing, and other housing that ought to be part of the private rental stock. Such warrant of fitness testing should be subsidised.

The third part of the reform is for Labour to replace the ‘capital gains tax’ idea with a ‘property speculation tax’ similar to that introduced by the Third Labour Government in its 1973 Budget.

Adjacent to a property-speculation tax would be legislation to require landlords to declare to tenants if there is aprospect of a rented house having to be vacated in the next 12 months, regardless of the maturity of tenancy. (For example a 12-month tenancy should be presumed to be a roll-over tenancy unless the tenant gives, on signing, notice of intended vacation at the end of the tenancy.) Thus tenants could negotiate lower rents in exchange for heightened insecurity. Landlords who decide to sell at short notice without prior warning would be required to compensate their tenants. The cost of rented housing escalates significantly when the landlord is an active property speculator.

 

Conclusion

Auckland is an emerging world-city, with many employment opportunities not present in other parts of the country. The externalities around both transport and housing can be resolved in orthodox ways that make full use of the price-mechanism that is at the core of economics.

Do we want a proper world city, or an overgrown country town? We need more young people living and working near to their places of employment – walking, cycling, bussing, training or ferrying to work – engaged with their communities through an efficient rental housing market. That’s capitalism the way I like it. Congestion pricing facilitates ‘good’ capitalism; Green capitalism.

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9 Comments

  1. One pissed of liberral says:

    How about making the cost of work related travel fully tax reductable for all workers. As an example while still in Germany I lived in a small town some 60 km’s from Munich and I worked in a subburb of Munich.

    1. take bike to Train station – ca. 15 min,and park bike in guarded locked bike park.
    Cost for parking the bike came to about $ 20 a month
    2. take train to Munich Central – 20 min
    Cost Monthly 220$
    3. take subway to subburb – 10 min
    Cost Monthly 60 $
    4. Walk 10 min to Office.

    cost total per year $ 240 bikepark, train ride 2640 $ subway 720 $ = $ 3580.
    Of that cost per annum, 60 % were re-imbursed at my end of year tax return.

    Now in Auckland a single ride from Royal Oak to Central Auckland will cost you about $ 6 and take up to 2 hours. And you have no guarantee that the bus will be on time, that the bus will be functional, that the bus driver has enough small cash on him to change a 20 $ note etc etc. I have been refused entry to a bus because the driver could not render cash on a 10 $. I also suggest that increasing the wages of bus drivers would be a good start to improve services. ……but this is not going to happen, it has not happened for the last twenty years and it will not happen in the next 20 years.

    I welcome a debate for Toll Roads as clearly it will come to pass, but I suggest that instead of punishing Aucklanders further for living in Auckland that maybe our Government tries to entice businesses to locate elsewhere – why can’t a call centre be located in Huntly or Morrinsville?,
    Refund work related / study related travel costs on public transportat the end of the year tax return.
    And by all means the Tolls need to be paid by businesses, hauling companies and the likes. Businesses use the roads and should pay for that use.
    Don’t forget to sell Toll tickets ( as is done in Austria on the boarder) for any tourists that may use the roads in Auckland.
    The roads already have been paid for by the tax payer, if we can only fund new roading via toll than that cost should be covered by the ones that use the road.

    In the meantime, the toll seems nothing like a desperate money grab by an ineffective wanna be politician, in a behemoth super city that was never set up to succeed but only to generate revenue. And that is what we do in Auckland.

    Another question to be raised, would it then be acceptable for an unemployed person to refuse a job on the Shore if only minimum wage is paid, and the cost of going to work will then be cost of gasoline, cost of vehicle use, and 4$ toll per day?

    And as a last thought, can we then promote the use of tolls anywhere in the country for all roads and bridges build? Because a lot of the Tax revenue generated in Auckland does not stay here….or are we to become the milking cow for NZ? To be milked anytime cash is needed and the government does not want to provide?

  2. dave brown says:

    This discussion is framed in dollar terms only to serve the interests of capital.

    Workers pay their transport costs directly and indirectly via consumption taxes.
    This includes delivering their children to and from school in the absence of sufficient school buses.

    So yeah, start by taking back the taxes ripped off Auckland to keep rural NZ fat.

    And instead of making working, commuting, taxpaying consumers subsidise the profits of the business sector, look for much cheaper logical solutions.

    Auckland’s transport problems could be solved by one gutsy measure.

    Quickly beef up a subsidised public transport system including an overhead rail between the Britomart station and Mt Eden via Symonds St, and back via Eden Tce, Newton and Ponsonby with stops en route to distribute commuters to the various parts of the central city. This would enable workers who work all over the CBD to get to and from Britomart by rail.

    Much cheaper and more efficient than the proposed underground that will only stop for Sky City for high rollers, but miss out K Road for the flaneurs.

    Taking in the view of the city and gulf from on high would make Auckland a truly liveable city. Even the apartment battery dwellers could get up for a view.

    As part of that beefing up, a fleet of school buses of various sizes should be provided to deliver children safely to schools in their catchment areas. In that way a morass of cars transporting children to and from schools would be coaxed off the road.

    With the excessive load taken off the existing roading system there would be a need only for a new harbour crossing.

  3. Black Lemming says:

    CARS ARE SO 2014

    Dedicated cycle only cycle-ways for kids to get to school safely under their own steam would vastly reduce early morning congestion and stop the pump sipping, SUP driving , super mums of Auckland from clogging the roads during rush hour like saturated fat in your traffic arteries .

    If the kids don”t like going up hill or into headwinds get them a trendy e-bike.20 cents a recharge.Yew !

    While your at it , get yourself an e bike and only use your car on wet days .Anyone heard of Copenhagen ?

    You don’t have to redesign Auckland for more cars because given time peak Oil will sort things for you .

    When petrol climbs to $ 5 a litre and above, many lemmings will be heading back to town with an e bike, where they will be $200-300 a week better off compared to expensive, time consuming commuting.

    Traffic volumes may also reduce as private automobiles become more of a luxury ,compared to more cost effective public transport.

    Cities will naturally compress , and the endless sprawl of suburbia will become less and less attractive.Inner city slum areas will become redeveloped and cities more compact.Its all based on simple economics relative to the cost of Oil .

    Bringing in another 50,000 immigrants on to Auckland roads every year isn’t so good for conjestion either.But then ,we love growth don’t we, so its all part of the charm .Nuts.

    Nationals thinking is so 1963, if you want to watch a scary movie on urban transportation try this DVD.

    ” The Death of Suburbia “, oil depletion and the end of the American dream .

    Whats that lovely new house 1/2 way to Hamilton worth when oil costs go through the roof ? Who wants to buy it ? And is it worth what you paid for it ? oh dear .

    But we can all relax because the world only uses 88,000,000 barrels of oil a day.Next time your doing your morning lemming run down the motorway you may want to reflect on this.

    Ultimately oil is finite and will over time increase in cost. This will absolutely affect how we organise transportation in urban environments in the near future ,and our planning should reflect this. NZ needs to be less reliant on oil , not more .

    Even if we can expand the oil supply for to cater for world growth
    we can use only 25% of our fossil fuel reserves this century to prevent further climate change and global warming .

    Stone age.Iron age. Oil age……I wonder whats next ?

    Don’t be a lemming , be a black lemming , its way more cool .

  4. Dorothy Bulling says:

    What should happen to service vehicles using motorways to travel around to their clients? And why should you pay to travel on the motorway which is part of SH1 when you already pay taxes? This is a short step away from collecting a fee from anyone anywhere to travel on a state highway.

  5. Brendon Harre says:

    Read the comment stream here for a good description of housing problems.

    http://transportblog.co.nz/2014/10/28/why-demographia-is-fundamentally-wrong/

  6. Mike in Auckland says:

    You are wrong to think that we need no additional rail projects for the next 20 or so years. That is absurd. Rail is highly important, and we need a wider network, also reaching to the north, as far as Albany, to offer electrified trains as transport.

    Cars must be phased out as the regular form of transport for most, as it will inevitably need to happen, with fossil fuels becoming scarcer and more expensive anyway. Also the idea to use “alternative” fuels, grown on farms, or in the sea (algae and so) is not going to prove to be efficient. We need land and even parts of the sea for food production, so forget trying to grow “fuel” crops, which will take away the land that is better used for growing food for humans (sadly still an increasing species).

    We do not really want nuclear energy here, do we? That may be an alternative source for electricity, also to power cars. But cars that run on such power, need expensive, complex and also toxic batteries, and charging up stations, the whole infrastructure would be prohibitive.

    Why not get real with people, and get back to basics? Firstly improve public transport for trains and buses, perhaps some trams here and there, but otherwise, offer massive tax cuts, even bonus payments, for people buying bicycles. Cycling is very common and popular in Copenhagen and Amsterdam (“world cities” that are rather sustainable), and get people out of their comfy cars and so, to MOVE, and exercise, while they travel to and from work, to and from school, and it will also improve health, and save us billions.

    It is not good to stick to our unhealthy, lazy lifestyles, and expect to be transported everywhere by high powered mobile transport that uses whatever energy. Why not use our physical body, at least more so, to get us around? Our bodies are not made to sit on the backside 24/7, they are still very suited for functional motion, for walking, cycling and whatever, and we may as well get damned used again to use our limbs and more, to get to places, rather than waste and pollute.

    Now there is a challenge, but I hear already the screams, hey, nobody gets me out into the rain, to cycle or walk. How spoiled we are, perhaps?

    Naturally long distance travel will still have to be done by trains, buses, cars and so forth, to be reasonable after all.

  7. GM says:

    Keith, you’ve made some good points. I agree that a fundamental rethink of attitudes towards housing is needed – discussion about housing is indeed far too much focused on the financial and not on the human and health aspects (with the honourable exception of the Greens focus on home insulation etc.)

    However your argument about which projects are important lacks weight. Simply saying that the “holiday highway” from Wellsford to Puhoi is an important project for the people of Northland is merely repeating the Government argument. The need for a full motorway through such difficult terrain to service so few vehicles on an average daily basis has been repeatedly debunked by the likes of the Campaign for Better Transport and the Transport Blog. Something like Operation Lifesaver http://transportblog.co.nz/our-proposals/operation-lifesaver/ would delivery most of the benefits for a fraction of the cost.

    Further more, the CRL has always been the City Rail LINK, not the City Rail Loop. It is indeed a critically-important project, but the use of the incorrect word loop (while it technically forms a circle, the trains that use it will not run in circles, hence it is not a loop in the typical sense) merely feeds the disinformation of those who oppose the CRL.

    Changing tack, I would be interested to hear your detailed thoughts on the Alternative Waitemata Harbour Crossing, to give it its full name. The effect of the Government’s proposed project (a tunnel from the Shore to feed into the Southern Motorway) would be simply to massively increase the vehicle flows onto parts of the motorway network already struggling to cope, and would not do much for network-wide capacity. Hardly a good use of several billion dollars. Or would you rather the new crossing be a rail line, which would be cheaper and leave money over for development of rail on the North Shore?

    In summary, I hope that The Daily Blog gives you some more space to expand on your discussion – Auckland’s transport and land use approach clearly needs more fresh thinking. I look forward to yours.

    • Keith Rankin says:

      Thanks GM for your comments,

      One of my main points was that there is a spectrum of importance in terms of the various projects, and that the $12b figure represents somewhat more than the most important projects.

      On the Wellsford to Puhoi Highway I basically ‘kicked for touch’.

      Re the Harbour Crossing, yes the geography is tricky. My main view was that we need something like Sydney, where now maybe 20% of traffic uses the bridge and 80% the tunnel; and that a rail link should be included.

      However I’m inclined to see that the North Shore busway has been a replacement for a rail link to North Harbour, just as the Adelaide busway replaces rail in the NE quadrant.

      My feeling now is that a tunnel that could link near Western Springs would be good in that it could direct traffic onto SH20 and away from the city centre. But I have no idea of the technical feasibility.

      Re rail, I would like to see a good frequent efficient electric service on the existing lines plus the LINK, combined with much better Park and Ride facilities. I also think that Park and Ride should work well for North Harbour, with buses and ferries instead of trains.