How we pay for road use must change

Here is a copy of my submission to the parliamentary enquiry on Congestion Charging in Auckland

Submitter;?Timothy Hughes, professional transport engineer.?

I am a professional transportation engineer with 43 years experience. During my study for a Master of Transportation Engineering I studied transport economics including pricing mechanisms and congestion pricing. I am experienced at Economic Evaluation for Roading projects.?This submission is from a professional perspective.?I do not live in Auckland.?Until recently I thought congestion charging was the silver bullet for many of our transport problems. I now have serious reservations -especially with the TCQ report preferred option. It was last decades solution but the climate emergency has shifted the goal posts.??????

Road use costs and pricing?-the bigger picture

The proposal to price road use at congested times needs to be considered in relation to the other ways that roads are paid for, the objectives of transport policy and the way prices affect the behaviour of people.?Studies of transport costs, taxes and charges in Auckland have found that when all the costs are counted users only pay about half the total costs caused by use of the road by motor vehicles. (These analyses do not include the harmful health impact of sitting in a vehicle, when compared to active modes including access to public Transport.)?The external costs are paid for by others including general taxation.?

Transport process are experienced by users in 4 main ways.

·??????Costs of car ownership- -purchase capital cost / depreciation due to time, registration, part ACC levy, insurance, garaging / permanent parking. About $4,6000 per annum for a small car (source NZ AA).

·??????Costs of car use: fuel, maintenance, mileage depreciation.?About 22c per km plus fuel and RUC taxes 7.65c per km. Total about 30c per km (IRD expense rate).?For an average distance per annum of about 10,000km,??$3,000 per annum – average.

·??????Property taxes; pay for about half of local road maintenance,

·??????Parking costs at home and where it is charged -mostly free and though an expensive use of land and buildings, is paid for by someone else.

User charges : Fuel tax and RUC pay for maintenance of State Highways, about half of local road maintenance, traffic enforcement etc.

External costs: congestion, greenhouse gases, air pollution, noise, severance etc.?is about the same size as the running costs and is paid for by others.

The health cost of inactivity?- compared to the same trip by cycling ($2.20 per km,. walking $4.40 per km (source Waka Kotahi -NZTA Monetised Benefits and Costs Manual). Public transport users gain these benefits in the access trip at each end of each journey. Inactivity costs are partly paid for by the user in the long term , but most if it is paid for by the public health system from general taxation.?Ironically this price of inactivity, is always counted in economic analysis of projects as a benefit for active travel, but never as a cost of motoring – which is where it really belongs.??

Once a car is owned, it is a relatively cheap and convenient to use it?- especially as so much is invested in ownership.

?So one of the reasons why the road is overrun with cars and there is congestion is that the use of car is heavily subsidised, whether or not the road is congested.?As a result, public transport has to also be heavily subsidised. It has been pointed out that Tokyo with no free parking and no car subsidies has a public transport system that is self-funding and does not require subsidy.??

Congestion is only one of the costs that is not properly priced.

The big new issue that now has to be factored in is the new and urgent priority to decarbonise transport - which means that the price of green house gases needs to receive greater prominence in any road pricing scheme.

The new paradigm of the climate emergency;

The Climate change commission has released draft targets for transport decarbonisation and the Ministry of Transport has just released a green paper Transport Emissions; Pathways to zero emissions by 2050.?Under all their scenarios, they envisage greater reductions in motor vehicle use than is being proposed by congestion charging.?

The congestion charging regime as prosed in the TCQ report has the single objective to?maximise the efficient utilisation of the road asset.?It is like the airlines setting charges so that planes are just full of passengers. Another analogy would be to the problem of obesity.?To make the most of our existing clothes size and to avoid the cost of a new wardrobe, we manage our weight so they are tight on us, but still just fit.?The climate emergency requires a stricter diet, and the patient would benefit from more exercise.?Any charging regime should be proportionate to the greenhouse emission of the vehicle.

The logic to correctly pricing the externality of congestion, by a congestion charge equally applies to all the other externalities especially health and climate change, which are not perceived by the motorists in the price when they make their transport choices.

The conflict between the proposed congestion charging details and other policy objectives.?

One conflict between the congestion charge proposed and the needs of climate change is that the proposed charge is the same whether trips are long or short.

The congestion charge only reduces trips to the extent that a small drop in numbers achieves as stable efficient travel time. This reduction is not sufficient for the other objectives.

One of the claimed benefits is that in 30 minutes all but the few who shift their travel time or mode, by paying the charge benefit by more than they pay.?This reinforces the advantage the car has over other slower modes. Though buses may also gain time savings from less congestion, the car benefits more and retains the relative advantage. So by itself a congestion charging scheme gives little incentive for mode shift, unless it frees up road space exclusively for PT and or active modes.

The analysis of benefits is according to current practice but is subject to some fundamental flaws that are inherent in this type of analysis. It assumes that the only other changes over coming years are the transport improvements already planned. That is otherwise business as usual – which is not an option. It assumes land use is not influenced by the change in transport pricing.?Land use is changing dynamically all the time partly in response to transport provision. The higher the speeds and the further people can drive in 30 minutes, the further they live from the places they work and visit. This perpetuates the pricing incentive for urban sprawl.???

The proposal envisages that the extra congestion charge will be offset by lower fuel and RUC taxes.?This makes it cheaper to travel off peak increasing the subsidy for the car.

The proposal only applies to Auckland – the rest of the country where the bulk of transport carbon emissions are produced is not affected.???

To implement smart road pricing is expensive, and will take some time to implement.

Complementary measures?

The proposal considers some complementary measures that may optionally be used alongside a congestion charge.

Some of these are very cost effective and can be implemented straight away.

So in an economic evaluation the least expensive should be applied first and the extra costs and benefits of the more expensive options considered over and above the cheaper ones in an incremental cost benefit analysis. In the economic analysis of the congestion charging proposal, the expensive smart pricing method is considered first, and the easier and cheaper options treated as add-ons.?

Examples that are largely cost neutral, shift the burden from fixed charges to per kms to usage.

·??????Registration and ACC $180.?– about 1.8c per km for typical 10,000kms per annum.

·??????Insurance;?the risk does not happen while the car is in the garage -but as it is used. Mandate that insurance is paid as you drive.?This is fair and equitable as people who drive less should not be subsidising those who drive long distances.?Annual Insurance premiums range from about $500 per year to over $1600.?On a per km this would be about 5c to 16c per km.?Pay as You Drive Insurance is offered overseas, but last time I checked, not in NZ.

·??????Rates;?Transport is 36% of Auckland city spend?I suspect this includes NZTA financial assistance so presume 18%.?Average rates for Auckland is $3,469. So ratepayers pay an average of $642 per annum. Converted to cost per km over 10,00km + 6.4 c per km.

These three combined put fairer cost on transport as used of at least 12c per km which is the congestion rate per km used in the network wide option of the congestion charge.?It costs the users on average nothing more, just changes the way it is paid to be fairer, and applies to all trips, so is more effective overall.?

Pricing of Parking. ?

Parking is never free. it is paid for by someone else. If I travel to the regional shopping mall, the parking is paid for by the shop owners in their rental, and included in their prices. I use it for free. If I travel by another mode I am paying for the car park that I have not used. Similarly for workplace parking provides a hidden subsidy for the car trip that is not available for other modes. The effect of parking charges on travel mode can be seen in the much higher share of Public Transport and active modes to CBD areas where parking is priced. Even a modest charge for parking, or an equal value subsidy for public transport or active travel?would be fair and contribute to mode shift.??Tokyo is cited as city where car use is not subsidised and free public parking is not available. The result is a public transport system that needs no subsidy and a successful and prosperous city.??

Health;

For other externalities such as health costs, extra cost could be included as a distance charge, with corresponding reduction in other taxation.

Conclusion

Together the above tools are more powerful than the proposed congestion charge, cost little to implement, can be applied nationally, and require less mitigation. If done first congestion may dissipate to the point where a smart road charging regime adds little value.

Recommendations

Other less expensive changes to the way motor vehicle use is priced should be prioritised for more immediate implementation, NZ wide.??

The proposal for a congestion charge needs to be redeveloped into a more general smart pricing approach so it is consistent with the greater reduction in motor vehicle trips required by transport decarbonising and other government policies.

The economic justification of the costs will then need to be re-done, as it is likely that the?benefits of the cheaper methods would be such that the extra costs of a smart pricing regime would be less than the benefits.?

Fairer user pays prices for car use will mean that other modes are more price competitive with the private car. However the poor provision for public Transport and cycling infrastructure will be an obstacle and needs major investment.??