Monday, 11 July 2016

Auckland road pricing should be full network charging says report

I've written about Auckland plenty of times, not least because I am originally from New Zealand. (NZ)  There have been two major discussions about road pricing in Auckland in the past 12 years, the third has now come from the interim report of the Auckland Transport Alignment Project (PDF).

Auckland motorway network
Later I will write a more detailed look at road pricing in Auckland and New Zealand, but for now a quick summary.


Auckland Council and the NZ Government have been disagreeing about a future transport strategy for the city for the past few years.  It has focused on the priority Auckland Council has given to an underground railway loop through the city's downtown Central Business District (CBD), but has wider implications.  Auckland Council has prioritised significant capital spending in fixed public transport infrastructure, but the NZ Government has been sceptical about the economic efficiency and value for money for such spending.  Auckland Council's primary revenue raising instrument is property rates, and it is political unsustainable to fund the proposed capital works from rates alone (rates already pay for around 60% of the costs of maintaining and upgrading local roads, not motorways and state highways), and pay for around 50% of the costs of subsidising public transport).  The NZ Government fully funds motorways/state highways and pays for 40% of the costs of maintaining and upgrading local roads, and the other 50% of the costs of subsidising public transport, it also owns the railway network and motorways/state highways.  The funds spent on transport by central government are mostly raised from hypothecated motoring taxes on road users, being fuel tax, a weight/distance tax on heavy vehicle and light diesel vehicles, and  registration/licensing fees.

The Auckland Transport Alignment Project (ATAP) as the project name suggests, is a joint project between NZ Government and Auckland Council representatives to get alignment between both levels of government on a 30 year strategy for transport in the city.

Talk of road pricing goes back over ten years, with an initial report (Auckland Road Pricing Evaluation Study) concluding the blatantly obvious, that you can reduce congestion and raise revenue from introducing road pricing.  However, the options considered were limited, in part because the lead consultant and the client decided that only point based charging was proven and feasible (that is charging using DSRC/tag and beacon, or automatic number plate recognition technologies).  The only options modelled at the time were cordon charges, area charges and motorway charges.  The cordon/area charge options had to be large to have any meaningful impact (a downtown cordon would have little impact on traffic and generate limited revenue).  Furthermore, by placing cordons across suburbs, there would be significant impacts on businesses and residences either side of these artificial boundaries, as those just inside would lose value and those just outside would benefit, and congestion impacts would be blunt.  Motorway only charging was ruled out because it would greatly increase congestion on local streets.

Subsequently, Auckland Council has proposed motorway charges, as a way of raising additional revenue to pay for rail projects, but as the motorways are owned by the NZ Government (and Auckland Council has no powers to introduce any form of road pricing on existing roads), it has been a point of difference with the NZ Government.  With that issue, and a broader concern about the need for a coherent strategy for Auckland transport, to address congestion and accommodate a growing population, ATAP was set up.

The first report of ATAP (Foundation Report-PDF) was published in February 2016, outlining the key strategic issues, which are:
- ensuring access of residents to employment and employers to labour;
- reducing congestion;
- increasing the mode share for public transport, to help reduce congestion (and to ensure adequate utilisation of considerable capital spending on public transport infrastructure).

The interim report which has just been released came to the conclusion that changing the scope and type of capital investment in the next 30 years will not make a substantial difference in transport outcomes.  Much heavier spending on public transport instead of roads or targeted investment on specific high value road and public transport projects will have localised impacts, but will not adequately address the key challenges.  It also concluded that shared mobility options and connected vehicle technologies (and greater automation) could contribute towards improving "network performance".  However, it also came to the conclusion that variable network pricing by time of day and location, could significantly relieve congestion.

Urban network pricing or beyond?

There is no specific proposal on pricing, but two suggestions made in the report indicate a direction that hasn't been picked up by the NZ media.  One suggestion was that heavy vehicles be the first to move towards such pricing and the other was that fuel tax could be replaced with such pricing.

NZ has long had a weight/distance road user charge (RUC) applied to all heavy vehicles and all diesel vehicles (including cars and light commercial vehicles) on all public roads (fuel tax is only applied to petrol, LPG and CNG, not diesel).  A prepaid distance permit is bought by road users, by reference to the vehicle's hubodometer reading for heavy vehicles and odometer reading for light vehicles.  In the past six years the option of having a GPS based on board unit and paying a certified service provider has been available, although it is still to pay for prepaid electronic permits.

Where to go from here?

Rather than have an Auckland specific variation on this, a logical policy path would be to evolve the existing road user charge, because the only way that variable network charging is going to work effectively will be if all vehicles are on it.  To do that would mean:

- Providing a post-payment option for RUC (even with a prepaid account) so that road users can more closely relate usage to what is paid, linked to electronic measurement of distance.  This would best be provided by private account managers;
- Transition away from hubodometers and paper RUC licences to all heavy vehicles being on electronic systems that are capable of charging by time of day and location.  One way to do this would be to make electronic systems mandatory for all newly registered heavy vehicles or to have a transition period of say five years;
- Introduce some location based charging to heavy RUC, based on infrastructure costs (e.g. cheaper on motorways than local roads) and even time of day incentives for off peak driving in urban areas;

That alone would enable heavy vehicles to be charged with more disaggregation, but the much bigger step will be for light vehicles.

- There are options now for electronic measurement of distance for light vehicles paying RUC, but this should be encouraged further.  A transition towards universal electronic light RUC could be achieved by making it compulsory for newly registered diesel vehicles.  Lessons should be learned from the Oregon and California pilots on how this may best be achieved;
- Transition dual-fuel vehicles towards light RUC by piloting a mechanism to deliver fuel tax refunds for such vehicles, and removing fuel tax on LPG and CNG (which will also remove a costly compliance burden on many users of those fuels who are not using it on road and claim fuel tax refunds as a result). This should also be a time to remove the exemption on RUC for electric vehicles;
- Introduce RUC as an option for petrol powered vehicles instead of paying fuel tax;
- Develop a process to transition petrol powered vehicles to RUC.

Of course all of this raises big questions.  One is privacy, another is what sort of organisation should be responsible for price setting of disaggregated variable road charges.  I doubt it should be any that exist now, and there is a strong case for transitioning road management towards more commercial entities with the power to set such prices and vary them based on demand conditions.  That means taking the power to set RUC away from central government politicians and moving the management of roads from central and local government entities to independent companies.  I doubt ATAP will go quite that far, but the greatest benefits from dynamic variable road pricing will come when roads can be priced according to changes in demand, supply and infrastructure costs.

ATAP is about a thirty year time horizon for transforming Auckland.  To implement the sort of road pricing that will deliver the greatest benefits for Auckland will need around half that time, but it will be for all of New Zealand, and will also challenge both road and public transport capital spending ambitions.  Most of all, it will change the relationship between road users and road providers, and also provide a major challenge to assumptions around all transport modes.  After all, once roads are priced relatively efficiently, so congestion is significantly reduced, what remains the case for subsidising peak provision of public transport, when road users are paying fully for the costs of their road use (and incentivising the use of other modes)?

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