A $3 billion loan for Transmission Gully

Written By: - Date published: 8:40 am, December 10th, 2012 - 33 comments
Categories: transport - Tags:

Transmission Gully is meant to cost about a billion dollars to deliver about half that in benefits, right? Well, thanks to the magic of Public Private Partnerships, National’s managed to triple that cost! If they manage to get the contract signed before the next election, they’ll lock us into annual payments of $120-$130m – totaling $3 billion over 25 years.

In this fascinating exchange with Julie Anne Genter, Bill English admits that PPPs are just expense forms of borrowing that have to be recorded as such in the Crown’s books. He hasn’t bothered to multiply NZTA’s estimate of the annual cost by 25 to work out the total, but Genter has:

8. JULIE ANNE GENTER (Green) to the Minister of Finance: Does he stand by his statement that “there is no suggestion of the Government borrowing billions of dollars for motorways”?

Hon BILL ENGLISH (Minister of Finance) : Yes, I stand by my full statement, which was: “There is no suggestion of the Government borrowing millions of dollars for motorways. The motorway investment is largely funded … from the dedicated road-user charges and excise tax that go into the road-user fund.” Between 2009 and 2012 the National Land Transport Fund spent around $4.8 billion on State highways and around $1.9 billion on its share of spending on local roads. Over the same period fuel excise duties and road-user charges raised around $7.5 billion.

Julie Anne Genter: How does he reconcile that answer with this letter addressed to the Minister of Finance from the New Zealand Transport Agency, dated 2 October 2012, which states that the planned public-private partnership will “allow the NZTA to borrow”— that is, enter into a long-term repayment obligation—“for the Transmission Gully project”?

Hon BILL ENGLISH: That is the nature of the public-private partnership financing method, but all the cost of that financing comes from the National Land Transport Fund, funded by the users of the roads through road-user charges. We do not go to the bond market to raise that money, but we do account for it as if it is debt of the Government.

Julie Anne Genter: What is the total projected cost of the loan that the Government will be taking out for the Transmission Gully public-private partnership?

Hon BILL ENGLISH: I do not have that detail here.

Julie Anne Genter: I would like to table this calculation done by the Parliamentary Library that shows that the payments would total $3 billion over the life of the public-private partnership.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection.

  • Document, by leave, laid on the Table of the House.

Julie Anne Genter: Why is his Government planning to borrow $3 billion for Transmission Gully, when the New Zealand Transport Agency’s own reports shows the project will increase congestion south of Levin through to central Wellington, and return only $360 million to $500 million worth of benefit?

Hon BILL ENGLISH: We can argue about what the $3 billion figure she is quoting means. In fact the cost of that project is considerably less than that. It probably includes all the road-user charges and petrol excise tax, which would be used to pay for the project over the life of the project. But the reason the Government is interested in proceeding with that project is its benefit to the region, because it does deal with a particular vulnerability of Wellington—having only one coastal route north of the city—and is part of a well-signalled corridor of development stretching from Levin to the airport.

Julie Anne Genter: I seek leave to table this Ministry of Transport report from 2008, released under the Official Information Act, which shows that the project will increase congestion and will deliver a benefit-cost ratio of 0.36 to 0.5.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection.

  • Document, by leave, laid on the Table of the House.

Julie Anne Genter: What is his response to Professor John Goldberg, who has undertaken an analysis of public-private roading partnerships in Australia, who says: “The public-private partnership concept has failed in Australia and should serve as a warning to superannuation funds of the high risk of investment in road infrastructure.”?

Hon BILL ENGLISH: The professor may be right in pointing out that some Australian projects have failed. But the lesson there is that those risks were carried by the shareholders in the large companies that operated those roads. The failures did not fall on the taxpayer, and that is one of the reasons that public-private partnerships are attractive to Governments.

Julie Anne Genter: Is it not the case that the availability payment model that the New Zealand Transport Agency is looking at for the Transmission Gully public-private partnership actually transfers the demand risk to the Government, because it would not be able to get private investors to invest in such a poor project; thus, will it not be future taxpayers who are carrying the risk of this $3 billion loan well into the future?

Hon BILL ENGLISH: The Government carries so-called demand risk on every road in New Zealand at the moment because we have not transferred that demand risk to anyone else, in any example that I can recall right now. Actually, I thought the Greens would be pleased about those projects failing, because if they failed, it was because fewer cars showed up, and given that the Greens-Labour Opposition is opposed to cars, they should think that is a good thing.

Julie Anne Genter: I seek leave to table traffic volumes for the Wellington region, which show that traffic volumes have not been growing as expected and therefore the benefits—

Mr SPEAKER: What is the source of the document?

Julie Anne Genter: The New Zealand Transport Agency road monitoring.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is objection.

So, a $3 billion borrowing programme for a project that would deliver, at most $500m of gains, and would actually deliver far less because traffic volumes aren’t increasing as modeled. Seem like a good use of taxpayer money to you?

33 comments on “A $3 billion loan for Transmission Gully ”

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  1. karol 1
    10 December 2012 at 9:31 am

    And that’s how to do a well-researched and well thought out Question for Oral Answer & supplementaries.

    Excellent work Ms Genter!

    And Blinglish left struggling to justify the whole failed project: a failure which he says the Greens should be glad of – kind of admitted the failure there, Bill.
     

    • David Viperious H 1.1
      10 December 2012 at 7:54 pm

      She’s even better when taking Brownlee to task.

    • TiggerViper 1.2
      10 December 2012 at 9:26 pm

      Agreed. She’s really impressed me this year in the House. This nails the govt over this utter waste of money. Keep it up, Greens.

  2. infused 2
    10 December 2012 at 9:36 am

    I look forward to this great overdue road.

    • Bastard Te Viper 2.1
      10 December 2012 at 11:50 am

      I look forward to you whinging that taxes are too high and the rest of us telling you that they have to be so high due to the poor spending of this government.

      • TiggerViper 2.1.1
        10 December 2012 at 9:29 pm

        Don’t get too excited, Infused. The announcement that this road is being ‘delayed’ is only twelve months away… It’ll be one of the first big tickets to go once asset sales are halted.

    • Fortran 2.2
      11 December 2012 at 1:46 pm

      infused

      Will not be built.
      The Green part of the coalition will make it part of their coalition agreement, and Labour will acceed.
      QED

  3. Tom Gould 3
    10 December 2012 at 9:39 am

    Why do the Greens have this pathological hatred of roads? They appear to be opposed to any new motorway, anywhere. Why? Do they think that by not building roads it will somehow make cars go away? Besides, when Transmission Gully was first mooted back in the mid 80s, it was estimated to cost $100m. Now it will cost $1b to build, or $3b with the corporate welfare factored in. Maybe the Greens could swallow some of their own medicine and commit to riding trains and buses as their sole means of transport? And maybe walking and cycling too. Lead by example? Or is this just another case of do as I say, not as I do, from the ‘we know best how you should live your lives’ brigade?

    • karol 3.1
      10 December 2012 at 9:44 am

      Did you miss the bit of evidence that building such roads will increase congestion?  And who says Green MPs, and many of the rest of us, don’t walk, cycle, and/or use public transport when we can?

      The problem is that this government is putting too much focus on roads, and not enough on public transport, and infrastructure changes that will enable more walking and cycling: e.g. more facilities and work closer to home. 

      • alwyn 3.1.1
        10 December 2012 at 11:08 am

        Given the amount their air travel (within NZ) and land travel (read taxies) costs the tax-payer the Green MPs obviously don’t have time to walk, cycle or take public transport.
        In the 12 months between 1st October 2011 and 30 September 2012 The green MPs ran up just under half a million dollars on internal air travel and a little over $180,000 in land travel.
        I was at Wellington Airport one morning when the MPs were all arriving for the week. I recognised 3 of the Green MPs. They probably got off the same flight as they were within a couple of minutes of each other and they all got into different taxies for the ride into town.

        • Rich 3.1.1.1
          10 December 2012 at 12:02 pm

          You expect them to walk and cycle from Auckland, and swim the Cook Strait?

          When we have a Green-led government, we’ll probably allow MPs to speak and vote in Parliament by video conference. Alternatively, we could just disenfranchise all those tories in Auckland and the South Island, saving MPs from the bother of having to leave the Wellington area.

        • Bastard Te Viper 3.1.1.2
          10 December 2012 at 12:04 pm

          1.) Perhaps they were all going to different places
          2.) Time critical so couldn’t wait round for the bus
          3.) This would indicate that PT needs more investment not less

          In the 12 months between 1st October 2011 and 30 September 2012 The green MPs ran up just under half a million dollars on internal air travel and a little over $180,000 in land travel.

          Citation needed.

          • alwyn 3.1.1.2.1
            10 December 2012 at 12:29 pm

            The numbers are available, for all MPs by quarter at.
            http://www.parliament.nz/en-NZ/MPP/MPs/Expenses/
            These are the ones for MPs who are not ministers,. Ministerial expenses are recorded separately.

            • Bastard Te Viper 3.1.1.2.1.1
              10 December 2012 at 12:54 pm

              Why, thank you:

              Green Total
              Air: 131,581
              Surface: 49,867

              Somewhat different to your assertions of “The green MPs ran up just under half a million dollars on internal air travel and a little over $180,000 in land travel.”

              • alwyn …
                10 December 2012 at 1:20 pm

                As I very clearly stated, and as you quoted me, I said
                “In the TWELVE months between 1 Oct 2011 to 30 Sept 2012”.

                The numbers you are quoting are for the THREE months from 1 July 2012 to 30 Sept 2012.

                I simply added the four quarters up to get the annual figure. All the quarterly returns are given in the same section of the Parliamentary website.

                The totals for the year were Air 496,690 and Land 181,629.

                That’s pretty close to what I said don’t you think?

                • TheContrarian …
                  10 December 2012 at 2:09 pm

                  heh, good call.

                • Draco T Bastard …
                  10 December 2012 at 5:29 pm

                  Sorry.

                  • alwyn …
                    10 December 2012 at 5:56 pm

                    Thank you. Maybe I was a little snarky in the response.

                    • karol …
                      10 December 2012 at 6:26 pm

                      Maybe you should take it up with Metiria, alwyn.  She’s tweeting about public transport use right now.  She has said the following:

                       @FedFarmers @NZGreens I do. I take the airport bus and sometimes Green cabs.The airport bus is very good in Welly actually, recommend it.

                      @FedFarmers @NZGreens I do.I hitch lifts with MPs/ministers Always wondered why they dont put on a Thurs 6.15pm parliament to airport bus

                      @FedFarmers @NZGreens In fact, i find buses quite relaxing for some reason. Cosy, friendly, entirely ordinary.

                      @FedFarmers @NZGreens I also have a Go card for Dunedin buses but will wait to get a Auckland bus card till next year.  

                                                  

                    • alwyn …
                      11 December 2012 at 10:07 am

                      Karol.

                      I can only suggest that the $13,865 in land travel expenses she claimed in the last recorded 12 months certainly comes to a hell of a lot of bus trips.
                      At say $5/trip it would mean about 8 trips/day every single day of the year.
                      Somehow I think her passion for public transport is more in looking at it, or tweeting about it, than using it.
                      Incidentally the total cost is roughly what one person (living with someone else) gets, after tax, from National Super. They are expected to LIVE on that, not just travel by land transport.

        • Kevin Welsh 3.1.1.3
          10 December 2012 at 12:21 pm

          Were they all going to the same destination?

    • Salad 3.2
      10 December 2012 at 9:59 am

      Encouraging a switch from cars to public transport is a good way of reducing carbon emissions. If we put so much money into roading, it won’t be there for PT. Seems quite logical.

    • Dave Kennedy (bsprout) 3.3
      10 December 2012 at 10:22 am

      Tom, this government has a blind obsession with building roads that will provide appalling returns on their investment and current data shows that traffic volumes are stagnating. Meanwhile the demand for public transport in Auckland has increased and freight volumes carried by rail are at the highest level ever. When we have huge issues with poverty, underinvestment in Research and Development, systemic failures occurring in almost every government department (partially due to staffing cuts) and a housing shortage the Government wants to spend $12 billion on roads.

      You accuse the Greens of a pathological hatred of roads but seem comfortable with National’s very expensive addiction to roads. I think you will find that the Greens aren’t opposed to all roading and as the Green spokesperson for the Southland region I have been pushing for a greater share of funding for our local network. Southland produces 11% of NZ’s export revenue but our funding for roads has been cut by a 1/4 to support the uneconomic roads further north. Our milk tankers and logging trucks have to struggle on substandard roading so that Aucklanders can have their holiday highway.

      The Greens would like to use more public transport but until it receives enough investment to become fully reliable it is problematic. I think you will find that our Green MPs do use public transport and cycle where it is practical. On a recent trip to Zurich I was impressed by the lack of cars in the city and noted that most people used light rail or bicycles (even in Winter). The Government is prepared to throw money at roads for little return and yet they closed the Hillside Workshop and we have no passenger train between Invercargill and Dunedin.

      It is all about priorities and while this Government has made motorways their main priority the Greens happen to see others that are more worthy of investment.

      • tc 3.3.1
        10 December 2012 at 10:30 am

        ‘this government has a blind obsession with building roads ‘ the obsession is around rewarding their mates and backers, roads, dairying, mining, anything USA etc etc

    • ghostwhowalksnz 3.4
      10 December 2012 at 10:29 am

      The 80s project wasnt the same as currently planned.
      Now it goes around Porirua to end up in Tawa.

      if its such a great idea let the users pay, Australian experience is that the trafiic flows are overestimated for a point to point highway like this.

      My guess is that it will mostly be a two lane expressawy to cut costs

  4. infused 4
    10 December 2012 at 9:58 am

    FYI, they are asking for tenders now. The deal will be stitched up before the next election. I’d like to see what the public think on this road.

  5. Ennui in Requiem Mass for CV 5
    10 December 2012 at 2:18 pm

    Ennui had a day out of Purgatory and drove a car …(not an everyday event for me) across Wellington city, and then over the hill to the Wairarapa. Things that occurred were that:

    * so many parked cars around the winding streets of the capital that you have to assume every household must have multiple cars..and they are a major pain in the arse to go around, and represent a hazard to cycles, pedestrians etc.
    * bloody 4 wheel drives everywhere. Do you really need one to go and buy a latte at Maranui, or to traverse the city to the Warehouse? On the Rimutaka hill road SUVs acting like bully boys…does one of these monsters turn you into an aggressive toss-pot automatically?

    So as the oil runs out we don ever larger faster metal overcoats, increase our mortgages so we can have the latest flashest shiny penis extension or fanny fluffer. Our world reduced to burning oil to warm the planet when we could have walked or cycled, or caught the bus m/ train. I contemplated my next trip over the hill, train and bike..if some bastard in an SUV does not run me off the road because I am on a small metal frame and because he can….is this what we are reduced to?

    And as a taxpayer some Nat related freeloaders are now going to rip me off to build more infrastructure for something that wont be there (the cars will be piled up for scrap metal), and should not be encouraged today. Fekk them, when they come to Hell as they surely will they will be in for a hot time from the victims of motor accidents.

  6. Chooky 6
    10 December 2012 at 6:48 pm

    Need to look at what is at the end of these roads…who benefits? …who has shares ?…who has private airports waiting to take over from Wellington Airport…..follow the money.

  7. gnomic 7
    10 December 2012 at 9:56 pm

    Surely you people realise that whatever the question, the answer is a road. Have you not read the Book of Joyce? Surely you realise that roads magically enhance NZ’s infrastructure and make everything OK as stuff rushes around ever more efficiently on ever bigger truckses. Are you dumb or something? Perhaps sad smelly greenies who don’t worship ‘growth’? And don’t forget the pork barrel, what would the friends of the National Party in the roading industry be doing if they weren’t laying asphalt? And what would National Party MPs in marginal electorates have to boast about if not more tarmac? Don’t forget NZers love their cars. So let’s borrow more and more to keep the whole sad and silly charade going, until it fizzes out . . . . Have to admit to slight grudging respect for English as engaging in debate at least.

  8. Richard 8
    11 December 2012 at 12:11 am

    I hope none of you falling for this “$3 billion loan” rubbish have ever borrowed money – if you have, you must think you were mightily ripped off.

    If you borrow $400,000 to buy a house, and end up paying $1,000,000 in principal and interest over the term of the loan, have you taken out a “$1,000,000 loan”? Of course not – at least if you’re not a greens MP…

    • mouse 8.1
      11 December 2012 at 10:45 pm

      Richard…

      The difference is up till now NZ did not need to take out loans for transport infrastructure that does not make business sense. Transport Infrastructure was funded form Road User Charges and Fuel Excise Tax from the current period.

      The Problem is National Know the point of Road Demand Elasticity has been reached… at least on SH1 north of WGTN, and they can’t increase RUC and Fuel Taxes without sending the Economy into negative GDP, and kiss bye bye to the Baubles of office.

      So rather than admit one of their core policies is not workable, their solution is to kick the can down their idelogical road… and stump you! Mr Tax payer, with a liability, that was not made apparent to the Enviornmental Protection Authority at the time of the Resourse Consent Process.

      I for one feel like the victim of the economic hitman.

  9. jamie prentice 9
    11 December 2012 at 11:06 pm

    Lot of talk but as usual no solutions. The Americans would have built in ww2 if we had said yes, even did all the planning for it. Having a house in Otaki have a vested interest, like the idea of having the road cause make it easy to get into Wellington.

    However as many have said 3b bit rich. Its doubled laned on the railway to waikanae now why not double lane it to PN. Has anyone done any research into where traffic is coming from and how we could get those freight trucks killing that road and instead using rail. Is a loaded on/ loaded off problem, being a narrow part of the island it should be easy to comeup with a smarter solution.

    Then we could put the rest of the money into making more highways around Auckland (just joking.)  

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    12 December 2012 at 5:49 am

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