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?
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