COAG ROAD REFORM PLAN :: CRRP STAKEHOLDER MEETING :: DATE COAG ROAD REFORM PLAN Driving Australia’s Road Reform South Australian Local Government Roads and Works Conference Neil Aplin, CRRP Project Director Thursday 25 August 2011

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Welcome to the infrastructure restaurant Does Sir have his Annual Entry receipt? Good. Tonight the Chef has prepared three courses of food. As is our policy, we don’t guarantee what that is just yet, but you will enjoy it… whatever it turns out to be! What I can reveal is that there is a chance that the food has been spoiled, owing to the broken fridge, and it may be uncooked, due to the oven not working. Funding from our patrons precludes our spending on maintenance however, you have come on a special night! Tonight we are using this years new chairs! Ooh la la! As usual, the cost is upfront… will Sir be paying by cash or card?

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 The road infrastructure restaurant Would you remain a customer?… would you like to be an owner?

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 How would you fix this situation? The owners still need their revenue to run their shops - better reflect their costs; - allow them to better meet the needs of their customers; and - to enable the revenue needs to be shared across all the shops in the chain in a ‘fair’ way. They need to simultaneously satisfy their - owners and their customers - so do road authorities (and our culture) “Must shift from Asset Managers to service providers” Gary Liddle, Chairman CRRP

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Under funding road networks can stall the economy Source: Transporting Australia’s Future Oct 2010 Relationship between investment and productivity growth.

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Australia and heavy vehicle productivity Australia’s road network is playing ‘catch up’ in accommodating larger vehicles.

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Multifactor productivity Source:BTRE_TruckProductivity_March2011

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Growing freight task Larger vehicles increased their share of the freight task with reforms in standards. Source: BITRE

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Challenges for road freight infrastructure Sufficient capacity in the freight network to handle the growing freight task, –through utilisation of existing infrastructure and the provision of new infrastructure Optimising the use of existing network infrastructure Sometimes called ‘sweating’ the asset Improving access for freight to origins and destinations on local roads, managed by local governments (last mile issues) Upgrading existing infrastructure to maintain access or allow access by more productive vehicles Move from Asset managers to Service Providers

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 What should a road market do? COAG identified 2 key objectives (the CRRP Objectives) Promote the more efficient, productive and sustainable provision and use of freight infrastructure; and Ensuring that national heavy vehicle road prices promote the efficient, safe and sustainable use of infrastructure, vehicles and transport modes. Issues: how best achieve these objectives?

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011

Federal Government Current road funding arrangement State Roads - Arterials National Highways Local Roads Local Government Funds local roads through rate revenue & developers contributions Registration charges Fuel excise No direct revenue from road use charges Funds state roads State funds – local roads Regional Road Block & REPAIR Special programs – urban bus routes Federal funds for arterial roads Federal funds for national highways Federal funds – local roads Untied – FAGS (via state) Tied – Black Spots, Roads to Recovery State Government

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Registration Charges (Prime Mover/Truck & Trailer Charges) + Road User Charge (Fuel Based) Current HV Charging System MDL Charging System HV Charge is based on actual usage of the road network taking into account: Mass of Vehicle (or its components) Distance Travelled (km) Location (e.g. road type) MDL pricing – What does it mean?

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 ‘Closing the loop’ Road service provider Revenue Activity Based Charge Expenditure ‘User pays’ Road Spending Improved linkage between revenue and expenditure Lower operating costs Roads are maintained to an efficient standard CSO’s

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Possible funding options Model optionExplanation Option 1 (base case): status quo on funding Minimum required to implement pricing option/s. Agreement to maintain funding at current split and funding coming out of general revenue. Option 2: Maintenance costs associated with HV traffic given direct to road suppliers Direct funding for HV maintenance costs. This should Increase revenue certainty and flexibility. Option 3: Maintenance and Capital expenditure costs associated with HV traffic given direct to road suppliers. Direct funding for total HV costs. This should give even greater revenue certainty and flexibility.

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Issue identification: pricing reform What key issues does road reform raise for local government? Heavy vehicle use of local roads The benefits of pricing reform are likely to depend on: -availability of alternative routes and -how often heavy vehicles use local roads

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Funding reform: benefits By removing disincentives and providing accountabilities promote more efficient maintenance and investment in road infrastructure i.e. the right infrastructure for the freight task is built and funded at lowest cost. -optimisation of road network quality -optimisation of vehicle operating costs -reduced life cycle cost of road provision -fewer inappropriate access restrictions -efficient planning and road provision -improved road expenditure accountability

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Other key issues Community service obligations Funding of CSOs not linked to revenue from road charges Impact of removing cross subsidisation in current charging system Opportunity for increased transparency Incentives Aside from pricing and funding reform what else is required to promote usage, funding and investment decisions that increase heavy vehicle productivity Ensure that system minimises incentives not consistent with COAG reform outcomes e.g. gold plating (more investment than is optimal) or running down the network (less investment than is optimal)

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Implementation issues for consideration Governance and institutional framework; Price setting arrangements; Commonwealth – State financial relations; Linking road user revenue and road funding; Local government and CSO funding; Information collection and use; Data collection options; Alignment with existing systems and national initiatives; Alignment with intelligent transport systems; and Compliance and enforcement.

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Key challenges Partial market reform - CRRP only involves heavy vehicles –Most roads are built for all vehicles –Infrastructure funding by heavy vehicles alone could lead to inefficient investment Community Service Obligations and other subsidies (both funding and pricing) Achieving national agreement

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011

Challenges for road freight infrastructure Sufficient capacity in the freight network to handle the growing freight task Optimising the use of existing network infrastructure Improving access for freight to origins and destinations on local roads, managed by local governments Maintain access or allow access by more productive vehicles Changing cultures

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Where to from here? Submissions being reviewed on Preliminary Findings Consultation and the supplementary Evaluation of Options Papers Final CRRP to COAG Report Submission due to COAG by February 2012 CRRP website – stakeholder information portal Contact Neil Aplin

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011 Questions

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August