THE PUBLIC FINANCE DEBATES: “It’s time…New Zealand extended charging for public infrastructure” Opponent: Peter Conway

Key Points Keep the ‘public’ dimension Equity issues Implementation Risks Mitigation Alternatives The VUW-GEN Public Finance Debates November 12, 2013

Keep the ‘public’ dimension Infrastructure underpins economic, social and environmental development Relative benefits to individuals vary with single and multiple dimensions of infrastructure Charging undermines the rationale for ‘public infrastructure’ High degree non-excludability, non- rivalry The VUW-GEN Public Finance Debates November 12, 2013

Charging Options Tolls Road pricing Area charging Cordon charging Network charge Toll lanes Fuel taxes High occupancy vehicle lanes Road user charges Parking charges Rates Targeted rates Development contributions Carbon taxes The VUW-GEN Public Finance Debates November 12, 2013

Equity User pays implies consideration of homogeneity of users Vertical, horizontal…..context Wealth and income inequality a major issue 63-77% earn less than ‘average’ wage New Zealand’s household income inequality is in the top third of the OECD The VUW-GEN Public Finance Debates November 12, 2013

Equity Concerns High levels of vehicle ownership Already hypothecated charges - fuel excise, registration, licensing fees, road user charges Tolls regressive Lead to social exclusion Dispersion leads to less viability for public transport The VUW-GEN Public Finance Debates November 12, 2013

Equity concerns… Spatial mismatch – employment centres/homes as commuter costs rise Depends where ‘poor’ people live and work relative to cordon Net benefit to ‘wealthier’ drivers in one case 27 times those from poorest quartile because of relative value of time The VUW-GEN Public Finance Debates November 12, 2013

Risks Geological Finance Use Sunk costs All suggest Government better placed to cope with risk, spread across many assets and long period The VUW-GEN Public Finance Debates November 12, 2013

Implementation Risks Evidence of heroic assumptions (BrisConnections) and ‘biased analysis’ Cross City Tunnel Sydney Life cycle issues, implementation and transaction costs Risk transfer, subsidies, renegotiation The VUW-GEN Public Finance Debates November 12, 2013

Northern Gateway Built 10 years earlier because borrowed $158 million based on anticipated toll revenue. Prices rises in March 2012 were described by NZTA as ‘regrettable”. Transaction costs and write offs. The VUW-GEN Public Finance Debates November 12, 2013

Mitigation Free quota, discounts, peak time only Cars with 3 or more people exempt Segmentation (community travel passes as in community health cards), special category exemptions Alternative roads Improved public transport options Many different charging methods Targeted revenue redistribution The VUW-GEN Public Finance Debates November 12, 2013

Alternatives Government – cost of capital lower Development Funds Small additional time bound progressive tax Other taxes – CGT, land tax If low public benefit then don’t do it Other drivers – housing, environment, climate change, density vs sprawl The VUW-GEN Public Finance Debates November 12, 2013

Congestion Options Exclusive lanes for public transport Real time public transport lanes Parking restrictions More public transport Cycling, walking The VUW-GEN Public Finance Debates November 12, 2013

Conclusion Public economic development goods best to be publicly funded Equity issues and social exclusion Risks Other options available – funding and congestion If additional charging then use more equitable options The VUW-GEN Public Finance Debates November 12, 2013