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

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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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