During 2013 the New Zealand Transport Agency (NZTA) is reviewing the local road funding system, the Funding Assistance Rate (FAR). This could have a significant impact on local roads' quality and the costs of district and city council rates.
The FAR is the percentage of the total cost of roading investment paid for by NZTA. It applies to the non-state highway, or local, portion of the roading network. The remainder is paid for by councils, usually through rates.
Given New Zealand's economic reliance on primary industry exports, poor roading investment decisions have serious implications.
Primary goods travel largely on the local road network to processors and ports. According to the NZTA, local and regional roads make up 88 per cent of New Zealand's total road length with 83,000km.
While roughly half the local roading network's costs come from NZTA, this is the average. Funding received by individual councils differs significantly.
For example, the base FAR for 2012/13, providing funding for maintenance, operation and renewal activities, contributes 88 per cent to roading costs on the Chatham Islands and 66 per cent for Kawerau District, but only 43 per cent to Auckland, Taupo and Tauranga and 44 per cent to Queenstown Lakes District's roads.
The key question for FAR's review is, does this represent a reasonable allocation of funding to the local roads in these areas? Federated Farmers thinks it falls short in two key ways. First is the key basis for the different FAR rates for each council, based on a territory's relative land value. Under this approach, districts with higher land values receive a lower FAR, on the presumption they can afford to cover the shortfall.
However, land value is not a good measure of a council's ability to pay.
More relevant factors could include the actual drivers for roading investment in each district, including the size of the local roading network, who uses the roads and the type of use, the type of roading, the contribution of roading to economic productivity and the number of residents.
The second way FAR fails is the contribution proportion it makes to local roads. The money allocated through FAR comes from road use revenue, fuel taxes, road user charges and licensing and registration fees. The Federation says these are better measures of road use and the relative benefits from roading than property value based rates.
Unfortunately, this latter concern will not be addressed in NZTA's FAR review.
It is a strategic, political decision outside NZTA's scope which the Government must address.