A new Super City transport agency will have responsibility for roading as well as buses, rail and ferries in the Auckland region.
Transport Minister Steven Joyce said the Auckland Transport Agency (ATA) would take over the transport roles of the eight councils in Auckland and the Auckland Regional Transport Authority under the Auckland Regional Council.
Mr Joyce said officials had identified up to $200 million of potential cost over-run in the $1.6 billion Auckland rail electrification project, which is still on the drawing board.
He said the Government was committed to the electrification projects but cost over-runs were not an option.
He rejected suggestions by Auckland Regional Council chairman Mike Lee that the Government might not honour its promise to pay for electrification, saying Mr Lee had a "lovely paranoia".
Mr Lee said Auckland commuters needed electric trains not another bureaucracy with a fancy name.
"We do not need more bureaucratic deck chair shuffling."
The ATA will be a significant division of the new Auckland Council, which will appoint its directors, who will include two city councillors.
Mr Joyce said the agency was "a really significant part" of the Super City Auckland Council.
"If we can get this relationship right between the council and the agency ... Auckland will achieve a lot, a lot more than it is now."
The ATA would control about $1 billion of spending, Mr Joyce said.
The Government and local authorities now spend about $1.5 billion on Auckland transport.
The capital cost of the electrification project - double tracking, the new trains and the electrification of lines - amounts to $1.6 billion and will spread over several years.
Mr Joyce said the Government was committed to the rail electrification project and providing the $500 million that the abolished regional fuel tax would have funded.
"There is no more than that.
"Mike Lee has this lovely paranoia that we are not going to come up with the electric trains and we are, but it will have to be done on a sensible basis and it will have to come within the cap of $500 million."