Infrastructure Report: Simon Court: A practical prescription for progress

Britomart Station, Auckland. Photo / Michael Craig

This op-ed appeared in the NZ Herald’s Infrastructure Report. Read more views here.

OPINION

Our national infrastructure is falling behind. The last expansion of road capacity across the Auckland Harbour took place in 1969, only 10 years after the harbour bridge was first built. In 2017, the average water pipeline in New Zealand was more than 30 years old. That’s a story repeated across the country.

Unsurprisingly, our infrastructure is straining under the weight of population growth and improvements in living standards.

Congestion costs the New Zealand economy hundreds of millions of dollars a year. Plumbers who used to be able to do four jobs in a day can now only do three because they’re stuck on the Auckland Southern Motorway. Freight which used to take six hours to get from Lyttelton Port to Queenstown might now take seven. Across five million New Zealanders, these costs add up.

Similarly, our failure to deliver infrastructure is holding back housing growth.

Councils routinely cite the inability of water, roading, or public transport infrastructure to cope as a reason to decline resource consents.

The Government’s focus on mega-projects like Auckland Light Rail, Let’s Get Wellington Moving, the cancelled Auckland Harbour bike bridge, and now a future Waitematā Harbour crossing are almost random interventions in what should be multi-generational work programmes.

Simon Court. Photo / Supplied

Programmes that do have a sound basis for investment, like Road to Zero, get trapped in unrealistic timeframes imposed by political ambition, resulting in wholesale speed limit reductions at the expense of thoughtful designs incorporating barriers, guardrails and passing lanes at regular intervals.

Waka Kotahi NZ Transport Agency commissioned a report in 2020 that identified 40 extreme risks to the transport network, yet are only working on three.

If I was sitting on a business board and the executive produced a report showing 40 extreme risks, that would be the primary focus for the business. But not for Waka Kotahi or its minister.

Waka Kotahi does not invest in roads at the same rate as depreciation. This is reported on in the Waka Kotahi Annual Report each year.

Yet, the Minister of Transport has crowed about a record pipeline of transport infrastructure projects. Based on announcements, he may well be right.

However, it serves New Zealand poorly to announce projects which have little relationship to existing urban plans or that fail to make the most of existing networks — or, given this Government’s track record, are unlikely to be delivered.

Act believes that structural reform is clearly necessary to return discipline and efficiency to infrastructure delivery in New Zealand. Act would start by establishing a new independent state-owned enterprise, Highways New Zealand, which would own and operate New Zealand’s state highway network. It would also construct any new state highways and conduct maintenance and improvements on existing highways.

Act proposes user pricing be introduced into as much infrastructure as possible. In return, fuel taxes and the existing road-user charges will be abolished, as will taxpayer funding for operating expenses of the rail network. The fairest way to fund infrastructure is by charging those who use it. Such user charges also allow limited infrastructural capacity to be allocated to their most valuable uses. They also provide a valuable signal (and incentive) to the government and to private investors of where new capacity ought to be built.

Highways New Zealand would be expected to be operationally self-funding out of user fees, including delivering a return on invested capital to the government. It would be incentivised to deliver projects promptly and affordably because delays and cost overruns would harm underlying profitability and executive compensation.

Act would also reform the management of the rail network. Our expansion of the mixed-ownership model to KiwiRail would ensure that it was subject to proper commercial discipline, without running the risks posed by full privatisation. Naturally, KiwiRail would also be expected to provide a return on invested capital to the Crown and its minority shareholders. As part of this change, KiwiRail would be required to allow non-KiwiRail users to access the rail network on reasonable commercial terms, regulated by the Commerce Commission. KiwiRail would no longer enjoy a statutory monopoly overuse of the rail network for freight purposes.

Both Crown infrastructure companies (Highways New Zealand and KiwiRail) would be permitted to independently issue debt to fund new projects. These bonds would explicitly not be guaranteed by the Crown. Instead, they would be secured on underlying revenues from the projects funded by the issuance.

This commercial model would also allow for both Crown infrastructure companies to explore innovative financing structures. For instance, rail companies in Hong Kong and Japan fund significant portions of their capital costs by developing the land around and above their train stations. This not only creates a new funding source for infrastructure, it also generates new housing and retail space.

Our infrastructure reforms subject investment to real discipline and enable proper pricing. That will allow taxpayers to get more bang for their buck and for more funding to emerge through innovative financing mechanisms. It is a practical prescription for progress.

· Simon Court is the Act Party infrastructure spokesman