Councils throughout the country are challenging the economic value of building more state highways at the expense of other transport needs, including local roads.

Local Government NZ - representing the country's 82 local and regional councils - says a significant shift of money to highway construction "is not justified and may have perverse outcomes".

It warns in a submission on a draft three-yearly Government transport policy statement that diverting extra money to new highways will not provide short-term economic stimulus under planning and contracting procedures.

"A better spread of economic stimulus, economic efficiency and productivity gains could be achieved by spreading investment across activities," the organisation says.

Suitable candidates would be "ready to go" local roading projects as opposed to highways with long lead times, although it says pressure to limit property rate rises could make it difficult for councils to respond without extra subsidy support from the Government.

The submission is a response to Transport Minister Steven Joyce's decision to alter a policy statement issued in August by the previous Labour-led Government, and to pump $961 million more money over three years into new highways such as a northbound motorway tunnel under Victoria Park in Auckland.

But despite Local Government's concern about long preparation times for highways, the $430 million tunnel and associated motorway widening project through St Marys Bay have the advantage of being fully consented under the Resource Management Act for an accelerated construction start in January.

Although Mr Joyce has persuaded his ministerial colleagues to allocate $258 million of new capital funding to state highways, and to raise $283 million from national fuel tax rises from October, the remaining $420 million is to be diverted from other land transport fund categories such as public transport, walking and cycling.

His main reasons for readjusting the policy statement is to reflect the Government's priority of investing in transport infrastructure to achieve economic growth, and to reflect transport choices that are already "realistically available".

Mr Joyce has also promised that the Government will pay for Auckland's rail electrification project, after scrapping a regional fuel tax which was to have covered a local half-share and $202 million of spending on other public transport projects including railway stations and the $80 million-plus development of a new electronic ticket.

The Local Government submission says that although it supports the rationale for ditching the tax, given that it would have been inefficient to administer, it is concerned the principle of regional self-determination underpinning it is not recognised.

It says a disproportionate share of funding has gravitated to state highways, given that the Government foots the full bill for these while requiring local and regional councils to share the costs of other transport infrastructure.

The Government's draft policy forecasts spending of between $9.1 billion and $12.2 billion on state highway construction over 10 years - more than four times its proposed subsidies for building new local roads.

Yet the submission notes that half of vehicle kilometres travelled are on local roads, meaning 50 per cent of fuel taxes paid to the national land transport fund are generated from them.

"The sector has long held the view that this is iniquitous, and further disproportionate investment in state highways is not supported," it says.

Auckland City says in a submission on the policy statement that although it welcomes extra transport investment, especially in difficult economic times, continued high investment in public transport and travel "demand management" is needed to achieve maximum economic growth.

It fears the withdrawal of the regional tax will leave too high a burden for ratepayers for the integrated ticketing project and other public transport contracts.

Although Mr Joyce is basing his reallocation decision on a desire to cater for the large majority who drive to work rather than catch buses or trains, or walk or cycle, both the city and Auckland Regional Council point to a need to provide high quality public transport to encourage them to switch.

A regional council submission says transport users need greater choice, to cope better with fuel price shocks.

North Shore City's representative on the Auckland Regional Transport Committee, Chris Darby, warns of suburban sprawl from Hamilton to Wellsford.

"The path to becoming a world-class city won't be found trumpeting outdated 1950s-style highway development," he says in a briefing paper.

* Moving on up

The Government plans to spend $2.75 billion in 2009-10 from the national land transport fund, into which all fuel taxes are paid, on roads and other transport - except for rail capital projects, which are bankrolled separately through the Treasury.

It expects to increase spending in successive years, rising to $3.75 billion in 2018-19.

The expected ranges of spending over the 10 years include:

State highways (fully Government funded):

Construction - $9.15 billion to $12.2 billion.

Maintenance and renewals - $4.7 billion to $6.5 billion.

Local roads (Government subsidies covering about half the cost to city and district councils).

Construction - $1.8 billion to $2.8 billion.

Maintenance and renewals - $5.1 billion to $6.1 billion.

Public transport (Government subsidies covering about half the cost to regional councils).

Operations - $2.4 billion to $2.7 billion.

New infrastructure - $220 million to $740 million.

Walking and cycling facilities (Government half share): $108 million to $279 million.