$600m hit to war chest: Agency fears public transport will cut budget

Attempts to get people to shift to public transport could hit Waka Kotahi's revenue. Photo / Supplied

Transport officials are worried that a green revolution could wipe hundreds of millions of dollars off their future budgets.

But it's buses and trains rather than electric cars that pose the biggest threat to the Government's $4 billion war chest for funding new transport projects, according to advice obtained by the Herald under the Official Information Act.

Each year, Waka Kotahi NZ Transport Agency rakes in about $4b a year, mainly from fuel taxes and road user charges.

That money is recycled into everything from maintaining existing roads to building new ones, investing in public transport infrastructure, subsidising public transport ticket costs, and road safety campaigns.

The agency has publicly fretted that this funding source is under threat as the transport system moves away from emissions-intensive fuels. It has successfully convinced Transport Minister Michael Wood that it needed an urgent review into the sustainability of the fuel tax system, despite previous policy advice saying revenue would be stable until the end of the decade.

Speculation has focused on the role of EVs, which currently freeride on the public transport system, paying no fuel taxes (because they use no fuel), and paying no road user charges, thanks to an exemption that will run until 2024.

The Waka Kotahi modelling that sparked Wood's review - released to the Herald under the Official Information Act - shows that it isn't EVs, but increased public transport use and cycling that really has Waka Kotahi spooked.

The modelling shows that under Waka Kotahi's regular baseline funding forecast it would expect revenue from fuel taxes to increase from more than $4.4b now to just over $6b by 2050. This scenario would see income from fuel taxes decrease slightly (implying many people would still be driving petrol cars in 2050), while income from road user charges roughly doubles over that time.

The modelling presented two other scenarios to show what would happen if scenarios presented by the Climate Change Commission came to pass, and large parts of the vehicle fleet were decarbonised.

Waka Kotahi thinks that even under these scenarios, about half a billion dollars in fuel tax revenue would still be booked in 2050, however, presuming EVs begin paying road user charges, nearly $4b in revenue would be coming from them in 2050.

The biggest scare comes from "Pathway Four" - a scenario modelled by the Ministry of Transport for its Hīkina te Kohupara green paper on decarbonising the transport sector.

Pathway Four assumes ministers succeed in getting people to shift transport modes away from private vehicle use towards public transport and cycling to reduce transport emissions by 47 per cent of 2018 levels by 2035. It also assumes people avoid using high-emissions transport in general.

Succeeding would require reducing people to travel 40 per cent fewer kilometres by car by 2035 and over 55 per cent by 2050.

This comes at a massive cost to the land transport budget, which would fall from $4.4b now, to about $3.8b by the end of the decade - a $600m gap.

That drop in revenue would be keenly felt by the agency, which would have to grapple with massive infrastructure cost inflation and rising public transport subsidy costs over the next decade.

An example of increasing spending over the next decade can be found in the Government's directions to Waka Kotahi, which say it should spend between $390m and $600m on public transport subsidies this year, rising to $490m-$1b by 2030 - a cost increase which would be difficult to fund with reduced revenues.

Waka Kotahi modelling shows revenue declining because of public transport use. Photo / Waka Kotahi

Critics from the left argue that Waka Kotahi has an inbuilt bias towards roads, for the way it induces more road use: more roading means more driving, which translates to more fuel taxes and road user charges.

By contrast, more public transport uptake means less revenue from road charges and higher expenses in the form of subsidies.

The Green Party's transport spokesman Ricardo Menéndez March warned of the "perverse incentive" fuel taxes create for Waka Kotahi as it sets about trying to decarbonise the transport system.

"For years governments have underinvested in accessible public transport, safe cycleways and walking paths.

"Instead they have relied on revenue from policies like Fuel Excise Duty and road user charging to fund transport infrastructure.

"This approach has created perverse incentive for Waka Kotahi to prioritise policies that keep us in our cars. You can see that in the narrow way they are looking at what reducing pollution means for their income," he said.

In a select committee hearing with Waka Kotahi last month, March asked Waka Kotahi chief executive Nicole Rosie whether she and the agency considered revenue loss when it came to funding projects.

Rosi said the agency did not consider revenue drops when funding projects. Instead, she said the agency was directed by the Government's priorities.

If the Government's plan to shift people to public transport is successful, revenue will drop off quite steeply. Photo / Waka Kotahi

Transport Minister Michael Wood denied there's a conflict and said he's awaiting the outcome of the funding review.

"I don't think there's a conflict of interest and I certainly trust Waka Kotahi with that important role," Wood said.

"Waka Kotahi take their riding instructions from the Government Policy Statement on Transport and there's clear direction there that we need a multi-modal system and good support for public transport, walking and cycling," Wood said.

"You are right in identifying the revenue pressures that are there - that's why we have work that is under way now in terms of the future of the land transport revenue system to ensure we fund it properly as we decarbonise the system."

Criticism of Waka Kotahi isn't just coming from public transport users who feel underserved: freight and logistics users feel frustrated too.

They argue that the increase in public transport subsidies funded by this government has transferred funding generated from their expensive road user charges, to public transport, at the expense of funding improvements to roads.

Ia Ara Aotearoa Transporting New Zealand (formerly the Road Transport Forum) chief executive Nick Leggett said that his organisation was "always concerned when we see information about a reduction in funding for roads".

"The cost of maintaining roads has increased 30 per cent in the past five years. With no signal of any increase in budget, and possibly even less money available in the future, this is more bad news for people who think maintaining roads is a job for government.

"And that's before we even start on new road projects, which seem to be on hold," he said.

He said that his members, road freight transport operators, contributed heavily to the National Land Transport Fund via RUC, but were beginning to see less and less benefit from their contributions.

"Of the $4.43b total revenue, RUC paid was $1.94b, or 44 per cent, the bulk of that from heavy vehicle RUC," he said.