Going down the wrong road

Last updated 05:00 21/11/2010
On the road again in Auckland. Below, Transport Minister Steven Joyce.

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THE GOVERNMENT told owners of 55 properties last week that their homes or other buildings could be bulldozed to make way for its $1.65 billion Puhoi to Wellsford motorway. It was a tragedy for the owners.

OPINION: But what if the motorway was also a tragedy for 1.4 million Aucklanders?

It could well be. The motorway will significantly distort development patterns, thereby blighting the region. It will help push urban development out to 85km north of Auckland's CBD over coming decades.

This will exacerbate Auckland's weakness as a sprawling city, with dire economic consequences. Worldwide evidence shows lower density means higher infrastructure costs, favouring private over public transport and a weaker network effect. People living and working closely together generate greater wealth than those spread out.

In fact, the government knew last year the motorway was uneconomic, according to the cost/benefit analysis done for it. Likewise, the Waikato Expressway and Wellington to Levin motorway were uneconomic under conventional analysis.

That was very embarrassing for the government. After all, the three projects account for almost half of its $11b, 10-year Roads of National Significance programme. And the analysis showed speeding up the projects, which the government promises, would reduce the benefits.

These were political problems it created for itself. It announced the seven roads in March 2009, nine months before it received the economic analysis. It didn't like the analysis, so spent another seven months getting the answers it wanted, according to documents coming to light.

Transport Minister Steven Joyce is proud of the government's work ethic. "No work had been done on this project prior to it being confirmed as a road of national significance last year so this is great progress," he said last week when announcing the route for the first stage from Puhoi.

The government got its unwelcome news about its uneconomic road projects in the work it commissioned from SAHA, an Australian-based consultancy. SAHA's December 2009 report, billed as its final one, showed the conventional cost/benefit ratio of the Puhoi to Wellsford project was 0.4, meaning for every $1 invested the return was 40c; the Waikato Expressway's was 0.5 and the Wellington Northern Corridor 0.9.

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These were very poor results, even by this conventional form of analysis which is notorious for underestimating costs (for example, the cost of owning and operating a vehicle on the roads is not included, neither is adequate analysis of the impact of rising fuel costs on road use); and the benefits are overstated (for example, vehicle emissions are deemed to fall thanks to free-flowing traffic, apparently delivering a saving in greenhouse gases versus vehicles stuck in traffic jams).

Moreover the analysis is very weak in its handling of induced growth – new roads create more demand so over time traffic slows, costs rise and benefits fall.

In total the ratio for the seven RoNS projects was 1.9 under the conventional analysis, thanks to the Victoria Park Tunnel and Waterview Connection in Auckland substantially bumping up the overall value. But under the accelerated programme the government is pushing, it fell to 1.5.

SAHA's report, though, went beyond the conventional. It also drew on two other pieces of analysis commissioned by the government from Richard Paling Consulting and Infometrics. The Paling work attempted to measure the wide economic benefits (WEBs) of the roads from factors such as the investment and jobs they might trigger along their routes. This is new methodology internationally which is, as the SAHA report noted, subject to much debate about how to do it and use it.

Paling estimated the WEBs would lift conventional benefits by 65% in 2016, or by 40% discounted to net present value. By contrast, Infrastructure Australia says its WEBs are typically in the 20-30% range and it advises against adding WEBs on top of conventional ratios because there may be double counting.

Infometrics used a different methodology to try to measure the same wider economic benefits, coming up with a very wide range from none to high in different scenarios.

The WEB analysis, stacked on top of the conventional analysis against the warning of Infrastructure Australia and others, pushed the cost/benefit ratio up to 2.6 for the seven roads in total; Infometrics' work ranged from no change over the base of 1.9 up to 3.8 combined.

Moreover, on every method of analysis the accelerated programme of road building pushed by the government suffered a decline in benefit compared with a longer build time. No surprise it never published the report. When the Green Party finally got hold of it through the Official Information Act it came attached with the warning no contents could be disseminated without the explicit permission of the government. Handily for this columnist, however, the government screwed up. Earlier, it had given a copy to a group fighting the Wellington Northern Corridor. A copy of that is one of the documents used for this article.

Finally in July the government published a revised version of the SAHA report. It says it and its consultants had refined their earlier work. Indeed. The conventional cost/benefit ratio for the accelerated build was now-level pegging with the longer timetable. Only on one measure that used the additional benefits analysis was it marginally ahead; three others were the same.

This means the government will add to its medium-term borrowing to fund the accelerated building without delivering any increased benefit. No wonder the prime minister has made a few off-the-cuff remarks in public that Finance and Infrastructure Minister Bill English isn't as enthusiastic about the roads as some of his cabinet colleagues.

Moreover, the July version of the report removes or buries deep in its text many of the caveats about the analysis of WEBs; and it grossly misrepresents the analysis, contrary to the practices of Infrastructure Australia, by stacking it on top of the conventional analysis in tables and charts.

And, of course, the July version was purged of the detailed analysis of individual projects that made the final report in December such interesting reading.

Even so, the revised ratio for the seven roads has fallen on three measures, is static on one and has risen slightly on a fifth on the base case which was massaged much less than the accelerated build scenario.

Thus, it is possible the cost/benefit ratio for the Puhoi-Wellsford, Waikato and Wellington roads might have actually fallen in the revised analysis.

Cynics will say get over it. Governments cook the books all the time.

Actually, it matters hugely. Auckland, Wellington and Christchurch are trying to cope with growth. They have just elected mayors and councils who believe some of the solutions are more public transport and more compact urban forms.

In contrast, the government has said bluntly it believes the opposite is true. It sees the future as a continuation of the past – more roads, more sprawl. And it is investing $11b to deliver that, not only straining government finances to do so, particularly between 2013 and 2018, but also grabbing funding from local roads and other forms of transport and skewing the analysis against them.

Thanks to the Waikato Expressway and Puhoi to Wellsford motorway, urban and peri-urban Auckland will spread 150km from north to south in coming decades. Yet, there is no room to build any more roads through the Auckland isthmus. Thus the region has to have more public transport, particularly rail. But lower density induced by $3b of uneconomic road building makes the case for it even harder.

The only solution is for the government to come clean, park its road prejudice and sit down with our three biggest cities to discuss how we can do urban development much better. If it doesn't, our shambling cities will be to the Key government what Think Big was to Muldoon's.

- Sunday Star Times

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