THE PUBLIC FINANCE DEBATES:

“It’s time…New Zealand extended charging for public

infrastructure”

Opponent:

Peter Conway

Key Points• Keep the ‘public’ dimension• Equity issues • Implementation Risks • Mitigation• Alternatives

The VUW-GEN Public Finance Debates November 12, 2013

Keep the ‘public’ dimension

• Infrastructure underpins economic, social and environmental development

• Relative benefits to individuals vary with single and multiple dimensions of infrastructure

• Charging undermines the rationale for ‘public infrastructure’

• High degree non-excludability, non-rivalry

The VUW-GEN Public Finance Debates November 12, 2013

Charging Options

• Tolls• Road pricing• Area charging• Cordon charging• Network charge• Toll lanes• Fuel taxes• High occupancy

vehicle lanes

• Road user charges• Parking charges• Rates• Targeted rates• Development

contributions• Carbon taxes

The VUW-GEN Public Finance Debates November 12, 2013

Equity• User pays implies consideration of

homogeneity of users• Vertical, horizontal…..context• Wealth and income inequality a major

issue• 63-77% earn less than ‘average’ wage• New Zealand’s household income

inequality is in the top third of the OECDThe VUW-GEN Public Finance Debates

November 12, 2013

Equity Concerns• High levels of vehicle ownership• Already hypothecated charges - fuel

excise, registration, licensing fees, road user charges

• Tolls regressive• Lead to social exclusion• Dispersion leads to less viability for

public transportThe VUW-GEN Public Finance Debates

November 12, 2013

Equity concerns…• Spatial mismatch – employment

centres/homes as commuter costs rise• Depends where ‘poor’ people live and

work relative to cordon• Net benefit to ‘wealthier’ drivers in one

case 27 times those from poorest quartile because of relative value of time

The VUW-GEN Public Finance Debates November 12, 2013

Risks• Geological• Finance• Use• Sunk costs• All suggest Government better placed to

cope with risk, spread across many assets and long period

The VUW-GEN Public Finance Debates November 12, 2013

Implementation Risks• Evidence of heroic assumptions

(BrisConnections) and ‘biased analysis’• Cross City Tunnel Sydney • Life cycle issues, implementation and

transaction costs • Risk transfer, subsidies, renegotiation

The VUW-GEN Public Finance Debates November 12, 2013

Northern Gateway• Built 10 years earlier because borrowed

$158 million based on anticipated toll revenue.

• Prices rises in March 2012 were described by NZTA as ‘regrettable”.

• Transaction costs and write offs.

The VUW-GEN Public Finance Debates November 12, 2013

Mitigation• Free quota, discounts, peak time only• Cars with 3 or more people exempt• Segmentation (community travel passes

as in community health cards), special category exemptions

• Alternative roads• Improved public transport options• Many different charging methods• Targeted revenue redistribution

The VUW-GEN Public Finance Debates November 12, 2013

Alternatives• Government – cost of capital lower• Development Funds • Small additional time bound progressive

tax • Other taxes – CGT, land tax• If low public benefit then don’t do it• Other drivers – housing, environment,

climate change, density vs sprawlThe VUW-GEN Public Finance Debates

November 12, 2013

Congestion Options• Exclusive lanes for public transport• Real time public transport lanes• Parking restrictions• More public transport• Cycling, walking

The VUW-GEN Public Finance Debates November 12, 2013

Conclusion• Public economic development goods

best to be publicly funded• Equity issues and social exclusion• Risks• Other options available – funding and

congestion• If additional charging then use more

equitable optionsThe VUW-GEN Public Finance Debates

November 12, 2013