Simeon Brown works to make transport system less sustainable

By 0 Comment

Two pieces of news this week makes you wonder about the suitability of Simeon Brown for the position of Transport Minister.

First of all together with Christopher Luxon he announced the ending of Auckland’s Regional Fuel Tax.

It is clear there have been intensive discussions behind the scenes as Auckland officials attempted to persuade the Government that cancelling the tax would leave a rather large hole in the Council’s transport spend, about $1.2 billion to be precise.  But the representations have had no effect.  The Government could have delayed until it had an alternative funding system in place but chose not to.

Brown’s justification was that the money was being used on cycle lanes, red light cameras, speed humps, and lowering speed limits across the city. He clearly has a deep distaste of cycleways. This is a shame because if we are going to meet the country’s climate goals cycleways have a major role to play.

The history of the fuel tax is important as are the reasons for it being implemented. It arose because the Auckland Transport Alignment Project, started by National in 2016, had a rather large unfunded hole in it. ATAP was designed to address congestion, which at the time was getting out of control.

As I said previously there was an initially estimated $4 billion shortfall that ballooned by a further $1.9 billion in 2017.  About a fifth of the projects were not funded.  This is as sure fire a way of creating a transport crisis as you can imagine.

So the last Labour Government introduced the ability for Auckland Council to raise a fuel tax.  At the level that has been agreed to about $1.5 billion would have been raised over ten years.  With the help of NZTA subsidies and other funding mechanisms this would have filled in the funding gap. It also revised ATAP and in 2018 made an announcement that the following projects would be funded and constructed:

  • $8.1 billion in operational costs (especially more for public transport subsidy as more people take public transport)
  • $3.3 billion in asset renewals
  • $8.4 billion in rapid transit, which covers busways, rapid rail, and light rail
  • $3.8 billion on strategic and local roads
  • $1.3 billion on roads etc for green fields areas
  • $ 0.9 billion safety improvements, targeting a 50% reduction in death and injury
  • $ 0.9 billion walking and cycling
  • $ 0.7 billion bus and ferry improvements
  • $ 0.7 billion network optimization

As you can see cycleways and speed humps were very small parts of the program.

Brown was concerned that the Council had large amounts of money unspent sitting in a bank account. Although it is correct that $350 million will shortly be held in reserve this amount was fully committed to complete stage three of the Eastern Busway, important for Brown’s Pakuranga electorate, and to fund the purchase of electric rail units for the City Rail Link. You do not sign up to a significant construction project without the funds being held in reserve. This is like someone engaging in a major renovation of their home and hoping to fund the costs through income. Unless you have plenty to spare, which Auckland does not, then of course you have funds held in reserve.

Mayor Wayne Brown has said:

The money set aside has been fully allocated to projects that are under construction. It just isn’t spent until contractual milestones are met. That’s standard practice when you’re building something,” Mayor Brown says.

Auckland Council will have no choice but to pause any further work on projects funded by the RFT, including those already contracted, to see how we can fund them in the Long-term Plan.”

The projects facing cancellation include improvements to major roads such as Glenvar Road and Lake Road, as well as the fourth and final stage of the Eastern Busway and work to progress the proposed Airport-Botany Busway. The Mayor has indicated these could be cancelled permanently. Again from the Mayor’spress release:

I remain determined to keep rates under control and I’m simply not prepared to pass the cost of these projects on to struggling Auckland households. I’ve already proposed to cut spending on cycleways by $141.5 million and raised pedestrian crossings by $80 million.  I’m quite happy to talk with the government about what else we can cut.”

But this is a problem that can’t be solved just by making cuts. Every Aucklander agrees that our transport system is a mess and it’s going to cost a lot of money to fix. That money must come from somewhere. Unfortunately, the Government has just made it a lot harder for us”.

In my view the decision is deeply undemocratic and very disrespectful. Imagine trying to dictate to the city that comprises a third of the country’s population what sort of transport system it has.

Simeon Brown is working on a new Government Policy Statement on Land Transport and is promising to concentrate efforts on economic benefits and value for money. He is talking about a new East West link which brings up memories of the previous proposal which National was keen about but which was horrendously expensive. If he was interested in the economics he would pursue more incremental changes to the existing road which would provide greater economic benefits. Per kilometer this particular road was said to be potentially the most expensive road in the world. Brown has this rather myopic view that cycleways should prove themselves economically but not roads of National significance.

And unfortunately as pointed out in this Newsroom article addressing climate change does not appear to be part of his thinking.

Simeon Brown has interfered in other climate friendly policies. His axing of the clean car discount saw the sale of electric cars plummet. Previously one in four new cars entering the fleet were electric, one month after the change in policy the figure is now one in 26.

And the pending introduction of RUC for electric vehicles has seen a further startling statistic appear. It will soon be more far more expensive for an electric car to use the road that it will be for a petrol fuelled car.

From Thomas Coughlan at the Herald:

[I]n what looks like a bad April Fool’s joke, the Green Party has discovered drivers of EVs and plug-in hybrids will be paying more to use the road than people driving fossil fuel cars.

Someone driving a battery EV on a return trip between Wellington and Auckland (presumably with lots of charging stops) will pay $98.80 in RUC and a driver of a plug-in hybrid Toyota Prius would pay $94.78, comprised of $72.80 in RUC and $21.98 in petrol taxes.

These figures are more than double what a driver of a Toyota Prius, non-plug-in conventional hybrid would pay for that journey, which would be just $42.92 in petrol taxes.

More roads, less spent on public transport and walking and cycling and fewer electric vehicles. These are not the steps a responsible Government takes during a climate crisis.

Tree protection for urban trees to be restored

By 0 Comment

Tree protection is an issue that I have followed rather intently for the past few decades. Living nestled in Te Wao Nui a Tiriwa in Titirangi’s magnificent but slip prone hills has made me appreciate the importance of trees.

And it is not only to stability that trees contribute. They provide artistic inspiration, a home for flora and fauna and a sense of tranquility that cannot be matched by artificial means. And in these times of global warming they are sequesters of carbon. Their contribution to a stable climate cannot be underestimated.

The previous National Government did not see things this way and had a couple of attempts to rewrite the law so that protection for trees was lessened. The changes provided that District Plans could no longer have tree protection rules applying to urban properties unless the tree or group of trees were specifically identified in the plan. The result was that an increasing number of significant urban trees have been felled over the past decade.

Previously Waitakere Council had rules that protected classes of trees, for instance coastal pohutukawa or Kauri over the height of 2 metres. After the change trees were in the remarkable situation that they were the only things that could not be protected by general district plan rules.

The justification was that the rules provided too much red tape for homeowners and they should be allowed to do what they want.

There was some litigation about the changes. Auckland Council managed to get a ruling that protection provided by significant ecological areas, part of the regional policy statement for Auckland remained.

National replied by having a second attempt at making changes.

When the second bill was being considered I went to the select committee hearing. I posted earlier about the experience when I said this:

On behalf of the Waitakere Ranges Local Board I went to the select committee and made submissions.  I pointed out that trees were wonderful things, they were integral to the amenity of Titirangi and they were vital for maintaining stability in an area that is stability sensitive.  I suggested that the existing subdivision pattern in the area was predicated on current tree and bush coverage remaining.  We fell trees in Titirangi at our or our neighbour’s peril.

I also pointed out that the proposed protection mechanism, the scheduling of trees, would be cumbersome and excessively bureaucratic. A recent scheduling exercise, plan change 41, had protected 188 trees but only after 4 days of hearing, and the hearing and reading of 94 submissions as well as the arboreal examination of each of the trees. My very rough estimate is that there are approximately 1,500 affected sections in Titirangi and Laingholm, and that the average number of trees per section is 100. To protect each tree would require 150,000 arboreal examinations and on a pro rata basis 3,000 hearing days. I described the scheduling system for protection as “hopelessly unfit for purpose”. There has to be a better way to protect Titirangi’s trees.

Labour MPs on the committee said this about the changes:

Labour contends that the bill will atomise the protection of trees in the urban environment, and ignores the collective and community significance of trees and groups of trees in that environment. We support the general tree protection rules which existed previously. There is a legitimate and important case for protecting trees for wider community benefit and not simply defending the right of an individual property owner to fell any tree on their property.”

With the change of Government there has been a change of thinking. David Parker’s rewriting of Resource Management law has given the Government an opportunity to reconsider the existing law.

The Natural and Built Environment Bill, part of the legislation replacing the RMA, contained an initial proposal to modify the existing restrictions rather than remove them.

The Government proposed a complicated arrangement whereby a level of tree protection could be returned by way of a National Policy Framework declaration. This would however make the level of protection of trees subject to Ministerial whim. A change of Government and an unsympathetic Minister could see the problem return.

There was a second issue. The proposed general limitation in the original bill could conceivably affect all trees including those in significant ecological areas which are currently protected.

The local board made submissions on the latest bill.

We suggested allowing Councils general power to set their own tree protection rules provides the best solution. This could be augmented by minimum standards set out in the National Policy Framework but Councils should be allowed to set local minimum standards of protection.

Our proposal was to go back to the previous system and delete the restrictions on Councils being able to include blanket tree protection rules.

After events earlier this year the benefit of trees has never been clearer. They assist with stability and water retention, two features that are really important as this year’s events have shown. Without the area’s tree cover things would have been dramatically worse.

I am pleased to advise that in the latest version of the bill, which is going through committee stages right now, the restrictions on tree protection rules have been removed. As noted by the select committee:

Clause 125 would restrict the ability for plans to contain rules relating to tree protection. It would require that trees can only be protected in a plan if the tree, or group of trees, is described and located by site.

We recommend deleting clause 125. We think that trees should be managed through plans, with the [National Policy Framework] providing direction as required. We have recommended amending clause 58 to require the NPF to provide direction on protecting urban trees.

The Government is clearly intent on passing the bill within the next couple of weeks and this would be good news.

But there are a couple of problems. A change of Government would I suspect see National and Act try to reverse this aspect of the bill very quickly. They are indifferent to the immense value of trees and supportive of some extreme view of individual rights that would see us all suffer.

And Unitary Plan changes in Auckland will be required and this could take time. And there could be a stampede of urban trees being felled as any protection approaches.

But the good news is that the laws of New Zealand are in the process of being amended to provide better protection of urban trees. So they can continue to perform their important roles of stabilising slopes, providing shelter for native fauna, and providing amenity.

And sequestering carbon.

Why selling Auckland Port Operations is a particularly silly thing to do

By 1 Comment

It is a given that the right in power want to sell public assets off and the left want to retain those assets. And it appears that the right’s eyes are on Ports of Auckland.

Mayor Wayne Brown is clearly a fan of privatisation. He recently managed to get a majority of Auckland Councillors to agree to the sale of a significant number of the Council’s Auckland International Airport’s shares. I thought that the justification for the sale was wanting and that the decision would cost the City a significant amount in the long term.

The vote was close. Three progressive Councillors decided for various reasons to support the sale. If they had changed their vote the result would have been different.

Fresh from his success the Mayor has raised the possibility of the privatisation of Ports of Auckland’s operations.

From Finn Blackwell at Radio New Zealand:

Just two weeks after [Mayor Wayne] Brown won a contentious vote for the partial sale of the council’s shareholding in Auckland Airport, he has floated the idea of selling an operating lease for the port business and reclaiming some of the land for public use.

He said it would make the port more efficient but the union feared it could be a financial disaster.

Ports of Auckland operates as an independent business, working off port land owned by the council, to which it also pays dividends.

Brown has always been highly critical of the port’s performance saying it is inefficient and has wasted hundreds of millions of dollars on a botched automation project.

Now, he has been looking into what leasing its operations and freeing up land could mean for the city.

Maritime Union Secretary Craig Harrison thinks that any privatisation will be a lose-lose situation for ratepayers, workers, and businesses.

From Bernard Orsman at the Herald:

Responding to plans by Auckland Mayor Wayne Brown to clear the way for a possible sale of the port’s operating business, union general secretary Craig Harrison said relinquishing control of the strategic asset would be a “lose-lose situation” for ratepayers, workers, and businesses.

“The Australian experience is privatisation of port operations creates another layer of management costs and profit-taking for no real benefits,” said Harrison, whose union represents most of the workers at the port. …

“The risks of going down this path are massive, and the only beneficiaries in the long term would be the new owners.”

He said the “one-off sugar hit” of privatisation would soon wear off if the port was permitted to effectively become a private monopoly.

“Splitting off leased port operations from land ownership does not change the fact the ports would be privatised and the new owner would have huge leverage over Auckland,” Harrison said.

Mayoral adviser Matthew Hooton has for some time advocated for the closure of the ports. His analysis displays a simplistic right wing laissez faire approach to the issue. Essentially the ports land is worth $X, the City only received $Y in value and it should receive $Z. Therefore it is failing and should be handed over to private enterprise to sort out and increase profitability.

But his analysis ignores the fact that the Port is a transport hub and a transport asset. As a hub it assists all sorts of economic activities to happen. Exporters find that their ability to send their goods overseas is cheaper because there is a local conduit. Importers enjoy the extra ability to get large volumes of goods landed and into their warehouses quickly. If the Port only broke even then it would still be generating a significant public good. Currently we do not charge for using roads realising that they provide an important service. I do not understand why Ports should be treated differently.

The second problem is that his proposal ignores the implications for Auckland’s transport system of closing the port. If you adopt a blinkered money only analysis of Auckland’s port then its closure can be justified. But Auckland City needs to think about the big picture. Imagine up to 663,000 extra container movements by truck from Tauranga or Whangarei into the greater Auckland area each year. POAL is in the centre of the most intensely developed urban area in the country. Of course it has an important role and should continue.

Improvements are possible and in particular more freight should be able to be transported once the third rail line on the Southern line is complete.

If the Mayor’s goal is to facilitate the conversion of Port land to other uses then handing operations over to a private entity is the last thing that he should be doing.

And private Corporations do not act in the public good. They are there to maximise profit. Giving them control of an entity with monopoly control of the downtown wharves is giving them a licence to print money to the detriment of the city as a whole.

Councillor Mike Lee has been involved in issues concerning the port since the 1990s. He has provided this fascinating insight into what happened the last time that an attempt to privatise the Ports occurred. The then National Government pressured the Auckland Regional Council to sell its 80% shareholding in the Ports. After Bruce Jesson, Mike Lee and others managed to stop the sale process that had been started the Government then imposed structural reforms designed to ease the sale of public assets but were thwarted when the Alliance managed to capture control of the new entity.

As Mike said:

To the consternation of the political establishment a viable alternative to privatisation had been created – holding on to public assets – and managing them to create public wealth in the public interest. “Economic Jessonism” – perhaps we might call it. This completely flew in the face on neo liberal conventional wisdom. I have absolutely no doubt that the remarkable success of the ARST between 1992 and 1995 was to have an important influence on the Labour-led government some ten years later.

Since that time the profits from the Port and other regional assets have been a key funder of Auckland transport and storm water projects – and are now virtually taken for granted in Auckland. It is hard to imagine how we could have embarked on the recent transport and other infrastructure upgrades without it.

How this issue plays out will be a real challenge not only to the Mayor but to all Councillors.

And if it succeeds it will make the long term development of the harbour more difficult and I am certain that it will increase costs to local businesses and consumers and threaten the working conditions of Maritime Union members.

Auckland Council’s finances – there is no crisis

By 10 Comments

At the risk of being described as financially illiterate I thought I would revise my earlier post and set out why I think Auckland Council selling its airport shares is a particularly silly thing to do and why Council’s finances are not in a status of crisis.

There has been a lot of talk suggesting that the Council is in a financial crisis. Debt is apparently out of control and there is a “massive” deficit that needs to be resolved.

I don’t share that level of concern. The figures are large but so is Council’s overall asset base.

The last Annual Report indicated that assets were $70.4 billion and borrowings were $11.4 billion.

This is like a household having a million dollar house and a $162,000 mortgage.

And the debt to revenue ratio, as shown by this graph, is within Council’s usual expectations. During Covid Council decided to allow debt to go up to 290% of revenue. It less than 250% currently. Using my earlier household analogy this is like a family having a million dollar house, a mortgage of $162,000 and income of $65,000 per year.

So do we actually need to sell the shares?

In my view there are a number of reasons why we should not.

Historically the shares have performed well. Apart from the Covid period they have consistently provided dividend revenue and they have also appreciated considerably in value since the beginning of Super City as this graph shows.

They dipped during Covid but since the lockdowns have ended the shares are moving up in price. Following is a graph showing the share price over the past 12 months. As can be seen their value has significantly increased over the past six months. The 200 day moving average trend (grey line) is strongly positive. Given their historical performance and their recent performance now may not be a good time to sell.

For an entity that has not paid a dividend for a couple of years AIAL’s share price is surprisingly resilient. And I would have thought that the prospect of 18% of a public company’s shares hitting the market would cause nervousness. But the price is clearly trending upward.

Repeating the household example this is like a family having a million dollar house, a mortgage of $162,000, income of $65,000 per year and Kiwisaver worth $31,800. Except you get about $650 a year paid into your bank account as well as the capital gains.

And the income from the dividends is expected to increase significantly in the next few years. This graphic from a Council shows the analysis which backs the claim that the sale is the appropriate thing to do.

There are two things to note about the analysis. First of all the anticipated interest cost savings are static, despite interest rates being predicted to drop significantly in the next few years. This graphic from the recent Government budget shows by how much.

I appreciate that Council’s finances are complex and that the use of derivatives smooths Council’s interest rate out but to not allow for a reasonably significant reduction in the interest saved by applying any share sale proceeds to debt over time appears to me to be wrong.

And on the income side there is a healthy increase in dividend income until 2028 when the anticipated income flattens. This graph shows Council’s projected increase and what would happen if the gains for the first four years were extrapolated out.

I understand this is because staff anticipated that following 2028 increases would match the rate of inflation. With respect this is very cautious.

The graph indicates that there is a short term benefit in selling the shares and paying down debt. But after a few years of anticipated dividend growth Auckland Council and the region will be all the poorer for any decision to sell.

And it raises into question the Mayor’s rhetoric where he says that selling the shares will save the Council $100 million each year in interest costs. The net figure in year one is $58 million and it then keeps going down, even on Council’s figures.

One other figure, currently Council spends about 10% of its income on interest payments. Given Auckland’s growth and the need to provide infrastructure using borrowing to achieve this is not unusual.

There were other interesting aspects to the Mayor’s budget. He announced further funding for bus driver salaries to move their salaries to $30 per hour. Interestingly this matched the proposal made by Central Government in the recent budget. I wonder who is actually funding it?

He also wants to reduce the Natural Environment Targeted Rate. Given the environmental challenges facing the city in my view now is not the time to do this.

If I had control of the Council’s finances I would accept the Mayor’s proposed savings of $70 million, pump up the increase in rates to 10% to realise a further $110 million and borrow the balance of $145 million. The debt to income ratio would increase to just over 250% but would still be within currently allowed parameters.

And Council does not have to balance the books. Sudden shocks such as two one in five hundred year storms within a week of each other can justify more radical steps being taken.

Selling the shares will in the long term undermine the city’s ability to develop and maintain its assets. Big corporations are lining up to purchase the shares because they realise that in the long term they are a good buy.

I trust that Council will do the right thing this week and keep the shares. And I wish that the decision making process adopted was more conciliatory and less confrontational.

The renaming of Ceramco Park to Ōkaurirahi

By 0 Comment

The local board recently had a formal ceremony to acknowledge the change of name for Ceramco Park.

As part of the Te Kete Rukuruku process Te Kawerau a Maki has gifted to the Local board Te Reo place names for a number of local parks.

All of the names are magnificent and I can recall clearly the excitement I felt when the names and the reason for the names were introduced to us.

The name for Ceramco Park is Ōkaurirahi.

It is a name that provides a perfect description of the area in its previous form.  It is something for us to reflect on. This is important to our community and for the local board, and as I said at the ceremony it is an honour to be playing a part in restoring mana to the land and to the community.

I believe the process is important.

Out west we have a smattering of Maori place names and Pakeha names.

To be frank the Pakeha names lack the beauty and the relevance of the Te Reo names.

The Maori names are beautiful and eloquent and descriptive. Just think of these names:

  • Titirangi – fringe of heaven
  • Karekare – rough sea
  • Piha – a reference to what we know as Lion Rock
  • Whatipu – the name of an ancient taniwha

And to this list we can add Ōkaurirahi – the place of the huge Kauri.  This is a traditional Maori name and it is great to see it being restored to this area.

This is an important process.  Te Reo Maori and Te Ao Maori are integral and unique to Aotearoa New Zealand.  They are beautiful and they need to be preserved and enhanced.

If you want official justification for this in 1986 the Waitangi Tribunal said this when it considered the Te Reo claim:

Some New Zealanders may say that the loss of Maori language is unimportant. The claimants in reply have reminded us that the Maori culture is a part of the heritage of New Zealand and that the Maori language is at the heart of that culture. If the language dies the culture will die, and something quite unique will have been lost to the world.”

That rationale is one of the reasons I believe that making the use of Te Reo part of every day life is so important.

This is one of 19 Te Reo names that were gifted to the local board by Te Kawerau a Maki as part of tranche one of this process.  There are a further 20 names as part of tranche two.

The local board has unashamedly chosen to adopt sole Maori names for many of the parks throughout the Te Kete Rukuruku process.  We believe that proper respect to Te Ao Maori is shown by giving the Te Reo name primacy.

I took the opportunity to thank Te Kawerau a Maki again for this gift and also for their contribution out west, particularly to the protection of Te Wao Nui a Tiriwa, the great forest of Tiriwai in the Waitakere Ranges.

We share a common belief that the ranges need to be protected and enhanced and I expressed the desire that this term Council advances the Deed of Acknowledgement anticipated by the Waitakere Ranges Heritage Area Act.