Should New Zealanders Fund Rail and Road?

5-minute read

Is it time to radically change our thinking in terms of rail? Should we stop expecting a financial profit from the rail, and start to recognise its more strategic importance in our national transport infrastructure?

The prompt for asking these questions was the release of Treasury documents after the Budget, in which Finance Minister Bill English rejected advice to advance funding to KiwiRail for only a year, and instead committed to $210 million this financial year and $190 million in the next.

That, though is the only committed funding KiwiRail has, so the long-term future of rail remains a topic that needs decisions sooner rather than later. Therefore, we need to debate the way we can move forward, recognising the value of rail in a new light.

Ex-Railway Minister Richard Prebble has come up with a wider vision for the funding of rail, and also a more holistic role for the NZ Transport Agency. Prebble’s view is to regard both motorways and rail tracks as corridors for accessing our centres of population. However, rail has more opportunity to increase capacity.

He wrote in an editorial in the NZ Herald.

“If we cannot get new road corridors into our cities is there any other corridor? Yes, the rail. Is it possible to increase our use of the rail corridor? Yes. The only transport corridor that has spare capacity is the railway . . .

“KiwiRail is not ‘unsustainable’ but a national asset. KiwiRail owns corridors to all our ports and connects all our cities and most towns. We set up systems and then they blind us to the obvious.”

Mr Prebble argues that the State Owned Enterprise Act, which requires Kiwi Rail to be a profitable enterprise and the Road User Charges that makes our roads user-pay, has resulted in officials thinking in boxes. He admits to being one of the architects of the present system that gives him more right than most to see where it has failed.

He says: “To solve road congestion we need a more holistic approach. If there is no other way to reduce traffic congestion why not spend a fraction of the road taxes on the rail? Right now Auckland needs a freight track into the city.”

“Mayor [Len] Brown’s rapid urban passenger trains run on the same track as KiwiRail’s freight trains. Unless a third freight line is built then at peak times freight will be tyre forced off the rail onto the trucks.”

“We will have spent billions of dollars to take cars off the road only to have them replaced by more trucks. It makes sense to use Road User Charges to fund the third freight line to keep rail freight off the road.”

Mr Prebble’s vision is to make the NZ Transport Agency responsible for funding the rail network as well as looking after the country’s major roads.

He goes on: “To those who say rail is ‘unsustainable’ and having Road User Charges fund the track is ‘corporate welfare’. I ask what is your solution to reducing road congestion? You have not got one.

“I am sure the Government is right to ask KiwiRail to make savings. As the owners, we are entitled to ask the management and staff to be making continuous productivity improvements. But it is unrealistic to expect KiwiRail to make a profit and pay “for the full cost of the track.”

Mr Prebble’s parting shot, to put the potential cost of supporting rail prospective, comparative to the road spend, is: “The Government has’ recently announced a record $14 billion transport spend that includes 5.5 billion for roads and $250 million for rail projects.”

In a $14 billion transport budget, a $100 million a year for rail to reduce road congestion is very sustainable. At the root of this argument is the difficulty that rail has, in having to make a return on investment in the track as well as its “above the ground” operations.

The argument is not new. For rail, the whole lot is bundled together and under the State Owned Enterprise Act, KiwiRail is supposed to return a dividend on the entire thing.

If one was to put this in the context of reading, you would have to bundle all the trucking firms together as one company, and instruct them to make a profit inclusive of the cost of building the roads they run on.

Truckers pay for the “cost” of roads through Road User Charges, but what is meant by that is the cost of maintenance and upkeep. If road transport had to fund the capital cost of new roads, then basically it would have to be funding the $5.5 billion for roads that Mr Prebble referred to above, plus obtaining a return on that investment, as well as the cost maintenance.

Rail’s burden, since privatisation, has always been the cost of the infrastructure. The cost of track spending eventually crippled Tranz

Rail and Toll would only take on the rail task on the basis of the Government coming up with an annual payment to cover track maintenance and upgrades.

When agreement on a continuation of that arrangement could not be reached, the Government took on the track infrastructure itself. Eventually, Labour bought out the operational bit as well. Since then, various critics have bemoaned the cost of keeping “rail”, but the real cost is keeping the track.

Sure, KiwiRail has needed to get better and become more commercially savvy. It has made mistakes in the past but is doing a lot better now.

So, coming back to Mr Prebble’s point about the NZTA possibly becoming the funder of the transport rather than just roading, is that inconceivable?

Well, not according to the agency’s own mission statement. Its website states its purpose is “to deliver transport solutions for a thriving New Zealand on behalf of the Government nowhere does that say “by investing in roads alone”.

There is the further precedent for Government agencies taking a holistic vision of transport needs. The ill-fated SeaChange scheme had only just started to fund some research projects before it was scrapped when National got into power. I dug back into articles from 2009 and found Port Taranaki had been granted $250,000 in government funding to help with a feasibility study for a RORO service between New Plymouth and Nelson.

Other projects funded in the allocation of $2 million from the Domestic Sea Freight Development Fund included a Cubic Transport Services study aimed at establishing the size of the container pool available for domestic freight distribution; Eastland Group, Port of Napier and Winstone Pulp were studying the viability of a coastal shipping link between the ports of Gisborne and Napier.

Buller Port Services was doing an economic analysis of shipping fuel from Marsden Point to Westport; and Coastal Bulk Shipping was fitting sponsons to the Anatoki to enable the vessel to lift increased loads without a significantly increased draught, to enable it to work smaller ports such as Wanganui, Greymouth, Westport, Gisborne and possibly Oamaru.

That funding may have been minimal but it showed government can change the narrow vision of its agencies if it wishes. Whether this Government would take on Mr Prebble’s suggestion re the NZTA’s role, I have my doubts. But at least the Government clearly has a wider view of rail than does the Treasury, which is a good starting point!

Source: NZ Shipping Gazette

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