Transmission Gully opens at a cost to taxpayers of at least $1.25b as Horowhenua and Kapiti landowners celebrate $7.8b in tax-free capital gains on their land over the five years it took to build
The 11 minute average cut in journey time is not particularly consequential in good traffic conditions, but the real benefit of Transmission Gully will be in having an alternative route if one gets blocked by an accident or slip (and the chances of an accident or slip on the new road are much less because of the engineering differences). The cut in journey times also be much more substantial in times of heavy afternoon traffic, where it could take over an hour to get from Plimmerton to Paekakariki.
Transmission Gully conclusively proves that Public Private Partnerships don't benfit the taxpayer. The only agency in NZ's history which built cost effective infrstructure was the Ministry of Works & Development, abolished by that economic illiterate, Roger Douglas.
Wellingtonians get their new road without having to pay for it. Instead of making it a toll road for X years or $Y earned to pay for it, it is being paid for by all NZers via NZTA.
It seems user-pays has been dropped as a policy because it's too neo-liberal (sarcasm).
The nearest to any sort of value capture will be the increased rates paid by owners on the Kapiti Coast.
I'm currently reading Mariana Mazzucato's book "Mission Economy". The two biggest value destroyers these days are PPP's and consultants.
Do you really think there won't be another PPP? The Infrastructure Commission, which has establishing PPPs firmly embedded in its DNA, appears to be focused on ways to improve PPP establishment and operation rather than questioning the choice of using a PPP in the first place. Looks like the 'no true Scotsman' fallacy in operation. And, as you've pointed out, with the low debt level targets still in place there is a strong incentive to move projects off balance sheet with PPPs or SPVs (at least there is a chance of value capture in the SPV levy setting). I would not be surprised that in a few years there will be another PPP that will be prepared to fight the last war, and will find a whole new method to privatise the profits and socialise the losses.
Interesting point. Yes. I’ve been quite surprised at how the usual suspects in favour of low public debt and PPPs have been allowed to colonise the Infrastructure Commission. The same old approach. It has never questioned the article of faith that net public debt should never deviate beyond 20-30% of GDP, except for crises (except for housing affordability, child poverty and climate inaction crises…)
The thing I haven't heard explained re Transmission Gully is how robust its engineering is in terms of likely earthquake damage. It's a really steep gradient through a narrow cutting.
The reason this matters: reduced travel times and greater road capacity are straightforwardly immoral, in a decade when we desperately need to be reducing car and truck use. But the thing I was shocked by when I moved back to Wellington five years ago, having never thought of it when I was growing up here, is how isolated the city is if you knock out two very earthquake-vulnerable roads and one very earthquake-vulnerable airport. After a Christchurch-level quake, Transmission Gully might be the only way to get food and water into the city for a substantial period. Unless the earthquake knocks it out as well.
The Port is a good option, and it’s a key part of the regional recovery infrastructure/plan. But let’s not forget that the wharves were damaged in the last big event, alongside the marquee property developments sitting alongside. Perhaps there’s a flaw in the plan?
Thanks Leaflemming. I asked the Wellington Gateway Partnership MD John Humphrey about that yesterday. He said it was designed to cope. He said the cut is quite wide and the road is designed to flex. Also, Transmission Gully doesn’t really solve the Ngauranga Gorge problem or the main road to the Hutt being cut off. The port, assuming it could be used, would be the best option. The more I look into Wellington’s vulnerabilities to quakes and climate, the more I think of moving away somewhere warmer and drier and flatter and more solid.
Pick your poison -- if they're warmer they're not going to stay drier, and those places are about to be a lot less insurable due to floods. And fires, in the fullness of not very much time. (My fantasy is moving to Dunedin while I can still afford a house there. I'm carefully not looking up prices. It was a reasonable fantasy five years ago...)
Good stuff on the deep dive. However, Wales really is a terrible comparator when it comes to roading policy.
Their population has grown by about 500000 in 60 years! That’s 5-6 years of popn growth pre covid.
The population of 3m is clustered along one stretch of Cardiff, Newport and Swansea which is already connected by the beautiful concrete 6 lane (sometimes 8 in smart lanes around Cardiff) M4. They have as much need for new motorways as Wellington does for more wind and rain.
Looking forward to a tolled PPP under the next Nat/Act govt that finally connects Chch to Ash and beyond.
I imagine it will have IRR close to or under 1. However the people that matter, and will ultimately decide who gets elected, live in suburbs throughout NZ and love roads more than they feign passion about our emissions. Time will tell but the N/Acts will build that road and Drury etc etc.
Good? No, but unless we have compulsory voting with fines like Aussie it won’t change so certainly aware of the limitations. How do you convince people to vote to make themselves poorer in the short term is the green conundrum?
Getting our tax system in line with OECD is the closest thing to a silver bullet on offer for NZ (as it drives Inequality etc and diverts from innovation) so thanks for highlighting this aspect. If only the voters could see the bigger picture
A harsh (but probably fair) critique of the Welli climate Bernard. We do have excellent mountain biking though. Looking forward to a hoon up the new TG road with a bunch of other Subaru enthusiasts on Sunday (hoon being a Kaka reference only, it will be very civilized and law abiding)
Try some of the gentler uphill trails! Happy to advise, one mid-50s guy with bad knees to another. The trails here have been one of the great gifts of moving back, and I’m no downhill thrill warrior.
I like riding up through those Polhill trails or the George Denton reserve one to Highbury, and then back down by road. You can build the skills for the level 3 and 4 downhills safely enough if you start at level 2 and take it slow, but you definitely don’t want to jump straight onto one of the wilder downhill trails. (I admit to being dumb enough that I ended up hanging upside down from a tree in the process of learning this simple lesson).
Great deep dive Bernard. Really enjoyed listening. How do land value uplift rates differ from standard rates? To a layperson like myself both seem to capture increases in value?
Depends on the design. But essentially it’s a special targeted rate on the land around the transport nodes that captures a percentage of the capital gain pre and post route designation and project build. Here’s a useful NZTA paper from 2013 on how it could be done and why. https://www.nzta.govt.nz/assets/resources/research/reports/511/docs/511.pdf It’s never been done at scale here because it would break the New Zealand business model of building wealth through unearned and untaxed capital gains on land appreciation.
The 11 minute average cut in journey time is not particularly consequential in good traffic conditions, but the real benefit of Transmission Gully will be in having an alternative route if one gets blocked by an accident or slip (and the chances of an accident or slip on the new road are much less because of the engineering differences). The cut in journey times also be much more substantial in times of heavy afternoon traffic, where it could take over an hour to get from Plimmerton to Paekakariki.
Transmission Gully conclusively proves that Public Private Partnerships don't benfit the taxpayer. The only agency in NZ's history which built cost effective infrstructure was the Ministry of Works & Development, abolished by that economic illiterate, Roger Douglas.
Wellingtonians get their new road without having to pay for it. Instead of making it a toll road for X years or $Y earned to pay for it, it is being paid for by all NZers via NZTA.
It seems user-pays has been dropped as a policy because it's too neo-liberal (sarcasm).
The nearest to any sort of value capture will be the increased rates paid by owners on the Kapiti Coast.
I'm currently reading Mariana Mazzucato's book "Mission Economy". The two biggest value destroyers these days are PPP's and consultants.
Do you really think there won't be another PPP? The Infrastructure Commission, which has establishing PPPs firmly embedded in its DNA, appears to be focused on ways to improve PPP establishment and operation rather than questioning the choice of using a PPP in the first place. Looks like the 'no true Scotsman' fallacy in operation. And, as you've pointed out, with the low debt level targets still in place there is a strong incentive to move projects off balance sheet with PPPs or SPVs (at least there is a chance of value capture in the SPV levy setting). I would not be surprised that in a few years there will be another PPP that will be prepared to fight the last war, and will find a whole new method to privatise the profits and socialise the losses.
Interesting point. Yes. I’ve been quite surprised at how the usual suspects in favour of low public debt and PPPs have been allowed to colonise the Infrastructure Commission. The same old approach. It has never questioned the article of faith that net public debt should never deviate beyond 20-30% of GDP, except for crises (except for housing affordability, child poverty and climate inaction crises…)
The thing I haven't heard explained re Transmission Gully is how robust its engineering is in terms of likely earthquake damage. It's a really steep gradient through a narrow cutting.
The reason this matters: reduced travel times and greater road capacity are straightforwardly immoral, in a decade when we desperately need to be reducing car and truck use. But the thing I was shocked by when I moved back to Wellington five years ago, having never thought of it when I was growing up here, is how isolated the city is if you knock out two very earthquake-vulnerable roads and one very earthquake-vulnerable airport. After a Christchurch-level quake, Transmission Gully might be the only way to get food and water into the city for a substantial period. Unless the earthquake knocks it out as well.
They seem more likely to be, though there are bridges along the Kapiti Coast that might not make it I guess.
But you’re right about the port and I’d totally failed to think of it.
The Port is a good option, and it’s a key part of the regional recovery infrastructure/plan. But let’s not forget that the wharves were damaged in the last big event, alongside the marquee property developments sitting alongside. Perhaps there’s a flaw in the plan?
The port has had significant repairs done to reduce the liquefication risk that occurred in the Kaikoura quake.
Thanks Leaflemming. I asked the Wellington Gateway Partnership MD John Humphrey about that yesterday. He said it was designed to cope. He said the cut is quite wide and the road is designed to flex. Also, Transmission Gully doesn’t really solve the Ngauranga Gorge problem or the main road to the Hutt being cut off. The port, assuming it could be used, would be the best option. The more I look into Wellington’s vulnerabilities to quakes and climate, the more I think of moving away somewhere warmer and drier and flatter and more solid.
Pick your poison -- if they're warmer they're not going to stay drier, and those places are about to be a lot less insurable due to floods. And fires, in the fullness of not very much time. (My fantasy is moving to Dunedin while I can still afford a house there. I'm carefully not looking up prices. It was a reasonable fantasy five years ago...)
Good stuff on the deep dive. However, Wales really is a terrible comparator when it comes to roading policy.
Their population has grown by about 500000 in 60 years! That’s 5-6 years of popn growth pre covid.
The population of 3m is clustered along one stretch of Cardiff, Newport and Swansea which is already connected by the beautiful concrete 6 lane (sometimes 8 in smart lanes around Cardiff) M4. They have as much need for new motorways as Wellington does for more wind and rain.
Looking forward to a tolled PPP under the next Nat/Act govt that finally connects Chch to Ash and beyond.
Thanks. Julian. How do the economics stack up for the that ChCh to Ashburton road, once the true liabilities of emissions are included?
I imagine it will have IRR close to or under 1. However the people that matter, and will ultimately decide who gets elected, live in suburbs throughout NZ and love roads more than they feign passion about our emissions. Time will tell but the N/Acts will build that road and Drury etc etc.
Hi Julian. Thanks. Do you think the democratic deficit that the dominance of the suburban land owners implies is right and good? By the way, the Benefit to Cost ratio for Transmission Gully never got much above 0.9, even within a $691m capital cost and a 4% discount rate. Last page in this. https://www.nzta.govt.nz/assets/projects/transmission-gully-old/docs/s11-traffic-and-economics.pdf
Good? No, but unless we have compulsory voting with fines like Aussie it won’t change so certainly aware of the limitations. How do you convince people to vote to make themselves poorer in the short term is the green conundrum?
Getting our tax system in line with OECD is the closest thing to a silver bullet on offer for NZ (as it drives Inequality etc and diverts from innovation) so thanks for highlighting this aspect. If only the voters could see the bigger picture
A harsh (but probably fair) critique of the Welli climate Bernard. We do have excellent mountain biking though. Looking forward to a hoon up the new TG road with a bunch of other Subaru enthusiasts on Sunday (hoon being a Kaka reference only, it will be very civilized and law abiding)
Ha! Mountain biking scares me a lot. I’m an ACC claim on a bike when it comes to steep dirt tracks…
Try some of the gentler uphill trails! Happy to advise, one mid-50s guy with bad knees to another. The trails here have been one of the great gifts of moving back, and I’m no downhill thrill warrior.
I have enjoyed some of the ones around Zealandia and the wind turbine. Going up is ok. It’s the going down that worries me.
I like riding up through those Polhill trails or the George Denton reserve one to Highbury, and then back down by road. You can build the skills for the level 3 and 4 downhills safely enough if you start at level 2 and take it slow, but you definitely don’t want to jump straight onto one of the wilder downhill trails. (I admit to being dumb enough that I ended up hanging upside down from a tree in the process of learning this simple lesson).
Great deep dive Bernard. Really enjoyed listening. How do land value uplift rates differ from standard rates? To a layperson like myself both seem to capture increases in value?
Depends on the design. But essentially it’s a special targeted rate on the land around the transport nodes that captures a percentage of the capital gain pre and post route designation and project build. Here’s a useful NZTA paper from 2013 on how it could be done and why. https://www.nzta.govt.nz/assets/resources/research/reports/511/docs/511.pdf It’s never been done at scale here because it would break the New Zealand business model of building wealth through unearned and untaxed capital gains on land appreciation.