The future road funding crisis

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Posted on: 9 November 2017    

New Zealand’s main funding mechanism for land transport is the National Land Transport Fund (NLTF), a hypothecated (ring-fenced) fund for transport generated from transport income.  This income is used by the NZ Transport Agency to investigate, construct and maintain infrastructure in NZ as well as educate drivers, monitor drivers and vehicles and undertake research.

 In 2016/17 the funding was received as follows:

 NZ NLTF

Source: http://www.nzta.govt.nz/assets/resources/annual-report-nzta/2016-17/nltf-annual-report-2017-section-d.pdf

While most vehicles and drivers pay for Vehicle Registration and Licensing, this accounts for just 6% of the annual NLTF income of around $4 billion.  The vast majority of remaining funds are obtained via fuel excise duty (around 60% of the price of fuel at the pump) and road user charges for diesel vehicles, although e-vehicles are currently exempt.  Vehicle licensing charges are applied as a flat rate, but petrol vehicles also pay fuel excise duty as a proportion of the fuel they purchase, which approximates to a charge loosely reflecting the costs of driving.  This is significant because each vehicle driving on the roads costs society and the environment a varying amount depending on who is driving, what vehicle is being driven, and where and when it is being driven.  Diesel vehicles pay a distance-based road user charge. 

Consider a 45-year-old person with no driving convictions driving a new 5-star safety rated vehicle, taking their children out on Sunday afternoon in rural Otago.  Now consider an 18 year old who has had a few drinks and is driving their 20 year old vehicle around central Auckland on a Saturday night, with four friends in the car.  Which scenario imposes a greater cost to society?  The 18 year old is a higher risk, and with the older vehicle, will pay more in fuel and have to bear the congestion cost of driving in a city.  But they are themselves posing a significant crash risk to other drivers, they are increasing congestion, severance, wear and tear on infrastructure, point air pollution and noise pollution to many more people than the rural Otago driver.  In my opinion, the two drivers should not be paying the same amount for two such different trips. 

While e-vehicles continue to make up a tiny proportion of the vehicle fleet, the government can afford to bypass the income those vehicles should be generating, in the interests of encouraging their uptake.  By 2021 though, when e-vehicles are likely to comprise 2% of the fleet, the government may have to re-examine the decision to exempt e-vehicles from vehicle registration charges.  However as the income figures for the NLTF demonstrates, the lion’s share of income is generated from fuel excise duty and road user charges.  Since e-vehicle owners can charge their vehicles anywhere a power source is available, theoretically they will simply pay a power charge, which bears no direct connection to their road usage.  Therefore the registration charge for e-vehicles will need to be sufficient to cover the loss of income from fuel excise duty, or a funding gap in the NLTF will ensue.

Before this funding gap becomes critical, the government has an opportunity to develop and implement a variable charging scheme, to directly apportion the costs of driving to the driver charges.  By linking driver and motor vehicle licensing information with GPS tracking to identify where, and when a vehicle was driven, the costs can even reflect the relative likelihood of a driver to impose a crash cost, the delay they are causing other vehicles, and the wear and tear they are imposing on infrastructure. Concerns about ‘big brother’ watching people driving will continue to cause concern for new users of GPS tracking systems. While such concerns are understandable at a conceptual level, law-abiding drivers have nothing to fear.  Also, many people fail to realise just how visible their own movements are already with the prevalence of hand-held GPS units in smartphones. 

This technology is already out there for such intelligent distance-based charging systems.  Oregon Department of Transportation is trialling a system which charges according to the type of vehicle being driven, as well as distance travelled (http://www.myorego.org/.)   In Germany, Poland and Austria a distance-based scheme for charging heavy vehicle usage has already been implemented while EU-wide schemes are being contemplated, to enable cross-border drivers to pay fairly for a journey where fuel purchased in one country imposes a cost on another. https://www.transportenvironment.org/news/eu-unveils-distance-based-road-charging-plan.  

The NZ government will need to impose charges on e-vehicle drivers soon, otherwise road maintainance will not be sustainable, and funding for other improvements to land transport including rail, walking and cycling will suffer.  NZ has an opportunity to embrace a fairer system as a new method of charging will be necessary. 

Abley has a number of tools to map congestion and crash risks that can be used to identify how driving costs differ across the country and how a more equitable charging system might work.  Do touch base with Jo Draper if you are keen to learn more about these tools or discuss this topic further.

Blog written by Jo Draper, Principal Transportation Planner, Abley Transportation Consultants

Have you read my other blogs in this series?

Should we be subsidising e-vehicles?

Regional Fuel Tax - is it fair?

 

Jo blog image road toll web