Waka Kotahi has told the government it will not take on any more debt without an underwrite guarantee, giving the incoming transport minister an ultimatum to secure a longer-term plan to fund the transport system by 2027.
The feedback came from the Transport Agency’s response to the Government Policy Statement on land transport released under the Labour government in August, which included a top-up loan to make up for sluggish revenue gathering.
The submission said Waka Kotahi would only agree to the new $3.1 billion loan if it received written confirmation of a plan to resolve land transport (NLTF) funding constraints by 2027.
The agency has almost $7b available in various borrowing facilities, but as of mid-2023 it had only drawn down $1.4b.
“Taking on any additional debt should only be considered a short-term fix. Efforts to resolve the wider funding instability in the NLTF should be prioritised immediately so that Waka Kotahi is not required to take on additional debt from 2027/28.
“If the current system remains, the next land transport programme will require Waka Kotahi to either take on more debt in the next period or see a substantial increase to revenue through existing mechanisms ie FED/RUC or other charging mechanisms. This way of doing things is not sustainable and changes to our revenue system are desperately needed before the 2027-2030 period.”
It went on to say it would only agree to the latest loan and the restructuring of the $2b loan before that if the government provided an assurance that “the Crown will underwrite debt liabilities of the NLTP if additional and substitute revenue sources are not secured in this period”.
Ministry of Transport officials told the transport minister at the time, David Parker, the conditions of accepting the loan “may prove difficult to meet”.
“Treasury and Ministry officials are commencing work with Waka Kotahi to determine if loan terms acceptable to the government can be agreed.”
The loan amount is not unsubstantial, but does only make up a relatively small proportion of the total expected revenue for the three-year period, which is $20.8b.
Waka Kotahi also told the ministry it needed a clear steer on whether Road to Zero was still a priority.
The target is a 40 percent reduction in deaths and serious injuries by 2030, from 2018 levels.
“Over the last year, Waka Kotahi have been asked by government to slow down aspects of the Road to Zero programme and in particular, speed changes. This means that other aspects of the road safety programme like infrastructure investment and policing will need accelerated investment if we are to continue to target a 40 percent reduction in death and serious harm by 2030.
“If Road to Zero activities cannot be delivered, and in some cases, significantly accelerated through this NLTP period, we will not meet the 40 percent reduction target. To resolve this risk, we suggest that the Policy Statement clarify whether there is a Crown expectation that the NLTF should prioritise safety improvement initiatives over others … and whether there will be additional funding for this purpose where required.
“If neither of these apply, we suggest the government consider adjusting Road to Zero targets to reflect a slower path to delivery of these outcomes.”
The Labour government was previously criticised for “giving up” on Road to Zero by the Green Party.
Criticism also came from Waka Kotahi on the subject of emissions reduction and how climate-related investment would actually be paid for.
“Treasury has estimated that capital expenditure to reduce transport emissions could be upwards of $20b over 10 years from 2025. We note in this context that while Government is funding development of urban light [vehicle kilometres travelled] reduction programmes, it has not as yet committed to funding delivery of them, and there is unlikely to be much headroom in the NLTF for the ‘additionality’ they provide.”
The agency said the proposed funding settings also did not appear to account for the potential costs of complying with the Carbon Neutral Government Programme, which required the public sector to be carbon neutral by 2025.
“The impact of this funding (and policy) uncertainty is that delivery of significant, additional improvements for public transport, walking and cycling are unlikely to be funded from the NLTF during the 2024-2027 period. Availability of further Crown funding is also uncertain.
“This puts achievement of emissions reductions expected from transport from 2026 (the second emissions budget period) at risk. It also diminishes the potential for significant equity, health, congestion and affordability benefits through place-shaping land use and mode-shift interventions.”
Funding pressure for Waka Kotahi has been described as an “extreme risk” for the agency before and a review is underway to figure out a better way.
Before this year’s Budget the pressure on the Land Transport Fund was highlighted by Treasury officials to the Finance Minister, Grant Robertson.
“There are two notable themes that persist across the package which you may wish to specifically discuss, namely, the flow-on impact that NLTF [National Land Transport Fund] sustainability issues are having on the number and size of initiatives seeking Budget funding; and the trend of funding being sought for local-share costs,” Treasury officials said.
The fund collects revenue mainly from fuel taxes and road user charges. Vehicle licensing and rail track user charges also go into the pot.
It pays for state highways and motorways, about a half of local roads, cycling and walking infrastructure, and public transport subsidies. It also funds traffic policing.
However, it has become increasingly unsustainable with revenue of $635m forgone during the current land transport programme period (2021-2024) because of the cost of living package in which road user charges and fuel excise duty paid by motorists were reduced.
The policy statement on the table suggests in addition to the loan the work programme would be funded by a $2.9b Crown grant and an extra $1.4b through the phased increase in fuel excise duty.
Before the election National’s transport spokesperson Simeon Brown said it would “re-write” the policy statement, and re-fund it.
Its policy document states it would take $1.5b from the Public Transport Infrastructure class and $3b from the Road to Zero programme for its renewed Roads of National Significance plan.
“National will also shift NZTA’s National Land Transport Programme from a three-year to a 10-year investment horizon, to provide more certainty around long-term transport funding commitments.”
Private equity, value capture and cost-recovery tools would also be part of the equation.
“The equity finance model involves the use of private capital to build infrastructure in exchange for long-term operational, development, and value capture rights that recover the cost of construction. This model is becoming increasingly common around the world to deliver modern, world-class infrastructure projects faster and at lower risk to taxpayers.”
Brown said it would also be funded through “an increased Crown contribution”, but did not clarify if this would be a grant or a loan.
There will also be aspects of the Road to Zero programme that will be unwound, including lowered speed limits that might be raised again.
The Future of the Revenue System review is expected to go out for public consultation early next year.
It will be up to the new government to ensure the wheels turn on getting it over the line before the next funding period rolls around in three years.
Are there any constitutional limits or guidelines on a public agency refusing to carry out the policy of the government of the day?
i think it is pretty clear what the new Government will do. Stop the road to Zero, stop all cycleways, build more motorways and forget about reducing emissions.