Port of Auckland pulls brakes on rail ‘subsidies’

Port of Auckland is axing a $7.7 million per year it spends to incentivise freight companies to move containers by rail.

But while the council-owned company wants to phase in a rail-handling charge over the next three to five years, Auckland Mayor Wayne Brown is questioning why the cost wasn’t being recovered by charging peak-time truck users more.

Port of Auckland Ltd CEO Roger Gray appeared before Auckland Council’s transport and infrastructure committee yesterday to announce the organisation’s plans to increase rail prices, beginning with a roughly $20 charge per container, which began at the beginning of this year.

Over the next few years this will increase to around $90 in order to cover the $88 per container the port currently swallows.

$88 per container adds up to $7.7m a year – $4.9m running three trains each day, $2.2m on moving the containers from the port onto the railway, and $800,000 yearly rent for the Wiri rail yard the containers end up at.

“If I was being totally commercial, which I’m not, because you’ve got aspirations, I would close the rail operations tomorrow. And we would save a lot of money,” Gray said.

The aspirations he’s referring to are the council goals of emissions reductions and congestion easing.

Gray said if Auckland Council wanted to prioritise rail from the port, it would need to come via a more “transparent” subsidy direct from council coffers.

“If you choose to want rail to be competitive, we will sit with you and discuss,” he said. “But I think us non-transparently subsidising rail needs to end and we need the community to understand what is the cost of rail and how we should do it.”

Wayne Brown, however, would rather see costs for trucks increase to encourage rail use and maximise climate and decongestion gains.

“We’ve been under-doing that for too long; we’ve been subsidising trucks in Auckland. I don’t like paying rates just to have some bugger in a truck.”

Auckland’s mayor would like the port board to become “a bit more progressive with everything”.

“I support the way you’re doing it,” he said. “But bump it a bit more and remove the subsidy for the trucks.”

It’s an unsurprising stance from a mayor who ran on a platform of moving port freight onto rail.

Back when Brown was just a mayoral candidate, he frequently brought up the idea of moving more freight off the roads to cut down on traffic.

In the latest letter of expectation from council to the port organisation, Brown asked its managers to move rail volume up to 16 percent of all freight.

Last year, rail freight was at 10.6 percent – slightly down on the year before.

But Gray said it was up to freight companies to decide how they wanted their products moved, and those companies were likely to follow the cheaper option.

“The reality is road is more flexible, and cheaper,” he said. “We do not make the decision of what cargo goes on rail. That is the decision of the cargo owner … And right now, road is significantly cheaper and will be a point-to-point delivery, versus rail, which leaves the port, goes to our inland depot at Wiri, and then it has to be picked up by a truck and delivered to a warehouse.”

But along with increasing the cost of rail, Port of Auckland Ltd is also looking to increase the cost of using trucks in the next few years.

Specific costs will be announced to the sector some time in the coming months, but Gray signalled they would be in the realm of $200 per container at peak times and $120 off peak.

This mostly equates with daytime versus nighttime activity, in an effort to divert trucks to the quieter hours.

“You jump in the truck and leave the port at three in the morning, you’re in Wiri in 20 minutes,” Gray said. “You do it at nine o’clock in the morning, it’s an hour and a half. For me, that’s the simplest solution in the short term.”

He acknowledged there would be other challenges to deal with if night truck activity increases, such as noise concerns.

He expected these increased charges would save the port around $12m to $15m over the next five years.