Potholes Remain in Roads of National Significance Plan

Gareth MorganEconomicsLeave a Comment

PotholeThe article by Jenny Chetwynd in the Dominion Post last week was great cheerleading for tarmac lovers, but did it really clear up the potholes we raised in our article? Sadly the holes are still there, and some of them could have a truck driven through them.

Firstly, let’s be clear that we were not opposing improvement of the transport system. We were opposing how massive transport investments have been biased by politics rather than decided upon the evidence.

We concede that the BCR (benefit cost ratio) is not the be-all of transport evaluation tools. As Jenny points out, it doesn’t pick up issues like earthquake resilience. Similarly BCRs don’t pick up the synergies with a new longer runway at Wellington airport, so there will always be a place for discretion. But our point was not that transport proposals stand or fall on their BCR, it was that where the recommendation hinges on additional factors (as Jenny argues it does) then that rationale should still be as transparent, rigorous and evidence-based as possible. Sadly in this case it’s not. The issue we’re raising then is about rigour and analytical consistency, demonstrably independent of political influence. After all these are taxpayer funds the proponents are seeking to commandeer.

Even if we take Transmission Gully (which is usually justified on earthquake grounds) out of the equation, Jenny’s response still left huge questions about the roading plan:

  • Should we justify a massive, amalgamated roading project on the basis that the uneconomic bits are outweighed by the economic bits? Or should we just focus on the economic bits?
  • Are the decision processes double counting certain elements?
  • Has the RONS biased the choices made in the local Wellington city spine study?
  • While the benefit from the whole project may well be larger than the sum of the benefits from doing each component, that needs to be proved not merely asserted.

We will look at each of these in turn.

Economic vs Uneconomic RONS sections

The BCR may have been boosted in the most recent calculations, but there are still many parts of this project that don’t stack up. Should the whole Northern Corridor “Think Big” project be justifiable on the benefits from improving Aotea Quay and building the Basin flyover only and the benefit of the master plan be arbitrarily boosted by ropey claims of ‘agglomeration benefits’ that even the experts can’t agree on? Why not simply build those bits that do pass the BCR hurdle and see if the rest becomes economic to improve, rather than spend money based on an assertion they will be?

As we will discuss below, BCRs are most useful in comparing alternatives. To have a convincing argument for RONS, NZTA need to make it clear what transport projects are not being built in order to invest in the RONS, and what their BCRs are. Where do these so-called RONS really rank on the conventional transport benefit list?

Double Counting

Jenny’s response only furthered our concerns on double counting. In addition to the BCR, she also cited improved journey times and reduced accidents as proving the ‘strategic fit’ of the project. Both of these elements are already counted in the BCR. It’s invalid to give them another special mention under strategic fit. If the benefits are not sufficiently captured by the BCR, then the proponent needs to justify the additional benefits the RONS framework finds that the BCR doesn’t. Otherwise it’s unadulterated padding.

Does the RONS Bias the Spine Study?

BCRs are not perfect, but they are great for comparing two ways of solving a problem. This is the approach used in the Wellington Spine Study, which looked at public transport within the city. However, because for the purposes of the spine study, the RONS money was already committed, light rail never really had a look in compared to buses. The transport options for central Wellington have never been compared in a transparent and evidence-based way. That’s just analytical slop.

Luke Troy, who led the Spine Study, lent his weight to Chetwynd’s argument in a letter to the editor. His argument is that because the RONS project is a reality it therefore follows that bus rapid transit is preferable to light rail. Of course if the road tunnel already exists it makes bus rapid transit attractive, that is a no-brainer. However, he seems to have missed the point that we’re questioning whether the Airport to Mount Victoria road should proceed in the first place, particularly when it returns 40c of benefits for every dollar invested. His assumption that it will be built then, is beside the point we’re making here. On a level playing field it would be a totally different comparison, which is why we argued for an apples v apples comparison in the Spine Study, rather than basing it on the spurious RONS assertion.

Maybe State Highway 1 should be a multi-lane highway all the way to the airport. Or perhaps the multi-lane highway ending at the port on Aotea Quay (for freight) and linking to a public transport system such as bus or train to the airport would be better. Thanks to the RONS these options have not been fairly evaluated, in a way that compares apples with apples. That is why the proposal justification is flawed. All we are asking is that the analysis be done, so we have a convincing and credible case for a massive investment that would close off other options and change the face of Wellington forever.

Proof versus Assertion

The whole point of our piece was to say that the RONS process assigns political, non-evidence based accreditation to projects and has little to do with the standard cost/benefit evaluation of infrastructure projects. As such the process isn’t valid and needs to do a lot better than be justifiable merely because of political decree. It is of course perfectly possible that the whole is worth more than the sum of the parts for this road, and so taken together a BCR on Otaki-airport does get a pass on normal, objective BCR criteria. But that is not what happens in the RONS process as it currently stands – which is our point.

We repeat our objection – this should not be a decision for politicians with a 3 year focus, desperate to score electoral brownie points for having built a monument. Neither should the analytical backing be so loose as that which NZTA appears to have sponsored.

Potholes Remain in Roads of National Significance Plan was last modified: December 15th, 2015 by Gareth Morgan
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Gareth Morgan

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.