Government will announce road tolls or congestion charges next week: Goff

Auckland Mayor Phil Goff says there will be a road pricing announcement from the government next week, which will be good news for the city in the medium term. He wouldn’t give any more details, saying it’s up to the government to make the announcement.

Mr Goff called on the government to consider road pricing in an interview with NBR published on Friday.

Road pricing is direct charges levied for use of the roads, including road tolls or congestion charges on certain roads. New Zealand councils are restricted on how they can raise funds despite having one of the lowest ratios of local to central government spending in the developed world.

He says the amount of money needed for Auckland infrastructure over the next decade is likely to be about $7 billion, rather than the $4 billion initially included in the Auckland Transport Alignment Project. He says the difference is down to a big increase in the number of people moving to the city.

The mayor says he would still like to discuss proportional allocation of GST with central government, so Auckland gets back the GST on its rates. He says he’s raised it but hasn’t heard back.

Auckland Council, which is carrying around $7.6 billion in debt, has little scope to borrow more money. Its borrowing rules work on a debt-to-revenue ratio, which says it cannot borrow more than 265% of its revenue, he says. Right now the council's borrowing level is at 256%.

In February the government ruled out the regional fuel tax Mr Goff wanted to introduce to help plug the funding shortfall, with Finance Minister Steven Joyce saying better options included getting outside finance from the private sector and longer term talking about road pricing.

In a March environmental performance review of New Zealand, the OECD favoured more road tolls, introducing congestion charging, and the end of tax breaks for company cars and carparks to manage transport demand. It said the government needed to look at the extent it was limiting access to other tools and recommended removing barriers to road pricing, which is limited to three roads in New Zealand.  

Mr Goff says the government needs to come to the table now to discuss other financing options for Auckland such as revenue sharing and road pricing.

TRANSCRIPT: Lisa Owen interviews Auckland Mayor Phil Goff on The Nation

Lisa Owen: Good morning, Mr Mayor.

Phil Goff: Good morning, Lisa.

In February the government ruled out the regional fuel tax Mr Goff wanted to introduce to help plug the funding shortfall, with Finance Minister Steven Joyce saying better options included getting outside finance from the private sector and longer term talking about road pricing.

Road pricing is direct charges levied for use of the roads, including road tolls or congestion charges on certain roads. New Zealand councils are restricted on how they can raise funds despite having one of the lowest ratios of local to central government spending in the developed world.

In a March environmental performance review of New Zealand, the OECD favoured more road tolls, introducing congestion charging, and the end of tax breaks for company cars and carparks to manage transport demand. It said the government needed to look at the extent it was limiting access to other tools and recommended removing barriers to road pricing, which is limited to three roads in New Zealand.  

Mr Goff says the government needs to come to the table now to discuss other financing options for Auckland such as revenue sharing and road pricing.

Are you preparing for a legal battle over this, or do you think they’re just going to roll over and accept it?

Look, I’ve had very clear legal advice. Simpson Grierson, one of our leading law firms, works with council on it. An expert in the area of commercial and consumer law, David Goddard QC, one of our leading QCs. And I believe that we’re on very firm ground. And let me make one point absolutely clear to the industry. They say they cannot pass it on. I am absolutely certain that they can pass it on in the same way that they pass on any other business cost.

Okay, so you think you’re in the right, but that’s not what I’m asking. I’m asking if you’re preparing for it to be tested in court.

It’s not that I think that I’m in the right. I’m advised that what we are doing is consistent with the Fair Trading Act, the Commerce Act and the Local Government Act. It’s up to the industry as to whether they now want to spend money on legal fees and put Auckland ratepayers to the expense of legal fees. What I say to the industry is this is about a fair sharing of the burden of promoting their industry, and they need to think about the community and the community reaction to this because the community won’t thank them for putting them to a huge expense to try to avoid any responsibility for promoting something that benefits themselves.

So how much have you budgeted for that potential expense?

I’ve budgeted nothing because I’m not assuming at the moment that the industry will–

That’s not responsible, is it?

No, no. You don’t budget for something that’s hypothetical. If the industry decides to take it to court, then we will fight it. But I hope they don’t make that decision. And I’ve said to the industry, look, they’ve been pretty aggressive and strident about this. I’m happy to sit down with them, as I have over the last six months, and talk them through, to work with them to get the scheme as equitable as possible. But what I am saying to them very clearly – don’t expect the ratepayer to meet the full burden of promoting your industry from which you benefit.

Okay. Let’s talk about some of the other challenges you’re facing. Paula Bennett actually says that the levy is the wrong approach. Steven Joyce and the prime minister have said that Auckland isn’t putting enough money into its own transport funding. Now, you’re getting about, what, $3 billion in revenue a year and rising. Have you got your spending priorities wrong, as they would suggest?

No. And I’m not sure that they are all suggesting that. It’s certainly not what the minister of transport is saying to me nor the prime minister. And it’s like this. We’ve just passed a budget – $2 billion in extra infrastructure expenditure, 40% of that going into transport, but 70% of the increase in investment in infrastructure going into transport. Now, our problem, and Bill English knows this well – I’ve had the discussion with him – and so does Steven Joyce. Our problem is that we’ve just about reached the limit for our borrowing. We work under a debt to revenue ratio which says that we cannot borrow more than 265% of our revenue. We’re already at about 256%. Why is that? Because we just put $1.7 billion into paying for the city rail link – the only city in New Zealand that’s paying for its own heavy rail.

We understand that predicament. But the thing is Steven Joyce is and did say on this programme that he thinks you got your priorities wrong and that you should spend more on transport. So they are saying it. And the thing is whether you believe it or not, it’s perception, isn’t it? And if they’re saying you’re not paying enough, they’re not going to give you any more, are they?

Look, I guess there’s a little bit of politics in that. But we’ve had very good discussions, both with the Prime Minister on several occasions, the Minister of Transport on many occasions and the minister of finance. They understand the situation that Auckland is in. They understand because every economist advising them will be telling them this – that the benefits of growth come 10 to 25 years down the track, but the costs fall now. And they know that Auckland has to succeed for New Zealand to succeed.

If they know that, Mr Mayor–

And if they want our city to be congested, gridlocked and unaffordable, they will do nothing. I think they know better than that.

So what are they going to do for you, then?

Look, we’ve had discussions, for example, on the housing infrastructure fund. There’ll be decisions made about that later this month.

Yes. How much are you punting for? Because when you came here last time, you said two-thirds of it should be for Auckland. Are you on track to get two-thirds?

I was modest if I asked for two-thirds of it.

So what are you asking for?

We’ve had a discussion, and they’re looking separately at Auckland because they know the constraints that Auckland is facing. They’ve assured me that the proposal that we’ve put up can be dealt with by them. They are working professionally and collaboratively with us on that.

Just to stop you there, in your terms, have you got a greenlight for the proposal?

Look, I won’t know till the government’s made a decision. And can I pre-empt the government? It’s their decision. But they know our case.

But you’re feeling confident?

Well, I’m confident about this – that they know that we are the one internationally competitive city that New Zealand has and we cannot remain internationally competitive if we’re gridlocked and our gateway from the airport is so congested that people can’t get in and out of it.

If you don't get the two-thirds that you identified previously as saying you should at least get that, would you be disappointed? If you get anything less than two-thirds?  

I'm not going to predict what the Government's going to do – that's their decision.  

I'm not asking you what they're doing—  

But I've made it very clear about why Auckland needs this – because we have run out of ability to borrow more. We could, of course, put it on rates, and that would be 20% to 30%. But I don't think the Minister of Finance is going to say that's a proper way for Auckland to be dealing with it, either.  

You're not going to do that, and you've been categorical about that, which leaves you with shortfalls in departments. You've got a $4 billion shortfall for your transport projects, so over the next decade—?  

Yeah, I've got news for you – it's not 4 billion. It's more likely to be 7 billion, because when we put forward – and we did it together with Government – the Auckland Transport Alignment Project—  

Okay, so it's worse than first anticipated?  

Yeah. No, let me just explain it. It was based on a 16,000 rise in population by Auckland each year. We're now growing by 45,000, so we add the population the size of the city of Tauranga every three years. And the Government knows – I've given them all the figures on that – they know that with that growth, 800 extra cars on the road each week, they've got to work with us to resolve this problem – for the sake of New Zealand as well as Auckland.  

But the thing is just because they see and understand that, that's not making them give you more. And the thing is with the Alignment Project, by about right now, you guys are supposed to have come up with an agreement on how you're going to fund it. So have you reached an agreement?  

And the short answer is that my—  

The deadline is nigh.  

What I said to the Government was that we need two things – we need some degree of revenue sharing. You know, if you go to Australia and you look at a big – let me finish, please. If you go to Australia and see a big city like Melbourne, where do they get their money for infrastructure? The government – the federal government – puts down to the state government a share of GST. We need something like that for a city the size of Auckland in New Zealand.  

Have they agreed to that?  

No, no, but they are still considering that. The second thing we need is a road-pricing system. Now, next week, you'll hear an announcement from Government on road pricing. I don't want to comment on it, because I can't pre-empt the Government's announcement.  

Is it going to be good news for your city?

It is. I think it will be good news in the medium-term. But we need something in the short-term. You know, think about that $7 billion deficit I mentioned before. We cannot leave it like we left the City Rail Link. We'll get the City Rail Link – it'll really help – but it won't help for another five years, and in the meantime, the city is becoming more and more gridlocked. We need to bring that expenditure forward, and that is the case that I'm making, and not just me, but all of our Auckland councillors are making to the Government.  

No, this is really important. So a road-pricing announcement – that's going to come next week. What form is it going to take? And when you say it's not going to help you in the short-term, how far off is it?  

Oh, look, I'm going to leave it to the Government to make that announcement. And you'll see my comment in response in due course. It's not my role to pre-empt it. But we have been having these discussions, and they're serious discussions.

So proportional allocation of GST, which is what you raised before, is that still on the table with them?  

I've raised it; they haven't responded to it yet. But I've put it in this way – the Government each year takes $239 million, which is GST, on our rates bill. So we levy rates to our constituents, and then the Government adds another 39 million and takes it to itself. 239 million. And I'm saying that that 239 million would be really helpful to help us address our infrastructure needs.  

So as far as you're concerned, it's still on the table, it hasn't been tossed to the side?  

It's a discussion still to have.  

Okay. Well, how would you describe your relationship with the Government? Because, you know, from the outside, it doesn't look that friendly. 

Oh, no, I disagree entirely. I believe that it's professional, and I believe it's amicable. I've worked with all of these ministers over many, many years. I'm not in a partisan position now; I'm in a position of being Mayor of Auckland, advocating for Auckland. I meet on a weekly basis with a whole range of ministers. The discussions are professional. I think we are making progress. Bill English was at his media conference last week, saying, yes, he understood Auckland's position, he understood that we can't put more on our balance sheet, and they've got to find other ways of working with us. And I regard that as real progress.  

Before we go, I want to talk to you about housing. Last time you were here, you said to me – and I'm quoting you here – "If we don't tackle the housing unaffordability, the electorate in Auckland will punish both central government and local government." Well, the average house price in this part of the world is about a million bucks, so in your view, does the Government deserve to be punished now by voters?  

Oh, look, I'm not going to tell the electorate what they should do. I'm not entering into the electoral fray at the end of this year. It would be unprofessional for me to do so. What I'm saying to all political parties is that we cannot continue with a situation where it is unaffordable for a young family to buy a home of their own in Auckland. I've just completed work with a mayoral task force. Within about three weeks, we'll be announcing the results of that, not only to the public, but to the Government itself. There are things that we on Council need to do. There are things that central Government has to do. This task force is made up of economists, of developers, of builders. I've brought the whole sector together. I think its recommendations will be really helpful to Government, any government, and to us.