THE PUBLIC FINANCE DEBATES: “It’s time…New Zealand extended charging for public...
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THE PUBLIC FINANCE DEBATES:
“It’s time…New Zealand extended charging for public
infrastructure”
Opponent:
Peter Conway
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Key Points
• Keep the ‘public’ dimension
• Equity issues
• Implementation Risks
• Mitigation
• Alternatives
The VUW-GEN Public Finance Debates November 12, 2013
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Keep the ‘public’ dimension
• Infrastructure underpins economic, social and environmental development
• Relative benefits to individuals vary with single and multiple dimensions of infrastructure
• Charging undermines the rationale for ‘public infrastructure’
• High degree non-excludability, non-rivalry
The VUW-GEN Public Finance Debates November 12, 2013
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Charging Options
• Tolls• Road pricing• Area charging• Cordon charging• Network charge• Toll lanes• Fuel taxes• High occupancy
vehicle lanes
• Road user charges• Parking charges• Rates• Targeted rates• Development
contributions• Carbon taxes
The VUW-GEN Public Finance Debates November 12, 2013
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Equity
• User pays implies consideration of homogeneity of users
• Vertical, horizontal…..context
• Wealth and income inequality a major issue
• 63-77% earn less than ‘average’ wage
• New Zealand’s household income inequality is in the top third of the OECD
The VUW-GEN Public Finance Debates November 12, 2013
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Equity Concerns
• High levels of vehicle ownership
• Already hypothecated charges - fuel excise, registration, licensing fees, road user charges
• Tolls regressive
• Lead to social exclusion
• Dispersion leads to less viability for public transport
The VUW-GEN Public Finance Debates November 12, 2013
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Equity concerns…
• Spatial mismatch – employment centres/homes as commuter costs rise
• Depends where ‘poor’ people live and work relative to cordon
• Net benefit to ‘wealthier’ drivers in one case 27 times those from poorest quartile because of relative value of time
The VUW-GEN Public Finance Debates November 12, 2013
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Risks
• Geological
• Finance
• Use
• Sunk costs
• All suggest Government better placed to cope with risk, spread across many assets and long period
The VUW-GEN Public Finance Debates November 12, 2013
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Implementation Risks
• Evidence of heroic assumptions (BrisConnections) and ‘biased analysis’
• Cross City Tunnel Sydney
• Life cycle issues, implementation and transaction costs
• Risk transfer, subsidies, renegotiation
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Northern Gateway
• Built 10 years earlier because borrowed $158 million based on anticipated toll revenue.
• Prices rises in March 2012 were described by NZTA as ‘regrettable”.
• Transaction costs and write offs.
The VUW-GEN Public Finance Debates November 12, 2013
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Mitigation
• Free quota, discounts, peak time only• Cars with 3 or more people exempt• Segmentation (community travel passes
as in community health cards), special category exemptions
• Alternative roads• Improved public transport options• Many different charging methods• Targeted revenue redistribution
The VUW-GEN Public Finance Debates November 12, 2013
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Alternatives
• Government – cost of capital lower
• Development Funds
• Small additional time bound progressive tax
• Other taxes – CGT, land tax
• If low public benefit then don’t do it
• Other drivers – housing, environment, climate change, density vs sprawl
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Congestion Options
• Exclusive lanes for public transport
• Real time public transport lanes
• Parking restrictions
• More public transport
• Cycling, walking
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Conclusion
• Public economic development goods best to be publicly funded
• Equity issues and social exclusion
• Risks
• Other options available – funding and congestion
• If additional charging then use more equitable options
The VUW-GEN Public Finance Debates November 12, 2013