Rail Shifts From Taxes To Rates


“Improving the operating models” for Auckland and Wellington Metro rail - which means local councils and ratepayers having to foot more and more of the bill - is a key message in the Ministry of Transport’s four-year plan.

It warns that a”sustainable funding solution for the new trains and Metro rail operational costs must be found. New projects will require serious consideration across a range of factors including costs and benefits, effectiveness, affordability and timing.”

It was prepared for Treasury for this year’s Budget but has just been released publicly.

It’s an interesting companion to the Government’s motorway-laden 20-year Infrastructure Plan released this afternoon.

The message in the Budget document is clear that Government handouts for rail are going to be carefully managed and reduced.

KiwiRail needs to have increased emphasis on being profitable through freight movement - “For rail to contribute to the government’s priorities, it is vital to ensure that the rail freight operation is conducted on a commercial and sustainable basis.”

In a continuation of what we have seen start already, funding for Auckland and Wellington commuter rail will be shifting away from Government handouts to ratepayers.

The report says there has been strong oversight of the $1.1 billion combined budget for urban passenger rail networks in Auckland to provide headroom for the funding of additional network infrastructure.
“This will also ensure Auckland Transport and KiwiRail deliver more from the existing appropriation and contribute to the procurement of the electric multiple unit trains.”
The report says that durable funding and operating arrangements for Metro rail are essential and the focus is currently on ownership and performance issues relating to the Metro rail networks and services.
The intention is that the Auckland and Greater Wellington regional councils will make decisions about service levels (in the full knowledge of the costs) and hold KiwiRail accountable for their delivery.

“The councils also need the right incentives to ensure capital and operating costs are funded. Regional councils will be expected to step up in providing a greater proportion of metro rail funding and any predicted shortfalls.”

The paper accepts that Auckland Council’s “transport aspirations” have to be acknowledged but they say there are expectations that would need to be met before further infrastructure investment could be considered for Auckland.

But one encouraging line Len Brown needs to keep quoting back at them says:

“Effective development and expansion of the Metro rail network in Auckland and Wellington will provide a preferred transport alternative to an increasing number of commuters on a daily basis, reducing travel time and congestion.”

The overriding message throughout though is that transport spending needs to be justified by how it grows the country’s economy - and building the roads of national significance are seen as a key part of that happening.




  1. Patrick R says:

    That last line is just a circular argument: it is stated from an unexamined assumption that the answer to growing the economy is always more highways. This needs proving. Because almost every RoN is in fact duplicate route it is very hard to see how they will have anything but marginal effect on the economy. And then because of their enormous cost they are more likely in fact to be a below return diversion of resources.

  2. Matt L says:

    Shifting costs to local governments is not new to rail or to New Zealand. It is often done claiming it is to ‘gain efficiencies’ and only ever happens to spending the government doesn’t like. The intention is to load up the local government with so many costs, valid or not, they are forced to cancel things and to face so much voter backlash at that or increased rates. All the while the government looks much more like the good guy as they can just say ‘it wasn’t us who cancelled it’.

    The Auckland Council is probably large enough and has enough ‘experts’ that in most areas it can rival much of the government. If it really wanted to I think it could put up a pretty large fight but at the moment I feel they are trying the ‘lets ask nice’ approach. In terms of infrastructure.

    I think the best solution would be if the government just assigned the council a set amount of funding based on factors like population and growth projections and then left it to the council to decide how that money is spent. The region would then be responsible for maintaining and developing all existing infrastructure including things like the motorways. That way if the council wants to blow it all on a rail line and the voters agree with that then we should be able to providing we don’t go back for a handout. Of course the government would never go for this as they would lose to much control.

  3. Geoff says:

    I love the graphs in the report showing how the 2006-2010 stalling/reduction in road traffic volumes somehow manages to project an increase beginning in 2011. I think they must have just made up the projections, to justify the roading projects.

  4. KarlHansen says:

    Why even use the word “handouts” - which implies money one hasn’t earned, and shouldn’t really get?

    All this is paid for by MY taxes, or from the sales of MY state assets. NZ has a very centralised tax structure - so most money will always get funnelled through Wellington. Arguing that rail money is a handout while motorways aren’t, it’s blackest propaganda.

    Jon is very unlikely to have chosen this word intentionally, but I think the use is wrong, and where used intentionally, even insulting.

  5. AKT says:

    @Karl I just grabbed the word, no great philosophy behind its use here.

  6. Tony says:

    The NZTA standard PT funding model is for it to pay 50% of the PT operating subsidy with ratepayers picking up the other 50% . . . this is the model that bus and ferry PT services have been living with for many years. The previous model was government fund 60% operating AND 60% capital subsidies for all PT programmes.

    It was the previous Labour government that lowered government funding for bus/ferry operating subsidies to 50% and totally eliminated any government funding category for bus/ferry capital investments. They also left passenger rail on the previous model of 60% operating and 60% capital subsidies. This greatly helped ARTA and Wellington Regional Council to fund the major rail upgrades. (The Labour government actually funded 90% of most parts of the Wellington rail capital programme and provided an interest free loan to the GWRC for the other 10% !).

    This also means the bus services in these (and othe cities) are now the PT mode starved of capital investment.

    The fact the government is NOT changing the 60% funding of passenger rail operating subsidies shows an ongoing bias TOWARDS funding rail.

    The government is right to move to having all public transport government funded on a mode-neutral basis. Rail will STILL receives more government funding than bus or ferry services so I think railfans should count themselves lucky.

  7. Matt L says:

    Tony - That is actually incorrect, the government has already removed rail capex from the NLTF apart from what was already committed to, this was done as part of the 2009 GPS. Any new rail projects have to compete for money out of the general budget against things like education and healthcare.

    As for subsidies, rail subsidies are being reduced year on year so that they get to 50% regardless of any benefit they cause, i.e. the NZTA consider a rail trip provides more economic benefit than a bus trip as rail isn’t impacted by congestion like buses are.

    It should also be noted that PT OPEX funding has been effectively capped at 2009 levels despite the overall transport budget increasing


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