Improvements in investment efficiency

Currently, Transfund provides funding for approximately $325 million of new road investment each year. Local authorities invest a further $39 million of their own funds to attract Transfund's financial assistance for new road projects. Local authorities are also investing additional amounts to carry out unsubsidised improvements to their networks. It is estimated such investment could be in the order of $40 million to $80 million per year. Estimated gains of approximately $20 million to $55 million per year in the economic efficiency of such expenditure are possible under the changes within the next 5 to 10 years. These gains are anticipated to arise from better investment decisions, better road pricing, and the adoption of a commercial focus to road development. These gains do not imply a net reduction in the overall amount of investment in roads; they indicate more effective and focused investment.

By way of example, debate is now focusing on the need - or otherwise - for a second harbour crossing in Auckland. The cost is estimated in the Auckland Regional Land Transport Strategy to be between $250 million and $1,700 million. For every year the introduction of better road pricing and other measures could change transport patterns, and so delay the need for such a crossing, the savings at 10 percent would be between $25 million and $170 million.

Savings in maintenance costs

Currently, Transfund spends approximately $480 million each year on the maintenance of the road network. Local authorities spend an additional $220 million to attract Transfund's financial assistance. Significant gains have already been achieved in the actual cost of undertaking maintenance through competitively tendering work.

It is estimated that an annual saving of between $50 million and $100 million of these costs is likely with the adoption of a commercial framework and better road pricing. These savings are expected to arise primarily from better decisions relating to when and to what extent maintenance is undertaken, rather than from how the maintenance is undertaken, although further gains from this aspect are still possible.

Reductions in congestion costs

Changes in pricing are expected to lead to lower congestion. With appropriate congestion pricing, the net cost to users and the economy would be less than the net cost of users simply queuing in traffic.

Work recently commissioned by the Auckland Regional Council on the cost of congestion in the Auckland region estimated the total cost to be $755 million in 1996. Estimates of this kind are contentious and difficult to validate. However, if it is assumed that the use of congestion pricing reduced costs by only 5 percent to 15 percent of this figure, the expected savings in Auckland would be $40 million to $115 million per year. Benefits in Wellington have been roughly estimated from these figures to be of the order of $10 million to $20 million per year. Savings in administration costs

Further savings from the changes are likely to arise from reductions in administration costs with fewer entities. Unfortunately many local authorities do not specifically allocate in their accounts a proportion of their overheads to their road operations, so estimates are difficult to make. However, the current administration costs of roads are in the order of $50 million per year. A conservative estimate of the savings of reducing the number of road controlling authorities from the current 75 is $5 million to $10 million per year.

Adoption of the safety system

In 1996, road factors were a contributing cause to 15.5 percent of crashes involving fatalities and 9.1 percent of crashes involving injuries. The Land Transport Safety Authority has calculated the economic cost to society of such crashes as being $195 million and $330 million respectively, and in total $525 million. A safety regime that resulted in improved road quality is estimated to deliver, net of costs of construction and changes necessary to ensure compliance, between $25 million and $50 million, or 5 percent to 10 percent of the estimated cost.

Extra costs from new charging methods

New pricing systems would involve additional administration and compliance costs. If it is assumed that most users are operating a new charging system by 2010, then the additional costs could be in the order of $30 million to $50 million per year. Most of these additional costs would fall upon those paying Fuel Excise Duty now. Those on the Road User Charges system already face administration and compliance costs, and the replacement systems would be likely to have costs similar to the present ones, and possibly lower.

Administration costs of Corridor Management Agreements and other contracts

The negotiation and updating of Corridor Management Agreements between public road companies and local authorities would result in additional administration. So would the negotiation of other contracts between purchasers, local authorities and road companies. It is estimated that the development of such agreements and contracts could cost $10 million to $15 million and, once developed, such agreements could cost $1 million to $2 million per year to maintain.

Annualised restructuring costs

While rationalising the number of road entities would save costs, the corporatisation of Transit and Transfund and the transfer of local roads to road companies would also require additional expense. These one-off costs are estimated to be between $10 million and $20 million.

Additional safety costs

The development, approval and auditing of road service providers' safety management systems would also entail additional costs. Assuming five public road companies, the ongoing cost of implementing a safety management system is estimated to be $1.5 million per year. Meeting the standards is also likely to impose additional costs, but the 'safety at reasonable cost' requirement should constrain these. These additional costs have been incorporated into the estimate of the savings from adopting the safety system, and so need not be included again here.