The issue here is not some woolly concern about buses and trains or boats and
planes. The issue is about access—whether by road, rail, water, air, pipes,
wires or airwaves. Any or all of them influence land values profoundly. Because
of this direct cost/benefit relationship the capital cost of the reticulation
and its maintenance must be met by a charge on the enhanced land values, spread
over say a 20 year period, thereafter generating a cashflow for other such assets,
building an inheritance for posterity. Local roads have been built in this way
and should continue so.
With the capital cost thus covered there is then scope for user charges i.e. your
private car on the road, bus fares or cartage charges; train fares or freight
charges; metered water; competitive market rentals for the use of wires or radio
spectrum, or at least, (in the absence of competition), a return on capital at the
current rate of interest. Neither Rates nor User Charges can cover the cost of both
the capital investment and the operation.
In the case of both roads and rail, if the capital cost were covered in this way,
cheaper fares and freight charges would relieve road congestion as between cars,
buses, trucks and trains, for both passengers and freight. As the charge is also
directly related to the area of benefit it avoids competing, arbitrary, contentious
allocations from a petrol tax which would abate accordingly.
In the case of wires the reticulation would best be done by a Regional Power/Network
Authority providing power cable and a fibre optic communications cable to the gate
with bandwidth rented to competing telephone, TV and IT operators. It would also
reduce the tiers in the electricity supply chain from 4 to 2 and ensure maintenance
and cheaper power, instead of dividends now to remote investors at the expense of
Providing the reticulation and its maintenance and recovering the cost from the
enhanced land values is a core government function—central or local. Loans
raised for these purposes are a traditional trustee security. Using or operating
the facility (competitively) is the private sector role, at market rentals. In
the absence of competition e.g. water, airports, the service should be supplied at
marginal cost. i.e. monopoly profits where there is competition or marginal cost,
whichever is appropriate.
The Special Infrastructure Land Value Rate for the capital cost and the maintenance
should be made tax-deductible to both commercial and residential payers or become a
charge against the property—at the Ratepayer's option. In some cases re-acquisition
of the privatised utility would be necessary—a small price to pay for rationalising
basic social needs across the country. In some cases the private investment of capital
could be left intact but with a Resource Rental for the monopoly element set off
against other taxes. A Resource Rent for a Resource Consent. A common experience,
here and abroad, is that privatised utilities are run down and have to be rescued by
the state e.g. British Rail, TranzRail, Enron Electricity in California, water supply
in U.K.. Dividends have been paid at the expense of maintenance. This would be highly
likely in the case of private toll roads reverting after a short "investment" term.
Apart from the unnecessary administrative complexity and higher charges to cover
dividends in the meantime. Any toll road, public or private, is another ruse by which
a multitude of monkeys pay peanuts now to benefit the property gorillas. Congestion
pricing unselectively hits those who cannot avoid it or afford it. The congestion
must be relieved by upgrading and integrating public transport (above).
The reality is that service utilities need the underpinning of a charge on the land
values they enhance in order to allow a viable operating cost. At the same time the
charge progressively secures to the community the enhanced value instead of capitalising
it for the speculator.
Toll Holdings are re-building a run-down rail and transport service for a rental, if
the Govt re-builds and maintains the tracks. Govt buy-back (since completed) of the
operation solves nothing. Likewise the Govt should recover Telecom's unbundled Local
Loop for market rentals to competing operators. Thus we would all share in the free
market instead of being robbed by it.
The place for the private operator is in the delivery of services. Ownership of the
monopoly rights is the province of local and central government. Recognising this
neatly resolves the political conundrum confronting us of defining public/private
property and establishes the proper partnership between the public and the private
About 1995 the then Auckland Regional Services Trust, now Infrastructure Auckland, with
its interest in "Ports of Auckland", etc demonstrated that communally owned natural
monopolies and infrastructural assets can make a valuable contribution to major community
projects. We should build on that example not plunder it.
In 1998 Rt. Hon. Helen Clark advocated that the principle be extended to include transport,
airports, water and electricity.
Currently, Telstra Clear has consent from the Auckland City Council to reticulate "New Zealand's
first national full service broad band network - the only system able to carry a full range
of telephone, data, internet, mobile and cable television services to business and residential
customers". (New Zealand Herald 30.1.02).
All the above functions should be co-ordinated and undertaken by the Auckland Regional Council,
in line with Helen Clark's perception, and the principle applied to Local Government across the country.
These are core local government functions and would add to our heritage for posterity.
The co-ordinated reticulation should be financed (as in the past for roads, water and sewerage) by
a combination of:
- a Special Infrastructure Land Value Rate
- loan money (an intergenerational sinking fund)
- a Special Rate for an area of special benefit - as in flood control
- Infrastructure Auckland
- a Resource Rental paid by operators