the Kingston flyer, Kingston NZ

Public Transport

by Bob Keall

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 maintenance.

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 sectors.

Local Example

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