10 March 2015
Completing the Waikato Expressway including starting the Hamilton and Huntly bypasses and Longswamp section this year will realise important productivity and safety benefits for New Zealand, but begs the question why we dont accelerate more transport investment through debt funding major capital projects, says Stephen Selwood, Chief Executive of the NZ Council for Infrastructure Development.
This is one of the busiest sections of State Highway 1 linking the Auckland, Hamilton and Bay of Plenty regions. The Upper North Island has shown rapid growth over the last three decades and will comprise over 60 percent of the nations population and economic growth the future, yet it will have taken us almost three decades to complete the expressway which was first started in 1992.
Completion of the four lane expressway corridor will reduce travel times between Auckland and Tirau by up to 35 minutes; significantly reduce the number of fatal and serious injury crashes on one of the busiest stretches of the state highway network; increase the highway's capacity and passing opportunities; reduce traffic impacts and congestion within smaller communities like Huntly, Ngaruawahia and Cambridge; reduce fuel costs and contribute to economic growth.
Assuming a relatively high 6% discount rate, the benefit cost ratio (BCR) for the full corridor is 2.4 with economic benefits of $5 billion dollars exceeding costs of around $2 billion.
The completion of the strategic network will enable new commercial and industrial development adjacent to the highway including the recently consented Ruakura inland port at Hamilton.
All of these benefits could have been delivered much sooner if the expressway had been debt funded rather than relying on drip feeding capital investment on a pay as you go basis.
"This is the model that is being used to deliver Transmission Gully and is under consideration for the Puhoi to Warkworth Expressway to Northland.
It doesnt make sense to defer economically beneficial projects like the Waikato Expressway for want of capital, especially when investment in large projects forces a reduction in essential renewals and maintenance programmes, as is currently the case. It would make sense to debt fund more major capital projects and toll the roads to enable debt to repaid.
At a discount rate of 6%, any project with a BCR exceeding one is economically viable. But with a BCR exceeding two, the costs of delay in completion of projects like the Waikato Expressway vastly exceed the costs to borrow and toll.
While it is good to see this important strategic route finally proceed, it would make sense to enable debt funding of other transport projects, particularly those with strong economic development opportunities. This would free up the National Land Transport Fund for much needed maintenance and renewals work across the country and enable faster economic growth in the regions, Selwood says.