The Prime Minister’s announcement yesterday of the start date for the Auckland Central Rail Loop being brought forward to 2018 still the left the big question of how it will be funded unresolved.
Mr Key was adamant that the decision to start in 2018 instead of 2020 was not an answer to the pre-Christmas call from Reserve Bank Governor, Graeme Wheeler, for more infrastructure spending in Auckland to take pressure off monetary policy to avoid deflation.
Instead it seemed it may have been the need to resolve legal issues and provide certainty to two big office and retail developments planned for the bottom of Queen Street that may have provided the impetus.
But there are still three major unresolved issues:
- Who will own the underground loop
- How much the Government and the Council each contribute.
- How the Council will fund its share of the bill.
The issues are to be negotiated by Government and Council officials this year.
But Mr Key suggested the Government could be willing to fund about half of the $2.5 billion five year construction project.
However even though the start date has been pulled forward, the Government money will start to flow only in 2020.
But Mr Key said the Council had indicated this would allow construction of the Rail Link’s main works to start in 2018 – at least two years earlier than currently envisaged.
But the sticking point will be how the Council funds its $1.25 billion share of the bill.
Mayor Len Brown was adamant that the city needed the power to levy a congestion charge.
“Fifty seven per cent of Aucklanders last year through a pretty intensive consultative process said they would support a congestion charge,” he said.
“They will support a congestion charge because it helps to decongest; it gives people a choice of whether they go on the motorway or take public transport.
“And it will assist us, so that rather than utilising borrowings or unnecessary asset sales, it would raise funds to fund our transport investments.”
But the Prime Minister said he was lukewarm about congestion charges.
“What the Government has always said is that if the Council wants to put a further tax or charge on Aucklanders we are lukewarm,” he said.
“Because in the end it reduces the available disposable income of Aucklanders and it makes Auckland as a place to do business a little more expensive.
“But we haven’t ruled it out.
“We have said they would absolutely need to justify them so the Council as it goes through its processes will have to answer some pretty simple questions.
“How much will it need to fund from its rates; how much can it realistically fund through debt; what does the asset mix look like.
“It’s got lots of options it needs to consider.
“It needs to consider the way it manages its balance sheet the same the Government does.”
If all that wasn’t a heavy enough hint that the Council ought to consider borrowing against its assets or privatising some of them, then Cabinet member and Auckland Central MP, Nicky Kaye was much more blunt.
While she said she was open to the Council making a case for a congestion charge “the Council has more than $40 billion worth of assets”.
“There are levers available to them.
“It’s time now to get to the table and look at exactly how they are going to pay for the loop.
“They have got options; they’ve got assets; they’ve got rates and they’ve got other mechanisms.
“But if they can show that a congestion charge is justified, then good.”
Meanwhile Labour MP and Auckland Mayoral candidate, Phil Goff, has made not privatising strategic Auckland assets a central plank of his campaign.
However yesterday he congratulated the Government on its decision to bring the start date for the project forward.
Some construction on the loop could begin as early as this year.
Precinct Properties are expected to start work on their 39 story $6811 million Commercial Bay development adjacent to the bottom of Queen Street in June this year.
When that development is complete the downtown end of Queen Street is expected to house 10,000 office workers.
The Commercial Bay development will include two of the loop’s tunnels and is expected to be ready in 2019.
Mr Key suggested this was one of the reasons for bringing the star date forward.
“It’s become clear that we need to provide certainty for other planned CBD developments affected by the Rail Link,” he said.
“This means we see merit in starting the project sooner.”
And the Government has also brought the start date for the East-West connector forward.
This road from Onehunga to Penrose is a main route for trucks in Auckland traversing the city’s industrial corridor.
Mr Key said the Government was declaring it a route of national significance which meant that the RMA consent process could take no longer than nine months.
That would allow construction to begin in 2018.
Though Mr Key was adamant the Government had not made either decision because it wanted to stimulate the economy, Economic Development Minister Steven Joyce and Finance Minister Bill English were fast out of the blocks with a press release headed: “Infrastructure programme rich source of jobs”.
“The National Infrastructure Unit estimates, for example, that Roads of National Significance projects will involve around 35,000 construction jobs in regions like Northland, Auckland, Waikato, the Bay Of Plenty, Wellington and Canterbury,” they said.
“The Government’s current investment in Regional State Highway improvements is expected to result in a further 2100 jobs.”
However what Mr Key was not prepared to put any figures on was what these projects might do to the Government’s debt track.
“We’re going to have to have a look at that,” he said.
In many ways the rail loop decision was inevitable.
Ironically it was inadvertently floated in a table put out by Treasury six months ago which was then hurriedly withdrawn.
But regardless of the still unresolved policies there will be many Aucklanders just happy the days of them sitting still in their cars on the motorway may be coming to an end.