Analysis: When Rodney Farm’N’Machinery was razed in a suspected arson last month, it took the fire engines a while to arrive. The business is in the village of Te Hana – Auckland’s northernmost outpost on State Highway 1.
Manager Devend Chandra is a bit of a jack of all trades: he’s a mechanic, he provides a towing service, and he rents out machinery such as a tractor, roller, digger and truck. He says he lost $20,000 worth of tools in the blaze, which weren’t insured. “I’m really feeling the pain.”
For him, yesterday’s news that the Government has signed a public-private partnership to deliver the first section of the Northland Expressway – Warkworth to Te Hana – is too little too late.
Cars and trucks speed along the road outside the front door of his business; it was a worry when his four kids were small, but they’re all grown up now.
At $3.65 billion, the expressway will be the most expensive road ever built in NZ. Local leaders say it’s the biggest investment in Northland since the high-voltage power cables were put through in the 1960s, but Chandra isn’t convinced the expressway’s planned opening – seven years away in 2033 – will shift the dial.
Some cars may turn off to Te Hana to get a bite to eat and use the toilets at Te Hana Café; most will probably continue on through to Kaiwaka and beyond.
Northland leaders, however, are far more upbeat. Kaipara Mayor Jonathan Larsen and Whangārei Mayor Ken Couper tell me they’ve been planning for this for years.
“A four-lane motorway coming right to the doorstep of the Kaipara District is absolutely huge for us,” says Larsen. “That’s the biggest thing I’ve seen happen from an infrastructure perspective in my lifetime.”
// Larsen drives through Kaiwaka on his way to work, and likes to stop at the Italian bakery there to pick up one of their famous long cream donuts, and a coffee.
“Kaiwaka is going to be the first stop out of Auckland, and so I’m really focused on making sure that Kaiwaka is going to be prepared for the growth that’s going to come. There’s going to be more traffic, and there’s going to be more people visiting, and so we need to make sure we’ve got the right infrastructure in place and the right facilities for travellers. Toilets, parking, all those key things to make sure that people do want to stop and shop and enjoy the place.”
It will trim seven to 10 minutes off the drive north. The mayors accept it will almost certainly be a toll road, meaning local motorists will contribute a “significant” portion of the cost of building it. Larsen hopes the toll will be less than $5. “I don’t think people will mind too much, to get a much superior road.”
Transport Minister Chris Bishop has signed an agreement with a group called the Northway Consortium to design, build, finance, maintain and operate the expressway through to 2058. It’s a new 26km four-lane expressway, with interchanges at Warkworth, Wellsford and Te Hana.
(The Wellsford interchange will be at Wayby Rd, which will be convenient for all the Waste Management trucks transporting Auckland’s refuse to the massive new landfill the company hopes to build there).
The expressway will feature 15 bridges, two underpasses, 12 wetland stormwater treatment basins, and 1km twin tunnels through Kraack Hill above the Dome Valley.
Public-private partnerships have been controversial, and some, like Transmission Gully, have ended up overdue, over budget and over in court as the builder, managers, financiers and the Crown sue each other.
But Bishop says this time, they’ve incorporated lessons from previous PPPs, including Transmission Gully, along with international best practice and market feedback. “This has included a more sophisticated approach to allocating risk, securing property and resource consents earlier, and establishing a stronger evidence base for setting affordability thresholds.”
He says the final project cost has a net present value of $3.65b. That’s $251m below the $3.9b public sector comparator approved by Cabinet last year, which estimates what the project would cost under traditional public sector procurement. “This PPP represents good value for taxpayers,” he says.
// So is this road good value for money? Bishop says yes. Every dollar invested is expected to return $1.60 in wider economic benefits to NZ.
To be fair, that’s better than the worst of the Roads of National Significance (the proposed motorway improvements through central Wellington have a benefit-cost ratio of 1.2) but it’s still not good. Not good at all. The Cambridge-to-Piarere expressway is expected to have about a 3-to-1 benefit-cost ratio.
Over the life of the Warkworth-to-Te Hana expressway, these benefits are expected to include 145 fewer deaths and serious injuries, 1000 fewer closure hours caused by unexpected events like severe weather, and removing 1000 heavy vehicles a day from the main streets through Wellsford and Te Hana.
The investment case adds up the current total value of a future stream of benefits, adjusted for inflation and risk. The first 20 years are discounted at 2 percent; the subsequent 40 years at 1.5 percent – placing greater weight on the long-term costs and benefits.
The NZ Transport Agency published the investment case yesterday. It shows almost all the projected benefits are from the seven to 10 minutes saved on travel time. The savings from fewer accidents are valued at just one tenth of the total benefits, and savings to vehicle operating costs and resilience benefits are negligible. The expressway will slightly worsen emissions.
The benefit-cost ratio would actually have been just 1.4, except that the agency has also factored in so-called wider economic benefits to push the number up to 1.6.
“Northland is one of the poorer-performing regions economically in NZ,” the report says. “Given its location next to NZ’s best-performing regional economic centre of Auckland, the economic benefits are considerable and could have not only regional significance, but also national benefits.”
The investment case admits it’s difficult to quantify these potential benefits, but suggests these could include improved land use, increased competition and increased labour supply.
The thing is, all these benefits have been calculated at new Treasury-mandated lower discounts. It’s more defensible to use the lower discount rates when you’re talking about the 1km tunnels, which would be expected to last a very long time, than it is to apply them to other aspects of the project.
“I am darkly amused that the people who pushed very hard for this kind of discount rate, thinking they’d get better climate policy, are getting more roads. I hope they are very happy with their success,” says NZ Initiative economist Eric Crampton. “At any normal discount rate (4 percent or 8 percent) the project costs more than it is worth even when wider economic benefits are taken into account.”
// As a dairy farmer who relies on getting the contractors in, and the milk trucks out, mayor Ken Couper is hopeful the gradual extension of the expressway will help the economy.
There’s now the hope, in Northland, that the railway may reopen and extend out to Northport, while the expressway eventually extends through to Whangārei – though there’s still no budget or timeframe for that.
Couper agrees with Chandra that it’s taking a long time; he admits it may not happen in his lifetime. “But these things take time. I think the important thing is that it’s going to be started. Chris Bishop has said that Northland has a load of potential there waiting to be tapped, and so that’s really good.
At the moment, he says, Northland is a net taker: “We contribute less than we get in grants and benefits and things like that. The cost of the way Northland is operating at the moment is not sustainable, and so part of this is saying, you have a responsibility to lift yourself up.”
Northland leaders understand that. “We are ready to respond to that and make sure that we are trying very hard in areas like education, areas like our council reform, looking for ways to make things better so that we actually can contribute. And I think that’s the signal the Government trying to to send, and the response they’re looking for.”
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