KEY POINTS:
At the rate petrol prices have been rising for a while, an extra 10c a litre would hardly be noticed. But the tax that the Auckland Regional Council wants to levy on petrol sales in the region from next year should not be accepted without critical scrutiny of its purpose.
The council hopes Aucklanders will accept a "modest" fuel tax if it will provide better public transport, cleaner air "and a friendly city that is easier to get around". Translated, this means electric trains. The council wants to use the petrol tax to service a $630 million loan mainly to buy trains.
So the first question ratepayers should be asking is, do we need to own trains? Infrastructure Auckland, the businesslike body that was disbanded when public transport funding was transferred to an ARC subsidiary, strongly believed public money could be better spent on upgrading tracks, signals and stations, and the provision of trains could be left to the contracted private operator, which would probably lease them.
Leased vehicles are common in the commercial world for good reason. They are assets that rapidly depreciate and need to be frequently renewed. Public bodies do not need to worry as much about maintaining their asset value because they cannot go broke. They can run assets into the ground and raise taxes when they need to buy new ones.
The ARC wants to buy trains so that it can have the best that money can buy. It thinks a private provider would lease second best, which the council will label cheap and nasty and not much improvement on the old diesels that Auckland commuters have suffered for too long.
There is an easy solution. The Regional Transport Authority could invite bids from competing private providers and ensure it chooses one that is offering an acceptable standard of trains. It still might not be quite the standard of public transport planners' dreams, but there would be good reason for that: trains of that standard could not repay their cost.
Again, the ARC does not care. Spenders of public money do not need to ensure their capital purchases can recover their cost. But they should care about their cost of capital because large amounts of public money represent significant national resources, and the whole economy needs its resources to be invested for their maximum value.
The Government is far better attuned to this consideration than is the ARC. The Government is backing the Auckland urban railway upgrade but it is not buying trains. It prefers to spend money on tracks, electric power lines, signals and other fixed infrastructure. The Government stands to receive some of the Auckland petrol levy for these purposes and for road projects. But the ARC wants the bulk for trains.
Parliament has yet to pass the legislation permitting the regional petrol levy, but the ARC has begun the task of convincing Aucklanders to accept it. We may hear much more about the glittering electric locomotives that are envisaged to reduce traffic, clean the city's air and make it more "friendly" into the bargain.
All this for a mere 10c on a litre of petrol that has already risen by 40c in the past year - an extra 3c just last week. Motorists paying 179c for a litre of 91 octane now cannot begrudge the price of a 30-year loan for trains, can they?
They can, and should, question it. Would 30 years exceed the life of the trains? How bad would their depreciation be under public ownership long before we ceased paying their capital cost? Would they be provided free to a private operator? How much of their cost will passengers pay? The case for the petrol tax is not convincing yet.
