Next Steps in the Land Transport Review 30 April 2007
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Next Steps in the Land Transport Review
30 April 2007
1Table of Contents
Executive Summary …………………………………………………………………………….3
About the Report………………………………………………………………………………...8
Land Transport Sector Today………………………………………………………………….10
Issues Identification…………………………………………………………………………....14
Next Steps for the Land Transport Sector……………………………………………………...19
Implementation………………………………………………………………………………...41
Summary Assessment………………………………………………………………………….44
Recommendations……………………………………………………………………………...45
Appendices……………………………………………………………………………………..51
2Executive Summary
Purpose
1 The Ministers of State Services, Finance and Transport asked the State Services
Commission to lead a multi-agency review of the land transport sector in February 2007.
The Review was one of the Government’s responses to the findings in the report from the
Ministerial Advisory Group on Roading Costs, 2006.
2 The Next Steps in the Land Transport Sector Review (Next Steps) Report outlines
officials’ analysis of the machinery of government, governance and funding
arrangements for the land transport sector. It makes recommendations to the Ministers of
State Service, Transport and Finance on proposed changes to the government land
transport sector in terms of investment planning, funding and structure with a view to
enhancing agency responsiveness, performance, capability and value for money.
Context
3 The land transport sector is complex. There are a high number of stakeholders and the
scale, cost and multifaceted nature of infrastructure projects has increased dramatically in
recent years. In addition, the sector has been subject to much change and is still adjusting
to a new operating environment.
4 Transport sector infrastructure is critical to the transformation of the New Zealand
economy and the movement of people and goods impacts profoundly on the nation’s
health, lifestyle, sustainability (environmental and economic) and public safety.
Government agencies must be able to respond to changing Government priorities over
time as well as deliver the desired outcomes and benefits cost effectively.
5 The land transport sector has been reviewed a number of times in recent years. Many
improvements have been made, but there has been an on-going concern that it is: not
fully achieving value for money; not fully delivering on the New Zealand Transport
Strategy (NZTS); not fully delivering on the Government’s wider agenda e.g. economic
transformation and sustainability; not sufficiently responsive; and creating ongoing fiscal
risk for the Government.
6 The Review has identified a number of underlying causes including:
• gaps in the interpretation of the NZTS objectives;
• the Ministry has yet to acquire sufficient capability to fulfil the leadership role
envisaged by the Government Transport Sector Review in 2004;
• expenditure pressures that are not being addressed strategically;
3• the roles of some Government agencies remain unclear, and some functions are
duplicated;
• inconsistent planning and funding policies distort incentives within the sector; and
• inefficient churn in planning and limited sector collaboration fail to align central,
regional and local land transport plans.
7 This Report concludes that a lack of sector collaboration and integration underpins many
of the issues present in the sector. The lack of role clarity, sector leadership, and
common expectations about how the sector should engage has helped perpetuate a
fragmented sector culture.
8 These concerns and issues have been endorsed consistently in stakeholder conversations
during the review.
Proposed Next Steps
9 Consistent with the Terms of Reference, the Review has focused on current and
improved machinery of government, governance and funding arrangements for the land
transport sector.
10 A package of measures is recommended, which would require legislative change.
Planning and Funding
11 The Review concludes that the most urgent issues to address relate to land transport
sector planning and funding. Therefore, it recommends measures to improve land
transport decision-making and funding that build on the current system and previous
reviews.
12 Useful improvements, in terms of sustainability and balance between transport modes,
could be made through more integrated decision-making, and if the Government and
government agencies provided more guidance to the sector. It is also recommended that
Government should determine the appropriate balance between different classes of
activities.
13 Lower compliance costs should also result if the current consultation and paperwork
churn could be reduced.
14 Key points to note in the planning and funding proposals are that:
• legislative change would be required;
4• statutorily independent decision-making would be retained for individual
activities/projects;
• more explicit guidance on the Government’s funding priorities would be provided
for the land transport sector through two published documents:
- “Implementation of the New Zealand Transport Strategy” - currently under
development by the Ministry and due in March 2008; and
- a Government Policy Statement with a six year outlook and a three-yearly
update process;
• activity class ranges and associated Fuel Excise Duty and Road User Charge levels
would be determined through clear processes as part of the Government Policy
Statement settings;
• all land transport plans would be produced every three years rather than annually;
• regional councils, probably through their Regional Land Transport Committees,
would become responsible for prioritisation of all land transport activities,
including State highways, within their Regional Land Transport Programmes;
• separate consideration could be needed for Auckland; and
• all consultation on activities that would be funded through the National Land
Transport Programme would take place at regional level. Therefore, Approved
Organisations, including Transit NZ, would no longer be required to consult
separately on their Land Transport Programmes. All revenue raised from Fuel
Excise Duties would be directed into the National Land Transport Fund - this
would usefully demonstrate to road users that road charges are being used for, or
match the level of transport investments.
Sector Structure
15 From the outset of the Review, it has been apparent that the transport agencies needed to
work more collaboratively and with a common purpose. The Review notes that the many
levers of Ministerial influence over the Government agencies in the land transport sector
could be utilised more effectively to support this collaborative approach.
16 The report states that the proposed changes to the planning and funding system would
address most of the issues facing the sector. Their implementation would require
changes to the configuration of the current roles, functions and nature of the Government
institutions in the sector.
17 The subsequent question addressed was whether the changes would go far enough,
especially in terms of the signals sent to the sector about the required changes in
expectations, behaviour and approach.
18 The Review considered a number of structural options in detail. Two viable options
emerged as the most appropriate – the first would retain the existing three agency model,
but with the required changes to their roles and functions, while the other would merge
the two Crown entities to form one land transport agency.
519 The Review concludes that both options are viable. However, on balance it recommends
the more significant structural change to disestablish Land Transport NZ and Transit NZ
as separate agencies and merge their new functions into a new statutory Crown entity
(which would retain the statutorily independent functions currently held by Land
Transport NZ).
20 The factors considered against the merger included the possible loss of transparency,
making it more difficult for the Ministry of Transport to carry out its role as the
Minister’s adviser, and a likely perception by some stakeholders of bias in favour of
State highways in the funding allocation (despite measures to limit that possibility). In
addition, a merger could be seen as coming too soon after the 2004 restructure, and
therefore providing insufficient time for the more difficult, “soft wiring” behavioural
changes to have become the norm.
21 The reasons for the Review’s preference for a merger include the following:
• the benefits of integration would be greater than the benefits of retaining separately
focused entities;
• one Crown entity would be required to consider all transport modes and activities
and ensure that appropriate trade-offs are made;
• one Crown entity would be accountable to the Minister;
• one Crown entity would be required to focus on cost-effective delivery of its
activities; and
• one Crown entity should facilitate more easily the transition, over time, to the fully
implemented new planning and funding arrangements.
22 The report emphasises that the success of the proposed changes to roles and
responsibilities across the agencies would be influenced by the membership of the Crown
entity board and its operation. For example, it may be appropriate to require the
establishment of one or more board sub-committees.
23 Irrespective of other outcomes, the Review considers that the Ministry must fulfil its
envisaged sector leadership role and enhance its capability. In addition to the proposed
changes to the land transport Crown entities, a number of key roles and responsibilities
are recommended to transfer to the Ministry. To this end it would quickly need to boost
its capability in key areas to negate any need for other agencies to fill a vacuum.
24 A collaborative culture needs to be embedded throughout the Government land transport
sector. The proposed new planning and funding arrangements and the proposed merger
of the current two Crown entities to establish new institutional arrangements would
contribute to this.
6Implementation Requirements and Risks
25 The proposals outlined above represent the next steps for the land transport sector and
will take considerable effort to implement successfully. Implementation aspects include:
• communication
• legislative changes
• roles and functional clarification and changes
• structural changes
• costs/resources
• timing.
26 Implementation arrangements will need to remain active for at least the next 18 to 24
months. It is recommended that an Implementation Steering Group, led by the Chief
Executive of the Ministry of Transport and supported by a multi-agency team, drives
these arrangements. Regular reports on progress are recommended to be made to the
Ministers of State Services, Finance and Transport.
7About the Report
27 This section outlines the Terms of Reference for the Review, how it was undertaken,
and pertinent background. The following sections describe the land transport sector
today, issues facing the sector, proposals for change in the sector, and what would be
involved in implementing those changes. The last two sections summarise the assessment
of the proposals in the context of the Terms of Reference, and detail the
recommendations.
About the Review
Terms of Reference
28 The Next Steps project was required to report to the Minister of State Services, Minister
of Transport and Minister of Finance by 30 April 2007, with recommendations to
improve the performance of the land transport sector (“the sector”) through addressing
investment planning, funding and structural issues. The project considered the
performance, roles and responsibilities of the Ministry of Transport (“the Ministry”),
Land Transport NZ, Transit NZ and the Treasury (with regard to Rail). The interface
with regional councils and territorial authorities (“TAs”) was also considered. The terms
of reference are attached as Appendix A.
29 The project was asked to:
• consider ways to enhance the responsiveness, performance, capability and value for
money of the sector;
• review the range of funding mechanisms currently in place and consider ways to
better link demand and expenditure and effect improvements consistent with
accountability requirements; and
• consider the best placement of policy, planning and procurement functions to fit
with the NZ Transport Strategy (“NZTS”) and any new funding and planning
regime.
30 The Review was required to ensure that any proposed changes are financially sustainable
for the sector and would not result in a structural imbalance or bias between transport
modes or communities of interest.
The Review
31 The Review was undertaken in conjunction with the Department of the Prime Minister
and Cabinet, the Treasury, and the Ministry. Each was represented on the Steering
Group for the Review. Each agreed with the recommendations.
832 A number of stakeholders were invited to have input into the Review. The Review
benefited from their contributions.
Background
33 Next Steps follows the 2004 Government Transport Sector Review which identified the
problems of the transport sector as: lack of leadership by the Ministry; less than ideal
placement of functions; poor alignment of the enabling legislation of the safety agencies
with the NZTS; lack of collaboration within the transport sector; and poor policy
development resulting in advice that is often unsatisfactory.
34 The 2004 Review recommended:
• softwiring the transport sector through Ministerial mandate for collaborative action
and behaviours, under the strategic leadership of the Secretary of Transport.
Strategic leadership for sector policy development was assigned to the Ministry and
the role of the Crown entities’ boards in policy development processes was
clarified;
• transferring selected functions within the transport sector to improve alignment and
integration;
• amending the enabling legislation of the Civil Aviation Authority and Maritime
Safety Authority to address administrative improvements, allow consideration of
wider NZTS objectives and enable functions to be transferred; and
• creating a new organisation to undertake the activities that would remain in
Transfund and the LTSA following functional transfers.
35 In the period since the 2004 Review expected improvements in the land transport sector
from its recommendations have occurred only slowly. The sector continues to create
ongoing fiscal risk for the Government, is insufficiently responsive, is not delivering
adequately on the NZTS (nor the Government’s wider agenda, e.g. sustainability), and is
failing to achieve sufficient value for money.
36 The underlying causes of these issues are:
• gaps in the interpretation of the NZTS objectives;
• the Ministry has yet to acquire sufficient capability to fulfil the leadership role
envisaged by the 2004 Review;
• expenditure pressures are not addressed strategically;
• the roles of some government agencies remain unclear, and some functions are
duplicated;
• inconsistent planning and funding policies distort incentives within the sector; and
• inefficient churn in planning and limited sector collaboration which fails to align
central, regional and local plans.
9Land Transport Sector today
Planning and Funding
Complex Sector
37 The land transport sector is complex. It has a wide range of stakeholders, which include
Ministers, the Treasury, the Ministry of Transport, Land Transport NZ, Transit NZ,
regional councils, Territorial Authorities (TAs), Auckland Regional Transport Authority
(ARTA), transport operators and the wider community. There are also various
components to the transport system including State highways, local roads, railways,
passenger transport, walking and cycling and coastal shipping which compete for
funding.
38 There is a detailed and complex decision-making framework which aims to ensure that
both national, regional and local priorities are taken into account and that the wider
community’s views are represented. The Government’s New Zealand Transport Strategy
(NZTS) provides the overall vision and objectives for the sector. The Land Transport
Management Act (2003), along with a raft of other legislation, sets out the framework
and complex processes by which the sector must operate.
39 The key planning and funding processes are set out below. This is followed by a
description of the key central Government agencies. The planning and funding
processes, along with the current roles, functions and structure and institutions of the
sector are described in greater detail in Appendix B.
Planning
40 The NZTS provides the overall context in which the planning and funding system
operates, by setting out the Government’s vision and objectives for the sector. These
objectives are set at a broad overarching level. The vision and objectives are
incorporated into the Land Transport Management Act 2003 (LTMA). This means that
both central government agencies and regional councils and territorial authorities (TAs)
must take these objectives into account when making decisions.
41 Land Transport NZ is responsible for deciding which land transport activities will receive
funding. Each year Land Transport NZ prepares the National Land Transport Plan
(NLTP) which sets out the list of activities it is prepared to consider for funding
throughout the coming year. This is a statutorily independent function.
42 Land Transport NZ produces the NLTP by considering funding requests for specific
activities submitted by Approved Organisations, such as regional councils, TAs, the
ARTA and Transit NZ. These requests are set out in each Approved Organisation’s Land
Transport Plan (LTP). Individual requests are received from around 80 Approved
Organisations. Land Transport NZ uses an extensive and detailed funding evaluation
10policy to prioritise these proposals. This policy is set out in a range of manuals and is
complex.
43 In addition to the NZTS objectives, when preparing LTPs, Land Transport NZ and
Approved Organisations must also take into account relevant Regional Land Transport
Strategies (RLTSs). They are also required to consult with the community to a specified
standard.
44 Activities funded include State highway construction and maintenance, local road
development and maintenance, passenger transport services and infrastructure
development, road policing and educational activities. State highways and road policing
are fully funded by Land Transport NZ while other activities receive varying levels of
funding. The remainder of the funding comes from councils, and directly from the Crown
(see later).
45 Agencies are responsible for different activities. For example Transit NZ is responsible
for State highways, while TAs are responsible for the local roading network. Regional
councils are responsible for planning and funding passenger transport operations, while
TAs are responsible for some key infrastructure aspects of passenger transport (e.g. bus
lanes). Land Transport NZ is responsible for assisting regional councils and TAs to
coordinate and plan across modes. Transit NZ has also taken a key role in the planning
process. – both in terms of planning State highways and involvement in land-use
planning.
46 The rail sector sits largely outside the LTMA framework with only urban rail passenger
transport and some infrastructure expenditure for passenger transport being planned and
funded under the LTMA framework. The majority of rail infrastructure is funded directly
by the Crown.
47 Finally, special arrangements apply to the Auckland region. The Auckland Regional
Transport Authority (ARTA) is responsible for planning, funding and developing an
integrated, safe, responsive and sustainable land transport system. Unlike TAs in other
regions, Auckland TAs cannot receive funding directly from Land Transport NZ. Instead
funding is allocated to ARTA, which submits and coordinates an LTP covering
passenger transport, local roading and local maintenance and construction.
Funding
48 The total amount of funding allocated through the NLTP is some $2.4 billion per year.
Funding is traditionally sourced from road users through a portion of Fuel Excise Duty
(FED), charges on diesel and heavy vehicles (Road User Charges – “RUC”), and motor
vehicle registration and licensing fees. While the Crown controls the amount of money
that goes into the National Land Transport Fund (NLTF) by setting the overall levels for
the various user charges (FED/RUC), the amount collected depends on economic activity
and changing patterns of fuel consumption. Currently, only a portion of the FED is paid
into the NTLF.
1149 Since 2004/05 the Crown has provided additional funding from general taxation either in
the form of top-ups or appropriations for specific regional needs. In 2006/07 Crown
funding of $608m makes up approximately 25% of total funding.
50 Decisions on FED and RUC levels and the amount of Crown funding to inject into the
NLTF have tended to be driven by particular funding pressures. Funding is categorised
into National, Regional and Crown (N, R and C) funding, each broadly targeted at
different transport issues and programmes.
51 Local roads are the responsibility of TAs and are co-funded by Land Transport NZ, and
TAs from rates and other revenue sources such as parking fees. Land Transport NZ’s
Financial Assistance rate (FAR) for maintenance varies across TAs and is approximately
50% while the FAR provided to each TA for construction varies.
Roles and Functions and Institutional Arrangements
52 The current roles and functions of the Treasury (as adviser on transport), the Ministry,
Land Transport NZ, Transit NZ and ONTRACK (currently a State-owned enterprise, but
proposed to be a Crown entity), are set out below. More detail is provided in Appendix
B.
The Treasury
53 The Treasury is a Public Service department and central agency. Its core role is as the
Government’s principal adviser on economic and financial policy. It has three key
specific roles in the sector:
• lead agency for the current commercial negotiations on the Rail Network Access
Agreement;
• Vote Finance administration of funding for ONTRACK and certain other sector
infrastructure investments; and
• adviser on Crown infrastructure investment, including rail infrastructure.
Ministry of Transport
54 The Ministry is a Public Service department with four key roles in the sector:
• lead adviser to Government on the transport sector;
• provider of strategic leadership and international representation;
• agent for the Minister of Transport with regard to sector Crown entities; and
• administrator of the NTLF on behalf of the Crown.
12Land Transport NZ
55 Land Transport NZ is a Crown entity with three key roles:
• allocate and manage funding for land transport infrastructure and services;
• manage access to the land transport system through licensing, registry and related
regulatory enforcement functions; and
• provide land transport safety and sustainability information and education.
Transit NZ
56 Transit NZ is a Crown entity charged with building, maintaining and operating the
national State highway network.
ONTRACK
57 ONTRACK is a State-owned enterprise charged with owning, maintaining and managing
the national railway infrastructure. ONTRACK is scheduled to become a Crown entity
with the enactment of the Rail Network Bill.
Ministerial levers of influence over Crown entities
58 As Crown entities, Land Transport NZ and Transit NZ are legally separate from the
Crown and operate at arms-length from the Minister of Transport. Land Transport NZ
has a number of statutorily independent functions that it carries out free from Ministerial
influence, in particular approving activities in the NLTP.
59 Despite the formal separation between the entities and the Minister of Transport, there
are several important avenues available to the Minister to influence the entities’
performance and operations. These mechanisms are detailed in Appendix C.
13Issues Identification
60 The issues identification drew heavily on related recent reviews (EXG Review of Value
for Money in the Land Transport Sector, Ministerial Advisory Group on Roading Costs,
and Ministry of Transport Review of Business Processes and Work Flows) which
focused on matters relevant and complementary to the scope of the Next Steps Review.
Planning
Strategic gap
61 There is a ‘strategic gap’ between the vision and the broad objectives in the NZTS and
their implementation through the NLTP. The NZTS objectives are too high-level, lack
specificity and do not contain measurable targets. They do not provide sufficient
guidance for decision-making and, in particular, how to prioritise funding decisions or
activity selections across the land transport system.
62 The ‘strategic gap’ results in the NLTP being a collection of activity classes and projects,
rather than a land transport programme with a truly strategic focus. Other agencies have
stepped in to fill the ‘strategic gap’ (e.g. Transit NZ has taken de facto responsibility for
State highway strategies) resulting in confused accountabilities and roles.
63 There is also a lack of clarity regarding the inter-relationship between the NZTS
objectives and whether and how they may need to be weighted or traded-off against each
other. Approved Organisations have commented that they are unclear about how they
should take account of the five NZTS objectives and how they can establish whether they
have chosen the ‘right’ projects for funding. This lack of clarity results in a weak
alignment of national and regional needs and processes.
64 There is a need for national objectives to be clearer and guidance regarding how the
NZTS objectives should be used in decision-making and weighted. There is a need for
measurable sector targets and performance measures to be developed.
Barriers to effective regional planning and prioritisation
65 Decision-making at the regional and local levels is fragmented and there are tensions
between local and regional interests that are not always managed well through current
processes. This can result in a lack of effective prioritisation across regions.
66 RLTSs in their present form may not be an adequate tool to assist regional councils
through Regional Land Transport Committees (RLTCs),in making tradeoffs between the
priorities of TAs. RLTSs tend to be aspirational documents, and set out what a region
would like achieved rather than what is possible within current funding, policy
parameters and the region’s rating base. As a result, RLTSs can include demands in
14excess of available funding. There is no requirement for RLTSs to include a list of
priorities for the region.
67 The political nature and structure of RLTCs may also be hindering effective regional
prioritisation. In trying to be representative some RLTCs are large and unwieldy and
may not be appropriately balanced for effective decision-making. The accountabilities of
RLTC members are mixed with some concerns that those who do not represent agencies
that have funding responsibilities have voting rights on the recommended projects.
68 There is a need for good regional prioritisation processes and an effective body along the
lines of RLTCs to undertake this role.
Balance between national and regional priorities
69 There is a lack of balance between national and regional priorities. This has been
exacerbated by a lack of top-down strategic direction and as a result planning decisions
are frequently driven from the bottom-up. Land Transport NZ has noted that it can only
consider projects that have been submitted to it by Approved Organisations (it cannot
itself direct Approved Organisations to put forward certain projects).
70 The separate consultation on the State Highway Programme also tends to create
expectations and stakeholder support for State highway projects at the local level. That
support is exacerbated by the funding arrangements that mean that there is no local
contribution to State highway projects. This means that Land Transport NZ’s ability to
filter projects is constrained.
Frequency of planning
71 A planning cycle of one year does not provide sufficient certainty and is too short for the
development of a NLTP, which is expected to have a strategic focus.
72 There are extensive consultation requirements on Approved Organisations with
associated compliance costs on them. There is also potential duplication on consultation
around State highways.
73 There is a need to rationalise and streamline the planning process.
Lack of robust evaluation including focus on value for money
74 There is no specific requirement to evaluate and report on the effectiveness of the NLTP
as a whole, and therefore it is difficult to determine how effectively the NZTS objectives
are being met.
75 There is insufficient consideration of factors such as:
• cost-effectiveness in the evaluation of projects;
15• value for money indicators in the performance monitoring system resulting in a
lack of focus on evaluating major projects and monitoring scope and cost;
• transparency in Land Transport NZ’s funding allocation process; and
• emphasis on cost-efficiency in the LTMA.
Funding
Fiscal risks and system distortion
76 Recent Crown funding injections (i.e. revenue and State highway guarantee) have
provided additional funding. However they have confused accountabilities and resulted
in increased fiscal risks for the Crown. These risks include an expectation that cost
increases will be funded by the Crown rather than from existing revenue.
77 The Crown funding injections have also resulted in:
• less integrated decision-making across modes and activity classes; and
• blurred accountabilities for Land Transport NZ.
78 There is a need for separate processes for the management of Crown funding outside of
the NLTF in order to ensure greater accountability and transparency.
Distorted incentives
79 There are a number of incentives that distort the effectiveness of the planning and
funding system and affect tradeoffs being made. These incentives include:
• State highway development being favoured by councils over other activities
because State highways are 100% funded and require no local share;
• the Government’s cost guarantee for State highways does not incentivise Transit
NZ to achieve efficiencies; and
• as a large, well-resourced organisation with a single focus, Transit NZ is able to
have a stronger influence in the planning processes than is appropriate for its role.
80 These incentives result in insufficient trade-offs between modes (e.g. between
expenditure on State highways and passenger transport). There is a need for enhanced
ability for making trade-offs across modes, and correct incentives.
Roles
Unclear roles and accountabilities
81 The roles of the Ministry, Land Transport NZ, and Transit NZ and how the agencies
should engage with each other are unclear. Councils comment that they are unclear of
16the Ministry’s role and consider the Ministry to be less visible than Transit NZ and Land
Transport NZ. The EXG review reported that TAs consider the Ministry’s low visibility
is due to its lack of engagement with the sector and communication on key policy issues.
82 Role confusion is heightened by the role the Treasury plays in respect of rail, the
tendency for Transit NZ to step in to fill the ‘strategic gap’, and no shared view about the
degree to which Land Transport NZ should review and evaluate projects. Regional
councils have commented that they are unclear which central Government agency they
should engage with on funding and planning matters.
83 Working relationships between agencies are variable and inconsistent. There is a lack of
information sharing and consistent engagement at an early stage on areas of common
interest, and insufficient consideration given to the impacts of operational policy
decisions on strategic policy (and vice versa).
84 These unclear roles result in:
• a lack of clarity between the Crown entities and the Ministry as to the inter-
relationship of strategic and operational policy;
• Ministers receiving inconsistent or conflicting advice;
• multiple engagements within the sector, and overlapping/duplicated work effort;
• Crown entities focusing resources on ‘backfilling’ the strategic policy gap rather
than their operational roles; and
• rail decisions policy not being integrated with other modes.
85 One key reason for both the confusion over roles and the lack of effective working
relationships is that the Ministry is not yet fulfilling a strong policy or sector leadership
role. The lack of effective monitoring and reporting on Crown entity performance by the
Ministry has also perpetuated unclear roles and sector objectives.
86 There is a need for greater role clarity. There is also a need for the land transport Crown
entities to focus clearly on their respective roles and for the Ministry to fulfil its role of
providing of strategic policy advice, leadership and monitoring the overall land transport
sector. Sector performance could also be enhanced by Ministers fully using the levers
available to them (e.g. accountability documents, board appointments) to hold the land
transport agencies accountable for delivering their roles, and to improve responsiveness
and alignment between policy and operational actions.
Capability
Capability gaps
87 The NZTS and the 2004 Government Transport Sector Review required the sector,
particularly the Ministry, to improve and build capability in a number of new areas (e.g.
sector leadership and strategic policy). The recent review of the Ministry has highlighted
17that, although some progress has been made, significant capability gaps have not been
addressed.
88 For example, the review of the Ministry states that: “some key functions are undervalued
or absent: strategic policy (integrating economic, environmental and safety, and access
and social perspectives to form an overview of the transport sector, and applying this
consistently to policy development to ensure alignment with sector outcomes)”. The
review also noted that: “Almost certainly, existing MoT staff do not have all the
knowledge, skills and experience necessary to fulfil this function, and further staff
development and/or targeted recruitment may be necessary”. The review of the Ministry
also identified capability gaps related to sector monitoring and integrated, cross-ministry
approaches to wider transport policy issues.
89 The Ministry needs to ensure it addresses existing capability gaps.
Sector Culture
Lack of sector integration and collaboration
90 Lack of sector collaboration and integration is a problem underpinning many of the
issues present in the sector. The lack of role clarity, sector leadership, and common
expectations about how the sector should engage has helped perpetuate a fragmented
sector culture. As a result, there is mistrust and ‘competition’ amongst the agencies. The
agencies are individualistic and act independently. A similar conclusion was reached in
the 2004 Government Transport Sector Review.
91 There is need for agencies to become less individualistic and independent and act more
as a ‘transport team’ working with a common purpose and shared outcomes under the
NZTS. Importantly, there is a need to be more specific about the type of collaboration
expected, (e.g. collaboration for agreement/consensus building; collaboration meaning
supporting each other and being open and communicative) how this should be achieved,
and for these expectations to be sanctioned in accountability documents.
18Next Steps for the Land Transport Sector
Planning and Funding
Introduction
92 The proposed planning and funding system outlined below aims to address the
issues identified in this Review by establishing a new strategic framework for the
land transport sector:
• providing clear direction on the Government’s funding priorities over a three
year period – this substantive guidance to Land Transport NZ and Approved
Organisations will guide decision-making, and contribute to the achievement
of the longer-term goals of the NZTS;
• enabling national and regional interests and priorities to be managed and
integrated within a coherent framework;
• clarifying and improving accountability for decision-making at all levels;
• improving the linkage between those who pay and those who benefit from
and cause the expenditure; and
• reducing the fiscal risk to government.
93 The proposal includes some immediate measures to be taken to improve land
transport decision-making and funding. It builds on the current system and previous
reviews. The proposal is also largely consistent with and builds on measures that
the Government has already put in place (such as the funding update process).
94 These measures are envisaged as part of an on-going process of refining and
improving how the land transport planning and funding system works. In addition
to this Review’s core proposals, some topics for further work are suggested.
95 The key changes that are proposed to the current system are:
• more explicit guidance on the Government’s funding priorities for land
transport over the medium and longer term. This guidance will be provided
through two documents:
• “Implementation of New Zealand’s Transport Strategy” (INZTS) currently
being developed by the Ministry; and
• a Government Policy Statement (GPS) with a six year outlook and a three-
yearly update process;
• the NLTP will be developed on a three-yearly, rather than an annual basis;
19• all land transport funding proposals (from councils and the State highway
agency) must first be prioritised at the regional level (through RLTCs or
similar bodies) and included in a Regional Land Transport Programme
(RLTP), in order to be considered for funding;
• consultation will no longer be required on the State Highway Forecast: this
will be incorporated into the consultation process undertaken on RLTPs;
• the Ministry’s role will be enhanced to include advice to the Minister on the
Land Transport Agency’s (see later) evaluation process and monitoring of
specific activities;
• FED and RUC will be fully hypothecated to the NLTF ; and
• because the NLTF will only include revenue from user charges (FED and
RUC), any Crown funding used to fund land transport activities, will require
a separate process to provide clear accountability to Ministers for the use of
this funding.
Planning
Government policy statement
96 As noted in both the EXG and MAG reviews, greater guidance is needed for the
decision makers in the land transport system on the NZTS and how the high-level
objectives contained in the NZTS can be achieved. The INZTS, which is being
prepared by the Ministry, will provide greater guidance to the sector with a
medium-long term focus. In addition, it is proposed that there be a new statutory
document to establish the Government’s short term funding priorities, funding
levels, and FED and RUC levels. This would be in the form of a Government
Policy Statement (GPS) revised every three years.
Three-yearly review
97 As part of the process for developing the GPS, every three years land transport
funding would be reviewed to:
• determine whether funding and the balance between activity classes and
short-term priorities are sufficient to achieve the objectives outlined in the
NZTS and INZTS; and
• provide an opportunity for the Government to highlight any particular land
transport priorities it wishes to focus on for the next few years.
2098 This three-yearly review would build on the process developed for updating the
NLTP revenue guarantee and State Highway Plan cost guarantee. The key
difference is that the three-yearly review would result in a formal GPS which would
provide concrete guidance to the sector.
99 An Issues, Trends, and Options Report would be developed by the Ministry in
consultation with the Land Transport Agency for Cabinet consideration.
100 Following Cabinet’s consideration of the Issues, Trends, and Options Report, the
Ministry would develop the GPS for Cabinet sign-off. The GPS would outline:
• Government’s funding priorities;
• the proposed range within which each activity class would set; and
• FED/RUC levels for the next three years.
101 It is proposed that the document be statutory and published. Central Government
land transport agencies would be required to give effect to the GPS, and regional
councils and TAs to act consistent with it. Further work is required on the precise
legislative nature of the GPS.
102 The GPS would cover a period of up to six years and would be reviewed every
three years, or at the Government’s discretion.
National Land Transport Programme
103 It is proposed that the NLTP be retained. The NLTP would outline the activities
that will be funded within expected funding levels and that are considered to best
contribute towards achievement of the desired outcomes. It is proposed that the
Government remain separate from any decision-making on individual activities.
Therefore, the NLTP would continue to be developed at arms-length from core
Government.
104 Further, it is proposed that the NLTP be produced every three years rather than
annually and be required to outline how the proposed set of activities will help
achieve the priorities in the GPS. This will help provide certainty on what activities
are likely to be funded over the next three years and reduce the constant churn of
consultation and document development that currently exists.
21Funding
105 New Zealand’s land transport funding system was established as predominately a
road user funded system. The recent Crown injections have weakened the link
between those who benefit from and cause the expenditure and those who pay. The
mixed funding sources have also caused accountability difficulties. It is proposed
that the funding of land transport activities return to being more tightly linked to
road use. This proposal would be consistent with an eventual move towards more
sophisticated road user charges should the Government decided to move in this
direction.
106 Whether rail funding should be part of this system requires further consideration.
Rail passenger transport, as with road passenger transport, is currently part of the
system as it is considered to benefit road users. Other aspects of rail funding, such
as infrastructure investment, are currently under review.
Full hypothecation of Fuel Excise Duty
107 In order to reinforce the linkages between those who cause or benefit from the
expenditure and those who pay, it is proposed all FED be spent on land transport.
108 Further work is required on how this change would be implemented. Officials
propose to report back on:
• fiscal implications;
• grand-parenting the existing Crown appropriations to the NLTF;
• the retention of 2007/08 – 2008/09 funding levels; and
• implications for the relativities between FED and RUC.
FED/RUC levels
109 As outlined above, Cabinet agreement would be sought to the proposed FED and
RUC levels for each of the next three years. These levels would then be established
in legislation (most likely Budget legislation).
110 There may need to be slight adjustments to these levels if the assumptions
(expected cost movement and economic growth) on which forecasts were based
proved to be inaccurate. There will need to be a mechanism to make such
adjustments.
22111 Further work is required on exactly how changes to setting FED and RUC levels
would be implemented. For example, this work would consider what legislative
change would be needed, the constitutional implications of any changes, and how
to achieve consistency between the mechanisms for setting FED and RUC.
112 This proposal for adjusting FED and RUC, along with the development of a GPS, is
designed to provide certainty on overall funding levels and activity class levels for
the next three years. We consider that there would no longer be a need for the
Government to provide a revenue guarantee for the NLTF and a funding guarantee
for State highway construction projects. These changes will also remove Crown
fiscal risk associated with the current guarantees.
National Land Transport Fund
113 It is proposed that the NLTF include only revenue raised from road users. That is
FED, RUC and MVR. This proposal does not stop the Government from
appropriating funding for priority activities that might not be appropriately funded
from FED and RUC. However, decisions and accountability for these
appropriations would be separate from the NLTF and would not necessarily go
through the NLTP process. Arms-length distance would be retained for activities
funded by FED and RUC, but Ministers would have direct control over the funding
that they appropriate for specific purposes.
114 The NLTF would be allowed to go into deficit/surplus in any one year if unforecast
changes in revenue or costs occurred, but not over time. The ability to find out
expenditure over time should also be considered for other purposes, such as
speeding up activities and building up surpluses to pay for “lumpy” capital
activities.
Approval of evaluation policy
115 Evaluation policy determines how projects are assessed in terms of their
contribution towards the achievement of the desired outcomes (relative to their
costs), and is an important element in achieving these outcomes. It is proposed that
the Minister of Transport approve the evaluation policy (i.e. the funding
methodologies) prepared and applied by the Land Transport Agency. The Ministry
would play a greater role by providing advice to the Minister on whether the
evaluation policy should be approved.
116 It is also proposed that officials provide advice on whether, and if so how, the Land
Transport Management Act be amended to give greater emphasis to cost-
effectiveness.
23Use of design standards
117 The way that higher level design standards (for example intersection spacing,
design speed) are applied to State highways can have a major effect on the
operation of the transport network, on the communities the highways pass through
and on important considerations such as urban form. They can also be one of the
factors that significantly affect costs. While the default position is that the road
controlling authority (Transit NZ and councils) will set such standards, the Minister
should have reserve powers to direct the application of certain standards, on the
advice of the Ministry, to ensure the preferred balance between the factors.
Regional planning and prioritisation
118 As well as providing better guidance at central Government level, there is also a
need to achieve better integration of national with regional and local processes.
119 It is proposed that regional councils working through RLTCs (or similar bodies) be
responsible for prioritising all regional and local land transport funding proposals
through new Regional Land Transport Programmes (RLTPs) prepared on a three
yearly basis. The RLTPs would also outline how the proposed activities contribute
towards the national objectives and any particular regional objectives. The RLTPs
could be part of the Regional Land Transport Strategies (RLTSs) or a separate
document. With the RLTP on a three-yearly cycle, it may be appropriate for RLTSs
to move to six yearly-cycles, and with a horizon extended beyond the current 10
years to align with the INZTS and to reflect their more strategic role.
120 The RLTP would include all State highway activities. This would mean that there
would be no separate consultation on proposed State highway activities. Some
strategic State highway improvements would be identified in the INZTS, and/or the
GPS, and would ensure that national priorities would proceed.
121 Only activities prioritised in RLTPs would be eligible for funding from the NLTF.
The Land Transport Agency would still make the final decision on what activities
to include in the NLTP and in what priority category.
122 Further work is required on the proposed regional prioritisation process. Officials
propose to report back on:
• alignment of timeframes between the GPS, NLTP, RLTS and RLTPs;
• the regional structures for developing the RLTPs;
24• whether activities because of their nature should be excluded from the
regional prioritisation process;
• whether the introduction of the proposed system should be phased in; and
• implications for the Auckland region.
123 Officials consider that this new system would lead to a closer partnership between
central, regional and local government in developing solutions to regional and
national transport problems.
Consultation
124 It is proposed that the key consultation process for land transport projects would be
through the development of the RLTP. This will streamline existing consultation
processes. The NLTP would, as currently, not be consulted on.
125 There is an issue about whether NZ Police road safety enforcement activities (under
the Authorities Land Transport Programme) should be consulted on as part of the
regional prioritisation process. These are currently approved by the Minister of
Transport. Officials propose to report back on the precise mechanisms for
consulting on and approving this activity class along with whether the Minister
should also approve the operational funding of the Land Transport Agency. There
will also be a need to consider if there are other activities that need to be exempted
from the regional consultation process e.g. emergency works.
Impact on the State Highway Forecast
126 These proposals mean that there would no longer be a need for, or consultation on,
a national State highway programme (known as the State Highway Forecast). The
proposed approach to planning would also mean that a guaranteed State Highway
Construction Plan would not be necessary although the Government may require a
plan for accountability reasons.
127 The GPS would set the activity class ranges for the next three to six years. This
would provide some surety to the industry on how much funding would be
available in the roading construction area (and not simply in the State highway
construction area). Likely State highway construction activities for the next three
years would be documented in both the RLTP and the NLTP and the medium term
outlook of likely corridors for upgrading in the INZTS and RLTSs.
25Implication for Rail
128 Ultimately it is envisaged that rail policy and funding would be more integrated
with the rest of the land transport system than it is currently. The Ministry has
historically been responsible for rail policy and funding, but the waters have been
muddied recently with the Treasury’s involvement on funding. This has caused
confusion over relative roles and responsibilities.
129 It is proposed that the Ministry be mandated to be the lead agency on rail policy.
The Ministry should eventually take the lead on rail funding issues. However, as
the current commercial negotiations with Toll NZ Ltd are being progressed, it is
proposed that Treasury’s current rail funding functions (in terms of commercial
negotiations) remain with the Treasury until they are completed. Following the
completion of these rail funding decisions, consideration of how rail funding would
be best integrated into the overall land transport planning and funding system
should be undertaken.
Review and Monitoring
130 An important element of any system is the review and monitoring of how the
system overall is performing and how the various agencies within the system are
performing. It is proposed that the Ministry develop a more effective performance
monitoring system. As part of this monitoring role, the Ministry, on behalf of the
Minister, would be given the power to monitor and review a selection of activities
funded under the NLTP at any stage pre, post and during an activity’s life cycle,
and the processes undertaken by the Land Transport Agency.
Further work
131 The following issues need to be considered in more detail and any changes made to
legislation, structures or systems to enable these issues to be discussed and
resolved:
• how the proposed funding and planning arrangements may be further
improved to address the lack of incentive for TAs and local communities to
consider cost-effectiveness for State highway proposals in their areas;
• how to move towards more sophisticated road user charges;
• the incentives/measures (over and above what is currently proposed) required
to achieve better integration between planning and funding; and
• how to achieve better integration between modes in key areas such as
Auckland, Wellington and Christchurch.
2627
Roles, Functions and Institutions Arrangements
132 The planning and funding changes recommended above would have a substantial
impact on the roles and functions of the Ministry, Land Transport NZ, and Transit
NZ.
Ministry of Transport
133 As a consequence of the changes recommended above, the Ministry would be
endorsed as:
• the Government’s principal adviser on all transport modes and matters;
• the leader of strategic developments within the land transport sector,
including priorities and targets and providing guidance on how to meet
strategic objectives;
• the Minister’s agent in:
- assisting land transport Crown entities to carry out their roles, and
monitoring and evaluating their performance;
- monitoring and evaluating land transport performance at activity class
level; and
- monitoring and reviewing selected land transport activities.
134 Depending on which structural option is chosen (see below) for the possible
placement of the current Crown entities’ roles and functions, the impact of change
for the Ministry could be significant for the monitoring and review functions. The
Ministry would be charged with monitoring and reviewing:
• selected activities funded through the NLTP;
• all activities funded by the Crown;
• land transport Crown entities, as part of the 'standard/regular' Crown entity
monitoring that Ministry conducts as the Minister's agent; and
• particular aspects of Crown entity performance, such as the processes for
approving and funding land transport activities.
135 To perform these roles, the Ministry must develop and maintain a capacity and
capability to:
• set strategic directions and provide advice and guidance to central and local
government institutions, and others, on how to interpret and implement the
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