Introduction

Central government invests around $3 billion each year in the land transport system through the National Land Transport Fund (NLTF). To this, local government contributes another $800 million each year to bring total annual spending on the National Land Transport Programme to about $4 billion.

NLTF revenue comes from fuel excise duty, road user charges (RUC), and motor vehicle registration and licensing fees. All revenue from these sources is hypothecated, or earmarked, to land transport expenditure apart from about $7 million of fuel excise revenue that goes to search and rescue and recreational boating safety activities.

The graphs below show the different revenue components that make up the NLTF and the New Zealand vehicle fleet as at 2013. As we can see, more than half of total revenue in the NLTF is collected from fuel excise duty. However, when taking into account the make up of the vehicle fleet, we can see that heavy vehicles contribute proportionately more per vehicle to funding the land transport network. The reason for this is heavy vehicles cause significantly more road wear and this is captured in RUC.

 

Funding the land transport network

State highways are owned and funded by the central government. On the other hand, local roads are owned by local councils rather than the central government. They are co-funded by local councils (through rates) and the central government (through funding assistance rates). Funding assistance rates determine the proportion of approved costs that will be paid from the NLTF.

The graphs below show the different revenue sources that are used to fund both state highways and local roads.

 

 

Although heavy vehicles make up a small proportion of the total vehicle fleet, they contribute a significant amount to the construction and maintenance of state highways and local roads. This is especially true when it comes to the funding of local roads where heavy vehicle RUC makes up of almost 50% of total Crown funding. This is to ensure that road wear caused by heavy vehicles is entirely captured by funding assistance rates, and that local ratepayers do not subsidise heavy vehicle use.

How are road user charges calculated?

Road user charges are paid on all diesel vehicles and on all vehicles with a gross vehicle mass of over 3.5 tonnes.

The purpose of the road user charges system is to recover the costs each vehicle imposes on the land transport network, as well as provide funding for new roads and infrastructure.

Road user charges are calculated using a cost allocation model, which spreads the costs of the land transport system across all vehicles depending on their weight and axle combination. 

The costs generated by the model are not a precise measure of the actual costs being generated by vehicles at the time they use the roads. They are only an estimate, based on historical expenditure in a given year. On the other hand, RUC rates are set based on the level of revenue required for future expenditure. Because of this, there are small differences between the costs generated by the model and actual RUC rates. 

The process for setting RUC rates is based on allocation of expenditure to different cost categories. The cost categories are:

  • Heavy vehicle cost (HV)
  • Space (PCE)
  • Powered vehicle cost (PV)
  • Road Wear (ESA)
  • Gross vehicle weight (GVW)

Heavy vehicle cost (HV)

HV costs are applied equally to all vehicles weighing over 6 tonnes and are mostly made up of the costs of running the Commercial Vehicle Inspection Unit (police division responsible for heavy vehicle enforcement)

Space (PCE)

PCE (‘passenger car equivalent’) is related to the costs associated with the space a vehicle takes up on the road. Heavy vehicles are treated as two PCEs, or more if towing trailers. Most of the costs relate to building new state highways and local roads (including adding new lanes to existing roads).

Powered vehicle cost (PV)

PV costs are allocated equally to all powered vehicles (i.e. trailers are not included) and are also referred to as common costs. PV costs are costs that are not related road wear, vehicle weight, or vehicle size. Costs include public transport subsidies, road policing (excluding CVIU), and road works to repair weather related damage or natural deterioration.

Road wear (ESA)

ESA (equivalent standard axles) assigns costs to vehicles based on weight and axle loadings. Most of these costs are for pavement rehabilitation and resurfacing, along with a portion of other road maintenance and the extra construction costs needed to build roads that are strong enough for use by heavy vehicles.

Gross vehicle weight (GVW)

GVW assigns structural strength costs to vehicles based on their gross laden weight. These are costs required to ensure that roads do not subside and bridges do not collapse.

The graph below shows the proportion of the different cost categories that make up the RUC for different types of vehicles commonly found on New Zealand roads. For example, the RUC paid by a light diesel vehicle weighing less than 3.5 is mainly consist of common costs, while more than half of the RUC paid by a 3-axle truck weighing more than 18 tonnes relates to road wear costs.

Comparative Breakdown of Costs

You can find out more about the cost breakdown for each individual vehicle type here:

Data

The spreadsheet below holds the data that the graphs on this page are based on.


 Light diesel vehicle <= 3.5 tonnes

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2 axle truck > 6 & up to 9 tonnes

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3 axle truck > 18 tonnes

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3 axle prime mover with 3 axle semi trailer

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4 axle truck and 4 axle trailer

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4 axle truck and 5 axle trailer ("50Max")

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