Land Transport Management Amendment Act- Questions and Answers

Questions and answers on the Land Transport Management Amendment Act 2008

1. The  Government Policy Statement on Land Transport Funding
2. Hypothecation  (ring-fencing of transport revenue)
3. A single transport Crown entity – the New Zealand Transport Agency
4. Regional  Transport Committees 
5. Regional Fuel Tax


Why was the  Land Transport Management Amendment Bill introduced?

The Land Transport Management Amendment  (LTMA) Bill was created in order to introduce a raft of recommendations that  came out of the ‘Next Steps Review of the Government Land Transport Sector’,  which was released in April 2007.

The Bill (now legally an Act) will  see an improved transport system by bringing together the planning around land  transport activities: state highways, public transport and local roads.  In addition, there will be a clearer  statement of national priorities (including funding allocation) through the  proposed Government Policy Statement (GPS).

Greater guidance on national  priorities will also result in better value for money.  The Next Steps Review found decision making  had been too ‘bottom up’.  As well, the  new three-year planning cycle, will create a higher level of certainty for land  transport investment.

The creation of the New Zealand  Transport Agency, which will take over the functions of Land Transport New Zealand  and Transit New Zealand, will reduce the number of Crown entities involved in  land transport planning and provision, and lead to more streamlined decision making  in the central government land transport sector.  A single Crown entity will also provide  clearer accountability to the Minister.

What happens to the LTMA Act now it has passed its third reading?
The Act will now proceed to Royal  Assent – a constitutional formality for all legislation.

The Act will commence on 1 August 2008, at which time the New Zealand  Transport Agency and all provisions under the Act will come into effect.

What does this mean for the public who need to deal with Transit New  Zealand or Land Transport New Zealand?
Until 1 August 2008, Land Transport  New Zealand (LTNZ) and Transit New Zealand (Transit NZ) are continuing work and  business as usual under the existing legislation. The contact details for the  organisations and staff remain the same.

On 1 August 2008, the New Zealand Transport Agency will take over the functions  of LTNZ and Transit NZ.

What are the benefits of the new legislation?
The expected benefits that will  result from this reform are:

• greater co-ordination between central, regional and local land transport planning
• expenditure pressures now being addressed within a national strategic  framework
• complementary planning and funding policies that complement should provide appropriate incentives as to where and when transport investment takes place
• a longer term focus for transport investment
• a greater ability to plan and set priorities across the different transport modes
• more clarity around the roles of the government’s land transport agencies with less duplication of functions
• the availability of a new funding mechanism to assist regional transport  priorities.

What are the  main changes for the transport sector in the Act?

1. The  Government Policy Statement on Land Transport Funding

What is the  Government Policy Statement?
The Government Policy Statement (GPS) will ensure that  funding and planning for land transport contribute to the strategic objectives  set out in the New Zealand Transport Strategy 2008. The GPS will be issued on a  three–yearly basis by the Minister of Transport.

What will the  Government Policy Statement do?
It will set out the government’s funding policy and  priorities for land transport for the next 10 years, funding ranges by broad  investment category for the first six years and forecast funding ranges for the  following four years.   The broad investment categories will be set out  by activity classes (for example, state highway construction and maintenance).  Funding ranges for each activity class will be included

What will the Government Policy Statement influence?
Setting those priorities will have an impact on the  funding that regional and local councils are likely to receive from the  National Land Transport Fund through the three-yearly National Land Transport  Programmes. In doing so, the GPS will directly influence the transport  programmes prepared by local authorities and provide the basis for the New Zealand Transport Agency’s funding decisions. Regional Land Transport Programmes will also need to be consistent with  the GPS.

2. Hypothecation  (ring-fencing of transport revenue)

What is hypothecation?
Hypothecation means  the dedication (or ‘ring-fencing’) of all fuel excise duty, road user charges  and motor vehicle registration fees for land transport expenditure.

A dedicated fund ensures that  funds collected from road transport users will be used to fund activities which  benefit those same users, whether the activities concern roading, public  transport, cycling or walking.

Full hypothecation will involve about $600 million of  extra revenue each year going into the National Land Transport Fund, although  for the first two years must of that revenue is already committed.

The Act enables hypothecation to occur.

3. A single transport Crown entity – the New Zealand Transport Agency

Why create a single Crown entity?
One organisation will reduce the amount of  planning churn.  There will be a more  consistent stream of advice, greater integration of land transport as a network  (especially at the regional level) will occur and ultimately a greater ability  to plan for how people travel, and freight is moved, using all of the different  modes: roads, public transport, rail and coastal shipping.

The new planning and funding system being  implemented under the Act would only be partially achieved if Land Transport  New Zealand and Transit New Zealand remained separate organisations.

4. Regional  Transport Committees

What  is happening to Regional Land Transport Committees?
Regional Land Transport Committees will now  be renamed Regional Transport Committees to reflect a broader transport focus. They will continue to be appointed by regional  councils. Regional Transport Committees will have new responsibilities to prepare Regional Land Transport Programmes and  recommend a regional fuel tax scheme. They will continue to prepare Regional  Land Transport Strategies.


Who  will be on the Regional Transport Committees?
In general, each committee’s membership will  consist of two representatives of the relevant regional council, one from each  city and district council in the region, one from the New Zealand Transport  Agency (the Agency), one representative for each of the five New Zealand Transport  Strategy (the Strategy) objectives and one to represent cultural interests.

The five objectives are:

• ensuring  environmental sustainability
• assisting  economic development
• assisting  safety and personal security
• improving  access and mobility
• protecting  and promoting public health.

However, only direct funders of transport (ie  local government and the Agency) will be able to vote on Regional Land Transport  Programmes.  The Chair will be appointed  by the regional council.   

For regions which are unitary authorities,  such as Gisborne, the committee’s membership will consist of five  representatives of the relevant unitary authority, one from the Agency, one  representative from each of the five Strategy objectives and one to represent  cultural interests.

The committees are required to consult with  representative groups of land transport users, such as the Automobile  Association or the Road Transport Forum.   However, it is possible that representatives of such groups could also be  appointed to the Regional Transport Committees as representatives of the  Strategy objectives.  The Minister of  Transport will issue Ministerial Guidelines to assist regional councils in the  appointment of the representatives of the five Strategy objectives and cultural  interests.

What happens if a  regional council and its Regional Transport Committee cannot agree on the  contents of a Regional Land Transport Programme or a Regional Land Transport  Strategy?
A regional council can only send a Regional Land  Transport Programme back to a Regional Transport Committee once. After that, it  must send the draft programme to the Agency with a statement setting out why it  disagrees with the recommended programme. The Agency can then consider both  views. This mechanism ensures that a Regional Land Transport Programme can be  put in place so that funding can flow to the region.

In the case of Regional Land Transport Strategies, the  region must come to a collective view.

How are the Regional Transport  Committees different in Auckland?
In Auckland, the Auckland Regional  Council Transport Authority (ARTA) is responsible for compiling the land  transport activities of Auckland local government into a land transport  programme.  State highway activities will  be added to this programme and it will become the Regional Land Transport  Programme for Auckland.  ARTA will need  to consult the Auckland Regional Transport Committee before preparing the Regional  Land Transport Programme.  The Regional  Transport Committee will remain responsible for the Auckland Regional Land  Transport Strategy.

The membership arrangements for Auckland’s regional land  transport committee are not being changed.   It was decided not to change these arrangements before the report of the  Royal Commission on Auckland Governance no later than 1 December 2008.

5. Regional Fuel Tax

Purpose of Regional Fuel  Tax

What is Regional Fuel Tax?
Regional Fuel Tax (RFT) is  a tax levied on petrol and diesel at a regional level. 

What are the benefits of a Regional Fuel Tax?
RFT is an additional  funding tool available to regions for high priority transport projects that  will not reasonably be funded from any other source in the timeframe desired by  the region. 

Why does the Government not pay the costs of these projects? 
There are a number of  projects which sometimes cannot be funded out of the National Land Transport  Fund, often due to a combination of their cost and the very long timeframes  required to repay construction debt.

Why is the tax rate not the same across the country?
RFT provides regions with  an opportunity to match the level of taxation in their region with the level of  expenditure proposed for capital projects which are a priority for their  region.

The rate of RFT is set by  the region and is based on the funding the region has identified as necessary  to fund projects that are a high priority for their region.

Does a  region have to levy a Regional Fuel Tax?
RFTs are not mandatory. It  will be up to each region to decide whether they wish to levy RFT.

Why  can’t regional representatives use existing taxation mechanisms like property  rates to pay for projects they promote?
RFT is a funding source of  last resort. The legislation requires that it is used to fund capital transport  projects only when regional representatives consider that full funding for  those capital projects will not reasonably be available within the timeframe  desired by the region.

Setting the tax

How  much will the tax be?
It is generally up to a  region to decide the proposed level of fuel tax in their region. The tax may  vary from one cent per litre of fuel up to a maximum of 10 cents per litre of  fuel.

The  Act provides that RFT cannot exceed two cents  per litre of fuel in 2009 and 5 cents per litre of fuel in 2010.

It is also proposed that a  region must always consider phasing the tax in any scheme to reduce the  financial impact on people purchasing petrol or diesel within a region.
 
Is there a maximum tax that may  be levied? 
The legislation provides  that a regional fuel tax may not exceed 10 cents per litre of fuel.

Who decides how much tax will be  levied in each region?
The Regional Transport Committee  of a region is responsible for preparing its own RFT scheme, except in Auckland  where the Regional Transport Committee has agreed that the Auckland Regional Council  should prepare the initial scheme.

The scheme must state the  proposed rate of tax and identify the projects that will be funded by the  tax. 

Expenditure of the tax

How will the tax be spent?
RFT may only be spent on  transport capital infrastructure (eg new roading and public transport). RFT  schemes must identify the projects or group of projects that the tax will be  spent on and state the allocation of revenue between each project or group of  projects. 

Why is the tax used to fund capital projects only and not operating  costs? 
RFT is not an open-ended  tax of the type needed to support operational costs. It is limited to a maximum  of 30 years. Capital works are funded over a specific period of time, even when  financed through borrowing.

The tax is designed to  address a specific shortfall in infrastructure investment. It is important that  the public are able to see a clear benefit from the tax they are paying.

Can all of the tax be spent on roading?
Up to five cents may be  spent on roading used for general traffic within the overall ten cents limit.  This will ensure that funding for walking and cycling facilities, bus lanes and  high-occupancy vehicles is not crowded out by demand for funding of general  traffic.

How the Regional Fuel Tax scheme  is different in Auckland

Why has Auckland been treated differently under the Amendment to the  Act?
Auckland is more advanced  in preparation of its RFT proposals than other regions. The Auckland Regional Transport  Committee has agreed that the Auckland Regional Council should prepare the  initial scheme to reduce the time required in its development.

Why are the Auckland funding arrangements different? 
Crown expenditure on  passenger rail electrification forms an integral part of the rail  electrification project at the heart of the Auckland RFT proposals. Provision  for Ministerial nomination of up to five cents of the Auckland RFT allows this  Crown component to be seamlessly integrated into the Auckland scheme.