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:
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:
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.