Government investment in land transport - Government Policy Statement

Funding framework principles

64. The principles that underlie the funding framework are that the NZTA will manage expenditure so that it both equals revenue over time and matches the target expenditure.  To give effect to these principles the GPS is required to set out:
• an expenditure target for the National Land Transport Programme for the first three years covered by this GPS
• a maximum and minimum level of expenditure for the National Land Transport Programme for the same three years
• an allowable variation between expenditure incurred in the National Land Transport Programme and the revenue received in the National Land Transport Fund
• likely changes to the duties, fees and charges paid into the National Land Transport Fund for the first three years covered by this GPS
• overall investment in the land transport sector over a period of 10 financial years and the likely or proposed funding sources.

Total Funding

65. Funding for the activity classes described in Section C requires total levels of expenditure shown in Table 3 (below). The level of expenditure increases from $2.75 billion in 2009/10 to $3.75 billion in 2018/19.  The total level of funding represents a balance between achieving the impacts set out in Section B, and the level of revenue that can be raised. 

66. In 2009/10 and 2010/11, total expenditure is expected to be greater than revenue as unspent funds in the National Land Transport Fund are drawn down.

67. Table 3 shows the expenditure target (the expected level of expenditure) along with the maximum and minimum range for National Land Transport Programme expenditure for the first three years of this GPS.  For the purposes of Section 20 of the Act, from 2012/13, the expenditure target figure for each year is deemed to be the maximum level of National Land Transport Programme expenditure.

TABLE 3: TARGET NATIONAL LAND TRANSPORT PROGRAMME (NLTP) EXPENDITURE 2009/10 – 2018/19; MAXIMUM AND MINIMUM NLTP EXPENDITURE 2009/10 – 2011/12 

68. The NZTA is expected to plan funding allocations for each activity class and approve funding for activities, so that total planned expenditure in any year is equal to the expenditure target set out in Table 3 for that year.  However, as previously noted, the expenditure target is based on forecasts of economic variables that may differ from what is predicted.  It is accepted that the NZTA may not achieve the expenditure target in any one year,  provided that expenditure is within the range specified in Table 3 if one or more of the following conditions apply:
• Cost increases applying to funded activities are substantially different from the forecast cost increases.
• The level of expenditure for emergency works is different from the forecast level .
• Activities did not proceed as planned in the previous year - for instance because of construction work progressing much faster or slower than anticipated, delays in the consenting process, or a catch up or slow down is planned for the year in question.

69. Revenue is dependent on the level of economic and transport activity so will fluctuate according to economic conditions.  Those conditions are currently very challenging.  As a result there may be unplanned imbalances between expenditure incurred under the National Land Transport Programme and funds received into the National Land Transport Fund.

70. The Act requires the GPS to set an allowable variation between expenditure incurred under the National Land Transport Programme and what is received into the National Land Transport Fund.  The purpose of allowing a variation between expenditure is to allow the NZTA to manage cash flows, including the use of borrowing, when circumstances such as required emergency works or fluctuations in input costs arise.  For this GPS the allowable variation is set at $400 million.

71. The NZTA is required to report on its expenditure and revenue through the Annual Report on the National Land Transport Fund as set out in Section 11 of the Act.  The Minister of Transport expects to be forewarned of any likely expenditure variations and the reasons for those variations.  The NZTA is expected to advise the government on the adjustments required to expenditure targets or revenue settings to correct any imbalance.

Sources of funding

72. Funding for land transport within this GPS is anticipated to come principally from the hypothecated (dedicated) transport related charges - fuel excise duty (FED), road user charges (RUC) and motor vehicle registration fees (MVR).

73. To provide the revenue to meet the expenditure targets set out in this GPS, the government announced its intention (on 16 March 2009) to increase FED and RUC rates in October 2009, October 2010 and July 2011.

74. The government will closely monitor actual revenue levels.  Where actual revenue levels significantly vary from forecast levels, a decision will be made whether to revise expenditure targets and/or whether to increase or decrease FED and RUC to meet expenditure targets.

75. The rate of contribution from MVR to the National Land Transport Fund is not assumed to change over the first three years of this GPS.



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