‘Hard choices lie ahead’ - Chris Bishop warns of ‘challenges’ with $56b Roads of National Significance

In government, these projects have become 17, they will be funded with a mixture of fuel taxes and road user charges, tolling and government borrowing.

Speaking to the Roading Industry Conference on Wednesday, Bishop managed expectations that the roads would be delivered soon, dropping hints that some of the roads may not be coming for a very long time.

“I do want to be upfront with you about the challenges we face in delivering these big new roading projects,” Bishop said.

“The starting point is that the Roads of National Significance are very expensive projects,” he said, noting that stage two and three of the Northland Expressway could be up to $18b and the Hope Bypass could be more than $1b.

Bishop said delivering all the roads over the next 20 years would cost $56b if funded entirely by road user charges and petrol taxes, these would need to go up by 70%, equivalent to a 49c a litre increase in fuel tax.

“To be clear, this 49 cent per litre increase would only allow the RoNS to be delivered. It would not provide any funding for other major transport projects, such as the Second Waitematā Harbour Crossing or the North West Busway,” Bishop said.

Bishop said the Government was “committed to the Roads of National Significance but delivering them all tomorrow is not realistic”.

For years, NZ Transport Agency Waka Kotahi (NZTA) has warned there is not enough money coming in the door from petrol taxes and road user charges to pay for all the roads the Government wants it to build.

The last Labour Government was forced to loan NZTA money and look at new revenue tools after warnings it would struggle to deliver what the Government has asked of it. The coalition was forced to give NZTA a “letter of comfort” assuring it the Government would assist NZTA if it got into financial strife.

In NZTA’s most recent National Land Transport Plan (NLTP), the agency published a graph warning that in the next decade, it will have only about half the money it needs to do all the things the Government is asking of it.

There is an assumption that NZTA will need to be steadily drip-fed government capital contributions, meaning the agency will need to compete with other government capital projects like schools and hospitals if it wants to get things built.

Bishop’s speech is the clearest acknowledgement yet the Government is hearing the message.

“The National Land Transport Fund is already massively subscribed,” he said.

“Our transport system is supposed to be user pays. In other words, road users pay petrol tax and road user charges and the money goes out the other end on maintenance, upgrades and new projects.

“But in recent years, Crown funding has been tipped in more and more, which comes from general taxation – in other words, all taxpayers,” he said.

Bishop noted that the 2018-21 NLTP was almost entirely funded by charges on road users through petrol taxes or road user charges. The current 2024-27 NLTP sees road users pay for less than half of the $32.9b plan.

He warned the Crown could not be expected to infinitely contribute its own capital.

“Every dollar of extra Crown capital we put into roading is a dollar that can’t go into health, or education, or defence, or any of the other calls on capital the Crown has,” Bishop said.

Other options like Public Private Partnerships (PPPs) and tolls were not silver bullets either. PPPs are a useful funding tool, Bishop said, but do not fundamentally answer the question of where the money comes from. In New Zealand, tolling is also a challenge, with traffic volumes “not even close” to being enough to fully fund roads.

Bishop suggested the Government was open to altering the expected timeframes for delivering the roads. He said even if the Government could pay for them all at once, the local construction industry did not have the spare capacity to build them.

He said the Government has a Major Transport Projects Pipeline, or MTPP which will be a “credible, long-term pipeline of transport projects with a variety of funding options and in a logical sequence”.

The pipeline will show what projects are capable of being delivered and when, and which funding options can be used to pay for them.