The Answer Is Urban Consolidation – What Was The Question?

Perpetuating the Myth

The Green Party is perpetuating the claim that development beyond Auckland’s “city limits” imposes a high cost on ratepayers.  A spokesperson claims that the current Auckland plan which allows for some new development outside the current urban area, “will cost ratepayers $42b billion to 2042, an annual levy of $200 per ratepayer”  according to a report in the New Zealand Herald.   

But is just so happens that  study on which these calculations are based is a flawed commissioned report  rather than a peer reviewed academic study (Roman Trubka, Peter Newman and Darren Bilsborough (2008) Assessing the Costs of Alternative Development Paths in Australian Cities, Curtin University Sustainability Policy Institute, Fremantle, Report commissioned by Parsons Brinckerhoff Australia). 

Oops – Contradictory Claims

The authors of the Curtin report acknowledged at the outset that

"The challenge ...  is that infrastructure costs are so heavily dependent on area-specific values.  For instance, road costs among different prospective development areas may vary based on the necessity for major arterial roads, costs for sewerage and water infrastructure could vary immensely depending on terrain and trenching conditions, and many infrastructure components will differ depending on the level and degree of excess capacity” (p.4)

So why did they try to develop a generic tool for estimating the cost of urban development in Australian cities based on a mishmash of evidence from different cities and suburbs in Australia and the United States?  And why would anyone even contemplate applying such “findings” to Auckland with its distinctive physical geography, so different from its Australian counterparts? 

A Quick Critique

The Productivity Commission actually considered the study, among others, in a brief review of housing costs and urban form (Appendix B of the final report).  It noted substantive differences in the physical and social settings  behind the data assembled to support the  study’s claim to some sort of universal cost relationship between development and distance from the city centre.

And there are glaring methodological deficiencies:

“An obvious one is mixing discount rates (zero for infrastructure capital costs, 7% for transport-related costs, and 3% for health and emission costs), and omitting operating costs for some items (non-transport infrastructure) and not others (pp. 295-296)

To these flaws can be added the assumption of a cost of Aus$170/tonne for carbon emissions when the carbon floor price set by the Australian government (of $15) has since been rescinded and figures at or below $10.00 may be more appropriate based on today’s European prices.  So the environmental argument is seriously overstated.

And the analysis fails to deal with the costs of expanding the capacity of ageing infrastructure in long-established urban areas, of remediating services designed for far lower loadings than they are now expected to sustain, of the health impacts of apartment living in an increasingly brown – not green – environment, and of reductions in the physical and socialresilience of high density and often congested urban areas in the face of possible natural disasters or infrastructure failures.

Penalising the Household - is that Socially Sustainable, or Politically Justified? 

Even if it can be proven that the balance of public benefits favours medium or high density living, is there any evidence that such savings will not be offset by the better affordability of traditional suburban housing and the benefits residents derive from living into it?

Putting aside  flawed data and methodology for the moment, the results indicate that 70% of the differences in costs between decentralised and central locations is attributable to travel and transport.  Over half of these comprise travel costs and  time carried  by households.  If we take these private costs out of the equation the authors' estimate of the difference  between centralised and decentralised development falls by 40%.  

The resulting "present cost" for the average household (whatever that might be) of A$22,000 is easily  justified by savings on land and housing in “outer” areas, the benefits households get  from  additional space, greater choice over housing style, and the security and community benefits of suburban environments.

So who pays if we deny people the choice of living in medium to low density housing?  Mainly new households through exclusion from household ownership, or commitment to punitive mortgages, or through the insidious extension of housing poverty through ever higher income brackets. 

So what about the Auckland case: where does the evidence really lie?

Surprisingly-- given the obstinacy of the planners and politicians pushing the consolidation barrow --   no-one has actually done the analysis required to determine the relative economic benefits of different urban development paths for Auckland.  

A technical analysis of the gaps in the Auckland Regional Growth Strategy made the point that the planning  model that informed it was hardly up to the task.  The principal conclusion that came from using the Regional Council's land use and transport  model was that there is “little [identified] economic difference between growth options”.(McDermott Fairgray Ltd (1999) Gap Analysis, Review and Recommendations: Auckland Regional Growth Strategy, Technical Report, Auckland Regional Growth Forum )

The failure of the model to demonstrate economic differences between alternative urban forms was used to suggest that intensification imposes no additional costs than traditional  decentralised development.  Of course, the converse is true – although it has been conveniently ignored: there were no demonstrable economic benefits from consolidation or net cost penalties to decentralisation.  This suggests that it would make most sense to let the market prevail, subject  to broad environmental standards and fiscal constraints.   

The  conclusion  that consolidation was the best option for Auckland ignores other shortcomings  in the  model that could  tip the balance  in favour of strategic decentralisation:

• The failure to actually define realistic alternatives that would  clearly demonstrate economic differences;
• A failure to evaluate the marginal rather than average impacts of differences in urban form;
• The failure to identify the costs of implementation.
• Ambiguous measurement (both omissions and double counting);

To this list we can add underestimation of the high infrastructure and development costs associated with brownfield development and urban consolidation.  These are turning up today in high financial and development contributions for inner city projects.

Calling for  Consolidation – a Case of Artificial Intelligence

So why is the Auckland Spatial Plan so fixated on consolidation –despite the begrudging lip service the final version pays to decentralisation (a small concession to market reality that appears to have  upset  the Green spokesperson)?

I can only think it is "artificial intelligence": if enough people say the same thing, it must be right.  Consensus becomes an excuse for lack of evidence, critical analysis, or even common sense.  Groupthink prevails,: a phenomenon defined by psychologist Irving Janis as:

A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action (Janis, I L (1972). Victims of Groupthink Houghton Mifflin p. 9)

Contrary evidence is dismissed while reports favouring an emerging consensus, such as the Curtin one, obtain a degree of currency which, while unjustified,  plays into the hands of policy makers looking for easy (or ideologically comfortable) answers to difficult problems.

And so we blunder on, potentially building our cities on myth and misconception and reinforcing the gap betwen generations as we do it.

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All at Sea – Port Plan for Auckland

Critical Infrastructure at a critical location

Ports of Auckland Ltd (POAL) operates a substantial general cargo port and container terminal on the edge of Auckland’s CBD.   It occupies a critical site adjacent to  commercial, recreational, and residential zones.  Its future development will have a major impact on the city centre by way of land use options, traffic flows, harbour and harbour-side-based recreation and tourism, and the quality of central city life.

Rob Campbell’s concerns

It was disturbing, then, to read recently resigned Board member Rob Campbell’s view of the port’s future on Bob Dey’s Property Report website, especially in light of controversies about  port operations and plans.

As I read it, Campbell is saying that corporate plans for the port are really about more of the same – a harbour edge transport operation which does little to recognise the value of the site or consider how the company might increase efficiencies and returns by greater specialisation.  He calls for radical change: incremental gains in productivity are not enough.

He argues that POAL is not pursuing the gains that might come from exploring the use of surplus or lower cost capacity elsewhere.   This would take a quantum shift in thinking, though, including a willingness to cooperate with other northern ports (Tauranga and Northland).

The sector is due for a major shakeup in New Zealand if for no other reason than the uncertainty that  substantial long term increase in fuel prices create around future trade and shipping arrangements.  Our ports have to be able to respond.  Not only  that; our economy and the economies of our trading partners are undergoing transformations which are bound to impact on trade flows in ways that are difficult to predict.

The Productivity Commission’s focus: governance issues

Against this background of uncertainty the Productivity Commission in its International Freight Services Inquiry highlighted the difficulties in port management and development arising from current governance arrangements.  Local council control confuses purpose and direction, and prejudices governance in a commercial environment through the presence and expectations of elected representatives.  

This effect has been seen in Auckland where a prolonged industrial dispute has seen councillors taking partisan stands and where one of the most contentious issues in the Auckland Council’s Draft Spatial Plan was the proposed inclusion of a planned a 250m extension of reclamation by the port, since removed.

Revolutionary change – saving sectors

I have been involved in two sectors that underwent revolutionary changes to stay above water.  Both involved new players moving the ground from under conservative (and dominant) incumbents.

The New Zealand slaughtering and meat processing industry had to experience plant closures and company collapses to move from being a highly seasonal, over-capitalised, and non-viable industry to one that could compete internationally.  Long-standing work practises, fixed management thinking, and remote ownership prejudiced its ability to respond  to the trade upheavals that followed Britain’s move into the EEC in the 1970s.  It took new entrants with new ways of doing things to save it from crippling rigidities built on past success and current complacency.

In aviation, the beliefs of major western airlines that they were as streamlined and integrated as they could be and of  airlines in emerging nations that they could compete using the same management model but paying lower wages were turned over by a new breed of low cost carriers. Southwest pioneered the model in the US in the 1970s but it was not until the last 15 years that the LCC has really taken off. RyanAir and easyJet led the way in Europe in the 1990s. Air Asia has changed thinking about how airlines should operate in the developing world since then.  

These and their emulators re-invented the operational, management, and capital structures of aviation, forcing change on those traditional carriers that survived.  They have changed the way the public travels and have managed to restore a semblance of profitability to a sector in which that has been all too rare.

The Ports of Auckland Plan: back to the future?

The port industry in New Zealand may need a similar revolution.   I  looked for signs of revolutionary thinking in the POAL 2009 Development Plan.  All I could see is a commitment to more of the same.

The  analysis of future demand is central to any understanding of what the port expects to be doing, and how it might be doing it in the future. But there is no such analysis.  Instead, there is an extrapolation of TEU (20 foot container equivalent units) throughput and a conversion of this projection into capacity requirement.  A compounding 8% growth rate in TEUs handled from 1989 to 2007 was adjusted down to 5% as “a slightly more conservative long term growth rate” and used to project demand from 2008 to 2040.

This is anything but conservative   

When I looked at tonnage growth using the Statistics NZ Infoshare cargo figures from 1989 to 2010 I actually got a 4% growth rate, which raises a question over which figures to use.  However, anomalies in the historical figures fade into the background when we consider the impact of 5% compounding growth over thirty years: a four to five fold gain in container throughput. 

This raw projection begs a lot of questions about New Zealand’s changing trade profile.  That’s not the immediate subject of this blog.  Suffice to say, few commentators or policy makers are likely to see a fulfilling future as one built on exponential growth in trade volumes.

Ports of Auckland Vision for its Future

So why such a conservative response?

POAL does acknowledge uncertainty around the projections which inform its assessment of expansion options.  But none of the options canvassed (see pages 11 -13 in the Plan) envisage relocation of component trades or operations, although inland ports will no doubt play a significant role in the streamlining envisaged.  Instead a combination of progressive reclamation and new stacking operations is proposed.  The need to deal with larger vessels is also acknowledged in new berth design parameters and a channel deepening programme.  

No doubt efficiencies can be imposed at the margins through investment in new equipment and changing working conditions.  But what will this achieve in the long-term?  And how relevant will it be to New Zealand’s – and Auckland’s – economy in 2030 or 2040?

POAL is proposing to cement in a development plan  which imposes a singular and historical view of its place in New Zealand trade, and in the central Auckland cityscape.  If we are to go with Rob Campbell’s analysis, productivity will be diminished because a relatively low cost activity will be expanded over high cost (reclaimed) land. 

Its  hard to understand  how such a conservative approach to development can be founded on such a bullish vision of the future. Unless we actually suspend our belief in the projection, which seems like a sensible idea.

Time for a rethink

I’m not sure that this path is one that the country or the city can afford, at least not on such an apparently thin analysis of future demand. 

So it’s a wise move by the Council to omit the planned reclamation from Auckland’s Spatial Plan.  This is something that we need to think long and hard about.  We need to expand our thinking about the physical options facing trade in the northern North Island, for a start, rethink the role of the port in downtown Auckland, and perhaps heed the Productivity Commission’s advice regarding ownership and governance of the port industry.  

Are we there yet? Auckland welcomes 1.5 millionth citizen

Well
we know where we're goin'
but we don't know where we've been.
And we know what we're knowing'
but we can't say what we've seen.
And we're not little children
and we know what we want.
And the future is certain
give us time to work it out.
We're on a road to nowhere
come on inside
(On the Road to Nowhere, Talking Heads)

Come in citizen 1.5 million
Auckland welcomed its 1,500,000^th citizen on Wednesday 1 February. The Auckland Council decided that baby Ramonah Patience Toomalatai was the one. It was a symbolic choice, Ramonah, born of Samoan parents, reflecting Auckland’s multi-cultural face and future.

It was a gesture for the future: nominating an immigrant at Auckland airport would just not have been the same. Given the recent slow-down in migration gains, Statistics New Zealand was probably right anyway. It suggested that citizen 1.5m was more likely to arrive in a maternity ward than at a customs gate.

It was also symbolic, and maybe a bit embarrassing, that the New Zealand Herald had jumped the gun and already decided on Emily Van Wonderen, born a couple of days earlier.

Does it matter if we don’t know?
It doesn’t really matter what the choice is; that Wednesday – or maybe Monday – was the day the city hit this milestone. It was always going to be arbitrary and, apart from the photo op(s) not very meaningful.

Anyway, statistical estimates of the population are inevitably imprecise, and converge on some sort of reality only with the five yearly census. Unfortunately, the decision was made after the February 2011 earthquake in Canterbury to push the Census due that April back a couple of years. That's a pity. Just when we needed a benchmark entering what was bound to be a very volatile few years of residential and business adjustment we took the easy way out. And it adds a new level of imprecision to our current population estimates, and to our population projections.

It's a pity because if we are really going to understand our future choices we need a firm grip on where we are coming from.

Anyway, the arrival of citizen 1.5m, whoever she is, raised two issues for me.

First, you have to wonder what city the girls will grow up in.
Because beyond celebrating babies and their parents, I am not sure why we would even bother marking such a milestone unless we are really prepared to think in terms of the needs and choices of our future citizens and plan accordingly.

There is a chance that these girls will not stay here. That’s been an increasing choice for Aucklanders over recent years, especially if they are young, qualified, and ambitious. Or if they hope to buy a house and settle down. Sure, plenty of people have also been arriving in search of a better life. But don’t expect them all to stay if they cannot find it. Or to keep coming if it isn't all that better -- or different - after all.

And growing numbers are leaving - either for affordable bits of New Zealand or for destinations overseas.

Putting people on the road
It worries me, then, that Auckland’s plans appear to be more about structures than people. The future of the city is presented by the planners today as “up not out” – a mantra repeated by the Deputy Mayor on television last night. But that’s a policy built on a particular set of planners’ prejudices about the hardware of a city – the buildings and networks – and not about the software – the people who make it work. And its the software that is mobile.

Unfortunately, the evidence suggests that no matter how easily they role off the tongue, “compact city” and “affordable housing” just don’t seem to go together, at least not in Auckland.

And we really do run the risk of undermining what makes Auckland today a great place to be if we stick with arbitrary building targets and densities of the sort promoted widely in the 1990s and now promulgated in the draft Auckland Plan. We are having to offer up our green spaces to housing; our roads to congestion; our blue skies to high rise; all for the sake of ... actually, I am not sure for the sake of what, especially if all it leads to is higher costs, less choices, more congestion, and greater social disparities.

Maybe if we want our children in their time to enjoy Auckland’s real heritage of sea, sky, and landscape we should give low impact a try instead. Or simply watch them leave when we most need them to stay.

Second, should New Zealand have a population policy?
I raise this question because actually we do have a population policy – it just hasn’t been aired that widely. And it is simple - play the Auckland card. Interestingly, this was raised on television by Invercargill Mayor, ex-Aucklander Tim Shadbolt. Thinking about population issues – where and how people might choose to live and what role, if any, government has in influencing this – has been subjugated to yet another prejudice, that New Zealand will only do well economically if Auckland continues to dominate the numbers.

Unfortunately, the evidence suggests that concentrating consumption and big jobs in the city does not necessarily boost the country’s economy. In fact, it could have the opposite effect if it simply adds to congestion costs, inflates housing and the cost of employment, and drives up commercial and industrial land costs. Higher wages and higher rents do not really equate to a productivity advantage.

A bigger Auckland – cost or benefit?
High levels of consumption, the higher costs of services, and the increasing demands on public spending that they make do not add to national productivity. What might be seen as higher added value in Auckland may be little more than a cost to other parts of the economy. There is not a lot of evidence that Auckland’s higher costs add to our net export income or to our pool of innovation. So one has to wonder where this particular path is taking us (if not to Sydney and beyond).

Now I’m not advocating the sort of intervention we practiced (and I use that word advisedly) in the 1970s. This is not something that “Wellington can fix”. On the other hand, we need to be careful of policies that implicitly or explicitly favour Auckland, especially if the city’s own plans are likely to frustrate the very growth they seek to promote.

We're on the road to paradise
here we go
here we go.
We're on a road to nowhere

I’m really not sure where Auckland is heading at what is potentially a turbulent time for New Zealand and its dominant city. We certainly can’t predict an end point or steady state, so let’s not treat plans as blueprints.

And let’s hope for Ramonah and Emily’s sakes, we don’t impose a 1990s view of what a city should look like on Auckland in 2030.

Whither white collar services?

The Sydney-Mumbai connection
My son-in-law is visiting from Sydney, back in Auckland for Christmas and New Year celebrations.  He is a middle manager in one of Australia’s biggest IT testing teams (in financial services). The group’s growth over the past seven years has been phenomenal, from less than ten people to 700.  Of these, 400 are based in Sydney and 300 in India. 
That’s a substantial investment in Indian IT by an Australian business, an investment in high tech jobs that has strengthened the Australian operation even as it has boosted the economy in Mumbai.

From what I gather, growing expertise and experience mean that the bulk of investment in expanding capacity will take place in India, not Sydney.  As they acquire greater technical expertise and better management skills, expect offshore contractors there to play an increasing role in this sector, and others, and begin displace their home-based counterparts.

A farewell to footloose services?
This got me thinking – where is white collar employment headed?  What does it mean for the future of New Zealand (and Australian) IT?  And, of interest to me, what does this mean for our cities? 

Are we looking at a repeat of what happened to manufacturing – where producers have migrated to the lower cost, increasingly skilled labour forces of China and Thailand, for example?  Sure, locally oriented production (building materials and the like) has remained in New Zealand, but little high value manufacturing other than that associated with primary production and a few exceptional entrepreneurial producers survives.  From 2000 to 2011 New Zealand manufacturing lost 25,000 jobs (down 10%).  46% of these went gone from Auckland (down 14%).

Are we now looking at something similar in the white collar sector, especially among producer services?[1]  

Take one of our biggest, Telecom New Zealand. The company retained some call centre capacity in New Zealand when it restructured in 2009, but the expansion plan favours new investment in Manila. Keeping a New Zealand presence looks like a strategic move, about the consumer interface and brand management, not about reversing the tendency to invest in services offshore. 

And it was acknowledged by Telecom that while knowledge of products and services was usefully served from New Zealand in areas “where specific, technical knowledge was particularly important, offshore staff have delivered strong results ... [and] ... the offshore operation recorded our highest ever level of customer satisfaction for broadband support in December”.

Falling behind in the IT employment stakes?
Incidentally, the bias this example in favour of greater technical knowledge offshore differs from the findings of a US study[2].  This suggested that off-shoring impacted mostly on medium and low level skill occupations, creating a higher skill bias among those remaining.

If we want to limit New Zealand’s loss overseas to lower skill jobs, extra investment will be needed in building the quantity and quality of investment in technical education and training.  But with the collapse of many financial institutions, and ownership of our major players offshore, it may be too late: perhaps we already lack the depth of IT smarts, for example, needed to hold our place in the world’s financial and producer service sectors.

Of course, off-shoring among the upper echelons of the white collar sector has been going on for a long time as New Zealand companies have been absorbed by overseas principals.  The result is generally that senior management, IT control, and high tech jobs end up elsewhere, even if some production or distribution remains here. 

In terms of economic theory, increasing trade based on specialisation and comparative advantage should increase net welfare in both exporting and importing nations as each plays to its specialisations and its strengths.  It should be no different for services. 

Unfortunately theory is not enough.  The necessary assumption that comparative advantage is static does not hold.  In fact the gains in skills and experience to the service exporting country as experience accumulates may be reinforced by selective migration depleting the skills and experience of the importing country. 

The impact on our cities – time for a rethink?

Either way, the loss of high or low skill capacity to overseas suppliers, through loss of control of our companies or outmigration, raises important questions.  The one I am interested in is how we can plan for the future of our cities if we cannot assume a strong, growing white collar sector?

Perhaps we should qualify our plans for Auckland by contemplating the impact of a ground-shift in white collar employment as a result of the migration of current and future professionals and managers to Sydney and beyond, and of mid-level skilled technical tasks to lower cost Asian suppliers.   

Ambitious plans for a burgeoning Auckland CBD, the land use transformation and infrastructure investment required to shape it do not reflect the possible impact of a white collar slow down.  Quite the opposite: business and technical services are picked as the big performers necessary to meet Draft Plan goals according to the background papers, with no discussion of where the threats to such optimistic growth forecasts are coming from. [3]

So what has been happening?

I looked at recent white collar employment growth.  According to Statistics New Zealand Auckland gained 88,000 jobs from February 2000 to February 2010 (20% growth) with 84% in white collar sectors.  The rest of New Zealand gained 211,000 jobs at the same rate (also 20% gain), but only 47% of these were in the white collar sector.

So white collar employment was the big driver in of New Zealand’s economy over the decade, and accounted almost entirely for Auckland’s job growth. 

A decade of two halves
Solid growth came to an end in 2008 (Figure 1).  Around 85% of the decade’s new jobs were in place by 2005: employment grew by 261,000 between 2000 and 2005 but by only 46,000 between 2005 and 2010.  The figures for Auckland were 81,000 and 15,000 respectively. 

There was a decline in non-white collar jobs between 2005 and 2010, reinforcing dependence on services for growth. Nationally 84,000 new white collar jobs were partly offset by a loss of 38,000 elsewhere.  Auckland gained 32,000 white collar jobs but lost 17,000 non-white collar jobs.

Figure 1: Employment Growth in Auckland and the Rest of New Zealand, 2000-2011

Clearly we cannot afford to take the future of white collar employment for granted.

Is this decade going to be different?
It got a more interesting last year, and a little more promising.  Auckland staged a recovery between February 2010 and 2011, driven by 8,600 new white collar jobs out of a 9,000 gain overall.  White collar employment stalled in the rest of New Zealand, which recorded a decline of 3,100 jobs.  

Does this represent a recovery, a turning point perhaps?  With Auckland starting to grow ahead of the rest of New Aealand, and white collar servcies resuming their pre-2008 growth trajectory? 

It’s probably too soon to say.  These are small numbers coming in the course of what could be a drawn-out downturn.  I like to think that we are looking at accelerating growth founded on a strong producer services sector.  But I fear we may not be.

So what jobs are growing and what are their prospects?
When we look closer at the composition of white collar job growth (Figure 2) we see:

• It depended heavily on community services (education, health, and government) especially outside Auckland.  These jobs will not migrate offshore, so that’s good.  Unfortunately, economic conditions mean they will have minimal medium-term growth.
• Personal services (arts, recreation and others) have been slow growers.  So much for economic salvation by the creative sector.  Unfortunately, these activities depend on discretionary spending; they follow rather than lead growth.   So don’t expect too much from them as incomes stall and discretionary spending falls.
• Commercial services (finance, real estate, information and media, professional and scientific services, and administrative support to business) held up longer outside Auckland than inside, but the rate of growth fell sharply.  Herein lies the biggest long-term threat: these services are most vulnerable to offshore supply and lack of investment, especially in human resources.  On the plus side, the bulk of Auckland’s 2011 gain was in this category.

Figure 2: Employment Growth by Service Sector and Period, Auckland and the Rest of New Zealand

Thinking about the future
I wish I could feel as confident about Auckland’s growth as the authors of the city's Draft Spatial Plan.  But in light of the vulnerability of our white collar sector, I can’t, despite a better employment performance in the commercial service sector last year.  And I certainly would not be relying on strong long-term growth in that sector to underpin heroic land use assumptions and big spending commitments.

I am not sure how we might respond to the threat to white collar employment in Auckland.  I guess I would start by addressing our education and training capacities, and maybe continue to explore ways of boosting innovation and development appropriate to our capacity and our setting (and not built simply around comparisons with other post-industrial, western cities!) 

And I would certainly address the relative cost of investing in IT and other producer services here, considering issues around infrastructure and public spending, local and central government regulation, and appropriate land use strategies for modern producer services. 

As I see it, though, it will be a long time before Paul might bring his family home permanently, if at all, and enjoy the sort of challenging, high tech (and well-rewarded) job he has at the moment. 

---

[1]           By producer services I mean those that primarily service the needs of other businesses and perhaps government rather than households.  Of course, there is some cross-over between markets and categories.

[2]          Crin R (2009) “Service Offshoring and White Collar Employment” Institut d.Analisi Economica, CSIC, Barcelona

[3]                 Despite positioning Auckland as an innovation hub in Asia Pacific, all the international indicators considered are about relativity with cities in Europe, North America, or Australia.  See Auckland Council (2011) Background Paper: Auckland Economic Development Strategy, especially p.103

Rethink the Link - Does Auckland really need to pour money into a hole in the ground?

Anchoring the CBD, or Sinking it?

A cornerstone of the Draft Auckland Plan is implementing an underground inner city rail link.  At an estimated $2.3bn this is the single most expensive new commitment in the plan, and accounts for around 15% of capital spending identified. This seems a big price to pay to transform what is already a perfectly functional CBD with adequate and improving public transport (PT) arrangements. And unless it makes a substantial difference, it could become a major fiscal anchor on Auckland’s development.  This posting considers the prospects.

Why?
So why do we need the inner city rail link?  The plan says:

·     It will contribute to “a transformational shift towards greater use of public transport”, reducing congestion “that has become increasingly intolerable” (p27)

·    It will improve the timeliness of public transport for inner city workers and by improving access to the CBD “catalyse related urban and business development and growth” (p35).  Oddly enough, the Plan also states that “existing rail and motorway connections to the city centre make it highly accessible and an efficient location for business” (p127).

·     It will support an additional 55,000 to 70,000 jobs projected for the CBD.  In a hint of circularity, 5,000 of these are attributed to the rail link itself (p165).

The Background Document, Towards Preferred Urban Form, says:

·    The link will raise service levels across the network, cut travel time on the western line by 10 minutes or more, and create a higher “accessibility profile” for CBD fringe areas (p25).

The Business Case
I looked at the business case supporting the rail link, but struggled with it.  For a start, while it claims to consider alternatives, it departs from convention by looking only at different transport responses to fixed assumptions about land use.  Normally, transport evaluation for urban development starts with land use options, and considers their differing transport needs to decide which combination is favoured economically.  It also considers differing land uses so it can highlight the social and environmental tradeoffs being made. It might then vary the best options further to take into account fiscal risk.  

Rather than go into the detail of the business case here I concentrate on whether building the City Rail Link the best way to reduce congestion.

Commuting - the Data
To get some idea of this I looked at the distribution of commuting trips across Auckland.  I first divided the city into five sectors:

–    The North, locations north of the Waitemata Harbour and dependent mainly on the Harbour Bridge for access to the CBD and points south, including the rest of the Auckland Isthmus;

–    The West, former Waitakere City, mainly dependent on the Western Motorway for access to the CBD and points south;

–    The CBD, as defined by the plan to cover areas within the motorway ring (Auckland Central East and West and Harbourside), but extended for this exercise to include fringe areas likely to be impacted by the rail link (Freemans Bay, Newton, Grafton East and West);

–    The balance of the Auckland Isthmus, through to Panmure in the southeast; and

–    The South, the former Manukau, Papakura and Franklin council areas, and Waikato Region

An origin-destination matrix of work trip was sourced from Statistics New Zealand for the 2006 Census at Area Unit level.  Motorised trips were divided between those using private vehicles (company or individual owned) and those involving bus or rail [1] and allocated among the five sectors.  Pedestrian and bicycle trips were set aside as they are mainly local.

(The source data rounds small numbers for confidentiality reasons. This means flows between areas with few trips are slightly exaggerated or under-counted, although this should not affect this general analysis.  [2])

Getting to the nub – getting past the CBD
Let’s compare trip numbers to the CBD with those bypassing it:

–    14% of trips originating in the North are destined for the CBD.  But 19% go past to points south. (62% remain within the north);

–    15% of trips originating in the West end up in the CBD, but 37% end up elsewhere on the Isthmus or further south (not all of these need go near the CBD, though).  Only 38% of trips originating in the West terminate in the West - a low level of employment self-sufficiency.

–    Only 32% of trips originating in the CBD terminate there; 53% go elsewhere on the Isthmus or and further south;

–    64% of trips originating in the South end up in the South, just 7% are destined for the CBD, 26% for other parts of the Isthmus, and 3% for the North or West.

 Origins (Place of Residence) and Destinations (Workplace)
Auckland Journey to Work, 2006

Source: Census of Population 2006, Statistics new Zealand

Around 21,000 trips a day from the West and the North of the region went to the CBD in 2006.  But 38,000 had to get past it (although some from the west would have gone near it at all). 

Significantly fewer north- or west-bound trips indicate more limited employment opportunities in those areas.  But there were still 15,000 from south of the CBD to the north or west.

So, 54,000 trips went past the CBD, nearly as many as destined for it (58,000). And 127,000 went to other parts of the Isthmus.  While the CBD is the largest single destination (around 14% of the city’s total jobs using our definition) the real congestion issue is how to cater for – or reduce -- cross-city commuting, and especially north-south trips that must use the motorway system to drive round it.

Is pouring money into a CBD-rail link really the answer?
Will the proposed city rail link meet the Plan's expectations?  No.  Not just because it does not address cross-city congestion.  But also because in 2006 30% of trips from elsewhere on the Isthmus into the CBD already used PT. In some nearby Isthmus areas the figure was much higher e.g., 50% for Mt Eden North, 40% Newmarket, 42% Sandringham, 41% Newmarket, and 40% Surrey Crescent. And a substantial 26% of commuters from the North and 27% from the South to the CBD also used PT in 2006.  (These figures do not include ferries, which accounted for 7% of PT boardings in the year ending October 2011 – all to the CBD).

And this penetration will have grown with expanding PT patronage.  Look at the past few years: 

Source: October 2011 Statistics Report, Auckland Transport, p.4

We can take heart from this, and the prospect of more of the same, especially as the cost of motoring seems set to increase, and as existing transport services are upgraded and fine tuned.

Contrast this, though, with the fact that only 4% of trips passing the CBD  in 2006 used PT, and 7% of trips destined for locations on the Isthmus other than the CBD.  And rail, even with its planned city link, is not going to make much difference to these figures. 

It must be asked: how we can justify over $2bn in capital spending to raise rail’s share of CBD-focused travel in which PT already plays a large part?  Because we face the prospect of diminishing returns by way the high cost of each additional unit of demand that might be satisfied by spending up large on the rail link, especially because this does not really address where the problem really lies: with cross regional travel. 

There may be more cost effective and enduring measures we can take.

Reducing Congestion:  (1) the Role of Bus Services
Buses account for the bulk of the growth in public transport patronage to date, and will continue to do so whether or not a city rail link is built.

Bus services offer relatively low marginal costs for expansion, route and service flexibility, capacity for continuous improvement to rolling stock, and a better ability to cope with disruption than rail.  They offer wider network capacity and greater passenger convenience and responsiveness.  They are less prone to system-wide disruption.

Given a long-standing legacy of rail transport to a few suburbs it may make sense to incorporate what we already have into a multi-modal system, but putting a lot more money on the line to “benefit” from sunk costs in a system that is inferior to the alternative is not good economics.

Reducing Congestion: (2) Rebalancing Land Use
There has been much analysis, reporting, deliberating, and dithering for over decade about how much and where more employment land might go to allow investment outside the CBD and the Isthmus, to bring down the high costs of industrial land, and to facilitate business investment close to the labour force.  Action is long overdue. 

The Draft Plan falls into much the same trap as the Regional Growth Strategy did 12 years ago, doing little to reassure us that increasing the region’s employment capacity has the priority it needs.  There is passing comment about where it might happen in the Discussion Document People and Economy (p83) ,generalised commitments to development in the northwestern and southern priority areas in the Spatial Plan itself,  and continuing reference to 20 years notional industrial land supply (which we haven't had for some time now) and increasing employment densities to accommodate growth  (Draft Economic Development Strategy, p42).  But there is no discussion of how current imbalances might be acted on or how the relationship between where people might live and work will be addressed other than by building more road and rail capacity.

In any case, the 55,000-70,000 additional jobs proposed for the CBD and a commitment to triple the CBD population which appear to be the land use assumptions underlying the Business Case for the rail link will generate far more demand for travel than can ever be met by PT.  The National Transport Survey, for example, demonstrates that journeys to work accounts for well under 30% of national travel demand (at least on a time basis).

The balance includes travel for personal business, recreation and socialising, shopping, and travel in the course of work favours, all generating dispersed trips at less predictable times than commuting.  These are trips that inevitably lean on private rather than public transport.  No amount of money poured into a rail tunnel will prevent the planned level of intensification from creating a real CBD congestion problem. 

Reducing Congestion: (3) Fine Tuning the Road Network
Already initiatives are being taken that will do a lot to reduce current congestion, though.  One is the completion of the western motorway, connecting west and south Auckland directly.  And the new Victoria Park tunnel recognises that the problem is one of getting past the CBD rather than getting into it.  A further harbour crossing could eventually build much-needed redundancy into the network, reducing the disruptive potential of occasional traffic incidents (although we might question the wisdom of integrating it into the same feeder and distributor roads as the existing Harbour Bridge).

There are other initiatives that might be taken.  The motorway system itself could be reviewed to see just how far it might serve better the arterial needs of Auckland through such measures as relocating on and off ramps to cater for local and intra-city movement.

Reducing Congestion: (4) Road Pricing
The idea of tolling roads to pay for the rail link has been floated.  This acknowledges the uneconomic nature of the latter.  But the benefits to motorists of the rail link by way of lower congestion on roads are likely to be far less than implied by such a tax, if they exist at all. The suggestion does raises important constitutional issues, though, over who can levy a tax in new Zealand, and why.

If the intention is to better reflect the costs of private motoring – in other words charging users – the solution is likely to revolve more sensitive pricing of access to and use of roads than this thinking suggests.  For example, in the foreseeable future vehicle positioning and on-line user charging technologies will enable motorists to pay directly for the costs that they impose on the network.  Adopting this approach to countering congestion, rationalising the use of transport resources, and encouraging sensible land use makes more sense than taxing motorists to fund the capital for expanding the rail system. 

We also know from experience with petrol prices how responsive motorists can be to real increases in the cost of motoring.  And that as the population ages, there is a tendency to rationalise and reduce vehicle use.  Let’s work towards changes around these tendencies rather than impose an expensive and potentially unnecessary element of infrastructure on the city.

Plan for Improvement
By committing to continuous improvement in a bus-based system, completing and refining the road network, and fostering a land use pattern that better matches where people might live and work we can reduce congestion and lower the environmental costs of transport in the short to medium term.. And this will leave us well placed to take advantage of improving technology in vehicle transport (bus and car) and user charging in the medium to long term.

A high cost rail system will reduce this flexibility, and instead lock us into a set of costs and structures that will be more of burden to the city, its residents and businesses, than a benefit.  Continuing to push it at all costs could well be the game breaker for Auckland's Draft Plan.

[1]       Travel by ferry comprises only a very small share of the total and is not identified in the statistics

[2]     Comparing the sum of trips across cells compared with the overall figures provided by Statistics New Zealand suggests that this leads to between a deviation of 5% undercounting (for car based trips) and 7% undercounting (for public transport-based trips).  This is acceptable for the level of generalisation dealt with here.

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Central City Dreaming

Getting past the words

The Draft Auckland Plan is a daunting document – both in ambition and in presentation.  It covers a range of fields.  In what started out as a spatial planning exercise, Auckland Council boldly sets thirty year priorities for central government in areas like transport, health, and education; spells out what industry might do and how it might perform;  and promulgates its own long-term agenda in the areas of land use, urban design, and infrastructure.

So when we get past the vision, the photos, the charts, the the strategies, the principles, and directives, what does it all boil down to?

A central city manifesto

Well, in areas in which the council has direct accountability, it emerges to all intents and purposes as a central city manifesto.  A cynic might call it a bold attempt to boost inner city land values, potentially at the cost of ordinary, suburban ratepayers who will be called on to help fund its many CBD projects.

To try to pin down what the Plan really stands for, I examined the spending priorities.  Now we know these are indicative in most places, perhaps fanciful in some, but this is the best sign we have of where the Council’s priorities for us, and our children, lie. 

And when we look at where the priority area spend is targeted, it is clearly anchored to the CBD:

Priority Locations for Capital Expenditure: Draft Auckland Plan

Source: Table 12.3 Draft Auckland Plan

Of course, the further into the future we go, the more tentative this spending becomes. 

So let’s just take the first decade, 2011-2022: during this period 48% of the Council’s priority spending is targeted at the central city and water front.

Is it justified?

The area attracting the lion's share of spending, the area the Plan defines as the central city, [1] accounted for under 2% of the region’s population in 2009, although it did pick up 6% of growth in large part as a result of the boost in rental apartments in the middle of the decade.  It also accounted for 14% of Auckland’s employment and 11% of employment growth.

Turn these figures on their head: the rest of Auckland attracted 89% of population growth and 86% of job growth in the decade, but is lined up for only 52% of priority spending – much of that already committed by existing plans.  And this share falls to just a third if we add in all the figures through to 2040. 

While funding for the Council’s Southern Initiative is not pinned down in the Draft Plan and might adjust the balance slightly, that initiative focuses on strengthening children and families.  It depends largely on working with the relevant community and government agencies to meet social goals.  The Auckland Council is likely to act mainly as a civic champion for a needy community in the vacuum left by the demise of Manukau City Council.  It’s not clear what, if any, commitment to direct investment it might make in this space.

And there’s more

On the other side of the ledger, the priority projects listed do not include the $2.7bn investment planned for rail and transport improvements (which are listed instead under city-wide infrastructure improvements in Table 12.2).  These are an intrinsic part of the grand plan to revive the central city. 

Certainly these two projects are not yet funded, and may never justify funding in terms of demand, economics, or urban design.  But the fact remains that when we add them in to the mix the Draft Plan identifies close to $6bn planned by the Council for spending on the CBD over the next thirty years.  And that’s before we take account of such fundamentals as stormwater management, water supply, and wastewater infrastructure. 

It is not clear how much retrofitting will be required for these and other underground services. The recently reported  requirement for a $4.5bn spend to fix ageing stormwater infrastructure over 50 years (which is not obvious in the Plan, and does not include new capacity) represents the sort of bill that redevelopment of existing built-up areas incurs, especially in older, central areas.

How will it work?

Regardless of how we qualify the Draft Auckland Plan's numbers the bias in the vision is overwhelming.  And it is difficult to see this emphasis making Auckland a better place to live for the majority of its residents. 

The CBD is certainly improving as a place to visit as a result of investment that has gone into the waterfront, Aotea Square, and iconic events such as the Americas Cup regattas and the World Rugby Cup.  There is no doubt justification for more investment to make it even better. But there is a limit, especially if it comes at the cost of civic spending on more worthy projects that can be enjoyed by more people on a day-to-day basis, or if it unduly increases the community's exposure to high rates and charges. 

The CBD pre-eminence bestowed by the Plan shows limited appreciation of where most Aucklanders live, work, and play, and what might be required to make our suburbs more attractive. 

A high risk vision?

A key driver of the Plan's great CBD expectations is anticipation of an unprecedented population boost.  Chapter 8 of the Draft suggests that between 2006 and 2040 the population in the central city could increase by 340%, from 23,000 to 78,000.  This lies between 14% and 18% of projected region-wide growth, quite a turn-around.

It also raises some interesting issues. 

For a start, there are no strong grounds to expect Aucklanders to embrace the increase in housing densities that would result, from around 20 to over 70 households per hectare (more or less, depending on average household size), especially given the environmental and social issues such a strategy raises in an intensively developed area of mixed use. 

Second, there are real question marks over the capacity to deliver at a reasonable cost the 25,000 to 30,000 new dwellings implied in an environment where land assembly and remediation costs are high; infrastructure is constrained, ageing, and expensive; planning and consenting are traditionally tortuous; where dependence on medium density housing will push up construction costs; and where there is also an expectation for a revival in employment numbers. 

Third, it raises real questions over the resulting conflicts between the requirements of residents – for space, security, and residential ambience – and visitors.  The latter comprise a large student population, office, hospitality, and service workers, and visitors to recreational and cultural facilities, all of whom make quite different demands on the built environment.  And this is an area where there were already 86,000 employees in 2009 (although that was down 4% on 2007).

Fourth, it concentrates even more people and activity in a part of Auckland that is most vulnerable to the impacts of natural hazards, with a concentration of ageing commercial buildings at risk from earthquake activity, a significant area of reclaimed land prone to liquefaction, and low lying areas, including key arterial routes and lifelines, subject to storm surge flooding or even tsunami-based inundation.  While the probability of these events is low, the relative impact of any one of them will be high in the central city. 

How far, then, are the risks factored into the Draft Plan prescription: the risks of market resistance, commercial failure, economic inefficiency, land use conflict, and the impact of extreme events?

At least it’s a draft

In trying to create a CBD that might be all things to all people the Draft Plan may fall between stools.  Visionary planning certainly calls for imagination, but imagination tempered by clarity of means and ends, and a little more than a small dash of realism. 

The CBD can be a great place, but that need not be at the expense of heartland Auckland.  And if we do not maintain the attraction of our suburban spaces, and make it easy for people to meet their work and lifestyle aspirations we may not get the growth required to support plans for the city as a whole, let alone to support the resources this council plans to pour into the CBD.

The Draft Plan is a useful snapshot of what the politicians and advisors want – now it’s time to take seriously what the people are likely to prefer, and what they might be able to afford, and shape our civic spending plans accordingly. 

[1] Auckland Central, East and West, Freeman’s Bay and Newton Census Area Units.  The latter two are traditionally excluded from definition of the CBD, but are included to bring the 2006 population estimate up to the Plan figure of 23,000 people.

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