Redesigning a City: Planning an Affordable Future for Auckland

At last some urgency ...

The Government has responded to the analysis of housing affordability by largely adopting the multifaceted approach proposed by the New Zealand Productivity Commission.

My interest is in what it says about boosting the supply of houses, a necessary but not sufficient condition to improve affordability and sustain the liveability of our two largest cities.  The government response acknowledges the urgent need to boost dwelling numbers in Auckland and Christchurch by providing sufficient brownfield and greenfield land accessible to the market in a regulatory environment that no longer unduly impedes development. 

This posting explores where some of this land might come from. 

...maybe

The Government concedes that land supply is largely the responsibility of local government.  Having said that, it suggests that legislation will be needed to support the regulatory tools councils need to accelerate consent processes.

The risk is that the Auckland Council (and others) will offer up an all too familiar response: “We agree, and we are doing it already”.  Because that would belie the performance that got us into this fix and suggest a complacency unjustified by current plans.

It’s time to get beyond the glib.  A failure to rise to the challenge – and it is a challenge – that faces Auckland risks continuing distortion of the housing market and all that entails.  This in turn undermines the labour market, as employers are obliged to pay higher wages to offset high housing and living costs to attract and retain skilled and experienced employees.  And wage inflation detracts from any advantages of scale associated with operating in New Zealand’s biggest city.

We need jobs as well as houses

A failure to ensure the availability of suitable land for business in the right places has also prejudiced development.  This was a hole in the 1999 Auckland Regional Growth Strategy, subsequently squeezing the supply and lifting the price of industrial land.  It has continued to receive scant attention, despite the gloss in the Auckland Plan.  It was not addressed by the Productivity Commission.  But a failure by the Council to move with alacrity on deficiencies in land for industry will undermine any response to the housing shortfall, continue to exacerbate costly cross-region commuting and congestion. 

An integrated response is needed to ensure that sufficient business land is released in the right places to facilitate investment and employment accessible to growing residential areas.

Where will the houses go?

Simply pushing housing up or out is not a sufficient response. There are limits to demand for medium density housing in central locations, and cost impediments as well as community resistance to their proliferation. 

At the same time, the usual form of greenfield development – the tack-on model of occasionally stretching  urban limits – is not good enough.  It risks all the inefficiencies and social shortcomings of undifferentiated sprawl by creating extensive, contiguous, tracts of housing – often large houses on small sections – with minimal local employment and poor transport connectivity. 

There is a real risk that Auckland Plan’s centrepiece for urban expansion – the Southern Initiative – will simply  go down the path of continuous development of limited merit, limited amenity urbanisation, and little by way of local employment.

Here, instead, are some options available to create a truly interesting and liveable Auckland.

Some options

 

Thinking brown? Then think big

One of the problems of brownfield and infill development is finding sufficient land for comprehensive development. Piecemeal development that simply fills in the spaces, including green spaces (such as golf courses) is not especially exciting.  And squeezing multiple units onto scattered sites demands a lot of care and innovation in design, cost, and development. 

We need substantial brownfield sites where the amenity and variety associated with greenfield sites can be incorporated.  The existing public housing estate is a start, but hardly enough. This is where the Council and the Government might most usefully work together, assembling sufficient land and, once done, calling tenders for substantive, integrated (re)development.

 

There are few obvious areas for doing this, though. Henderson central may be one. The head of the Manukau Harbour may provide an opportunity close to industrial and commercial areas.  Ageing industrial areas on the Isthmus  may work, although the costs of land remediation will mean that some public funding is inevitable.   With imagination, though, and the clout of council and government backing, there must be more brownfield opportunities of substance.

Decentralised intensification

Greenfield sites on the fringe are okay if based on integrated suburbs or urban villages which meet many if not most residents’ needs locally – for community activities, recreation, shopping, and work.  They may include a mix of housing options, townhouses, low-rise apartments, detached and semi-detached homes.  Ideally they will be on sites that offer some interest by way of contour and the natural environment.  The secret is in smart design. And not all such development need be contiguous.  Let’s bring green space – and nature -- back into our city as it expands.

Satellite towns

Ideally, small and medium-sized towns will be promoted in a green hinterland, linked by effective and flexible transport corridors which allow for a variety of modes..

Pokeno in the south is leading the way (with the added benefit of a potential rail connection), building on existing infrastructure and community in an attractive physical environment, well removed from the urban limits but utilising good urban design and providing for substantial local employment. 

The growth of nearby service town Pukekohe over the past decade tells us something about the market's positive view of this sort of setting.  Warkworth and eventually Wellsford will follow the Pukekohe path, providing real grounds for plans to push the motorway corridor north.

The opportunity of progressive expansion through rail-linked towns to the west is an exciting one, through Kumeu, Waimauku to Helensville and Kaukapakapa.  This is an  area of significant natural amenity and an opportunity for effective commuting to new employment precincts around the north-western motorway.

Village Life

Some consolidation and growth can be founded on existing villages. Already Matakana and Whitford are showing the way, acting at the same time as centres of rejuvenated rural economies.

There are similar opportunities elsewhere – Waitoki, Wainui, and Coatesville stand out in the north, all reasonably close to a north-western rail commuter service in  one direction,  and the commercial infrastructure of Albany, in the other.  Tuakau, Waiuku, Bombay and Te Kauwhata offer similar opportunities in the south.

We might also encourage the emergence of totally new villages and hamlets, catering in compact, contained sites of character for those who might otherwise opt for sprawling and wasteful countryside living under the current planning regime.   

Detached greenfields

Greenfield areas beyond the city edge could be the focus of substantial new townships: Dairy Flat on the Hibiscus Coast, Riverhead near Albany, and Drury in the south are opportunities where land and land use would be enhanced by sensible urbanisation.  Each is far enough removed from existing development to protect extensive green belts but close enough to offer efficient connection. 

This is perhaps how the Auckland Plan's Southern Initiative might work – developed as a new community at Karaka, rather than as an  extension of Manukau.  It would be detached but close to the southern urban edge in an area where the landscape calls for sensitive and comprehensive planning rather than piecemeal enlargement of the urban boundary.

Moving markets

There is the risk that good quality development will maintain a tendency for new houses to be the preserve of established households already well up the housing – and income – chain.  Mixed communities with a variety of styles and tenures might offset this.  But the ideal outcome of a multi-faceted supply shock like the one outlined will be a more active market in existing dwellings.  Moving on means someone else can move in.

And here’s the how

It goes without saying that this all has to be done within environmental constraints.  The council may have to develop a new mindset, a new culture; one that ensures good things - innovative and varied -- can happen, rather than that they can’t.  

And to achieve some momentum, it may need  adopt a project-managed approach to a whole range of new initiatives , rather than attempting to spread planing, evaluation and design  through various divisions of the council focusing on just one or two models for boosting the land and housing stock

It may even mean creating a new public land development agency that can work with central government and the private sector to rise above currently constrained thinking and remove impediments to large scale development in a number of localities. Only when we get a variety of development opportunities and move away from the monotony of contiguous development might we realise the variety of housing models available.   Multiple initiatives may reduce the incentive  to land bank at the city boundaries-and encourage new players into  the development and housing field where a prolonged downturn has left competition weak.

Land assembly must be high on the list of actions so that a growing and hopefully increasingly efficient supply sector gets the opportunity to respond in a comprehensive fashion to a diverse market that has for too long had its material needs and diverse preferences curtailed.

Trans-Tasman Blues – the Housing Crisis and Our Future

Boxed in thinking

While filling in time in the Auckland International Airport waiting hall last Thursday I read about a Property Council discussion of what accommodating  an extra 1.2 million people over the next 30 years might entail. Martin Udale, the development expert heading Essentia Consulting Group, talked about having to push the envelope to meet the challenge posed by the Council’s population growth expectation and its commitment to housing three quarters of that  growth over the next thirty years within the city's boundaries: that's 10,000 new dwellings a year (not counting any catch up from the current  shortfall ).

This is going to need as much as 15% of the current stock to first be demolished, to be replaced with infill housing – apartments and townhouses -- at a ratio of perhaps three or four new for every one knocked down . But for this to happen, Martin said,  Aucklanders -- and that includes planners -- have to first "get over their phobia about height".

Affordable living, Auckland City

Now that’s a challenge. Building medium density housing to a standard and in localities that Aucklanders might like at a price they might afford has so far proven well nigh impossible. New apartments are generally over-priced relative to detached houses because of land prices in preferred locations, consenting and development challenges, and construction costs.  The result has often been cost cutting and poor construction. Consequently, most apartments built over the last 15 years cater for transient populations – students, recent immigrants, solos, non-family groups –often in tight accommodation. 

Outside the box

There are other options for increasing densities – in greenfields, satellite towns, and through selective suburban infill and brownfield redevelopment (including developments modelled on retirement communities and suburban villages).  Going down this path – of decentralised intensification --- would take a serious re-think by the city fathers, though, and their planning advisors. 

But if we take on the challenge  of demolishing 50,000 to 85,000 of our existing housing to build apartments and townhouses, we might inadvertently solve the problem another way: by  stalling population growth. 

Or outside the country
The slowdown is already here.  And intensification along the proposed lines with the congestion and loss of amenity that goes with it will make Auckland that much less liveable and Australia that much more attractive.

Affordable living, Sunshine Coast

Which brings me back to why I was waiting at the airport.  My wife was returning from visiting our three Australian-based children and their families. She’s beginning to think we should move there.  Some of our friends have done just that.  Even though they are not far off retirement age, their skills and experience are transportable if they want to work in Australia and be closer to their families.  

And they are in good company. According to Statistics New Zealand (SNZ) there was a net national loss (an excess of long-term departures over arrivals) to Australia of 486,000 people over the past 30 years, 212,000 of those in the last ten years alone (September years).  The trend has been accelerating (Chart 1).  Add that to the cyclical nature of movements from other countries and we can anticipate more, and more prolonged, net migration losses from all sources in the future.

Chart 1: Net Migration Movements, New Zealand 1991-2012 (September Years)

So how will Auckland fare?

The latest population projections from SNZ suggest that there could be another 480,000 people living in Auckland in 20 years time under a “medium scenario”,  a figure which  more or less lines up with 10,000 new dwellings a year.  Over a third of this  growth is based on assumed migration gains .  Of course, some of the natural increase projected also depends on migration : fewer migrants = fewer babies.

Going down

So I took a look at the assumptions behind the projections. According to SNZ sources, there was a net gain of 66,600 international migrants (arrivals less departures) in the five years ending 2006, but that dropped 56% to 37,700 between 2006 and 2011 (September years).

And the net loss from Auckland to other parts of New Zealand from internal migration has been growing –18,000 estimated between 2001 and 2006.  So, international and internal migration over those boom years contributed around 48,000 new citizens, 9,600 a year.  

Without a 2011 Census subsequent internal movements cannot be calculated.  But since 2005 gains from  international migration  have continued to fall, down to an average  7,000 a year. The trend continued in 2012 with a gain of just 4,100 (Chart 2). 

Chart 2: Net International Migration Gains, Auckland 2002-2012 (September Years)

More hope than history?

The SNZ medium assumptions in fact assume an average 6,000 gain in migration through to 2016 (actually, that’s now closer to 6,500 following the overshoot in 2012), before it is assumed to jump back to boom-time figures of 9,000 a year for the next 15 years.  But the conditions experienced ten years ago are unlikely to be repeated in the foreseeable future.  And our longer history certainly doesn't support a view of such prolonged gains.  And even a modest 6,000 a year through to 2016  looks  out of reach if real house prices cannot be brought down to where they were a decade ago.

So who are we losing?

So what does this mean?  Well, over the past twenty years, more than half of the people who have left Auckland have been aged between 15 and 34 (again, based on SNZ data), mostly educated young adults at the start of their work career and entering the housing chain.  Lose them, and we can trim our housing demand figures. More than that, though, we can reduce our aggregate fertility expectations and lower forecasts of workforce growth 

Some of these young adults  are embarking on the traditional New Zealand passage of rite, the Overseas Experience trip  – rather like my daughter and her partner did ten years ago.  But they are now well settled north of Sydney with an affordable home, pool and yard for the children, great amenities, good friends,  good schools and jobs.  I don’t see them – or many others like them – heading back this way in my lifetime.

In any case, Chart 3 shows a shift over time towards more  family groups leaving, older adults and children. This is worrying because they don't  make such a significant move without  good reason.  Could it be tied up with housing affordability?  Is it associated with the challenges facing the intermediate housing sector – people with good jobs and dual incomes still unable to afford a house in Auckland ? And not wanting to live in ever-more crowded suburbs?  

Chart 3: Age Distribution of People Leaving Auckland for the Long-Term

Of course, there is always the prospect of resurgence in immigration from Asian origins offseting the  loss of young New Zealanders.  Even that is not  assured, though.  The prolonged GFC  and economic uncertainty here changes New Zealand's appeal  relative to other options opening up to them. We cannot count on New Zealand always being a destination of choice, especially if we are busy recreating the sorts of urban densities that many potential immigrants are moving from.

Maybe exporting some of our housing problem to Australia  is positive move – but we are also exporting our future and accelerating the ageing of our city as a result.  It would be a shame if by going along with the urban design consequences of consolidation that the advocates of a compact city are bestowing on us  the Property Council somehow legitimises the dogma that risks the undoing of our city.

It is time, instead, to begin to think about quality not quantity in our urban planning.  And that means really thinking outside the compact city box.

Another Middle Class City Vision

Roads or cafes? That is not the question.

Dr Joel Cayford says that we are throwing away money when we invest in roads but creating value when we invest in downtown infrastructure (New Zealand Herald, 17 September 2012).  It’s a mistake to think state highways are not a critical part of our urban infrastructure, a mistake too many central road planners make – failing to appreciate that the highway's main role in and around Auckland is in the provision of urban arterials, the roads that keep the city itself connected and working.

And while I share Dr Cayford’s concern over the shaky rationale behind some current over-the-top  inter-city road projects, I cannot accept the idea that throwing a lot public money into the CBD is a rational alternative.  Nor do I accept that we should persist in a cargo cult mentality, demonstrated in his suggestion that the taxpayer should deliver more central city goodies to Aucklanders.

Creating a central city sink

Dr Cayford’s vision is one of even more public spending in an area already at risk from over-investment in public amenities.  This simply means that the city’s ratepayers will have to cough up even more because of over-optimistic – or plain misleading - extrapolations of demand and dollars and a contrived vision of what a central city might be.  Except that he would also have the taxpayers help pay for the party.  

At least he is in good company: Auckland’s spatial plan promotes the CBD as a sink for the city’s rates.

Even the occupants of the latest flagship quarter, the Wynyard Wharf, are said to require further rental subsidies from the city.   And while it was great to have Wynyard set up  for the Rugby World Cup – and we were lucky enough to have fair weather most of the time – it is more often echoing and empty than thriving and buzzing. 

The CBD is doing fine

Dr Cayford suggests that the problem is that the city centre is not a great place to visit.  I disagree, and I doubt that never-ending spending on me-too inner city infrastructure will drag more tourists down to New Zealand as he suggests. Incomes and exchange rates drive tourist numbers, as years of analysis for the tourism sector have demonstrated, topped up a little by awareness campaigns and airfare promotions. Having a city that bears a vague resemblance to the Mediterranean won't make any difference.

(He is right to diss a new convention centre, though: there is good reason not to gamble too many public dollars on a sunset industry).

Anyway, things  already look pretty good.  To quote Dr Cayford, :

Go down and sit at a table outside the old netshed on North Wharf about 5pm on a balmy, sunny afternoon, Saturday, Sunday, Friday - whenever - and watch the promenading that's happening here in Auckland. You could be on the Mediterranean. Kiwis have style and they like to show it, given an opportunity.

One problem is that the promenaders that Joel likes to watch are spread ever more thinly spread through fashionable quarters, and therein lies the risk. 

There has been a string of such initiatives, local nodes promoted by public investment in the built environment.  And they are all great places to be on their day, but they are also struggling to retain tenants and stay that way.   Princess Wharf, Queens Wharf, High Street and Vulcan Lane, the Chancery Quarter, Britomart, the Vector Centre, the University precinct, the Viaduct Basin: they are all worthy destinations, great spots to kick back in on a sunny day.

They are  nodes that, as long as they  retain some vibrancy, create the frame of a great CBD. Individually and collectively they contribute to a city centre that’s well worth a visit.  But we need to be thinking strategically now about how much more we can sustain, and how we are going to keep what we already have buoyant.

Time for fine-tuning and coming out

For a start, when it’s wet and blustery, winter or spring, the Mediterranean idyll goes out the window. 

There are things we can do to reduce dependence on our uncooperative  elements, and they needn’t cost a lot.  Wellington has created sheltered pedestrian ways in a climate  less comfortable (if somewhat drier) than Auckland’s.  We certainly do not need new tracts of paving, new collections of cafes, and over-capitalising infrastructure to get our CBD working better.  The new rail loop that Joel cites, for example, might make it easier for a few more residents from outer suburbs to visit the CBD, but it won’t do anything for the ambience and quality of places within it.  

Much current thinking seems simply to pander to the café set and an image of our climate that is only true some of the time.  Queen Street appears to have bucked the trendy trend, though.  It caters increasingly to the take-away crowd and night owls.  While this perhaps reflect some of our much-touted diversity it seems to be a source of middle class angst.

Democratise the CBD

We need to consolidate what we have and to do so within a budget that reflects our means.  We should ideally aim to make the CBD relevant to citizens other than just the coffee set.

Maybe we could pursue initiatives that will democratise it: improve pedestrian links among existing nodes; open up  hidden spaces (St Patricks Square, Myers Park come to mind); create more places for kids to play; promote more informal gardens and greening; provide capacity for people to perform and not simply promenade in public places; provide for street art, street theatre, and street life; and  promote places where our local cultures can inject new life, all the time recognising the need for sheltered places and paths. 

These are the sorts of things that might put a little flesh on the CBD bones without relying on the begging bowl or  pandering to middle class conceits.  And they just might turn it into an asset for more Aucklanders.

No more LBF

If we need to do more, let’s do it within our means and in a way that is relevant to our citizens. Focus on what we’ve got and who we are.  And get off the me-too middle class spending bandwagon that seems to be driving Auckland’s civic leaders and planners, and amounts to little more than rates (and taxes?) being treated as some sort of central city Landlords’ Benevolent Fund. 

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.

---

Irresponsible inner city behaviour

The latest in urban design - new public spaces for the dispossessed

In my last blog I raised the question of whether purchasing land for a possible rail link through the city would reduce the attractiveness of the inner city living by laying waste to a corridor cutting through it – shades of the motorway madness of the 1950s and 60s.  I suggested that this will increase the anti-social behaviour after dark that so worries CBD residents and visitors.

So it was interesting to see in the New Zealand Herald today the concern over the use of vacant city sites as places of refuge for people deemed anti-social and particularly as sites for binge drinking.  These are, of course, informal public spaces, simply being used as such.  And with the purchase of 280 properties in the central city for construction works or sites for rail-related development in support of our “sometime-maybe-never?” underground rail link, we are creating more of the same.  This will no doubt make inner Auckland more liveable for the homeless, dispossessed, impoverished, and underemployed.  Paradoxically, we could claim from this that laying waste to inner city sites contributes to the vision of increasing inner city living.

Getting rail up and overrunning

By the way, the $240 million set aside for acquisition of 280 properties sounds just a little light.  I haven’t searched the records, but I suspect few of those properties would be valued at under $1million.  And what about the compensation for relocation and loss of revenue and goodwill among the  many businesses that currently occupy them, and of course the relocation costs of displaced households?  

To me it looks suspiciously like we have taken the first step down the budget blow-out track.  But then, that tends to be the way of big civic projects utilising public funds, which are almost inevitably subject to optimism bias and waste, partly resulting from confused accountability.

(On accountability, it is not quite clear whether the train driver is the Council, the Mayor, or Auckland Transport.  And any expectation that the Government should shoulder much of the cost or should legislate to tax motorists points to further potential confusion in accountability, in this case between central and local government.  This is particularly significant for a project destined to make  a big a hole in public finances).

Of course, many of the properties to be acquired will be sold once the link is completed.  But assuming that the holding costs are based on $240m expenditure, any over-run will boost them.

So will delays to the project as a result of unresolved funding problems, continuing economic uncertainty, and likely fiscal constraints.  These are likely outcomes: a Benefit Cost Ratio of 0.4 doesn’t justify going ahead, and the strategic benefits remain decidedly unclear. But that’s another story. 

Suffice to observe that like alcohol bingeing among people with too much time on their hands, it seems that playing the train game is a difficult habit for politicians and other enthusiasts to break.

Passing the bucks

Even if  we do get to spend all this hard earned (or borrowed) money down the track, over-optimistic passenger and revenue projections and pie in the sky proposals for station-based office and residential developments will mean under-recovery of capital and operating costs.  A BCR of 0.4 looks a bit optimistic. 

Of course, we can continue  to behave badly by excessive, wasteful spending  and leave someone else to clean up the mess.  In this case another generation will be left to foot the bill while today’s decision-makers slip – or slope -- off into retirement (most likely in suburbia or their coastal retreats).  How responsible is that?

Tunnel Vision: thin edge of the rail wedge

Digging in

There is an interesting if depressing narrative emerging in a number of independent stories about Auckland's passenger rail aspirations, city centre hopes, and spatial plans.   This posting aims to string together just some of the bits - with links.   

The recent announcement that Auckland Transport is going to acquire 210 inner Auckland properties (or is that 280?) to preserve the route for a rail tunnel with no assured funding suggests that politicians and planners in this city – and their plans – are a couple of steps removed from reality, committed to an inner city rail tunnel at almost any cost.. 

At what cost?

It’s noteable that when councillors start lambasting officials for their tunnel costing, or propose a tax on motorists to pay for the project, they say nothing about and the history of over-runs associated with Think Big projects and the contingencies – including delays – that history tells us have the capacity to double the costs of large civil engineering projects. 

And they seem fixated on a tunnel without addressing how ongoing rail operating losses after completion will be met, or the costs attendant on the ancillary road works, the parking facilities, and  other above-ground spending on existing and proposed stations necessary to get people on board.  There is also the cost of the electrification  ($500m already advanced  by taxpayers for electric units, quite apart from line costs) required simply so that we can run trains underground. 


So far, then, it has been difficult to get a picture of the  total costs of this project.  Arcane debates between politicians and officials about how to factor in the impact of inflation over a project which it is conceded will take some time to get underway, let alone completed, seem rather incidental in the bigger picture.

Why is this city – today's and tomorrow's ratepayers – going along with a high risk, low return - and somewhat opaque - gamble?  The risks are all on the downside.  For a start, incremental investment decisions based on broad  estimates are bound to escalate the costs of a project of already doubtful merit. 

The reasons, we are told, lie in the benefits of better access to and promotion of the CBD, reduced road congestion, better connectivity between the south and the west of the region.  Let's revisit those reasons.

Cross-regional connection - L

Dealing  with the last first:  journey to work figures from  2006  show that only around 1.3% of all motorised commuting trips (a total of 4,700 by bus, car, rail, or motorcycle) were between the west and south of the region. So cross-regional connectivity hardly goes any distance towards justifying the tunnel. 

In 2006, 7% of commuting trips from the west to the Inner City were by train – around 560.  Let’s say that increases 5-fold or thereabouts as a result of a more direct route (putting aside, for the moment, the time associated with  additional stops at new stations).  That’s perhaps 2,500-3,000 trips.  Again, the marginal cost of these additional trips looks pretty high.

And with recent investment in road and industrial land  developments in the west of Auckland a much more sustainable strategy would be one that fostered more investment and greater work opportunities closer to home.  This is consistent with the expectation in the business case that many of the additional workers in and around the CBD will also live there.

So cross-regional commuting hardly makes a compelling case for the rail link.

Reduced congestion L

There is an expectation that even making a marginal difference to car traffic will reduce congestion.  That ignores the experience: road capacity gained by transferring commuters from bus or car to rail is simply absorbed by the reinstatement of trips that would otherwise have been deferred by peak capacity constraints. 

More than that, we are now seeing the benefits of considerable spending on roads in the past by way of reduced congestion anyway, something that could easily undermine  rail patronage forecasts. 

 And we can look forward to even more gains on that front as more people work from home, an ageing population reduces its use of cars, and long-term increases in fuel prices lead to more rationing of car use by households.  These benefits come at virtually no public cost – and are likely to be collectively a lot more beneficial than a costly (but still limited) increase in the capacity of the passenger rail system.

All the big boys have one L

Of more immediate interest is why we would be expecting to generate greater demand for rail transport to the CBD.  Several reasons have been advanced. One is the old  Me Too chestnut.  The big cities we are familiar with – Paris, London, New York, Sydney  –  have metro rail serving the CBD using underground systems.  We want to be one of the big boys.  


Of course, we start well  behind the eight ball.  Cities with "successful" metro rail transit also have populations many times that of Auckland. 

Even so,  metropolitan rail in large cities still runs at a loss despite long-sunk capital costs, higher population densities, and vastly more employees in the central city. Take New York’s Metropolitan Transport Authority, for example. 43% of revenue comes from taxes and subsidies, another 12% from tolls; and just 43% from fares. Railcorp, responsible for passenger rail transport in New South Wales, including Sydney’s CityRail, lost $2.5bn prior to state government contributions in 2010-11.   Travel for London reported an improvement as a result of increasing trips numbers: to 1.2bn from a loss of £626mn in 2010 to £100mn in 2011/12, or close to £3.60- for each of its estimated 28milion passengers on the London rail and underground. And on top of these losses are substantial ongoing capital costs. 

It’s hard to understand why we should emulate these systems.

Boosting the CBD L

The Auckland Plan makes much of the CBD as  the key to Auckland's international standing.  The new rail loop is seen as a critical part of that.  

This is based in part on the expectation that many more people would live and work in and around a series of new stations to  be built on the proposed inner link. As I have suggested previously, there is very little we might see in the development of future labour markets or even housing preferences that suggests that the inner city will hold a lot of appeal or achieve the sort of growth proposed in the Auckland Spatial Plan. The business case for the rail (and the spatial plan) presents outcomes underpinned by implausible drivers.

Laying Waste

In the meantime, let’s think about the impact of acquiring 210 to 280 properties on the possibility that they are  required for tunnel construction. We know how the acquisition of land for motorway construction in the 1950s and 1960s laid waste to swathes of inner-city land for decades, here and overseas. We can look forward to that on a putative rail corridor from Britomart to Mt Eden for who knows how long.

Proposed Inner City Rail Link - Planned Corridor

      Source: Auckland Transport

And the disruption this will cause goes beyond the cost and inconvenience to current owners who have invested in inner-city businesses and inner-city living.  This will be no doubt lead to a long and contested consultation programme. 

But what will happen when  this land  is acquired?  One possibility might  be a range of quirky, interesting, temporary activities occupying low rental ageing properties. But that's not likely when we are dealing with a corridor.

Another - more likely - is that it simply goes to waste, becoming a  ribbon of vacant, deteriorating buildings cutting through the inner city.   Already Aucklanders are wringing their hands over the booze-ridden late night culture, and “a deluge of rubbish” hitting inner city streets. Creating a corridor of waste land will not help.    

The real and immediate problem faced by Auckland's  inner city is not one of enhancing access. It is a problem of credibility; of maintaining the quality in a place where its appeal as a place to visit (at least after dark) and live is already under threat.  Locking the city into the rail tunnel is not the way to tackle the long-term prosperity of the CBD and surrounds.  This is a much bigger issue – and not one that should be obscured by desperate defence of a flawed project.

... to be continued ..   

Local government restructuring – putting the cart before the horse?

The Quest

In March 2012 central government launched a multifaceted reform programme, Better Local Government. The aim is to “refocus” local councils in the interests of improving governance, efficiency, and management. It identified eight areas for action:

1.  refocus the purpose of local government;
2.   introduce additional fiscal responsibility requirements;
3.   strengthen governance provisions;
4.   streamline reorganisation procedures;
5.    establish a local government efficiency task force;
6.     develop a framework for central/local government regulatory roles;
7.      investigate the efficiency of local government infrastructure provision;
8.      review the use of development contributions.

This is a longer posting than usual.  In it I touch on the key components of the proposed reform and raise a question or two around why and how we are going about it.

Better Local Governance?

The programme is reductionist – breaking reform down into separate parts as if they can be acted on independently. The risk is that the sum of the various initiatives adds up to something less than a satisfactory whole.

For a start, none of the seven subsequent objectives can be considered independently of the first.

The recently issued Local Government Act 2002 Amendment Bill pursues their integration by introducing a new purpose statement. This seems a reasonable approach (whether or not the purpose statement is reasonable).  The purpose should shape local government  funding needs, governance, and management ; determine how it allocates and manages its resources; and influence what it regulates, and how. 

Promoting the Bill as the first step in the reform process also seems to take care of the first four objectives.  It offers the prospect of containing and streamlining what local government does, informed about how it might best do those things by the four reviews promised in the second four objectives.

Or More Central Direction?

The bill will change the  purpose of the Act from providing for :

local authorities to play a broad role in promoting the social, economic, environmental, and cultural well-being of their communities, taking a sustainable development approach (Part 1, 3 (d)).


to:

local authorities to play a broad role in meeting the current and future needs of their communities
for good-quality local infrastructure, local public services, and performance of regulatory functions

Reintroducing statutory limits to curb council (and community) discretion  at the outset of the reform process risks pre-empting what might emerge from those reviews.  The  Bill requires local government to focus on functions that only it can perform. This return to basics means that councils might only act where markets fail or where they can demonstrate collective benefits sufficient to justify local public action . This is a step back from accountability -- because council hands are tied -- and consequently from community democracy. It moves us closer to the strait-jacket 1974 Act that the 2002 Act was intended to unbind. . 

The inference is that since the 2002 Act councils have acted too broadly.  With only a small number of exceptions (the larger councils stand out in this respect), this is highly debatable.

Other provisions of the current Bill further reassert central over local authority. These include scope for setting prudential standards or benchmarks by Order in Council and much strengthened powers for the Minister to intervene in the affairs of councils considered to be “struggling”. 

Ironically, the provision also introduced in the Bill  for elected councillors to dictate staffing and remuneration policy increases the likelihood that councils will “struggle”, confusing roles and reducing executive accountability.  And allowing mayors more power in running their councils – which may be a worthwhile measure in its own right  –  is unlikely to offset the increased exposure to governance failure. In practice, tinkering with mayoral powers while limiting what councils might do may simply lift the tendency evident in our largest authorities towards divided councils and sectional alliances.

Is this the thin edge of the amalgamation wedge?

Perhaps the biggest concern for me is the much greater weight given by the Bill to restructuring. Unlike the reforms of 1989, which were geared towards increasing the effectiveness of local government by doing away with the redundancy, duplication, inefficiency, and excessive overheads of a fragmented, hide-bound system, the objective of these measures is not clear.  Lurking behind them, I suspect, is a commitment to further amalgamations, encouraged by provision for applications for restructuring rather than proposals. 

A preoccupation with amalgamation again raises the spectre of a solution looking for a problem. The evidence that better governance or enhanced efficiencies are delivered by larger units of local government is decidedly mixed. Internationally research suggests that efficiencies may be increased by moving from very small to medium-sized units of local government. But there is little evidence that moving from medium to large units will deliver the goods. 

Certainly I have seen no evidence to support such an approach across the board in New Zealand.  It doesn’t exist in the Department of Internal Affairs Regulatory Impact Assessment for the current Bill, which acknowledges an aim to facilitate more interests and more communities moving on the “union or abolition of councils or the creation of unitary authorities” (Paragraph 158).

Technical efficiencies may be available from merging, sharing, or jointly purchasing particular functions or services across jurisdictions.  That hardly requires amalgamations.  And  there is scant evidence of administrative efficiencies.  Mergers that lead to multiple tiers of management simply pile up the challenges of internal and cultural alignment within enlarged bureaucracies  already struggling to engage with their communities.

The Auckland Experiment – too soon to tell?

In New Zealand’s case we should at least wait to see if the Auckland Experiment works.  The Local Government Auckland Council Act (2009) sought to create a bigger, more influential, and more effective council from the eight that went before. 

Maybe it’s too early to judge the success or otherwise of this  experiment. However, there are sufficient  disquieting signs to suggest that the Government should make haste somewhat more slowly elsewhere. 

For example, the operating budget for Auckland Council in 2012/13 is $2.8 billion compared with the collective 2008/09 operating expenditure of the eight councils identified of $1.95 billion (see Royal Commission Report Appendix B).  Spending growth of 45% (or $721m in 2009 dollars) compares with just 8% inflation between 2009 and 2012.  Transition costs alone can’t explain such a jump in costs - the Royal Commission suggested that at most transition would cost  just $60 million a year for four years.

So much for operating and administrative efficiencies from amalgamation. What about capital expenditure? 

I have not compared collective capital expenditure by the prior councils with the plans of the new council. However, I have already raised doubts grounded in the evidence for Auckland over the Council’s planned capital programme. This is marked by an over-emphasis on the CBD and the $2-3billion it is throwing at an underground rail connection, the benefits from which are both constrained and uncertain.  That central government does not accept the arguments put forward by Auckland Council to justify this investment (despite the $500m already committed to the electrification necessary for under-grounding) is evident in its reluctance to support the proposed rail connection financially. 

The Risks of Amalgamations

These question-marks over Auckland’s capital programme highlight serious questions over the allocative efficiency of larger councils (and, as we often see in the private sector, of large corporations generally).

The creation of oversized municipalities does away with the sorts of checks and balances associated with medium-sized councils.  It raises the spectre of single minded spending of larger budgets on ever more ambitious – and unrealistic  –  pet projects.  Bigger councils with bigger budgets but the same old thinking risk serious misallocation of finite public funds.  And allocative inefficiency is  a greater threat to aggregate productivity with more far reaching consequences than any operating inefficiencies that might be associated with smaller organisations.

A more  cautious approach to restructuring, an approach which encourages modest reform and puts barriers in the way of building large,  bureaucracies  remote from their task environments may be called for.  I suspect that the Auckland Experiment will demonstrate sooner rather than later that restructuring is not the silver bullet that will  put an end to run-away council costs – or run away councils. 

Seeking out Efficiencies

Better Local Government also sets the stage for an expert group to advise the Government on how best to deliver good quality infrastructure at an economic cost.  We need this advice on how to achieve better allocative efficiency before going too far down the track on local government reform generally.  


This call for best practice in policy analysis and the decisions that sit behind infrastructure investment regardless of council size.  Improvements in allocative decisions may well be available before committing to the costs and uncertainties inherent in council amalgamations.

Operating efficiencies might be gleaned from improved process, procedures, training, investment, and, ultimately, purchasing. Administrative efficiencies might be husbanded through moderating the size of councils. But don't expect to make big gains in this area, especially if, in doing so, we further weaken the local government labour market. 

It’s early days yet, but it seems that the advice that emerges from any expert investigation should inform any local government reforms, suggesting that the Bill is premature within the wider programme.

Similarly, it seems premature to promote restructuring while the Local Government Efficiency Taskforce is only now looking at how to streamline consultation, planning, and financial reporting. Equally, the New Zealand Productivity Commission has only just commenced its inquiry into what regulations are best developed and administered at local government level.

Resource Management Review

Something else that bothers me about the Local Government Act 2002 Amendment Bill and how it is clearing the way for amalgamation is what happens to the environment under unitary councils? 

Again we have some experience here, and I would expect to see it brought to bear in the reform process. 

Prior to the 1989 reform of local government and the 1991 Resource Management Act it was all too easy for the environmental gamekeeper to also be the environmental poacher. We need to be aware of the risks of this happening again.  How far, I wonder, is the Technical Advisory Group exploring options for streamlining the RMA (convened by the Minister for the Environment) able to do so in the face of parallel initiatives likely to change both the shape and practice of local government in New Zealand?

Make haste slowly

There may well be merit in the wider programme of reforms the government has instituted, especially in the context of its economic development mandate.  But it seems important that multiple programmes and initiatives do not lead to conflicting outcomes.  An enthusiasm to reform – and restructure  –  local government should not pre-empt the efficiencies that might be achieved by simply boosting the quality of decision-making. Only when we have examined how infrastructure, regulation, and resource management might be delivered most effectively will we really know what sort of reforms might be needed in local (and central) government.