What’s happening to central city services?

Questioning the future of the CBD
In an earlier posting I speculated about the future of white collar employment. This raised the question of what confidence we might have in service sector growth underpinning the future of the CBD, and incidentally how risky is investment – public and private – based on assuming that it will. 

This was construed in the comments as “giving up on the CBD” and a criticism of the proposed $2bn plus central rail link (CRL).   Well, I haven’t given up on the CBD, but I do differ in my analysis and prognosis from people who believe that a combination of coercive plans and think big projects will do the trick (see, for example, Hey, City Planners,  Remaking the CBD and Central City Dreaming). 

But the questions raised certainly go to the heart of the “business” case for the CRL.  In this blog I dig a little deeper into changes in the white collar sectors in the CBD to see if we can cast more light on the subject.

Projecting even more of more of the same
I have looked at service employment in the CBD and the rest of Auckland from February 2000 to February 2011 using Statistics New Zealand Business Statistics job count data (which does not distinguish between full- and part-time jobs).

The City Council’s economic update on the CRL projected central city employment to jump by two thirds, or 60,000 jobs, over 30 years, or 20,000 jobs a decade.  Now that’s real optimism in light of growth of under 12,000  from 2000 to 2011, and I don't see any underlying analysis supporting it.

The risk of depending on white collar growth
But this is only one of my concerns.  Changes in white collar employment raise other, more fundamental issues around the future of the urban area and especially the CBD.

White collar services (omitting hospitality and retailing for this analysis) accounted for virtually all the CBD job growth and rose from 71% in 2000 to 75% of employment there in 2011.  Commercial services accounted for two thirds of this.  So what happens in the service sector seems petty critical to the future shape of our CBD especially is we hope to counter a long-term tendency for work to decentralise (i.e., to grow faster outside the CBD than inside).

Decentralisation - international examples
A quick review of international examples suggests that greater contracting of public service delivery favours deconcentration (e.g. Washington DC); that dispersal to suburban and town-based offices contributes to decentralisation (e.g., Dublin), but that there may be a simultaneous decentralisation of some services and concentration of others (e.g., Paris).  

This is quite apart from the increasing international mobility of white collar jobs, and potential changes in functional interdependence and the need for clusters of centralised specialist services as a result of the deskilling traditional specialist occupations.

So what’s been happening in Auckland?
The 11,800 new white collar jobs in the CBD in 2011 represented 19% of Auckland’s total growth in those sectors.   Because they collectively grew faster elsewhere in Auckland (42%), though , the CBD’s share was down from 22% at the beginning of the decade.  

This tendency to decentralise varied by sector.  In Chart 1 the bars denote absolute gains (or losses) of jobs (left axis) and the points show the rates of change (right axis).  The CBD gained employment share in the sectors on the left hand side of the chart (centralising) and lost share in those on the right (decentralising). 

Chart 1: Changing Shares in White Collar Employment, the CBD and rest of Auckland, 2000-2011

                                              
Some sectors centralising
Centralisation increased in the specialised but small information and media and arts and recreation sectors.  The bigger finance and insurance sector also continued to focus on the CBD where 51% of the city’s employment in this sector is now located .  There was a slight increase in the CBD share of Auckland’s total education employment, although 87% is still located elsewhere.

While the others decentralise
But what about the fast growing – and highly significant – professional, scientific, and technical service sector?  Over a third of employees were in the CBD in 2000, but this was down to 27% in 2011.  A gain of 3,550 CBD jobs was dwarfed by 20,800 new jobs elsewhere.

And health care, medical and social services were clearly driven by suburban investment and demand.

In fact, 50% of white collar employment in the CBD in 2011 was in sectors which had grown faster outside it than in; not an especially strong foundation for projections that require annual employment gains in the area to almost double over the next three decades.

Recession can change these spatial patterns, of course, if lower order services and services directed towards individuals and households bear the brunt of a slowdown.  So we could see some re-concentration of services in the CBD in the next year or two, but it’s unlikely to be driven by high growth rates.

The CBD – a centre of specialisation?
Digging a bit deeper confirms the more specialised nature of CBD services. In the education sector  45% of tertiary jobs are located there.  This share didn’t change over the period, but the number of CBD jobs was still up by a solid 4,200 (47%).  Community and adult education jobs were up by 1,600. 

Chart 2: The Changing Share of Scientific, Professional and Technical Services in the CBD, Auckland 2000 and 2011

Scientific and market research services increased their CBD presence, but these are minnows in the wider picture (Chart 3). 

So it’s today's bigger employment sectors that show signs of decamping – especially management consulting and legal and accounting services.  In fact, 75% of employees in perhaps the most "knowledge-based" sector,  professional, scientific and technical services, were in sub-sectors that have been decentralising.


Chart 3: The Composition of Auckland''s Scientific, Professional, and Technical Service Sector 2011

So what can we take from the past?
There are two broad reasons for questioning reliance on white collar jobs to continue to underpin CBD growth.  The first is structural – a changing mix of jobs (and we haven’t seen the impact of global financial restructuring in New Zealand ... yet), including the international realignment of services suggested by my earlier posting on the white collar sector. 

The second is location preferences – with the analysis here suggesting that the CBD may not be the focus of future white collar growth that city and transport planners hope for. 

The international experience cited above suggests some reasons for this.  There may be others.

For example, people may be more concerned today with the quality of the work environment.   For many, elevator-dependent, air-conditioned, fluorescently-lit, high rise (and high cost) offices may no longer cut the mustard.  The convenience and amenities of working in the heart of the city can increasingly be replicated in suburban centres, without the congestion.

And perhaps issues of resilience, reliable infrastructure, flexibility, and proximity to the work force are important suburban attractions to the investors who employ them. 

Time to ask the hard questions
I don’t have the answers.  But I suspect that the people planning to spend billions on offering better transport to, from, and around the CBD should at least ask the hard questions, and particularly explain the grounds for expecting such a boost in job growth in the CBD and the consequences for their plans (and the city) if it does not happen.

If we cannot rely on the growth drivers of the past – and the evidence suggests that we cannot, not with any confidence at least – then we have to continue to question the very foundations of our plans. 

When I get older losing my hair many years from now - recalibrating retirement (and urban form)

Recalibrating retirement

Retirement in the 21^st century retirement is a bit a fuzzy.  Is it a function of age?  Does it happen when we qualify for superannuation?  Does it depend on paying off the mortgage?  Is it something we decide on, or is it decided for us?  In New Zealand, even the official age of retirement – qualifying for the pension at 65 – is up for debate.

The tradition of an abrupt end to working life is changing, whether from necessity or choice.  For some people it’s about priorities, rebalancing rather than swapping lifestyles.  Some may need to work because of financial or family circumstance, others because it’s what they know and enjoy.  Casual work, mentoring or volunteering, working from home and part-time work are all viable alternatives to outright retirement today.

From rest home to retirement village

And the rest home, where one faded into the Sunset (often a name of choice for such homes) has given way to the retirement village, with connotations of an active community encompassing a range of lifestyles and interests.  Villages offer varied housing choices, too, from small detached and semi-detached dwellings, through terrace units and apartments, to dependent living facilities and nursing units.  Arrangements are flexible and adaptable – key words when thinking about our individual and collective futures in uncertain times.

Residents may still be working.  They may be totally mobile and independent, or they may choose to draw on shared transport services.  Transport needs are further reduced because villages typically offer gymnasia, bowls, swimming pools, other recreation amenities, and restaurant facilities on-site.  They offer security in generally pleasant grounds, sometimes with the capacity to develop gardens within private spaces.   All this adds up to why even people under 60 seek to move into them. It doesn’t necessarily make for demographic balance or social diversity, but it does cater to the varying needs of a growing group of people.

A pointer for urban design

Retirement villages also provide a physical model of how we might best achieve higher density living in urban areas.  In fact, as Mark pointed out, they could play a significant part in shaping Auckland (and other cities) over the coming decades.  Integrated villages offer the prospect of economical construction, higher residential densities, economies of scale in service delivery, and reduced transport demand. So they provide something of an exemplar when we think about where people might prefer to live in a resource-constrained future. 

Villages in the suburbs – the case of Auckland

The Retirement Village Association has 280 members throughout New Zealand.  I looked at the locations of its 61 Auckland-based members. 

First I mapped them using Google Earth.  This shows a wide distribution throughout the city and surrounds, from the town of Warkworth in the north (Totara Park Village) to Pukekohe (Palms) in the south.  The Hibiscus Coast (Maygrove, Red Beach, etc) with it coastal environment north of the metropolitan area is a popular locality. Overall, though, there is quite a wide spread across the urbanised area (Mayfair to Longford Park).

Location of Retirement Villages, Auckland

I also used Google Earth to plot the road distances to the CBD.  There is only one within the Inner City Ring (as described in my last blog, Ageing in the City), none within the CBD, and only two within 5km of it.  11 villages lie between 5 and 15km away, covering the Isthmus and immediate surrounds (lower north, inner west, and upper south), with the biggest group (19 villages) falling in the heart of the post-war suburbs, 15 to 20km distant, and 19 over 20km away. 

Distance of retirement Villages from Auckland CBD

This pattern of dispersal, together with the tendency for older people to favour living some distance from the CBD as described in the previous posting does not support the contention that the future of an ageing population lies in the CBD, even if there is a small minority who through preference or as a result of personal history will do so.

A sustainable choice

Retirement villages offer an insight into alternative ways of increasing the density of settlement and reducing society’s demands on resources.  And they do not rely on over-regulating land use to do so.  In fact, they most likely benefit from an approach that encourages innovation in development and design.

They also capture some the principles associated with increasing the attractiveness of medium density living, including privacy and personal space, security, and quality housing and fittings. These are attributes which compensate for smaller houses, and offer the added advantages of shared transport, accessible services, and local amenities, generally without requiring people to move away from the neighbourhoods within which they have their roots.

Knightsbridge Village, Mairangi Bay, Auckland

A cursory survey of the Auckland villages indicates that most are close to shopping centres, with their attendant restaurants and cafes, and personal, financial and medical services. So the day to day needs of residents are easily served near their homes, while the villages themselves have good access to trade and medical services.

The economics

Retirement Villages provide one physical solution to the economic challenges of developing and constructing medium density housing identified by Matt H.  Assuming that the costs of site acquisition are not excessive and development is straightforward, the village model can deliver affordable density in the suburban and city edge environments preferred by many of our ageing (retiring and not-so retiring) citizens.

Village dwellings are not necessarily cheap, although there are third sector examples which offer fewer frills for increased affordability.  The majority, though, are pitched at households with reasonable equity on hand, or who can structure funding to facilitate purchase through such devices as reverse mortgages.

One positive spin-off from the proliferation of retirement villages is the release of second hand housing to the market, enabling more young families to satisfy their aspirations for a detached home on its own site in the suburbs, and perhaps increasing opportunities for infill in the suburbs.  Consequently, successful multi-housing developments of this sort will create positive ripples throughout the housing market.

Making it work

By and large, the companies that have driven the retirement housing sector have done it well.  They have consequently been good financial performers.  They have created a product that has proven popular in the market.  They have integrated uses on sites, applied good design, and created density without losing the sense of space.  This is a sector that we can expect to grow.  It’s also a sector in which the private sector has shown the way ahead.

Perhaps the main weakness of the retirement village is a social one – the limits imposed by a homogeneous age and social structure, with the richness of diversity lost.  But that does not mean that integrated villages in the suburbs catering for more mixed communities would not work. Broadening the scope of such developments may well be a useful tool in the toolbox of planners seeking to cater for more people on less land.

The capacity to locate such villages on large enough sites in appropriate locations will be critical.  They may be located on brownfields, converted from other uses in good localities.  But most are likely to be away from the centre (and those that are close by are likely to be among the more expensive), with many close to the edge of the city where real economies can be achieved.  Wherever they are located, encouraging the development of retirement - and non-retirement – villages will be an important key to providing for a more sustainable city as it grows and ages.

Ageing in the City

Ageing in the CBD

In responding to my doubts about the employment assumptions behind Auckland’s plans for a new central rail link and what this means for the CBD, Patrick R cited the example of his 84 year old grandmother who enjoys the CBD lifestyle.  Dan talked about the attractions of town centres in Europe where many older people hang out.

If people are attracted to the CBD for its amenities and lifestyle as they are saying, I am not sure of the relevance of the rail link. But I take their wider point: don’t underestimate the attraction of CBD living, and let’s make sure we make Auckland’s CBD attractive.

Interestingly, the European city argument is most relevant because it refers to people ageing in place.  Many of the people Dan observed in Sardinia (and, indeed most other European towns) are likely to have always lived in and around the centre. 

Seeking a balance

Patrick’s observations about diversity of ages in the CBD are important because they highlight a key planning issue in Auckland, and elsewhere.  How to plan for an ageing population, particularly if reduced residential mobility is a feature of ageing?  I agree with Patrick that we are not talking about an “either-or “ situation here, and that our interest in the well-being of the majority should not blind us to the interests and needs of the minority.

There are plenty of people who will move into the centre in new world cities given the chance, making the most of the revival in street life, the performing arts, cafes and restaurants.  This is a reflection of a growing capacity in post-industrial cities for people to exercise choice about lifestyle and where they will live.  But it’s only part of the story. 

Living in the suburbs

The facts and figures I have cited in other postings indicate that the amenities associated with the CBD are also a growing part of the suburban story, a part that justifies greater attention and perhaps greater favour.[1] 

Suburban centres are becoming more like village centres.  This is entrenched in Europe.  Even in large cities like Paris and London the vast majority of people do not live in the centre, but live suburban lives focused on urban centres and urban villages.  The localisation of amenity and living is reflected in a more intimate system of local government than we are used to, though.  Perhaps one of our problems is having a single super city trying to plan for a diverse region.  But that’s another story.

The New Zealand evidence confirms that people here prefer to age where they have their roots, which is overwhelmingly in the suburbs. [2] This is where they have their financial, social and emotional investment. Even moving out of an outsized family home is a wrench.

The Data

So where might older people prefer to live?  I thought it would be useful to map their living preferences.  So I did this for Auckland using the 1996 and 2006 Censuses, assuming (rather unfairly perhaps) that age 50 qualifies you as an older person.  

I divided Auckland into several zones – the CBD; the inner Isthmus suburbs, (Westmere, through Kingsland, to Newmarket and Parnell); the balance of the Isthmus ; and the suburbs of the north, south, and west.  Among the latter I separated those closest to the CBD – Northcote and Takapuna areas further south on the North Shore; New Lynn in West Auckland; and Otahuhu through to Mangere and areas north in South Auckland. 

The figures tell the story.  The upper part of the bars on the graph below represents the growth in the number of older people (using my definition) between 1996-2006.  The lower part is the growth in those under 50.  The squares show the share in each area aged 50 years or more in 2006.   

Where do the over-50s live?

This 2006 figures show that the outer parts of the city have relatively more older people: 36% on the Hibiscus Coast (the coastal suburbs north of the metropolitan area), 30% in towns, and 29% in rural areas.  Only 12% of the CBD population was 50 years or older.  (The total for the city was 25%).

The city’s population grew 22% over the ten years to 2006.  The number of older persons grew 33%, accounting for 34% of Auckland’s growth, but only 11% in the CBD and 18% in inner Isthmus suburbs.  By contrast, oldies made up over half in rural areas and 35% in the outer suburbs

The gains were biggest in the southern suburbs, but the shares of growth accounted for were highest in the Hibiscus Coast (38%) and the west (40%).

Auckland Population Growth 1996-2006 - by Age and Area

Thinking about the next twenty years

There seems to be a preference for suburban and even outer suburban living among older people.  It’s not absolute, but it does suggest that we should be wary of overstating future demand for CBD living as our population ages.

Current Statistics New Zealand projections indicate that the 50+ age group will account for over half of Auckland’s growth in the next 20 years.  (The figure is much higher elsewhere, over 80% in Christchurch, for example – and that was before the earthquakes).  So we should be clearly reflecting their tastes and preferences in our plans.  And their attachments mean that the majority of that growth will take place in the suburbs.

What does this mean for the CBD?

The point is not that people do not want to live in the central city.  Many do, although most are likely to be in transition.  They include migrants and temporary residents. That’s not surprising: New Zealanders on their OE also favour living close to the centre of the cities they live in overseas.  Many others are young, in education, early in their career, in non-family households, or not in long-standing relationships.  For a majority – not all – the central city is a place of transition, traditionally a place where they dwell before stepping onto the housing ladder.  And interestingly, young people building their careers and their independence, people in transition, will be a smaller share of our growing population, not a larger one. 

So to maintain strong residential growth in the CBD we will need to influence more people’s preferences, and especially the preferences of older people.  While some will come, it’s a big – if not impossible -- ask to get the sorts of numbers current plans project. 

We need to think about the numbers as well as the anecdotes, and bring balance to our thinking about the CBD, its place in our lives, and how much we might be spending to make it something which it is not.

[1]           I have argued this elsewhere, e.g. http://cities-matter.blogspot.com/2011/05/sustaining-suburbs.html, http://cities-matter.blogspot.com/2011/10/central-city-dreaming.html

[2]           See, for example, Davey J (2007) “Ageing in Place: The Views of Older Homeowners on Maintenance, Renovation and Adaptation” Social Policy Journal of New Zealand, 27

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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. 

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[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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