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National Local Roads Congress 2002

Presentation by Professor Allan Layton

Final Report of Public Inquiry on Mechanisms to Fund Queensland's Road and Transport Infrastructure

Contents

• Objectives of Inquiry
• Inquiry Process and Timeline
• Funding Options
• Commonwealth Funding
• QLD Fuel Subsidy Scheme (QFSS)
• Table 2.7: Congestion Costs in Capital Cities 1995 to 2015
• Private Sector Involvement
• User Pay Mechanisms - Toll Roads
• User Pay Mechanisms - Cordon Pricing
• User Pay Mechanisms - Parking Levies
• Public Sector Borrowing
• Impact/Development Fees
• Table 5.9: Summary of Proportion Indicating Opposition to Option
• Conclusion

Objectives of Inquiry

Identify funding alternatives to satisfy Queensland's road and transport infrastructure needs.

• Determine, by way of research and community consultation, the most suitable means of obtaining the necessary funds.
• Inquiry accepted that a significant increase in expenditure is necessary.

Inquiry Process and Timeline

January 17	Inquiry Launch
February 10	Background Paper released and public submissions called
March 15	Closing date for submissions and Discussion Paper released
March 22-27*	Public Hearings conducted
April 8-15	Community Survey carried out
May 2	Interim Report released, presentation at QLD Road and Transport Forum, and final feedback sought
May 31	Final Report handed to LGAQ

* Large number of individual stakeholder meetings were also conducted during the period Feb 10 March 21.

Funding Options

Inquiry accepted that a reprioritisation of expenditure (from existing sources) in favour of transport infrastructure was unlikely.

Therefore Inquiry sought suggestions for new funding sources.

Alternatives suggested in submissions, stakeholder meetings and public hearings included:

• Commonwealth Government to allocate a greater proportion of Federal fuel taxes to roads and transport.
• Elimination of the Queensland Fuel Subsidy Scheme.
• Greater private sector involvement in infrastructure provision.
• Greater use of user pays mechanisms, including use of 'smart' technology.
• Increased public sector borrowing.
• Development impact fees.
• Other financing methods (tax incentives, accelerated depreciation, infrastructure bonds).

Commonwealth Funding

• Small % of federal fuel excise tax currently spent on roads and transport - 13% (16% inclusive of Roads to Recovery (R2R)).
• BUT competing demands on revenues.
• However, indefinite continuation of R2R Program (at current real levels) should be politically achievable.
• In the longer term strive to achieve increase from 16%.

Thus:

Recommendation 1:

• Local Government to continue to lobby the Commonwealth Government to achieve an extension of Roads to Recovery funding.
• The Commonwealth to allocate a minimum of 16% of fuel taxes to roads and urban public transport initiatives, increasing to 20% by 2008.

Queensland Fuel Subsidy Scheme (QFSS)

• Strong submissions arguing for elimination of QFSS - 8 c/l State Government subsidy to QLD fuel prices.
• Current cost of over $480m per year to rise to around $700m per year within 10 years.
• Community survey indicated almost 60% of Queensland population may favour its elimination provided: Resulting funds are directed to both road improvements and some motor vehicle registration relief.
• A full and informed debate of this issue is needed.
• Bipartisan political leadership needed to promote this debate.

Thus:

Recommendation 2:

• The State Government to eliminate the QFSS, with all revenue saved as a result being dedicated to providing additional funding for roads and public transport infrastructure across the State and to reducing vehicle registration charges to a level, on average, similar to that elsewhere in Australia .
• Funding from this new pool should be allocated on a needs basis across the State, including funding of local roads.
• If elimination of the subsidy in rural locations is not accepted, then either of the following options should be considered as a first stage: (a) the subsidy should be withdrawn in SEQ with all revenue retained dedicated to providing additional funding for roads and transport infrastructure in SEQ; or (b) the subsidy should be fully withdrawn in SEQ and coastal localities while in the rural balance of the state a 4 cents per litre subsidy should be retained. All revenue retained should be dedicated to providing additional funding for roads and public transport infrastructure across the State and to reducing vehicle registration charges to a level, on average, similar to that elsewhere in Australia.
• If the QFSS is eliminated, roads and public transport spending, in real terms per capita, should increase over existing budget allocations by the full extent of this additional funding.

Table 2.7: Congestion Costs in Capital Cities - 1995 to 2015

City	Congestion cost 1995 $billion	Congestion cost 2015 $billion	Congestion cost/capita 1995	Congestion cost/capita 2015
Sydney	$6.0	$8.8	$1600	$2000
Melbourne	$2.7	$8.0	$840	$2100
Brisbane	$2.6	$9.3	$1800	$4600
Adelaide	$0.8	$1.5	$740	$1500
Perth	$0.6	$1.9	$480	$1900

Source: BTE 1999; (congestion cost is value of excess travel time and extra fuel use relative to free flow conditions)

Private Sector Involvement

• Concept of Public Private Partnerships (PPPs) has been suggested.
• Delivering services sooner - possibly at lower cost to community.
• At the margin, PPPs will present a useful way forward for several important projects (in the SEQ).

Thus:

Recommendation 3

PPPs should be encouraged by the State Government as one mechanism to accelerate the provision of key elements of the road and transport system, particularly in SEQ.

User Pay Mechanisms - Toll Roads

• Suggested as an option for providing improved levels of service.
• High traffic volume areas and availability of alternate routes.
• Electronic tolling, convenience, and fine tuning of prices.
• Consider charging for excess capacity in transit lanes and Busway.
• Community Survey: - 57% support if alternate road available (another 13% 'neither oppose nor support').

Therefore:

Recommendation 4:

• Toll roads should be regarded as an appropriate mechanism for provision of premium road infrastructure, with costs recovered directly from users by electronic tolling methods.
• Any new roads funded by tolls should maintain an alternate route for traffic not wishing to pay for the premium service.

User Pay Mechanisms - Cordon Pricing

• Purpose of easing Congestion.
• Flexibility allowed by electronic methods.
• Limited to congested CBDs like Brisbane.
• Generated funds hypothecated to system upgrades and public transport.

Therefore:

Recommendation 5:

• Electronic tolling approaches, including cordon tolls and other network tolling approaches, should be supported as longer term future options to better target user charges according to costs imposed and benefits obtained from road network use.
• Implementation of such systems should be accompanied by transparent dedication of funds to relevant system upgrades, including public transport.

User Pay Mechanisms - Parking Levies

• Peak hour travel promoted by current pricing schemes.
• Motivated by profit maximization but not consistent with efficient transport infrastructure provisions.
• Revenue hypothecated to public transport and related infrastructure.

Thus:

Recommendation 6:

• Local Governments should have the power to levy an annual parking space levy to assist in the capture of road user costs imposed on congested central city areas, and to encourage greater use of public transport. All revenue from such a levy should be required to be used to improve public transport and related infrastructure which will improve access and mobility in the levied area.

Public Sector Borrowing

• Principle of intergenerational equity
• Constraining expenditure on roads and public transport to current tax revenue and charges - may lead to under-investment
• If governments are unwilling to use borrowing capacity - inevitable social and economic costs

Thus:

Recommendation 7:

• Increased use of public debt should be considered by both the State Government and individual Councils, to assist in spreading out the costs of infrastructure provision over time, as well as to provide social and economic benefits to the existing population.
• The LGAQ could usefully consider providing support to Councils on this issue in the form of educational seminars for members to enable a better understanding to be developed of opportunities for the appropriate use of borrowing capacity.

Impact/Development Fees

• Proposed new amendments to IPA extend road headworks charges to State-owned roads.
• May still be very significant costs to wider transport system from new outlying developments.
• Arguably desirable to have developers meet these costs with higher costs passed on to purchasers.

Thus:

Recommendation 8:

• The State Government should further review IPA to ensure that new development pays the full costs imposed on the wider regional road and public transport system.

Table 5.9: Summary of Proportion Indicating Opposition to Option

Location	Brisbane metropoliton	Outer metropoliton	Provincial	Rural	Total
Greater use of debt	23.6%	20.6%	33.6%	43.1%	28.8%
Toll roads if alternative untolled route (b)	26.1%	20.5%	45.7%	30.6%	28.8%
Congestion charges	33.1%	24.8%	50.0%	20.9%	31.1%
Remove fuel subsidy, with rego reduction and rest on roads and transport	27.4%	33.2%	35.0%	44.0%	33.3%
Greater private participation	38.0%	35.8%	39.3%	58.3%	42.3%
Greater use of toll roads (a)	45.0%	44.7%	55.0%	42.2%	45.7%
Electronic user charges	50.6%	44.3%	46.5%	52.9%	49.3%
Remove fule subsidy - all spent on roads (a)	47.8%	50.6%	47.9%	58.2%	50.7%

(a) initial question prior to supplementary question (b)

Conclusion

Ultimately the public must be prepared to pay the price to obtain a road and transport system which meets its needs.

Queenslanders have a choice. They can choose to maintain the lowest taxes, fuel prices and per capita debt in Australia. However, they must also be prepared to accept that a consequence of this choice may then be an inadequate road and transport system.

Alternatively, they can choose to support the financing of major road and transport infrastructure upgrades using some suitable combination of measures such as have been outlined in this report.