Submission

Response to NTC discussion paper on the third heavy vehicle road pricing determination

August 2005

Contents of this page

 

Introduction

Local government in Australia has responsibility for a massive network of local roads. Of the 850,000 kilometre national network of roads, local government has responsibility for the development and upkeep of some 685, 000 kilometres or about 85 percent of the total network.

Local government has a $75 billion dollar investment in the local roads network and accordingly has a substantial stake in the charging (and pricing) regimes that apply to that network.

General approach

ALGA notes that the paper provides "the results of the cost allocation calculations that have been carried out for the Third Determination". The paper seeks to make a distinction between this process and the process of determining the charges themselves which is described as "judgemental" Nevertheless the paper, more or less by necessity, indicates levels of charges that are generated by the calculations.

As a matter of process ALGA does not believe that the Commission has succeeded in ensuring that this distinction is widely appreciated and believes that accordingly, the paper would have benefited by a discussion that simultaneously addressed both technical and policy issues. This has been evidenced by, among other things, the public and fairly predictable debate that has ensued since the paper's release. Stakeholders have deduced that the paper has in effect recommended a level of charges that otherwise, and still may be, moderated by policy concerns.

The charging principles

The charging principles approved by Ministers are a long way from achieving a sound competition framework for land transport that would prospectively produce better inter-modal outcomes at both the local and national level. Unless a start is made to creating a framework that produces a transparent process for driving competitive neutrality between road and rail then distortions will remain, and loud and inconclusive debates about whether road and rail are respectively "paying their way" will continue.

Notwithstanding that national competition policy would suggest the establishment of such a framework there appears to be a reluctance to take it on and indeed a disposition to view each mode in isolation from one another. Thus we see discussion around such matters as environmental pricing for trucks in isolation from anything else including other road users. It is well known that environmental pricing was excluded from the current third charges determination only by virtue of the fact that it was ultimately considered too hard to take it on at this stage.

The NTC now has a charter to not only review regulation in the road and rail industries but to also review inter-modal issues and relationships. Accordingly ALGA would propose that the pricing principles proposed for future deliberations of the Commission should be more expansive and form the basis of a comprehensive competition framework.

Other issues

1. Link between revenue and road maintenance

A first tier issue for local government is its lack of access to the heavy vehicle road charging regime, and indeed to road based revenues more generally, that reflects a relationship to their road maintenance responsibilities and to the usage of local government's road networks.

Transfers of taxation revenue made to local government for local roads bears no strong or logical relationship to useage, or to charges incurred by users of local road networks. If anything it has created a situation where local government is chronically short of funds to meet its road maintenance responsibilities. In essence local government is providing a roading service or utility from which it derives little or no direct revenue.

ALGA contends that it is not sufficient to address this matter by reference to general levels of grants, including untied grants, provided to councils by the other levels of government. There are important principles at stake including that local government should receive revenues (or alternatively grants) in keeping with maintaining the level of access it is expected to upkeep.

ALGA advocates that:

  • local government be recognised first and foremost as one of the most important stakeholders in the third and future determinations
  • acceptance of the principle that revenue generated from heavy vehicle pricing of local roads should be returned to the relevant infrastructure manager (this can occur directly or indirectly)
  • acceptance also that as the NTC moves into purer forms of pricing such as mass distance charging, as is currently contemplated for the fourth determination, then the scope for local government to be directly involved in the pricing process, will be increased.
2. Heavy vehicle useage of local roads

The NTC does endeavour to measure the cost of heavy vehicle access and use of local roads. However the paper makes a number of observations in this regard, namely:

"a number of assumptions are needed about how much of local road expenditure is spent on different types of road works as very little data is available on this. The shares in this paper are based on the average shares for arterial roads" (page 4)

The factors over which there is some uncertainty are:

  • the appropriate cost allocation rules for routine and periodic pavement maintenance expenditure
  • whether heavy vehicle enforcement expenditure should be recovered in the charging system
  • the extent of local road use by larger heavy vehicles" (page 5).

"While there can be no doubt that revised estimates of the amount of local road use for each vehicle type are significantly more reliable than those used in the previous determinations, there does remain some uncertainty over the proportion of travel of articulated trucks, B-doubles and road trains on local roads. This uncertainty arises because it is possible that the local road use survey is slightly biased, as local councils are believed to be more likely to install traffic counters on the roads with greatest use by the largest vehicles (page 12).

The NTC clearly has identified an issue with the integrity of available data on both the use of local roads and on local roads costs that should be allocated to heavy vehicles. Issues would appear to include the following:

  • the fact that shares of the various types of road expenditures for local roads has been based on arterial roads may understate the impact that heavy vehicles have on local roads
  • the exclusion of 75 percent of urban local road expenditure is deserving of scrutiny
  • the measurement of the percentage use by heavy vehicles of local roads is currently very "hit and miss".

If a mass distance approach is to be used in the fourth charges determination then clearly a large body of work will need to be undertaken on the local roads network, including the identification of the various standards of local roads on which differential charges would logically be based. These issues strengthen the case for local government to have a pro-active role in future development of the road pricing regime.

ALGA also is of the view that if enforcement costs are to be allocated to the industry for the purposes of determining charges, then it follows logically that revenues derived from enforcement activities should likewise be attributed.
3. Impact of the proposed charges

ALGA supports a charging regime that fairly reflects the road costs of the various classes of heavy vehicles, based on a methodology that stands up to scrutiny. Any moderation of charges so determined then depends on policy questions related to equity for example, as might be applied to truck dependent communities.

Under this heading we make a number of observations:

  • The substantial increases proposed for mcv's relative to 6 axle semi trailers seems to ALGA to be counter-intuitive. That B-doubles are being "penalised" by virtue of them being comparatively fuel efficient seems to indicate a methodological flaw.
  • In this respect the more important aspect as far as local government is concerned is that prospectively these implied charges could lead to the use of less efficient vehicles, and therefore more heavy trucks on local roads with higher unit axle masses, than otherwise might be the case. This is not a sensible policy outcome
  • Equally importantly, ALGA's remote area constituents are very concerned about the potential impact on remote communities that rely on B-doubles and on road trains for their basic needs. In this regard the paper does note the Overriding requirement on the NTC to consider the impacts of its recommendations, particularly on remote areas, as set out in the IGA". However, as previously noted, these policy issues are not otherwise addressed at this stage.

ALGA does not necessarily see this as a debate about the total level of road costs attributable to the heavy vehicle population as a whole, but rather the apparent distortion in relative road coasts attributed to each class of vehicle.

4. Incremental charging

ALGA recognises that this matter is being separately addressed by the NTC. However we would wish to take this opportunity to flag the strong interest that local government holds in this matter, and in the continuation of the development of models that can be applied locally and from which councils can directly benefit.

August 2005

 

 
Contact regarding this submission

Andy Hrast
Director, Transport Policy
Australian Local Government Association
Tel: 02 6122 9432   
andy.hrast@alga.asn.au

 
Page last updated: 18 October 2005