COAG ROAD REFORM PLAN :: CRRP STAKEHOLDER MEETING :: DATE COAG ROAD REFORM PLAN Driving...

COAG ROAD REFORM PLAN :: CRRP STAKEHOLDER MEETING :: DATE

COAG ROAD REFORM PLAN

Driving Australia’s Road Reform

South Australian Local Government Roads and Works Conference

Neil Aplin, CRRP Project DirectorThursday 25 August 2011

COAG ROAD REFORM PLAN : SA Local Government Roads and Works Conference : August 2011

Welcome to the infrastructure restaurant

Does Sir have his Annual Entry receipt? Good.

Tonight the Chef has prepared three courses of food. As is our policy, we don’t guarantee what that is just yet, but you will enjoy it… whatever it turns out to be!

What I can reveal is that there is a chance that the food has been spoiled, owing to the broken fridge, and it may be uncooked, due to the oven not working. Funding from our patrons precludes our spending on maintenance however, you have come on a special night!

Tonight we are using this years new chairs! Ooh la la!

As usual, the cost is upfront… will Sir be paying by cash or card?


The road infrastructure restaurant

Would you remain a customer?…

would you like to be an owner?


How would you fix this situation?

The owners still need their revenue to run their shops

- better reflect their costs;

- allow them to better meet the needs of their customers; and

- to enable the revenue needs to be shared across all the shops in the chain in a ‘fair’ way.

They need to simultaneously satisfy their

- owners and their customers

- so do road authorities (and our culture)

“Must shift from Asset Managers to service providers”Gary Liddle, Chairman CRRP


Under funding road networks can stall the economy

Source: Transporting Australia’s Future Oct 2010

Relationship between investment and productivity growth.


Australia and heavy vehicle productivity

Australia’s road network is playing ‘catch

up’ in accommodating

larger vehicles.


Multifactor productivity

Source:BTRE_TruckProductivity_March2011


Growing freight task

0

20

40

60

80

100

120

140

160

180

200

1960–61 1965–66 1970–71 1975–76 1980–81 1985–86 1990–91 1995–96 2000–01 2005–06

Year

Bil

lio

n t

on

ne k

ilo

met

res

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

% t

ask

by

veh

icle

typ

e

Total Task Light % of Task Rigid % of Task Articulated % of Task

Larger vehicles increased their share of the freight task with reforms in standards.

Source: BITRE


Challenges for road freight infrastructure

• Sufficient capacity in the freight network to handle the growing freight task, – through utilisation of existing infrastructure and the provision of new

infrastructure

• Optimising the use of existing network infrastructure

• Sometimes called ‘sweating’ the asset

• Improving access for freight to origins and destinations on local roads, managed by local governments (last mile issues)

• Upgrading existing infrastructure to maintain access or allow access by more productive vehicles

• Move from Asset managers to Service Providers


What should a road market do?

COAG identified 2 key objectives (the CRRP Objectives)

• Promote the more efficient, productive and sustainable provision and use of freight infrastructure; and

• Ensuring that national heavy vehicle road prices promote the efficient, safe and sustainable use of infrastructure, vehicles and transport modes.

Issues: how best achieve these objectives?


Federal Government

Current road funding arrangement

State Roads - Arterials

National Highways

Local RoadsLocal Government Funds local roads through rate revenue & developers contributions

Registration charges

Fuel excise

No direct revenue from road use charges

Funds state roads

State funds – local roads

• Regional Road Block & REPAIR

•Special programs – urban bus routes

Federal funds for arterial roads

Federal funds for national highways

Federal funds – local roads

Untied – FAGS (via state)

Tied – Black Spots, Roads to Recovery

State Government


Registration Charges

(Prime Mover/Truck & Trailer Charges)

+

Road User Charge

(Fuel Based)

Current HV Charging System MDL Charging System

HV Charge is based on actual usage of the road network taking into account:

Mass of Vehicle (or its components)

Distance Travelled (km)

Location(e.g. road type)

MDL pricing – What does it mean?


‘Closing the loop’

Road service provider

Revenue

Activity Based Charge

Expenditure

‘User pays’

Road Spending

Improved linkage between revenue and expenditure

Lower operating costs

Roads are maintained to an efficient standard

CSO’s


Possible funding options

Model option Explanation

Option 1 (base case): status quo

on funding

Minimum required to implement pricing option/s. Agreement to maintain funding at current split and funding coming out of general revenue.

Option 2: Maintenance costs associated with HV traffic given direct to road suppliers

Direct funding for HV maintenance costs. This should Increase revenue certainty and flexibility.

Option 3: Maintenance and Capital expenditure costs associated with HV traffic given direct to road suppliers.

Direct funding for total HV costs. This should give even greater revenue certainty and flexibility.


Issue identification: pricing reform

What key issues does road reform raise for local government?

Heavy vehicle use of local roads

The benefits of pricing reform are likely to depend on:

- availability of alternative routes and

- how often heavy vehicles use local roads


Funding reform: benefits

By removing disincentives and providing accountabilities promote more efficient maintenance and investment in road infrastructure i.e. the right infrastructure for the freight task is built and funded at lowest cost.

- optimisation of road network quality

- optimisation of vehicle operating costs

- reduced life cycle cost of road provision

- fewer inappropriate access restrictions

- efficient planning and road provision

- improved road expenditure accountability


Other key issues

Community service obligations

• Funding of CSOs not linked to revenue from road charges

• Impact of removing cross subsidisation in current charging system

• Opportunity for increased transparency

Incentives

• Aside from pricing and funding reform what else is required to promote usage, funding and investment decisions that increase heavy vehicle productivity

• Ensure that system minimises incentives not consistent with COAG reform outcomes e.g. gold plating (more investment than is optimal) or running down the network (less investment than is optimal)


Implementation issues for consideration

• Governance and institutional framework;

• Price setting arrangements;

• Commonwealth – State financial relations;

• Linking road user revenue and road funding;

• Local government and CSO funding;

• Information collection and use;

• Data collection options;

• Alignment with existing systems and national initiatives;

• Alignment with intelligent transport systems; and

• Compliance and enforcement.


Key challenges

• Partial market reform - CRRP only involves heavy vehicles

– Most roads are built for all vehicles

– Infrastructure funding by heavy vehicles alone could lead to inefficient investment

• Community Service Obligations and other subsidies (both funding and pricing)

• Achieving national agreement


Challenges for road freight infrastructure

• Sufficient capacity in the freight network to handle the growing freight task

• Optimising the use of existing network infrastructure

• Improving access for freight to origins and destinations on local roads, managed by local governments

• Maintain access or allow access by more productive vehicles

• Changing cultures


Where to from here?

• Submissions being reviewed on Preliminary Findings Consultation and the supplementary Evaluation of Options Papers

• Final CRRP to COAG Report

• Submission due to COAG by February 2012

• CRRP website – stakeholder information portal www.roadreform.gov.au

• Contact Neil Aplin 03 9095 4455


Questions


www.roadreform.gov.au

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