The Congestion Question: submission to Transport and Infrastructure Committee

Heart of the City (HOTC) is the business association for Auckland’s city centre. We represent the interests of business in the city-centre and strive to ensure the city centre is vibrant and successful, commensurate with its role in Auckland’s economy. We are committed to the growth and success of the city centre as an accessible, safe and welcoming urban community.

HOTC participated in the development of the refreshed City Centre Masterplan which includes objectives to transform the city centre into a more pedestrian, family and environmentally friendly place and reduce emissions in the city centre.  How this will be delivered is yet to be clearly articulated.  Several projects including the City Rail Link (CRL), ferry terminal development, and the Access for Everyone (A4E) project have funding earmarked in the Auckland Transport Alignment Project 2021-2031 and the Regional Land Transport Plan 2021-2031 (RLTP).

Auckland Council has expressed support for congestion pricing in Auckland, conditional upon having public transport services and projects in place to allow road users to switch to alternative modes, the satisfactory mitigation of equity impacts, and as revenue and costs allow, the replacement of the Regional Fuel Tax. 

Just as Auckland Council has applied a recovery lens to its 2021-31 Long-term Plan, this is also the lens HOTC is applying to current plans and programmes to improve streetscapes and public spaces as well as proposals affecting access to the city centre.

Key points of HOTC's submission

• Overall, we are supportive of The Congestion Question (TCQ) objectives to improve the efficiency and effectiveness of Auckland’s transport network.  We also support the reframing of TCQ’s work on congestion reduction now being broadened to include other transport outcomes such as emissions reduction and equity.   
• However, congestion charging should only be introduced as part of a consistent, even-handed approach to reduce congestion pressures where it is most severe on Auckland’s roading corridors, and not penalise one destination over others.  Further analysis is required regarding the proposed City Centre Cordon.
• The city centre has been significantly impacted by COVID-19 and long-term, large-scale construction projects. The city centre has experienced greater economic scarring impacts compared with other commercial centres in Auckland and the retail, hospitality and cultural and entertainment sectors are likely to take time to adjust to a ‘new normal’. 
• Access has become a significant issue for many businesses located in the city centre, and their suppliers and customers.
• While we are optimistic about the city-centre’s future, HOTC seeks to ensure that the city centre’s offer as a destination for business activity is strengthened, not weakened, in the lead up to the end of 2024 when the City Rail Link (CRL) is due to open.  
• Decisions on congestion charging options should take a risk management approach by considering the implications of alternative options on the economic resilience of the city centre given it competes with other commercial centres in Auckland and all need to adapt in a post-COVID environment. 
• We note that the key performance metrics from TCQ modelling for the City-Centre Cordon (CCC) option suggests that by 2028:
  • morning peak trips would reduce by less than 2,500 (0.4%),
  • PT use would increase by only 619 (0.5%),
  • time spent in severe congestion (within the city-centre) would reduce by only 2.5%.
• COVID induced changes in travel patterns in the city-centre have dramatically reduced commuting trips over 2020-21 compared with when the TCQ modelling was undertaken and give cause to revisit the TCQ’s estimates of projected travel demand as well as the costs and benefits of the CCC and other options.
• TCQ Technical Report 2020 notes (p73) that while the CCC option is not one of the top ranked options, primarily due to its limited geographical coverage and corresponding limited potential for impact on overall network performance, it represents a low risk and internationally comparable scheme, which could potentially provide the first stage of a larger, more comprehensive scheme.
• Based on the information available, we cannot agree with TCQ conclusion that a CCC option is “low-risk”.  There are real risks that a pilot, stand-alone CCC option could:
  • encourage business, education and other jobs to relocate to the city-centre fringe or other urban areas;
  • discourage new business activity; and/or
  • leave most of the core motorway and arterial roading network outside of the city-centre experiencing high congestion to carry on as it is and get worse.  Both car and bus passengers to the city centre could therefore experience negligible gains in travel time on an ‘end-to-end’ journey basis.  
• In principle, road charging should be introduced as part of a consistent, region wide approach to the significant problem of congestion on motorways and main roads. The roll-out of congestion charging needs to be done in an integrated way which provides a ‘just transition’, including:
  • a level playing field approach that minimises displacement or diversion effects on the location of residents, business and jobs in particular centres.
  • selection of roading corridors to be subject to charging based on severity of congestion on the corridor;
  • replacing (rather than being on top of) the regional fuel tax (RFT); and
  • mitigation of impacts on low-income households in the region (including workers, residents and students travelling to the city centre);
• HOTC seeks the following issues to be addressed in the next steps with the congestion charging policy process:
  • Consider risks of all options causing distortionary effects on the location of residents, business and jobs, including potentially undermining the utilisation and optimisation of current public investment in the city centre, particularly the CRL;
  • Update transport modelling projections and benefit-cost assessments in light of post-COVID travel demand patterns, 2018 Census results, and the final RLTP (which will indicate planned improvements in transport infrastructure and services across Auckland).  It will be important to understand the proportion of the region that will have reliable access to the city centre by public transport at the time the CRL is complete;
  • Take account of impacts on households’ affordability of the RFT co-existing with congestion charges in considering a phased option approach;
  • Be clear about the benefits of a city centre cordon option for travel time savings for motorists before they enter the city centre rather than just while they are inside it; and
  • Engage with HOTC about the implications of congestion charging options before any decisions are finalised.

Our submission covers:

1. Auckland’s city centre is focused on recovery from COVID-19
2. The city centre’s share of total commuting trips in Auckland is declining
3. Support for mitigation of impacts on low-income and transport disadvantaged households
4. Assessment of the congestion charging implementation options

Commentary

(1) Auckland’s city-centre is focused on recovery from COVID-19

Auckland’s city centre accommodates around 38,000 residents^[1] and over 126,000 employees (full-time and part-time)^[2], and has seen sustained and significant growth in business activity since at least 2000.  In the past year, the city centre has experienced a massive shock from COVID-19, the first major shock since the Global Financial Crisis impacted in the few years after 2008.  Post-GFC growth has been strong across all market sectors, with an increase in the number of people living, working, studying in, and visiting the city centre.

Over the year to December 2020 the city centre made $1.12b in retail sales^[3], which was down $467m (29.4%) from 2019, returning to the lowest level since 2016. COVID impacted businesses, which employ people from all over the city, have faced a major loss of consumer spending over that period plus all the costs associated with things like shutting down at short notice.

On top of that, spending in the city centre was already trending down before COVID-19, challenged by ongoing impacts from long-term, large-scale construction.  Access has also become increasingly difficult for businesses, their suppliers and customers. 

In November 2020 Auckland Council’s Chief Economist Unit reported that:

“The number of people in the city centre on the average workday under Level 1 restrictions is about 80-85% of pre-lockdown levels…. some, but not all, of lost city centre spending appears to have shifted to other major centres in Auckland.None of these centres have seen declines as large as in the city centre. Businesses, especially those that serve office workers and tourists in the city centre, are struggling. No international tourists, fewer foreign students, higher unemployment and more working from home is bad news for the city centre”^[4].

While updated job numbers and retail sales for 2021 will not be available until later in 2021, we expect significant reductions have occurred in the retail, accommodation, tertiary education and hospitality sectors. The number of ‘for lease’ retail premises in the city-centre is a reflection of this. Bayleys 2021 office sector review shows vacancy rates in the city-centre rose from 5.4% in January 2020 to close to 10% by December 2020. By comparison Takapuna and Albany had office vacancy rates of 6.3% and 5.3% (respectively) at the end of 2020^[5]. 

Hotel Council Aotearoa (HCA) reported in its submission to Auckland Council’s 10-Year Budget 2021-2031^[6] that as a direct result of COVID-19, the performance of Auckland based hotels has collapsed with many now unprofitable.  Comparing the month of February 2021 with February 2020 (usually a peak occupancy month), occupancy was down to 57.8% and revenue per available room was down by 50%.  Excluding Auckland’s MIQ hotels (many of which are in the city centre), occupancy was reduced to 46%, indicating that domestic tourism alone will not drive a quick recovery in the hotel sector.

The tertiary education sector was also very hard hit by COVID-19, resulting in a large decrease in student numbers. In 2019 the combined student rolls of the University of Auckland (UoA) and Auckland University of Technology (AUT) was 46,300 EFTS^[7].  Both entities international student count reduced by 8% in 2020^[8]. The return of such students in 2021 will obviously depend on border re-opening.  Similarly, with cruise ship passenger visits, which pre-COVID had been a growing tourist segment in Auckland, with 237,400 passenger arrivals in the year to June 2019^[9].

The reduced presence of people in the city centre compared to pre-COVID times is reflected in our pedestrian count monitoring illustrated below, showing a significant loss of pedestrians over most weeks since late March 2020^[10].

Figure 1: Auckland city-centre pedestrian counts 2019-21

Two periods of Level 3 in quick succession this year have exacerbated the situation for many and the next 12 months remain uncertain in terms of the ongoing economic impact of the pandemic. While HOTC is optimistic about the city centre’s future, and recently we have seen some positive trends in domestic spending and the benefit of major events such as America’s Cup, local events and opportunities from the Australian travel bubble, we are under no illusion about the severity of impact in the short to medium term.  Uncertainty about the return of international visitors including cruise ships visits and international students, together with many office staff working from home, is likely to continue to impact on property, retail, hospitality, entertainment and education sectors for some time to come.

In outlining the challenges facing the city-centre we are not suggesting that congestion charging is a bad idea.The point is that the context or economic environment within which such charging might be applied in the city centre has shifted from when the TCQ analysis was undertaken over 2017-19. As a result, travel demand patterns to the city-centre have also significantly changed, as discussed below.

(2) The city-centre’s share of total commuting trips in Auckland is declining

The TCQ modelling work undertaken prior to COVID-19, anticipated that demand for travel into the city centre should continue to increase in line with growth in employment and usage of entertainment and education facilities in the area; and congestion charging should help to encourage such growth to be absorbed by public transport and active modes (while decreasing the overall car mode share).

Indeed, based on 2018 census data the share of commuting by car had already been declining from 59% in 2006 to around 42% in 2018 reflecting that over the past decade Auckland had seen major growth in usage of public transport due to rapid transit improvements such as the Northern Busway and the upgraded rail system running electric trains, and increases in the frequency of PT services into the city centre.

The fringe area just outside the city centre is also a significant employment destination in its own right which is largely accessed by the same roading corridors as the city centre.  A report prepared for Auckland Transport based on analysis of StatsNZ 2018 Census results^[11] shows that (pre-COVID-19) the City Centre accounted for 13% of total jobs in Auckland, while an ‘Other Central’ area^[12] accounted for a further 10% of total jobs.  At that time the volume of daily commuting trips (by all modes) to the Other Central area (67,900) was equivalent to 76% of commuting trips to the city centre (89,550)^[13]. 

Both areas require high levels of inward commuting at peak times to access jobs but over the 2013-18 inter-censual period the city centre’s share of total commuting trips marginally declined while the ‘Other Central’ areas went up.

The report also identified that the majority of jobs that people commute to in Auckland are not in the central area at all. They are in other parts of the isthmus and ‘Outer Urban’ areas (i.e. away from the isthmus and the southern North Shore).  The latter area is the largest sector with 38% of jobs and 45% of resident workers (refer Figure 2).  

Figure 2: The geography of commuting locations in Auckland 2018

The Outer Urban area is increasing in importance - with 60% of growth in commuting trips (2013-18) coming from, and 50% of new trips going to it.  As the TCQ Technical Report July 2020 (p13) notes, Auckland employment-related travel patterns are largely local and not dominated by significant inflows towards the city centre.  The overall picture is that Auckland’s commuting patterns are highly distributed. 

HOTC agrees that road pricing could potentially improve access and the general amenity of the city centre.  We understand the theory that a marginal increase in the cost of driving into the city centre will lead to a reduction in vehicle congestion at peak times and reinforce the take-up of other modes (namely public transport, walking and cycling). 

However, COVID-19 has now led to significant reductions in travel to the city centre by car and public transport modes.  Recent AT data indicates that due to alert level changes and a shift to working from home, total morning peak demand for car travel to the city centre dropped from 63,000 in December 2019 to 49,000 in December 2020.  Meanwhile the reduction in commuter trips has not helped public transport – with PT boardings in February 2021 being at 53% of February 2020 numbers, and down 47% for the year compared to the 12 months to February 2020^[14].  Both commuters and visitors to the city centre have been apprehensive about using public transport. 

Less travel into the city centre was good for emission levels, but it will likely take time for public transport patronage to recover to close to pre-COVID levels, and maybe only once disruptive impacts from rail upgrades and CRL construction have receded, and the CRL is able to offer better public transport access to the city centre.  Time will tell if the city centre’s share of total Auckland commuting trips falls further compared to 2018 Census patterns, whether as a result of more city centre workers ‘working from home’ or faster growth in jobs in the fringe, isthmus or outer urban areas.

(3) Impacts of congestion charging on low-income and transport disadvantaged households

HOTC supports introducing initiatives that both manage demand and raise funding equitably, balanced with investment into affordable and more frequent public transport in order to effect sustainable behavioural change.

While almost half of commuting trips to the city centre originate from Inner Urban areas (essentially the isthmus and southern North Shore) over a quarter (26%) come from Outer Urban areas^[15]. We are aware that many businesses in the city centre struggle to recruit workers from low-income households due to the high cost of travel (including public transport and parking) and many parts of the Outer Urban area in particular lack alternative modes relative to residents on the isthmus and North Shore.Many tertiary students and occasional visitors from Outer Urban areas are also highly car dependent.

We support the committee ensuring that a congestion charging scheme is designed to adequately mitigate impacts on low-income households.We understand that such equity measures will trade-off to some extent the expected revenue as well as network efficiency benefits of congestion charging, but mitigation measures such as maximum caps on daily charges and relief for Community Services Card holders are justified.Other equity-based mitigation measures should also be addressed prior to implementing charges:

1. provide greater certainty about improvements in public transport services being ‘in place’ to allow road users to switch to alternative modes, especially in outer urban areas currently poorly served compared with the isthmus and North Shore;
2. maximum daily charges/caps for delivery operators that need to make multiple trips to business customers;
3. road users should not be charged twice.  Assuming the Regional Fuel Tax (RFT) will expire in 2028 (as anticipated when it was introduced), congestion charging should only commence at that time; conversely if congestion charging is introduced earlier the RFT should also be removed at the same time; and
4. if the RFT is proposed to remain in place and overlap with congestion charges for a period, the TCQ analysis of equity implications needs to take account of the aggregate impacts on household affordability.

(4) Assessment of the congestion charging implementation options

The TCQ Technical Report 2020 (p92) recommended that the City Centre Cordon (CCC) and Strategic Corridors (SC) options were taken forward for further detailed investigation and analysis. However, it proceeds to also outline a phased pathway, with the CCC as Phase One 2025, to coincide with the opening of the CRL, adding that it might include the “city centre and fringe extent of the Strategic Corridors” (p128).

We note that the key performance metrics from the TCQ modelling for the CCC option (p48) suggests that by 2028:

• morning peak trips would reduce by less than 2,500 (0.4%),
• PT use would increase by only 619 (0.5%),
• time spent in severe congestion (within the city-centre) would reduce by only 2.5%.

Annual revenue is estimated at $21m while annual operating costs would be $10m with additional periodic costs of $13.8m (p89).

In evaluating the options over a longer 23-year period and taking account of wider benefits in terms of travel time savings and emissions reductions, the CCC was assessed to have a Benefit-Cost Ratio (BCR) of 1.7, close to the 1.8 for the Strategic Corridor option’s 1.8 but below the Isthmus Area’s 2.2.  The report notes (p73) that while the CCC option is not one of the top ranked options, primarily due to its limited geographical coverage and corresponding limited potential for impact on overall network performance, it represents a low risk and internationally comparable scheme, which could potentially provide the first stage of a larger, more comprehensive scheme.

HOTC has major reservations about the current validity of the TCQ assessment of the CCC option given the underlying assumptions about travel volumes and mode shares to the city centre have changed significantly since the TCQ analysis was undertaken.  As mentioned in section 2 above, COVID-19 induced changes in commuting trips to the city centre (by car and PT) mean the starting point for modelling has changed dramatically – with morning peak demand for car travel to the city centre having dropped from 63,000 in December 2019 to 49,000 in December 2020 and PT boardings being down 47% for the year compared to the 12 months to February 2020.

This alone gives cause to revisit the costs, benefits and net revenue estimates for the CCC option.  In addition, we cannot agree with the TCQ conclusion that a CCC option is “low-risk”.  There are real risks that a pilot, stand-alone CCC option could:

1. encourage business, education and other jobs to relocate to the city-centre fringe or other urban areas,
2. discourage new business activity;
3. leave most of the core motorway and roading network outside of the city centre experiencing high congestion to carry on as it is and get worse (with negligible or zero time savings for commuters by bus or car to the city centre). 

While the city centre has a degree of resilience given its wide-ranging roles and attractions, with the CRL due to open in late 2024 it still needs to function as a strong destination for the benefits and return on that investment to be realised.  If distortionary effects occur from a city centre cordon due to a shift of activities, jobs and travel into city centre fringe destinations in order to avoid road charges, it would significantly change the BCR of the CCC option and do little to reduce congestion pressures on the majority of the roading network.  At a minimum, the previous modelling needs to be subject to sensitivity testing and the fringe areas should be considered as part of a broadened CCC option (as suggested in the TCQ Technical Report).

Our overriding concern is that a CCC alone option would essentially treat the city centre as if it is the main cause of congestion and mean the city centre’s businesses, workers and visitors face all the costs and few of the benefits - since congestion pressures will remain (and likely intensify) across the main roading network.  Congestion charging should therefore only be introduced as part of a consistent, even-handed approach to reduce congestion pressures where it is most severe on Auckland’s roading corridors, and not penalise one destination over others.  In terms of the options presented in the TCQ, either the Isthmus Area or Strategic Corridor options would have less distortionary effects than the CCC option.

The point is that how and where congestion charging is implemented in Auckland will matter a great deal to its effectiveness as a lever to reduce congestion pressures where they are most acute.  We urge the committee to require further detailed investigation and updated analysis of all of the charging options in light of COVID-19 induced changes in travel demand, before identifying a preferred option or implementation sequence.

_{[1] StatsNZ population estimate June 2019 (released in late 2020) which has grown at an annual average growth rate of 3.1% over the last 6 years.}

_{[2] Estimated in Market Economics 16 April 2021, ‘2020 Market Update Assessment’ prepared for HOTC.}

_{[3] Ibid. NB. Retail categories include: Accommodation, Attractions, Cafes and restaurants, Fashion, Food retailing, Health and beauty, Hospitality, and Other.}

_{[4] Refer https://www.aucklandcouncil.govt.nz/about-auckland-council/business-in-auckland/docsoccasionalpapers/journey-to-the-centre-of-the-city-november-2020.pdf}

_{[5] Bayleys AUCKLAND OFFICE MARKET UPDATE 2021 Issue 1}

_{[6] Sourced from https://akhaveyoursay.aucklandcouncil.govt.nz/submissions-budget-2021-2031}

_{[7] Equivalent Full Time Students, from data sourced from the Universities.}

_{[8] https://www.stuff.co.nz/national/education/123922679/how-covid-has-hit-our-5-billion-international-education-sector--and-what-universities-are-doing-about-it}

_{[9] Refer Market Economics 16 April 2021 ibid.}

_{[10] Noting that the Level 4 lockdown began on 25 March 2020.}

[11] Richard Paling Oct.2020 Travel to work and education in Auckland.

_{[12] The defined ‘other central’ area includes city-centre fringe areas of Newmarket, Parnell, Ponsonby and Grey Lynn and other parts of the Waitematā Local Board area.}

_{[13] Refer Table 16.2, p43 in R. Paling Oct.2020.}

_{[14] https://at.govt.nz/media/1985492/14_at-monthly-transport-indicators.pdf}

_{[15] Refer: Richard Paling Oct.2020 Travel to work and education in Auckland p 47 Table 16.6.}