Tuesday, 21 April 2015

A new track for KiwiRail

Recent news has emphasised again to me the need to separate KiwiRail as an SOE and the provider of railway infrastructure in New Zealand. KiwiRail has a proposal that could lead to the removal of the electrification of the North Island Main Trunk. This is in the context of the Minister of Finance confirming KiwiRail was seeking further funding in this year's budget, on top of the $1 billion already spent since the renationalisation of rail and sea ferry operations in 2008 - not including how much was spent by Labour buying it back. The biggest mistake Labour made in this process, in my view, was combining the infrastructure with rail operations again.

The electrification itself was implemented as one of Rob Muldoon's "Think Big" energy projects during the 1980s (although proposals for electrification dated back to the 1950s), a project that was eventually completed under Labour in 1987. Its main purpose was to lower the cost of imported fuel, at a time (just after the 1979 oil shocks) when it was expected fuel prices would remain high. They didn't, and to top it off the railways lost their monopoly on freight transport when the sector was deregulated in 1981. The locomotives purchased as part of the project, the EF class, are now coming to the end of their economic lives and are in need of replacement. Apparently KiwiRail only has six of the original 22 available for use, when they need 17.

While it is only one of three options allegedly "on the table" (the other two being either refurbish the EFs or buy new electric locomotives) a proposal to shut down the electrification has attracted a predictable campaign against such a move. Under the current model though, it's understandable that KiwiRail is considering shutting down the electrification.

KiwiRail made a headline loss of $248 million in the past financial year 2013-2014. But, take out the cost of providing KiwiRail's infrastructure, and KiwiRail made a profit on its operations before tax of $77.5m. In the 2013-14 year KiwiRail moved 17.1 million tonnes of freight. If KiwiRail were instead charged for infrastructure the same way commercial road operators are - both through fuel taxes and by the weight of freight carried over the distance it was carried - the balance sheet would look different.

Under such a model, the infrastructure - which is treated as a public good by commuter rail users - would be a public good nationwide, much the same as the roading network is. You wouldn't have KiwiRail contemplating removing parts of the infrastructure to keep costs down, nor investing limited capital in its right of way.

Saturday, 18 April 2015

Crunch time for CIT

The Dominion Post reports that the end date for tenders on the old CIT is 12 May. I understand there are a number of very different proposals in the pipeline, and it will be interesting to see what comes to pass.

I hope that we see some of the interested parties working together for the best outcome. CIT has a lot of empty land (9.7 hectares) around it that might be able to be used for housing development, while the buildings themselves are retained.

The article itself mentions either retirement villages, a growth area with New Zealand's ageing population, or - disturbingly - "national retail brands" which they say represents an "excellent opportunity" for a "bulk retail development." This appears to be a suggestion for turning some of CIT into retail, an idea which I wouldn't support.

My view remains the same that the best thing for Upper Hutt, given the growth in investment in innovation through the likes of Callaghan Innovation, would be for the CIT campus to become a technology park.

Thursday, 9 April 2015

Long Term Plan season in the Hutt

UH Mayor Wayne Guppy at the public consultation.
It's long term plan season - when our local councils put together their plans for the next ten years. Both Upper Hutt City Council and Hutt City Council have their ten-year plans under way and open for consultation now.

In Upper Hutt, there's a number of projects:

  • Reconstruction of Fergusson/Main/Gibbons St intersection (increased demand) $6.5 million 
  • Rural roads upgrades (improve services) $6.1 million 
  • Stormwater - Pinehaven Stream project (UHCC 50% cost share) $5.8 million
  • Fergusson/Ward/Whakatiki intersection upgrade (increased demand) $4.5 million 
  • Water supply - new Cruickshank reservoir (increased demand) $4.1 million 
  • Akatarawa Cemetery development (increased demand) $3.7 million

Overall it's a pretty balanced - the water and roading projects are pretty standard. The key thing for me though is that the council's debt remains below the Local Government Cost Index (LGCI) while a spending a bit more on extra projects to help Upper Hutt grow. They are:

  • Boosting economic development $500,000 
  • Cruickshank Rail Tunnel walkway/cycleway $452,000 
  • LED street light upgrade $431,000 
  • Upper Hutt City walkway/cycleway network $281,000 
  • Hutt River Trail upgrades (Rimutaka Cycle Trail) $253,000 
  • Harcourt Park paddling pool upgrade $245,000

It's pleasing to see local businesses are behind these plans. The investment in cycleways is good, especially the Cruikshank Rail Tunnel. Developing the tourist and recreation potential of Upper Hutt in this way is definitely a good think.

I'd question the rate of return from the half a million in economic development. If the rate of return is better than the cost incurred by the council of borrowing the money, then potentially more could be spent; on the other hand if its worse then this item of expenditure could be trimmed. We have seem a lot of positives in this area - but are we getting value for money?

The LED street light upgrade is another good idea. LED lighting looks better, and more importantly it uses much less electricity, so over time there's a net benefit to ratepayers.

Consultation on Upper Hutt's LTP closes on 20 April.

Meanwhile in Lower Hutt, Hutt City has its LTP up for consultation. Along with the key projects, they have a number of additional projects:
  • Eastern Bays Shared Path between Lowry Bay and Days Bay $9 million
  • City-wide cycle network upgrades. $3 million
  • Regional Bowls Centre in Naenae, funded through asset sales. $2 million
  • City-wide science and technology projects. $500,000
  • Viewing platform at the top of Wainuiomata Hill. $200,000
  • Petone and Wainuiomata Sportsville projects. $200,000
The regional bowls centre in Naenae is controversial, especially since it's funded by asset sales. Again, the rate of return on science and technology projects is debatable, but pleasing to see it forms a part of Hutt City's future plans.

There are also a number of projects from last year's plan that are underway:
  • Civic Centre development- scheduled to be completed by mid / late 2016
  • The construction of the Taita Community Centre – scheduled to be completed mid / late 2015
  • Fraser Park developments (in three phases), phase two – new multi-purpose clubrooms scheduled to be completed by late 2015 / early 2016.
  • Construction of new Learn to Swim and hydrotherapy facilities at Huia Pool – scheduled to be completed mid / late 2016
  • Significant Avalon Park developments - scheduled to be completed mid / late 2017.
  • Work on the Hutt River Trail to complete walkways and cycleways – completed mid / late 2015
  • Riddiford Gardens development - scheduled to be completed mid / late 2017.
Consultation on Hutt City's plan is open through to 30 April.

Monday, 30 March 2015

Northland implications

David Farrar has the best analysis I've seen on the reasons why National lost the Northland by-election. I think reason 3 - Mike Sabin's departure - is the strongest. The feeling I picked up from National supporters in Northland was that the vacuum of information about Sabin's departure - which inevitably was filled with rumour and conjecture - really irritated even the most loyal supporters.

The question now is what happens in 2017. The preliminary results point to Peter's win being made possible by a large number of Labour voters giving Peters their electorate vote, as Andrew Little essentially instructed them to do.

It was a smart move by Little, and a clear demonstration that he understands MMP. But it creates a two-part problem for Labour that will be a headache in 2017: firstly it means they lose the ability to whack National over deals in Epsom and Ohariu. Morally their position is degraded - the media will simply point out they accommodated Winston where it suited them, to stick it to the government. But I suspect the public understands this is part and parcel of MMP anyway.

Secondly it means that the deal will need to be repeated in 2017 to ensure a similar result. This will be even more imperative if the rumour (Peters wanted to capture an electorate seat to guarantee NZ First's survival, similar to Act's win in Epsom in 2005) that Northland is part of Winston Peters exit strategy are true. If Labour wants an alternative to the Greens (and they should) then NZ First is their best bet. That means Willow Jean Prime will need to take another loss on the chin for Labour - and that risks a Margaret Hawkeswood style melt-down.*

My prediction is that Winston will now work to position himself alongside National, to keep Little and Labour on their toes. That way he might be able to extract more - perhaps even the baubles of office - if he finds himself as Kingmaker again in 2017.

*Margaret Hawkeswood was Labour's candidate for Coromandel in 1999; she was very unhappy when Helen Clark told Labour supporters there to give their electorate vote to Jeanette Fitzsimons (Greens co-leader) to get the Greens into Parliament. On election night that worked; however after the counting of the special votes the Greens got enough votes to get over the 5% party vote threshold.

Thursday, 26 March 2015

CIT's future options

Picture from the Upper Hutt Leader.
The CIT is now on the market (Upper Hutt Leader, 26 March). The ongoing saga since the closure of CIT in 2001 may be drawing to a close. JLL has been appointed to sell the buildings and land which has a council valuation of $13 million.

With the Treaty of Waitangi claim now resolved, there seem to be a number of future options for CIT:
  • The site is cleared and turned into a housing development.
  • CIT returns to some form of tertiary institution. WelTec may have to spend millions on earthquake strengthening its Petone building, it would make sense for WelTec to instead purchase CIT.
  • A technology park, hosting high-tech companies and creating high value, well-paid jobs in Upper Hutt.
My personal preference (as you can probably guess) would be for CIT to become a technology park. There could be a mixture of both a tertiary institution and technology park (or an "incubator" for new high-tech ventures) which would get optimal use of the site.