With a budget that has more than doubled, the road has little hope of recouping costs through tolls, writes Catherine McGregor in today’s extract from The Bulletin.
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One very expensive road
The cost of the Ōtaki to north of Levin (O2NL) highway has ballooned to $2.1 billion, more than double the original 2020 estimate of $817 million, despite the fact that construction has yet to begin in earnest. Infrastructure minister Chris Bishop has laid the blame squarely on the previous government, claiming “it was basically costed on the back of an envelope very quickly so Grant Robertson could announce projects at the start of election year”.
In a bid to contain spiralling costs, NZTA proposed a series of pared-back design changes earlier this year, including replacing an interchange with a roundabout. But those proposals were strongly opposed by Horowhenua residents and, as 1News reported in June, ultimately scrapped. NZTA told BusinessDesk’s Oliver Lewis (paywalled) that reconsenting the changes would have added more delays and costs than simply sticking to the original plan.
Tolls won’t bridge the funding gap
To help recoup some of the cost, the government will impose tolls on the O2NL once it opens in 2029. But they’re unlikely to make much of a dent in the final bill. The Infrastructure Commission recently told a select committee that for a toll road to pay for itself, it must cost no more than $32 million per kilometre, carry 40,000 vehicles a day, and cut travel time by 15 minutes. As Thomas Coughlan writes in the Herald (paywalled), O2NL fails on at least two counts: it will cost about $85m per km and is expected to carry more than 20,000 vehicles a day by the late 2030s.
Currently, just three toll roads exist in New Zealand, all in the upper North Island. More are planned, including Penlink north of Auckland and Tauranga’s Takitimu North Link, with O2NL joining that list. On Wednesday, the government announced a new digital road user charge system that should also enable the digital payment of tolls – but easier toll payments won’t solve the core problem of projects that cost far more than they can return.
Consensus under construction
The O2NL cost blowout coincided with this week’s Building Nations infrastructure conference, where politicians from both major parties repeated the familiar call for bipartisan planning on major builds. Infrastructure minister Chris Bishop says he wants 80 to 90% agreement on the long-term project pipeline. But as The Spinoff’s Joel MacManus points out, high-minded talk of consensus tends to mask the cynical partisan reality. Bishop insists his concerns are about “project selection and management”, but, Joel notes, his definition of the “right” projects tends to track closely with his party’s own preferences.
Labour has hardly done better: its handling of the cancelled iRex ferry project kept National in the dark about the extent of the cost blowout until after the election. “The problem is that it is easy to say your opponents should be bipartisan in supporting your ideas,” Joel writes. “It’s harder to agree to support your opponents’ ideas.”
The Green roadblock
The problem with the bipartisan-infrastructure dream isn’t just opposing priorities, but also a deeper ideological divergence. As Richard Harman argues in the Herald (paywalled), any future Labour-led government is almost certain to include the Greens, a party that remains staunchly opposed to National’s Roads of National Significance, including O2NL. The Greens believe that funding should be redirected toward rail and existing road upgrades, not carbon-intensive new highways.
A recent Labour-Greens minority report on another expressway project argued that “there is an urgent need to reduce greenhouse gas emissions, and New Zealand has a limited financial budget and a limited carbon budget”. According to Harman, this kind of objection “transcends the purely practical and economic and veers off into ideological considerations”, making lasting political consensus difficult to achieve. As long as infrastructure remains a proxy for deeper debates over climate, growth and spending priorities, bipartisan agreement may remain more aspiration than reality.
