New NIMBYs

We're all used to standard NIMBYs. 

But now the Ministry of Education and NZTA have gotten into the game.

Fulton Hogan wants to turn an end-of-life quarry into a new development.

Well, that just doesn't fit the plan.

Early plans had shown more than 500 residential sections would be in the development and there would be space for shops and a restaurant/bar.

Waka Kotahi said in its submission it considered the proposed location of the site was quite remote from the existing main urban environments within the Central Otago district.

The Waka Kotahi submission said the subdivision would be about 10km from Cromwell, 40km from Alexandra and 45km from Wānaka and, since there was no public transport, heavy reliance on the use of private vehicles was expected.

It also said the proposed development was outside the future growth areas identified in the Cromwell spatial plan.

The area was not identified for future residential zoning recently notified in plan change 19 of the Central Otago district plan. The spatial plans were developed to manage urban growth in a manner that promotes an accessible walking and cycling town.

It also highlighted further consideration had to be made for carbon emissions and potential climate change effects for the future development.

It said the development of the site was unlikely to result in a significant uptake of active transport modes such as walking and cycling nor a reduction in a reliance on private vehicle trips. There was no provisions made for public transport.

...

In its submission, the Ministry of Education said the proposal would place pressure on schools in Cromwell with an influx of people coming into the region.

“The boost in dwellings constitute a sudden large addition to the number of total dwellings and total rating units, at a scale and pace that is larger than projected numbers. This growth is at a faster rate than that anticipated by the Ministry of Education,” it said.

Nothing can be allowed to grow faster or slower than the Ministry of Education projected. 

And even though transport emissions are fully covered in the ETS so residents of car-dependent places will have to pay for their own emissions, NZTA doesn't want to let it happen. 

What a mess.  

These are not serious people

If you believe it to be a good idea to remove GST from food, whether all food or just some food, at least one of three things is true.

1. You have not thought this through or read anything from anyone who has thought this through. Labour's 2018 Tax Working Group showed that, for the same cost to government revenues as a food-sized hole in GST, you could provide a transfer to every household. That transfer would provide twice as much benefit to poor households as taking GST off of food. Please read Paragraph 33 of the TWG report and reconsider your position.  
2. You have tried to think this through but are, in fact, an idiot. You are neither able to do basic math nor to listen to anyone who is able to do math. Not being able to listen to people who obviously know more than you do about a specialist topic suggests you really are unfit for politics. You will do harm to the people you purport to represent and wish to help, through willful stupidity. This will be a general problem across all policy areas, if you have revealed that this is your type. 
3. You are pandering to people who you think are unlikely to think this through, or who you think are unable to think this through. In this case, you are, in fact, evil. You are proposing something to people who you think are too dumb to know any better, that will make them far worse off relative to other policies that cost just as much. 

I can believe that Te Pati Maori have not thought this through and have not bothered to read anything from anyone who has thought this through.

Too much of the rest of their tax policy sounds like Trump promising to build the wall and make Mexico pay for it. 

If Labour goes for this, it's firmly Category 3. They know better. They have time to reconsider. I really really hope they reconsider. 

Susan Edmunds at Stuff asked me for comment on it yesterday; Thomas Coughlin at Herald caught my bit on TVNZ Breakfast this morning.

I'd gone through the absurdities of exemptions a while back; it all still holds. 

The ETS and its enemies

In the weekend papers [ungated], I despaired at sets of policies that work to undermine how the ETS works. 

Investment in decarbonisation should be driven by carbon price signals; instead, it's turning into subsidy-seeking. Using your own money for decarbonisation was looking more and more like a mug's game. 

The government threw carbon forestry into chaos with speculation around eroding all the underlying rights. 

And decisions on ETS unit supply threw further uncertainty into the mix. 

The Zero Carbon Act set the country with a target of net zero emissions by 2050. The Emissions Trading Scheme was designed to target net emissions.

But reviews of the role of carbon forestry, and of the role of carbon removals as compared to gross emissions reductions, have driven deep uncertainty about the property rights that underlie the scheme.

Earlier this month, carbon prices dropped from about $55 per tonne to $35 per tonne. Regulatory changes could particularly hit carbon credits generated by growing trees.

In CarbonNews, one carbon market participant reported, “We’ve been speaking to some very angry forestry people and some very confused emitters. Foresters don’t know if they can plant and emitters don’t know if they can use those units to offset after 2025.”

Carbon prices have since rebounded, but not because forestry issues have been resolved.

The High Court last week told the government to look back over last December’s decisions about ETS auction settings. Those decisions had resulted in the carbon price falling by almost 60%. They had also resulted in consecutive auctions of government-issued carbon credits this year not meeting the government’s reserve price.

And the next carbon credit auction will happen before the government is due to respond to the High Court.

If the government had wished to throw sand into the ETS’s gears, both to make the ETS work less well and to make everyone less responsive to the signals carbon prices send, it could hardly have done a better job.

A sufficiently advanced incompetence is indistinguishable from malice, but the former still seems the more likely explanation.

Let’s hope the government’s response to the High Court, and the final review on forestry, shows a bit more competence. Getting this right matters.

But things have moved quickly! Tuesday night, the government adopted the Climate Change Commission's advice on ETS auction settings from December. And carbon prices jumped. 

Let's hope they manage not to wreck carbon forestry though. 

Morning roundup

The morning's worthies:

• iPredict's PredictIt gets another stay of execution
• Kainga Ora has been making great progress in streamlining builds. So long as they don't get burned down. Perhaps it would help if nearby owners could reasonably expect Kainga Ora's tenants to be better neighbours. It's the rare prominent cases that create reputations.
• Jason Sorens says that bad zoning leads to dysfunctional housing markets and high prices, leading to bad ideas about how to fix the problem. A variant on Caplan's Idea Trap.
• Problems that wouldn't exist under proper road pricing and if debt for new roads could be backed by road-user revenues.
• I wish for a world in which Andrew Leigh were a Labour MP rather than a Labor MP. 
• Resale price maintenance. It is still fun to think through the conditions under which it's efficiency-enhancing substitute for vertical integration or otherwise efficient rather than potential indication of cartel-type mechanisms. The typical presumption is the latter, but it isn't necessarily the case. 
• ComCom price regulation of the proposed 3-waters entities will follow standard drill utility regulation. EnergyNews rightly points out that prohibitions on water suppliers earning a profit (remember that standard state-owned enterprises and council-owned enterprises can!) will "limit the extent to which profit can reward and incentivise efficiency and innovation". 
• NZ mayors pushing for city deals. Seems antithetical to Labour's current centralising DNA. Maybe some future better government will dust off the report we'd written back in 2015.

Roads and PPPs

Had a chat with RNZ's Wallace Chapman and The Panel this afternoon on the ACT Party's proposal for reform to how roads get built and maintained.

I usually put a few notes together for myself ahead of these things, mainly to sort out my own thinking rather than to be able to convey every nuance for a light afternoon radio talk. 

Those notes are here, in part so I can find them again next time I need to think about this stuff. 

Biggest-picture: there is need for fundamental restructuring to get to a system that’s responsive to user-demand and is consequently able to deliver projects where road users are willing to pay the cost of the service and to bat back projects that aren’t cost-effective. 

First, summary of ACT’s proposal:

1. 30-year plans for major infrastructure set by local, central, and infrastructure commission. Sets out expected timelines for NLTF projects and which could be fast-tracked if PPP;
2. Public consultation on draft plan;
3. Private sector bids to deliver kit, with tolling on the road, are entertained – they’d have to beat public sector timelines/spec;
4. Then Waka Kotahi has to get consent and acquire land;
5. Public sector could reconsider a proposed route if private sector gives it a pass at toll rates that users find acceptable;
6. Could add tolls to existing roads to help cover maintenance, with a focus on congested roads to help spread traffic to other routes;
7. Not in the ACT proposal here but mentioned by Simon Court on LinkedIn: shifting ownership of the state highway system to a new SOE, Highways NZ, which would be expected to be operationally self-funding out of user fees and deliver a return on capital to the government. 

Big picture things this gets right:

1. Funding for land transport and its management are currently a mess that contribute to poor quality roads. NLTF increasingly a bucket for sundry transport funding and spending rather than dedicated mechanism for user-pays
2. Getting price signals into the mix would be really useful. Far too much transport debate ignores it. Is a second harbour crossing a good idea and who should be able to use it (car, bus, bike, pedestrian) ought to depend on whether the kit can pay for itself through user fees collected over the decades of its life, like the Auckland Harbour Bridge, rather than who can make the most convincing case to a Minister. Benefit-cost ratios can be a useful proxy for this, helping to figure out user priorities. If traffic volumes are high enough to justify the cost of collecting tolls, that’s even better. 
3. Toll roads get us closer to user-pays, and it is better to be closer to user-pays. Remember though that RUC for cars is 7.6c a km, and petrol excise averages that. Neither vary by time or location – though RUC could get there for heavy commercial on telemetrics. 
4. Reducing admin costs of running a tolling system would also be very helpful. But it’s a big hurdle. RUC has collection costs of about 3%; tolls have been closer to 30% [at least according to the experts I've talked with]. You need high traffic volumes on a road to justify the kit for monitoring and billing. Those costs could come down as tech improves. But it’s still a high hurdle unless there is a lot of traffic on the road. 
5. Setting interest in running a PPP as one market test of a roading proposal is one way of knocking back bad projects and making sure very valuable ones get built. But there will be others where the cost of tolling, relative to RUC, could prevent good but not superb projects from going ahead.

Potential fishhooks:

1. Acquiring the land for routes only after extensive consultation can make it a lot more expensive to run projects at all. The Infrastructure Commission has pointed to some of these problems in its own work on corridor designation. Normal drill has been that land is only designated and acquired when the project is ready to go, which means that the value of the project gets bid into the price of that land, which makes everything more expensive. Early corridor designation can help, and 30-year horizons could help with that as well. Option contracting on potential routes, ahead of designations, could help. Corridor designation can be done much earlier, well in advance of any project being viable, so the option is maintained. 
2. Rather than 30-year plans, long-term corridor designation and flexibility to press ahead whenever circumstances warrant could do more good. Right now, one of Tauranga’s larger housing growth areas is being held up because nobody’s allowed to build to the density that makes sense because the roads aren’t currently up to it, but the SH29 overhaul isn’t planned until 2050. Housing demand can shift more quickly than 30-year horizons. Lots of lead time in designating corridors, and flexibility to build/upgrade as demand comes into the system, may be a better mix. 
3. The proposal conflates user charging with congestion charging, making the toll charge do both jobs. It’s better to keep the separate objectives separate, even if charges wind up being collected through the same system. A user charge or toll is set to cover the cost of the road – its building and maintenance. A congestion charge should be set to maximise traffic throughput: it should be zero when there is no traffic, and potentially high when there is a lot of traffic. The congestion charge should be designed to encourage changes in times of travel. A dynamic toll that can vary by time of day might be able to do both. But keeping the two separate keeps the incentives clearer and provides other alternatives for dealing with potential equity considerations.  
4. Consultative processes risk leading to gold-plating requirements that make routes unviable. The proposal has the consultation process in place as a way of gauging real user demand. But that could also be done by setting congestion charges on existing roads and seeing what actual willingness to pay looks like. The example I love to use is a second Mt Vic tunnel in Wellington. I have no clue whether a second tunnel makes sense. But imagine if we had a congestion charge on the existing tunnel set to make sure that the thing doesn’t get plugged. If it only took a $0.50 charge to clear congestion and nobody saw any way of building a second tunnel that could cover its costs on a $0.50 user charge, then it would be dumb to build a second tunnel. But if it took a $5 charge to clear congestion, and if that charge would be enough to cover the tunnel’s cost over time, then that could be a reasonable option – noting you’d also want congestion charging over alternative main routes – or a downtown cordon.

Potential alternatives: 

1. ACT’s proposals are a step in the right direction. But it’s high time the overall system be reconsidered. 
2. NLTF is meant to cover road building and maintenance out of payments by road users. But excise is increasingly disconnected from road use / burden imposed. Would be simple to shift away from petrol excise and put everything onto RUC. Note that excise is also increasingly inequitable: a new hybrid imposes no more burden on the road than an old Toyota Estima, but the latter pays a hell of a lot more for the same amount of road use and road burden. There’s weird status-quo bias where people freak out about equity implications of any change from status quo, but never question the biases built into the existing system. But it would also require tighter enforcement of RUC – potentially integrated with WoF. 
3. ACT is looking at toll charges as one way of alleviating congestion, with public feedback mechanisms aimed at improving social license. If people were worried about equity, you could instead run congestion charges cleanly on their own basis – and use the collected revenues to fund a congestion dividend that rebated collected fees to road users irrespective of their time of use. There is already cross-party agreement for congestion pricing in Auckland/Wellington. 
4. In 1998, the government proposed substantial transport reform under Maurice Williamson. “Better Transport, Better Roads.” A lot of what was proposed was before its time – the tech wasn’t there for low-admin-cost road user charge collection, and we’re still not 100% of the way there yet. But the system was elegant. Rates would no longer fund roads. Road use levies would be paid into Transfund, a Crown-Owned entity, responsible for recommending road use rates to Minister of Transport. Regional road companies would take over running local roads; a Crown-Owned company would run the state highways and motorways – and this part sounds like what Simon Court had suggested on LinkedIn. It was a straight user-pays system. Transfund would commission roads based on user needs; the public road companies would operate them. The link between user payments and what they get from those payments would be a lot clearer. 
5. Under the 'Better Transport, Better Roads' option, the road companies would introduce pricing as cost and feasibility were demonstrated – rather than it being a political decision for ministers.
6. Currently, a PPP can help solve two different problems: infrastructure delivery & management, and financing. If the government instead issued debt tied to specific roading projects, so that road users could pay those costs off over time through either tolls or road user charges, that would be a more direct way of solving the financing problem. And then PPPs would only be chosen if the road companies [Under something like 'Better Transport, Better Roads', or Highways NZ under ACT's extended proposal], or Waka Kotahi under the status quo, thought it would be better value. 

I'd also recommend Liberty Scott's excellent thread on all of this. 

Morning roundup

The morning's closing of the browser tabs:

• Labour is determined to push its resource management reform through before the election. National and ACT say they'd repeal it if elected. The current Resource Management Act is bad, but the new legislation looks worse - though it's hard to tell. The National Planning Framework that would set out how all the different outcomes and priorities might be weighed against each other still hasn't been released. 
• In a better world, the NZ Commerce Commission could go after NZ Independent Community Pharmacy Group for cartel behaviour...
• Economics on rooftop solar don't really seem to stack up. But lots of utility-scale investment going on. 
• Good piece on how the government's consultation on ETS changes around forestry erodes property rights. "On the ground, I’m being told by angry Māori landowners and foresters that the Government’s actions feel like “yet another punch in the face”."
• Betfair currently says that it's about 70% likely that the next election results in a National Party Prime Minister. 
• Excellent piece by Bronwyn Howell and Dave Heatley on the effects of price regulation for NZ universities. 

A depressing NZAE keynote

Auckland University of Technology’s Professor Rhema Vaithianathan's keynote at the NZAE meetings was depressing. 

Her work is great: better data tools to help child protection workers better triage cases. One result: a one-third reduction in child hospitalisation. 

What's depressing is that it could have been happening here, but the New Zealand government chased the work away. 

I covered it in my column over in the Post; unfortunately, some snafu on their side resulted in a short version in print. The online version has all of it; ungated here. 

I also summarised it in our Insights newsletter:

The New Zealand Economics Association annual meetings are a great way of keeping abreast of what the country’s economists are working on. 

And sometimes they’re downright depressing. 

At last week’s meetings, Auckland University of Technology’s Professor Rhema Vaithianathan’s keynote explained what she’s been up to over the past decade. 

Her team has been helping American child protection services to do a better job protecting kids.  

Child protection work is grim. Officials balance two terrible kinds of errors.  

Over-zealousness means a lot of families will be put through a painful wringer unnecessarily. But under-intervention means some kids who could have been helped will wind up abused, hospitalised, or killed.  

Unless you can find a way of reducing both types of errors. 

And Prof Vaithianathan’s team found a good one. 

Child protection workers have a mountain of administrative data for making decisions on whether to intervene in response to a call, but only about ten minutes to make each decision – then on to the next case.  

It is impossible to regularly make good decisions faced with that much complexity and that little time. 

Prof Vaithianathan’s team reduced complexity by turning data into a predictive score laying out the risk each case posed, to help child protection workers make the right call.  

They started the U.S. work in Allegheny County, Pennsylvania, because Allegheny wanted to use data to make better decisions. The programme’s success inspired others to try it out.  

And a later randomised control trial showed that the system reduced child hospitalisation by a third.  

It also reduced the bias that case workers otherwise bring with them in making assessments. The risk scored meant more high-risk white families received help and fewer low-risk black families had to deal with child protection services. 

It’s a great story.  

The depressing part?  

The work started here in New Zealand. It was killed by Anne Tolley as Minister, who described it as experimenting on kids. And the subsequent Labour government showed even less interest in data-based approaches.  

One third fewer hospitalisations for children in risky families.  

But not here.  

In America instead.  

Thanks to Kiwi researchers, who were chased away from doing the work here.  

An innovative American county can try something new and let others follow. New Zealand’s centralisation means a single bad Ministerial decision can cause a lot of harm for a very long time. 

Far better policy, and outcomes, are possible. Even here. But voters have to demand it. 

I also had a two-part podcast with Prof Vaithianathan about it (Part 1, Part 2).

I take all of it as exemplar of why centralised systems fail relative to decentralised ones.

In New Zealand, MSD botched its handling of the system, leading a risk-averse Minister to kill it.

That kills it for the whole country. 

In the US, all you have to do is find one county that isn't full of freaking idiots. When you find that one county, demonstrate that your idea works. Second-movers pick it up, showing that it can work in other places. And then others follow along. 

And every trend in NZ has been toward greater centralisation.