Board meeting
| 2 March 2023
In confidence
Review of Current Tol ing Arrangements
ELT owner: Sara Lindsay, Group General Manager Commercial and Corporate
Issue owner: Howard Cattermole, Chief Financial Officer
Whāinga | Purpose: For decision
This paper seeks approval to increase toll tariffs to reflect movements in the consumer price index
ACT 1982
(CPI).
He kupu whakatau | Recommendations
Management recommends the Board:
•
Approves increases in toll tarif s on the Northern Gateway, Tauranga Eastern Link and Takitimu
Drive Toll Roads from 1 July 2023, as follows:
Cars /
Motorcycles
Trucks
INFORMATION
From
To
From
To
Northern Gateway Toll Road
$2.40
$2.60
$4.80
$5.20
Tauranga Eastern Link Toll Road
$2.10
$2.30
$5.20
$5.60
Takitimu Drive Toll Road
$1.90
$2.10
$5.00
$5.40
•
Notes an option to announce a deferred start to the increases (e.g. to take ef ect from 1 July
2024) might be considered in light of recent weather events impacting the upper and eastern
North Island.
•
Notes the proposed changes are equivalent to 2% per annum since the previous increases in
2019, rounded to the nearest 10c increment – below actual CPI increases of nearer 4%.
•
Notes the increase in administration costs from 70c to 80c.
Take matua | Key points
• Toll revenue is used to: repay debt/notional debt and related interest associated with each road,
as well as meeting the administrative costs of toll collection and operation including sensors and
back-of ice system.
• Increases in tolls from time to time are necessary to ensure the repayment of debt in a timely
manner.
• We have reviewed the administration costs of collection in line with the cost allocation basis
used for the regulatory fees and funding review. A CPI-based increase from 70c to 80c, the first
since 2011, wil ensure the fee remains cost reflective, including meeting the costs of a new
tolling back-of ice system.
• Given the current cost of living pressures, we recommend a lower 2% p.a. increase that “looks
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through the recent spike in CPI”. For comparison, Tauranga City Council is consulting on an
annual rates increase of 13.7%.
He kōrero mō tēnei kaupapa | Background
Waka Kotahi currently operates three toll roads: Northern Gateway (NGTR), Tauranga Eastern Link
(TELTR) and Takitimu Drive (TDTR). In addition, tolling has also been proposed for Penlink.
Over time, traf ic volumes have been impacted by Covid related lockdowns. Previous tolling
increases have not led to additional diversion onto the alternate route (refer Attachment 1).
Tolling is not a particularly efficient method of revenue collection compared to FED or RUC with low
tarif s relative to the costs of installing and maintaining gantries and sensors, collection costs plus
back-office software (now undergoing replacement). Tolling has, however, allowed the roads to be
ACT 1982
constructed earlier than would have occurred without tolling. Also, the key beneficiaries of the roads
contribute directly to their costs.
Toll revenue can only be used for the purposes of debt repayment and/or maintaining the toll road.
Tariffs were last reviewed in October 2018, Board paper “Review of Current Tolling Arrangements”
refers, with the increase taking effect in March 2019. The fee to cover the administrative cost of
collection has not been reviewed since 2011.
Kia mōhio mai koe | What you need to know
Proposed increases meet debt repayment obligations and costs of new back-office system
INFORMATION
Waka Kotahi has typically reviewed tolls every three years. The current increase was delayed as we
worked through a costing review of tolling that took into account the forecast costs of the new tolling
back-of ice system.
The proposal balances tariff increases with paydown of the debt. The increases manage our debt
obligations efficiently. With the current traffic assumptions and increased tariff, debts are expected
to be repaid somewhat ahead of the original borrowing assumptions (refer table below). At this point
tolls are due to cease. If recent increases in interest rates persist, repayment dates could extend by
several years from those indicated.
We do not consider that there would be an increase in traffic diversion to the alternate (un-tolled)
route, due to the comparatively small increases in the tariffs. Attachment 1 has information on tolling
volumes and the impact of the previous CPI increases. Nonetheless, increasing tariffs is consistent
with the wider policy objective or discouraging private vehicle use relative to public transport or
active modes.
There is time and cost involved in increasing tariffs, with new signage, customer engagement,
changes to tolling and payment systems and customer accounts. The costs are expected to be in
the range of $300,000-$400,000.
Included within the tolling increase is an increase for the administration costs of tolling collection. An
increase in the base collection rate from 70c to 80c is reflective of current/forecast costs and also
provides the added funding needed to cover the costs of the new tolling back-of ice system.
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Tol increases must be set in accordance with the relevant Orders in Council
The Orders in Council for each of the toll roads has similar wording – in essence that Waka Kotahi
may from time to time increase tolls provided increases do not exceed CPI increases and are
rounded to the nearest 10c.
The increases proposed are in accordance with the Orders in Council and do not require Ministerial
approval. However, the Ministry of Transport will be informed.
The history of tariff increases is set out in At achment 2.
The proposed increases wil enable debt repayment
ACT 1982
Each toll road has debt (or notional debt) associated with its establishment.
• Northern Gateway was part-financed with debt held by the Debt Management Of ice of $158
mil ion (largely at floating rates, currently 2.85%);
• Tauranga Eastern Link was part-financed with debt held by Waka Kotahi of $107 mil ion, (largely
at fixed-rates ranging from 4.99-5.14%; $20 million at floating rates);
• Takatimu Drive was purchased for $65 million from Tauranga City Council in 2015 using the
National Land Transport Fund (NLTF). The Board determined that the $65 million notional debt
plus its opportunity costs would be recovered from tolls on the road to the NLTF (current notional
interest rate 4%, previously 8%).
INFORMATION
The modelling of repayment profiles is summarised below, including the original assumptions for
final repayment and current projections based on the proposed tarif increases and traf ic volume
assumptions. For comparison, the expected final repayment dates for no increase or for a “2% p.a.
CPI” scenario applied instead of actual CPI are also included:
NG TR
TEL TR
TD TR
Year tolling commenced
July 2009
August 2015
August 2015
Original Debt
$158m
$107m
$65m
Debt outstanding at 30 June 2022
$204m
$107m
$52m
Estimated final repayment date:
Original business case (which
assumed CPI increases)
By 2045
By 2044
By 2041
With increase based on actual
CPI i.e. 4% p.a.
By 2037
By 2038
By 2030
With proposed tariff increase i.e.
at 2% p.a.
By 2039
By 2040
By 2031
With no tariff increase
By 2043
By 2045
By 2032
Repayment forecasts assume a continuation of a “low interest rate” environment. Northern Gateway
and Takatimu Drive repayments are sensitive to interest rate (or associated opportunity cost)
assumptions.
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He whakaaro anō | Other key considerations
Ō tātou hononga | Partner, community and stakeholder considerations
Given other cost of living pressures, tariff increases are unlikely to be popular, particularly as there
are currently road works on Takatimu Drive toll road and Tauranga Eastern Link toll road impacting
on service levels.
Delaying increases would add to the pressure for future increases and/or defers final debt
repayment and therefore extends the period over which the road is tolled.
However, were a response to cost of living issues and recent weather events required, ACT 1982
announcement of the increases but deferred, say, by 12 months to 1 July 2024 could be considered.
This would reduce revenue by $4m and, all else equal, extend forecast debt repayment dates by
approximately three months. Total tolling revenue across all three roads in 2021/22 was $31.8
million.
Ngā tūraru matua | Key risks and how we wil manage them
Key risk
Management
Negative publicity and
A communications plan including updating information already
feedback
included on our website INFORMATION
Road works on two of the toll This wil be covered as part of the communications plan. Noting
roads mean that a reduced
that users can use the non-tolled alternative route.
level of service applies
Ā muri ake nei | Next steps
A detailed project plan (and team) is required to implement the changes. This includes: signage
changes; system changes (through the Kapsch tolling system); retail network changes; payment
and customer account changes; customer engagement and advice. In addition, a communications
package wil be prepared including: media content; website changes and notification through local
newspapers to explain the increases and to ensure the necessary notices are provided as required
by the Orders in Council.
The likely duration of the work and for the team, including the notice period of 28 days, is three
months.
Ngā whakapiringa | Attachments
Attachment 1
Toll road traffic volumes
Attachment 2
History of tariff increases
Attachment 3
Alternative of actual CPI p.a. increase (using Sep CPI)
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Attachment 1: tol road traffic volumes
NGTR Traffic Volumes and Network Usage
Annual
Period to
volumes
Percentage
Comments
‘000
increase
30-Jun-09
1,944
Opening January 2009
30-Jun-10
4,918
30-Jun-11
5,116
4.03%
ACT 1982
30-Jun-12
5,186
1.36%
Tolls increased March 2012
30-Jun-13
5,385
3.85%
30-Jun-14
5,741
6.60%
30-Jun-15
6,057
5.52%
30-Jun-16
6,629
9.44%
Tolls increased November 2015
30-Jun-17
7,041
6.21%
30-Jun-18
7,389
4.94%
30-Jun-19
7,519
1.75%
INFORMATION
30-Jun-20
6,769
-9.97%
30-Jun-21
7,436
9.86%
30-Jun-22
6,225
-16.29%
Note: orange shading reflects Covid impacted years and traffic volumes are not necessarily
following usual patterns
TELTR Traffic Volumes and Network Usage
Annual
Period to
volumes
Percentage
Comments
000
increase
30-Jun-16
2,627
Opening August 2015
30-Jun-17
3,371
30-Jun-18
3,753
11.35%
30-Jun-19
3,976
5.93%
30-Jun-20
3,712
-6.62%
30-Jun-21
4,183
12.69%
30-Jun-22
3,890
-7.01%
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TDTR Traffic Volumes and Network Usage
Annual
Period to
volumes
Percentage
Comments
000
increase
30-Jun-16
2,511
Transport Agency became tolling
operator August 2015
30-Jun-17
3,378
34.53%
30-Jun-18
3,860
14.29%
ACT 1982
30-Jun-19
4,365
13.08%
30-Jun-20
4,149
-4.95%
30-Jun-21
4,863
17.21%
30-Jun-22
4,661
-4.16%
INFORMATION
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Attachment 2: History of tariff increases
Northern Gateway Toll Road
Established under clause 9 of the existing Order in Council for the “Land Transport Management
(Road Tolling Scheme for ALPURT B2) Order 2005”
Car/Motorcycle
Truck
Cumulative CPI
Base July 2004
$1.80
$3.60
Opening January
2009
$2.00
$4.00
14.59%: July 2004 –
December 2008
ACT 1982
March 2012
$2.20
$4.40
23.95%: July 2004 –
December 2011
November 2015
$2.30
$4.70
27.97%: July 2004 –
March 2015
July 2019
$2.40
$4.80
32.91%: July 2004 –
June 2018
July 2023
$2.80
$5.60
55.47%: July 2004 –
Sept 2022
INFORMATION
Tauranga Eastern Link Tol Road
Established under clause 8 of the existing Order in Council for the “Land Transport Management
(Road Tolling Scheme for Tauranga Eastern Link) Order 2015”
Car/Motorcycle
Truck
CPI
August 2015
$2.00
$5.00
July 2019
$2.10
$5.20
3.65%: Sept 2015 –
June 2018
July 2023
$2.40
$6.10
21.25%: Sept 2015 -
Sept 2022
Takitimu Drive Toll Road
Under clause 7 of the existing Order in Council for the “Land Transport Management (Road Tolling
Scheme for Takitimu Drive) Order 2015”
Car/Motorcycle
Truck
CPI
August 2015
$1.80
$4.80
July 2019
$1.90
$5.00
3.65%: Sept 2015 –
June 2018
July 2023
$2.20
$5.80
21.25%: Sept 2015 -
Sept 2022
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Attachment 3: alternative of actual CPI p.a. (vs. 2%)
increase
Impact on tariff
Alternate tariff (vs. proposal)
Cars/Motorcycles
Trucks
From
To
From
To
Northern Gateway
$2.40
$2.80 ($2.60)
$4.80
$5.60 ($5.20)
ACT 1982
Tauranga Eastern Link
$2.10
$2.40 ($2.30)
$5.20
$6.10 ($5.60)
Takitimu Drive
$1.90
$2.20 ($2.10)
$5.00
$5.80 ($5.40)
Impact on debt repayment
Year Debt Repaid
Actual CPI
2%
INFORMATION
Northern Gateway Toll Road
2037
2039
(NG TR)
Tauranga Eastern Link Tol
2038
2040
Road (TEL TR)
Takitimu Drive Toll Road (TD
2030
2031
TR)
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Document Outline
