Friday, 27 October 2017

And never the twain shall meet*

According to the text of the Labour/Greens confidence and supply agreement, "Auckland’s East-West motorway link will not proceed as currently proposed".

I'm not surprised, though before I was asked to look at the East-West Link, I'd have had a different reaction. Auckland's been so short of infrastructure investment, and transport investment in particular, that I would have welcomed anything at all that helped, even if it wasn't especially efficient. Two billion dollars, the ballpark cost of the Link, however poorly spent, had to be some sort of advance on half of five eighths of the proverbial alternative.

And then the Campaign for Better Transport asked me to have a look at how the New Zealand Transport Agency had signed off on the Link. A Board of Inquiry had been set up to decide whether to approve the Link: would I be interested in putting in an expert view? I would. I did.

I was rather surprised when I had a look at the benefit/cost ratios for each of the six options that the NZTA had shortlisted for the Link. The option chosen was far from being the best on a benefit/cost basis. Compared to the chosen one, there was an alternative that would have achieved slightly more benefits, but for only 60% of the cost. And there was another one that was less ambitious - only half of the benefits - but was very cheap indeed, at only a quarter of the cost. The preferred option was, bluntly, inefficient.

But mankind does not live by cost/benefit ratios alone, and the NZTA, sensibly, also put all six options through a 'multi criteria analysis' wringer, prodding them from every possible perspective, including Maori, historical, and environmental.

Again the preferred option didn't stand out. That cheap and cheerful one - half the benefits but very cheap to do - scrubbed up well (again). And even if you played around with the weightings, as I did, I couldn't get the NZTA's preferred option to come out on top. Even when I gave double weighting to transport outcomes, which after all might be what the NZTA was prioritising, there were better ways of doing the Link than the NZTA's golden-haired choice.

As happens in these sorts of proceedings there's a "hot tub" where the economists get together to say what they can agree on and what they can't. On this occasion there were five of us: in the post-tub joint statement we put in to the Inquiry, four of us agreed that "The [NZTA's] application [to build the Link] and subsequent evidence does not establish...How Option F [the NZTA's preference] was arrived at as the preferred option and, in particular, how the Option reconciled with the NZ Transport Agency's own system for prioritising Projects". The NZTA's economist disagreed.

In sum, I couldn't make much sense of the NZTA's justification for ploughing ahead with their preferred option, and said so when I fronted up to the Inquiry. If you're seriously short of better things to do, the transcript is here. I come onto the stage at page 4897 (!) and the most relevant bits are on pages 4907-10 where I have trouble with the NZTA's thinking behind its choice and finish up by rhetorically asking the NZTA, "with all that lovely information, why did you do F?"

Lots of other people have been having trouble with the decision, too. Cameron Pitches of the Campaign for Better Transport has had a go at 'The Economics of the East West Link' with part two here, and the Greater Auckland site has a string of posts, with highlights being the latest 'Where to now for the East West Link?' and the earlier 'Rethinking the East-West Link'The Spinoff's  Simon Wilson has also been on the case, with 'The most expensive road in New Zealand history is coming to Auckland. Why?' and '‘I have not quantified the benefits’: the astonishing truth about NZ’s most expensive road ever'.

Bottom line: my guess would be that you could deal to a lot of the Onehunga/Penrose congestion with a slimmed-down version of the Link, and still have a billion dollars left over. That's a rather irresistible bit of economic - and political - calculus.

What happens to the Inquiry itself? Far as I know, it's still due to deliver its final decision by December 22, and I hope it's let do it. The board seemed to me to be a very sharp collection of folks, and I'd like to hear what they made of it all, even if swathes of it may have become moot.

There's also a point of law they had to consider that could be important for future regulatory proceedings. Was the board constrained to examining only what the NZTA put in front of it, or could it enquire into the NZTA's thought processes when it came up with the scheme?

As the chair of the Inquiry said (p4909, para 35)
it seems to be  reasonably clear law that we as a Board can't sit down and start scratching our heads and drawing alternative lines over bits of paper and saying, "Well, this option might have been better than that option" etc. We really have to judge on the merits what's been served up to us.
But on the other hand as one of his colleagues said (p4913, para 15)
I think you're quite right that we have to be satisfied that there was a robust process of evaluation of the alternatives.
In practice it may not make a huge difference. Submitters could (and did) propose that the NZTA's preferred option should have been redirected around this town centre, or slimmed down along that stretch, or mitigated a different way, and would have effectively smuggled the NZTA's discarded options back into the proceedings irrespective of whether the Board itself did not want to revisit the NZTA's original decision.

But it's still an important point. My preference lies down the end of tyre-kicking that "robust process of evaluation of the alternatives". If, by analogy, some group appeared before the Commerce Commission for authorisation of an otherwise anti-competitive arrangement that nonetheless has a net public benefit, I would expect Commissioners to ask, very early in the piece, did you consider other or better or less intrusive ways of doing this? What did you find? Why did you go with this one? And if they weren't satisfied, I'd expect them to say, go back to the drawing board.

If Boards of Inquiry find they don't have these powers under the Resource Management Act process, then maybe we should fix the Act so that they do.

*OK, pretty corny, but if you don't recognise it it's a bit of Rudyard Kipling: "Oh, East is East, and West is West, and never the twain shall meet"

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