7.7 - Costs to government

Introduction

The costs to government of a transport service incorporate:

• the funding gap (chapter 6)
• road maintenance and construction cost savings
• road user charges foregone.

Road maintenance and construction cost savings

Some transport service proposals will provide a cost saving to government if:

• future planned road construction costs are avoided (freight and passenger services)
• the implementation of the proposal results in a reduction to road maintenance expenditure when traffic is removed from the road (freight services only).

Government cost savings have the effect of reducing the bottom line figure of the efficiency ratio, potentially making a transport service proposal more attractive.

The transport service proposal and any other options are assessed to determine any planned road construction savings and, in the case of freight services, any road maintenance savings that will be made as compared to the do minimum roading option.

Care must be taken when claiming a cost saving from future road construction avoided. The year or years in which the road construction would likely be funded must be assessed.

Note:

Normally road construction cost savings should only be claimed if there are significant road user benefits associated with the transport service proposal.

Road maintenance and improvement cost savings associated with implementation of a freight services proposal are calculated by estimating the total annual amount of freight traffic, measured in terms of 'equivalent design axles' (EDA), removed from the roading network. The simplified procedure for freight services provides indicative EDA and $/EDA/km values. However, local values are to be used for proposals where the default values provided in these simplified procedures do not represent local conditions. Also, if the amount of the freight traffic removed from the roading network varies from year to year, separate calculations are required for each year.

Road user charges foregone

In New Zealand, road user charges include:

• road user charges for all diesel-engined vehicles, and vehicles over
  3.5 tonnes
• petrol excise tax for all petrol-engined vehicles.

For the purposes of this manual, it is assumed that all vehicles used in freight services will be paying road user charges.

Note:

For passenger services it is not necessary to calculate the loss of road user payments.

In the case of a freight service, lost road user charges are subtracted from the road maintenance and construction cost savings to derive the net savings to government.

For freight-based services, it is assumed that heavy commercial vehicles will be removed from the road. Thus, the loss of road user payment as a result of the introduction of a freight service will be based on the weighted average road user charge for the type of vehicle that is removed.

Determine the reduction in road user charges as a result of the introduction of freight service using the following procedure: