Green light for Auckland congestion charges
By Ashley Gardyne, Portfolio Manager, Property & Infrastructure
06 October, 2016
Auckland’s transport woes are again in the spotlight as local body elections kick into top gear. While traffic is a never ending frustration for many Aucklanders, those living outside of Auckland probably feel equally frustrated that their tax dollars are being funneled towards Auckland’s road and rail projects in ever increasing quantities.
But perhaps a solution is in sight. During September the New Zealand Government hinted it was considering congestion charges for Auckland. The impact of these charges (particularly if higher at peak times) would be to reduce vehicle numbers and improve the flow of traffic — a win for Aucklanders currently facing long commutes. By levying those using the most congested routes, charges are borne by those who benefit from faster flowing traffic, rather than taxpayers at large.
The introduction of a congestion charge in London in 2003 was highly successful in reducing traffic in the city and increasing the use of public transport. In fact, by 2006 there were 21% fewer vehicles on the roads despite a massive increase in buses (+25%), taxis (+13%) and bikes (+49%).
Toll roads currently account for less than 2% of roads in most developed countries. However, this number is starting to increase given significant Government debt burdens and a preference by taxpayers in many countries for user-pays models.
While congestion charges are a particularly contentious topic in Auckland, the increasing prevalence of toll road concessions creates an investment opportunity for infrastructure investors globally. We are invested in two international toll road operators in our Property & Infrastructure Fund, Transurban Group (Australia) and Atlantia (Italy).
Toll road operators have many of the qualities we seek in an investment. Not only do they have stable cash flows and attractive dividend yields, but increasing Government acceptance of private sector infrastructure delivery provides attractive long term growth opportunities. For well run operators like Transurban and Atlantia, the road ahead looks clear!