Regional Fuel Levy details announced

Regional Fuel Levy details announced

A range of significant Auckland transport projects, including Auckland passenger rail electrification, have been given a green light with the Government's decision to approve Auckland's regional fuel levy scheme, Transport Minister Annette King said today.

"Funds will also go to improving Auckland's ferry terminals, developing an integrated public transport ticketing system, and constructing a new road linking the Whangaparaoa Peninsula to State Highway 1 at Redvale (Penlink)."

The levy, to be levied on petrol and diesel within the Auckland region, will be phased in over three years, starting with 2 cents per litre of fuel from July 2009, 5 cents from July 2010 and 9.5 cents from July 2011 through to 2039.

The levy is expected to raise around $110 million a year once the full 9.5 cent levy is being collected.

"Regional fuel levy is an additional funding tool available to regions for transport projects they have identified as high priority, but that will not reasonably be funded from any other source in the timeframe desired," Ms King said.

"The Auckland Regional Council has identified the $1.25 billion rail electrification project, improving ferry terminals and an integrated ticketing system as high priority projects to benefit the region and an electrified rail network in particular will lead to faster, quieter and more frequent rail services for the Auckland region.

"Penlink was identified by the Rodney District Council as a priority north of the region to create a better link between the Whangaparaoa Peninsula and Auckland. It also ensures that the benefits of regional fuel levy are more widely distributed across the region."

Ms King congratulated the Auckland Regional Council and Rodney District Council for their successful proposals.

"The Government is already forecast to provide more than a billion dollars in Auckland land transport infrastructure this year, but this levy will see other high priority transport projects of the Auckland region realised much faster than they could have been otherwise."

Questions and answers

What is regional fuel levy? Regional fuel levy is a levy levied on petrol and diesel at a regional level. A refund system will operate in certain circumstances where the fuel is used for non-road purposes e.g. fuel used in farm vehicles.

What are the benefits of a regional fuel levy? Regional fuel levy is an additional funding tool available to regions for high priority transport capital projects that will not reasonably be funded from any other source in the timeframe desired by the region.

Can regional fuel levy be used to fund operating costs? No. Regional fuel levy cannot be used to fund operating costs such as road maintenance or public transport services.

Why does the Government not pay the costs of these projects? There are a number of projects which sometimes cannot be funded out of the national land transport fund often due to a combination of their cost, and the very long timeframes required to repay construction debt.

Does a region have to levy a regional fuel levy? No. Regional fuel levies are not mandatory. It will be up to each region to decide whether they wish to levy a regional fuel levy.

Why can't these projects be paid for by regional levyation mechanisms such as property rates? Regional fuel levy is a funding source of last resort. It can be used to fund transport capital projects only when a region considers that full funding for those capital projects will not reasonably be available within the timeframe they desire.

How much can the levy be? It is generally up to a region to decide the proposed level of fuel levy in their region. The levy may vary from 1 cent per litre of fuel up to a maximum of 10 cents per litre of fuel. For Auckland, the region can propose a regional fuel levy of up to 5 cents per litre of fuel and the Ministers of Finance and Transport can identify projects to be funded by up to five cents per litre of fuel. A region must always consider phasing the levy in any scheme to mitigate the financial impact on the people in the region and legislation states that a regional fuel levy cannot exceed 2 cents per litre of fuel in 2009 and 5 cents per litre of fuel in 2010.

Is there a maximum levy that may be levied? Yes. A regional fuel levy may not exceed 10 cents per litre of fuel.

Why is the same levy rate not applied across the country? Regional fuel levy provides regions with an opportunity to match the level of levyation in their region with the level of expenditure proposed for capital projects which are a priority for their region. The rate of regional fuel levy is set by the region.

Who decides how much levy will be levied in each region? The regional transport committee of a region is responsible for preparing a regional fuel levy scheme, except in Auckland where the Auckland Regional Council is responsible for preparing the initial scheme. The scheme must state the proposed rate of levy and identify the projects or group of projects that will be funded by the levy.

Can a region immediately introduce a levy of 10 cents per litre? No. A regional fuel levy levied in 2009 may not exceed 2 cents per litre of fuel and in 2010 it may not exceed 5 cents per litre of fuel. From 2011 onwards a region must consider phasing the levy to mitigate the impact of the levy on the people resident in the region.

Does GST apply in addition to regional fuel levy? Yes. GST applies to all goods and services based on their final retail price. All levy that contributes to that final retail price is subject to GST, including any regional fuel levy component.

When can a region implement a regional fuel levy? Regions that wish to implement a regional fuel levy first need to prepare a regional fuel levy scheme which will then need to be considered and approved by the Ministers of Finance and Transport. The effect of legislation is that a region can only start collecting the levy (once the scheme is approved) at the beginning of a financial quarter (i.e. 1 January, 1 April etc) and not before 1 July 2009.

How will the levy be spent? Regional fuel levy may only be spent on transport capital infrastructure e.g. new roading, railway stations and rolling stock. A regional fuel levy scheme must identify projects and state the allocation of revenue between each project.

Can all of the levy be spent on roading? No. Up to 5c may be spent on roading used for general traffic within the overall 10 cent limit. This will ensure that funding for walking and cycling facilities, bus lanes and high occupancy vehicles is not crowded out by demand for general traffic.

Does the levy have to be spent on projects in the region where it's collected? No. A region can decide to fund a project in another region. The region would need to decide that the project they are funding is of sufficient benefit to their region to warrant that expenditure.

Who collects the levy? The New Zealand Transport Agency collects it.

Who pays the levy to the Agency?The levy must be paid by any person who supplies fuel to a retail destination located in a region subject to a regional fuel levy. Most of these people will be established fuel distributors.

In what circumstances can a claim for a refund of a regional fuel levy be made? Refunds of regional fuel levies can be claimed for fuel that has been used for non road purposes by a commercial, charitable or public sector organisation e.g. fuel used in farm vehicles.

How can a claim for a refund be made? Applications for refunds will be processed by the New Zealand Transport Agency. The Agency will require proof of purchase of the fuel and will need to be satisfied that the amount claimed is for levy paid on fuel used for non-road purposes.

How much is the Auckland regional fuel levy and when will it start? The levy will be phased in over three years, starting with 2 cents per litre of fuel in July 2009, rising to 5 cents per litre of fuel in July 2010 and 9.5 cents per litre from July 2011 through to 2039.

How much levy will be collected? Net revenue after refunds and administration costs is expected to be between $95m and $140m a year once the full 9.5 cents is being collected.

How will regional fuel levy be used to pay for the cost of the projects? The cost of construction will be met by borrowing. Regional fuel levy revenues will be used to meet the cost of that borrowing.

What projects will be funded? The main project that will benefit will be the Auckland passenger rail electrification project which will get 8 cents of the regional fuel levy revenue when the regional fuel levy rate is 9.5 cents. 1 cent will be used to construct a new road linking the Whangaparaoa Peninsula to State highway 1 at Redvale (Penlink) and 0.5 cents will go toward improving ferry terminals and developing an integrated public transport ticketing system. Projects are described in more detail in Appendix A

How much will each of these projects cost? • Above-track rail electrification: approx $500 million • Non-electric rolling stock: approx $150 million • Rail system upgrade: approx 100 million • Ferry wharves and integrated ticketing system for buses and ferries: approx $ 110 million • Below-track electrification: approx $500 million • Penlink: approx $180 million

Will revenue from the Auckland regional fuel levy meet the total cost of each project? The projects will be funded as follows: • Above track electrification --- 100% regional fuel levy • Non-electric rolling stock project --- 67% regional fuel levy, 33% Auckland Regional Holdings • Rail system upgrade --- 79% regional fuel levy, 19% Auckland Regional Holdings, 2% New Zealand Transport Agency • Bus, ferry and integrated ticketing system --- 37% regional fuel levy, 10% Auckland Regional Holdings, 53% New Zealand Transport Agency • Below track electrification --- the Crown will fund the borrowing and repay the capital cost, Regional fuel levy will meet the interest payments on this borrowing • Penlink --- 80% regional fuel levy, 20% Rodney District Council

Why rail? New electrified rolling stock will lead to faster, quieter and more frequent rail services for the Auckland region.

Why Penlink? PenIink was identified by the Rodney District Council as a high transport priority in the north of the region. Funding Penlink ensures that the benefits of regional fuel levy are more widely distributed.

Which agencies get the money? The rail funding will be divided between the Auckland Regional Council who will buy new trains and stations and ONTRACK who will provide the cabling and signalling that these trains will use. The ferry terminals and integrated ticketing money will also go to the Auckland Regional Council. The New Zealand Transport Agency will receive the money for Penlink.

Why has Auckland's regional fuel levy scheme been developed by the Auckland Regional Council? The Auckland region was more advanced in its preparation of a regional fuel levy proposal than other regions. The Auckland regional transport committee agreed that the Auckland Regional Council should prepare the initial scheme to reduce the time required to develop it.

Why is there is provision in the legislation for the Crown to set five cents of the Auckland regional fuel levy? This arrangement reflects the distribution of rail electrification costs between the Auckland region and the Crown.

How is the Auckland region defined? For the purposes of regional fuel levy, the region extends from the northern boundary of the Rodney District Council to the southern boundary of the Franklin District Council.

APPENDIX A

ARC projects (a) Above-track rail electrification project (estimated cost - $500m), which includes — (i) 35 four car electric multiple units; and (ii) the development of a long term stabling and maintenance depot; and (iii) additional infrastructure and rolling stock as required; and (iv) contingency and project management costs; and

(b) the non-electric rolling stock project (estimated cost - $150m), which includes— (i) rebuilt carriage trains; and (ii) rolling stock capital renewals; and (iii) overrun protection on train equipment; and (iv) contingency and project management costs; and

(c) the rail system upgrade project (estimated cost - $100m), which includes— (i) reconstruction of the Newmarket railway station; and (ii) refurbishment of the Newmarket heritage station; and (iii) a Manukau rail link station and above track works; and (iv) new and upgraded stations for Parnell and New Lynn; and (v) stations and above track works on the Onehunga Line; and (vi) station works at Kingsland and Morningside; and (vii) temporary platforms and permanent stations at Helensville, Waimauku and Huapai; and (viii) a real time passenger information system for rail; and (ix) contingency and project management costs; and

(d) bus, ferry, and multimodal infrastructure project (estimated cost - $110m), which includes— (i) upgrades to ferry terminals at Bayswater, Beach Haven, Downtown Auckland, half Moon Bay, Hobsonville, Birkenhead, Stanley Bay, and West Harbour; and (ii) upgrade to access at Gulf Harbour ferry terminal; and (iii) smart card integrated ticketing; and (iv) a real time passenger information system for bus and ferry services; and. (v) contingency and project management costs.

Additional projects (a) Below-track rail electrification project (estimated cost - $500m), which includes— (i) the construction of an overhead catenary system and provision of the required power supply; and (ii) signalling immunisation works; and (iii) bridge and clearance modifications; and (iv) contingency and project management costs; and

(b) The Penlink project (estimated cost - $180m), which includes— (i) a two lane road between the Whangaparaoa Peninsula and State highway 1 at Redvale, including a crossing of the Weiti River; and (ii) a new motorway interchange at Redvale connecting the Weiti Crossing to State highway 1; and (iii) realignments and widening on East Coast Road at the new intersection with the Weiti Crossing; and (iv) widening Whangaparaoa Road between Brightside Road and Arklow Lane, including the intersection with Weiti crossing; and (v) contingency and project management costs.