Minister of Transport Four Year Plan for the Transport Sector 2014

The Treasury

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July 2014

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Minister of Transport Four Year Plan for the Transport Sector 2014

6 December 2013

Contents

Overview of the Plan – Key messages p.5

The Four Year Plan Section 1 – Delivering on the Government’s priorities p.10 What the Ministry and Crown entities will deliver over the next four years p.10 Section 2 – Strategic context for transport p.14 The importance of transport to a thriving New Zealand p.14 The government transport sector operates with a common outcomes p.15 framework Longer term issues for transport p.18 Section 3 - Managing the financial and investment issues p.21 The transport sector’s funding arrangements p.21 Government Policy Statement on Land Transport p.22 Managing land transport revenue issues p.25 Crown entity fees, charges and levies reviews p.28 The Government’s Budget decisions for 2014 and outyears p.30 Cost savings and opportunities for reprioritisation with the transport sector p.33 Section 4 – Leadership and co-ordination p.34 How the Ministry leads and provides leadership and co-ordination for the p.34 transport sector How the Ministry and Crown entities are building capability, improving p.36 business processes and delivering better value for money Key risks for the sector p.40 Monitoring the transport sector’s performance against this plan p.41 Section 5 - Annexes p.45

Figure 1: The government transport sector provider Airways KiwiRail MetService information services Provision of weather of Provision weather Air navigation service navigation service Air Rail owner and Rail operator State Owned Enterprises State rail occurrences rail Transport Accident Transport Board Commission of Inquiry into selected aviation, maritime and aviation, maritime selected Investigation Commission Investigation Funder Service provider Service Safety Regulator Sector leadership Board Enabler of economic activity NZ Transport Agency NZ Transport Minister of Transport Transport Crown Entities Transport Authority Safety regulator Service provider Service Sector leadership Civil Aviation Aviation Civil Board Enabler of economic activity Wider transport sector leadership role (by mode) sectorrole (by Wider leadership transport Sector leadership Policy adviser to government adviser Policy Ministry of Transport Ministry Governance &accountability supportGovernance Zealand Zealand Safety regulator Service provider Service Sector leadership Maritime New Board Enabler of economic activity

OVERVIEW OF THE PLAN – KEY MESSAGES

A Four Year Plan for the government transport sector

1. This Four Year Plan sets out the key fiscal and investment issues the government transport sector will manage and the work programme the sector will deliver over the next four years. The plan has a strong focus on the Ministry of Transport, and also addresses issues relating to the four transport Crown entities1. It also includes the three State Owned Enterprises2 that are involved in the transport sector, where there are relevant financial issues.

Strategic direction and alignment with Government priorities

2. The government transport agencies have an agreed long term sector goal and outcomes that they work towards. The sector is also guided by the strategic direction provided through document including Connecting New Zealand, Safer Journeys Road Safety Strategy and the draft Intelligent Transport Systems Action Plan. Transport agencies have a clear alignment to the Government’s priorities, and key deliverables over the next four years include:

 Government Policy Statement on Land Transport 2015

 Roads of National Significance programme

 Auckland transport package

 implementation of the Safer Journeys Action Plan

 negotiation of international air services agreements

 implementation of new risk-based regulatory approaches

Sector leadership and performance improvement

3. The Ministry will play a critical role over the next four years in ensuring all the government’s transport agencies are capable, effective and efficient in delivering the results required of them. The Ministry’s role in sector leadership and performance improvement includes the following elements:

 leading sector-wide work on the common outcomes framework, understanding of the Government’s priorities and the implications of these for individual transport agencies

 governance and monitoring oversight– supporting the Minister to set appropriate expectations for the Crown entities and to hold them accountable for their performance

 ensuring the implementation of a major regulatory reform programme across the sector to support Better Public Services

1 Civil Aviation Authority, Maritime NZ, NZ Transport Agency and Transport Accident Investigation Commission 2 Airways, KiwiRail and MetService

 co-ordinating sector activity (where agency roles mean this is appropriate) through groups such as the National Road Safety Committee, and the New Zealand Search and Rescue Council

 leading strategic policy development for the transport sector (including the Intelligent Transport Systems Action Plan)

Managing investment and other financial issues over the next four years

4. The plan also sets out the Government’s investment and other financial decisions over the next four years. The Ministry has enhanced the level of scrutiny that is applied to all Budget and non-Budget investment and other financial proposals to ensure they are appropriate and provide value for money. Table 1 (page 7) provides an overview of the investment and other financial decisions for the next four years.

5. The Government Policy Statement on Land Transport is the government’s major funding lever (approximately $3 billion a year) to influence the land transport system. The Statement is a statutory document that takes an explicit 10 year approach to investment, and applies it consistently to central and local government. The Statement allocates funding to activity classes in ranges, for 3 year tranches, within that 10 year window. The Ministry is undertaking significant analysis to support Government decisions in early 2014, for the 2015 Statement.

6. The Crown entities are primarily funded through third party sources (fee, charges and levies). Crown entity funding reviews are, therefore, the primary mechanism through which the government makes decisions on value for money and whether to fund capability or services. The Four Year Plan seeks to provide assurance to Ministers that these processes are being managed in a robust manner.

7. Other significant investments by government are typically only made through Vote Transport where road or other users may not be the appropriate source of funding. For example, the KiwiRail Turnaround Plan (where Treasury is the policy adviser, and Vote Transport the funding mechanism), the Auckland transport package (where government will make decisions that will be actioned through Vote Transport) and SuperGold Card (where Vote Transport is the vehicle used to give effect to a social policy decision).

8. The key financial and investment decisions for the next four years are set out in Table 1.

Table 1: Financial and investment decisions to be taken

Key financial and investment decisions that will be made over the next four years within the transport portfolio Decisions for 2014/15

Type Name Purpose Status Third Party Government Policy Statement on Key statutory lever that gives effect to the Under development. Cabinet decisions will be sought funding decision Land Transport 2015 funding levels for central and local government in March 2014 for consultation on the draft to fund roading infrastructure Statement. The Statement is to be issued in July 2014 to take effect in July 2015 Departmental Nil n/a Expenditure pressures managed within baseline Funding Payments on Auckland transport package To give effect to Ministerial decisions on Under consideration by Ministers. behalf of the Auckland Cabinet paper to be finalised for consideration in Crown through [10] March 2014 (as agreed by Cabinet in December 2013) Vote Transport Payments on Kid wiRail ad itional support Funding to support Government decisions Treasury is the lead adviser. behalf of the around the rail freight business [10] Decisions will be taken as part of Budget 2014 Crown through Vote Transport [7]

Third Party Implementation of triennial fee Establishment of a programme to oversee all Will be given effect during 2013/14 through a funding decision review programme third party funding issues across the transport programme agreed with the Minister of Transport sector Third Party NZ Transport Agency fees and Fees for Warrant of Fitness and Certificate of Decisions sought in Q3 2013/14 funding decision charges Fitness implementation Third Party Aviation Security Services fees and Fees for passenger screening New fee regime for four years to take effect from 1 funding decision charges April 2014

Decisions beyond 2014/15

Type Name Purpose Status Crown entities Transport Accident Investigation Review of funding sustainability To commence in 2014, led by the Ministry. Action, if Commission any, for 2015 Budget Payments on SuperGold card public transport Decisions on funding and how the scheme’s Budget 13 provided two years of funding (2013/14 and behalf of the concessions sustainability could be improved 2014/15). Crown through The Ministry is to review the scheme’s operations and Vote Transport report to Cabinet in 2014. Decisions on outyear funding will be made as part of Budget 15 Payments on Joint Venture Airports The Crown has a legal liability to six joint venture The current funding expires on 30 June 2015 behalf of the airports to cover certain costs Decisions on outyear funding will be made as part of Crown through Budget 15 Vote Transport Payments on KiwiRail – roll over of existing loans Crown loans to KiwiRail are usually rolled over to $10.75 million of loans will be rolled in 2014/15 to a behalf of the allow spare cash to be invested in the KiwiRail currently unknown maturity date – already Crown through Turnaround Plan appropriated Vote Transport $163 million of loans mature in 2017/18. Decisions on the $163 million will be made as part of Budget 17 Third Party Civil Aviation Authority fees and Fees to operate the regulatory systems for Review will conclude in 2014/15 with decisions to be funding decisions charges aviation given effect in 2015

Third Party Maritime NZ fees and charges Fees for the safe shipping and seafarer To be given effect during 2014/15 funding decisions certification systems

How to read this Plan

9. This Plan is in five sections.

10. The first section sets out what the transport sector’s initiatives to deliver on the Government’s priorities are. It includes:

 the Ministry and the Crown entities work programmes for the next four years to deliver on the Government’s priorities

11. The second section provides the strategic context for the transport sector’s work programmes. It includes:

 the importance of transport to a thriving New Zealand  the government transport sector’s agreed goal and long term outcomes  the longer term trends that influence the development of the system and the strategic choices that government will need to make in the long term in response to those trends  how the Ministry is addressing and will address the long term trends and strategic choices through its annual work programmes

12. The third section sets out how financial and investment issues for the sector are being managed. This includes:

 the Government Policy Statement on Land Transport  the National Land Transport Fund  a summary of the decisions for Budget 2014 and outyears

13. The fourth section sets out how the sector is led and co-ordinated. This includes:

 how the Ministry leads and provides leadership and co-ordination for the transport sector  the work of the Ministry and Crown entities to build their capability to meet future demands  work to improve business processes, manage risk and deliver better public services  how the delivery of this plan will be monitored

14. The final section of the Plan is a set of annexes that contain more detailed information on a range of matters (many of which are addressed in part in the earlier sections). The annexes also include specific information on the each of the Ministry of Transport, Crown entities and State Owned Enterprises.

PRIORITIES SECTION 1

What the Ministry and Crown entities will deliver over the next four years -

FIGURE 2: ALIGNMENT OF SECTOR DELIVERABLES TO GOVERNMENT PRIORITIES DELIVERING ON THE GOVERNMENT’S

Government’s Rebuilding Productive & competitive Responsibly manage Better Public priorities Christchurch economy Government’s finances Services

Minister of Investment in Better Quality Improved Transport Opening Markets Safer Transport Systems Transport’s infrastructure Regulation Agency Performance priorities

National Land Transport Air services agreements Regulatory efficiency Improved sector co- Programme  Vehicle Licensing Safer Journeys Action Plan ordination  Christchurch rebuild National Freight Demands Reform  Roads of National Study  Driver Licensing Reform Aviation Safety Reforming business + What the sector Significance Management System regulatory models is delivering  Auckland package Freight scenarios Intelligent Transport Systems Action Plan Maritime Operator Safety Shared services KiwiRail investment Construction costs research System Risk based regulatory Improved customer service GPS 2015 Complete freight plans for approach Improving the quality of the Upper North Island, Central vehicle fleet Increasing number of online High Productivity Motor New Zealand and South Rules programme transactions Vehicles Island

Alignment of key deliverables to the Government’s priorities

15. As shown in Figure 2 (page 10), the transport sector aligns its key deliverables with the Minister of Transport’s five priorities, which link directly to the Government’s four overarching priorities. A more detailed alignment between the plan’s key deliverables and the Government’s priorities is set out below.

Supporting the rebuild of Christchurch

16. The rebuild of Christchurch needs to take account of the longer term trends and the strategic choices, how to get the most from the existing transport network, where and when to make the next set of major investments, how to meet rising social expectations and how to balance demands for levels of service with affordability.

17. The transport sector’s work to support the rebuild of Christchurch largely involves the provision of infrastructure to promote Christchurch’s future. These include:

 the NZ Transport Agency’s:

o Investment for the reinstatement of Christchurch’s roading network. To meet the costs, the NZ Transport Agency has proposed that the balance of costs be funded by a Crown loan, repaid at $50m per year from the National Land Transport Fund (including interest). [7]

o Roads of National Significance programme which has an $800 million Christchurch highway construction programme (the most ambitious programme ever seen in Christchurch) which addresses future freight needs.

 The Ministry of Transport’s work to identify whether there are opportunities, through its international air services negotiations with other countries, to enhance international air connections to Christchurch. This allows for an increased number of flights to and from Christchurch, which in turn would create the opportunity for increased tourism and additional capacity for the movement of higher value goods from Christchurch.

Supporting a productive and competitive economy

18. For the transport system to support a more competitive and productive economy, it needs to take account of the long term trends and the Business Growth Agenda. It must also focus on the strategic choices of how to get the most from the existing transport network, where and when to make the next set of major investments, how to meet rising social expectations and how to balance demands for levels of service with affordability. All of these will impact on future demand for transport.

19. Improvements in the operation of the transport system can improve the efficiency of firms (by reducing their transport costs, enhancing reliability and safety, and increasing access to labour and other markets). Reducing transport regulatory compliance costs also improves the efficiency of firms.

20. To support a more competitive and productive economy, the Ministry of Transport will be advising Government on:

 the allocation of $9 billion of land transport investment through the Government Policy Statement on Land Transport 2015 and a similar amount for the 2018 (discussed in more detail on page 22)

 a range of major investment decisions including the funding of the recently announced Auckland transport package

 the emergence and uptake of Intelligent Transport Systems which are expected to offer significant opportunities to maximise the effectiveness of existing transport networks

21. The NZ Transport Agency will continue to develop high volume parts of the State highway network to improve safe and efficient access to and from some of our busiest ports, airports, productive areas and largest population centres.

22. Maritime NZ and the Civil Aviation Authority will focus on implementing new risk-based regulatory regimes to improve the safety and efficiency of the maritime and aviation industries.

23. The Ministry and NZ Transport Agency are also implementing a broader programme of regulatory reform including vehicle, transport services licensing and driver licensing reform.

24. The Ministry and NZ Transport Agency’s regulatory reform work also contributes to the National Infrastructure Plan and the Business Growth Agenda. Other work includes:

 Ensuring transport infrastructure supports business growth - the Ministry will ensure investment decisions on physical infrastructure is supported by data or other relevant information. Enhancements of the Freight Information Gathering System, publication of the National Freight Demands Study and associated ports study will contribute to that.

 Conserving national resources - the Ministry will investigate opportunities for energy efficiency in transport and focus on how to get the most from the existing transport network.

 Better understanding of future drivers of infrastructure demand and options to manage these - the Ministry will examine the long term interplay between changing demographics, lifestyle choices, wealth and settlement patterns on personal transport demand.

Responsibly managing government finances

25. Transport agencies understand the Government’s fiscal goals, and the fiscal constraints that the Government is under. The transport agencies also recognise that those goals and constraints apply to the provision of both Crown and third party funded services. The efficient management of the National Land Transport Programme is an essential part of this. More detail on the sector’s approach to responsibly managing its finances is set out later in this plan.

Delivering better public services

26. The delivery of better public services includes ensuring that transport agencies are positioned to meet both current and future needs, connect better with industry and other stakeholders, and provide services in more innovative and customer focused ways. Understanding the impact of the long term trends (including technological change, social expectations, and an ageing population) is critical to the development and delivery of better public services.

27. All of the transport agencies are focussed on delivering improved services through a combination of individual agency and collective sector actions. Key initiatives include:

 The Ministry of Transport’s:

o two year organisational development action plan ‘Shaping our Future’ to support the Ministry to deliver on its Performance Improvement Framework four year excellence horizon (focusing on five specific action areas over the next two years)

o leadership of the transport sector’s shared capability and services programme to provide enhanced access to specialist services and to reduce costs (the first area that will improve the sector’s performance is the risk and assurance centre of excellence)

o implementation of a new three yearly Funding Review Programme for Crown entities to ensure any future changes in fees, charges and levies are co-ordinated, have gone through consistent and robust scrutiny, and represent value for money

 The NZ Transport Agency’s:

o implementing its target for 70 percent of vehicle licences to be renewed online by 2017 (Result Area 10)

 The Transport Crown entities’:

o development of new or amended business models to take advantage of technology and drive other service level improvements. The NZ Transport Agency has major change programmes underway for its Access and Use; and State Highways Groups; while the Civil Aviation Authority and Maritime NZ are implementing new risk based regulatory approaches to their sectors.

SECTION 2 – STRATEGIC CONTEXT FOR TRANSPORT

The importance of transport to a thriving New Zealand 28. Transport is a critical component of daily life for all of New Zealand’s businesses $60 billion and citizens. The transport system is New Zealand’s primary mechanism for international connectivity, linking our businesses to their export markets and of roading supporting New Zealand’s $23 billion a year tourism industry. Safe aviation and network maritime systems underpin that by providing the confidence necessary for $4.3 billion international aviation and maritime lines to operate in New Zealand. The aviation sector is responsible for the movement of almost $5 billion of exports of rail annually, while more than $40 billion of exports are moved by sea. network

57 29. On the roading network, 18 billion tonne kilometres of freight is moved each year, with a further 4.6 billion tonne kilometres being moved by rail. Light

passenger vehicles travelled an estimated 31 billion kilometres in 2012. The Air Service social cost of road injuries has reduced from $3.94 billion in 2008 to $3.3 billion agreements in 2012, while the annual road toll has reduced from 384 in 2009 to 308 in 10% of 2012. The transport system also has environmental impacts, with 19 percent of New Zealand’s greenhouse gas emissions arising from domestic transport. New Zealand There are 165 million public transport trips (bus, train, ferry) each year, while workforce cars account for 96 percent of all vehicle trips (motorcycle, car or public 5.5% transport).

30. In addition to its economic role, transport also contributes to social connectivity of GDP

and the leisure pursuits of New Zealanders. New Zealand has 1,450 passenger 96% of trips vessels and 500,000 pleasure craft, while 100 commercial jet boats and 300 whitewater rafts carry around 450,000 passengers on our inland waterways annually. New Zealand also has 5,000 registered aircraft and more than 10,000 in vehicles are by car licensed pilots. $6.5 billion The transport system needs to be focused on both the longer term issues and the system’s more immediate needs of exports by air

31. The importance of the transport system to all aspects of daily life, and the 2.6 million changing nature of its environment, mean that it is critical that the Ministry has a focus on the longer term issues for the transport system. The Ministry must also ensure that it delivers on the Government’s priorities. The next section of light passenger vehicles the Plan sets out the sector’s outcomes framework, the longer term challenges 165 million for the transport system and how the Ministry is approaching them.

public transport boardings

$40 billion

of exports by sea

The government transport sector operates within a common outcomes framework

32. The Ministry and Crown entities have a clear intervention logic for their activities in the transport system. That intervention logic was agreed in 2012 through the common outcomes framework for the sector (Figure 3, page 16). The framework provides the basis for specific work programme initiatives that deliver on both the Government’s priorities (discussed earlier) and at the same time provide a focus for the Ministry’s work that addresses the long term issues (see page 20) for the transport system. The framework also supports the Ministry to better understand its future capability needs and to meet them through its organisational development programme - Shaping our Future.

33. The Ministry of Transport has three key roles within the transport system. The Ministry is the government’s principal adviser on transport policy, it supports the Minister to set his expectations for the transport Crown entities and to hold them accountable for their performance, and it has a leadership role for the sector. The core roles of the government transport Crown entities are regulatory (with a strong safety focus), service provision, and in the case of the NZ Transport Agency, funding for the land transport system.

34. The sector goal is for “A transport system that maximises economic and social benefits for New Zealand and minimises harm”. Each transport Crown entity has its own interventions to deliver on the sector goal and long term outcomes. Those interventions reflect the statutory responsibilities of each entity, and its broader role within the transport system.

35. The lower half of the diagram shows the Ministry’s interventions in the transport system. The Ministry focuses on these interventions as they are the means to drive maximum improvement in the transport system from a policy perspective. In determining the specific initiatives to pursue under each of the intervention areas, the Ministry focuses on the broad strategic context and long term trends, and Government and Ministerial priorities. The Ministry also collects and analyses a wide range of data and research to identify pressure points and opportunities.

Figure 3: Transport sector’s long term goal and outcomes; and Ministry’s lower level interventions

Monitoring the transport system’s progress against the long term outcomes

36. The Ministry monitors the sector’s progress towards the long term outcomes using the five headline indicators below. The Ministry reports on them as part of the Transport Monitoring Indicators Framework (available on the Ministry’s website) and in its annual report.

37. The Ministry will lead work with the sector in 2014 to review the performance measures and ensure they are the most appropriate measures. Further work is required to develop a performance measure for the resilience long term outcome.

Longer term issues for transport

New Zealand’s demands on the transport system are likely to change over time

38. Transport infrastructure is commonly very expensive, with a long life span (often covering many decades). This means that making the right transport investment decisions is of critical importance for New Zealand. Investing in infrastructure that turns out to be unnecessary in the longer term creates a burden for the economy, while under-investing creates a constraint on the economy in the short term and causes unnecessary disruption to peoples’ lives.

39. The ongoing challenge for the transport sector, therefore, is to better understand what future demand for transport is likely to be, and to be able to adjust the investment decisions we make now, so they reflect our understanding of those future requirements. This includes how technology may impact on demand for transport services. While the Ministry and Crown entities currently estimate future demand on the system, the Ministry will significantly increase its efforts in this area over the next four years to better understand future demand and to measure the impact of interventions and investment in the system.

40. The key trends for the long term future of the transport system are discussed below.

New Zealand’s population growth

41. New Zealand’s population is expected to grow from 4.4 million in 2012 to 5.4 million in 2036 and to 6.0 million in 2061.

42. While the majority of that growth will occur in the Auckland region, many New Zealand communities are forecast to have declining populations, raising questions about how those communities will be able to fund their transport needs in the longer term. It is possible that Auckland will require increasing levels of transport investment to keep the city and its economy moving, prompting ongoing calls for ‘regional equity’ from other parts of the country.

43. However, there has also been a reduction in transport consumption per person in New Zealand, caused by factors such as the ageing population (discussed below), teenagers buying electronic goods to stay connected with their friends and deferring the purchase of cars and urbanisation. The net effect of population growth and decline in transport use per person has been a flat line in vehicle kilometres travelled since 2004. It is not clear whether the per capita vehicle kilometres travelled reduction will continue and how much this reduction will be offset by population growth in the medium to long term.

New Zealand’s ageing population

44. The proportion of New Zealand’s population aged 65 and over is estimated to double to 1.2 million by 2036 and reach 1.5 million by 2061.

45. The ageing population is more pronounced outside of the major urban areas and international data suggests that individuals halve their vehicle kilometres travelled when they retire. The combination of these matters is likely to radically change the transport task in the regions and reduce the revenue base available to both maintain the transport network and meet social expectations for levels of service.

New Zealand’s growing freight task

46. Freight has consistently represented about 6.5 percent of the vehicle kilometres travelled on New Zealand’s roads.

47. In recent years there has been a flattening of the kilometres travelled by heavy vehicles, while at the same time the freight task has grown in total tonnage. This is likely to be because of more efficient operations of freight networks, and also through the use of larger vehicles. While the overall freight task is expected to rise significantly over the next 30 years3, it is not clear whether opportunities to achieve further efficiencies within the roading network will be able to keep pace with the increase in the tonnage of freight to be moved.

48. In addition to this, the Business Growth Agenda targets growth in exports from 30 to 40 percent of GDP by 2025. The way in which the economy achieves this target will drive different demands on the transport system (are we exporting more big, heavy and low value goods; or small, light and high value goods) and will impact on future investments that the government will need to make in the transport system.

Increased fuel prices

49. Fuel prices are expected to rise, with continued volatility, impacting on demand for transport and for new fuel technologies. While fuel price has traditionally been seen as relatively inelastic, increasing prices may be one of the factors keeping downward pressure on vehicle kilometres travelled. A sharp increase in the price of fuel can lead to reduced revenue for the National Land Transport Fund and Programme, while increasing demand for public transport (which in turn requires the Programme to provide additional funding for public transport subsidies, at a time when the Fund has less revenue coming in).

Heightened social expectations

50. There are high social expectations for increases in levels of service across the whole transport network. This is expressed in terms of reduced levels of congestion, a safer system for users, greater resilience and less environmental impact. Transport decisions need to take account those expectations, and that transport makes a broad contribution to the economy and society. The challenge may be to balance rising expectations with willingness to pay.

3 The update of the National Freight Demands Study forecasts that New Zealand’s freight tonnage will grow by 50 percent by 2042.

Decreasing cost of information technology

51. While the cost of traditional infrastructure increases, the cost of information technology is decreasing, offering improvements in efficiency, safety and social experience. Information technology is therefore likely to play an increasingly important role in helping to improve service levels whilst managing costs.

Strategic choices for government for the longer term

52. The above longer term trends drive four strategic choices for New Zealand (see below). Those choices underpin the Ministry’s strategic policy work programme – an ongoing programme that includes research and monitoring to build the Ministry’s data-led and wider understanding of the long term issues, in order to inform and improve decision-making now and in the future. Table 2 below sets out the strategic choices and some of the Ministry’s strategic policy work programme (work that the Ministry either is already undertaking or will initiate, over the next four years) to address these choices.

Table 2: Long term strategic choices for government and Ministry’s strategic policy work programme initiatives

1 How to get the most from the existing transport network  enhance regulatory efficiency for access and use of transport networks  identify opportunities to reduce cost within the transport system (2013 report on Construction Industry Performance is an example of this)  Intelligent Transport Systems Action Plan  future opportunities to improve the utilisation of the transport networks 2 Where to make the next set of major investment decisions for the transport system  update the National Freight Demands Study  develop a passenger demand model to better understand how demands for passenger travel are changing and the implications of this for the future investments in transport infrastructure and services  develop transport future scenarios 3 How to meet rising social expectations  identify longer term options to enhance the resilience of the transport system to major events or incidents  improve the quality of the vehicle fleet 4 How to balance demands for levels of service with affordability  explore and advise on future funding models for the wider transport system

53. In addition to undertaking specific work in relation to the strategic choices, the Ministry addresses those choices through its policy advice deliverables (discussed earlier in this Plan).

SECTION 3 – MANAGING THE FINANCIAL AND INVESTMENT ISSUES

The transport sector’s funding arrangements 54. This section of the plan sets out the major financial and investment issues which the sector needs to manage over the next four years, and how it intends to do that. These issues largely sit outside normal Budget processes because of the particular arrangements that exist for the National Land Transport Programme (and its associated planning and funding mechanisms), and the way the Crown entities are funded.

55. While the transport sector will invest $3.5 billion in the transport system in 2013/14, $2.975 billion is statutorily reserved for the National Land Transport Fund (and drawn from third party fuel excise duty, road user charges and motor vehicle registrations). Beyond that, approximately $300 million is provided through Crown funding (including $155 million for KiwiRail and $33 million for the Ministry of Transport). The transport Crown entities raise a further $225 million directly from fees and charges. The funding allocations are shown in Figure 4 below.

Figure 4: Transport funding 2013/14

Land transport funding

56. The land transport system has its own, statutory, planning and funding system, through which the government funds State highways, and co-funds the provision of local roads and public transport with local government. This system brings together local and national transport goals (which are established in regional and national transport plans) through the National Land Transport Programme, which is set by the NZ Transport Agency. This process allows the tensions between competing interests to be played out, and trade-offs made, at arm’s length from government. Figure 5 sets out how the planning and funding arrangements come together through the National Land Transport Programme.

Figure 5: Land transport planning and funding arrangements

Government Policy Statement on Land Transport

Regional Land Transport Plans National Land Transport Programme

Road Policing Fuel Excise Duty

Local Roading Road User Charges

National Land Transport Fund State Highways Motor Vehicle Registrations Public Transport

Other Revenue Other Activities

Government Policy Statement on Land Transport

57. The most material funding decisions within the transport sector are decisions on funding for roads and road related expenditure within New Zealand - including road construction and maintenance, road safety policing and public transport. These decisions relate to the collection of revenue from motorists and road users, and the allocation of that revenue through the Government Policy Statement on Land Transport.

58. The Statement is a statutory document that is issued every three years. The Statement takes an explicit 10 year approach to investment, and applies it consistently to central and local government. The Statement allocates funding to activity classes in ranges, for 3 year tranches, within that 10 year window.

59. The Statement provides the investment framework that the government wishes to take for the approximately $3 billion a year spent on land transport. The Government’s decisions in 2014 (for the 2015 Statement) and 2017 (for the 2018 Statement) provide it with a very

powerful lever to set objectives and priorities for the operation of the land transport system. The Statement also sets out the government’s policy on the allocation of resources to national and local roads, the subsidy levels for public transport, and the share of local roads that government will subsidise.

60. The Statement enables the government to influence the subsequent decisions made on how funding from the National Land Transport Fund is invested, while remaining at arm’s length from specific decisions. An important assumption for the Statement is how much revenue will be raised, and then spent. The Government has previously agreed to three cent increases in fuel excise duty in each of 2014 and 2015, with equivalent raises in road user charges.

61. The National Land Transport Programme must give effect to the Statement. Regional Land Transport Plans must be consistent with the Statement. This means the government’s decisions on the direction and aims of the Statement have a direct influence on the funding that goes to regions and activities, and the way the transport system develops and operates.

62. While the Statement provides a broad national picture of land transport funding, the detail of how funding is allocated to regions and specific projects is the statutory responsibility of the NZ Transport Agency. In carrying out this responsibility, the NZ Transport Agency must give effect to the Statement while also taking regional land transport plans into account.

Analysis to support the 2015 Statement

63. The Ministry of Transport is leading work to advise the Government on the proposed objectives and investment strategy for the 2015 Statement. Analysis work for the 2015 Statement includes a focus on enhancing understanding on:

 Demand  Maintenance spending  Capital spending  Overall size of the National Land Transport Fund

Demand

64. A key indicator of demand is vehicle kilometres travelled. Vehicle kilometres travelled is important as it is linked, among other things, to how a large part of the revenue for funding land transport investments are made and returns on investment in the network. All current demand predictions sit beneath the levels predicted in 2008 (when the current Statement was developed). Growth in personal vehicle kilometres travelled has been sluggish to flat since the early 2000s– this experience matches overseas experience in developed countries and there are a number of factors at play.

65. It is not clear whether this reduction will continue and how much any ongoing reduction will be offset by population growth in the medium to long term. In addition, while freight traffic is expected to increase by 50 percent by 2030, that is still only about half the rate forecast under the current Statement.

66. Modelling has been undertaken for national demand trends for personal travel, public transport and freight. In addition, a disaggregated analysis of regional vehicle kilometres travelled has been undertaken, which appears to indicate a redistribution of demand.

67. This analysis is providing an enhanced understanding of the level of revenue that will be available for the National Land Transport Fund, and the way these funds might be allocated across the network.

Maintenance spending

68. Investments need to meet and be maintained to an appropriate quality. $1.4 billion is spent on maintaining the network annually. Work to date is indicating that maintenance levels in New Zealand appear high relative to similar areas overseas, and there is great variability in maintenance costs across different providers.

69. There appear to be a number of good reasons for this analysis of this cost variability, including varying aggregate costs and ground conditions. However, analysis also indicates that varying service levels may be a leading factor. There may be instances where standards exceed the levels of performance required for a road’s actual use, or may be more expensive than alternatives (such as modifying speed limits).

70. This analysis is relevant to the policy settings around maintenance and service level improvements.

Capital spending

71. Capital expenditure accounts for a significant proportion of spending from the National Land Transport Fund.

72. Analysis of the returns from capital investment across the State highways, local road and public transport networks has been undertaken, and opportunities for further optimisation of investment have been identified.

Overall size of the National Land Transport Fund

73. New Zealand's investment in roading is the highest it has been since the 1960s, and comparatively, New Zealand seems to spend a higher percentage of GDP on roading compared to other OECD countries. The Government has made significant ongoing investment commitments in terms of completing the Roads of National Significance and the Auckland package.

Government decisions on the 2015 Statement

74. The Ministry will complete its analysis and prepare a Cabinet paper in time for the Government to take decisions in March 2014 on a draft Statement, before consultation with local government. In light of the above factors, and current demand scenarios, that advice will address matters including opportunities to unlock more value from investment in the land transport system by being very clear about:

 the services or outcomes the land transport system is expected to deliver, with a particular focus on what users need and value

 better matching service levels to current and anticipated demand

 how investment decisions are expected to be made (value-for-money)

Over the next four years the Ministry and the NZ Transport Agency will:

 manage the Government Policy Statement and the National Land Transport Programme within the following revenue assumption: o 2014 and 2015 revenue increases in fuel excise duty of three cents each year, and equivalent raises in road user charges

The Ministry will:

 provide advice on the 2015 and 2018 Government Policy Statement on Land Transport with a view to ensuring the available funding is allocated to areas of investment over the next decade that lead to greatest value

Managing land transport revenue issues

75. Due to hypothecation, the level of investment through the National Land Transport Fund is limited to the available revenue that comes into the Fund. The main source of funding is from fuel excise duty and road user charges. Understanding patterns of fuel consumption and transport usage underpins the confidence that government can have in funding decisions for transport.

76. During 2012/13 it became apparent that the revenue coming into the fund from fuel excise duty and road user charges was below that which had been forecast in October 2012. The Ministry has spent the last year undertaking quality assurance and testing to determine whether the forecasting model was flawed, or whether external factors and shocks were having un-predicted impacts. Issues include:

 the way the New Zealand economy has responded to the Global Financial Crisis

 behavioural change occurring in the use of private motor vehicles (vehicles kilometre travelled is well below forecast)

 how the trucking sector is implementing technology to drive efficiency gains in fleet operations

 whether changes to the Road User Charges regime had led to behavioural change in the industry (heavier loads, more back loading)

77. Taken together, there is a reduction in expected revenue flowing into the National Land Transport Fund. The roading programme is set out in the Government Policy Statement on Land Transport and the NZ Transport Agency can only spend up to the revenue level (with short-term cash flow management tools providing some flexibility).

78. A difference between forecast revenue and actual revenue does not necessitate that the government provide additional Crown funding for the National Land Transport Fund or increase the taxation levels for fuel excise duty and road user charges. The difference requires one or more of the following actions:

o efficiency gains to be made on the expenditure side (to support the ongoing delivery of the programme)

o greater consideration to be given to the prioritisation of investments – what, where, when and how to invest

o consideration to be given to the better utilisation of other tools such as borrowing, public private partnerships or short term cash flow arrangements

79. The NZ Transport Agency’s Statement of Intent 2013–16 revised projected expenditure for 2012/13–2014/15 downwards by approximately $350 million. This reduction reflected the reduction in forecast revenue for 2012/13–2014/15 since the National Land Transport Programme 2012–15 was amended in November 2012. The Ministry is satisfied that the NZ Transport Agency is keeping expenditure within revenue as required and is delivering the Government’s priority programmes on schedule.

80. To achieve this reduction in projected expenditure, the NZ Transport Agency raised the threshold for improvement projects that will receive nationally distributed funding, which reduces expenditure by approximately $250 million. Local government claims for co-funded activities are tracking at a lower level than expected, reducing expenditure over 2012–15 by a further $100 million. The Agency will smooth the remaining $150 million across the expenditure programme with the use of the cash-flow debt facilities it has available.

81. This expenditure reduction will not affect projects of a high Government priority such as Roads of National Significance. This change in the availability of funding for some projects may have a medium to long-term impact on the delivery of regionally-significant roads in regions where regionally distributed funding (R-funds) has been exhausted.

82. At this point in time, the Ministry is confident that the 2013 Statement, covering the years 2013 – 2015 is under control, and, barring any significant economic or natural ‘shocks’, there are no unexpected fiscal risks that will need to be managed within the National Land Transport Programme. The ongoing tensions between actual revenue flows and the previously determined National Land Transport Programme is a permanent feature of the land transport funding arrangements. That tension is a key lever to drive the NZ Transport Agency to deliver improved performance.

83. The Ministry is investigating the medium to long-term implications of both the lower expenditure and the results of more recent demand modelling for future investment needs.

The Ministry will outline its findings through advice that will be provided in early 2014 on a draft 2015 Statement.

84. The Agency continues to adapt its procurement approach and in December announced the Wellington Gateway partnership as the preferred bidder for negotiations for the Transmission Gully highway project (a public private partnership). In addition to offering opportunities to drive greater value for money, public private partnerships can also alleviate some of the revenue pressure on the National Land Transport Fund. The Agency will continue to use a public private partnership approach, where appropriate.

Over the next four years the Ministry will:

 continue to test whether efficiency gains can be made on the expenditure side – with particular emphasis on construction industry productivity, procurement strategies, and the transparency of level of service improvements

 improve its understanding of current and future demand and how this can best be met – including the development of a passenger demand model and more up to date information on household travel preferences

 improve the alignment of the parameters, responsibilities and accountabilities around the NZ Transport Agency’s short-term borrowing facilities, so they better support the efficient management of the National Land Transport Fund

 establish, through the next Government Policy Statement, the policy framework to guide consideration of the appropriate balance between ‘pay as you go’ and borrowing

 develop improved metrics to allow transparency around value for money in road construction, maintenance and improvements

Over the next four years the NZ Transport Agency will:

 fulfil its obligation to manage National Land Transport Programme expenditure in line with actual revenue, and in doing so will:

o adjust the timing of some improvement projects to optimise the management of the available revenue, including by restricting funding to priority 3 or better initiatives, deferring a number of smaller scale State highway projects and some ‘R’ funded projects, and making small adjustments to some of its local road renewals and improvement activity classes

o continue, over the medium to long term, with the Roading Efficiency Group and implementation of the Operations and Maintenance outcome contracts, which should will generate examples of improved cost efficiency and sustainable savings

o examine the possibility of alternative funding sources and maximise the use of tolling

o continue to enhance its procurement strategy to achieve better value for money, including the use of public private partnerships where appropriate

Crown entity fees, charges and levies reviews

85. Three of the transport Crown entities (NZ Transport Agency, Civil Aviation Authority and Maritime NZ) receive the majority of their operating revenue (approximately $225 million per annum) from more than 70 third party fees, charges and levies, rather than Vote funding.

86. The capacity and capability of these Crown entities is therefore determined primarily through decisions about fees, charges and levies rather than through Crown funding bids in normal Budget processes. A key consideration in making decisions about these revenue sources is comfort that the agencies are delivering value for money, and that the charges are a justified impost on users of the system. A key role for the Ministry in this regard is to exercise independent scrutiny over any proposals to ensure they are appropriate.

87. The revenue transport Crown entities receive from their fees, charges and levies is demand driven, with the level of a fee, charge or levy being set based on a forecast level of demand and expected costs. However, it is the actual level of demand and costs in any year that is determinant of whether a fee, charge or levy covers its costs (or over or under recovers), and whether any future adjustment to the level of fee, charge or levy is required. In addition, the revenue received for one fee, charge or levy should only be spent on the provision of that particular service or function. The combination of these two factors means Crown entity revenue and expenditure needs to be closely managed by the Crown entities and carefully monitored by the Ministry.

88. 2013/14 has been a very active year for setting fees in the transport sector. This has been due to the following factors:

 demand for services has been far more volatile than in recent years (partly due to the fallout from the global financial crisis (e.g. airlines departing, or substituting smaller aircraft on routes thereby affecting revenue)

 major regulatory reform in all modes has led to fees and charges changing

 legacy issues relating to Aviation Security Services, where fees were deliberately reduced below cost to soak up historical surpluses

 concern from stakeholders about the scale of fee increases, and the consistency of fees across the sector (e.g. aviation industry stakeholders inquire why the maritime sector takes a slightly different approach to costing levies, and to phasing them in)

89. Overall, the Ministry formed the view that there needed to be a common framework and approach developed to address fees and charges, and to create an overall fees review programme. This programme was developed during 2013/14 and is intended to provide enhanced assurance to government that any future changes in fees and charges are co- ordinated, have gone through consistent and robust scrutiny, and represent value for money. The programme, which will focus initially on priority areas within the sector, will also minimise the likelihood of cross-subsidisation occurring in the future, and provide organisations and individuals’ reassurance that the costs being charged for are appropriate.

Over the next four years the Ministry will:

 strengthen the quality of business cases for fees, charges and levies proposals and provide an enhanced level of assurance to government on Crown entity fees, charges and levies by:

in 2013/14:

o prioritising the 70 reviews for the next three years

o building a framework to resource the Ministry’s two roles in agency reviews under new common processes – assisting doing the reviews (where needed) and assessing the reviews

in 2014/15 and outyears:

o becoming involved early and throughout the agency review process to ensure value for money, quality and completeness of the reviews

o ensuring Crown entities make better of use of the expertise across the transport sector agencies when developing business cases for their reviews

 examine the opportunities to streamline decision-making processes for adjustments in the level of fees, charges and levies to gain efficiencies (where the change is minor in scale)

dZ'}Àvuv[µP]]}v(}îìíðv}µÇ The Government has a number of financial decisions to make in relation to transport

90. tZ]oZ'}ÀvuvW}o]Ç^uv}v>vdv}]ZP}Àvuv[ui}(µv]vP lever to influence the land transport system, there are still some financial decisions that need to be considered as part of Budget 2014. This is because, as either a matter of policy or statutory definition, these matters are not capable of being funded by the National Land Transport Fund or users.

x Auckland transport package t the scale of investment required for the package is too big to be dealt with solely by the National Land Transport Fund

x KiwiRail additional support t the intention has been for KiwiRail to operate as a commercial enterprise in the freight business (the policy is that rail infrastructure is not funded by road users, it is funded by the Crown as the owner of the company)

x [7]

91. The Budget decisions, for which the sector works to provide robust advice that enables government to make decisions in a timely manner, are:

x how to fund investment decisions that have already been made:

o Auckland transport package (fuv]vPZ}Áv[}v]µ]}v t see indicative Budget bid 2 in Annex 3. Papers will be submitted to Cabinet in December 2013 and March 2014 on funding options for the motorway acceleration component of the package.

x agency specific decisions that need to be taken for Budget 2014:

o KiwiRail additional support [10] See Budget bid 1 in Annex 3 for further information (the Crown Ownership Monitoring Unit in Treasury has the principal advisory role on KiwiRail investment, the Ministry of Transport provides secondary advice).

o [7]

o KiwiRail support for Aratere t level of this bid, if any, is yet to be confirmed.

o [7]

[7]

[11]

x future Budgets - possible future decisions under this category relate to:

o SuperGold Card public transport concessions t additional funding to meet the demand driven costs of the scheme from 2015/16.

The public transport concession component of the scheme essentially provides an Zv]ouv[(}Z}o}ÀoU]v}}u}]o}i]ÀXdZ scheme was introduced in 2008/09 at a cost of $18 million. However, it is a demand driven scheme, and with a growing and ageing population the cost of the scheme has grown to $22.8 million in 2012/13 and will expand in the future. While the public transport concession is for social objectives, it is funded through Vote Transport.

CAB Min (13) 12 6 (27) from Budget 13 noted that the Ministry would review the operating mechanisms of the concession scheme in 2013/14 and report back to Cabinet on options for cost efficient sustainable funding excluding eligibility and entitlement considerations and the long term operation of the scheme.

o Joint Venture Airports t continuing financial support for six airports, owned jointly by the Crown and local authorities, beyond 2015/16.

The Crown is the legacy joint owner of six regional airports that either run at a loss or require ongoing capital investment from their owners. Under the joint venture obligations, the Crown must contribute a 50 percent share towards these losses or investuvXdZD]v]Ç[}Ào~µvoP]}v]µ](}vÇ investment decisions can be made. [10]

o Transport Accident Investigation Commission t to provide ongoing operational support and address cost pressures.

The Commission is a small organisation, with a total budget of $3.8 million a year and its baseline has not been increased since 2008/09. It has staffing capability issue as it must manage a transition, with several of its investigators due to retire in the next few years. This will require some overlap of staffing during this transition period [10]

o KiwiRail t rollover of loans t a rollover of $163 million of existing loans.

 non-Budget decisions to be taken by joint Ministers - over the period of this Plan, joint Ministers are expected to take non-Budget decisions on:

o Search & Rescue – a three yearly review is being undertaken to determine the funding required (this is funded through fuel excise duty collected from recreational boaties and is fiscally neutral to the Crown).

The Permanent Legislative Authority for Search & Rescue was established in 2010, and is currently $7 million. The funding provides for a range of search and rescue related activities, all of which are being scrutinised as part of the review (this includes some external review work that is being undertaken by Martin Jenkins Ltd).

The replacement MEOSAR (mid earth orbiting satellite system for search and rescue) ground station is currently being funded by a capital appropriation of $7.1 million from 2013/14. Further work to support Government decisions on the level of ongoing operational funding needed to support MEOSAR is expected to be undertaken for 2015/16.

92. A summary of the key financial elements of this Plan is set out at the beginning of the Annex section.

Over the next four years the Ministry of Transport will:

 provide robust and timely advice to support the Government in making informed transport infrastructure and services investment decisions

Cost savings and opportunities for reprioritisation within the transport sector

93. The transport agencies are responsible for approximately $3 billion of expenditure each year. Of that, the Ministry of Transport receives approximately $33 million a year of Crown funding, largely for the provision of policy advice and other ministerial support. The Ministry has not received an increase in baseline funding since 2008/09, and is committed, through this Plan, to live within its current baseline for the next four years. Since 2008, the Ministry has reduced its staffing from 173 in 2009/10 to 145 people and increased productivity through its professional services operating model. The Minister effectively takes reprioritisation decisions each year for the key elements of the Ministry’s work programme through the Statement of Intent and Output Plan agreement decisions.

94. As the Crown entities are so heavily reliant on third party funding for operating expenditure, any efficiency gains that they achieve are reflected in changes in the level of their future fees and charges rather than by providing opportunities for reprioritisation. There are, however, ongoing Case study – Driving savings through opportunities for Crown entities to improve the policy changes and improvements in the efficiency of their operations. performance of the transport system

95. The recent Aviation Security Authority funding The major opportunities for savings and review identified opportunities for efficiency gains efficiency gains are through policy changes of $3.7 million over the next four years, and steps and improvements in the performance of are being taken realise those gains. the transport system. The vehicle licensing reform programme 96. For the NZ Transport Agency, any efficiencies that will deliver $1.8 billion of savings to the are achieved within the operation of the National economy over a thirty year period. The Land Transport Programme effectively act to offset various changes will reduce wider public other cost increases within the programme or sector operating costs by a conservatively enable other projects to be advanced sooner than estimated originally planned. $1 – 5 million annually.

97. The major opportunity for the government to Improvements in the operation of the reprioritise within the land transport system is transport system have lifted its safety through the three yearly Government Policy performance, resulting in a saving to the Statement on Land Transport. As discussed earlier, economy of $600 million a year through reduced social cost of crashes (down from this allows the government to set objectives and $3.9 billion per annum in 2008 to $3.3 priorities for the operation of the land transport billion in 2012) system, including how much funding may be provided for each activity class within the Statement.

SECTION 4 – LEADERSHIP AND CO-ORDINATION

How the Ministry leads and provides leadership and co-ordination for the transport sector

Sector leadership

98. The Ministry has an important leadership role for the sector, that flows from:

 its function as the Minister’s principal policy adviser on transport (including advising on the overall legislative and regulatory framework, and prioritisation of land transport funding through the Government Policy Statement on Land Transport)  its governance and accountability, and monitoring function in respect of the transport Crown entities (through which the Ministry both advises the Minister and acts as his agent)

99. Through its leadership role, the Ministry has worked collaboratively with the Crown entities to introduce a common outcomes framework to guide the sector. The Ministry will continue to work with the Crown entities to ensure that they are aligned to the Government’s priorities, have a clear understanding of the Government’s policy objectives and are appropriately engaged in government-wide initiatives.

100. The Ministry supports the good governance of the transport sector through its advice to the Minister on Crown entity board appointments and performance expectations, and its reporting on actual performance. The Ministry’s ability to effectively engage with the Crown entities (as the Minister’s agent) is central to the Ministry’s ability to influence their direction and overall performance.

101. The Ministry has fundamentally reviewed its governance and monitoring role during 2013/14. The Ministry’s governance team has been restructured, and responsibilities for sector performance have been placed directly with a second tier manager who has taken responsibility for oversight of the relationship with Crown entities, and for supporting the Minister in his relationship with his Boards. The changes will help the Ministry to provide enhanced assurance on the performance of the Crown entities and drive improved performance in the future.

Sector co-ordination

102. Each Crown entity and State Owned Enterprise within the sector has its own Board and management team. These give effect to a range of statutory and regulatory functions. During 2013/14 it has become increasingly clear that while the Crown entity model has delivered significant service improvements in the quality and professionalism of the sector, it has also been necessary to ensure that the sector works effectively as a single unit for those matters that require collective or co-ordinated action.

103. New initiatives that commenced in 2012/13 will be bedded down over the next four years. They include, shared services (in particular risk and audit, and a sectoral Chief Information Officer), a common outcomes framework for the sector (fully implemented in 2013/14), refreshing the common approach to regulatory frameworks (programmed for 2014/15), continuing the programme of reforming and modernising regulatory practices (Vehicle Licensing Reform, maritime and aviation safety regulation) where key decisions were made during 2013/14, and implementing a common approach to third party funding for the sector (developed during 2013/14).

104. Initiatives that have been continued and strengthened during 2013/14 and that will continue to be improved over the next four years include the Transport Sector Leadership Group, National Road Safety Committee, New Zealand Search and Rescue Council, and the Transport Response Team. The Transport Sector Leadership Group includes the Ministry of Transport, transport Crown entities and the three State Owned Enterprises. The purpose of the Group is:

 provide leadership of joint initiatives that support effective operation of transport agencies, and the achievement of shared goals or outcomes for transport  ensure a shared understanding of government priorities or other wider developments relevant to the operation and performance of government transport agencies

105. The work of the Transport Sector Leadership Group is supported by a number of other cross sector groups that are either in place or are intended to be established over the next year.

Case study – Transport sector collaboration Figure 6: Cross-sector co-ordination groups and capability

The transport sector’s Collaboration and Transport Sector Leadership Group Capability Programme (shared services) has a five year strategy to examine and implement

Existing Proposed new ways for the transport agencies to work together to deliver better business services, National Land more cost-effectively and efficiently. Transport Fund Cross-Agency Revenue Forecasting Regulatory Group Group The programme includes the following business functions: Communications, Human resources, Funding Reviews Risk assurance, Ministerial services, ICT, Finance Programme Oversight Modelling Group and Procurement. Group

Collaboration focuses on: Household Travel Transport Research  identifying common services User Group Hub  standardising processes and systems  using economies of scale to make efficiencies Shared Services Strategy Group Governance Group  sharing expertise and knowledge  considering a sector rather than agency perspective

Early successes for the programme include the decision to establish the Risk Assurance centre of excellence and the joint payroll resource (Maritime NZ now provides the payroll service for the Ministry).

How the Ministry and Crown entities are building capability, improving business processes and delivering better value for money

Transport sector agencies have strong programmes in place to further lift their performance

106. In order to deliver on this Plan, each transport agency has its own, individual responsibility to identify and address its capability and capacity needs in order to lift its effectiveness and efficiency and deliver enhanced value for money. This means transport agencies need to be focused on the future demands for the transport system, customer and government expectations, fiscal constraints and how they need to evolve their business models and capabilities to be a fit-for-purpose organisation in a changing environment.

Value for money

107. The transport sector’s level of annual expenditure means it is important the government has confidence that individual transport agencies are delivering value for money. The Ministry has an important role in providing assurance on this, as do the boards of the transport Crown entities.

108. The Ministry has established a common Case study – Aviation Security Service framework for third party reviews, and is leading Funding Review a triennial programme to review fees and The Aviation Security Service Funding charges for the transport Crown entities which Review concluded that the Service was provides the base case to understand their highly effective in providing its core performance and value for money. As 94 percent aviation security duties and that it was of transport Crown entity operating revenue is taking appropriate steps to increase provided through fees and charges, these efficiency and improve its business reviews provide an important mechanism to management. understand Crown entity value for money. These The review identified opportunities for reviews assess the underlying activities of the efficiency gains of $3.7 million over the Crown entities, the business models that support next four years. A new fees strategy that them and the opportunities to drive down costs. will reduce fees over the four years The reviews commonly lead to ongoing beginning 1 July 2014 has been programmes of work for the Crown entity to developed. further improve their performance.

109. In addition to those scheduled review processes, the Ministry also influences the performance of the Crown entities through its work to support the Minister in setting performance expectations for the Crown entities, and in then holding them accountable for actual performance. As part of this, the Ministry advises the Minister on letters of expectations and performance expectations; the Ministry’s assessment of a Crown entity’s delivery against those expectations and its statement of intent, and how an entity is responding to changes in its operating environment.

Improving business processes

110. The sector will continue to implement a range of initiatives that will enable it to deliver services in more innovative and efficient ways over the next four years. Some of the sector’s key innovations, which will improve network efficiency and lower costs for firms, include:

 Ministry of Transport:

o Transport Research Hub - establish a research hub that will provide a more co- ordinated approach to research across the transport sector. This will help set the transport sector research agenda and encourage agencies to work together more closely on transport related research in order to achieve scale and critical mass. It will also bring public sector researchers together to collaborate with other research communities (such as universities and other research institutions), and inform and improve transport planning, policy and investment decisions. The Hub will initially focus on transport economics, transport planning and transport geography related research but this scope can be expanded in the future.

o Domain plan – developing a ‘domain plan’ that will set out the information that is needed across the transport sector for decision-making in the medium to long term. It will set out a plan of what information needs to be collected, how it should be collected and who is responsible for its collection across the sector. The Ministry is undertaking this work in partnership with Statistics New Zealand. The two agencies will look at the whole information gathering process (collection, processing and dissemination) and how it can be improved.

o The Ministry will also work with transport agencies and stakeholders (including local authorities) to define the sector’s information needs and obtain their support for implementation of the domain plan. The end point will be sector agreement on a framework establishing the information which should be gathered across the sector to support improved long term decision-making.

o Regulatory reform programme – the Ministry has significantly enhanced the transport sector’s approach to regulation, leading to process improvements and a reduction in the time taken to develop transport Rules. The Ministry is also working with the New Zealand Institute for Economic Research on a study of regulatory efficiency in the transport sector. This is identifying where the transport regulatory system may be inhibiting or preventing the effective operation of markets, and then look at the economic impacts of the regulations and come up with a small number of case studies for further investigation.

 NZ Transport Agency:

o Roading Efficiency Group – this group is a collective effort by the road controlling authorities to drive value for money and improve performance in maintenance, operations and renewals throughout the country. The Group will reduce costs and encourage innovation in the management of local roads and State highways.

o Procurement strategy review – a comprehensive review of the Agency’s strategy- led procurement policy environment. This will include testing procurement outcomes from a value for money perspective.

 Civil Aviation Authority and Maritime NZ:

o Risk-based regulatory regimes – these entities are moving to implement new risk- based approaches to their safety regulatory regimes. This will require that they work more directly with operators than they have in the past to achieve safety goals.

Building capability

111. Both the Ministry of Transport and the NZ Transport Agency have action plans to address their individual performance needs in terms of their excellence horizons under the Government’s Performance Improvement Framework review programme. The individual agency sections in Annexes 9 and 12 provide more detail on this.

112. While workforce issues are not the dominant issue for the transport sector as a whole4, some of the transport Crown entities are significant employers (the Civil Aviation Authority has 1,000 staff and the NZ Transport Agency has 1,300). The forward management of workforce issues is a matter for which the transport Crown entities have individual responsibility5.

113. Although the Transport Accident Investigation Commission is a very small organisation with only 17 employees, an ageing workforce is the most significant issue it has to manage. This is due to the length of time needed to train, and the level of expertise required by the Commission’s investigators. The Commission will undertake a strategic review of its business model in 2014 with a view to seeking any necessary resourcing and implementing changes for the 2015/16 financial year.

114. The transport sector has a broad shared services programme that it is implementing to increase access to specialist capability across the sector for support services. As part of this, the sector is looking at opportunities to establish ‘centres of excellence’ that provide all of the agencies with access to expertise and capability that they may not necessarily hold in-house. The first centre of excellence established is for risk and assurance.

4 Note that we have chosen not to include a standalone workforce section but have taken the approach of weaving the capability story through the narrative of the Plan as per the guidance material. 5 Annexes 9 - 16 provide further information on transport agency capability and workforce issues.

To improve performance and capability over the next four years the Ministry of Transport will:

 deliver on its Performance Improvement Framework two year Action Plan to build organisational capability in order to deliver on its future work programmes  lead work across the transport sector to provide increased access to specialist capability for support services  establish a Transport Research Hub  develop a domain plan for information across the transport sector

The NZ Transport Agency will:

 deliver on its Performance Improvement Framework action plan, including the change programmes for its Access and Use, and State Highways groups

The Civil Aviation Authority and Maritime NZ will:

 focus on building their capability to implement new risk-based approaches to the delivery of their regulatory functions

Key risks for the sector

115. The transport sector faces a number of strategic and operational risks (many of which it shares with other infrastructure sectors), and these risks and their mitigations are set out in detail in Annex 7. Key risks for the transport sector can be broken down into a number of groups, as follows:

 global risks – risks that can have an impact across the system (examples include systemic regulatory failure or natural disasters)

 modal/Agency specific risks with a potential fiscal impact – risks that may be unique to a specific agency or mode that have potential financial implications (examples include fuel price volatility)

 sector performance risks – risks that impact on the sector’s ability to deliver on Government’s priorities (examples include an inability to deliver the agreed work programme)

116. The most significant risk for the sector relates to the over or under investment in transport infrastructure. Transport infrastructure is commonly expensive and has a long life, spanning many decades. Over or under investment in transport infrastructure can arise through future demand being different from current demand, or new technologies impacting on the need for infrastructure. A key mitigation for this is to further develop and apply the sector’s understanding of the range of possible future needs and how different investment choices today could best position the sector to respond to whichever of those scenarios might unfold over time.

117. Collectively, the sector ensures that its approach to risk is appropriate and consistent. The Ministry leads the sector’s Transport Cluster which ensures co-ordination across the sector in preparedness and response to major incidents or emergencies.

118. In general, the different transport modes face different risks, and while some are sector wide, each mode needs to manage its own specific issues. However, the Transport Sector Leadership Group recognises the need for a sector wide approach to risk. The Group holds annual risk and security meetings on transport system level issues (that is, issues that are likely to have impacts beyond a single organisation, and will require a high level of co- ordination across transport agencies and beyond).

119. To support a best practice approach to risk across the sector, a new sector wide Risk and Assurance centre of excellence is being established within the NZ Transport Agency. This will provide all transport agencies with access to enhanced risk and assurance expertise, thereby enabling agencies to improve their risk identification and management over the next four years.

Monitoring the transport sector’s performance against this plan

120. This plan sets out a range of specific transport initiatives and other organisational issues which the Ministry of Transport and the Crown entities intend to address in order to enable them to meet the priorities of the Minister of Transport and the Government, and to ensure they are positioned to advise on and manage future issues.

121. The Crown entities are all separate statutory organisations, with boards that are responsible and accountable for their individual direction and performance. They each have their own Statement of Intent (addressing outputs, financial management, capabilities and organisational development priorities) which establishes how they will manage their business to support the sector goal, and through that, deliver on the Government’s priorities. The Minister of Transport will drive the delivery of this plan through the annual letters of expectation process with the transport Crown entities and the Crown Entities Act accountability mechanisms.

122. The Ministry and the Crown entities each need to focus on particular key areas.

 The Ministry of Transport has a two year action plan in place to deliver on its Excellence Horizon. The key areas of focus will be strengthening its strategic capability, improving its governance and accountability functions and providing improved sector leadership.

 The NZ Transport Agency is working to ensure that it manages its expenditure effectively in order to deliver the maximum value from the National Land Transport Programme (in line with the expectations set out in this Plan).

 The Civil Aviation Authority is well advanced in its transformation programme and is continuing to ensure that changes are bedded in over the next four years, whilst also responding to areas of highest risk in the aviation sector and ensuring ongoing financial sustainability.

 Maritime NZ is also focused on building its capability. It is implementing major changes to its regulatory models, and will be focused on successfully bedding in these changes over the next four years.

 For the Transport Accident Investigation Commission, the key areas of focus are ensuring they have both the people and funding to continue to deliver over the next four years. The Commission will undertake a strategic review of its business model in 2014 with a view to seeking any necessary resourcing and implementing changes for the 2015/16 financial year.

Success in delivering on the Plan will be demonstrated by some key indicators

123. The Ministry will report to the Minister of Transport on a quarterly basis on the progress on implementing this plan. That reporting will be based on the Minister’s letter of expectations to each Crown entity and their Statement of Intent.

124. Transport is a data rich system and the Ministry also monitors and reports on the performance of the transport system through its Transport Monitoring Indicator Framework. In addition to the performance measures for the sector’s long term outcomes that are set out on page 19, the Ministry has performance measures in place for its intermediate outcomes and impacts. Collectively, these measures support the Ministry to understand how the transport system is performing and how the Minister’s priorities are being progressed. The Ministry’s annual report and website (http://www.transport.govt.nz/ourwork/tmif/) reports progress against the measures. The performance measures are shown in Table 3 (along with the Ministerial priority to which they make the most direct contribution).

125. The Ministry will, however, lead work with the Crown entities in 2014 to review the performance measures and ensure they are the most appropriate measures.

Table 3: Success measures for the transport system

Ministry intermediate Measure What this shows Link to Ministerial outcome: priority Better quality regulation Changes to transport regulatory environment Regulatory changes support a more competitive and Better quality are estimated to provide a net economic productive economy regulation benefit to the economy Ministry impact Regulatory framework is adapting in a timely Reduced average timeframe for rule Better quality measure manner to meet the transport system’s evolving development regulation needs Open and efficient transport Increased number of international passenger International air passenger movements to and from Opening markets markets arrivals and departures New Zealand

Number of public transport passenger Number of public transport boardings for bus, rail Opening markets boardings and ferry Ministry impact Increased number of international air services Opportunity for increased air flights to New Zealand Opening markets measure provided for through international agreements

Reduced ratio of subsidy to public transport Subsidy per passenger boarding Opening markets passenger boardings

Increased range of freight information publicly Freight information Opening markets available

Port container handling statistics Port productivity Opening markets Other indicator Export volumes by transport mode Value and tonnage of exports by transport mode Opening markets

Ministry intermediate Measure What this shows Link to Ministerial outcome: priority Improved planning and Decrease in congestion levels Urban area road congestion (a.m. peak/p.m. peak) Investment in investment in infrastructure infrastructure and services Increased level of freight moved by KiwiRail Level of rail freight movements Investment in infrastructure Ministry impact Growth in revenue (in real terms) remains Investment in measure stable in relation to growth in traffic volumes infrastructure Fewer transport incidents Reduced social cost of crashes Total social cost of crashes Safer transport and other harms system Reduced number of road deaths Number of road deaths Safer transport system Reduced CO2 emissions from transport Level of CO2 emissions from transport system Safer transport system Ministry impact Reduced number of road deaths for target Number of road deaths for young, alcohol/drug Safer transport measure groups impaired, or high risk drivers system

Reduced number of road-related serious Number of serious injuries for young, alcohol/drug Safer transport injuries for target groups impaired, or high risk drivers system Improved government Percentage of performance expectations met Performance of transport Crown entities against Improved transport transport agency planned expectations agency performance performance Ministry impact Ministerial satisfaction with agency Ministerial satisfaction with the quality of the Improved transport measure performance Ministry’s policy advice agency performance Improved preparedness Transport response team ready to respond Preparedness to respond to emergency Safer transport system

SECTION 5 – ANNEXES

Financial Summary Annex

This section of the Plan provides a high level summary of the financial position of Vote Transport post the October Baseline Update 2013.

Operating – Departmental

2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Current operating expenditure baseline 34.3 32.6 32.6 32.6 32.6 Add any indicative allocation 0 0 0 0 0

Equals Total funding level for planning 34.3 32.6 32.6 32.6 32.6 Financial movements

Add cost of new activity to be funded from 0 0 0 0 0 current baselines Add total cost pressures 0 0 0 0 0

Subtract significant changes that will 0 0 0 0 0 generate savings

Add or Subtract vote transfers 0 0 0 0 0 Subtract any indicative allocation (as above) 0 0 0 0 0 Equals Total funding level for planning 34.3 32.6 32.6 32.6 32.6

The Ministry manages its budget by reprioritising expenditure depending on the work required. This could not really be described as ‘significant changes’ in the table and so the balancing is shown above by $0 in the cost pressure line and is explained further later in this document.

Funding is greater in 2013/14 due to a carry forward of $1.3 million to fund ongoing work. $1 million of this related to the Clifford Bay Ferry Terminal, which involved significant external expert advice. Cabinet has now decided not to proceed with this and the unspent funding has been reprioritised to a new non-departmental expense for maritime incident response capability.

Recently, the Ministry has reprioritised some departmental funding to assist with short term demand driven pressures within the non-departmental appropriations

 2011/12 - $1.25 million to Maritime NZ to assist with MV Rena related pressure  2012/13 - $0.39 million for SuperGold Card and Licensing Activities appropriations

Operating t Non-Departmental

20134 /1 20145 /1 20156 /1 20167 /1 20178 /1 $0.000m $0.000m $0.000m $0.000m $0.000m Current baseline 2 ,075.667 2 ,142.920 2 ,098.220 2 ,172.820 2 ,175.820 dAdd any in icative allocation 0 0 0 0 0 dEquals fun ing level for planning 2 ,075.667 2 ,142.920 2 ,098.220 2 ,172.820 2 ,175.820

Financial Movements Add cost of new activity to be 4 .450 7 .900 7 .900 7 .900 7 .900 funded from current baselines Add total cost pressures 10 .135 17 .618 21 .224 24 .723 29 .116 Subtract significant changes that (1 .014) (3 .825) (3 .563) (3 .518) (3 .477) will generate savings Add or Subtract vote transfers 0 0 0 0 0

Subtract any indicative allocation 0 0 0 0 0 dFun ed by third party revenue (31 .571) (12 .693) (52 .561) (92 .105) (33 .539) dEquals fun ing level for planning 2 ,075.667 2 ,142.920 2 ,098.220 2 ,172.820 2 ,175.820 gBud et initiatives without [4][10] allocation

The Financial Movements section in the table relate to the Crown entities. As they are funded significantly from third party fees, levies and charges, their cost pressures do not have a significant impact on the Vote. However in preparing this document and their financial information, this data on movements was collected. To balance the table it was necessary to use ZFunded by third party revenue[ line. All of the Crown entities have presented balanced Statements of Intent for the 3 years and will not be seeking additional funding for this line as part of Budget 14. Cost pressures will be funded by fees and charges reviews as appropriate.

The Transport Accident Investigation Commission is being reviewed in 2014/15 as a possible bid for Budget 15 but this is not included above as no firm figures are yet known.

The initiatives are for Auckland transport package, Weather forecasts and warning, and Christchurch roading reinstatement.

The non-departmental funding is applied as follows:

2013/14 2014/15 2015/16 2016/17 2017/18 $0.0m $0.0m $0.0m $0.0m $0.0m

Funding for the NLTF - tax revenue 1,873.7 1,953.8 2,007.6 2,082.2 2,085.2 Funding from Crown for other roading 34.2 0.5 0 0 0

Funding for Rail 67.7 93.8 3.8 3.8 3.8 Funding to Crown entities 41.5 37.5 37.5 37.5 37.5

Other projects 58.5 57.3 49.3 49.3 49.3 Equals total 2,075.6 2,142.9 2,098.2 2,172.8 2,175.8

The decline in the ‘Funding from Crown for other roading’ and ‘Funding for Rail’ lines represents time limited project funding coming to an end.

Capital – Departmental

Increase (Decrease) 2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Operating balance funding available 1.793 1.871 2.073 2.153 2.192

Add depreciation funding received 0.588 0.552 0.535 0.494 0.449 Add receipts from sale of assets 0 0 0 0 0

Add other (please specify) 0 0 0 0 0 Equals total baseline funding available 2.381 2.423 2.608 2.647 2.641

Subtract capital investments funded from 0.510 0.350 0.455 0.455 0.455 baselines Equals closing baseline funding available 1.871 2.073 2.153 2.192 2.186

Capital t Non-Departmental

Increase (Decrease)

20134 /1 20145 /1 20156 /1 20167 /1 20178 /1 $0.000m $0.000m $0.000m $0.000m $0.000m dBaseline fun ing for the purchase or 2, 060.837 1, 885.785 1, 793.390 1, 834.619 1, 940.746 development of Crown capital assets and capital investments in organisations other than departments gAdd bud et initiatives without [10] allocation Equals total

The budget initiatives relate to KiwiRail and the Auckland transport package.

The non-departmental capital funding is applied as follows (October Baseline Update 2013):

20134 /1 20145 /1 20156 /1 20167 /1 20178 /1 $0.0m $0.0m $0.0m $0.0m $0.0m dFun ing for the NLTF - tax revenue 795.5 886.2 1, 036.1 1, 081.6 1, 187.9 Cash flow management loans to the NLTF 850.0 750.0 750.0 750.0 750.0 Loan for Tauranga Eastern Link project 120.0 71 .0 0 0 0 dFun ing for National Memorial Park 52 .0 01 .0 0 0 0

KiwiRail Group t Turnaround Plan funding 39 .9 0 0 0 0

KiwiRail Group t loan roll over 0 10.7 0 0 0 Auckland Council t loan for electric multiple 138.0 192.0 0 0 0 unit package Other rail projects 36 .1 16.3 4.1 3.0 2.8 Other projects 2.3 3.5 3.1 0 0

Equals total 20,06 .8 15,88 .7 13,79 .3 14,83 .6 10,94 .7

As with the operating funding table, the decrease in some lines represent project funding coming to an end.

Workforce Capacity

30 June 30 June 30 June 30 June 30 June 30 June 2013 2014 2015 2016 2017 2018 (actual) Position numbers – dept 151.5 155 155 155 155 155 Position numbers – non-dept 2,534 2,550 2,566 2,569 2,563 2,563 Total Position Numbers 2,686 2,705 2,721 2,724 2,718 2,718

The Ministry’s current staffing of 155 reflects its current ‘shape’ on which it has been working for the last three years. Its intent is to remain at this size although it reviews all vacancies before recruiting to ensure the vacancy’s skill set is still appropriate. It will continue to review its size, depending on the deliverables required of it. This size allows it to maintain a budget for external expert advice that it could not afford to employ on payroll.

The NZ Transport Agency is the largest employer of the Crown entities. During 2012/13, it marginally breached its employment cap for efficiency reasons, as it increased the number of positions in its Traffic Operations Centres and brought its asset management function in house.

Maritime NZ will increase staffing temporarily over 2014/15 and 2015/16 to manage the change to the new Maritime Operator Safety System and certification systems described elsewhere in this document.

During 2012/13, the Civil Aviation Authority underwent an organisational change programme which established a number of new positions. The majority of these have now been filled. The vacant positions are being actively recruited in 2013/14. The change programme was in response to a report of the Auditor General in 2010 and was reported to Cabinet who accepted the proposals. The changes increased capability and capacity mainly in project management, business analysis and policy.

A review of the Transport Accident Investigation Commission is to be undertaken in 2014/15. One of its aims is to review how to maintain a suitably qualified and trained workforce with the necessary investigative and analytical skills. This review might change the Commission’s head count. The Commission began to develop a workforce strategy during 2012/13.

Staff turnover in the year to 30 June 2013 %age NZ Transport Agency 10 Civil Aviation Authority 16 Maritime NZ 8 Transport Accident Investigation Commission 23 Ministry of Transport 15 None of these turnover levels is considered of concern. The Transport Accident Investigation Commission lost 4 staff which results in a large percentage in an organisation of 17.

Annex 1 - Workforce Capability, Capacity and Costs Information

Capability Building

The table below highlights some of the key capabilities that the agencies are seeking to build over the next four years.

Agency Capability Capability Description of capability gap/ Proposed actions to address Assessment of Cost pressures name shift pressure capability gap likelihood of acquiring as a result of required the skills this change Ministry Governance Medium To provide better advice on sector The Ministry has recently realigned Recruitment is ongoing Manageable. The of and performance, the Ministry needs to its Governance and Accountability and was well advanced change will see Transport oversight improve its Governance and team in a bid to deliver better when this Plan was the Ministry stay oversight functions. This was results in this area. Recruitment for prepared. within its FTE cap identified as an area for several new positions within this and within improvement in the 2013 PIF review. team is underway. baseline.

Ministry Stakeholder Medium To engage more effectively with its The Ministry needs to develop The Ministry expects the Manageable. The of engagement key stakeholders, the Ministry needs improved stakeholder engagement role to be filled in early change will see Transport to develop more effective and has made this a key area of 2014 and does not the Ministry stay stakeholder engagement techniques. focus for all staff. To assist with anticipate any issues with within its FTE cap This was identified as an area for this, the Ministry has also recruitment. and within improvement in the Ministry’s 2013 developed a stakeholder baseline. PIF review. engagement plan and established a new stakeholder engagement role.

Ministry Strategic High As the government’s principal The Ministry has created two new The Ministry intends to Manageable. The of capability transport adviser, the Ministry needs Strategic Policy Director roles to use fixed term appointees change will see Transport to provide strategic leadership to the assist with building the strategic so the positions can be the Ministry stay sector. This was identified as an area capability of the organisation. filled as suitable within its FTE cap for improvement in the 2013 PIF candidates become and within review. available. baseline.

Recruitment

The table below highlights the roles that the agencies have difficulty recruiting - or expect to have difficulty with, over the next four years.

Agency name Difficult to fill Reason for capability gap/pressure roles/positions

Transport Investigators A number of investigators may retire in the next few years and it will Accident take several years for replacements to become sufficiently trained Investigation and experienced to be fully effective. In addition, the emergence of Commission new technologies, the availability of data, and expectations of best practice accident investigation are also changing the capabilities the Commission requires.

Ministry of Senior Advisers The Ministry has been attempting to increase the number of senior Transport advisers that it employs, as part of rebalancing the make-up of its policy teams. However, the market for this role remains reasonably tight and the recruitment has been lower than expected. As a result, the Ministry has re-focused on ‘growing its own’ through internal promotions, increased graduate recruitment and the introduction of the Applied Policy Adviser Development programme.

Civil Aviation Flight Operations The Civil Aviation Authority competes in an international market for Authority and Airworthiness experienced and highly skilled pilots and aircraft engineers. The Inspectors growth in aviation, especially in Asia and the Middle East, is making this market increasingly competitive and the disparity between the remuneration that the Authority can offer and what Airlines can offer is growing.

Annex 2 - Supporting financial information

As noted elsewhere in the Plan and shown below, a significant proportion of Vote Transport is paid to entities other than the Ministry and the transport Crown entities. Departmental funding is 0.8 percent of the Vote and so non-departmental funding accounts for 99.2 percent of the Vote.

Vote Transport Funding as at OBU 13 2013/14 2014/15 2015/16 2016/17 2017/18 $m $m $m $m $m

Non-departmental funding Funding for the NLTF - tax revenue 2,669 2,840 3,044 3,164 3,273

Loans to the NLTF for roading 970 767 750 750 750 Funding from Crown for other roading 59 10 0 0 0 KiwiRail – Turnaround Plan 94 0 0 0 0

KiwiRail – other projects 104 20 8 7 7 Auckland Council for EMU procurement 138 293 0 0 0

Funding to Crown entities 42 40 41 38 38 Other projects 60 58 49 49 49

Total non-departmental funding 4,136 4,028 3,892 4,008 4,117 Departmental funding 34 33 33 33 33

In percentage terms (based on 2013/14), the Vote is made up as below. 2013/14 is used as the base year due to the amount of time limited funding in the Vote (shown by the decrease in some lines in the table over time). By 2017/18, 96 percent of the Vote will be road tax funding or loans for roading.

Funding for the NLTF – from tax revenue 64.0% Loans for roading and EMU procurement 26.6% Crown funding for roading (mainly Christchurch reinstatement and 1.4% National War Memorial Park) KiwiRail – Turnaround Plan 2.3% Rail – other (mainly Auckland Electrification Project) 2.5% Crown entities 1.0% Other (SuperGold card and Weather forecasts and Warnings are 75 1.4% percent of this) Departmental funding 0.8%

The funding from hypothecated road tax cannot be reprioritised outside the National Land Transport Fund and thus the importance of the efficiency and effectiveness of expenditure measures used by

the NZ Transport Agency, described in the document. The Government Policy Statement on Land Transport is the government’s lever to drive any reprioritisation it seeks.

The loans are repayable to the Crown over time and so are fiscally neutral.

The time limited funding for projects (eg Auckland rail electrification, National War Memorial Park and Christchurch roading reinstatement) has been appropriated based on detailed budgets and is used to reimburse actual expenditure only and so any savings will be retained by the Crown. All projects are expected to be managed to obtain best value for money and are reported on at least quarterly.

Some pressures within the Vote are reflected in Budget initiatives later in the Plan – KiwiRail Turnaround Plan, the Auckland transport package, Christchurch roading reinstatement and Weather forecasts and warnings. The SuperGold card concession scheme is included as an initiative for Budget 15.

In looking at the cost pressures faced by the Ministry and Crown entities, the section below focuses on the funding they receive for their operations, rather than project funding.

Overview of the funding and costs of the Ministry of Transport and the Crown entities

Of the five core transport entities, three are significantly funded by parties other than the Crown. The table below shows the funding split.

Ministry NZ Civil Maritime Transport Total of Transport Aviation NZ Accident Transport Agency Authority Investigation Commission $m $m $m $m $m $m Crown funding 33 23 3 8 4 71

Non-Crown funding 0 250 112 24 0 386 Total funding 33 273 115 32 4 457

In the case of the NZ Transport Agency, the table above does not include the money that the Agency spends as the manager of the National Land Transport Fund. In non-Crown funding, the table includes the money received by the Agency for activities it undertakes on the Fund’s behalf, plus funding from fees charges and levies. The money from the National Land Transport Fund makes up some 50 percent of the non-Crown funding received by the Agency.

The table shows that a large proportion of any cost pressures faced by the agencies with significant non-Crown funding is paid for from these sources, not the Crown, and so the pressures do not affect the Crown baseline significantly. Increases in fees and charges are managed by regular reviews. In demonstrating the cost pressures, this paper considers all of the activities undertaken by the Crown entities, as it is not meaningful to separate the activities.

All of the entities in the transport sector are taking advantage of all of government contracts to reduce costs. These are not material in the scope of this document and most are not new in 2013/14 so the initial savings have already been recognised in baselines. Therefore they are not quantified. The savings allow funding to be reprioritised.

Workforce Costs

[10]

Workforce costs are a significant cost to all of the agencies in the transport sector accounting for between 45 percent and 75 percent of total funding for each.

[10]

New activity that will be funded within current baselines

Departmental

The Ministry of Transport has managed the Clifford Bay procurement facilitation within its baseline. This has involved external direct costs of $0.8 million in 2012/13 and an estimated $0.6 million in 2013/14, to prepare the next decision paper for Ministers. This 2013/14 cost is not shown in the tables as a pressure as it is being covered by a carry forward of funding from 2012/13.

Non-Departmental

The only other new activity within the sector is the operation by the NZ Transport Agency of its new subsidiary Transport Ticketing Limited with costs as below. This is being funded from fees.

Non Departmental - Operating 2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Transport Ticketing Limited 4.450 7.900 7.900 7.900 7.900 Total 4.450 7.900 7.900 7.900 7.900

Cost pressures facing the sector - Department

The Ministry of Transport has a baseline of $33 million per annum.

It manages its cost pressures by reprioritising between expenses depending on the projects being undertaken, having already reviewed its staffing levels and settled on an establishment of 155. The reprioritisation is shown in the table below by the negative ‘Other’ line.

Summary Table of Total 2013/14 2014/15 2015/16 2016/17 2017/18 Operational Cost Pressures $0.000m $0.000m $0.000m $0.000m $0.000m

From Increased Service Demand 0 0 0 0 0

[10]

From Capital Planning 0 0 0 0 0 From Other Costs

Rent 0.070 0.210 0.210 0.210 Other (0.300) (0.680) (1.130) (1.440) (1.760) Total 0 0 0 0 0

Increased service demand

The Ministry is a policy shop and is not aware of any increased service demand in the years to 2017/18. It manages its work programme in line with its agreed output plan with its Minister.

Direct employment costs

[10]

Capital planning

The Ministry has a small asset base, with its main assets being leasehold improvements and information technology. Depreciation and capital charge per annum are only 3 percent of its budget (less than $1 million). Therefore its current capital planning pressures are not significant. This could change if significant larger investment was required, but it is working with the Government Chief Information Officer to manage IT costs.

Other costs

Rent and property costs are approximately 10 percent of the Ministry’s budget. A rent review is due in March 2015 and so this expense has been estimated to rise by 15 percent ($210k per annum). The Ministry is seeking to reduce its rental expense by subletting one of its 5 office floors in Wellington. This would save some $280k per annum at current rent and has been discussed with the Property Centre of Excellence.

Changes that will generate savings

As noted above, the Ministry is a policy shop and so cannot change its activities as such. The possible reduction in office space noted above is only a proposal and so no savings can be counted at this time.

Cost Pressures facing the Sector – Non-Departmental

The table below summarises the pressures felt by the transport Crown entities in activities funded by the Crown and third parties.

Summary Table of Total 2013/14 2014/15 2015/16 2016/17 2017/18 Operational Cost Pressures $0.000m $0.000m $0.000m $0.000m $0.000m

From Increased Service Demand 1.361 3.541 4.314 2.421 2.421 From Direct Employment Costs 4.243 8.866 13.596 17.976 22.234

From Capital Planning 3.197 4.355 1.987 2.953 3.041 From Other 1.334 0.855 1.327 1.373 1.420

Total 10.135 17.617 21.224 24.723 29.116

Cost pressures arising from increased service demand

2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Maritime NZ – system costs 0 1.120 1.890 0 0 Civil Aviation Authority – 1.361 2.421 2.421 2.421 2.421 organisational change

Total 1.361 3.541 4.311 2.421 2.421

Maritime NZ is forecasting a peak in activity due to the implementation of the Maritime Operator Safety System and safe ship management certificates. This will cause a short term peak to the number of Maritime Officers in 2014/15 and 2015/16 (additional 10 FTE in 2014/15 reducing to 6.9 FTE in 2015/16).

Civil Aviation Authority underwent organisational change during 2012/13 and established a number of new positions. The majority of these have now been filled resulting in increased budgeted employment costs for 2013/14. Some positions are yet to be filled and are being actively recruited, resulting in the increased budgeted employment costs for 2014/15.

No other agency is forecasting significant cost pressure from increased demand.

Cost pressures arising from direct employment costs

2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m % % % % %

Annual salary movements [10]

[10]

Operational cost pressures arising from capital planning

Cost Pressures arising from Capital 2013/14 2014/15 2015/16 2016/17 2017/18 Planning $0.000m $0.000m $0.000m $0.000m $0.000m

Aviation Security Service - Write off 1.300 0 0 0 0 of assets NZ Transport Agency - Development 1.847 3.418 (0.635) 0 0 of RUC payments module, Tolling payments initiatives, SAP FMIS

Civil Aviation Authority - business 0 0.449 0.823 0.941 0.973 system replacement Maritime NZ - Systems reform 0 0.421 0.437 0.437 0.437

Maritime NZ - Navigational Aids 0.050 0.067 0.156 0.220 0.262 Maritime NZ - MEOSAR 0 0 1.206 1.355 1.369

Total 3.197 4.355 1.987 2.953 3.041

Aviation Security Service - a proposal to reduce existing office space in Wellington and sublease the vacated space. Leasehold improvement assets of $1.3 million will need to be written off. It is expected that there will be rental savings as part of this proposal and the write off in 2013/14 will replace depreciation in future years.

NZ Transport Agency – pressures relating to recent asset purchases/ developments

Civil Aviation Authority – its business system is an in-house developed legacy solution that needs to be replaced. It is fully depreciated and operating beyond its useful life. The replacement system was known and fully costed as part of the Civil Aviation Authority funding review on the assumption that the project would be loan funded.

Maritime NZ –Systems Reform project - an automated solution for the processing of Maritime Operator Safety System and SeaCert. Maritime NZ is seeking permission to finance lease the solution.

Maritime NZ –Maintenance of lighthouses and navigational aids has been timed to fit available budget. This contains some risks around ongoing functionality. Catch-up maintenance may be required to ensure continuous operation of these facilities.

Maritime NZ –The replacement MEOSAR (mid earth orbiting satellite system for search and rescue) ground station is being funded by a capital appropriation of $7.1 million from 2013/14 – the project is currently at the tender stage. Changes in the final cost of the station may place pressures on the appropriation. No operational funding was provided with the initial capital bid due to timing uncertainty, and the plan is to fund these costs from road tax revenue, which would be fiscally neutral to the Crown (it would reduce the funding to the National Land Transport Fund instead).

Other cost pressures

Cost Pressures arising from Other 2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Civil Aviation Authority - Contract 0.468 0.468 0.867 0.867 0.867 price increase Civil Aviation Authority – Wellington 0.179 0.306 0.306 0.306 0.306 rent increase Civil Aviation Authority – capability 0.687 0.081 0.154 0.200 0.247 building projects and other Total 1.334 0.855 1.327 1.373 1.420

Civil Aviation Authority - Contract price increase - this relates to a contract with Airways for the provision of data. The current contract price is $1.45 million per annum and the increase was the subject of significant negotiation prior to agreement.

The other agencies have not identified significant other cost pressures, however property costs are a key expense for agencies with regular annual rent reviews, for example:

 NZ Transport Agency – has been managing down its number of office premises since its creation in 2008/09. It now has 14 offices with an annual rental of $7.8 million in 2013/14 (a 15 percent increase would be $1.17million per annum). The most significant of the leases is in Wellington and has an annual rental of $3.3 million with a review in 2015.

 Maritime NZ - total property budget will be $885,000 per annum, after the Wellington office is reduced in size - Wellington is 78 percent of this cost. Its next rent review is 1 May 2016.

 Transport Accident Investigation Commission – its annual property expense is forecast at $0.785 million for 2013/14 (21 percent of its budget), with the next rent review in 2014/15.

Changes that will generate savings – Non-Departmental

Intention Name and Brief 2013/14 2014/15 2015/16 2016/17 2017/18 Description $0.000m $0.000m $0.000m $0.000m $0.000m Maritime NZ – release of 1 of its 3 0 0.300 0.300 0.300 0.300 Wellington office floors March 2014. Civil Aviation Authority – sub-lease 1.014 3.525 3.263 3.218 3.177 of surplus space in Wellington and other asset related costs Total 1.014 3.825 3.563 3.518 3.477

The above figures assume that the Civil Aviation Authority is able to rent out its excess space. Nothing has yet been agreed.

Vote transfers - None

Annex 3 - Budget initiatives

Summary of Budget initiatives 2013/14 2014/15 2015/16 2016/17 2017/18 $0.000m $0.000m $0.000m $0.000m $0.000m

Capital budget initiatives 1. KiwiRail additional support [10][4]

2. Auckland Transport Package Total Capital Budget initiatives

Operating budget initiatives 2. Auckland Transport Package [10][4]

[7]

Total Operating Budget initiatives [10][4]

[ 7 ] The table does not include any funding in relation to the Aratere ferry because no figures have yet been provided by KiwiRail. COMU is discussing this with KiwiRail.

Initiative 1

Initiative Name Vote Department Contact Person

KiwiRail additional support Transport Transport Fiona Macmaster Describe the funding request and the expected results:

KiwiRail is seeking continued investment to support its objective of becoming a commercially viable freight business that will benefit the economy. $845 million has been appropriated over 2010/11-2013/14. 2014/15 is year 5 of Crown support and funding has been appropriated one year at a time. KiwiRail is currently working through an updated business case in support of this funding. The Crown Ownership Monitoring Unit (COMU) of the Treasury (which is responsible for monitoring KiwiRail), expects to receive the business case by the end of 2013 and expects a request for a multiyear appropriation. This latter request was rejected last year. [10]

Describe how the expected results will be measured:

Success is measured by the progress of KiwiRail against agreed performance targets, the main one being the commercial viability of the rail freight business. COMU is responsible for this monitoring.

Funding Sought at Budget 2014 2013/14 2014/15 2015/16 2016/17 2017/18 $0 .000m $0 .000m $0 .000m $0 .000m $0 .000m

pCa ital

Capital funding sought 0 [10][4] Describe how, if the funding sought represents the total amount required for the initiative - and if not, what the total is and where the additional funds are coming from: Progress against objectives will determine the total contribution from the Crown. KiwiRail is using its own revenue (as available) to support the Plan as well.

Describe if this initiative might require additional funding in future years:

[10]

Describe how this new funding request supports the Government[s priorities:

}uu]ooÇÀ]o<]Á]Z]oµ}Z'}Àvuv[]}]Ç}(}u]]Àv}µ]À}v}uÇ as it allows businesses to move goods more easily and reduces the amount of freight on roads or highways. dZ]o}µ}ZD]v]}(dv}[]}]]}(Opening markets; Improved investment in infrastructure and services; and /u}ÀP}Àvuvv}Pv][(}uv. Describe how this new funding request aligns with your Strategic Direction and delivery thereof, as described in your 4YP:

dZ]µo]vl}v}}[}ÀooP}o}(Zv}ÇuZuÆ]u]}v}u]v}]o benefits and minimises harm. It is also linked to the long-term outcomes of Efficient, Effective and Resilient.

Describe why this new initiative cannot be funded within baselines: Vote Transport contains relatively little funding that can be re-prioritised.

Describe what other activities are already being undertaken, either within your agency or across the State sector, to address the issue this new funding will look to address: Not applicable

Describe the implication if this funding is not approved: If funding is not granted, it would jeopardise the ongoing viability of KiwiRail.

aIf p rtial funding of this initiative is an option, please describe how this might work: The funding to be provided will be considered by officials as part of the assessment of the business case.

Initiative 2

Initiative Name Vote Department Contact Person

Auckland Transport Package Transport Transport Fiona Macmaster Describe the funding request and the expected results:

The Ministry is working with other agencies on the costings to deliver the Auckland transport package announced by the Prime Minister in June 2013. Work is ongoing and this request is only a place holder. The Minister of Transport intends to report back to Cabinet in March 2014 seeking decisions on a finalised package, including a preferred funding approach. [10][4]

Funding Sought at Budget 2014 2013/14 2014/15 2015/16 2016/17 2017/18 $000 $0.000m $0.000m $0.000m $0.000m

Capital

Capital funding sought 0 [10][4]

Operating funding sought 0

[7]

[7] [7] [7]

Annex 4 - Anticipated outyear funding requests

Budget 2015

2015/16 2016/17 2017/18 2018/19 mSum ary of Budget initiatives $0 .000m $0 .000m $0 .000m $0 .000m

1. SuperGold card public transport concessions [10][11]

2. Joint Venture Airports

3. Transport Accident Investigation Commission

Total

Budget 2016 t no anticipated funding requests

Budget 2017

mSum ary of Budget initiatives 2017/18 2018/19 2019/20 2020/21 $0 .000m $0 .000m $0 .000m $0 .000m

4. KiwiRail t roll over of existing loans 163 .500 0 0 0 Total 163.500 0 0 0

Beyond Budget 2017

Auckland

The Ministry is also looking at the financial issues surrounding other transport projects in Auckland: Phase 2 of the East-West Link, the City Rail Link and an additional Harbour Crossing.

The investment required from the National Land Transport Fund and possibly the Crown will be in the billions. Cabinet has already indicated support for these projects and is receiving regular updates on progress.

The Ministry is working with other agencies to ensure that the transport plans for Auckland align with other initiatives. A high emphasis is being put on testing the assumptions (e.g. population growth and patronage) that support each investment, to ensure that the projects will provide affordable value for money and be delivered in the correct time frames.

KiwiRail

[10]

Summary of Initiatives Budget 2015

Budget initiative 1

Initiative name Vote Department Contact person

SuperGold card public transport concessions Transport Transport Fiona Macmaster

Describe the funding request and the expected results: The scheme allows cardholders to use public transport for health and social benefits. Additional funding has previously been granted for 2013/14 and 2014/15 only.

CAB Min (13) 12 6 (27) from Budget 13 noted that the Ministry of Transport would review the operating mechanisms of the concession scheme in 2013/14 and report back to the Economic Growth and Infrastructure Committee in 2014 on options for cost efficient sustainable funding excluding eligibility and entitlement considerations and the long term operation of the scheme.

The Ministry is currently progressing this review. The funding below is an estimate of the increase to meet the costs of the current scheme and will be informed by the review. Demand and cardholder numbers continue to grow due to a number of factors including changing demographics and travel patterns.

Describe how this new funding request suppoZ'}Àvuv[]}]]W This bid links to the broad concept of providing better public services. It also links to the Minister of dv}[]}]Ç}( Improved investment in infrastructure and services. Describe how this new funding request aligns with your Strategic Direction and delivery thereof, as described in your 4YP: The scheme delivers health and social benefits to cardholders, encourages use of public transport and is linked to the goal of maximising social benefits.

Expected Funding Request 2015/16 2016/17 2017/18 2018/19 $0 .000m $0 .000m $0 .000m $0 .000m

Operating

Operating funding sought [10][11]

Budget initiative 2

Initiative name Vote Department Contact person

Joint Venture Airports Transport Transport Fiona Macmaster

Describe the funding request and the expected results:

The Crown has a legal liability to six joint venture airports to cover certain capital expenditure and 50 percent of their operating deficits. The current funding expires on 30 June 2015 and additional funding will be required, assuming that the current legal structure remains in place. The funding indicated is based on the current level [10,11] as no work has yet been done on the ongoing funding requirement. Expenditure by the airports on major infrastructure is by its nature infrequent and so the necessary funding can vary year on year. Some larger costs are signalled in upcoming years and are being looked into.

]Z}ÁZ]vÁ(µv]vPµµ}Z'}Àvuv[]}]]W This bid links to the broad concept of providing better public services.

Describe how this new funding request aligns with your Strategic Direction and delivery thereof, as described in your 4YP:

The provision of joint venture airports is linked to the goal of maximising social benefits.

Expected Funding Request 2015/16 2016/17 2017/18 2018/19 $0 .000m $0 .000m $0 .000m $0 .000m pCa ital

Capital funding sought [10,11]

Budget initiative 3

Initiative name Vote Department Contact person

Transport Accident Investigation Commission (TAIC) Transport Transport Fiona Macmaster

Describe the funding request and the expected results: TAIC is the independent investigator of accidents. It receives Crown funding of $3.865 million per annum. The Ministry and TAIC are working on a funding review to inform this request and the current draft terms are to ensure that TAIC has the capability, resources and capacity to: 1. deliver its inquiries effectively and efficiently and produce reports of the required rigour and quality 2. maintain a highly qualified and trained staff with the necessary investigative and analytical skills 3. maintain and enhance its ICT systems to provide timely and accurate information 4. horizon scan for patterns and prediction indicators of accidents and incidents in order to develop proactive activity as opposed to re-active 5. be described by stakeholders as a highly professional organisation that is good at its job Point 2 addresses the capability pressure noted elsewhere in this document.

Describe how this new funding request suppoZ'}Àvuv[]}]]W

An independent Commission is required to fulfil New Zealand[]vv]}vo}o]P]}v. It contributes to the priority of a productive economy by giving confidence to our international trading partners. It also links to the D]v]}(dv}[]}]Ç}(^(dv}^ÇuVv/u}Àv}Pv][(}uvX

Describe how this new funding request aligns with your Strategic Direction and delivery thereof, as described in your 4YP: A successful and sustainable Commission is essential to the goal of a transport system that minimises harm.

Expected Funding Request 2015/16 2016/17 2017/18 2018/19 $0 .000m $0 .000m $0 .000m $0 .000m

Operating

Operating funding sought (indicative estimate only) [10][4]

Summary of Initiatives Budget 2017

Budget initiative 4

Initiative name Vote Department Contact person

KiwiRail t roll over of existing loan balances Transport Transport Fiona Macmaster

Describe the funding request and the expected results: In the past, Crown loans have been rolled on maturity to allow spare cash to be reinvested in the business. This indicative request for $163.5 million assumes that this practice continues. Loans of $10.75 million are being rolled over in 2014/15. The maturity date of this roll over is not yet known.

Describe how this new funding request supports the '}Àvuv[]}]]W }uu]ooÇÀ]o<]Á]Z]oµ}Z'}Àvuv[]}]Ç}(}u]]Àv}µ]À}v}uÇ as it allows businesses to move goods more easily and reduces the amount of freight on road. This also supports the Minister }(dv}[]}]]}(Kv]vPulV/u}À]vÀuv]v]v(µµv À]Vv/u}ÀP}Àvuvv}Pv][(}uvX Describe how this new funding request aligns with your Strategic Direction and delivery thereof, as described in your 4YP: dZ]µo]vl}v}}[}ÀooP}o}(Zv}ÇuZuÆ]u]}v}u]v}]o benefits and minimises harm[. It is also linked to the long-term outcomes of Efficient, Effective and Resilient.

Expected Funding Request 2017/18 2018/19 2019/20 2020/21 $0 .000m $0 .000m $0 .000m $0 .000m pCa ital

Capital funding sought 163 .500 0 0 0

Annex 5 – Capital intentions

Purpose

In general, capital expenditure in the transport sector is managed outside of the government’s annual capital allocation. The hypothecated National Land Transport Fund is the largest source of funding for investment in new transport infrastructure. The Fund also provides investment for extending the life of existing assets through maintenance, operations and renewals funding (this includes State highways, local roads, walking and cycling and public transport infrastructure).

The Government’s capital investment in other modes is more limited. It includes:

 contributions to the KiwiRail Turnaround Plan

 contributions to metro rail projects in Auckland and Wellington

 capital investment in transport agencies

 contributions to support enhancements at joint venture airports

Current state

The state of New Zealand’s transport infrastructure is generally sound, but with some significant investment required in the road and rail networks where the infrastructure is not able to meet current or future needs.

The NZ Transport Agency has undertaken work on improving its performance measures in recent years and this is ongoing in conjunction with the Ministry. In terms of asset management for the road network, the table below shows a selection of performance indicators from the NZ Transport Agency’s Annual Report 2012/13.

State highways Local roads Pavement integrity of the sealed network 99 94

Surface condition of the sealed network 98 98 Smooth ride: % of travel on network classified as smooth 99% 84%

On these indicators, the NZ Transport Agency reports stable, or slightly improved, performance over time.

The rail network is undergoing a significant investment programme to address the legacy of underinvestment. The Government has made a significant investment via the Turnaround Plan to support KiwiRail in repositioning itself to operate as a successful freight business ($845 million over 2010/11-2013/14). This investment has addressed capacity constraints on the key route between Tauranga and Auckland. KiwiRail also reports that the result of investment in infrastructure and new rolling stock has been a reduction in derailments from 50 or 60 per year a decade ago to 20 per year now.

Government has also provided separate capital to support metro rail improvements (an example of this is the Auckland electrification projects).

Due to the nature of the institutional arrangements and ownership interests across the transport sector, capital investment is undertaken on a modal specific basis. For example, the NZ Transport Agency is responsible for allocating the revenue collected from road users to maintain and improve the land transport network. Capital investment in maritime and aviation infrastructure is funded both by the Crown and the system users.

Trends

KÀZo(](vÇUZ}o}}(u]v]v]vPvvÁ]vPEÁov[}Z]v at an average rate of 6.2 percent each year, although this has slowed in recent years. This is higher Zv]v(o]}vuµÇEdv}PvÇ[maintenance index. This is attributed to a range of factors such as rising input prices (e.g. bitumen and fuel); increasing traffic demand (particularly heavy vehicles); and an increasingly sophisticated network that is costly to maintain. While some increases are unavoidable, it is important to maintain the focus on maximising value for money from maintenance and operations expenditure (discussed further below). dZ}Àoouv(}EÁov[}U]vu}(ÀZ]ol]o}uÀooUZv relatively flat for the past 10 or so years. There has been a moderate increase in the volume of freight carried over this period. It is unclear what the impact of population growth will be on vehicle kilometres travelled in the medium to long term. This is one area which the Government Policy Statement on Land Transport 2015 will look to address in more detail.

However, there are still key pressure points on the network that limit the efficient movement of people and goods, particularly around our five largest metropolitan areas. Investment is required to ensure the network has the capacity to respond to current and future demands. One way these pressures are being addressed is through the Roads of National Significance programme. This programme, and the Auckland transport package, both present challenges from a funding perspective (discussed in more detail below).

Potential for private sector investment

The potential for private sector investment as a procurement option for transport projects will continue to be considered on a case-by-case basis. Private sector investment has been given significant consideration for the following projects:

x The NZ Transport Agency considered the procurement of the Transmission Gully project as a Public Private Partnership (PPP) and the Wellington Gateway Partnership was announced as the preferred bidder in December 2013. The NZ Transport Agency will make a final decision on whether the Transmission Gully project should proceed as a PPP by mid-2014. This decision would be subi}i}]vD]v][}Ào}}}ÁµvZ}Ávv]] Act 2004.

x The NZ Transport Agency is also evaluating the potential of PPPs for other major road projects (for example Puhoi to Warkworth) while continuing to learn from international experiences of PPPs.

x The Ministry of Transport has completed its study of the viability of establishing a ferry terminal at Clifford Bay. In this case, it concluded that the level of the contribution required from the Government to enable private sector investment in the project was not justified and Cabinet agreed with this assessment.

Existing balance sheet

Each transport agency is expected to manage future capital expenditure pressures within its balance sheet. In the event that this is not possible, the relevant agency will prepare a business case that demonstrates the need for any new capital, for prioritisation as part of future budgets (see Annex 4 for further information).

For the National Land Transport Fund, both operating and capital expenditure is funded on a Pay-as- you-Go basis6. The NZ Transport Agency does not accumulate depreciation from which it could meet the costs of replacement (although depreciation is calculated for the purpose of asset valuation).

Major capital decisions/challenges likely over the next ten years

The major decisions and challenges in relation to land transport funding are:

x progressing the Roads of National Significance programme

x funding the Auckland transport package

x achieving the right balance between cost and delivering appropriate levels of service

The NZ Transport Agency is continuing to manage the pressures from the Roads of National Significance programme through reprioritisation of expenditure.

The costs of delivering the Auckland package will exceed the level of funding available on an annual basis through the National Land Transport Fund. Funding will therefore need to come from the Crown, either by a grant or a loan. Transport officials are working with Treasury officials to further investigate this. Ministers will be asked to consider these alternative funding mechanisms in March 2014.

The Ministry is also looking at the financial issues surrounding the remaining elements of the Auckland transport package (Phase 2 of the East-West Link, the City Rail Link and an additional Harbour Crossing). The investment required from the National Land Transport Fund and possibly the Crown will be in the billions. Cabinet has already indicated support for these projects and is receiving regular updates on progress.

Achieving the right balance between costs and appropriate levels of service requires driving value for money and improved performance in maintenance, operations and renewals. The Road Efficiency Group, a partnership between the NZ Transport Agency and local government, has been tasked with achieving this.

6 Note that this feature does not change if alternative funding mechanisms, such as borrowing, are used.

The Group is focused on three key areas:

x a One Network Road Classification to standardise data and create a classification system which identifies the service level , function and use of road networks and State highways

x best Practice Asset Management to share best practice planning and advice with road controlling authorities

x collaboration with the industry and between road controlling authorities to share information, staff and management practises

The Road Eff]]vÇ'}µ[Á}l]Æ}vµu}(v(]]voµ]vP improving the performance of suppliers and the industry, encouraging better collaboration and flexibility between road controlling authorities, reducing costs by saving money in the right areas and prioritising investment on the roads that need it most. Achieving the right balance between costs and appropriate levels of service will be an issue given priority through the next Government Policy Statement on Land Transport. [10]

Strategy for managing capital

The overall strategy for managing capital in the transport sector is to:

1. support ongoing improvements in asset management practices, to minimise whole of life costs and unnecessary interventions

2. ensure that procurement approaches are effective and efficient (i.e. that they provide value for money)

3. allocate capital to the highest value projects (at Vote Transport level or at an agency level)

4. ensure that additional costs are borne by those that benefit

The capital needs for the National Land Transport Fund will largely be managed within the Fund. However, alternative funding mechanisms, such as borrowing, may also be considered where this presents the best overall outcome for the Crown.

The Minister of Transport is expected to issue the next Government Policy Statement on Land dv}Ç:µvîìíðXdZ]Á]ooZ}Áv[ovv}]vÀuvPÇvÁ]oo]v(}u the development of the next National Land Transport Programme 2015/16 t 2018/19.

Other relevant information

NZ Transport Agency - State Highway Asset Management Plan 2012-15

Road Maintenance Task Force - Review of road maintenance regime (2012)

Annex 6 - Government ICT Strategy and Action Plan to 2017 - Alignment of agency ICT Strategies to Destination 2017

This Annex details collaborative ICT activity carried out within the sector (both proactively and as a pilot), in line with the Government ICT Strategy and Action Plan to 2017.

Shared Service collaboration and activity has been occurring across a number of work-streams for at least the last 2 years, including human resources, finance, communications, risk, and ICT and information management. An overarching transport shared services collaboration and capability strategy is being developed in parallel to ICT pilot strategies.

An integrated collaborative roadmap of the sector ICT strategy is being formulated, along with a sector ICT capability roadmap. These roadmaps are pre-cursors to the more detailed ICT Strategic Plan and the ICT Capability Plan. This planning work was carried out via:

x Drawing upon the individual ISSPs and programmes of work in each of the sector entities, looking for correlation, synergies and overlap

x Revisiting the high-level 2012 Transport Sector ISSP document

x Holding monthly CIO Forums

x Holding a full-day strategic planning workshop (Nov 2013)

x Conducting a comprehensive quantitative survey:

o Fiscal baselines

o Capability baselines

o CIO control continuums

o Gap identification

x Conducting a comprehensive qualitative survey:

o GCIO focus area alignment

o Business motivation model inputs

o Shared project interest levels and timing

x Taking onboard GCIO-recommended models and frameworks:

o Government ICT Strategy & Action Plan to 2017

o Operating model

o Business motivation model

o Business model canvas

In terms of a strategic ICT & IM roadmap, the sector has collaboratively:

x Identified recent ICT integration and collaboration successes including Enterprise Search functionality, infrastructure sharing, Gartner licensing deals, and a joint operations centre

x Mapped out a series of short-term sprints and partnerships that demonstrate working together for common benefits. These lend themselves to short-term delivery containment, building upon early successes. Examples under consideration include leveraging and expanding the number of entities utilising enterprise search and security expertise services; after hours service desk call handling and tools; common security firewall partnerships; CCTV analytics; and a series of opportunities for information management capability growth

x Mapped out intentions to work on longer term and more complex architectural alignment: a reference model for information architecture, geospatial, business intelligence, sector information hub scoping, and enterprise architecture

x Examined ongoing continuous improvement activities for integrated benchmarking; sharing of intelligence and lessons learned; and keeping abreast of ITS activity and cross-over

x Considered the goals and principles applicable to ICT strategy (based on corporate strategy, transport shared services goals, and GCIO goals)

x Considered the capability shifts required to undertake the plan (separate but aligned roadmap)

x Considered the influences and drivers for activity, including commercial/fiscal for SOEs, central government, local constituents, safety, and technology changes

x Recognised a governance framework with virtual leadership amongst transport CIO peers with links into the Transport Shared Services Governance Group and the Transport Sector Leadership Group

For capability road-mapping, the draft blue-print considers (but is yet to detail):

x The shift change required for the Strategy & Action Plan to 2017, highlighting the 2017 goals for leadership capability and also capability brokering, and the overall GCIO vision for leadership capability as extracted from the Strategy & Action Plan

x Utilising capability heat maps from the sector surveys to recognise shifts required in vendor management, relationship management and service management

x Recruitment plans t with a focus on graduates and catering for the sourcing strategies of each entity

x Retention plans t including career management and secondment opportunities

x Growth and development in information management, assurance, customer value and transferrable non-ICT skills in strategy, analysis and change management

x Leadership adjustments in business and 2nd tier representation at future forums, and buddy/peer support at senior levels

As well as Government ICT Strategy & Action Plan alignment (described in the next section) and capability heat maps, the sector ICT survey results have also provided ICT leaders with the following context, insights and baselines for which to help shape strategic work:

x Biggest ICT pain points t with balancing running the business versus transforming the business being on top

x Recognition of starkly varying levels of control of the CIO or IT managers in each entity t both fiscally and in terms of FTE control

x Commentary on draft operating models including the challenges and critical success factors

x Commentary on each component of a business motivation model for strategic planning across the sector

Alignment with Government ICT Strategy and Action Plan t focus areas

The Government ICT Strategy and Action Plan has four focus areas and the transport sector is well aligned across most of those areas. Survey results have highlighted high-level contributions t both planned and underway. The following tables provide a sector summary for each of the four areas and the specific agency actions. It utilises red/amber/green indicators as part of that assessment.

Services are digital by default.

Make Create Ensure identity Provide direct information integrated management access to GROW THE and services transactional and systems and DIGITAL joined-up and account views authentication data to enable As a sector, the CHANNEL easier to locate for citizens and capabilities are service co- integrated and access businesses fit for purpose creation collaboration includes z z z z planned information sharing (such as Implement a standard technology Consolidate and rationalise CONSOLIDATE footprint for branch office counters domain planning) and government's contact centre NON-DIGITAL to support consolidation across developing reference technologies and footprint CHANNELS agencies in shared premises models for sector z z information architecture along with Integrate Use consistent scoping of information Utilise distributed performance hub(s) which will aid in customer authoritative Implement measures to ENHANCE insights to information ZZul]vPÀ] new digital assess and SERVICE improve policy sources to joined-up and easier to service models manage service and service deliver DESIGN development cost o}v[X delivery smarter and quality services z z z z

Agency Specific actions: NZ The Agency Channel Strategy and Access & Use 5 Year Business Roadmap outlines the direction Transport / investment for services being digital by default. The Agency is represented on the Digital Agency Services Council and R10 Working Group. Civil On-line payments for Medical administration fee (in place); Online Medical Certification with Aviation RealMe authentication (currently preparing for RFI); certified medical practitioners; Aviation Authority Quality Database users; Aeronautical Information Publication with Airways Corporation. Maritime NZ Increased drive for Business Intelligence and Information Sharing, Portal interface for citizens - self-service application for registration/licensing etc, and Use of Real-Me for Portal access. Ministry of Domain plan with NZ Transport Agency and Statistics NZ. A strategic partnership is being Transport formalised between the sector (c/o MoT) and Statistics New Zealand to scope and consult on information indicators collected by the transport sector, leading into how that data is collected, stored, accessed and disseminated. Service design is being enhanced via the travel survey, the Freight Information Gathering System, and the performance measures that underline the D]v]Ç[îzWov. Airways Consulting with MetService on the possibility of a common after hours help desk service for international staff. Also putting in place a data services strategy for its operational business, including data for MetService. Service design is being enhanced via a billing product to deliver smarter services; and investigation of cloud services. Transport Interlink resources to the website inquiry function; and exploration of drop-box-like platforms Accident with regulators. Investigation Commission

Information is managed as an asset:

Establish Drive the use Accelerate the consolidated of advanced As a sector, the integrated release of public UNLOCK THE hubs for analytics information assets collaboration has overlap with the VALUE OF sharing supported by for commercial ZÀ]]P]oÇ(µo[ authoritative information INFORMATION and social re-use focus area t i.e. information information hubs sharing and information z z z architecture t with the sector IM forum examining capability uplift Strengthen information management, privacy and in information management along EMBED TRUST security frameworks. Review on an ongoing basis with joint visions in library services AND SECURITY and information hubs. Business z intelligence shared activity has been proposed to follow BUILD Review information architecture work. Enhance Catalogue and INFORMATION information information value information Leveraging ICT security expertise policy and GOVERNANCE governance assets and policy work is of strong legislation AND interest to the sector. CAPABILITY z z z

Agency Specific actions:

NZ Implementing a Business Intelligence programme which includes more sophisticated analytic Transport tools. Appointment of an Open Data champion and establishing a programme to accelerate the Agency release of our high-value public information assets. To unlock the value of information, a foundation information asset register is planned for an eventual information hub and sector strategy. Developing a set of information security and privacy policies as well as a user awareness and education programme. Privacy and security assessments have been incorporated into the Systems Development Life-cycle process. Ministry of Developing a domain plan with Statistics NZ which will define the high level information needs Transport of the transport sector. It will also define how we will collect, analyse and disseminate that information. Investigating a hub for transport economics and looking at advanced analytics. Working with NZ Transport Agency, NZ Statistics, Land Information New Zealand and others. MetService Developing an information portal to surface information delivered under the contract with the Ministry, using standards and tools defined by the World Meteorological Organisation. Civil Work in progress to increase security on information via Information Technology. Working on Aviation new Information Policy Framework, including Governance, Security and Information Authority Management as top level documents. Working with Privacy Officer to increase use of controls to increase awareness and prevent breaches. Working on a new Information Policy Framework, including Governance, Security and Info Management as top level documents. The assets in Civil Aviation Authority and Aviation Security Services repositories have been captured and valued in appraisal report. All those in other repositories are part of a project to increase compliance of all information stores, in 2014/15. CAA plans to be involved in shared sector library services and leveraging analytical work from other agencies. Maritime NZ Development of a Records Management Strategy & Roadmap for implementation; Information Improvement Strategy; Participation in sector Security Centre of Expertise The value of information is planned to be unlocked via collaboration with Customs on storage and analysis of AIS data and ion trade; collaboration on a single window and a single registration portal for incidents. MetService Recommendations have been made to enhance governance over Information Management. An information portal is being developed to surface information delivered under the MoT contract. This will provide a searchable catalogue and eventually tools to allow authenticated users to retrieve weather data.

Investment and capability are shared:

INTEGRATE Implement whole of government Fully deploy the Government Collectively, ICT ICT strategic and investment planning Enterprise Architecture framework but recognising PLANNING z z the differences between crown Optimise Accelerate Establish a Transition Expand the Consolidate entities and ownership of the uptake of government government portfolio of backoffice the SOEs, the ACCELERATE commodity existing solution and and user common financial and transport ICT assets common capability computing capabilities human THE UPTAKE sector is OF COMMON capabilities catalogue to a cloud resources and services applications committed to CAPABILITIES based use (and model consideration) z z z z z z of common capabilities. Invest in capability uplift to develop the ICT workforce Common REORGANISE z capabilities are CAPABILITY frequently discussed in the ICT forums.

Agency Specific actions:

Civil Currently hosting Maritime NZ IT infrastructure n Civil Aviation Authority's datacentre. In Aviation discussion with MetService for shared service desk capability; In discussion with NZ Transport Authority Agency on utilising centre of excellence Security Services.

Airways Looking for opportunities for shared services in the whole-of-government architecture and ICT strategic and investment planning, notwithstanding the requirement to remain a commercial enterprise. Airways will buy common services (such as email and Lync) in the future, from the cloud to reduce investment in hardware software and technical support. Airways will move core services to all of government hosting as a service in the coming year. Maritime NZ Shared Infrastructure with Civil Aviation Authority - extend to cover other service areas e.g. Helpdesk, Security Centre of Excellence with NZ Transport Agency. NZ Significant focus for IS @NZTA and working with Auckland Transport to develop who will lead/ Transport own/ deliver what for the Joint Transport Operations Centre as one example. Whole of Agency government ICT strategic and investment planning and the Government Enterprise Architecture framework are planned to be contributed to, with acceleration in uptake requiring GCIO collaboration and engagement. Ministry of Contributing via the Common Web Platform, Infrastructure as a Service, and using Maritime Transport NZ[Ç}ooofficer for processing services. TAIC Already on all of government Infrastructure as a Service and are keen to explore Desktop as a Service when available.

Leadership and culture deliver change:

REORGANISE Establish a sector and cluster- Ensure functional leadership is CAPABILITY based ICT operating model well supported and configured

z z The sector ICT DEVELOP Establish a virtual ICT leadership academy capability plan (and LEADERSHIP roadmap) will act as z one mechanism by ENHANCE Evolve governance Enhance Develop and review which leadership and GOVERNANCE assurance funding models to culture is changed to & DECISION- systems support the add value and align inception, delivery MAKING with the Strategy and and operation of Action plan. shared capabilities Structurally, centres z z z of expertise are being examined, and the COLLABORATE, Increase GCIO Report Establish a Establish most relevant COMMUNICATE engagement benefits research leadership governance for the & ENGAGE with agencies and and networks to and industry to findings innovation support and forum and pilot is strengthen accelerator enhance the being worked on. collaboration programme delivery of and systems capabilities delivery z z z z

Agency Specific actions:

Civil Aviation Support the establishment of a Transport sector Chief Information Officer role and shared Authority Transport Sector Information Systems Strategic Plan.

Maritime NZ Involvement in sector pilot

Ministry of Transport sector shared services Transport Airways Architecture and security knowledge and skills will be shared to create centres of excellence

The transport sector is acting as a Z]o}}[(}Z'/K

The sector is collaborating with the Government Chief /v(}u]}vK((]v]ZZ]o}}[(} the Government ICT Operating Model in conjunction with the Government Strategy and Action Plan to 2017. While the formal pilot process will run until April/ May 2014, the sector will continue its sector approach beyond that, and this will include continuing shared initiatives beyond July 2014.

]}(}µ}u~(}uZÀ]vP}Z-[v}oo}]Àvv}]vP principles have been developed for the pilot, and it will deliver learnings and recommendations that can be leveraged across the wider public sector. One of the main aims is to learn how the process of

applying frameworks and developing deliverables works when we move from an agency to a sector level, and then to an all of government level.

There are three components to the transport sector pilot project: Shared projects, Government Chief Information Officer framework collaboration and Sector artefacts.

Shared projects t at the sector level

The purpose of the shared projects stage is to demonstrate that the sector can work together and share capability t at the sector level. This involves identifying ICT projects that involve multiple parties and reflect the concept of operating together as a sector. Projects being considered include security centre of excellence, business intelligence and data, and shared service desk.

Collaboration with the GCIO on the development of a number of frameworks

The GCIO will be developing a number of frameworks and the sector pilot will collaborate on these and act as the test-bed for the strategy and planning, and investment management frameworks, in particular.

ICT artefacts for the transport sector

The development of the GCIO frameworks will support the organisational design phase of the pilot, and the finalisation of a sector ICT strategy, a sector ICT capability plan and a sector ICT investment plan. This work will identify where and how the agencies are aligning to the Government ICT Action Plan.

To collate the inputs required for a sector ICT strategic plan and sector ICT capability plan/blueprint the transport sector chief information officers undertook quantitative and qualitative surveys across the transport agencies. This allowed them to get a view of the transport sector ICT landscape drivers and influences, identify heat maps of capability, record interest levels in the suite of proposed sharing initiatives, and go through the suggested thought process for strategic development. It also uncovered degrees of alignment and contribution to the Government Strategy and Action Plan along Á]Z}À]]vP(l}vZ'}ÀvuvZ](/v(}u]}vK((][}]vPu}oX

The survey results document was utilised at a full day workshop of the transport chief information officers in November, and also contributed to the development of broader Government Chief Information Officer artefacts/deliverables.

Annex 7 t Risks

Strategic and Operational Risks - Global risks Uncertainties to be Treatment/Mitigation Assessment of risk after Risk Description of risk Impact of the risk managed strategies mitigation Inefficient regulatory Responding to best May result in additional The sector is moving to more The sector has taken steps system is a handbrake practice, international compliance costs for businesses risk-based approaches to to ensure regulation is fit- on economic growth. expectations and and restrict economic growth. regulation (in line with for-purpose and will Inefficient emerging technology. international best practice). The continue to do so. Based regulatory Ministry is running a Regulatory on this Z}[view is system Reform Programme to identify that the risk is acceptable. regulation that could be improved. A systemic failure in International May result in poor safety Building on international The importance of our safety and security of developments, outcomes for international and engagement and engaging with international reputation Systemic transport systems. emerging trends. domestic transport modes such key stakeholders in the means that, while regulatory as increased incidents or aviation, land and maritime acceptable post- failure fatalities. industry. Moves to risk-based mitigation, this is a risk regulation (in line with best that we will need to practice). continue to manage. A large natural disaster Natural event - Impact of risk will vary on type Improved capability of Risk is acceptable as such as the Canterbury weather event, and location of event. Likelihood transport agencies to respond natural disasters are earthquakes may lead to earthquakes, of risk eventuating is high given to natural events. unpredictable. There is an Natural event widespread disruption to eruptions, tsunamis New Zealand's geography. ongoing need to ensure the transport system. and the damage these response capabilities are would do to transport sufficient to manage any infrastructure. natural event. A man-made incident Ship grounding, oil Impact of risk will vary on type Capability of transport agencies The extent to which the such as another Rena spill, terrorist attack and location of event - significant to respond to a major incident. risk can be mitigated is grounding or a terrorist (road, rail, maritime, impact on corridors and Transport security measures, limited as man-made attack. aviation). infrastructure if aviation involvement with offshore oil events are often unseen or Major incident security/terrorism threat, less and gas exploration consent unpredictable. To the impact if a marine oil spill. processes. extent it can be mitigated, Z}[ view is the risk is acceptable.

Strategic and Operational Risks - Modal/Agency specific risks with a potential fiscal impact

Uncertainties to be Treatment/Mitigation Assessment of risk Risk Description of risk Impact of the risk managed strategies after mitigation Investment in Freight demand, major Wasted/unused assets or underutilised Better forecasts, While this will continue infrastructure to events (natural or assets, insufficient network capacity. understanding the network, }]lUZ}[ accommodate forecast man-made), understanding transport work programme for Investment uvÁZ]Z}v[ population growth. drivers, monitoring freight the next four years will fails to meet eventuate. Too much or demand. look to actively address future demand too little investment or this risk. investment in the wrong areas. Fuel prices are expected Stable flow of FED and Demand for transport and for new fuel Improved forecasts of NLTF Risk is determined by to rise with continued RUC revenue over the technologies. Fuel price volatility is revenue and advising on any global conditions. volatility due to supply next four years. enduring (an unsustainable resource) increases to FED and RUC. Forecasts can help Fuel prices and and demand constraints. therefore will continue to be volatile Monitoring alternative fuels alleviate future volatility over the next four years. and the effect of these on revenue shortfalls hypothecated revenue. therefore the risk is acceptable. The Government has Rail freight volumes, Impact of risk is significant due to Monitoring KiwiRail Risk was identified at invested significantly in revenue, large private amount of money already invested by performance and ensuring the outset of the KiwiRail to make the rail users collapse. the Crown. any future funds are Turnaround Plan KiwiRail freight business [6][10] invested wisely. therefore is acceptable. viability commercially viable. There is a risk that the investment does not lead to this result. The assumption that the Rising raw material Road construction and maintenance The NZ Transport Agency The ongoing work to road construction sector costs due to costs may be higher than they should be has undertaken a full review address rising costs Costs and is a healthy, sustainable competitive resulting in inefficiencies within land of its procurement should see the risk procurement market may not be valid. international markets, transport expenditure. practices. The Ministry is mitigated to an risks of land transport undertaking work to better acceptable degree. infrastructure volumes. understand the drivers investment behind rising construction costs.

Strategic and Operational Risks - Sector performance risks

Uncertainties to be Treatment/Mitigation Assessment of risk Risk Description of risk Impact of the risk managed strategies after mitigation Sector unable The sector (or part of the Changing levels of Potentially the failure to deliver on Each organisation within the The risk will vary across to deliver on sector) may fail to demand for services, Ministerial and Government priorities or sector is responsible for its the sector but, in agreed deliver on its work global economic to not meet international obligations. organisational programme t general, is deemed to programme of programme due to fiscal conditions, increasing These are described in be acceptable. work issues, a lack of capacity input costs. Annexes 9 -16. or a lack of capability. The Ministry has an Differing perceptions A lack of coherent leadership will result The Ministry has undertaken dZD]v]Ç[Á}l important leadership of the MinistrÇ[ in a fragmented transport sector that a realignment of its statistics programme and role for the sector that leadership role and does not perform optimally in delivering and research programme; organisational aims to both support the what constitutes on Ministerial and Government has invested in Lifting Our capability building will Ministry fails to alignment of transport success. The extent to priorities. Leadership to drive see this risk managed provide sector agencies with the which opportunities improved performance and to an acceptable level. leadership '}Àvuv[]}]]U for collaborative capability, has developed a and provide a clear approaches exist. stakeholder engagement longer term strategic programme and is direction for the sector. developing a strategic policy programme. There may be a Changing levels of Impacts on the relationship between the Better communication Risk is deemed to be perception (real or demand for services sector and the Minister. around the need for fee and acceptable based on otherwise) amongst may result in levels of charge adjustments, the mitigations in Ministers that the sector fees and charges being establishment of a fees and place. is not performing at an adjusted. charges Centre of Excellence Sector is optimal level. This could within the Ministry of viewed as poor be through the number Transport. performing by of fees and charges government reviews seen by Cabinet which might suggest to Ministers that the sector is not managing its finances well.

Annex 7.2 Resilience

The transport sector operates in an environment where it is susceptible to both major natural events and man-made incidents. These incidents are unpredictable in terms of where and when they might occur. Although they can have a significant impact on the provision of transport services (in the short term at least). While transport agencies plan for how they would respond to such matters (collectively and individually), a significant residual risk remains for the short term provision of some transport services. Within that context, it is considered that the sector is resilient to most eventualities, mainly within risk appetites.

Land transport

The resilience of the land transport network, its ability to recover from unexpected events and returning it back to service requires careful planning, investment and management. The NZ Transport Agency is working to improve its understanding of the resilience requirements of the State highway network and sharpen its investment and planning tools to ensure it has the resources to address it. The Agency has also developed a resilience framework that is being applied to identify, reduce and manage the risk of outages to the road network, and land transport services. To derive more value from this approach, it has been developed with other network operators who share the same geographic corridors (e.g. Transpower).

Maritime sector

The ability to respond effectively to a major maritime incident is critical t a multi factor incident and / or oil spill would have specific maritime safety and environmental protection implications, and uPEÁov[µ]}vXd}u]]PZ}]lUD]]uE]]uouvting recommendations from internal reviews and debriefs of the Rena grounding and the independent À]Á]v}D]]uE[}v}ZRena grounding. This includes implementation of recommendations from the Thompson Clarke Capability Review, along with the adoption of a Çu]}Z}u}v]}]vPUÀoµ]vPv}]vPD]]uE[}]}vo}v capabilities.

Aviation sector

For the aviation sector, an act of terrorism or unlawful interference, or failure to detect threat items or dangerous goods, could lead to an incident with high impact and profile. The Civil Aviation Authority mitigates that risk through its intelligence gathering, monitoring and planning in collaboration with other security agencies and aviation organisations; its business response and contingency planning; and by ensuring that its readiness to respond (capability and capacity) is maintained.

Annex 7.3 Risks to the sustainability of the Four Year Plan

Beyond the issues outlined in this Plan, we do not believe there are any issues that would threaten the sustainability of the Plan beyond the four year timeframe.

Annex 8 - Government priorities

Building a more productive and competitive economy

Efficient transport networks underpin a competitive economy. As such, the government transport }ZlÇ}o]vZo]vP}o]À}vZ'}Àvuv[]}]Ç}(µ]o]vPu}}µ]À and competitive economy. In particular, the sector is a key contributor to a number of goals within the Business Growth Agenda.

Key initiatives in relation to this priority include:

x the Ministry of Transport advises government on key transport investment decisions (for example through the Government Policy Statement on Land Transport and in relation to the Auckland transport package) x the Ministry is focused on ensuring that the transport system is in a position to deliver on the targeted levels of exports as identified in the Business Growth Agenda x all transport agencies are focused on ensuring we have safe transport systems across the land, aviation and maritime modes. This enhances the reliability of travel for New Zealand firms and gives confidence to our international trading partners

To better deliver on this priority, the government transport sector is doing some things differently. For example:

x the NZ Transport Agency is continuing to work to develop areas of the State highway network identified as high volume in order to improve access to key growth areas x the sector has a regulatory reform programme which is seeking to reduce compliance costs for businesses and individuals (examples of this include the NZ Transport Agency and the Ministry of Transport collaborating on the Vehicle Licensing Reform work which is expected to save $1.8 billion over 30 years) x the Ministry of Transport is leading a piece of work to advise on the potential roll-out of Intelligent Transport Systems as these represent a significant opportunity to achieve greater efficiency from the existing transport system (a discussion document was released in late November 2013) x the NZ Transport Agency is developing a strategic national high productivity motor vehicle network which will allow for access to vehicles up to 62 tonnes on 45,000kms of New ov[µiest freight routes

Some of the key projects for the Ministry in 2013/14 that contribute to this priority (and the level of associated effort7) include:

x Developing the Government Policy Statement on Land Transport (9,500 hours) x Investigating the commercial viability of Clifford Bay (4,500 hours) x Civil Aviation Act Review (3,800 hours) x Auckland and Northern Transport Issues (3,500 hours) x Freight policy (2,300 hours)

7 Based on 2013/14 Q1 Actual and 2013/14 Q2-Q4 planned hours

x Vehicle Licensing Reform (2,300 hours) x Development of an Intelligent Transport Systems framework/strategy (2,000 hours) x National Land Transport Fund Revenue Forecasting (2,000 hours)

Set out below is the total level of Ministry effort being expended on activities that result in a more productive and competitive economy.

2012/13 2013/148 2014/159 2015/16

FTE time (Total and %)

Departmental 65, 000 hrs10 67,500 hrs 67,500 hrs 67,500 hrs 50% of total 51% of total 51% of total 51% of total 43.5 FTE 45 FTE 45 FTE 45 FTE

Direct costs11 (Total and %)

Departmental $5.4 million $5 million $5 million $5 million 64% of total 60% of total 60% of total 60% of total

Canterbury rebuild

The government transport sector is working on a number of initiatives that will help to support the rebuild of Christchurch. Key initiatives in relation to the rebuild include:

x the NZ Transport Agency investing $50 million per annum from the National Land Transport &µv]v}]vuv}(Z]ZµZ[}]vPvÁ}l}ÀZvÆ(ÁÇ x the Roads of National Significance programme includes an $800 million Christchurch Motorways construction programme x the Ministry of Transport working to enhance international air connections to Christchurch through air services negotiations x the NZ Transport Agency is a partner in the Stronger Christchurch Infrastructure Rebuild Team and is also investing in key transport studies that will help shape the future of Christchurch, such as the Greater Christchurch Freight Study

8 Based on 2013/14 Q1 Actual and 2013/14 Q2-Q4 planned hours 9 ]u}vD]v]Ç}(dv}[îìíïlíðµ]vWov 10 1,500 hours = 1 FTE 11 Direct costs include all Ministry of Transport expenditure (except personnel related costs and overhead) that have been charged against a specific policy project. Major expenditure items include consultants, travel, research, legal fees and training. Examples of the excluded personnel related expenses include salary, superannuation contributions, health & safety costs and recruitment costs.

Set out below is the level of Ministry effort being expended on activities relating to the rebuild of Canterbury.

2012/13 2013/14 2014/15 2015/16

FTE time (Total and %)

Departmental 200 hrs 0 hrs 0 hrs 0 hrs 0.1% of total 0% of total 0% of total 0% of total .15 FTE 0 FTE 0 FTE 0 FTE Direct costs (Total and %)

Departmental $2,500 $0 $0 $0 0.03% of total

Delivering Better Public Services

The government transport sector has a strong focus on ensuring that the principles of Better Public Services are integrated into its individual and collective actions. Some of the key initiatives being progressed across the sector include:

x The Chief Executives of the government transport agencies work together to provide joined- up sector leadership through the Transport Sector Leadership Group. This co-ordinated approach to working allows the sector to work on initiatives such as the Transport Sector Collaboration and Capability Strategy and creates opportunities for new ways of operating. x The Ministry of Transport and the NZ Transport Agency are key contributors to the success of cross-government initiatives such as the Business Growth Agenda and the National Infrastructure Plan.

Delivering Better Public Services requires the sector to do things in different, more innovative ways. Examples of ways the sector is doing this include:

x Working across the sector to develop capability and to deliver more cost-effective and efficient services through the Transport Sector Collaboration and Capability Strategy 2013- 2017 (for example, the sector has developed a shared Risk and Assurance function that is being hosted at the NZ Transport Agency). x The development of a new sector wide fees and charges review programme to manage the more than 70 third party fees and charges in the transport sector. This work is being led by the Ministry of Transport and will help to ensure that the transport Crown entities are delivering value for money. This will include prioritisation of the reviews for the next three ÇV}µ]vPZD]v]Ç[}o]vPvÇÀ]ÁV]]vP]v}]vPv]vPZ reviews; becoming involved early in the agency review process; and ensuring Crown entities

make better use of the expertise across the transport sector agencies when developing business cases.

x Continued efforts to grow the number of transactions taking place online o the NZ Transport Agency is a contributing agency to the Result Area 10 objectives through its work to increase the proportion of vehicles relicensed online to 70 percent by 2017

o Maritime NZ contributes to Result Area 10 via an ICT system review and investment programme which will include online engagement and transacting with the maritime industry (seafarers and operators)

x The transport sector is collaborating with the Government Chief Information Officer and is ZZ]o}}[(}Z'}Àvuv/dK]vPD}oXdZ]]o}Á]ooZo}]u}À the processes of applying the GCIO across other sectors (and eventually to an all-of- government approach)

Some of the key projects for the Ministry in 2013/14 that contribute to this priority (and the level of associated effort12) include:

x Transport Sector Collaboration and Capability Strategy (Shared Services) (3,500 hours) x Crown Entity Funding Reviews (3,000 hours) x Crown Entity Performance and Accountability (2,300 hours) x Shaping our Future (2,000 hours) x Aviation Security Service Review 2013 (1,600 hours) x Improving Policy Capability (1,500 hours) x Board Appointments and Governance Project (750 hours) x MetService Review (600 hours)

Set out below is the level of Ministry effort being expended on activities relating to Better Public Services.

2012/13 2013/14 2014/15 2015/16

FTE time (Total and %)

Departmental 10, 500 hrs 15,500 hours 15,500 hours 15,500 hours 8% of total 12% of total 12% of total 12% of total 7 FTE 10.5 FTE 10.5 FTE 10.5 FTE Direct costs (Total and %)

Departmental $450,000 $450,000 $450,000 $450,000 5% of total 5% of total 5% of total 5% of total

12 Based on 2013/14 Q1 Actual and 2013/14 Q2-Q4 planned hours

Annex 9 - Ministry of Transport dZD]v]Ç[purpose is to ensure our transport system helps New Zealand thrive dv}]]]o}u}vv}(]oÇo]((}oo}(EÁov[µ]vv]]Ìv- enabling all economic activity and supporting economic growth, and accessibility and connectivity more broadly. The Ministry makes a valuable contribution to a thriving New Zealand through its role ZP}Àvuv[]v]oÀ]}vv}}o]ÇV]}oZ]}oU]}À]PZ}( Vote Transport (approximately $40 billion of expenditure over the next 10 years); and its support for the good governance of the transport Crown entities and their accountability to the Minister of Transport for their performance.

D]v]Ç[µ]vPÇ dZD]v]Ç[µ]vPÇ]]ven through its purpose and greatest imaginable challenge. The D]v]Ç[µ}]Zvµ]vP}µv}ÇuZoEÁovZ]À[v]P ]uP]voZoovP]Z]vPZvÀ]}vuv}}µoZÀoµ(}uv}]v]]]À[. The Ministry established these in 2012, through a process which included significant stakeholder engagement t this helped to ensure that the Ministry has the correct business focus. They are o}oÇo]PvÁ]ZZv}}[o}vPuP}o(}a transport system that maximises its economic and social benefits for New Zealand and minimises harm (and its four long term outcomes), and were recognised as being the right focus for the Ministry through its 2013 PIF review.

The Ministry implements its business strategy through its professional services operating model t a u]Æ}ZZuÆ]u]Zµ]o]Ç}(ZD]v]Ç[((~]P}µXdZ ongoing challenge that the Ministry grapples with is how it can best create the environment (utilising its three roles (see o}ÁZ}µPZÁZ]ZZv}ÇuvuEÁov[(µµ vXdZD]v]Ç[Á}l}Puu}ÀZvÆ(}µÇ](}µ}vZÀo}uv}( transport system that: x is future focussed t }ZÁoo}]]}v}uEÁov[o}vPuv}vV and flexible to adapt to, and benefit from, new technologies x understands the fiscal constraints that the government operates under and delivers value for money from its ongoing expenditure x has the capacity to deal with a significantly larger freight task t particularly for our major freight corridors x can deliver on the transport needs of our growing urban populations (particularly Auckland) and the implications of this for other parts of the country x provides robust and timely advice to government on major, transport infrastructure investment opportuni]~ÁZ]ZvÀÇÆv]ÀvZoµuÇ[]vZ]]u]vP) x is resilient to sudden, man made and natural shocks dZD]v]Ç[ZlÇ}o

The Ministry implements its business strategy through its three key roles in the transport system.

x Sector leadership tthe Ministry has an important leadership role for the transport sector that ]u}}Zµ}Zo]Pvuv}(v}Pv]Á]ZZ'}Àvuv[]}]]Uv provide a clear longer term strategic direction for the sector. The Ministry takes a collaborative approach to its sector leadership role, working with the transport agencies to develop a shared and agreed strategic direction and alignment. At the same time, the Ministry is able to deliver clear messages to the transport agencies about the G}Àvuv[]}]] or other matters, as required. This all occurs within the context that the transport agencies are a set of independent Crown entities, with their own boards, that are responsible and accountable for their individual direction and performance.

It is important that the sector is well connected when it needs to be. As part of its role, the Ministry leads a number of sector-wide groups including the Transport Sector Leadership Group, National Road Safety Committee, New Zealand Search & Rescue Council, and the Transport Response Team; ensuring that they have appropriate forward work programmes. x Policy advice t the Ministry has a critical role in the development of the transport system Z}µPZ]}oZP}Àvuv[]v]pal adviser on transport. This work shapes the way the regulatory system develops across the transport modes, and also its capacity to respond to changing future demands and new technologies. The Ministry works cooperatively with the transport agencies and other government departments in the provision of its policy advice, and is implementing a number of initiatives to further enhance the quality of its advice to government. This includes taking a longer term view of the transport system and how current decisions can better position the system to meet likely future demands. x Governance and accountability t ZD]v]Ç[(]vo}o]}}u}ZP}}P}Àvv and accountability of the transport Crown entities. Achieving this is central to the effective and efficient operation of the Crown entities, and the overall performance of the transport system. dZD]v]Ç[}Z]}}u}Z}]vuv}(Áooµo](]}uuZ are able to drive the performance of their entities, and to provide high quality advice to support the Minister to hold the boards accountable for their performance. The Ministry has recently reviewed how it undertakes its governance and accountability function, and is increasing the resources that it applies to this role.

Ministry work programmes that are focussed on meeting the M]v]}(dv}[v the G}Àvuv[]}]] dZD]v]Ç[P](uÁ}lvÁ}l}Puu(}µ}µv]Æ]vu] outcomes, through which it delivers on the D]v]}(dv}[vZ'}Àvuv[]}]]X The six intermediate outcomes, and impact that the Ministry intends to have through its sector leadership, policy and other advice roles, are: x Better quality regulation t The Ministry is looking to ensure that transport regulation is effective and designed in a way that minimises the costs to businesses and users. x Improved planning and investment in infrastructure and services t The Ministry is seeking to improve planning and investment decisions in infrastructure across the transport system.

Future focussed work such as the development of freight scenarios, the National Freight Demands Study and the national passenger demand model will drive increased value for money from investments. Work to optimise use of the existing transport network will also contribute to improved planning and investment. x Fewer transport incidents and other harms t The Ministry is seeking opportunities to reduce the harms resulting from the transport system (including reducing both the road toll and the annual social cost of transport crashes). x Open and efficient transport markets t The Ministry is looking to facilitate enhanced economic activity by creating opportunities for exporters to access new markets and improve freight flows to and through our export ports. x Improved government transport agency performance t The Ministry is focused on ensuring that the government transport sector consists of high performing agencies that are capable of o]À]vP}v'}Àvuv[]}]ies. x Improved preparedness t The Ministry is focused on broadening understanding of transport sector resilience and how this can be applied across the sector, and working with its transport partners as part of our engagement in the National Security System and National Infrastructure Plan.

iµ]vPZD]v]Ç[(}µ}(o]u}vZvP]vZÆvovÀ]}vuv dZD]v]Ç[P](uÁ}lZvÀo}}}À]}v]vµ]Ç}À]uX,}ÁÀU the framework is flexible and allows the Ministry to increase or decrease the level of emphasis and resource that it applies to particular aspects of the framew}lvÇ}]v]v]uXdZD]v]Ç[ professional services operating model enables the Ministry to respond quickly to new resourcing requirements that may be required as a consequence of a change in emphasis within the strategic framework.

Major extervo(}Z}µov]ZvP}ZD]v]Ç[(µµµ]v]}]] include a significant increase in the price of fuel leading to a sharp decline in revenue for the National Land Transport Fund and an immediate increase in demand for public transport; a significant natural or transport incident, or a major new transport infrastructure investment opportunity.

Z^Z]vP}µ&µµ[Á}Ç]}vov}µ]o}Pv]]}vo]o]Ç

^Z]vP}µ&µµ]ZD]v]Ç[}Pv]]}vo development programme through which it co- ordinates and prioritises all of its development activities. The Ministry moved to its professional services operating model in 2009, and so it is well on the way to making the model operate in a manner that is appropriate for a public sector Ministry.

The Ministry underwent a Performance Improvement Framework review in 2013. This review allowed the Ministry to get a sense of what progress had been made to date. The review was positive about the direction in which the Ministry was headed and the reviewers identified some areas where the Ministry has the opportunity to lift its game.

The Shaping our Future programme now has a two-year action plan to enable the Ministry to rise to the challenge laid down in its excellence horizon and supported through its Performance /u}Àuv&uÁ}lÀ]ÁXKÀZvÆÁ}ÇUZD]v]Ç[}((}µW x embedding our purpose and philosophy x improving our operating model x lifting our external engagement and reputation x lifting our strategic policy capability x improving the quality and consistency of our policy advice

Culture

To build a high-performing culture, the Ministry has confirmed the behaviours that help us to be clear about our purpose and philosophy. Creat]vPZµvv]vP}(ZD]v]Ç[}ov what it means for each member of staff, underpins a strong organisational culture and provides a shared direction for the organisation.

Staff engagement levels are significantly improving, with the recent Gallup staff engagement survey results showing a 0.12 increase (statistically significant) from last year, to 3.98. This indicates that staff members have largely adjusted to the professional services way of working, and are embracing the opportunities that a flexible work environment provides. In addition, it seems our clear sense of purpose and focus has provided a renewed sense of enthusiasm.

Capability

The Ministry has identified three areas where it needs to continue to build its capability in order to deliver on its priorities. Those areas are leadership and management, policy advice, and governance and accountability. The Ministry has a structured approach to the professional development of staff - developing management capability through the Lifting our Leadership programme and policy capability through the applied Policy Adviser Development programme. The Ministry also purchases external specialist expertise where it is inefficient to maintain that expertise in-house.

The Ministry has a target to increase the quality of its policy advice from 7.3 to 7.5 (as assessed through the EÁov/v]µ}(}v}u]ZZ[vvµoÀ]Á}(Zµo]Ç}(}µ}o]Ç papers).

To quickly develop the policy capability of new graduates and advisers, the Ministry has established ZZo]W}o]ÇÀ]Ào}uv[~-PAD) programme in partnership with the School of Government at Victoria University. The programme provides core training on key areas of policy needed to deliver consistent, high quality advice. d}vZvZµo]Ç}(ZD]v]Ç[oZ]vuvPuv]o]ÇUÁZ]Z]v important aspect of our overall performance, the Ministry established the Leading Together programme (partnering with the Leadership Development Centre). This programme aims to further Ào}ZD]v]Ç[}vvZ]]uvP}vµ}µ}ovi}ÇZ]PZv}( oZ]UvZo}o]À}vZD]v]Ç[}i]À(}Zv}ÇuX>]vP Together consists of an individual development assessment for managers which will provide them

with a targeted development plan. This initiative also contributes to the call for stronger leadership across the public sector, as highlighted in the Better Public Services Report.

The Ministry undertook a review of how it delivers its governance function in 2013. The review set new expectations for the execution of the governance function, and the role and skills required by members of the governance team. This is expected to deliver significant gains over the next two years.

Capacity

The labour market for policy advisers has been tight over the last two years and this meant that the Ministry has been up to 20 percent understaffed at times. To address this, the Ministry adopted a ZP}Á}µ}Áv[}Z]vîìíîXdZD]v]ÇZuvP}]Pv](]voÇµZvµu}( policy vacancies by recruiting 18 policy staff since December 2012. This has included moving to a graduate recruitment programme, and increasing our investment in training and development. We have reviewed our recruitment processes and are making changes to ensure we attract the very best candidates. The changes include targeting universities by attending lectures and developing targeted advertising. dZD]v]Ç[vÁµ]uv}]vÀ}oÀÆv]À]vPv]]]}v]vuv v}o]Zv][µ]]o]Ç(}ZD]v]ÇXdZ]]oÀo}(]P}µv}Ç]ooÇ seen in the state sector, except for perhaps the most senior positions. This approach differs from previous recruitment processes as it gives us the opportunity to be very deliberate about nurturing relationships with candidates. As a result, candidates gain a positive impression of the Ministry along with high expectations of what it will be like to work here.

All of our investment in recruitment, training and development is designed to ensure that we }v]vµ}o](ZD]v]Ç[]o]ÇUÁoovµ]vPZÁe have a healthy flow of staff up and out of the organisation.

Nurturing and growing our talent internally will not replace external recruitment at a senior/specialist level where required; it will support it by reducing the need to fill high numbers of vacancies with external candidates. dZD]v]Ç[µ]uvPÇP(]vv]oU}v}u] and modelling capabilities; alongside experience in the application of policy frameworks and thought leadership.

Managing workforce costs over the next four years

The Ministry recognises the need to maintain competitive salaries so that it can retain staff and build capability whilst at the same time managing its workforce costs. Alongside this, enhanced Ministry capability will reduce the need for expenditure on external contractors (where this would prove to be cost-effective).

Fiscal responsibility

Internally, the Ministry will continue to live within its means over the next four years and will continue to manage cost pressures within existing baselines. ThZvP}ZD]v]Ç[}o]Ç team structure support this aim and, along with continued proactive graduate recruitment and

ongoing work to increase capability, should help to reduce the need for some consultancy spend and enable the Ministry to deliver more work internally.

^}Á]UoP}(ZD]v]Ç[(}µÁ]oo}vvµ]vPZ]µo]vP}Z National Land Transport Fund are managed effectively. This includes providing advice to Government in relation to funding decisions fo(µZ]vÀuv]vµlov[v}vÁ}lX

The Ministry will continue to work with the Crown Ownership Monitoring Unit to advise the G}Àvuv}v<]Á]Z]o[}uu]oÀ]]o]ÇUvÁ}lÁ]Zv}Pv]}Ào} government transport sector Centre of Excellence for fee reviews that promotes a consistent approach to funding reviews across the sector.

Dµ]vPZD]v]Ç[(}uv

The Government should have confidence that the Ministry is providing good value for money. The Miv]Ç[vPPuvÁ]ZlZ}ovµµvW(}uv/u}Àuv&uÁ}l review confirmed that the Ministry is focussed on the right long term issues for the transport sector.

The Ministry participates in the G}Àvuv[vvµovZul]vP Administrative and Support Services and Policy Benchmarking reviews which will provide comparative information on agency performance in the future. dZ}Z(}(}ZD]v]Ç[(}uvZÆv}ÁZ]Z]o]ÀP]v] Statement of Intent and work programme agreement with the Minister, and the quality and timeliness of its policy advice to the government. The Ministry reports on these factors through its Annual Report.

Annex 10 - Civil Aviation Authority

The Authority makes a significant contribution to the economy and New Zealand dZ]À]oÀ]]}vµZ}]Ç}À](Çvµ]Ç}À]PZ}(EÁov[]À]oÀ]]}v sector and delivers security services to the sector. Effective delivery of these activities helps foster a civil aviation sector that is able to trade a diverse set of goods and services domestically and internationally. Critical to the success of the civil aviation industry is its ability to leverage off a strong international reputation for effective and efficient regulatory oversight.

The Civil Aviation Authority has a clear set of business priorities

The Authority supports the achievement of the sector goal and the Minister[ priorities, focusing on: x Better Quality Regulation v over the next four years, the Authority will work with other agencies to provide advice and recommendations to the Minister of Transport to deliver improved civil aviation rules that:

o have a strong focus on the targeted identification and active management of risk, thereby focussing resources where needed to achieve good safety and security outcomes

o are derived from plans, such as the National Airspace and Navigation Plan, that give industry medium to long-term certainty about the investments required and the regulatory and technical standards that will be applied

o are more flexible and consistent with international requirements and expectations, thus enabling civil aviation participants to take advantage of new technologies and grow markets for goods and services x Safer Transport Systems v the Authority will continue to shift its focus such that it works more collaboratively with the civil aviation sector to encourage and facilitate the adoption of non-regulatory approaches to improve safety outcomes, including:

o application of safety management systems for the active identification and management of risk

o sub-sector (e.g., the agricultural aviation sector) analysis of risk and the development of plans in conjunction with the sector to mitigate risk x Improved '}Àvuvdv}Pv][W(}uv v the Authority will maintain its focus on improving its performance and delivering good safety and security outcomes by:

o driving business efficiencies through collaboration with other agencies for shared services (e.g. the Authority is currently providing Information Technology infrastructure Maritime NZ)

o investing in business systems to reduce costs, such as the development of online services for various types of aviation certification

o building capability to effectively respond to new technologies introduced to aviation (e.g. the introduction of the new Boeing 787-900 into service with Air New Zealand)

o regular reviews of its financial performance

The Authority is focused on building a high performing organisation

The Authority has set in place clear performance expectations for its business units (the Civil Aviation Authority and the Aviation Security Service). Key initiatives include: x ]uouv]vPZÀ]]}v^µ]Ç^À][µ]vÀ]ÁÁ]Z(}µ}v]ving efficiency and performance gains to reduce the cost of service delivery x completing the triennial funding review, and ensuring recommendations are based on robust policy and financial analysis that give a sound framework for future reviews x strong internal governance and management of key initiatives, to ensure on-time delivery and cost minimisation x strengthening engagement with the civil aviation sector to ensure that the Authority µvvZ}[}vvU]o}]ÀoÇ}v}vunage safety and security risks, and make timely and effective decisions x working with the Ministry of Transport on the review of the Civil Aviation Act, focusing on streamlining the requirements of the Act without sacrificing safety and security outcomes

The Authority will continue its focus on consolidating the gains made from its recent organisational change programme; in particular, the organisational efficiencies that can be realised from its business units working more closely together.

To build organisational capability, the Authority will develop resourcing models that focus on the types of technical skill that will be required to enable it to properly discharge its functions. Its intention is to ensure that it has the right capability available at the right time, in order to respond to changes in the sector it regulates and the security threats it delivers services to counter. The Authority is striving to become a regulator and security service organisation that is sufficiently ahead of the aviation sector to enable the development of that sector (rather than constrain it).

The Authority is aware of the tension that arises between the maintenance of effective safety and security standards and the needs of business and recreational aviation for minimum regulatory impost and a system that is able to adapt quickly to new circumstances. To help manage this tension and maintain good safety and security outcomes, the Authority will continue to work closely with the sector and government agencies v in particular the Ministry of Transport, and agencies such as NZ Trade and Enterprise. Openness and transparency are critical to the Authority developing and maintaining credibility with both government and industry in this regard.

Finally, the Authority intends to become an agency that is known for finding and implementing smart solutions to emerging problems that enable the sector to grow and diversify, while at the same time delivering good safety and security outcomes.

Annex 11 - Maritime NZ

Maritime NZ makes a significant contribution to the economy and New Zealand

Maritime NZ has a statutory objective Zµ]]^}µvl](ÇUµ]ÇUu]v protection, and other functions in a way that contributes to the aim of achieving an integrated, safe, }v]ÀUvµ]vov}ÇuX_

Effective regulation that delivers a safe, secure and clean maritime environment, by definition provides a foundation to enable and support a productive and competitive economy.

Maritime NZ has a clear set of business priorities

D]]uEµ}Z]Àuv}(ZD]v]}(dv}[]}]ies by focusing on: x Better quality regulation t As the national maritime regulator, it is responsible for supporting the development of a regulatory framework that promotes a safe, secure and clean maritime environment, and is responsive to the needs of industry and those that are affected by the risks associated with the industry. Key initiatives include:

o developing a new Maritime Operator Safety System for all New Zealand non-Safety Of Life At Sea domestic vessel operators. This will enable Maritime NZ to work more directly with operators to achieve safety goals

o developing and implementing a new seafarer qualification framework (SeaCert) that reflects industry needs, including a clear career path for seafarers that can be accessed on-line x Safer transport system t In accordance with its statutory objectives, Maritime NZ promotes industry compliance with the regulatory framework using a range of intervention measures that includes licensing, monitoring, education and enforcement. Key initiatives include:

o reviewing the National Oil Spill Response Strategy to ensure it can continue to meet EÁov[v]v}Z(µµ

o continuing to execute its statutory role in regulatory approval and compliance processes for the expanding offshore oil and gas exploration sector. Ensuring sufficient organisational capability is available and a joined up approach with other agencies is used will assist in ensuring the application process for oil and gas exploration is efficient vuEÁov[(ÇvvÀ]}vuvtal protection imperatives x /u}À'}Àvuvdv}Pv][W(}uvt Maritime NZ seeks to continuously improve its performance by working to become an evidenced based, intelligence-led, risk focused regulator. Key initiatives include:

o development and implementation of a Information Management Strategy to improve the way Maritime NZ collects, analyses and shares information

o participation in Government ICT Strategy & Action Plan to 2017 via the transport cluster ICT leadership pilot

o contribution to Key Result Area 10 via an ICT system review and investment programme which will include online engagement and transacting with the maritime industry (seafarers and operators)

Maritime NZ is focused on building a high performing organisation

Maritime NZ is focused on ensuring it is in a position to deliver on Government priorities by: x developing and delivering a 3-5 year financial strategy for Maritime NZ, Oil Pollution Fund and Rescue Co-ordination Centre New Zealand that enables appropriate organisational capability to deliver against respective statutory roles and responsibilities x planning for the next Maritime NZ funding review (2015/16) and Oil Pollution Levy review (2016/17) x identification of required investment to support effective and efficient marine incident response capability in light of the Rena grounding experience

D]]uE[(}µ}v}v]vµooÇ]u}À]vPvÀ]v-based, intelligence-led and risk focused regulatory, compliance and response organisation is in accordance wiZZ'}Àvuv[(}µ}v the delivery of better public services. Key initiatives include: x undertaking a strategy, structure and service delivery review (MNZ Future State) to ensure it is organised appropriately with the right accountabilities in place to deliver against its regulatory, compliance and response functions x development of a people capability strategy to ensure Maritime NZ has the right people in the right place at the right time, supported by appropriate strategies, policies, systems and processes x implementing a new IT system to support the delivery of MOSS, SeaCert and an intelligence- led, risk focussed approach to regulation, including online engagement with industry

Annex 12 - NZ Transport Agency

The NZ Transport Agency makes a significant contribution to EÁov[}]ov economic life by working to provide an effective, efficient, and safe land transport system.

The NZ Transport Agency (the Agency) is specifically responsible for helping to plan land transport networks, bringing a national perspective, providing access to and use of the land transport system, managing the State highway network and investing funding from the National Land Transport Fund. dZPvÇ[]u]}transport solutions for a thriving New Zealand that integrate national, regional and local transport networks to support strategic connections and travel choices across EÁov[ovv}ÇuXdZPvÇ[lÇ}v]µ]}v}ZD]v][riorities are set out below.

The NZ Transport Agency has a clear set of business priorities

Better Quality Regulation

The NZ Transport Agency will ensure that complying with regulations is simpler and more affordable, and lifts behaviour from compliance with the statutory minimum to best practice.

Over the next four years the NZ Transport Agency, working with the Ministry of Transport, will deliver the Vehicle Licensing Reform programme implementing changes to Warrant of Fitness (WoF) and Certificate of Fitness (CoF). These changes will deliver reduced compliance costs for transport users, estimated at $1.8 billion in savings over 30 years.

Investment in Infrastructure

Over the next four years the Agency and local government will invest around $16 billion in maintaining and developing land transport infrastructure, and services. A focus of this investment is to lift the performance of constrained key parts of nationally and regionally strategic highways, ÁZ]Zo]vl}PZEÁov[ui}vUµ]]}v}Uv}À] access between the regions. This investment will deliver a safer, more reliable and resilient national network that is integrated into the wider transport system.

The Agency is transforming the way State highways are maintained and operated and is restructuring its highways business unit to achieve this step-change. These changes will see a greater focus on customer service, better asset management including more consistent management of road assets across the country, and more joined up operations with local councils.

Over the next 10 years, the State highway function will concentrate on the following customer solutions: x improving travel time reliability through greater resilience x more consistent travel experiences on similar types of roads x delivering the Roads of National Significance programme

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dZPvÇ]o}o]vP]v]]]À}u}((]]voÇuvPvu]v]vZ}µvÇ[} infrastructure to improve the return on investment. As the NZ Transport Agency develops and invests through the National Land Transport Programme and Road Policing Programme, it will remain focused on: x aligning investment to agreed outcomes and improving value for money x ensuring effective and efficient co-investment with local government x exploring ways to enhance the value delivered by land transport investments

The Roading Efficiency Group is a collective effort by road controlling authorities (including local councils) to drive value for money and improve performance in maintenance, operations and renewals throughout the country. Building a more robust, effective way of working will reduce costs and encourage innovation in the management of local roads and state highways. The reforms will: x improve the performance of suppliers and the roading industry x reduce costs by saving money in the right areas x prioritise investment on the roads that need it most

Over the next four years the Agency will make significant progress on delivering major ]u}Àuv}}u}(EÁov[µ]v]}vooÇP]}µ t the Roads of National Significance.

Safer Transport System

The Agency is working with the Ministry of Transport, NZ Police, local government, Accident Compensation Corporation (ACC) and road user groups to deliver the Safer Journeys Action Plan. The Agency, working across the sector, will: x set new standards for how speed is managed across the national road network x look to change sector and public attitudes towards speed and speed management x improve the safety rating of the road network, with a focus on the nationally and regionally strategic sections of the State highway network

Opening Markets

The Agency is continuing its work with other transport network operators, local government investment partners, freight owners and freight transport operators to improve the efficiency of freight supply chains. The Agency will achieve this through the use of collaborative freight planning that brings the needs of freight efficiency and safety into the planning process. To help grow New ov[}v}uÇZovv]vPÁ}lÁ]ooZÀ]µo(}µ}vu}À]vP exports more efficiently from places of production to international gateways. dZPvÇ[Á}l}v]u}À]vP(]PZ((]]vÇÁ]ooZoulEÁov[Æ}u} competitive in international markets. Key result areas include:

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x completing (through facilitated discussions) the Upper North Island, Central New Zealand and ^}µZ/ov(]PZovUÁZ]ZÁ]ooP]À((}ZW}µ]À]Ç}uu]]}v[ recommendations for better freight decision-making and co-ordination x improving land connectivity between road, rail, seaports and airports x lifting the percentage of travel by high productivity motor vehicles as a total of heavy vehicle kilometres travelled

/u}À'}Àvuvdv}Pv][W(}uv

The Agency also has a priority to put customers at the heart of its business. This priority is designed to reduce red tape, improve compliance, enable easier digital transactions and reduce the cost of v}v}]vPµ]vXdZPvÇ[]v]]]À]voµW x making it easier for people carry ouZ]v]}v}vo]vXdZPvÇ[}v]µ]}v} the G}Àvuv[Wµo]^À]ZµoíìU(}óìv}(ÀZ]oo]v} be renewed online by 2017, is ambitious and requires a step change in delivering online services for customers x moving from an organisation that offers a set of discrete customer services to offering a complete package of transport solutions. This requires new ways of working with customers and stakeholders, having clear line-of-sight with transport goals, using new or enhanced capabilities and responding with more flexibility to increasingly complex issues

The NZ Transport Agency is focused on building a high performing organisation

The Agency is building an organisation that responds efficiently and effectively to change, whether it is a change in operating environments or a change in the needs of its customers. The Agency is developing a capability development plan to ensure it focuses effort on the key areas that will have the most impact in achieving the desired outcomes. dZPvÇ[]o]Ç(}µ]}µ]oZ]PZ(}u]vP}Pv]]}vZW x harnesses knowledge to make timely, well considered and aligned decisions to better respond to the needs of the sector and its customers x creates value across the sector and with its customers operating as a trusted advisor that is an integral part of a wider transport sector that generates solutions collaboratively x encourages continuous improvement and innovation by strengthening its ability to identify, prioritise and implement ways of doing things better

The Agency has adopted an evidence-based approach that establishes performance measures for its work in order to guide better outcomes across its four core functions. These measures include the return on investment, service quality and customer satisfaction.

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Annex 13 - Transport Accident Investigation Commission

The Transport Accident Investigation Commission makes an important contribution to the transport sector and the economy

The Transport Accident Investigation Commission (the Commission) helps reduce the harms from transport through its statutorily-founded inquiries focused on determining the circumstances of selected aviation, marine and rail safety incidents and accidents, and helping prevent recurrences. dZ]Á}lo}Zo(µo(]oEÁov[]vv]}vo}o]P]}v}}vµ]vvv(Çv prevention focused investigations (so maintaining international reputation and access to markets).

The Commission has established operating intentions designed to help ensure the wants and needs of its stakeholders are met. These operating intentions include: x developing and maintaining inquiry and investigation best practice x continuously improving operating efficiency x growing stakeholder relationships for their mutual benefit

The Commission has a clear set of business priorities dZ}uu]]}v[ui}u]µuu}i]À]}vµ]u]vµ((]]voÇ(µv}(µo(]o its statutory mandate and to maintain its wider contribution to government outcomes.

The Commission, which is fully Crown funded, is working with the Ministry of Transport on designing and executing a funding review to address a range of pressures broadly categorised into four areas: x Workforce - it takes several years for a new investigator to become sufficiently trained. In addition changing technologies, data availability, and expectations of best practice accident investigation are also changing the capabilities the Commission needs to access. A workforce plan is being developed to detail this risk and propose a response, which will have financial implications x Business intelligence - the continuing computerisation of transport related activities provides the opportunity for more sophisticated data modelling to help establish emerging risks. The Commission needs to ensure it has an appropriate level of knowledge management and research capability to support this. x Contingencies - an expensive investigation challenge, a major inquiry or an inquiry which required extensive hearing processes might require a reprioritisation of existing resources away from other work and/or application to the government for supplementary funding. The Commission is active in multi-agency work to ensure and maintain preparedness. A long- standing contingency for an immediate funding guarantee or injection to support a major accident investigation needs to be reviewed. x Input cost management - the Commission is a small agency with an annual operating budget of $3.865 million (ex GST). As such, its operating model is extremely sensitive to input pricing

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changes and shocks. The Commission last received an increase of operational funding in 2008/09. The Commission has absorbed cost rises since its last increase in operational funding through efficiency measures and taking advantage of All-of-Government purchasing arrangements. Salary management has been within state sector expectations and the total personnel budget has benefited from staff turnover. However, the Commission now believes there is very little more money that might be reprioritised.

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Annex 14 - Airways New Zealand

Number of staff Turnover 760 FTE $180 million ]ÁÇ}À]EÁov[]vÀ]P]}vÀ]

Airways provides air navigation services that enable safe, reliable and efficient air transport. It fulfils EÁov[v(}]vv]}vo]v}Ç}v(}u]vP}international standards and keeping pace with international technology developments while providing an economic return on investment to the government.

Airways has created innovative best-in-class traffic management systems that enable airlines operating in New Zealand to achieve optimal efficiency while delivering those services at a price in the lowest quartile globally.

Airways is looking for opportunities to make better use of air transport system capacity

In the next four years, Airways will be focused on upgrading navigation infrastructure to Zperformance vÀ]P]}v[Çus in line with international requirements. The upgraded systems will provide the foundation for step change improvements in air transport system capacity and efficiency while helping to reduce emissions from aviation.

Airways is looking to introduce improved traffic management processes which will make better use }(EÁov[]v}Çu]ÇX/]o}l]vP}(Z]P}µv-based technical infrastructure to improve resilience and efficiency, while optimising capital investment and ensuring it provides value for money.

Airways is also looking at ways to deliver more innovative service. Examples include making use of remote towers, developing low cost service options, and investigating the possibility of providing international services for profit.

Airways is managing some key challenges

Airways will need to manage a number of challenges in order to deliver on its objectives: x develop collaborative partnerships with airlines that maximise the productivity of aviation in New Zealand x ensure sufficient investment is available for a capital programme to sustain safe operations and facilitate a growth agenda x respond to, and take advantage of, the emergence of new technology

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Annex 15 - KiwiRail

Number of staff Third party revenue 4,019 FTE $769 million

KiwiRail has a key role to play in a thriving New Zealand <]Á]Z]o[}o]vo]À]vPv((]À]oÇu]]]o}Zµ}(Z}Àootransport ÇuvUZ}µPZZU]lÇvo}(Z'}Àvuv[]}]Ç}(µ]o]vPu} competitive and productive economy.

The existence of an efficient rail system provides freight shippers with cost-effective alternatives in managing their supply chains and location decisions. It contributes to management of transport as a cost, and supports productivity gains across the economy. Rail also has an important role to play in achieving positive social outcomes for New Zealanders through the increasing significance of public transport solutions.

KiwiRail is looking to improve rail[}u]]Àv

<]Á]Z]o]l]vP}]u}ÀZµo]Ç}(EÁov[]ov}}u}vÀvu with other modes of transport, while also cooperating with other players to create integrated solutions for customers. KiwiRail is primarily focused on the efficient movement of freight t on rail and ferry t along key freight corridors. A secondary focus is on effectively managing the other parts of the KiwiRail business.

The more successful KiwiRail is in these focus areas, the greater the contribution it will make to the New Zealand economy.

KiwiRail is working to achieve commercial viability

KiwiRail is continuing to work to transform its business into a commercially viable entity able to meet its long term investment requirements. There are still significant challenges that need to be managed in order to deliver on this. These include continuing to grow profitable freight traffic, improving labour and capital productivity, addressing the pricing of contracts that do not reflect the cost and/or value of the service provided, and developing a safe, high performance culture across the business.

KiwiRail must also continue to invest in the renewal and upgrade of its assets to underpin its growth, ÁZ]o]vPZZoovP}((µv]vPZ}v-}(([]oÆv]µXdZ]]voµZµ]o]vP of its Christchurch facilities, addressing the premature decay of some imported wooden sleepers, ensuring the earthquake resilience of its buildings, and undertaking remediation work in the Otira tunnel to address health and safety and environmental concerns.

Beyond achieving commercial viability, KiwiRail also needs to ensure it is positioned to enable public transport solutions in Auckland and Wellington in particular.

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Annex 16 - Meteorological Service of New Zealand Ltd (MetService)

Number of staff Crown contract with MoT Third party revenue 245 FTE $20 million $28 million MetService makes a substantial contribution to the transport sector

MetService provides a wide range of services to government, business, and directly to the public, to enable mitigation of weather-related risks, including: x through its contract with the Ministry of Transport, provision of weather forecasts and warnings to support New Zealand public safety, marine forecasts and warnings that are essential for maritime safety across the South Pacific, and representation of New Zealand at the UN World Meteorological Organization x specialised weather services for the NZ Transport Agency to support those parts of the State highway system that are vulnerable to hazardous winter conditions x commercial weather services for international aviation, supporting the Civil Aviation Authority }uEÁov[}o]P]}v}Z/vv]}vo]À]oÀ]]}vKPv]Ì]}vUÁoo range of domestic aviation services.

MetService will continue to grow its business through new and innovative services

In the next four years, MetService will continue to deliver core commercial weather services in New Zealand while also focusing on growth through the development of innovative services for domestic and overseas markets.

MetService will also con]vµ}u}v]v]u}ÀEÁov[ÁZforecasting services. Key areas of focus are the expansion and modernisation of the weather observing network and improvements in IT infrastructure, with emphasis on improving business continuance capability.

MetService is managing some key challenges

MetService will have to manage a number of challenges to deliver on its objectives, including leveraging opportunities for international expansion and higher shareholder returns, within natural constraints on capital and human resources. From a transport perspective, the key challenges will be: x re-negotiation of the contract with the Ministry of Transport to ensure long-term sustainability of core weather services supporting public safety x strengthening disaster recovery capability through investment in IT infrastructure and de- vo]]}v}((}]vP}]}vUÁ]Z}µ}u}u]]vP}vZ}uvÇ[(]vv]o goals x responding to the rapidly evolving technological environment within the commercial aviation sector

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