Public Capital Programme

@JtO
I agree Fine Gael and Labour are partitionist. It’s because there is a partition (grown ups call it a border). You might as well call the French government partitionist because they refuse to build roads in Germany.
Any increase in road deaths between 1994 and 1997 has nothing to do with transport spending in that period as there is a considerable lag between capital investment and outcomes.

Sad , very sad – typical Irish entropy economics.

The report displays a similar attitude to the NAMA meme a few years ago – we spent billions & billions on concrete so we must make it work no matter what.

The high continual input costs into the road network that is not all expressed on the fiscal books is not talked about amongest polite dollar centric economists i.e. the much higher depreciation & fuel input costs of road vehicles over Tram & light rail.
(Trams typically operate for 2 to 3 decades – buses & taxis less then a decade before they display obvious reliability problems due to the shocks & bumps of continuous everyday road use.)
This effects our trade balance in a very real way which up until the euro crisis was not considered of utmost importance, now its everything so why do we continue with this disastrous road policey ?

The probable generational lack of bank credit for the purchase of consumer durables (cars) is not expressed – this will dramatically effect the size & reliability of the national car fleet going forward as they say.

Therefore there is no recognition that money must replace credit or else we enter into a depreciation vortex where the stock of our capital goods declines back into Victorian squalor.

They must now accept the national motorway project was a misallocation of resourses when all input costs are factored into the equation and not just fiscal as the costs were hidden by cheap private credit and oil.

If we tie our success to a flawed transport / housing policey just because it is built we will die a slow death I am afraid – these are 20th century consumption sinks , but Ireland was always last to the trough of transport policey with investment not returned as the world moved on and we did not – with canals , rail and now road – history is repeating itself.

A radical anti – private car tax policey is the only mechanism to save us from this transport dead end if we cannot create our own money.
We won’t even be able to run to standstill as the static driveway / carpark depreciation costs become apparent.

PS any transport economists out there who can give half decent car depreciation costs would be much appreciated.

@Edgar
Where can one get a list of the 45 road projects that have already been slashed?

Thanks, Edgar!

Very interesting French tram project in the town of Valencienne(pop just 40,000+) – this is not a typical compact French town / city.
http://www.trams-in-france.net/valenciennes.htm

Situated near the Belgium border it was near totally destroyed during the Great war and during the second round – subsequent urban development was industrial / car based during the remaining part of the 20th century.
fr.wikipedia.org/wiki/Arrondissement_de_Valenciennes

Looking at Google Earth the development is very Irish like infact with little rationality to the urban / rural divide.
Much of the phase II(8.8km) line uses a ancient train line(6.5Km) to terminate in the satellite town of Denain (pop 20,000), with the town of Anzin in between (pop 14,000)
Phase I moves through a more conventional suburban mess to terminate at the university.
http://www.youtube.com/watch?v=HKywpU4ANVo

This is also not the richest part of France – it is certainly not Bordeaux or anything like that.
And yet we have a 120,000ish Cork city with 15,000 class satellite towns in Ballincollig ,Rochestown , Carrigaline & 5,000 class Passage west and Monkstown , – a major port in Ringaskiddy , a University , a tech collage all along the south river which has no rail or heavy tram access !! – eventhough some of the old blackrock / passagewest railway route is still intact!!!!!

As I said we are a classic example of entropy economics operating in open view here – “just depreciate everything both human & physical to get a short term return”
Rationality be damned – its a foregin word in this bog.

sorry “foreign” for all those legionnaires in this room.

(apologies for broken numbering of above)

@Edgar Morgenroth

For the period 1995-97 when FG and Labour were in power per capita public investment in the border region was second highest.

JTO again:

This is ridiculous.

The previous FG/Lab/Stickie government was only in power for 2.5 years, a brief interlude in the 24-year period of FF government. All the spending priorites for that period were set by FF. FG/Lab/Stickies weren’t in power long enough to change them. Look at FG/Lab’s record over the long-term, then you might understand why nobody in Donegal votes for them. If you are so confident that FG/Stickies invest in infrastructure in Donegal, Monaghan and Cavan, let’s have an inventory of all the infrastructure in those counties and see under which governments it was built.

tull mcadoo:

Your lack of vitriol on the decision to shutter 45 other projects in the 26

JTO again:

Au contraire. If you read my post, you’ll see that I condemned the FG/Stickies government for winding down the road-building program generally because of its effect on road safety.

According to Edgar Morgenroth: “for all intents and purposes (national) roads building has stopped.”

This is disgraceful, but all too typical of FG/Lab governments, and not in the least unexpected from them. They will deserve all the flak they get when road deaths start soaring again and Monday morning news bulletins are dominated by reports of road deaths of 10, 15, 20 young people over the weekend, which was the norm in this country before FF made their massive investment in new roads.

However, there are good reasons for particularily condemning the A5 decision:

(a) The North-West corner of the island is the only one without a motorway link. Not only that, but it doesn’t have a rail link either. So, it is doubly deprived and at a huge disadvantage when it comes to FDIs deciding where to locate in Ireland. Not that Kenny and co will lose any sleep over that.

(b) The road deaths rate in the border counties is far higher than elsewhere. I have calculated them as follows:

road deaths rate by region in Ireland from 1997 to 2010

defined as: number of road deaths per 100,000 population

[1] Dublin and Mid-East region
[2] Border region
[3] Midlands region
[4] South-East region
[5] West region
[6] Mid-West region
[7] South-West region

———–[1]——-[2]——-[3]——-[4]——[5]——-[6]——-[7]

1997 9.976 20.088 19.664 14.238 11.299 14.789 11.473
1998 9.097 14.856 18.009 17.306 14.615 12.733 11.737
1999 7.779 19.045 12.629 12.361 12.332 11.346 11.065
2000 8.142 19.025 20.333 11.013 12.135 7.573 8.140
2001 8.149 13.882 14.512 13.685 9.767 11.333 11.534
2002 6.317 16.416 12.868 11.567 11.833 12.368 7.409
2003 4.937 14.786 16.927 9.758 8.224 10.222 7.648
2004 6.310 16.674 12.690 10.274 11.672 10.127 7.210
2005 5.750 17.705 17.776 11.136 10.848 11.045 8.207
2006 5.413 11.743 16.292 10.850 8.448 11.079 8.694
2007 4.160 14.128 11.530 10.542 9.537 9.320 7.117
2008 2.777 10.152 9.745 9.430 8.683 9.949 6.671
2009 3.282 7.968 5.543 4.431 8.577 9.091 5.093
2010 2.412 9.387 8.050 5.177 5.113 6.407 2.932

The number killed on the roads is far higher in the border region because the roads are much worse. But, I’m sure Kenny will find that every cloud has a silver lining – they are mostly FF voters.

The stickies as in the official IRA/ Worker’s Party ? What on earth are you blathering about.

Fine Gael are to blame for road deaths in Donegal ???

Someone call the men in white coats.

Does anyone have any thoughts on the shelving of Grangegorman. It was part of a wider Urban regeneration Plan which included HSE facilities, schools and so on moving to the site, not just DIT. Wondering if the entire re-gen project has also been cancelled.

@jto – I consider the first bit of your last comment liabolous and will remove it as soon as I get back to a proper computer. It is very easy to make remarks like that while hiding behind a pseudonym.

1. If you believe the BCR;

Do you mean that you disagree with the BCR model used or the assumptions or something else? The assumptions are in appendix 2 of this document.

2. BXD will reduce the BCR of Metro North through duplication;

Surely there would be +ve and -ve effects. BXD will feed passengers to the catchment areas of Metro North from North West Dublin city. There is also the network effect to consider. RER and Metro in Paris complement each other.

3. They did rebalance it, or be it by cuts – remember there is a very binding budget constraint.

If budgets are so constrained then why is the current budget increasing by 2bn? And why is public transport being cut so much more severely than roads?

5. Not all capital projects yield a return – some are just a cost. The cost of an IDA created job is a lot lower that a publicly funded construction job.

Being an expert on transport economics, you will know that the returns from transport project are difficult to predict and wholly dependent on myriad assumptions such as the long term future price of fuel, how to price human life and health and time and many other philosophical questions. BCR’s are at least useful for comparing projects of the same type.

I think your own analysis of MN using two methodologies came to two contradictory conclusions. The essential benefits from public transport projects are surely long term and centre around making a city a better place to live and do business. The construction jobs are surely a fraction of the long term benefits just as the disruption during build is a fraction of the costs.

The NPRF investment is interesting. It is commiting €250m with another €50 already committed from other sources.

To get to €1bn, they can lever the fund 2x-2.5x pretty handily I’d have thought. So they really only need to raise a further €100m-€200m in equity.

They haven’t said what kind of returns they are expecting from the fund other than that they will be ‘on commercial terms’. I think we can expect some of the Irish banks, insurance companies and pension funds to be asked to ‘wear the green jersey’ and invest.

Irish Life appear to be marketing the fund but not necessarily committing capital. AMP are to manage it.

If this fund is successful, they could try another one again in a couple of years. That is if the NPRF’s discretionary portfolio has not been totally liquidated by then.

@ossian – regarding BCR you might have a look at a paper I published yesterday. The fact that a project has a good BCR does not mean it is the best project. I take your point about positive and negative impacts of doubling, but serving roughly the same area with two routes reduces benefits.
I would also prefer there to be more money for public transport and all sorts of other projects, but we don’t have it. I have not looked at the current expenditure aspects of the medium term plan but I suspect we are spending more on social welfare etc.
The cost of a job difference refers to the average (see my 2009 working paper) and is quite large.

@all

I just crunched the numbers on this and coupled it with the fact that the coalition has included 25BN Euro (wlking around money) in the total debt of 170BN.

The five year capital expenditure plan of 17BN is very interesting when we compare it to modest projected growth of the NRPF(exclusive of the 12.5%shares it owns in the banks)

We know that a 3.6BN “adjustment” has been pencilled in for 2012 and is broadly accepted by the majority of the population. We also now know that capital expenditure for 2012 will be 4Bn and will come out of current expenditure during which time the NRPF will rise to 9BN (with at least 1.6Bn being poured into each year between 2013 and 2017) and that the fund performs comparitively well.

We also know that opposition to further austerity will be very strong in 2013 among at least one of the caolition partners. who also have historically never really been in favour of the the NRPF and have reservations about privatising state assets beyond the 2BN which has been tentatively agreed.

Both parties accept that taxation has to exceed growth in 2014 but neither party is particularly interested in allowing taxation to increase by much more tha 2% in subsequent years.

Both parties are also keenly aware of the madness that is currently going on in Europe and are not overly enamoured with the presence of the Troika.

Consequently it does not stretch the imagination that “adjustments” in 2013 will include 4BN capital expenditure (replaced by NRPF “purchasing” of state assets) 1BN tax increases, 1BN legacy savings from the Public service “Golden Parachutes” together with various public expenditure savings, and 1BN as part of the pre agreed privatisation.

Add the above 7Bn to 3.6 Bn “adjustments” in 2012 budget and we get 10.6BN “adjustment” with at least 10BN (down from 25BN) reamining out of existing borrowings to date .

This would allow Ireland to bid farewell to the Troika with a 3% deficit, be prepared for a Euro implosion (or depature) and counteract “sustainability/austerity” arguments by pointing to the NRPF and money in the current account as well as the eagerness of private Irish pension funds to buy into Irish bonds.

If the Euro survives than2 arecovery success story” would have to carry a 75BN premium for Irish membership. If the Euro does not survive than Ireland concentrates on strengthening the European Union (when we take over the presidency in 2013)

If the Euro survives we may see a “3 tier Europe” a small number of rich countries which are not in the Euro, a decreased number of countries who use the Euro and a third “tier” of countries who may use national currencies or something pleasantly described as a “Euro plus”.

IMHO Irelands choice in 2013 may well be to decide between a non Euro “Tier 1” or continue with the actual Euro itself (if it survives).

I hope this provides food for thought:)

There is an Economic and political “war” going on in Europe and it looks to me like the Irish have resorted to diplomacy, limited rationing and stockpiling.

@Edgar and all

re: funding for new schools.

Hopefully somebody will come up with the “bright idea” of converting some of the office buildings/hotels currently in the hands of NAMA . There might be some good “deals” available there for the taxpayer which would allow more of the “schools” money to be targeted at the “labour intensive” element of the earmarked expenditure. which can then be redirected at the end of the plan towards new housing construnction when we fnally “run out” of houses at the middle of the decade.

We have very little shortage of “concrete” constructions around the country at the moment which could provide a variety of public uses. IMHO it is time we became more “creative” with what we have (and using them to create jobs and improve our society) rather than focusing on what we dont have.

@Dork

I understand your concerns about too many cars in Ireland and the need for more public transport. One positive side effect of this recession is that a “3 car family” is finally no longer deemed a be a necessity.

However we need to remember that there ar a lot of people living in “Bally-back-of-whatever” (and even more central locations than that) who cannot hop on and off a Luas, Dart, bus or train. Cars are often more of a hassle than a luxury but many people simply cannot do without them.

with bad roads to the north it be harder for shoppers to escape the rip off republic and any vat rises, yes yes i see it now 🙂

@JTO

the Cork to Limerick motorway has been axed as well, that between the 2nd and 3rd largest cities in the Republic…..I blame the Dubs what do you think JTO??? 🙂

We should not be giving grants to farmers to build capital – surely they can borrow from banks to fund investment.

If not, then maybe give them soft loans – but not grants.

Edgar’s paper on evaluation methods for public infrastructure projects in Ireland: http://esri.ie/UserFiles/publications/EC002.pdf

JTO,

If the absence of the “road to nowhere” helps to prevent the Doengal football team from playing in Croker it will be a good day for Ireland.
Donegal may be in uproar but the rest of the country will survive.

Worth noting that tender prices are now a third lower than peak values and have returned to 1998 levels:
http://www.scsi.ie/publications/press_releases/scs_press_releases_2011/tender2

Is it really a great idea to wait 10 years until prices have re-inflated and the city is choked with congestion again to start building public transport infrastructure?

Also worth considering that various EU grants and loans will be forsaken if these projects are abandoned so that current spending is increased. The European Investment Bank had approved Metro North for a €500m loan. Cork-Dublin and Dublin-Belfast would both have qualified for funding under the trans-European transport network (TEN-T) programme.

@Livonian
They cannot hop on these public transports because they simply do not exist as most transport resourses went into private car expenditure that created this low density suburban / subrural mess.
We simply do not have the resourses to sustain this Californication of Ireland – we must divert our now limited resourses towards the linking up of the remaining Edwardian nodal points that were themselves a product of late 19th early 20th century rail connections
You see wasteful expenditure cannot be taxed – it just evaporates in the economic ether or more accuretly feeds the appetites of Gulf oil sheiks & there fellow Banker travelers.
And yet absurdly fiscal policey is not directed with much vigour to counter this gross misallocation of resourses !!!
According to the recent census Cork citys population has declined marginally with more and more people living in Corks satellite towns.
And yet very little public transport resourses have been deployed to link this linear follow the river development that is very suitable for a heavy tram project because the nature of the topography made Cork the most compact of our larger cities – linking the commuter town of Ballincollig all the way to Crosshaven terminus which has experienced explosive growth during the boom.
This is a triage operation – we must try to save the semi rational development and let the grossly misallocated habitations wither on the asphalt vine.
The lack of imagination and elan of our “planners” is striking.

The relevant graphs are on page 19 of my link. I haven’t fully mastered linking yet!

Antoin o lachtnain: here in Toronto 12 years is the aspired to timeframe to replace buses. You can get 18-25 if you rebuild but *only* if the frame construction is sufficiently good that it has that much more life left, and in any case a rebuild isn’t free either and it means slippage behind current accessibility standards etc.

Mark: apparently not true. See page 20 onwards of this document. . Those buses are built for a 20 year lifespan. Rebuilding is not expensive.

http://www.unhabitat.org/downloads/docs/7997_98920_Adam%20Giambrone%20Toronto.pdf

The climate in Toronto is very different.

Dublin Buses last far longer than 12 years. They sell them on at that point to other operators.

Dublin Bus also has large scale maintenance operations. There is one mechanic for every three buses and so rebuilding should not be much of a difficulty resource-wise.

@Eureka

100% thanks for that.

@John Foody

85% thanks for that

JTO again:

However, I have decided not to post any more on the site, although I will read it. But, as someone in Belfast once said, ‘I haven’t gone away, ye know’.

I am setting up my own blog, called Ireland Calling (unless that name is taken, in which case I’ll call it something else). It will be hopefully quite professional.

As I have a day job, it will be the Christmas holidays before I have time to do all the stats for the first couple of months entries. I’ll probably launch it in the first week of January, after the festivities are complete. It will be totally non-commercial and free, of course, like this one.

It will be based on high-quality (hopefully) and sober (which probably means boring) statistical analysis covering lots of topics, not just economics (but also, demographics, health, road deaths, sport), with lots of nice histograms and charts, and will give equal weight to N. Ireland and R. Ireland statistics, with lots of comparisons between the two. It won’t be me ranting off with my own opinions about the topic of the day.

The trouble with this one is that it gets too heated in the cut and thrust of the debate, myself included. So, I want to avoid that, and just do something that involves mater-of-fact (but hopefully quality) analysis of statistics. As I said, this site often gets out of hand, myself included.

@JtO

Chicken!

The government is attempting to correct a current account deficit by cutting capital spending while raising current spending in both nominal and %GDP terms. This makes no sense to me. Robert Watt is secretary general to Howlin’s new Dept of public expenditure reform that presented this plan. I’d love to hear him explain the logic of this move.

The difference between capex and opex is clear to anyone in business, partly because Revenue treats these expenditures in different ways (you cannot deduct capital expenditure in calculating your taxable profits).

Imagine a capital project at a cost of 100m with benefits and costs over 30yrs. Financed at 8%, that’s 8.8m/year. We cannot cancel this 100m project and then increase current expenditure by 100m/year while claiming that the adjustment is revenue neutral.

The government announced last week that the A5 would be given 50m despite the capital spending review. It is worth noting that the Derry-Belfast train is so antiquated that it only manages 50km/h. Money might be better spent on the Dublin/Belfast/Derry corridor by upgrading the train r completing the Derry-Belfast motorway.

Lastly, the new plan is to spend twice as much on investment in roads as on public transport between 2012 and 2016.

Oops, forgot the link:
http://www.esri.ie/pdf/COMMUTING.PDF
See table 2.3

Ossian:

Yes you can cancel the project and claim it is cash neutral. Not spending 100m now will mean that you have 100m to spend on something else. If you were looking at it from a financial accounting point of view, it would work out differently because you would only release the cost to the P+L slowly, over the life of the asset, but you would still have to find 100m to fund the asset.