Posts by Rhema Vaithianathan

  • Speaker: Economics of the Waterview Tunnel,

    The question of whether there should be extra financing costs simply because it is outside the Fund is questionable. I have never seen such a cost added. The ring fence is an artifice to Government accounting,. and financing costs should reflect the opportunity cost of funding. So either all options should have financing costs (i.e. opportunity cost) or none.

    It's sort of like taking a cash advance on your credit card, and then pretending that the option which uses your cash is free, and the one which uses your credit card costs 25% .

    It flies in the face of the theory of economic costing - which is that if accounting rules can influence our relative costs, then the costs are not "economic" but "accounting".

    This is why most economists think PPP for roading is a rort - it is just a way of getting the debt off the Govt. Books- but does not in any meaningful way reduce Crown risk. Nice for accountants but not for economists.

    I am getting pretty frustrated at the lack of proper costings. I was supposed to be on morning report debating it with LTA but got bumped by the Mellissa Lee car wreck. (Mind you - not the sort of topic to be debating in the morning before fully awake!)

    Auckland • Since May 2009 • 2 posts Report Reply

  • Speaker: Economics of the Waterview Tunnel,

    The $550 million which appears as a "finance cost" on the deep tunnel but appears nowhere in the current proposal is in my opinion a fabrication. There is no justification for it. The issues are rather technical. The $550 m reflects the fact that the funding of the deep-tunnel will exceed the LTA ring-fence. This means that it will have to come from somewhere else. In the case of the Transmission Gully it came from the Consolidated Account (i,e, Stephen Joyce) and therefore had no finance costs. It appears that Joyce has REFUSED to fund the deep-tunnel which means that LTA has to fund it elsewhere. It seems they are putting it on their credit card (or perhaps the Money Shop on Dominion Rd????) hence the outrageously high finance costs. It's a fiddle, plain, simple and outrageous. The difference in price has been over-stated by 100%.

    Auckland • Since May 2009 • 2 posts Report Reply