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Bridge to Somewhere: The Value of Auckland's Northern Motorway Extensions

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Document Format: Motu Working Paper

Publication Year: 2008

Abstract

We estimate benefits that have resulted from extensions to Auckland’s Northern Motorway since 1991. Population and employment rose substantially in locations near the new exits and to the north of the motorway extension, relative to developments elsewhere on the North Shore and in the broader Auckland Region. Land values also rose strongly near the new exits. Our approach to measuring net benefit uses changes in land values (after controlling for other factors) as a revealed preference indicator of value. We compare the estimated benefits with costs of the project to gain a measure of the project’s benefit:cost ratio (B:C). Our results indicate that the gross benefit of the extensions from Tristram Avenue to Orewa is at least $2.3 billion (2004 NZ$s) compared with the estimated extension costs (discounted to 2004) of $366 million, giving a B:C ratio of at least 6.3, which exceeds the standard ratio of 4.0 used to approve roading projects in New Zealand. Our estimates take account of the possibility of diminution in value occurring elsewhere near the existing Northern Motorway network, but not in other areas of Auckland or elsewhere in the country. Conversely, they do not include any benefits that may be impounded in commercial property values in the CBD (and elsewhere) arising from increased accessibility to an enlarged labour pool.

Citation

Grimes, Arthur and Yun Liang. 2008. "Bridge to Somewhere: The Value of Auckland's Northern Motorway Extensions," Motu Working Paper 08-07.

Motu code: MWP0807

JEL codes: H43, H54, R42