By Russell Jones*
The Independent Chair’s report on the City Centre to Mangere (CC2M) Rapid Transit proposal has been released. This article looks at the information in the report on the economics of the project. Three rapid transit options were evaluated; Light rail, Light Metro and Tunnelled Light Rail.
The costs of the options ranged from $9.0 billion to $14.6 billion. To put this into persepctive, total revenue into the National Land Transport Fund administered by NZTA in 2019/20 was $3.79 billion. This pays for the National Land Transport Programme (which pays for most of the land transport infrastructure investment and maintenance in NZ) and road policing.
A footnote to the CC2M costs states that “The costs are P50, and the cost estimate class (class 5; accuracy range of -50% to +100%, based on information produced and assessed against the AACE Criteria. The level of accuracy for these schemes have been assessed around -50% to +60%”.
Clearly there is a considerable degree of uncertainty in the costs which is a problem for the economics of the project as the report finds that the BCR (benefit cost ratios) of the options only just exceed 1 (1.1 to 1.2). A BCR of 1 is where the costs of the project equal the benefits. If the worse case occurs and there is an escalation in costs the BCR will fall below 1, meaning that the costs of the project exceed the benefits. BCRs are calculated using a discounted cash flow analysis.
Transport projects involve spending a big lump of capital up-front, with the benefits flowing over many years. The BCR is therefore sensitive to the cost of the project, the discount rate and the actual benefits which flow from the project. It should be noted that the NPV (Net Present Values) in this case are calculated over 60 years; this relies on being able to reliably forecast demand 60 years into the future which is almost impossible.
The report pitches the project as needed for the future where the area serviced is much more dense, with the report saying that the Tunnelled Light Rail and Light Metro options have the “potential for an additional 66,000 households over the next 30 years. This equates to 25 per cent of Auckland’s household growth within the Rural Urban Boundary. The Light Rail option has the potential to enable an additional 51,000 homes to 2051, which equates to 19% of Auckland’s household growth inside the Rural Urban Boundary”.
But as the corridor serviced is only a small part of the area within the Rural Urban Boundary and Auckland’s Unitary Plan, it is currently fairly liberal as to where development can take place the implication might be that for the project to be successful development may have to be restricted outside the CC2M corridor. The exception might be if Kainga Ora does enough development within the corridor – its website states that it’s building about 11,000 homes in the Roskill development and up to 10,000 in Mangere over the next 10 to 15 years.
The report is silent on the viability of any of the options at present.
The disadvantage of building the project now is that it becomes a drain on the taxpayer/ratepayer sooner and that the world may change in unforeseen ways. Two years ago nobody was expecting the COVID pandemic; it has stopped population growth in Auckland and changed people’s commuting behaviour with some people working at home more often or permanently.
This will have impacted on the economic viability of the City Rail Link and it’s possible the CC2M project could suffer a similar setback after the government has committed to it.
Russell Jones is an independent consultant in analysis and modelling of transport and urban planning issues.
37 Comments
Sadly when has ANY government project (local or central) ever come in on or under budget AND on time?
All blow their budgets and are never on time. NZ has 1st world expectations but 4th world project management skills, it feels like...
Cost of living would be so much more affordable if government and companies learned to reign in waste and inefficiency - what takes a year in other countries to build takes 6 years in New Zealand. It's not only silly and wasteful, but places such a huge burden on taxpayers current and future.
Blame both National and Labour governments for dismantling the venerable and productive Ministry of Works for no good reason in the 1980s and 1990s. All construction disasters since then can be traced back to that event.
Back in those days the Ministry of Works had years of experience in overseeing infrastructure provision, the training of thousands of apprentices, and the production of highly trained Clerks of Works to oversee individual projects.
Many of these well-trained Clerk of Works set up on their own and people getting a new house built for themselves could hire one for a modest fee to oversee the building of their house.
It's not just government, it's almost any decent scale construction. There's a range of reasons, increased compliance requirements, lack of experience, clients directly involved in the process, engineers and designers that make changes on the fly, etc etc.
NZ isnt particularly unique. Some places might be able to throw buildings and bridges up faster but a lot of them arent very well made.
At least they identify they can't actually nail down costs. It's not like its a spec house. Which ironically also can't be done for a fixed price anymore either.
Living in Katikati we are subject to ongoing traffic delays due to the four year $100m+ upgrade of SH 2 between Waihi and Tauranga being done for safety reasons. After observing how the work is being done I would love to see an analysis of the efficiency of the NZ road construction industry compared to those in advanced western economies. Of course the NZ industry would claim that such comparisons are impossible because the conditions in NZ are so different. But that is a copout. A study could look at the efficiency of each step in the process: excavation,quarrying of fill, placing fill, compacting fill, finishing the top layer, sealing (how often in NZ have we seen in recent years new sealing having to be redone), road marking, etc. And of course massive amounts are being spent on worker safety - an essential process but do we really need people standing all day at the side of the road holding/waving signs/flags when more sophisticated technology is available.
Its crazy what they are doing there, they put two white centre lines about 2m apart, fine in the daylight but at night in the rain all it takes is two cars tracking on the wrong white line and a headon crash will happen. Not long after that was done I arrived a few minutes after a headon crash there. Also lots of trucks and very little passing lanes, they could have put a few in but choose side barriers and a gap as described above. Idiots.
When I go to a city like Barcelona (pop. 1.62m) or Hamburg (pop. 1.84m)/Munich (pop. 1.47m) they have excellent local service underground and tram services. It only costs a couple of Euro, there is frequent service and it takes little time to traverse the city.
Auckland (pop. 1.66m) needs a huge ramp-up in service to reach the standards of a modern city. It has fallen far behind by developed country standards and is only falling further behind. We look absolutely amateur by comparison, it's embarrassing.
Oh how I tire of ignorance on population!
Barcelona is a very large city, it's metro population is nearly 5.5 million.
Auckland is a city at the small end of the medium sized city spectrum, with a metro population of around 1.6 million.
Hamburg and Munich's metropolitan populations are also much higher than what you quote.
why worry -- this government cant deliver on anything -- they wull be gone long before this even gets to approval stage and the project cancelled -- 14Billion would go a long way in our health service and education -
Every adult over 50 could get 5 yr MRI scans - early identifciation for heart and cancer the two biggest killers for starters - we could recruit the IC nursing staff -- train our own -- pay nurses and healthcare workers properly - resouce hositals -- upgrade failing infrastructure -- all before a pretty little train track that servies 1% of the population at best
You are right when you say it will not be built - they will be long gone before anything is approved .
They will have spent hundreds of millions on this white elephant though before it is canned - just like the cycle bridge - so to me it is something we should worry about.
Britomart train station was opposed by National. Smashed its long term patronage targets within a couple of years of opening.
The CRL was stalled for years by National but now we're wishing it was completed ASAP as it will take considerable pressure off other parts of the transport network.
Northern Busway, opposed by National and labeled a white elephant, it now transports more humans per hour than all the motorway lanes in that direction combined.
I'm a National/Act voter but the right's record on transport is abysmal.
The underground in London was a congeries of private companies, generally at each others throats, until 1932 when the predecessor of TfL came into being. Lines like the Metro were funded by land sales - Google Metroland. So 'public' bodies simply were not there during the underground's formative years......
Great frantic digging haste. Still discovering sealed off tunnels to nowhere. Manual labour. Poor sods. Many conscripted to tunnel under the Kaiser’s front lines and plant large bombs with dodgy timers and detonators. Miners as well, including NZrs. Bloody surrealistic to draw such a comparison, in present time, to what when on over 100 years ago.
The current NZ Govt is here for the long haul using emergency powers for many years ahead.
https://www.nzcpr.com/we-dont-love-you-anymore-jacinda/
“With a decent public transport system , Auckland could become the best city in the world.”
You reckon the above would offset our appalling house prices, violence, decaying infrastructure (eg water), generally expensive cost of living and a succession of left leaning councils that can spend $100,000s on street murals? Twenty years ago I thought bar the climate and distance from Western Europe, Auckland was a pretty desirable place to live. Now, I think it is a dump.
“the report is silent on the viability of any of the options at present.” Then look around. Sydney, a similar harbour city, built an airport link for the Olympics. Reason enough perhaps but it is now not profitable, and Auckland highly unlikely to ever host an Olympics. Quite incredulous that money of this magnitude should be touted for such a pie in the sky project when the Covid pandemic has exposed starkly, the chronic incapacity of our hospital services. This is where money must be spent. Ask any sane person what they would prefer.Easy access to a reliable professional hospital or a train ride from the airport. Wake up New Zealand for heavens sake. Sort the basics, bury the vainglorious political grandstanding. The ridiculous new wide bodied jet airport on pristine land in Central Otago, is another travesty.
Just bloody do it. The longer they leave it, the harder and more it will cost. Cars are not the future in Auckland, I think most can agree on that. Imagine the traffic now, FAR worse. I saw a house that sold with consented plans for 15 dwellings. That is, lets say, 2 cars for that address currently, to 15 cars minimum in a year. Over a 7 fold increase. Multiply that by many properties and it doesn't take a genius to see where we are heading.
I see major risks both ways from some quite strategic issues:
a) What if any carbon price has been assumed in the central scenario. NZTA's numbers don't align with Treasury's forecasts (NZ should be using 1 set of numbers)
b) Whether or not congestion tolls have been assumed around the Auckland CBD - this will substantially change travel mode shares
c) What population forecasts have been used. Its possible NZ productivity commission's inquiry could see the policy settings used by governments change in the future.
d) Given the governments proposed policy change to allow 3 storey housing as of right, how much of the proposed growth will actually occur in the light rail corridor vs expectations.
Also the paradigm shift in transport technology makes future forecasting dubious and I assume have not been modelled. (e-scooters, e-bikes, AVs, on-demand transit etc).
Given the very large strategic forecasting uncertainties a first year rate of return approach would at least anchor the upfront return. Construction could be timed so the FYRR is acceptable.
I really do not understand why the Onehunga line, that is currently dead headed, does just not get pushed out to the airport and beyond.
I really dont know what they are doing with the old bridge across the manukau harbour, but they have been working on it for at least 3 or 4 years. The painfully slow progress on civil projects in this country just does my head in.
Just do something, the paralysis by analysis brigade are in full force. Time for a good old fashioned dictatorship.
Not sure its growth as such , we are about 100 000 houses short of equitable housing situation . These will be high density housing near public transport.
Now , if you said lets end 200 m3 single storey houses , built on farmland and dependant on private car for transport , I would agree with you .
The only way to live. 200m2 = 100m2 of viable solar carrying capacity. On a 1/4 acre section enough room for gardens, chickens, fruit trees and a lamb to keep down the grass until Christmas.
Only 3 neighbours, not 24 households (3 plots x 8 townhouses). Peace, quiet, and never hear your neighbour going to the toilet.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.