Rethinking the future
While New Zealand has restored modest levels of domestic activity following the Covid19 outbreak, prospects for full recovery are undermined not just by continuing border threats, by the twin blows of falling global trade and rising global indebtedness. Even if the country remains largely virus-free, it faces ruptures to the economy and employment, migration and housing, commuting and travel. Under these circumstances many of the shovel-ready projects placed before Government for funding may be of minimal long-term value, leading instead to additional fiscal strain and lower productivity.
It is time for a real rethink.
Back track on this one first
For starters, it makes sense for Auckland to follow economist Tim Hazeldine’s advice and pull the plug on Auckland’s Central Rail Link. The cost of shelving it should be far less than the cost of completing it.
As for LRT, do not even get started
It also makes sense to abandon plans for light rail transit. A solution in search of a problem, there was never a robust case for it. And even if investment funds are willing to front up with the dollars, ratepayers (and taxpayers) will struggle to meet the returns they will require to justify such a high-cost, high-risk project.
It appears that LRT has been shunted aside by the government for the moment, athough evidently officials continue to work on it.
Now, though, is the time to finally lock it away.
Tracking light rail proposals
I intended to review the economic rationale for the LRT but could not pin down exactly what we are going to get, for how much, and why. So, all I can offer are conclusions based on reviewing as much of the associated documents as I could find.
Here is what I covered (with links).
· The Auckland Transport Plan (Auckland Regional Transport Authority, 2009) suggested rapid transit would be needed in the long-term to relieve commuting congestion on four cross-city routes.
· The Auckland Regional Land Transport Strategy 2010-2040 (Auckland Transport) firmed up on these prospects with proposed construction between 2031-2040.
· The Auckland Regional Land Transport Plan 2015-2025 (Auckland Transport) switched tracks, promoting LRT to fill the gap in services between the inner suburbs and the CBD.
· The Auckland Central Access Plan (CAP) Programme Business Case (Auckland Transport, March 2016) proposed “higher capacity rapid transit” services on the isthmus.
· A Peer Review (April 2016) supported the CAP but noted that it was based on a heavy focus on public transport; reliance on land use assumptions from the 2011 Auckland Plan (Auckland Council), and most significantly, ignored affordability, which “should be addressed as soon as possible” (p2).
· The South-western Multi-Modal Airport Rapid Transit: Draft Indicative Business Case (SMART, Jacobs NZ Ltd, June 2016, for Auckland Transport) compared the economic and financial performance of heavy rail, light rail, and bus-based rapid transit for the CBD to Auckland Airport route. While LRT was favoured, further investigation of Bus Rapid Transit was also recommended.
· The Advanced Bus Solution (LEK, January 2017, for NZTA) specified a more advanced system offering a higher level of service over a larger catchment. It indicated an incremental B:C ratio of 1.28 from the improvements proposed. While different discount rates prevent detailed reconciliation with the SMART report, the analysis suggests that a bus option could match LRT in economic terms.
· The Advanced Bus Solution Report (Auckland Transport, February 2017) suggested the LEK solution may only be sufficient until the 2040s, and involved technical uncertainties and transition risks. It instead proposed staged transition from bus to light rail.
· The Auckland Transport Alignment Project (ATAP), a collaboration between Auckland Council and central government, advanced rapid rail to Auckland Airport and Westgate as part of the rapid transit package in its 2018 report.
· The Auckland Regional Land Transport Plan 2018-2028 confirmed these routes.
· The final ATAP report (2019) called for a $8.4bn investment in rapid transit over ten years (excluding the western line). This included heavy rail, busways, and light-rail. The cost of light rail, scheduled post-2024, was not identified.
Government gets on board
In 2015 the government and Auckland Council agreed to align transport spending for projected growth of 700,000 people over 30 years. The government committed to $18.5bn of $28bn total funding called for by 2028. The Minister of Transport then proposed prioritising the CBD-Airport link from this “indicative package” (Cabinet Economic Development Committee, July 2018). He requested NZTA to prepare a business case, and called for measures to accelerate the project.
Treasury and the Ministry of Transport reported on an early draft of the business case in November 2018. They noted expectations for “balanced and robust” economic analysis, a “rigorous process” for considering risks to government, “clearly articulated financial implications”, and “appropriate” governance arrangements. While their advice was redacted, the report said that the NZTA Board was unlikely to be “in a position to resolve all issues that a business case requires as a minimum” at its November meeting.
And off again?
It appears that the rigorous analysis recommended by Treasury was sidestepped. Instead, in June 2019 two potential suppliers were announced for the City-Airport LRT, with proposals received in August from NZTA itself and from NZ Infra, a joint venture between Canadian investors CDPQ Infra and the NZ Superannuation Fund. The NZ Infra pitch raised the prospect of funding it off the books.
A decision on the preferred partner was not made, although $1.8bn was committed to seed funding. However, the total cost of just this link was estimated at $6bn, suggesting earlier estimates were wildly out and that LRT would never be economically rational, and throwing doubt on delivery of ATAP’s $8.4bn full rapid transit package.
In October 2019, it was revealed that the NZ Infra proposal was likely to provide for grade separation (including undergrounding) at a significantly higher cost than the at-grade NZTA proposal (costing perhaps $10bn). While this has the advantage of retaining capacity on existing corridors for other modes and might lead to lower long-term operating costs, it is impossible to see it stacking up in economic terms. Add in likely cost over-runs and it is surely a fiscal step too far.
Hence, reported splits in the governing coalition over the issue in May 2020 are hardly surprising. Labour is reportedly leaned towards the NZ Infra PPP proposal while junior partner New Zealand First appeared unwilling to commit to any LRT.
LRT at any cost?
Despite changing technical and financial parameters, and the uncertainties of a post-Covid19 world, the NZ Super Fund remains “enthusiastic about” Auckland LRT. That is not surprising: securing long-term, government-guaranteed returns is commercially clever in an uncertain, recessionary economic environment in which equities so much riskier and bonds so much less rewarding. But it wouldnot work for Auckland and Aucklanders.
So, what can we take from this history?
There is considerable variation in the policy trail regarding what LRT services might be required, and in what order: long-term cross-regional commuting? linking the inner Isthmus suburbs and the CBD? lifting capacity between the outer Isthmus suburbs and the CBD? or linking other employment centres (Westgate, the airport) with the CBD? This makes it difficult to trace the costs – and economics – of even the version currently being advanced, the CBD-airport LRT.
After more than a decade of official deliberation, we have no idea what the configuration of regional LRT will be, or of the costs, but we can be confident that they will be a lot more than the figures bandied around at present. (With four years to go before completion, the CRL is already 70% over the original budget). One way or another ratepayers and taxpayers will be footing a substantial bill if LRT development proceeds.  If nothing else, uncertainty over the future of international travel and the recovery of aviation mean that the time has come to dump the proposal for a CBD -airport line.
The public has been sold the sizzle but there is no sausage.
Time to take the bus?
Just as disturbing as undue preoccupation with LRT is the failure to fully evaluate advanced bus transit. This would offer the ability to invest incrementally to cater for short and medium-term shifts in public transport demand. It provides opportunities to:
· Adopt new technologies as they evolve, continuously advancing service levels;
· Respond to major changes in land use and patronage;
· Fashion a network that provides wide-ranging connections across Auckland’s distinctive geography; and
· Align investment and funding more clearly with benefits.
At the same time, a bus-based transit system would substantially lower economic and fiscal risk compared with large scale, fixed-track solutions.
If nothing else, the shock of Covid19 provides the opportunity – and excuse –to avoid repeating the Central Rail Link experiment. The future is more likely to be about demand-responsive rolling stock using largely existing corridors to serve communities and commercial activities across Auckland, rather than carving out new routes or reducing the flexibility and accessibility of existing arterials to favour limited corridors of residents and prop up values in selected commercial destinations.