We hear in the NZ Herald today that the government has axed the Waterview Tunnel options, leaving choices between a half-arsed trenched (or perhaps cut & cover) or full surface option.
Transport Minister Steven Joyce is expected to confirm this morning that the Government has no more money to spend on new highways after the $961 million extra it committed in March for the next three years, which were in addition to about $2 billion already available.As Waterview is only one of seven roads the Government has since classified as “nationally significant”, the Transport Agency will be left unable to build twin motorway tunnels costing up to $3 billion.
Now I’m going to be the optimist here and actually say that I reckon the Herald has jumped the gun. As a couple of my earlier posts alluded to the cost difference between a full tunnel option (by full tunnel I mean a bored/driven one and not a cut & cover one) and a surface option was much smaller than made out by many politicians. Going by Ministry of Transport figures, the difference was around $600 million, not the $1-2 billion that both National and Act are making it out to be. Therefore, while $600 million is still a lot of money, you really do have to question whether it’s worth trying to build a horrific surface level motorway through an established suburb just to save around a quarter of a project’s cost.
The other issue the NZ Herald gets wrong is that there will be no money in NZTA’s funding programme for the Waterview Connection, and that means an extremely cheaper option will need to be found. The business case for the Waterview Connection quite clearly stated that there are unlikely to ever be enough funds in the National Land Transport Programme for the Waterview Connection, and in any case neither NZTA nor ARTA consider the Waterview Connection as a priority:
All the sources of funding other than Crown funding or tolling require agreement from the Board of the NZTA, Auckland Regional Transport Authority (ARTA) or both. To date, neither the Board of the NZTA nor ARTA have indicated that they view the Waterview Connection as a priority project within existing funding levels.
Of course, now that the Waterview Connection is a “Road of National Significance” it may be slightly higher up the list, but it really doesn’t matter – as construction of this motorway (as a surface option OR a tunnel) would eat up a huge chunk of the roading budget for the entire country. Therefore, any option for the Waterview Connection is most likely to be funded via a crown grant – which basically means the government going further into debt for it. This is why financing costs were included for this project when they’re usually not included, because the Waterview Connection simply can’t and won’t be funded out of the usual pool of money (which comes from petrol taxes etc.)
But there are issues with funding it via a crown grant too:
Funding the project through the Crown account would create a liability on the Crown balance sheet. The cost of the Waterview Connection would increase the Crown’s gross debt by a little less than one percent of GDP. Given that gross debt is already forecast to exceed the Government’s target of 20 percent of GDP, Ministers need to consider whether this project is affordable, given its relatively modest net economic benefits if built now.
Now as we know debt is a LOT higher than projected in this (December I think) document. So the question of whether the project, either as a $2.2 billion surface option or a $2.8 billion tunnel, is affordable becomes critical.
Surely the answer can only be no.
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