When the CBD Tunnel business case was released in November last year there was a real flurry of reaction from central government. The reaction started with Minister of Transport Steven Joyce questioning a number of aspects of the business case and has eventually led to the formation of a review group: encompassing representatives from a number of agencies potentially involved in the project – to examine the questions raised about the business case and suggest ways in which the project can – or whether it should – move forwards. As I noted when the review of the business case was announced, I can very much understand the need to probe in great detail what the benefits of the CBD Tunnel are, whether they’re valid and whether they’re of such magnitude to warrant a $2 billion investment in the project. It’s just a bit weird the same standards aren’t being required of the Puhoi-Wellsford “holiday highway”.
I was always curious about what was happening in the background during this process. It seemed weird to me that Auckland Transport would have failed to provide simple answers to many of the questions Joyce raised, while at the same time it seemed strange that Joyce could make such specific criticisms of the CBD Tunnel business case when it was immediately released. Fortunately, someone kindly made an Official Information Act request to the minister’s office for all documents and advice he’d received since the release of the business case – and has passed on the documents to me.
The first document is dated November 19, and is a relatively detailed “first glance” analysis that Ministry of Transport officials made of the business case. It wasn’t until November 24 that the business case was released to the public, so the Minister had quite a few days forewarning. This is probably the most detailed of all the documents and would have certainly led to the questions Joyce had for the business case ‘ready to go’ after it was released. The executive summary of this document is included below:
The issues MoT staff have with the business case are outlined in greater detail later in the report:
At first glance these all seem to be reasonable points to raise. It is a bit strange that the MoT have taken such a negative opinion of the project – and not of other projects that appear to have even dodgier cost-benefit analyses, but let’s leave that issue to one side for now.
The next document is an Aide Memoire to the Minister of Finance from Treasury officials. It largely repeats what was noted in the previous MoT document, although because it takes from November 23 it updates things a little bit by talking about the draft recommendations (which were largely passed) relating to the CBD Tunnel at the November 25 meeting of the Transport Committee. One interesting thing it includes is a list of “talking points” that the Minister could potentially mention if asked by the media about the project:
It’s interesting how a lot of initial focus was on “let’s get the current rail funding deficit sorted before we even think about the CBD tunnel project”. That seemed to fall away a bit later on in November and in early December when I think the government came to the realisation they needed to do something about the project.
The next few documents are quite interesting as they relate to discussions between staff at the Auckland Transport (and their consultants) end of the line and officials for the Ministry of Transport relating to the matters in question. On November 30th, the CBD Rail Tunnel Project Manager (Alan Burford of AECOM) provided some further information that was passed on to MoT officials – seeking to answer a number of questions that had been raised about the business case. One question raised by MoT officials had been to question what difference the CBD rail tunnel made to rail patronage compared to a post-electrification scenario, which hadn’t been made explicit in the business case. This was provided in a table:
In effect, without the CBD tunnel we have rail patronage levelling off at 22.2 million, whereas with the tunnel it can increase to 47.6 million a year in 2041. But perhaps the more useful figure is overall public transport patronage, which would be around 15 million trips higher with the tunnel than without it in 2041 (some rail trips with the tunnel would otherwise be bus trips). That’s 15 million generally quite long, very much CBD focused, vehicle trips a year off the road.
Similar figures for the AM peak are also given:
These figures provide a useful indication of the difference the CBD tunnel makes to rail patronage around central Auckland during the most congested time of day.
However, this further information didn’t satisfy the MoT’s concerns – and according to officials actually seemed to confuse matters even further. This is outlined in an internal memo to the Minister from December 3. It advises that MoT officials have noted:
The point about passenger trips is a stupid one, as MoT have misinterpreted that to mean passengers in a car driven by someone else, whereas actually what it clearly means is the number of people shifted by private vehicles: including both car drivers and car passengers. Generally the other points make sense though, and seem worth raising.
The final document is AECOM’s response (through Auckland Transport) to the points raised by MoT officials, dated December 6th. It’s a bit difficult to tell if it answers all the questions raised, but it certainly provide some clarification on patronage and what difference the CBD Rail Tunnel will make. Perhaps the most interesting thing in the document is a table outlining how the CBD tunnel influences the modeshare of people travelling in the AM peak to work in the CBD:
I had thought, from originally reading the CBD Tunnel business case, that most people who would use the CBD tunnel would otherwise catch the bus to get into the CBD during peak times. Such a scenario would obviously have benefits (less buses clogging inner-city streets and faster travel times for PT catchers), but under the scenario outlined in the table above the benefits of the CBD tunnel are even greater. Put simply, without the tunnel we’ll have approximately an extra 10,000 cars trying to access the CBD in the 7-9am morning peak. That’s a pretty huge number of vehicles the CBD tunnel takes off the most congested part of Auckland’s transport network.
Another interesting table in the December 6th reply (which is the most recent document that formed part of the OIA release) relates to daily rail patronage on the Auckland network and the difference the CBD rail tunnel makes to the number of daily rail trips (and also the percentage of which are CBD bound or not):
Overall, the documents provide a useful insight into discussions currently taking place between officials of various transport agencies and provides a very useful look at what arguments are likely to be bandied around through the whole “review of the CBD tunnel” process. It does seem weird to me that the Ministry of Transport have nit-picked every little possible flaw in the business case, yet we don’t see them doing this kind of thing for other projects like the Puhoi-Wellsford road. There does seem to be quite a concerted effort on their behalf to avoid having the project proceed and I just hope Auckland Transport and their consultants have done a robust job in putting together the business case.
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Very interesting, of course the MOT officials would have been ordered to find every possible reason for the government not to support it, after all they do report to the minister so will do what he wants. I would much rather trust an internationally recognised group of professionals than local MOT officials under orders from a hostile minister. I also would find it highly unlikely that the companies employed to study the tunnel would have missed some of the crucial things the MOT mentions like not taking into account the full disruption costs but more likely is they choose not to include it in the final report so I assume most of the questions should be able to be answered quite quickly like these documents indicate. What this also shows is that the MOT obviously need to have everything spelled out to them in a way a baby could understand it which really calls into question their ability to do a good job.
Looking at the second to last table of the morning peak loads by mode share, it indicates that without the CBDRL we will need an almost 50% increase in road capacity into the CBD for cars alone, where would that come from and how much would it cost as most corridors are at capacity lane wise and it was a struggle a few years ago just to fit the CMJ in to the space available. That fact alone seems to show that the MOT are more interested in stopping the project rather than thinking about how to solve the problem which was how the study looked at things as a 50% increase in road capacity would be at least 10 lanes across all of the corridors and would easily be more expensive than the CBD tunnel.
“It does seem weird to me that the Ministry of Transport have nit-picked every little possible flaw in the business case, yet we don’t see them doing this kind of thing for other projects like the Puhoi-Wellsford road.”
Puhoi to Wellsford is a government initiative. The government can proceed with projects or programs regardless of the state of the business case or without any business case at all. I suspect that most government initiatives are thought up on the spur of the moment while politicians are out on the campaign trail. You could say that performing a business case is a waste of money if the project is going to proceed anyway. By contrast, the CBD tunnel is being championed by the Auckland Council who wish the government to fund some of it. The government can perform whatever due diligence is required for them to make a decision about whether to contribute or not.
Politically… Brown has promised to build the CBD tunnel, rail to the airport, a rail tunnel under the harbour, and rail replacing the northern busway. Since he is a man of his word and has the ability to fund these projects out of his own revenue stream and asset base, then the projects WILL be constructed even if the government refuses to contribute anything. In which case the government might as well spend the money on something that won’t be built unless the government contributes.
Point 26.4 in the MOT executive summary is interesting. They’ve noticed that the business case just assumes a certain level of employment growth in the CBD without any justification other than Auckland Council told them to assume it. MOT seem to think the actual figure will be significantly lower. It’d be interesting to test the Auckland Council assumption.
That doesn’t give the government the right to be irresponsible with taxpayers money, especially when they are preaching about the need to make good economic decisions.
Wow, you have to wonder, is this cost-benefit analysis, or cost-bogus analysis?
Where on Earth did the discount rate of 8% come from? That seems a bit high, and the
effect of that is to kill off the future benefits at a faster rate. The NZ Government 10 year bond
yield is only 5.4%. So why are they requiring 8% return??? And what are these WEBs?
Ramp up your off-peak and weekend frequency on rail and get frequent buses
feeding the rail stations. This will have the ‘BUZ’ effect and grow patronage on the system, hopefully
‘proving’ the patronage indeed can and will grow strongly.
I would also look up the City of Perth, their patronage is something like 56 million passengers
per year, far less dense than Auckland, stations that are located in the middle of freeways and
in low density suburbia. They built rail for something like 70 km of rail for about 14 million/km
including two twin bored tunnels under the CBD, and strengthening bridges etc.
How can a big city like Auckland have less patronage on trains than a much smaller less dense city like Perth?
NZ Government 10 year bond yield: http://www.nationalbank.co.nz/economics/interest/10yr.aspx
Any discount rate includes both the cost of servicing capital and a weighting to account for risk and uncertainty. A large infrastructure project is a lot more risky and carries a lot more unknowns than something like government bonds. So the 8% would be about 6% for financing costs and 2% for risk.
@Brisurbane – this is actually an extremely solid Business Case and there are numerous posts on Jarbury’s blog detailing specifics of the case and what the WEBs (Wider Economic Benefits) entail. I’d suggest you read through them before criticising the case. The issue is not that the business case is pretty impressive but rather that the current government is uninterested in growing PT.
In addition, Auckland currently has a lack of trains to continue to increase frequencies much and without the tunnel can’t open any further lines.
Auckland also has no problem demonstrating that spectacular growth is possible on rail – in just a few years patronage has grown fourfol – the issue is more one of currently having a government opposed to rail investment. Re: Perth, jarbury has also written several posts comparing Auckland to Perth, Auckland is basically at the patronage levels Perth was at prior to it electrifying its rail network, in 2 years Auckland will also have an electrified network and new electric EMUs.
My understanding is the 8% discount ratio has been around for some time and is now out of step with other parts of the world so big projects like this have started also showing the benefits at lower discount levels.
In the case of the tunnel, they also used a 6% rate which had a BCR of 1.6 and a 4% rate which was 2.4. If you add in the WEB’s the at 8% you get 3.5, at 6% 4.7 and at 4% a massive 6.6
I would be very careful with using Cost-Benefit analysis for transport projects, our own South East Busway is so well used that it is bursting at the seams with passengers.
The much heralded South East Busway is a flagship public transport project for Brisbane and was the first busway delivered as part of Brisbane‟s busway strategy; which is now coming to fruition with parts of the northern and eastern busway under construction.
Less than 10 years after it was constructed, parts of the South East Busway are close to full capacity, with people cramming into buses and buses cramming into busway stations.
Why then, with its apparent success, is it still so difficult to prove the benefits of busway projects (and other public transport projects)?
The killer: The cost-benefit analysis of the SE Busway is completely impossible to reconcile with real-world reality, which has led to questions about whether CBA on transport projects is actually undervaluing the project’s benefits.
The evaluation subsequently undertaken showed a Nett Present Value for the project of -$309M and a Benefit-Cost Ratio of 0.35, which lead to the conclusion that the analysis results “show the project to be unviable in economic terms”, based on the evaluation tools commonly used to assess transport projects.
Unviable? Even when people are struggling to get on buses because they are so full, and the system is very close to full capacity.
The link is here: http://www.patrec.org/web_docs/atrf/papers/2009/1834_paper152-Bitzios.pdf
Does “subsequently undertaken” mean now? Or at some point closer to the project going live?
It was after the project went live as I understand it.
The studies were performed, and something seemed really odd, given the CBA compared to the patronage:
The busway is carrying the equivalent of almost 10,000 cars an hour inbound, or over five general purpose lanes-worth of traffic. This location also reported 410 buses in the peak hour or a bus every 8.8 seconds.
Any road project of a similar capital cost to the busway project would be expected to receive a very healthy Benefit Cost Ratio with these levels of patronage.
@Brisurbane – a business case is a business case is a business case. Business cases are useful for comparing two similar peojects but the way they can be done varies so much that they often show merely what the author wants them to show. A business case undertaken in Brisbane for project A can’t be compared to a business case for a project in NZ simply because it’s unclear what parameters were used. It should also be noted that the CBD rail tunnel has a business case of 3.5 which is much higher than most roading projects currently being planned or underway. The busway in Auckland is also growing exponentially year over year – We don’t need to look far to show how people in Auckland will flock to regular reliable PT, the issue is more that the current government doesn’t want to listen.
I am not disputing that business cases are business cases. It is quite obvious that there is a good case for the CBD rail tunnel. All I am saying, is that there is a possibility that benefits done with CBA might systematically undervalue them, thereby showing them to be uneconomic when they are actually not.
Just like a road project, you might have to take into account “induced demand” on the rail system when you increase the quality of it.
Quote:
For many years, Benefit Cost Ratios have been demanded for public transport business cases in Queensland (and throughout Australia) and strategic transport models have been used as the primary tool for generating these benefits. This approach has regularly assessed public transport projects as not being economically viable and returning economic benefits far lower than competing road projects. Best practice world wide has still not been able to address this limitation.
The limitation of our current metropolitan transport models to properly capture the benefits of landmark public transport projects is the key reason for this.
God this is depressing. It appears they are desperatly looking for reasons to knock this project back. The Ministry of Trucks and the minister don’t want to fund this and will wriggle out any way they can.
You are right about the nitpickery from the MOT. They totally miss the point that the CBDRL will boost frequencies for the entire network. Clearly they aren’t being objective and Matt L’s hypothesis about being ordered to shoot holes in the business case is the likely scenario here.
But both parties ignore petrol and diesel costs as a scenario factor. By 2041, sweet light crude production will be well down from the current 74m barrels a day. The BCR for the rail loop should look stellar if petrol was modelled at $4 / litre, for example, but I don’t think the model takes petrol prices into account when forecasting patronage.
I actually think there might be an aspect of provincialism about it as well as much of the country dislikes Auckland and money being spent on it, also if it was a proposal for Wellington then I feel they would be more likely to look favourably on it being that they may personally benefit from it.
Great work Josh, depressing to see how it works, but very good to get it out in the open.
Those documents read very much like Joyce and English have said “Over our dead bodies. Make it so, hired policy minions”, and been fed appropriate talking points as a result. I cannot see any way that advice of this tone could have been supplied by a truly politically-neutral public service.
What happened in Perth, when they tried to close the Fremantle line, it really reached crisis point, protests and campaigns formed and they voted out their government.
And that was the turning point. The people just gave up on the Government at the time.
A propos of good points raised by Brisurbane, apart from wider town planning benefits, there is a well-known history of pessimistic patronage predictions in major game-changing PT projects. In essence, the BCA or CBA doesn’t seem to be able to accept the possibility of the break with the status quo which is the whole rationale for the project and concludes in a cicular manner that “you’ll never get Aucklanders / Perth-ites / Brisbanites out of their cars” and/or “we should just make do with on-street buses.” This may in turn be related to the habit of making “conservative assumptions,” for which no bureacrat was ever professionally penalised (as opposed to being an “enthusiast”), and also to undercounting of the actual disutility of being stuck in traffic, as opposed to speeding past on a train while working on the laptop. For instance the NZTA Economic Evaluation Manual values commuter time at about $7 an hour or thereabouts, which is just absurdly low, with academic work such as “Stress that Doesn’t Pay” by Stutzer and Frey suggesting that $30 an hour is far more realistic.
It concerns me greatly when I hear “the project has much higher ridership than expected” for a lot of transport projects when they open.
Although this sounds great, this is actually a disaster- because it means that a lot of perfectly good projects are probably dying at the cost-benefit analysis stage, when actually they are viable.
It suggests that there is some systematic underestimation, probably less to do with the CBA process itself, but with the ridership assumptions that feed into it. So more investigation into what
is going on why this is the case is needed.
I don’t see any reason why public transport projects are exempt from induced traffic, in the same way that roads are. The vehicle used to increase people-throughput should be irrelevant.
Again using our South East Busway as an example, it has been claimed that it carries 5 – 7 car lanes worth of traffic. The thing is, this busway is parallel to one of Brisbane’s biggest freeways
and that freeway has only three lanes. If it were really true that 5 lanes worth of traffic is taken off the road, I should be able to walk out at peak hour, look at the freeway and see it empty.
Needless to say, when I did this, it came as no surprise that I found the freeway had cars on it and it was full of cars. But the buses on the busway were also full. Where did these extra
cars and people come from???
It seems that the benefit from PT is actually to increase the access to the
CBD and move more people there than you otherwise would have without it. Certainly, when I visited Auckland, I was very surprised at how few major retailers or shops were in the CBD.
This may be because people and businesses have moved out due to the motorways; though its only a speculation of mine at this point.
I know that there have been many comparisons of Auckland with Perth (I searched this blog this morning on that- thanks for pointing this out)
but I would compare it to Sydney, which also has a harbour, lots of water crossings, and if you look really carefully around the CBD footprint it looks uncannily
similar to Auckland, except where you have your spaghetti junction, Sydney has and underground spaghetti of rail lines.
I very salient point BrisUrbane. I cringe whenever I hear the minister or other commentator say something like “but how many cars will this take off the road”… becuase the answer to this misplaced question is usually “few, if any at all”. Thats not the point.
In reality many people might make the shift out of their car, but there are plenty more who will simply take their place.. So the net change is minimal. Congested road links are always going to sit at a level of equillibrium that tends around 100% capacity at peak times. Having a very quick rail or busway route in parallel would drop that equillibrium point somewhat, but in our cities where we have huge motorways, world leading car ownership and massive demand none of those motorways are going to go empty at rush hour under any conditions!
But as you point out, this question is the wrong one to ask. Who really cares is any cars are taken off the road if you are now moving 20,000 people an hour that you couldn’t before. A more appropriate question is “how many more lanes of motorway would we have to build to get the same boost in transport capacity”. In the case of Brisbane you could argue that that cheap two lane busway boosted the CBD economy without the need to spend multiple billions building an entirely new freeway, widening several arterial feeders and constructing a dozen new multi-story carpark buildings.
In the case of Auckland, the question is really “is their any cheaper or more effective way to increase transport capacity to allow our CBD to grow and remain competitive in the globalised marketplace”.
A quick analysis of the option yields only two responses, either a resolute “No, the transport alternatives are all much more expensive and inferior”, or “we don’t want the CBD to grow, we don’t want to consolidate transport, we want the region to decentralise and sprawl outwards”.
Unfortunately the Ministry appears to have realised they can’t say the first, so they have to use the second.
Yes, with a bus every 8.8 seconds and buses flooding into the CBD like no tomorrow, some of us here in Brisbane are starting to think about rail options…
The busway has been amazingly successful, and now we can think of upgrades…
* clarification: three lanes in each direction, as measured at Garden City Busway station.
I agree. The problem with option #2 is the water crossings which create natural bottlenecks where public transport can have a huge advantage.
I feel that sprawl isn’t really the answer, because of this simple geographical fact. Trying to fit all those people through a natural, narrow, bottleneck of
crossings is going to be very difficult under a car-only transport policy.
And Auckland being surrounded by water also puts a bit of a lid on outward expansion.
That’s one of the great ironies of transport politics in Auckland. It is so common to hear the claims that Auckland is too spread out for public transport to work, that the land form doesn’t suit it, and that expansive development is the best way forward. However that is all simply myth.
If we look objectively at Auckland we see a thin almost island-like stretch of land squeezed on two sides by the ocean, with a mountain ranges running down the other two sides! In reality the only opportunity to sprawl further is along a thin north-south corridor, and as you point out the natural and man-made crossings of the two harbours and their inlets mean that all transport is forced into pinch points.
So here we have a city that has nowhere to sprawl and development and transport are forced into long thin corridors, which results in one of the highest population denisties in Australasia: the place is custom bloody designed for public transport. Really, you couldn’t invent a region that is harder to service by freeways!
The later documents (another post maybe)talk about the Auckland Passenger Transport Model, and it is noted that this is a very conservative model. The same one that hopelessly underestimated the demand for the Northern Busway.
Unfortunately this is the model that is used for economic evaluation purposes.
With a different model the BCR would be much higher, and we wouldn’t have to rely on the more uncertain and arguable agglomeration benefits.
There is 1 out of the 7 docs that has been withheld – a plain sounding ‘Key Facts’ memo from the MoT. Might have a try going down the Ombudsmen route to request that.
Yes, it would be very interesting to see a BCA calculated on that now that it is open, similar to how the SE Busway one for Brisbane was carried out.
Maybe they too would get a low BCR below 1 which is impossible to reconcile with the real world results?
Theory must properly predict and explain reality, because that is what theories are expected to do.
If the theories fail to do this, they must be changed.
The low density = low public transport theory/mantra one is coming under sustained challenge at the moment, along with the
‘nobody will catch public transport in the off-peak and weekends’ (as plainly disproven by the BUZ growth of 200% + on Sundays in low density Brisbane, of all places…
I really don’t think this is about the actual quality of the business case (or not). It’s about whether or not the Minister thinks that not funding the project will cost him votes in Auckland.
Sad, but confirming, to see what we all suspected; that the MoT under this minister is comprised of highly paid civil servants tirelessly working to discredit and undermine public transport while also desperately searching the land for new and uneconomic motorway projects to blithely force through….
The area needs a ferry port further up the river from the Halfmoon Bay one that connects to the discussed rail line (Glen Innes to Highland Park).