D-Day for the City Rail Link

Tomorrow Councillors will debate the feedback from submissions on the 2012-2022 Long Term Plan (LTP). There’s a lengthy agenda item on the LTP on the Council website, but even it doesn’t get into the details too much – detailed papers will supposedly be distributed separately, which means another mass of documents are likely to be uploaded onto the Council website in the next couple of days. The LTP is a really important plan as it effectively spells out the Council’s funding plans over the next 10 years, but most particularly in the first three (as new LTPs must be put together every three years). While there’s the opportunity each year to fine-tune an LTP by way of the annual plan, the LTP is where the meaty decisions are made.

And there’s not much more of a meaty issue at the moment than the City Rail Link. An NZ Herald article yesterday highlighted the importance of tomorrow’s meeting to the future of this project:

The $2.86 billion central rail loop remains the prime project in Mr Brown’s first 10-year budget, which faces a bumpy ride from councillors on Wednesday.

The day before Finance Minister Bill English unveils the Government’s Budget, Mr Brown and councillors will lock horns in the Auckland Town Hall over a $58 billion Super City budget.

Mr Brown said the council could not back off the need to invest in the future of the city and deal with major growth, but the budget had to be fair, just and prudent to the city’s 516,000 residential and business ratepayers.

Despite growing criticism towards the central rail loop, Mr Brown said it still had strong support.

The mayor’s determination for the 3.5km underground rail loop will be tested with a call by Citizens & Ratepayers and other right-leaning councillors to freeze funding on the project until it has Government backing.

The Government has serious reservations about the project.

Orakei councillor Cameron Brewer yesterday said it was crazy to spend $112 million in the coming financial year on land purchases for the rail loop when it had no funding certainty.

Mr Brown has put the Government down for half the cost of the project in the 10-year budget. Ratepayers are being asked to pay 14 per cent ($400 million) and alternative funding sources, such as tolls, the remaining 36 per cent or about $1 billion.

I get a bit annoyed when the Herald uses the phrase “growing criticism”, supposedly based off quite a few submissions to the LTP opposing the project because of its cost. If we’re going to attach “growing criticism” to the CRL then we should always attach “deeply unpopular” to the Puhoi-Wellsford holiday highway, based on submissions about that project.

That said, as this recent post pointed out, there’s a lot of uncertainty around the cost of the CRL and if I were a councillor I would absolutely want clarity on the matter. The price of the CRL seems to have edged up from $1.5 billion to $2 billion, then $2.4 billion and now, supposedly, $2.86 billion or even $2.94 billion – seemingly depending upon what day of the week it is. We know that the actual raw cost of the project (excluding contractors’ margins, design, contingency etc.) is under a billion dollars and has been peer reviewed on many occasions – so where on earth does the other $2 billion come from? We also know that Auckland Transport is looking at ways of reducing the project’s cost, where does that fit in the bigger and bigger numbers getting fed to the public all the time?

The most recent cost breakdown we’ve seen (emailed by Auckland Transport’s Wally Thomas to fellow blogger Patrick) suggests the project’s core cost remains at around $2 billion, with the extra money related to dollar inflation, extra trains and other additional infrastructure (which, I stress once again, is debatable whether it’s ‘part of the project’). Interesting to also see some potential savings of $166 million identified already: All that said, I think it’s time everyone took a big deep breath about the CRL project and actually looked at where the project is at, where it’s likely to get to in the next 3 years (the lifespan of the LTP), what money is actually needed during that time – and most particularly what money is needed over the next 12 months as next year’s Annual Plan offers the opportunity to revisit the issue. So let’s try to answer a few questions:

What money is needed in the next 12 months and where will that get the project?

According to the article above, around $112 million is proposed to be spent on the CRL during the 2012/2013 year – mostly on land purchasing but presumably also on consenting and detailed design. With the project’s route not yet even protected and no resource consents for its construction obtained, we’re certainly not starting construction in the next year. Money spent on property purchase should even be considered an investment, as surely once the project is completed that land will have increased in value (due to enhanced rail accessibility) and be prime for redevelopment.

To keep up with the proposed timeline for the project, by this time next year we will be well into securing the notice of requirement (route protection), resource consents and undertaking detailed design, as well as completing important property purchases for parts of the route not in a deep tunnel. What does that all mean? Well….

It means that this time next year we will have got this project further than ever before. Further than the 1920s scheme, the 1950s scheme or the 1970s scheme.

What does approving $112 million for next year NOT mean?

So let’s say I was a councillor worried about burdening ratepayers with a project that seems to be increasing in cost all the time, with no sign of commitment to the project yet from government. I would probably want to be sure that I wasn’t giving the absolute go ahead to the CRL’s construction at this time. Further work needs to be done to get the costs down, further work needs to be done to forge greater agreement between central and local government over its merits. Further work is needed to test public acceptance of the “alternative funding mechanisms” that will supposedly help contribute around $1 billion to the CRL’s construction cost.

Fortunately (for those such councillors), approving the $112 million next year does not mean the issue can’t be reanalysed in 12 months time to see where things are at on those matters. It seems pretty likely to me that the project’s cost will come down significantly, the consenting process and further detailed design will highlight ways in which the project can be further refined. Hopefully there’s also some good dialogue between council and government bureaucrats to resolve outstanding differences between business cases. In short, it seems like we’ll be in a much better position in a year’s time to really assess the long-term viability of the project than we are now – and the money we need to spend in the meanwhile is largely on land and therefore can be resold.

What happens if next year’s money is NOT approved?

Well this is why I call it “D-Day” for the City Rail Link project. If there is no money made available to progress land purchase then Auckland Transport’s ability to protect the route becomes severely compromised and effectively the CRL grinds to a halt: much as it has done so on so many occasions in the past. We go back to future scenarios with a rail system hitting capacity by the end of the decade, a city centre swamped with buses, an inherently inefficient rail system, more congestion on our roads, less ability to achieve the intensification outlined in the Auckland Plan, a less economically successful city.. the list goes on.

Clearly the project is not going to be “approved and funded” tomorrow. I suspect we’ll need to see a change of government for it to end up being actually funded – but that’s a debate for another day. So the council’s decisions tomorrow aren’t going to make the project happen, they’re not writing it a giant blank cheque. However, the council could certainly do the project’s future a lot of damage tomorrow – largely reacting to a bit of hysteria about the project’s costs that Auckland Transport should have dealt with a long time ago.

For now, we can just hope the councillors show some vision, don’t freak out, take a big deep breath and realise the money they’re actually approving is effectively an investment in some city centre land. I’ve got my fingers crossed.

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