On Saturday the herald reported the cost of the City Rail Link might have increased.
The cost of Auckland’s City Rail Link – New Zealand’s largest ever transport project – has blown out by $500 million, according to sources.
A senior council officer told the Weekend Heraldthat revised estimates for the $3.4 billion project have increased by $500m and “there are fears it is going to be over $1 billion” by the time the main contracts are awarded this year.
Two other sources confirmed the $500m figure.
The cost increasing isn’t ideal and hopefully the competitive tendering process will help limit the scale of any increases. But there are a few things that are worth noting about why the cost is possibly happening:
Last year the council and government agreed to alter the design to significantly improve the the CRL. This includes:
- Future proofing the stations to allow for 9-car trains, a 50% increase in capacity.
- Allowing for a much needed station entrance at Beresford Square for the Karangahape station.
The cost of these changes were estimated at $100 for just future proofing with higher costs to come back and build later or $300 million to build them as part of the project. Over the long term it rea cheaper to build it all now.
Auckland is in the middle of a massive construction boom and that has put pressure on construction prices. The herald article even notes inflation in construction costs us running at 7-8% per year at the moment.
On top of local cost pressures, tunneling requires a number of specialised roles and I understand there is a lot of international demand for them too.
I do wonder what the cost would be if the previous government hasn’t spent years dismissing the project – although there was a lot of design and consenting work needed so it’s not like we could have started back in say 2013. Also, it’s only because it’s taken so long and we’ve seen the massive success that electrification has been that officials were finally convinced of the need to improve the design as described earlier.
On the positive side, one thing that may help the overall cost was a recent announcement that contract to fit out the tunnels with tracks, signals etc would now be integrated into the contract to build the tunnels. This should help make the delivery more efficient and hopefully cheaper as the previous plan would have created some potentially tricky interactions between contractors.
This potential cost increase also highlights another issue. Given this year is also a local body election year, we’re bound to see some candidates campaigning on cutting rates and/or the regional fuel tax. The agreement between the council and government to build the CRL is that each pay 50% of the project costs. This means the council may be having to find hundreds of millions extra for their share. Candidates will need to explain how they will fund this as well as all of the other much needed transport projects that Auckland needs. The regional fuel tax for example raises about $1.5 billion in revenue but unlocks about $4.3 billion in spending thanks to the NZTA contribution it enables.
The winner of the main works tender is due to be announced in April.
While we’re in the topic of the CRL, it’s good to see they’ve improved some of their communications about it with some new hoardings around Britomart. I think it’s still a bit too focused on the CRL route only and not the benefit it provides the entire network but it’s at least clearer and easier to understand.
I particularly like that last one showing the capacity of the project.