On Monday a Stuff article by Thomas Coughlan revealed that the City Centre to Mangere light rail project seems to be tearing apart the government. It seems he Green Party and New Zealand First are extremely sceptical of the bizarre NZ Super Fund / Canadian pension fund (CDPQ) deal that the Labour Party seems to be incredibly supportive of.
The Government is splitting three ways on plans for Auckland light rail as the saga heads to its endgame phase.
Labour Ministers are erring towards signing New Zealand up to a long and expensive public-private partnership (PPP), while the Greens are understood to favour something more modest. NZ First wants something more modest still, publicly suggesting that its caucus is likely to axe any proposal put to it.
The Beehive has gone into lockdown, with Labour Ministers allegedly not sharing full and timely briefings with their Government colleagues, Stuff understands. None of the governing parties would comment on the record for this story.
Yet the dispute has already spilled out into the open. Associate Transport Minister Shane Jones told an infrastructure conference on Friday that the issue “has not been to the NZ First caucus and it will need to before we have a position as a party.”
Jones also noted that there was no concrete commitment to building Auckland light rail in NZ First’s coalition agreement with Labour. He also said the party were “doubting Thomases” when it came to the “light rail kaupapa”.
Jones made the remarks despite other Government Ministers putting him “under strict instruction not to talk about light rail”, he said.
The article also revealed, for the first time, some key elements of the PPP deal that NZSF/CDPQ have proposed – and they seem very similar to the terrible deal CDPQ lumped Montreal with that I discussed last year.
Labour Ministers are said to be increasingly keen on the NZ Super Fund option. Stuff has been told that this is based on a PPP with NZ Infra to build and run the rail network for 50 years.
Though currently equally owned equally by the Canadian and New Zealand Funds, this does not guarantee funding or returns would be equal. Stuff has been told these could be split 70-30 split in favour of the Canadian wing.
Some in the Government have been spooked by spiralling cost estimates and the amount of money likely to be sent sent offshore. Cost estimates shared with Stuff by sources familiar with the matter are now as high as $20 billion.
It would mean New Zealanders could pay hundreds of millions — potentially close to a billion dollars — to the Canadian fund each year, likely through taxes and tickets sale over the life of the joint venture. This has raised eyebrows at a time when interest rates for Government borrowing are at near record lows.
For example, assuming a return on capital of 7 per cent — a global standard for PPPs — on a $20 billion project fully financed by NZ Infra, the consortium could enjoy returns of $1.4 billion every year for as long as the PPP lasted.
Under that scenario, if those returns were split 70-30, just under $1 billion of that income would be heading to Canada, with the rest staying with the Super Fund.
There are two separate, but related issues here to discuss:
- The crazily high project costs reaching up to $20 billion. I suspect this figure is likely to be wrong by a significant margin but it likely stems from indications the government are looking at a fully grade separated light metro system instead of surface level light rail – In a meeting I (and others) had with the minister recently he described it as running alongside the motorway from the airport then getting through the isthmus via a combination of elevated, trenched and tunnelled sections. While there are some obviously some advantages of a fully grade separated metro system they do cost more and the challenge will be in justifying spending even half of that figure on this one corridor when we’ve also got many others in desperate need of funding, such as the Northwest.
- The bizarre financing arrangements of the PPP, where the proposal seems to be to pay a massive cost premium to a Canadian pension fund instead of the government just borrowing the money much cheaper themselves. Given the government recently announced a pretty big increase in borrowing to fund a pile of transport infrastructure, because interest rates are so low, this makes absolutely no sense whatsoever.
So the Government have got themselves in a right pickle over this and it’s difficult to see how they can move forward constructively, especially as there is so much pressure on them to show progress towards delivering light rail by the time of the election. After all, this was their flagship policy at the 2017 election.
It seems to me that the only way for the government to move forward on this project is to abandon the crazy Super Fund proposal and immediately embark on a comprehensive public consultation and engagement process to share all the detailed design work that must have been going on over the past few years. Buy out the design IP if they need to.
I’m aware of at least four designs that have been developed in detail over the last few years. This includes:
- The original Auckland Transport design
- The NZTA design from 2018 before the Super Fund gummed up the process
- The designs from the two most recent bids.
Presumably there’s an enormous amount of technical detail included in each of those, such as corridor options, number of stops and their locations, advantages and disadvantages of surface running versus grade-separated metro running, and much much more. That would help show the public that work has been going on and allow for a proper debate about the merits of the various options.
While the blame for this latest debacle must clearly sit with the government, light-rail in some respects has been a cursed project from the start due to a lack of public engagement and consultation. It’s now over five years since it was surprisingly revealed by Auckland Transport in January 2015 – and even then the project had been worked on in secret for many months beforehand. Never in that time has proper public engagement taken place over the project’s design, what its key goals should be, what the key trade-offs might be and how they could be addressed. For every other major project in recent years there has been multiple rounds of consultation and engagement as route and design options have been refined – but with light-rail there’s been basically nothing.
The desperate need to immediately improve public and stakeholder engagement on light-rail was strongly emphasised in a joint letter that ourselves and a wide variety of other transport stakeholders sent to the Minister recently following up on one we sent late last year. You can read the latest letter in full here. It was also picked up in this Herald article. It’s a premium article but I’ve picked out the key parts below:
The lobby groups’ letter, obtained by the Herald, is signed by leading members of the Automobile Association (AA), Employers and Manufacturers Association, Greater Auckland, Generation Zero, Bike Auckland and Heart of the City, which is the central city business association.
Their letter expresses concern at “the Government’s handling of the Auckland rapid transit programme”. Rapid transit is a term that covers both light and heavy commuter rail, and rapid bus services like the Northern Busway.
The groups do not express a view on the merits of light rail. They say their worries about transparency relate to a lack of information on the project, the failure of the Government to allow for informed public debate, the lack of “engagement with stakeholders” and a perception there is not a “level playing field” for making decisions.
The letter follows a meeting the groups held with the minister last Wednesday and another letter they sent to him in mid-December. Many of the same issues were also raised by Auckland mayor Phil Goff, when he wrote to the minister on December 9.
The letter writers say: “The response we have received from you and your officials has done little to assuage our concerns.”They add that “the cumulative effect of this approach has been to alienate your stakeholders (advocacy organisations, industry and officials), and to generate a significant deficit in public trust and confidence before the project has even started”.
A comprehensive engagement and consultation process, which laid out all the designs that have been developed to date and their various advantages and disadvantages, would provide the necessary “reset” for the light-rail project and enable some of the eroded public trust to be regained. It would also allow a proper public discussion of issues such as whether the extra costs of tunnelling compared to surface running can really be justified.
I can’t see any other way forward at this point.