CRL costs money but also provides huge benefits

The City Rail Link has been in the headlines a bit recently so I thought I’d look at some of them.

First up, yesterday the NZ Herald ran this piece about the ongoing costs of the CRL.

Auckland ratepayers will be saddled with an estimated bill of $220 million each year to run and maintain the $5.5 billion City Rail Link once it opens in 2026.

The costs are outlined in more than 1000 pages of just-released documents for an extraordinary budget committee meeting on Wednesday where Mayor Wayne Brown will present his first “Mayoral proposal” for a new 10-year budget.

Bernard Orsman has always put quite a negative spin on news about the CRL and as usual from him you have to actually read down to the middle of the article to get the real details.

A summary table of the estimated annual costs to the council shows ratepayers will shell out $160m in interest on loans to build the project, $41m for depreciation, more commonly known as wear and tear; and $64m in operating costs to run the stations, extra rail services the project will enable and track charges from KiwiRail.

These costs come to $265m, but the net cost to ratepayers will be about $220m after $44m of revenue is taken into account, including some funding from Waka Kotahi NZ Transport Agency.

It’s notable that the CRL is the only project where capital costs are grouped with operational costs like this. Furthermore, the council has billions in other debts that it is paying – currently around $12.4 billion and it is expected to rise to around $18 billion by 2031. Even with the council on the hook for half of the costs of the CRL, that still only represents a portion of that debt, most of which is to fund other transport and water infrastructure projects. That Auckland would have to pay for it’s share is not new and has been part of the debate around the CRL all along.

What is more interesting is the operating costs to run the stations and additional rail services. That is $64 million per year, a lot of money sure, but it needs to be put in some context.

1. The recent information released around the fare changes shows we currently pay around $150 million per year to run rail services, (including track access charges). So this represents around a 42% increase.
   
2. But what that investment achieves is what is important and in that regard, the CRL is a game-changer. Prior to COVID, we reached around 22 million annual trips on the rail network. With changes from COVID and the rail network closures for repair works usage is currently just over 12 million but without the closures the network would likely have recovered at a similar rate as buses which would put it closer to 18 million trips.

   The CRL likely won’t even open till some time in 2026 but AT’s current modelling suggests usage will quickly rise to over 42 million trips by 2030 and without additional investment in the wider network, will hit capacity in the early 2030’s somewhere between 42 and 51 million trips. That means a 42% increase in operational costs for a doubling in usage.

   With additional (and expensive) investment in the wider network, AT estimate that by 2052, rail network usage could rise to over 76 million. That’s a massive increase, and higher than the more expansive networks in cities like Brisbane and Perth achieved pre-COVID too.
   

Putting these figures to the side a little bit, the reason for investing in the CRL was never for it to turn a profit – very few road or public transport projects do that. It has always been about the overall economic benefit that investment delivers. By enabling more people to get move around the region, and especially to/from the city centre, faster and easier it is good for improving access, good for reducing congestion, good for the climate and importantly, the CRL has already helped spur billions in private development.

We even saw a prime example of that just two weeks ago with Precinct Properties buying the downtown carpark, which they’ll replace with a development likely to cost billions. That simply wouldn’t have been practical to do without the CRL and it’s ability to move large numbers of people to and from the area.

There is a wider issue here and that is why the CRL is so expensive to begin with and the Herald also covered that last week.

New Zealand is the most expensive country in the world to build new infrastructure. That was the charge levelled yesterday by Sean Sweeney, chief executive of the City Rail Link (CRL).

“But,” said Sweeney, “I don’t just want to complain about it. I have some thoughts on how to fix it.”

In a keynote address at the NZ Rail 2023 conference in Auckland, Sweeney noted that the cost per kilometre for building a “metro” or rapid transit rail line in New Zealand is US$922.37 million ($1.493 billion). This is an estimate of the cost of the CRL.

But in the United States, where costs are also regarded as expensive, it’s a third less, at US$601.85m/km.

In Australia, it’s only US$321.43m/km, which is almost two-thirds less than the New Zealand figure. France gets the work done for less again: US$255.55m/km.

And Portugal, South Korea, Spain and Finland manage to build transit lines for around US$100m/km. More than nine times less than New Zealand.

In many of the low-cost countries, the contractors are the same as those that do the work here. The lead tunnelling contractor for the CRL was the French company Soletanche Bachy.

Sweeney’s figures come from research by the Transit Costs Project, a private research company attached to New York University’s Marron Institute of Urban Management.

There are actually other projects more expensive per km than the CRL but New Zealand comes out on top in part because the CRL is only NZ project in the Transit Costs list. That’s also a part of the reason why it’s so expensive to build in NZ too, we don’t do projects like this very often so we have no retained experience, either in the construction sector or public officials. He also cites issues with things like how risks are allocated.

“The prevailing approach has been to load risk on to the contractor, even when it’s unrelated to their work.”

He gave the example of contractors being required to carry the risk for “below ground” events. “But they don’t know the local geology. So either they have to take that risk and it could force them out of business, or they charge a higher price.”

“When I started at the CRL I had to argue very hard to prevent contractors being made to carry the risk of the Government changing the regulations. But we’re the Government!”

[…..]

“Why should contractors have to accept that risk?”

Politicians and officials might believe they’re driving a hard bargain on behalf of taxpayers. “But,” said Sweeney, “because they load up their costs, we end up paying more.”

Finally, there has also been some commentary around when the CRL will be complete. Radio NZ reports:

Underground rail construction of Auckland’s City Rail Link (CRL) is 80 percent complete but there is no guarantee the November 2025 deadline will be met, the project’s boss says.

The CRL project is due to be handed over to Auckland Transport in November 2025.

Preliminary work on the 3.4 kilometre track, spanning four underground stations, from downtown’s Britomart to Mt Eden, began in 2016.

City Rail Link Limited chief executive Sean Sweeney told Nine to Noon there was still a huge amount of testing that needed to take place before the underground could be opened to the public.

“We’re responsible, basically, for handing over a railway that is able to be operated by Auckland Transport,” he said. “Once we’ve handed it over, they have to do a fair amount of work learning how to operate it so that it’s ready for public operations.”

While it might be making headlines now, this isn’t particularly new and Sweeney gave some more detail about it a few months ago. One such example was just how much driver training needed to take place, while still maintaining the existing schedules.

There’s a few more years of construction, testing and training still to go but the images and videos being put out by the CRL team do highlight that the stations and tunnels are really starting to look like a railway.

Share this