As well as mentioning me yesterday, parliament also had some interesting discussion about progress on deciding which option of the Waterview Connection is likely to be built, if any at all. It seems like Steven Joyce has got it into his head that the poor cost-benefit ratio of the Waterview Connection (only 1.15 and I have my suspicions that’s vastly over-estimated) can be fixed simply by finding a much cheaper option – never mind the environmental or social effects it will have.
Hon STEVEN JOYCE: I share the member’s concern about the cost-benefit ratio of the twin two-lane tunnels proposed by the previous Government. The cost estimates for that project were extraordinarily high, and that is why I have asked officials to consider ways to save costs. We are still working through the final decision on that.
The reason Mr Joyce is still working on this, is simply because there is no significantly cheaper and better value option. For a start, the cost difference between a full tunnel option and other potential options is not nearly as big as people make it out to be. The Ministry of Transport’s review of the Waterview Connection clearly pointed that out (see page 18 of that document).
To paraphrase (all costs in 2015 dollars)
1) Cost of full tunnel option: $2.005 billion for 4 lanes, $2.335 billion for 6 lanes
2) Cost of cut and partial cover options: $1.790 billion for 4 lanes, $1.813 for 6 lanes
3) Cut and extended cover: $1.988 billion for 4 lanes, $2.205 billion for 6 lanes
4) Open cut (no tunnel at all): $1.456 billion for 4 lanes, $1.585 billion for 6 lanes
So therefore, there is no cheap option. If we compare apples with apples we see that a cut & partial cover option is only around $200 million cheap than a full tunnel option, a cut & extended cover option is around the same cost. An open cut option is $500 million cheaper, but that must be counter-balanced against the huge environmental and social costs that this option would generate. These environmental and social costs would be included in a cost benefit ratio analysis, and may well outweigh the $200-500 million in saved construction costs. Speaking of cost benefit ratios, let’s have a look at the Waterview Connection’s one:
I do have my doubts about time-savings benefits, as research has shown that these time savings never actually eventuate – people just drive further. But that’s not really my point (for now). The main point is that the above BCR, which is based upon the full tunnel option, does not include anything for environmental costs, like the loss of parkland that would result from a surface option or the vehicle emissions that would no longer be pumped out 25m up in the air from a ventilation stack. These are significant costs that would be included in a surface level option (or should be) that may well end up counter-balancing lower construction costs. We have a cost benefit ratio of 1.16 at the moment, it might be not be any better with a surface option, and could even be worse.
Now, to take the theory that the Waterview Connection ‘would pay for itself’. The Ministry of Transport’s report was clear that neither NZTA nor ARTA view the Waterview Connection as a priority – so therefore it would not be funded out of traditional funding sources any time soon. This is largely due to its low cost-benefit ratio.
Page 11 of the report I link to above states this quite clearly:
“Funding the entire project from any single source would place a considerable strain on that source, making a combination a more feasible approach to take. All the sources of funding other than Crown funding or tolling require agreement from the Board of the NZTA, Auckland Regional Transport Authority (ARTA) or both. To date, neither the Board of the NZTA nor ARTA have indicated that they view the Waterview Connection as a priority project within existing funding levels.”
If the Waterview Connection was to be funded any time soon it will be through crown debt – as this is why financing costs were included in the reporting of the Waterview Connection’s cost going from $1.89 billion to $2.77 billion. This means that it will be general taxation that pays for it, not users of the connection themselves. If it is going to be built any time in the next 20-30 years it will not be via petrol taxes, as NZTA and ARTA do not view this link as a priority.
I just can’t see any option here being justifiable. There is no cheap alternative – we start at $1.5 billion (plus financing costs, plus upgrades to SH16 costs) and work our way up from there. The $1.5 billion option (Open Cut) would have huge environmental and social effects and it is still enormously expensive.
Financing costs & SH16 upgrades added arond $800 million to the price of the full tunnel option, and I can’t see them adding much less to the costs of an open cut option. That means we are looking at the cheapest option being around $2.2 billion AND having massive environmental and social effects.
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Do you have any further background on the tolling option? I really can’t understand how they would calculate that so many people wouldn’t be willing to pay $2. How can the $400 million of benefits be so important if individual users will be disuaded by suh a small toll? The whole BCR and traffic calculation don’t seem right at all. Are NZTA (ex-Transit people) still all stuck using the 1960’s work that has been so damaging to our cities?
Each $2 of tolls supports $400 million of debt.
The MoT document says this about tolls:
Although, I can’t see how the tunnel is useful for shorter trips. There are to be no intermediary ramps and basically you will go “this exit Maioro Street, next exit Western Springs/Rosebank Road”. I can’t see people using the tunnel for shorter trips because they’re simply unable to.
This is an excellent post, Josh. You really need to send this to journalists and get them to pick up the story of NZTA and ARTA not seeing this as a priority. Even Brian Rudman (of all people) was deriding Russell Norman’s position of not building the connection, calling it “not of this world”. The mainstream non-experts cannot seem to understand that a dispassionate economic assessment would suggest the project is not worth starting for at least 10 years — by which time it would be clear that it is unnecessary. We need to bring this debate to laypeople and citizens who wrongly believe the technicians who dreamed up this transport ‘solution’ know what they are doing.
I emailed a lot of this information to Darren Hughes last night, as he’s been asking a lot of questions of Steven Joyce in parliament. My main point is that the cost differences between a surface level option and the full tunnel option are not nearly as significant as people are making them out to be.
The $2.2 billion MINIMUM COST figure is accurate from what I have calculated. $1.456 billion for an open cut construction cost (this is on page 18 of the MoT document) + $290 million SH16 upgrade cost + $450 million financing cost (slightly less than the $550 million for financing the full tunnel option). That comes to $2.2 billion AND has the huge enviornmental and social costs that are inevitable with the surface option. If Steven Joyce wants 6 lanes then the cost is even higher.
I am a resident of waterview and we have been stuck in this situation now for a number of years. Back and forth between decisions we are never certain what will be decided next. I absolutely oppose the motor way connection and am very happy to see the sound logic being displayed within your writing. All evidence points to the fact that additional motor ways induce more users to use the roads thereby increasing traffic and congestion not decreasing it. I wonder when new zealanders will finally wake up from their outmoded and quite frankly detrimental modernist approach to planning and design, which ultimately leads to sterile cities, giant bands of motor ways shuttering people between high rises with no green spaces to be seen. Can we please look towards the future and put our money where it is needed? Great urban design, public transport and planning agendas which consider people and the environment as priorities not short sighted financially motivated developments which seem to be motivated by opposing ideas.
Thanks for your comment maliah. We should hear more today and tomorrow about the government’s prefered options. Don’t completely lose hope if they choose a surface level option though as they will still need to go through a resource consenting process for it.
I suspect that it will be VERY difficult for a surface option to get consent. That’s why the previous government went down the path of a tunnel option.