Release of CBD Rail Link Business Case reveals major differences between Auckland and the government

 Back in August I was criticised by some of my friends in the Green Party for refusing to show up at a rally organised by Keith Locke to demonstrate support for the CBD Rail Link.

My reason was simply that as the rail link was still under study by a team of experts commissioned by KiwiRail and ARTA/ARC, it wouldn’t be good form to be up on a soapbox declaiming via megaphone that it should go ahead.  It will be recalled that when I was chairman of the ARC in 2009 I accepted the Minister of Transport Steven Joyce argument that a business case would need to be made to justify the project going ahead.

Now the long-awaited study has finally been released and its recommendations are better than any rail supporter could have hoped for.  The study reveals that using standard Treasury criteria (8% discount rate etc), the CBD rail link has a benefit cost ratio (BCR) of 3.5 (including wider economic benefits), or using more conservative criteria, the NZTA Economic Evaluation Manual, it has a BCR of 1.1.  Essentially the business case provides compelling evidence that not only is the rail link economically viable but that it is absolutely essential for the ongoing development of Auckland.

So given my own approach (respecting the process and waiting until the business case was out) I have to confess being more than surprised at the response of the Minister of Transport.  Rather than merely receiving the business case and announcing that it would be given serious study, Steven Joyce immediately set about trying to discredit it.

 

 

A lot of public transport advocates have found Steven Joyce something of an enigma. While many have always suspected he was just another ‘roads first’ National Party politician, others have not been so sure – seeing him as a modern, sophisticated technocrat – open minded to the possibilities of rail.   I confess I have been in the latter school of thought.   In my assessment the Minister is a very smart fellow, more intelligent than most run-of-the-mill politicians. It’s his natural ability that has made him such a senior Minister and such an important member of the government – ‘the Minister for Everything’. Moreover Steven Joyce has always been keen to give the impression that he is first of all interested in objectivity and rigour – in other words ‘what works’ when making decisions around transport.  “Hard-nosed decisions” is one of Joyce’s favourite expressions. 

Reinforcing that impression was a series of decisions Joyce made in 2009, around electrification. First of all in March 2009 he cancelled the regional fuel tax initiative, thereby forcing the abandonment of the EMU tender process, then 9 months later after studying the evidence for himself he approved (again) the electrification of Auckland rail and the acquisition of a new fleet of electric rolling stock.  Moreover Steven Joyce has always made a lot of effort to get to Auckland rail station opening ceremonies – of which there has been many over the last couple of years and to speak positively about a balanced approach to transport (in other words not roads versus rail but roads and rail).

In regard to the CBD Link the Minister had previously been careful not to dismiss it out of hand and has even made some mildly supportive comments.  Given that apparently reasonable approach from the Minister I have tried to reciprocate by refraining from partisan comments (or turning up at rallies) until the business case was completed.

But now the case has been completed – and how revealing it has proven to be. Revealing not just in the sense of the benefits of the CBD rail link but also indirectly revealing of the government’s agenda for Auckland.  The CBD Rail Link Business Case, and Minister Joyce’s reaction to it, has also finally revealed in pretty stark relief exactly where Steven Joyce is coming from.

This has not been an especially good period for the Minister of Transport.  Clearly anyone with knowledge of the Auckland Super City reorganisation would know just how intimately involved the Minister of Transport was in all aspects of this.  Not just on the establishment of the Mega CCO, Auckland Transport, but it became very obvious that the Minister of Transport had his fingers all over the process – including areas which would have seemed to be quite outside his portfolio. 

Furthermore it was quite obvious that the government was expecting that their man John Banks and his government-friendly ‘affordable progress’ policies was going to win.  As it turned out Banks crashed and burned and it was Len Brown with a visionary manifesto very much based around rail projects who won a resounding mandate from Aucklanders.

With Plan A now around the government’s ankles, the government has gone to ‘Plan B’.  ‘Plan B’ is to delay any new rail projects for as long as possible by refusing to fund them. Plan B was in evidence during the Auckland Council swearing-in ceremony when the new Mayor, councillors and a crowded Town Hall audience of leading citizens was subjected to an embarrassingly obvious lecture from the Prime Minister about how important it was for the new Auckland Council to spend 18 months completing a ‘spatial plan’ before embarking on any major infrastructural projects like CBD Rail and rail to the airport.  Let me correct that – I should say ‘rail infrastructural projects’ – obviously the government would be unlikely to be calling for a freeze on road projects. 

‘Plan B’ was also in evidence in Minister Joyce’s letter to the newly elected Mayor of Auckland Len Brown revealed in the NZ Herald a couple of week’s ago.  Joyce had wasted no time in getting see the newly elected Mayor – and met with him on 14 October.  That was more than two weeks before he was sworn into office. The point of the meeting was to try to warn the Mayor off his visionary rail programme for Auckland.

The crux of Joyce’s message to the Mayor in a follow up letter of 28 October was that in terms of Auckland rail services, the Minister had discovered “an annual operating funding shortfall of $30m per year”.  (Never mind that the funding shortfall is almost entirely the result of policy decisions directly or indirectly made by the Minister)

In case the Mayor didn’t get the message the letter concludes with:

“Finally, it is my understanding that Auckland Transport and KiwiRail will formally present the initial Auckland CBD rail tunnel business case to us before the end of the year.  However it is imperative that we resolve the current metro rail funding shortfalls before we consider broader capital programmes to expand the network.”

Now with the release of the CBD Rail Link Business Case, ‘Plan B’ has racheted up a gear with the Minister trying to pour scorn on the business case. 

It would seem that why the Minister has become so emotional about the CBD rail link (which clearly he doesn’t especially care for one way or the other), is that the rail link has become inextricably entangled with something the Minister really does care for – the Puhoi to Wellsford road project – aka ‘the Holiday Highway’.

Clearly the CBD rail link, which at around $2 billion is about the same cost as the Holiday Highway, has become in Joyce’s mind the unwelcome – even dreaded Doppelgänger of his much favoured Puhoi to Wellsford roading project.

Last week a devastating critique of the Holiday Highway appeared in the Sunday Star-Times by business journalist Rod Oram. 

http://www.stuff.co.nz/sunday-star-times/business/4366408/Going-down-the-wrong-road

Oram’s article is so important I will quote from it at some length.

“The motorway will significantly distort development patterns, thereby blighting the region. It will help push urban development out to 85km north of Auckland’s CBD over coming decades.

This will exacerbate Auckland’s weakness as a sprawling city, with dire economic consequences. Worldwide evidence shows lower density means higher infrastructure costs, favouring private over public transport and a weaker network effect. People living and working closely together generate greater wealth than those spread out.

In fact, the government knew last year the motorway was uneconomic, according to the cost/benefit analysis done for it. Likewise, the Waikato Expressway and Wellington to Levin motorway were uneconomic under conventional analysis.

That was very embarrassing for the government. After all, the three projects account for almost half of its $11b, 10-year Roads of National Significance programme. And the analysis showed speeding up the projects, which the government promises, would reduce the benefits.

These were political problems it created for itself. It announced the seven roads in March 2009, nine months before it received the economic analysis. It didn’t like the analysis, so spent another seven months getting the answers it wanted, according to documents coming to light.

Transport Minister Steven Joyce is proud of the government’s work ethic. “No work had been done on this project prior to it being confirmed as a road of national significance last year so this is great progress,” he said last week when announcing the route for the first stage from Puhoi.

The government got its unwelcome news about its uneconomic road projects in the work it commissioned from SAHA, an Australian-based consultancy. SAHA’s December 2009 report, billed as its final one, showed the conventional cost/benefit ratio of the Puhoi to Wellsford project was 0.4, meaning for every $1 invested the return was 40c; the Waikato Expressway’s was 0.5 and the Wellington Northern Corridor 0.9”

 That’s right, Oram revealed that according to SAHA the CBR for the Wellsford to Puhoi is only 0.4!!!

Not surprisingly the Minister was infuriated and demanded the right of reply. http://www.stuff.co.nz/sunday-star-times/business/4395254/Getting-around-in-the-real-world

Those like me waiting with some anticipation for how the Minister would explain away the derisory 0.4 BCR for the Puhoi to Wellsford were to be disappointed. Joyce didn’t even try to respond to that most devastating revelation.  Instead of employing sophisticated counter-arguments, what Joyce gave readers was a stream of consciousness, obviously written by the Minister himself, revealing some fairly banal conservative views – including a snide comment about the ARC and the Metropolitan Urban Limits policy. (He also misrepresented the ARC policy on road access to Puhoi).  In fact Mr Joyce revealed his views on transport and urban development to be standard ‘roads first’ and pro urban-sprawl – in other words fairly basic small-town red neck stuff. 

In many ways this is history repeating itself – there have been two previous attempts to expand Auckland’s rail network with an inner city undergound link   Such a scheme was first proposed by Minister of Railways (later Prime Minister) Gordon Coates as early as 1923.  In the late 1940s the Ministry of Works formulated a scheme which was accepted by all parties for nearly 10 years before being killed off by the National Government of the time – with the active compliance of the then Auckland City Council.  Again in the late 1960s the ARA and the NZ Railways worked up another plan, again with an underground loop known as ‘Robbies Rapid Rail’. This in turn was killed off in 1975 by the newly elected National government of Robert Muldoon.

Not only is there an echo of events but also of personalities – with Steven Joyce the present-day ‘Minister for Everything’ playing the role of the 1950s era National ‘Minister of Everything’ Stan Goosman.

Clearly this debate has got a fair way to run – but it would seem clear to me that sooner or later if the National government wants to be re-elected next year it will have to concede that unlike the Puhoi to Wellsford Highway with its BCR of 0.4 – the CBD Rail Link does stack up.  The National Government would dearly love to kill it off – but if they are not careful what comes roaring out of Auckland’s underground rail link could end up running down the National government.

For further excellent commentary and analyses please go to these sites to read articles by Josh Arbury, Cam Pitches and Martin Gummer

http://transportblog.co.nz/2010/12/07/cbd-tunnel-vs-puhoi-wellsford-an-in-depth-analysis/

http://www.bettertransport.org.nz/2010/11/rod-oram-exposes-economic-fallacy-of-puford-toll-road/

http://transportblog.co.nz/2010/12/06/martin-gummers-opinion-piece/