Subscribe to RSSTransport Ministry “Explain” Their Decision
Below is the Ministry of Transport “explanation” of its rejection of the CBD business case.
The proposed Auckland City Centre Rail Link is a 3.5 km double track underground rail line running beneath the central business district from Britomart to the Western (North Auckland) Line near the existing Mount Eden Station, with underground stations proposed at Symonds Street/Khyber Pass Road, Karangahape Road/Pitt Street and on Albert Street between Victoria and Wellesley Streets.
The Business Case was prepared for the former Auckland Regional Transport Authority and KiwiRail.
The government requested officials formally review the business case in order to help determine if, how and when to progress with the project.
We need more motorways - forget rail
What is the agreed cost of the project?
All agencies agreed initial capital costs at $2.4 billion for construction of the project including additional rolling stock and network infrastructure.
What were the findings and recommendations of the review?
The review concluded that:
- The benefits of building the City Centre Rail Link are much less than expected costs.
- The case for the City Centre Rail Link does not justify further consideration for central government funding at this time because the project does not currently represent an economically effective investment.
- Auckland Council could undertake a range of actions to provide greater confidence about the growth projections needed to make the project viable.
- There is a strategic case for lodging a Notice of Requirement and it would make sense for Auckland Council to proceed with this if it is prepared to meet the costs.
- Significant patronage growth is still needed before the capacity provided by new rolling stock under electrification will be exceeded and the project is consequently not urgent.
- The City Centre Rail Link will cater for around 19 percent of extra journeys expected into the CBD in the 2041 morning peak. The majority of this increase in travel is expected to be met through bus trips and so a wider set of solutions is needed to deal with the whole of the transport demand faced by the CBD over the next 20 to 40 years.
- The Business Case did not properly consider potential alternatives to the project and key aspects of the methodology used do not meet the Treasury or NZ Transport Agency criteria for central government funding (as set out in the NZ Transport Agency’s Economic Evaluation Manual and Treasury’s Better Business Cases for Capital Proposals guidelines).
What changes in travel patterns are expected as a result of the project?
The City Centre Rail Link is forecast to result in an additional 6,000 rail trips into the CBD during the 2041 morning peak. This is 19 percent of the additional 31,800 car person and public transport trips forecast into the CBD (or six percent of the 98,800 total car person and passenger transport trips) during the morning peak in 2041.
The City Centre Rail Link will result in an increase of 9,551 rail trips in on the wider rail network in the 2041 morning peak. This compares to a forecast of 840,000 car person and passenger transport trips on the entire Auckland transport network.
The project is expected to remove a maximum of 3,800 car person trips from the entire transport network.
How was the review carried out?
The Ministry of Transport led a review of the Business Case with the Treasury and the NZ Transport Agency. The Ministry of Transport convened a working group comprising the Treasury, the NZ Transport Agency (NZTA), KiwiRail, Auckland Council and Auckland Transport.
The report sets out where findings have been agreed between all organisations involved in the working group and identifies the alternative views of Auckland Council and Auckland Transport.
What growth forecasts did the review team use to understand future transport demand?
The review team assessed the project using Auckland Council’s land use and transport models and the region’s forecasts for employment, population and transport trends included in the 2010 Auckland Regional Land Transport Strategy. This strategy includes the City Centre Rail Link.
How does the Auckland Council/Auckland Transport policy case fit in to the review?
At a late stage in the assessment of the Business Case, Auckland Council put forward a revised approach to managing the public transport network that would direct more trips onto the rail network (the policy case.)
While an in-depth analysis has not been possible, it is clear that some of the interventions in the policy case – particularly the additional park and ride and reconfiguration of bus routes – could be used to increase the benefits from the current rail investment as well as the City Centre Rail Link project. This issue would need to be explored and clarified in any future Business Case.
Why does protecting the route make sense?
The project is a strategic priority for Auckland Council and protecting the route now would provide clarity for landowners along the route.
Actions by Auckland Council as a result of its new Auckland Plan and other policy initiatives could change the nature of the risks and the expected benefits of the project in the future. Evidence of the success of electrification and the current $1.6 billion rail investment in leading change will also increase confidence.
Who will need to meet the costs of route protection?
All costs associated with route protection would need to be funded by Auckland Council, if it decides to proceed with this step.
What are the next steps?
Auckland Council needs to decide if it wishes to exercise and fund protecting the route. This is a two to three year process and involves lodging a Notice of Requirement to protect the route and working with KiwiRail as the designating authority.
Will the government consider a further business case?
There are a range of actions that could be undertaken or facilitated by Auckland Council and Auckland Transport which would improve confidence in the outcomes expected from the City Centre Rail Link:
- Auckland Council finalising and implementing its spatial plan and City Centre Masterplan to help clarify the project’s role in the CBD and wider Auckland.
- Demonstrating commitment to resolving current and emerging CBD access issues, for example by improving bus operations and addressing capacity issues.
- Development of a robust and achievable multi-modal programme for transport in the CBD, which considers a thorough analysis of alternatives and identifies the optimal mix of modes to meet demand.
- Beginning implementation of large scale residential developments along the rail corridor.
- Implementation of additional park and ride sites, and changes to bus feeder services where appropriate.
The implementation of these measures, combined with rail patronage above forecasts and a robust economic case, would provide a strong signal that the conditions are in place to drive the necessary benefits from the project and therefore to reconsider the business case for the project.
What is the Benefit Cost Ratio (BCR) and what does that mean?
Central government officials assessed the benefit cost ratio (BCR) for the City Centre Rail Link at 0.4 (or 0.3 if considering the same types of benefits assessed for other transport projects, including the Roads of National Significance). This is a calculation of the ratio of benefits over the costs of the project. A 0.4 BCR means that for every $1 invested in the project (i.e. the cost); there will be a return of benefits that are worth 40 cents.
A BCR calculation compares transport benefits, and wider economic benefits with capital and operating costs.
The review included some wider economic benefits that are not currently included in project assessments by the NZ Transport Agency.
What is the difference between direct transport benefits and wider economic benefits?
Transport benefits mainly reflect the direct impacts of a transport project, such as time savings, vehicle operating cost reductions and safety improvements.
Wider economic benefits reflect the indirect impacts of a transport project on the economy, including effects such as productivity improvements from increases in employment density and changes in job location, as well as benefits from growth in labour supply and increased output.
What are the key reasons for the differences in transport benefits and wider economic benefits between the Business Case and the review?
The review identified a number of methodological issues with the Business Case assessment of the transport benefits from the project. Correcting these issues, and applying a more robust approach to calculating the decongestion benefits from the project, resulted in a substantial reduction in transport benefits.
The Business Case estimated $3.3 billion in urban regeneration benefits (a form of wider economic benefit based on increased productivity which results from jobs locating in the CBD instead of elsewhere in the region). The Business Case estimated that an additional 22,000 jobs would locate in the CBD as a result of the project.
Following an international peer review, the review found that the Business Case estimate had not allowed for a number of factors such as types of businesses, workforce skills and capital investment that contribute to the higher productivity of CBD jobs. The Business Case had also not allowed for the fact that only a proportion of the productivity gains, equal to the tax on the increased productivity, would be additional to the direct transport benefits. After correcting these issues, and based on a lower number of jobs locating into the CBD as a result of the project, the review estimated job relocation benefits at $148 million.
The review estimate for Wider Economic Benefits included benefits from agglomeration, job relocation, increased labour supply and increased output. This resulted in total wider economic benefits of $305 million.
What about employment growth?
A key element in the calculation of the wider economic benefits hinges on the scale of employment benefits that have been forecast by central government and regional officials. This centres on the extra number of jobs and firms that would be enabled to be located in the Auckland CBD by the rail link. Estimating additional employment directly attributable to transport infrastructure projects is difficult as this is an emerging field and there is limited Auckland specific data.
Auckland officers estimate a range of 5,000 to 20,000 new jobs over and above current job growth forecasts. These numbers are reflected as low and high growth scenarios in the alternative policy case recently proposed by Auckland Council and Auckland Transport. Achieving these growth scenarios requires an average annual growth rate of 2-2.3 percent, compared with an annual rate of 1.7 percent in 1990-2006.
The Auckland officers’ view is based not just on the rail service that the link would provide, but on a general lift in the attractiveness of the CBD triggered by the rail link.
Central government officials estimate a maximum of 5,000 additional CBD employees as a result of the rail link, and that this number is within the region’s current overall forecast of 58,000 additional jobs by 2041.
Central government estimates are broadly in line with the review’s forecast growth in morning peak rail passengers as a result of service and capacity improvements from the City Centre Rail Link. Although some change seems likely, the evidential basis for claiming large job location effects as a direct result of a project is weak.
What are the other key areas of difference between regional and central government officials?
Transport benefits
Auckland Council and Auckland Transport note that the Review has identified and corrected issues with the way that the transport benefits were estimated in the Business Case. However, they consider that, combined with a number of other initiatives not included in the Business Case, the benefits would be significantly greater than the Review concludes.
At a late stage in the assessment of the Business Case, Auckland Council and Auckland Transport presented a new policy case which estimates transport benefits between $1.2 and $1.4 billion. This compares to a Review figure of $387 million.
While an in-depth analysis of the policy case has not been possible, it is clear that some of the interventions in the policy case – particularly the additional park and ride and reconfiguration of bus routes – could be used to increase the benefits from the current rail investment as well as the City Centre Rail Link project. This issue would need to be explored and clarified in any future business case.
Wider economic benefits
The NZ Transport Agency has undertaken an extensive research programme to develop a robust, international best practice methodology for assessing wider economic benefits beyond agglomeration. While this methodology has yet to be formally approved, all parties agreed to use it to calculate wider economic benefits.
Applying the draft methodology resulted in total wider economic benefits of $305 million. This comprises agglomeration (productivity) benefits arising from the project of $128 million plus additional wider economic benefits from imperfect competition, increased labour supply and job relocation of $177 million.
Auckland Council officers believe that the business case and subsequent work has only partially captured the potential wider economic benefits of the project. Specifically the review has not assessed any increase in the size of the regional economy arising from the project. Council officers believe this represents a significant share of the economic benefits from major transport infrastructure investment and that consequently the wider economic effects are likely to be understated by central government.
Urgency
The urgency issue centres on when the electrified rail system in Auckland (complete in 2013) will reach capacity in the morning peak period.
The Business Case assumed that all passenger growth on the rail network would cease in 2024, largely as a result of the Britomart bottleneck and the limited walking catchment around Britomart.
Auckland Council/Auckland Transport believe that the network will be operating at its maximum capacity once electrification is completed, which when combined with patronage growth, will lead to service delays across the network.
KiwiRail has advised that operational risks will not be fully mitigated by the current upgrade and electrification. These problems would be exacerbated by the proposed addition of a station at Parnell.
Analysis by central government officials indicates that some patronage loss will occur as Auckland’s rail system gets more passengers and more crowded at peak times. However, the emerging constraints are not as significant as set out in the Business Case, and there will be significant peak period rail patronage growth beyond 2024.
Full coverage
Ministry of Transport and Treasury report
Full commissioned Auckland Council Auckland Transport report
Minister, Len Brown and Greens react
Auckland must fight back: And more reaction
Mike Lee says decision major setback
The correspondence between the Govt agencies and the Minister
20 Comments
So how does this new estimate stack up against, for example, the Puhoi extension? And if the rail loop warrants no govt input, then what about Puhoi?
Why do i think they are full of S**t?
Hey Aucklanders, chuck ‘em out at the next election. The National Party ministers obviously know didley-squat about the needs of Auckland and are just a speed hump on the way to good governance.
Chuck ‘em out in 2011. 2014 is too long to wait.
[...] Transport Ministry “Explain” Their Decision [...]
OK I read some of that and agree with PWC that it is historically based such as the benefit numbers they use are during just the construction period only.
The final paragraph states that the electrified suburban system will not reach capacity for something over twelve years, and “rail patronage above forecasts” is one of the grounds which would justify reconsideration.
I’m not sure how to reconcile that with the concession that “some patronage loss will occur as Auckland’s rail system gets more passengers and more crowded at peak times”. At first glance the idea appears to be that loss of passengers at peak time will be made up by off-peak gains. But since road - like suburban rail - construction costs are driven by peak use, that can’t be right.
Is there an explanation anywhere of what the Ministry expects the electrified suburban system in Auckland to achieve over the next ten years?
@Ben - the initial Puhoi-Wellsford cost benefit analysis showed a return as low as 0.4, so this is more or less on par with that. Subsequent reviews have increased the highway project to ~1. But, analysis I’ve read is that projected construction costs are climbing steeply because of issues with terrain/geology and there were also suggestions the time savings would only be possible if average speed increased above 100km/hr.
It seems certain that this review by MOT/NZTA underestimates the tunnel benefits, with assumptions like we won’t run out of capacity at Britomart in the next 30 years. Rail passenger growth has been almost 10% per year and new electric trains will increase this further, so I’d love to know how all the services are going to fit in. Also, no tunnel prohibits expansion of the rail network in Auckland until 2050, long after the current minister of transport will be dead!
I wonder whether the government will accept the Auckland Council revised case (this current one was done for ARTA/KiwiRail). Has there been any mention of when they’re going to review it?
sorry I don’t want to spread miss information, I take back what said about the benefits but it would be nice to know how many years they take into account.
@Feijoa No timing. The issue seems off the table now.
“The Business Case assumed that all passenger growth on the rail network would cease in 2024″. Are they kidding, the Britomart glass has already got water spilling over the sides. The gov has no vision, apart from the greens.
The CBD growth figures are one of the things that the dropping of this year’s census makes impossible to fight right now. Until the census is carried out (2013, I believe), we’ll keep on being fed the 2006 numbers.
The up-side to 2013 is that the economy should have started to pick up (assuming National don’t find a way to gut things further and retard recovery, which is always possible) so growth should be happening. The down-side is that it’ll be at least 2014 before the results of the census are available for use.
@Matt
I’m not sure about CBD growth figures. CBD businesses tend to be financial/service/legal - and need the “prestige” of a CBD office tower.
My take is that these won’t grow that much. eg if your runnign a trading floor, and volumes increase you don;t need more staff - so as economy grows, yes there will be more forex trades etc - but that’s not a job increase.
A lot of CBD is actually education/b and c grade buildings - again probably won’t grow much more, as very very cost dependent - ie if a language school building is converted to apartments, the language school won’t re-locate to CBD A grade office - they’ll head to suburbs….
I support the CBD rail loop - but the real case for me, is the entire network. ie to travel to other outlying industrial/commercial areas. That is where we need our future economic growth (in real business actually making something!).
So that is mass transit via rail, with feeder local bus infrastructure. We can’t run inefficient bus routes across the whole region - and we can’t clog up CBD as some huge bus depot!
So I think AC have made a bit of a mistake, making this so CBD focused, they need to look at benefits out in New Market /Mt Albert / New Lynn /penrose/manakau etc
Mark, investigate the network effect of businesses before dismissing the potential growth. Increased numbers of businesses in close proximity adds increased value to those businesses. That increased value attracts other businesses.
There’s a reason that the Auckland CBD adds the most value per employee of any employment area in the country, and when you consider that average incomes are higher in Wellington it’s not just down to the types of jobs.
@Matt
It’s just I’m not convinced we have a “normal” CBD that can keep expanding. CBD businesses generally “serve” the real economy - accountants/finance lawyers, and they get more and more efficient, and don’t need as much space.
Expensice CBD is usually a prestige thing - and growth will be limitied - there won’t be a “new” PWC that suddenly sets up in the CBD.
I agree business in a “network” can increase growth - but imho CBD has reached that. A lot comes down to physical office design. The waterfront drift / large floor plates was well known 10 years ago and has happened as predicted eg Telecom / ASB etc - however the real problem for any extra growth was that just shifted people within the CBD, and has left B and C grade offices to be leased. The office floor plates don’t suit a modern open floor style of business.
I suspect many will migrate to residential, as the bowl/build option for offices doesn’t stack up economically.
That’s why I think it’s saver to look at the wider benefits of removing the Britomart cap - basing it on CBD is too risky. There’s also the public perception that too much goes to CBD now - public want to see their own areas going ahead.
And taking my hobby horse - Mt Albert would see the benefit of removing the Britomart cap, and redeveloping the town centre - all based around rail….
@Mark
The company I work for has recently moved 300+ workers from Takapuna to the CBD. A former employer has moved a similar number from Grafton to Britomart.
Decentralisation is fine if all your customers are in the area you move to, but it adds huge travel costs if they don’t.
Mark do you have numbers to support your theories? Are we not already intensifying the CBD?
@Patrick
It’s hard to get a handle on the “intensification” we know we’re over 20,000 apartments I think by now, but it’s hard to find out how many of the tenants are foreign students. Which is really an industry by itself, and isn’t about moving kiwis into apartments.
Also there are census figures which show large number of apartments as second residences.
My own gut feel is maybe only 3-4000 is “intensification” as such.
@Bryan
What type of industry? and have you moved new large floor size type building? ie a new building
Or into an older office tower? ie have you replaced tenants who were already there
Office parks outside the CBD still are growing in Auckland eg. Smales Farm Tech park near Takapuna where some ‘forward looking firms’ have moved over the years (eg Sovereign, Air NZ Call Centre, Telstra Clear, EDI etc) to highlight the type of employees they are looking for. The key is to have good Public Transport link options to them as well (not just carparks) otherwise you just get more local congestion in those local areas as well.
Initially Smales Farm, for example just had Clear and PT links were very poor now it has many more tenants like Sovereign, Air NZ, EDI partly prompted by improved PT links like the Smales Farm Bus Station on the Northern Busway. So business parks alongside rail and bus stations are important also. They can be quite intensive developments near bus or rail stations so growth doesn’t all have to be CBD focused for good PT (rail, bus ferry) to work in Auckland. Once Smales Farm reached a critical level ancillary businesses like Cafes, Pharmacies, takeaway food outlets, day care centres, restaurants opened up.
As I have said before the CBD jobs growth in the Rail Tunnel business case was well over stated - this was obvious to most who read the initial report. The tunnel is about a stronger CBD but also about better linking PT to other parts of the city so the CBD from a PT point of view can form a PT junction/interchange . Increasing numbers of commuters transit through the CBD on the way to work in other areas - it is not just workers that work in the CBD that “transit” through Britomart. If you live in Meadowbank for example you may catch the train to Britomart and then catch the Northern express bus to Smales Farm to work. These linkages are critical for PT in Auckland where you have so many origin destination permutations on PT journeys. That is one thing slightly left of field that people overlook and with integrated ticketing I would like to think this will happen more. After all many say things like - “I can’t use PT because I live in say Glen Innes but work in Takapuna”. I think that is largely a BS excuse and a stronger rail system through the CBD will encourage that sort of option as transit times will be quicker - connections more guaranteed etc. People will change from bus to train to bus etc if they know connections are reliable and that is partly what the CBD tunnel is about – better reliable PT across the whole Network not just the CBD in a isolated sense.
A thought anyway.
Giel the CRL is the next step towards linking more areas into the network, like Mangere, then crossing the harbor and converting the busway so those people at Smales are a quick trip to the airport, to manukau, and, yes the CBD. But with it we will be helping to lift constraints to growth in the CBD, which is important, we need a vibrant centre. The system can’t grow well without first fixing the city bottle neck.