Officials Cast Doubt On Rail Benefits

 
In the minds of public servants, the jury is still out on whether rail upgrades for Auckland have boosted Auckland’s economy and are worth the money in economic terms.
That in a report has been prepared for the Ministry of Economic Development by Nick Davis from New Zealand-based consulting firm  MartinJenkins (Martin, Jenkins & Associates Limited).
The June report is headed “Improving our understanding of Auckland’s competitiveness”.
To be fair the report does contain the disclaimer that it “reflect the views of their various authors, and not necessarily the views of the Ministry or the Government” but the views are mirrored in the commentary recently on the CBD Link.
The report, which praises the economic benefits Auckland motorway have brought but raises a question mark over rail upgrades, is another insight into why government officials, feeding these sort of views to their Beehive masters, remain so sceptical about the benefits of rail projects we need like the CBD Rail Link Of National Significance.
They just don’t think millions on rail does much to boost Auckland’s economy in terms of housing and spatial development but they think motorway development can exceed expectations because in the case of their example – the northern motorway extension – they can see new businesses and houses visibly sprouting up whereas upgrades along the Western Line were in well-established areas. But even then,the New Lynn  transport hub has been a catalyst for a rejuvenation of the town centre which is beginning and aided by further road work around the station, now the rail tracks have gone underground.
So it’s unfair to write rail upgrades off until proven otherwise. But effectively that is what they have done in this recent paper.
The report says that many studies have established a correlation between local land prices, population density and access to transport facilities.
The consultants’ research found significant evidence of benefits from transport infrastructure investment, particularly in relation to the northern motorway extensions.  The motorway investments have significantly influenced patterns of spatial development..
But an examination of Western Line rail upgrades shows that “anticipated benefits do not appear to be as great, relative to costs, for rail upgrades although it remains too early to tell what the full benefits from improved rail services will be. “
International experience indicates that the anticipated benefits of infrastructure upgrades should be factored into people’s location and pricing decisions upon announcement.  In mid-2005, planned urban passenger rail upgrades to Auckland’s Western Line were announced.  These upgrades include double tracking to the outskirts of Auckland’s urban area enabling a more frequent train service, station redevelopment, and related urban renewal projects.

The revamped Baldwin station

The study analysed the economic effects of the rail upgrades.  Specifically, the study tests whether Auckland residents, who do not have a strong history of rail usage, react positively to the prospect of improved rail services as implied by changes in land values.  The results are used to assess anticipated net benefits of the upgrade project.  The study also tests whether proximity to a Western Line station has become more highly valued over time as the line has been upgraded.

The results indicate that houses adjacent to a Western Line rail station rose in price on announcement of the upgrades in mid-2005, and that the magnitudes of the rises were sensitive to which station the houses were located nearest.  Houses more distant from the rail track also rose, but by decreasing amounts up to a distance of around 8 kilometres from the station where no rise was apparent.
Applying the estimates of land price rise attributable to the announcement effect to all parts of Waikatere City within 8 kilometres of a rail station results in an estimated aggregate rise in land value of between $610 and $670 million upon announcement.
These benefits are broadly comparable to Waitakere City’s share of the costs of the Western Line upgrades.  However, two points need to be noted:
The estimated benefits relate solely to properties within Waitakere City and do not reflect any benefits that accrue along the Western Line within Auckland City or in Rodney District.  The latter area may benefit to the extent that rail travel to the area is improved through double tracking and other upgrades.  Further, they do not include any benefits to businesses outside Waitakere City that may arise, for example, through improved access to a wider pool of labour.
One odd conclusion is that unlike in many countries, Aucklanders don’t check out public transport options before they decide where to live. Maybe that’s because Auckland is so car-centric.
It concedes that given Auckland residents’ lack a strong history of commuter train travel, it is possible that actual benefits will be higher than initially anticipated.  In other words, the full benefits
may only become apparent after the new higher frequency rail services are in place.The results suggest that the rail upgrades have been valued positively by local residents, and the estimated anticipated benefits are broadly comparable with budgeted costs.  Further work would be required to determine whether the benefits improve with actual experience of the network.
The studies examining the determinants of population location found little evidence of a specific role for access to transport (i.e., proxied by distance to the nearest motorway ramp, the nearest railway station, the sea and air ports).
” The authors find this surprising given the commonly accepted importance of transport accessibility.  It is particularly surprising because of the very fine spatial scale of the analysis, which should improve the chances of detecting the attractiveness of local amenities.However,  the coarseness of the amenity measures (e.g., failing to pick up transport congestion, or differences in frequency of public transportation) may mask any significant effects.  The study of housing preferences and needs of younger Aucklanders suggests that access to public transport is a factor in housing choice, but only one of many factors taken into account.  In addition, it is common for the individuals who make up households to have very different transport patterns, which complicates analysis of household transport accessibility..”
It says that a key question for Auckland is how and to what extent would transport infrastructure investments shape Auckland’s future patterns of spatial development.
Studies suggest that transport investments have generated significant gross benefits.
In the case of the Northern  motorway extension, particularly the section from Tristram Avenue through to Orewa. the investments have also significantly influenced patterns of spatial development in the Auckland region.
While the key line in terms of rail upgrade benefits is:  “It remains to be seen to what extent the rail upgrade leads to similar magnitudes of benefit:cost”
The study estimates the net economic value of the northern motorway extension to be at least $2.3 billion in 2004 dollars compared with an estimated cost of $366 million, resulting in a benefit:cost ratio of at least 6:1.  This is a relatively conservative estimate and is at the lower end of the range estimated in the report.
The rates of growth of land values, population and employment growth in localities along the path of the motorway rose at faster rates than for the region generally.  Real household income also grew faster than average in areas near the motorway, with the exception of the Inner North Shore, which could reflect either a tendency for lower income households to locate near motorway exits (e.g., to take advantage of employment opportunities, or to commute more easily); or lower attractiveness associated with living close to a motorway (e.g., pollution) and/or the possibility that
this may have led higher income households to move further away from motorway exits.
Interestingly, with all the debate about highways further north, the same changes and associated economic growth have not been realised in Wellsford, indicating that even with the motorway extension this area is effectively distant from Auckland.
The Northern motorway extension enabled a significant increase in population and employment growth in areas near and to the north of the motorway exits.
 
 
 

10 Comments

 
  1. Matt says:

    What’s not clear from what’s written there is that the study on land value increases around the Western Line was conducted by Motu, not by the motorway-friendly consultancy that produced this MOT talking piece.

    Assuming Motu’s figures are correct, and I’ve only read their study briefly because the numbers started getting very heavy, even a bottom-end value increase of $610m in the old Waitakere City alone is more than the cost of double-tracking the entire Western Line – including the bits in other former local government areas. I’d call that fairly compelling, personally.

    The other thing that seems to be conveniently missing from studies like this one is what the decongestant benefit is of not having to transport an extra million-ish people per month by road, primarily in peak time.

  2. Mark says:

    Not sure house value increases from 2005 mean much.

    I never trust house values – way to complex. For a start a lot of increase in NZ is in my view DIY. That’s always under-estimated by economists. Thye need to strip out renovation consents, and also the below radar DIY.

    But then a key well known driver is school zoning – so how is that stripped out?

    Also they’re analysing the western line far too early – and also hit by 2008 downturn. The New Lynn / Mt Alberts will redevelop, but they are small reasonably quick developments, where I suspect private developers will want tenants to see the 10min electrifcation impacts.

    What about other economic benefits? Look at the foreign education sector – large renter both CBD but also out in the suburbs – and also based on connectivity to education sites. That is a 2bn pa industry – far more importnat than a house value. What’s the growth in Unitec foreign students? same with Newmarket/CBD.

    We already know the Dominion RD bus corridor has a major foreign student component, from when it dipped back in 2004.

    And that benefit is a real export industry bringing money into teh country.

  3. Matt says:

    Mark, Motu employs some very smart folks. Have a read of their study if you’re interested in critiquing the methodology. They tried to be somewhat rigorous in their approach, which is more than can be said for many other studies done around the benefits of transport infrastructure *coughRONScough*

  4. Patrick R says:

    What a shoddy piece of work. The central argument is that motorways enable sprawl, yes, but then concludes, without examination, that all sprawl is good for the economy. No examination of gross cost to society of this sprawl, the extension of services out to these new low density developments and the added cost of all that driving for those in these new distant suburbs, Let alone the imported fossil fuel costs and risks. No qualitative analysis at all.

    Everything out of this Ministry stinks of post-rationalisation. Here’s the answer now fill in the way to get there. Very keen to keep the big fella happy aren’t they? Good idea to put the fear of mass public servant firings under the remaining apparatchiks, isn’t it?

  5. Jon C says:

    @Patrick R Well put

  6. BD says:

    I think living near a railway station and not relying on your car all the time is the way to go. I currently live with my parents in Titirangi and they are thinking about buying a new place. I am encouraging them to buy a place within walking distance of a train station in areas like Swanson, Ranui, New Lynn, etc. Living in Titirangi kind of sucks a beautiful area that it is I have to rely on my car all of the time to get me into work and into town.

    It would be nice to leave your car at home for once and just walk to the train station. With Electrification and hopefully if the CBD loop is built it will be even more of a win win situation.

  7. Matt L says:

    Seems like the government has instructed it’s departments to come up with as much as they can to try and stop the tunnel. There will probably be a few more reports to come out yet making bogus claims based on flimsy analysis.

    I can’t say about others but when my wife and I brought our current house, being near a train line was one of the key factors (and that was before going down the PT rabbit hole). It means we only need one car which we only really use on weekends and if we want to go out it is easy to get around and we dont have to worry about who will drive.

  8. Carl says:

    Did the bother to work out much less C02 is getting pumped car, because more are using PT now that its getting built up?

    this report is a yawn and lop sided.

  9. George D says:

    Way too early to make such bold pronouncements. The improvements form a package, and their effects should be considered together. Other cities that do well in the world put these in, and don’t try and post-facto weigh every dollar. They realise that a mobile population and less congestion are good, BECAUSE THEY ARE GOOD, not because they improve house prices, or some other proxy for the almighty dollar.

    Seriously, this kind of thinking is exactly why in many areas NZ is about 20-30 years behind the rest of the world (excluding the USA, which has the same problems)

    I do actually know someone who very recently bought a house in West Auckland based partly on its proximity to the train line. Not a train nut, just an ordinary person who doesn’t like driving for hours every day. Others will follow.

  10. Carl says:

    Oh dear, my other comment did not come out how i typed it =(

    (please remove it)

    It should have read, did they bother to work out much less C02 is getting pumped out of cars,

    because of this increased spending on PT, more people are using, sort of pulling more cars off the road.

    I mean isn’t that a good thing? less cars, less pollution, less sick people = more spending = happy store owners and a better country in $$$ terms?

    this report is a yawn and lop sided.

 

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