By Russell Jones*
The Independent Chair’s report on the City Centre to Mangere (CC2M) Rapid Transit proposal has been released. This article looks at the information in the report on the economics of the project. Three rapid transit options were evaluated; Light rail, Light Metro and Tunnelled Light Rail.
The costs of the options ranged from $9.0 billion to $14.6 billion. To put this into persepctive, total revenue into the National Land Transport Fund administered by NZTA in 2019/20 was $3.79 billion. This pays for the National Land Transport Programme (which pays for most of the land transport infrastructure investment and maintenance in NZ) and road policing.
A footnote to the CC2M costs states that “The costs are P50, and the cost estimate class (class 5; accuracy range of -50% to +100%, based on information produced and assessed against the AACE Criteria. The level of accuracy for these schemes have been assessed around -50% to +60%”.
Clearly there is a considerable degree of uncertainty in the costs which is a problem for the economics of the project as the report finds that the BCR (benefit cost ratios) of the options only just exceed 1 (1.1 to 1.2). A BCR of 1 is where the costs of the project equal the benefits. If the worse case occurs and there is an escalation in costs the BCR will fall below 1, meaning that the costs of the project exceed the benefits. BCRs are calculated using a discounted cash flow analysis.
Transport projects involve spending a big lump of capital up-front, with the benefits flowing over many years. The BCR is therefore sensitive to the cost of the project, the discount rate and the actual benefits which flow from the project. It should be noted that the NPV (Net Present Values) in this case are calculated over 60 years; this relies on being able to reliably forecast demand 60 years into the future which is almost impossible.
The report pitches the project as needed for the future where the area serviced is much more dense, with the report saying that the Tunnelled Light Rail and Light Metro options have the “potential for an additional 66,000 households over the next 30 years. This equates to 25 per cent of Auckland’s household growth within the Rural Urban Boundary. The Light Rail option has the potential to enable an additional 51,000 homes to 2051, which equates to 19% of Auckland’s household growth inside the Rural Urban Boundary”.
But as the corridor serviced is only a small part of the area within the Rural Urban Boundary and Auckland’s Unitary Plan, it is currently fairly liberal as to where development can take place the implication might be that for the project to be successful development may have to be restricted outside the CC2M corridor. The exception might be if Kainga Ora does enough development within the corridor – its website states that it’s building about 11,000 homes in the Roskill development and up to 10,000 in Mangere over the next 10 to 15 years.
The report is silent on the viability of any of the options at present.
The disadvantage of building the project now is that it becomes a drain on the taxpayer/ratepayer sooner and that the world may change in unforeseen ways. Two years ago nobody was expecting the COVID pandemic; it has stopped population growth in Auckland and changed people’s commuting behaviour with some people working at home more often or permanently.
This will have impacted on the economic viability of the City Rail Link and it’s possible the CC2M project could suffer a similar setback after the government has committed to it.
Russell Jones is an independent consultant in analysis and modelling of transport and urban planning issues.