Phil Twyford says the cost of capital isn't the only thing being considered by Cabinet, as it decides whether NZTA or the NZ Super Fund and its Canadian partner should build Auckland's light rail

Phil Twyford says the cost of capital isn't the only thing being considered by Cabinet, as it decides whether NZTA or the NZ Super Fund and its Canadian partner should build Auckland's light rail

Cabinet is considering a Ministry of Transport recommendation on whether the New Zealand Transport Agency (NZTA) or the New Zealand Superannuation Fund and a Canadian pension fund should run the Auckland light rail project.

However commercial sensitivity means a veil of secrecy remains around the bids.

There is also a lack of clarity over the procurement process, and talk of the three governing parties having opposing views of the project.

The rail is likely to cost several, if not tens, of billions of dollars. Building the first leg between Britomart and Mt Roskill by 2021 was one of Labour's key 2017 election promises.  

Question marks over the process

NZ Super Fund CEO, Matt Whineray, on Wednesday told the Finance and Expenditure committee that NZ Infra (the Super Fund and CDPQ Infra partnership) gave the Ministry of Transport a 1500-page proposal in December, detailing what it believed the light rail should look like, how many stops it should have, etc.

However Ministry of Transport CEO, Peter Mersi, in mid-December told the Transport and Infrastructure committee the Ministry had only just started considering whether NZTA or NZ Infra should lead the project. 

“Once that has been done, obviously the starting point is whatever proposals they have put forward,” he said, giving the impression the Ministry wasn’t yet considering project design.

“Then there will need to be a process of working in partnership to get to the final outcome and that will involve much more engagement with communities and councils.”

However Transport Minister Phil Twyford on Wednesday confirmed: “Cabinet is making a decision about the selection of a delivery partner and the model that is used…

“The two parties have presented a lot of detail on route design and different aspects of the solution.”

Question marks over the proposals

Whineray’s appearance before the committee also raised questions over the cost of NZ Infra’s bid to taxpayers.

He wouldn't say what the target rate of return to NZ Infra was, but noted the Super Fund targeted an 8% long-run rate of return across its entire portfolio (not specific assets, as some will be higher-risk, higher-return and vice-versa).

But, given the Super Fund’s mandate is to invest on a "prudent commercial basis" to help pay for NZ Superannuation in the future, media quizzed Twyford on why the NZ Infra proposal was even being considered, when the Government could effectively issues bonds at 1% and get NZTA to deliver the project.

“The cost of capital is only one factor to be considered. There is an array of other issues,” Twyford said.

“Cost is not the only factor. It’s important, but it’s not the only factor.”

Twyford dismissed a report by Stuff journalist, Thomas Coughlan, who had been told that even though NZ Infra was equally owned by the Super Fund and CDPQ Infra, its returns could be split 70-30 in favour of the Canadians.

Twyford said these figures were wrong, but wouldn’t give a categorical assurance that the returns would be split 50-50 between the two partners, saying he wasn’t going to comment as the proposal was before Cabinet.

Whineray said the proposal was for a 50-50 split. 

He confirmed NZ Infra's bid was for the light rail to go to the airport, but didn't give away hints over whether it was as ambitious/costly as documents leaked to the media have suggested. 

Twyford wouldn’t comment on the length of the proposed contract between NZ Infra and the Crown either, despite previously saying the proposal was for NZ Infra to operate the light rail under a public private partnership model for 50 years.

Question marks over whether political consensus will be reached

In terms of politics, NZ First isn’t a sure supporter of light rail.

NZ First MP and Infrastructure Minister, Shane Jones, specifically pointed out to those at an infrastructure conference last Friday that there was no concrete commitment to building Auckland light rail in NZ First's coalition agreement with Labour. 

He also said those in the party were "doubting Thomases" when it came to the "light rail kaupapa".

Jones has been copied in to a total of nine written briefings on light rail since October 2017. Twyford clarified this in Parliament, as he was being questioned by National’s transport spokesperson, Chris Bishop.

The Green Party is understood to be sceptical about the NZ Infra bid due to concern over this seeing government cede control and profits.

Meanwhile Labour is open-minded to the NZ Infra proposal, if not supportive. This is evident given Twyford directed the Ministry of Transport to lead the project, after deciding the former project lead, the NZTA, wasn’t giving proper consideration to NZ Infra’s unsolicited bid.

Clarifying National's position, Bishop said: "We are in favour of mass transit for Auckland, but on what we've heard so far, we are deeply sceptical about the NZ Infra proposal. We could cancel it if elected if no contract has been agreed." 

Asked whether National would push on with the NZTA proposal or run a new light rail procurment process, Bishop responded: "We will take a mulimodal package to the election to get Auckland moving."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

35 Comments

Jones wants a blank chequebook for his own reelection. Giving Auckland the infrastructure to support the population it has taken on is taking money away from him that he could spend with little logical oversight. Of course he opposes it.

GA has been blogging about this, based on another project delivered by the same group in Canada. Unfortunately, the language around this suggests the whole thing is a done deal. There must be ample grounds for judicial review should someone want a bit of a challenge. Meanwhile, the whole thing is late, no longer to spec and delaying the rollout of a wider rapid transit network across Auckland. They should have just let Auckland Transport build it and sent them a cheque once they were done.

However, Jones has Gerry Brownlee syndrome: every time he opens his mouth you can just about hear his party sinking in the polls. Also however, NZ First seem to be capable of dooming themselves out of parliament due to their general corruptibility. Peters does it time & time again. It's amazing that a certain section of the electorate falls for it time & time again. I'm very hopeful they'll all be gone come 2021 and never seen again.

How good would that be - I probably wouldn't care if labour or national won - as long as NZ First are gone.

""The rail is likely to cost several, if not tens, of billions of dollars."" So conservative guess $2b with then population of Auckland 2m - that is $1,000 per person and Aucklanders might consider it a decent investment.
Less conservatively make it $20b and introduce maintenance costs and assume we live in families of 3 (or adjust figures allowing for children and pensioners who would not be paying) and that becomes >$30,000 per family. Since we pay now and get the reward later the alternative may be to give every Auckland family a new car or at least free buses.

Air taxis or automated EV's in tunnels (Boring company), even autonomous taxis and minibuses all make passenger rail a bad idea that is likely to be obsolete before complete.

These are all do-nothing future-tech dude-bro silicon valley fantasy solutions that were all supposedly going to happen ten years ago. Yet here we still are. How many billions in lost productivity would you like to see us wait until that technology 1) exists and 2) is affordable enough to drive our entire transport system?

Yeah it is 1960s Jetsons thinking about the direction of urban progress. It is 'lala land' thinking. Flying cities for widespread personal travel has never happened and will not happen. The tunnel boring equivalent is even less likely. Meanwhile reasonable choices and options to improve productivity and the environment by using a public transport and multi-modal transport approach is forgone. The opportunity costs of this thinking are massive.

Absolutely, i can't wait to try the new autonomous helicopter taxis in Dubai, they are launching in 2017, not long to go now.

At current government borrowing, $20b should buy us multiple light rail branches to almost every part of Auckland that we would own outright. Or, we could, you know, spend it propping up Canadian pensioners are hugely inflated rates of returns because we the world's worst business case/tendering process in the known universe.

My only real hope is that this has been so poorly done that there is ample scope for a judicial review of the whole thing before any more time gets wasted should the foreign lobby group get their way.

""The Green Party is understood to be sceptical about the NZ Infra bid due to concern over this seeing government cede control and profits."" If my family as taxpayers pay for this lightrail I would expect not to have ceded control and profits to anyone .

I get the feeling light rail would benefit from Twyford catching coronavirus.

Hamilton launch their Ham/Ak train later this year but it won't go to AK.Passengers have to get off at Papakura and connect with another train.This service will lose millions for keeping a Govt estimated 150 cars off the road.

That project is even more farcical than the light rail. Twyford is developing quite a track record...

Only way that distance is truly feasible is via highspeed rail. We need a few more million people in the area though to be able to deliver that (the Chinese ones are brilliant though, we should get them over to build them here once they reach saturation point).

Exactly. Nowhere near enough population to.make it viable. Loony.

Helsinki and Lahti are similar in sizes and distances to Auckland and Hamilton and the Finns have 160km/hour trains succesfully running between Helsinki and Lahti. So it can.be done. Not sure if the details of Auckland to Hamilton trains mean it will work but it is possible to have fast(ish) trains serving towns and cities that size.

I have no problem with light rail from auckland city to mt roskill
the part connecting it to the airport is just daft and fails on so many fronts its not funny
it fails on best route from airport to and from auckland city
it fails on the numbers
it fails on connectivity to the other modes of public transport already in place

The part to Mt Roskill fails due to Dominion Road just being too narrow - unfortunately.

personally I think there is better tech coming than fixed trams for short dense routes that would make retrofitting our roads less expensive and enable us to upgrade easier over time
trackless electric trams are making big strides that coupled with better recharging and batteries and self driving
http://theconversation.com/why-trackless-trams-are-ready-to-replace-ligh...

That link is from 2018. How many more years of "almost there" before you've pissed away the total cost of a functioning transport network in congestion costs?

Trackless trams is essentially bus rapid transit rebranded as light rail. I cannot see how it would work on NZ's narrow single lane arterial roads. Maybe in places like Canberra where hugely wide boulevards can be repurposed trackless trams might be viable.

There's a few things that I think need to be noted here:

- It only fails on "best route to the airport" if you are obsessed with CBD to terminal travel, of which there would be few regular users. The light rail proposal eliminated bus traffic as well as adding in PT options in parts of Auckland that have no real PT options for residents. Heavy rail for such a small pool of regular commuters is going to be horrendously expensive and wouldn't connect to key employment and residential areas that LRT would.
- You can't know if it fails on the numbers or not because there are no public business cases and the Government isn't saying anything. You don't have a problem with the Mt Roskill but so the cost you are actually comparing is the marginal cost of extending it to the airport via Mangere, vs Heavy Rail which have a restricted alignment and minimal stops (think four vs fourteen).
- The aim of Light Rail isn't to connect to other things like buses, it's to replace a ridiculous numbers of buses down corridor routes like Dominion Road that you would need to service population growth along that corridor. If we accept the need for that to happen then Light Rail only really has to connect to itself for the airport leg.

The way i see it.. its a question of risk transfer. Let NZTA run it and NZ taxpayers will wear the overruns and cost blow outs.... or, a tight contract that clearly shifts the risk to NZ Infra, allows them to potentially make some money out of it, but also ensures they run the risk of any blowouts.

Naturally NZTA will say they can manage the project more efficiently and will be chosen as a cheaper option for the taxpayer... however it will be a case of 'false economy' as we will ultimately wear the cost of their continued bumbling and pay for the cost blow-outs.

Transmission gully is a PPP yet the government just had to write a big check to the private party for cost blowouts. I don't think the private party really takes much risk... And even if they do, its all priced in. Why pay for insurance when you have a cheque book as big as the governments?

It is not just cost blow outs. A lot of the economics of mass transit is about getting patronage numbers up to the economies of scale sweetspot. That means taking a public service entrepreneurial approach to attracting new customers. In particular integrating transport with urban development. NZTA have shown it is under-skilled in this area and that it is not inclined to learn those skills.

Having said that I am not sure if the Canadians are any better than we are. It is the Japanese who are the true masters in this matter.
https://medium.com/land-buildings-identity-and-values/japanese-urbanism-...

ABSURD.

Now is not the time to be deciding on light rail. The decision should be deferred & the funding used in the interim to assist with the covid19 shock. We have no idea how long this is going to play out.

Entirely true . However we all know we will not be getting a decision anyway - but rather an "aspirational" pre-election announcement that will never translate into anything real .

Finland is flat, has wide gauge rail and doesn't have existing infrastructure to navigate around constraints. So it isn't a valid comparison, as anyone who understands transport systems would know. Hard to get NZ trains on track speed above 80km/hr on the winding tracks. Straighten all those out and you might get to 120km/h plus time to accelerate and stop at stations. So best time Auckland to Hamilton with a dedicated track and billions spent creating it maybe 90 minutes.

Queensland have a trains that travel 160km/hr on narrow gauge track. Yes I agree that work would need to be done to improve the quality of the track between Auckland Hamilton as it was done between Helsinki and Lahti. This work might take some time -a decade or so. If that work was done I believe travel times could get down to close to one hour.

Finland has it's own geographic challenges. Especially to do with the extreme cold they get in that part of the world. They make it work. As we could too. There is a tendency in NZ to knock ourselves too much. I think this is example of that.

This site here says travel time getting from Helsinki to Lahti is comparable in car and only a bit slower in a bus
https://www.rome2rio.com/s/Helsinki/Lahti?r2r_campaign=MSQ_TP_Transport&....

And on what routes in Queensland do the trains do 160km/h? Google says the fastest is only 140km/h They were looking at building one at exorbitant cost to go 150km/h but that is along the coast.
https://www.brisbanetimes.com.au/national/queensland/queenslanders-will-...
Nothing like the Hunuas or Huntly hills/ swamps there.

Queensland tilt service trains have a top service speed of 160km/hrs and has a record speed of 210km/hrs.
https://en.m.wikipedia.org/wiki/Electric_Tilt_Train
Lahti to Helsinki on the hourly Pendolino trains take 1hr and 4 min versus driving takes 1 hour and 24min.

The tilt trains had their speed slowed by ongoing track issues. They actually got a train up to over 200km/h on a closed track but that isn't their service times, which is what the actual service advertises, not puff pieces. The trains had an earlier high speed but this caused trouble for the freight trains which actually pay for the line. That is why they have train networks - to take extracted minerals from the mines to the ports - the passenger trains have to work around that. The times for Finish travel I got was from the link. You haven't sourced your data. Cars get you destination to destination, not train station to train station. You need to add at least half an hour to each end to the train's time to make it door to door.
If Australia can't make a Melbourne Canberrra Sydney high speed train pay against one of the heaviest plane schedules in the world (https://www.theguardian.com/world/2019/aug/07/high-speed-trains-to-nowhe...) taking 150 cars a day off the road in NZ for billions of dollars is just another idiotic scheme by people wanting to spend other people's money.

Too late! The opportunity for accomplishing a decent transport system disappeared forever when first Labour and then National delivered knock-out blows to the venerable Ministry of Works with savage left and right hooks in the late 1980s and early 1990s.
You all do remember the Ministry of works, don't you? That was the government department that built most of our hydro dams and the original railway lines the length and breadth of the country. You may have seen old photographs of them constructing these feats of ingenuity......you know the photos with men digging with shovels or pushing wheel-barrows.
Oh yes, and the Ministry of Works used to train over 2000 apprentices a year to a very high level of skill.
But, weren't we all glad to see the last of the Ministry of Works. Good on you Labour, good on you National.

All they care about currently is keeping the debt off the government's books and they're happy for the taxpayer to pay a 7% per annum premium to do so