Cost blowout of $1 billion for Auckland City Rail Link confirmed as the price tag on the local government-central government partnership jumps to $4.4 billion

Cost blowout of $1 billion for Auckland City Rail Link confirmed as the price tag on the local government-central government partnership jumps to $4.4 billion

With the true gravity of the Auckland City Rail Link $1 billion cost blow-out now revealed what options does Auckland Council have to pay for it?

The project is being jointly funded by the Government and Auckland Council, and was originally expected to cost $3.4 billion and scheduled for completion in 2024.

But at a press conference on Wednesday City Rail Link chief executive Sean Sweeney announced the new revised estimate for the project has ballooned out to $4.4 billion and it is now planning to ask the Government and the cash strapped Auckland Council to pay for the shortfall.

Decisions by the Government and Auckland Council regarding the cost blowout are now expected to be made next month.

“The $1 billion cost increase on the previous $3.4 billion estimate made in 2014 reflects significant changes impacting the project in the past five years,” Sweeney says.

“No-one could have foreseen the competitive pressures that have occurred in the construction industry over the past few years and the impact that has on costs, particularly for a project the scale and complexity of the City Rail Link.   

“Last year, a decision was made to increase the scope of the project to accommodate longer, nine-car trains at stations. Planning today for a city that will be much bigger in the future reinforces the benefits the City Rail Link (CRL) will deliver to the way people travel, work and live in Auckland.”

Transport Minister Phil Twyford and the Auckland Council had both refused to confirm or deny previous reports about the cost blow out citing commercial sensitivity around the awarding of a contract for the next stage of the project.

But on Wednesday the tender for was finally unveiled long with the burgeoning costs of the project.

In a statement to the NZX on Wednesday Auckland Council says it has identified a range of potential initiatives which would enable its share of the cost blowout to be met within current debt policy limits.

These initiatives include: 

- Interest cost savings due to lower market interest rates; 
- A reduction in cash holdings from improved cash management; 
- Re-assessment of the valuation of operating commitments which impact on Auckland Council’s debt policy limits; 
- Development and implementation of the off-street parking strategy, including recycling assets to invest in CRL and new or upgraded park and ride facilities; and 
- Flexibility around the timing of Auckland Council’s CRL contributions.

Auckland Council’s Governing Body will consider budget decisions in response to the funding requirement on May 2.

Auckland Council’s latest financial update projected debt will be below its $9 billion target for this financial year. But with just $1.2 billion of debt headroom below its debt-to-revenue ceiling of 265%, Auckland Council’s ability to just absorb the costs by taking on more debt could be a squeeze.

And a credit downgrade by Standard’s and Poor’s and or Moody’s could be a real possibility. Auckland Council currently has a credit rating of AA with Standards and Poor’s and Aa2 with Moody’s.

Sweeney says CRL Ltd.’s own cost review underwent a rigorous examination by two international assessors to ensure the project delivers the best value for money for Aucklanders.   

After an exhaustive competitive tender process, the Link Alliance was announced as the preferred bidder for the next stage of the project.

 

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Rates payers will bear the extra 1 bil in cost!
Bravo to Auckland Council for managing this project so well.

Had national got on board earlier there wouldn’t have been a blowout. I’m not surprised it’s gone up that much in 5 years considering the massive increase in construction demand.

All rate-payers? Or all tax payers? I have a feeling this cost is going to spread beyond Auckland borders.

Perhaps Shane Jones would be able to help.

Ummm - look in the nearest mirror to see who's gonna pay???

Haha. I knew it! And that's not the last of the overruns. By the way, the original cost estimate was 2.5 billion and included one more station when approved by the esteemed mayor Brown. Spin doctors have had some work to do on the latest media release.

Oh, and would the initial expenditure when the council went it alone have been included in this 4.4 million sum? Probably not so the economics are probably even worse!

I can't help but think the timing of the announcement, on the same day as the CGT announcement, was intentional.
This blowout is a disgrace.

Been watching Yes, Minister - days preceding public holidays are full of happy people looking forward to the break and busy not looking at the news.

You're presenting it as if the scope is less than was originally planned.

In fact, this is not true. The scope was expanded: https://www.stuff.co.nz/auckland/105789529/aucklands-city-rail-link-expa...

I wonder what the estimates were when Robbie proposed it? By your argument they were probably 100's of times out!
This is the thing with delaying big projects; the cost goes up and the benefits are delayed / reduced.

Will never make a profit so the cost will compound into infinity.....No surprises, who will pay.....We are forever in their debt......even if we got out of our personal.........ones...they keep adding to our rates and taxes.

Yet another total waste of time, effort ....and yes...that thing called.......munny. ...Funny it ain't....no more.

Oh me oh my. What a surprise.
And the price will rise again. Tell me it won't.

That’s only around 7-8 months worth of Auckland Council rates income, no big deal for the monkeys running the show. The extra rates and taxes that we will have to shoulder for all of this incompetence in the years ahead will be mind boggling.

Any projection for light rail that we can believe?

the light rail will be hugely expensive and not achieve what they promise
they need to admit it is wrong and go back to the drawing board on that one
not against light rail but where they are going from and to is just wrong
tell them to go to MOTAT and look at the old plan for ideas

'The old plan' for the isthmus that ignores West Auckland and the industrial developments in the South/East? Yea, I can definitely see that being a viable commuter option.

Why is no one questioning a nearly 30% blow out in cost, that is huge and could not happen unless there was bad management of the project. It also show building cost in NZ are out of control and the govt needs to do something about the monopolies in this country. Ask questions and hold people accountable instead of signing up tax/rate payers to pay more which seems like rewarding bad behavior.

Only the ignorant would not have foreseen a cost blowout. It happens on most Govt. schemes. It will not be the last either. Grow up. Govt. always understates the cost of something if it is an important part of the agenda they are pushing. Quite laughable really that anyone would be surprised. And will they be surprised when the next blowout is announced?

Best comment here, likely to be significantly more than 4.4. Perhaps doubling over 5 years.