If politicians in Auckland and Wellington are so confident about light rail, they should put their own money where their mouths are, argues NZ Initiative’s Jason Krupp

By Jason Krupp*

Light rail is once again a topic of discussion around New Zealand dinner tables after newly elected Auckland Major Phil Goff stated that this transport mode is part of the city’s future. Auckland is not alone. The Greater Wellington Regional Council is also looking to review a plan to put in a light rail line through the southern suburbs as a means of fixing the city’s congestion problems.

The alarming thing about these proposals is the risk associated with them. A crude rule of thumb when it comes to light rail is these projects almost always come in over budget, never meet deadlines, and seldom achieve usage forecasts.

This is well supported by anecdotal evidence such as Sydney’s light rail project in the western suburbs, where costs have blown out by 250%. Washington DC’s street car project opened nine years late, and is unlikely to ever recoup the costs of construction, let alone break even.

The evidence is not  just anecdotal. A comparative analysis of 58 rail projects across 28 countries found that the average cost overrun was 44.7%, and of the 25 projects where data was available, average passenger traffic was less than half of what was originally forecast (-51%).

This presents a challenging circle to square. On one hand planners and politicians argue that mass transit systems are needed to solve the worsening congestion problem in cities. Yet the track record of these projects is dismal. Presumably there was a whole lot of analysis to support these projects, so what is going wrong?

According to Oxford University’s Bent Flyvbjerg there are probably three factors which account for this.

The first is technical, and relates to imperfect forecasting techniques, honest mistakes and inadequate data. The second is psychological, where project promoters have  unrealistically optimistic expectations about the chances of the project’s success. The third factor is related to political-economic manipulation.

Assessing these factors against the track record of infrastructure projects, Flyvbjerg’s conclusion is that while the first two play a part to some extent, it is the third factor that more often than not accounts for why bad projects get repeatedly chosen. Essentially, there is a governance problem when it comes to project selection. 

This occurs because funding for projects, like light rail networks, is by its nature limited. And one would reasonably expect that only those projects with a high ratio of benefits to costs would be given the go-ahead.

An unintended consequence of this process is it creates an incentive for project promoters and project managers to deliberately overestimate benefits and underestimate costs to beef up this ratio and get the project over the line. The temptation to tip the scale is especially strong where there is no punishment for doing so, as the project promoters will have moved on by the time the real costs are tallied.

As Flyvbjerg puts it: “The projects that have been made to look best on paper in this manner become the worst, or unfittest, projects in reality, in the sense that they are the very projects that will encounter most problems during construction and operations in terms of the largest cost overruns, benefit shortfalls, and risks of non-viability. They have been designed like that, as disasters waiting to happen.”

This problem extends beyond rail. Classic examples of major infrastructure projects that should have never gotten off the ground include the Channel tunnel, the Danish Great Belt rail tunnel, Boston’s Big Dig, and the Los Angeles subway project. However, Flyvbjerg notes that small projects are just as susceptible to this kind of manipulation as large projects.

His fix is to put in  sufficiently big counter incentives in place to ensure that project promoters stop producing biased forecasts. At the low end of the scale this involves commissioning independent peer reviews of project proposals, while on the other end he recommends professional and even criminal penalties for those who produce deceptive forecasts.

The question is whether this should be extended to the people who make this promises in the first place. I would argue that the answer should be yes.

Surely if, as Flyvbjerg proposes, forecasters are to be made accountable for the forecasts they produce, those who propose projects should also be made to account for their proposals. The danger is of course that too few projects get proposed because politicians fear to put their necks out, but this could be ameliorated by setting a best practice test. For example, should the costs on a project blow out, politicians that can show the forecasts used to support the project were based on independent and peer reviewed analysis will be absolved of liability.

There are several other upsides. A major one is that it would keep politicians from making unrealistic promises, and taxpayers would get a better look into the true costs of what is being proposed. It is also likely to see fewer white elephant infrastructure projects proceed beyond the concept stage, and the money otherwise allocated to those where there is more real bang for buck.

The light rail line being proposed from the Wynyard Quarter to Dominion Road in Auckland may indeed provide more benefits than costs. Indeed, as has been argued by Greater Wellington Regional Councillor Roger Blakeley, there may be ways of restacking Wellington’s light rail project so that it delivers a benefit cost ratio significantly higher than 0.05 (which was what the first cost benefit analysis on this project showed in 2013).

But if they are so confident in these forecasts, let them put their money where their mouths are.


*Jason Krupp is a Research Fellow at The New Zealand Initiative, which provides a fortnightly column for interest.co.nz.

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It's worth reading the across-the-ditch costings for the Brisbane South light rail extensions: http://www.goldcoast.qld.gov.au/documents/bf/gc-high-capacity-public-tra...

Surfers Paradise to Bundall: 3 km, $AUD244m or $AUD81M/km
Nobby Beach to Robina: 9km, $AUD697M or $AUD77M/km
Broadbeach to Coolangatta: 22km, $AUD1.516B (taking every cheapest option - see the pdf for details) or $AUD69M/km

Awkward things, facts.....

Interesting the cost per metre. Some of the proponents of light rail here in Wellington seem to think $45m/km "realistic", the real cost, however is edging close to double that, oopsie. I have huge arguments over even $45m/km being affordable let alone 69 or even 81!

The governmental goldmine is the issue.
When there is no penalty for budget blowouts, private firms are always going to exploit the nature of poorly organised governmental organisations.

In all of the government contracts I have had intimate knowledge of, I have only known a couple to come in on budget.

Auckland does need sustainable transport infrastructure. Private transport is not the solution when we are already choked in a relatively low density environment.
Worldwide evidence is that rail solutions are albeit always the optimal solution.
The ransom just needs to be paid, unfortunately.


rail in Auckland actually largely exceeded forecast, dude.

Thanks for the fortnightly dose of neoliberal propaganda vaccine

Rail in Auckland is heavily subsidized by ratepayers.

As are roads

It is also heavily subsidised by the Government meaning those outside of the main centres also pay for our rides.

As are 'the roads of national significance'

Public transport is subsidised because it also delivers a benefit to motorists: lower levels of congestion.

Witness the way Aucklanders piss and moan about traffic and imagine how much more of that moaning would occur were there no option but cars, and a load more cars on the road.

So its 50%? 60% subsidised? Also how much sense does it make to run 20~40tonne trains for 10 people outside of peak hours? Seems mad to me to run 20tonnes up and down a track employing 3+ staff per train when a 10~14 seater minibus would do it cheaper.

Extreme example of doing it the wrong way is in Wanganui. There's a full-size bus that goes around the route twice a day, first time leaving town at about 9.00am, and second circuit leaving town at about 3.30pm. It's craziness. For people going into town to work, the timing is wrong. For everybody else, it's just as wrong, because there's nothing to do in Wanganui for 5 or 6 hours waiting for the next circuit. So most circuits it's practically empty. Anyone with half a brain would ditch the bus, and just have a couple of people-movers whizzing round the circuit all day. Miss it, or it's full, no big deal, because it'll be back in 15 minutes.

I could imagine Jeepneys and Tuk-Tuks being right for Wanganui.

I suggest you try taking a Dominion road bus off peak - I doubt there will only be 10 people on it.
There is only one staff per light rail train, the driver.

I saw an artist's impression of the light rail proposed for Dominion Rd and what struck me was why can't electric buses simply replace the trams travelling in opposite directions down the middle of the road. No need for the expensive rail network and associated infrastructure, just use the existing road network. Save billions. Or am I being too simplistic? Same for Wellington.

Capacity - around 450 per tram vs 80 per double decker bus

You only need 250 seats on 2 to 3 trains in the morning and the same in the afternoon rush hour. So from Not really, or rathe ryes that's the bug bear. 6am to 730am the train is at best 1/3rd full but still has a driver, 2 conductors, 20~40 tonnes of weight plus all the support staff. From 9am maybe 10 or 20 people til 430pm. After 6pm we are back to almost empty. Its no wonder the regional council has to subsidise 50~60% of the cost. Now consider the capital investment needed to expand on virgin track to do the above v using existing road. Now this is an era when energy is cheap, give it 10 years and that will no longer be the case, then running hefty trains with on one on them makes nose sense what so ever.

Light rail only needs a driver, there are no other staff required. Because light rail can take 450 passengers per driver the operating costs are actually significantly lower than buses.
The main need for light rail is that the city centre will be completely full of buses by 2040 or so due to population increase. Like I said above its all about capacity (as well as the obvious other benefits like comfort and ease of use)

So we buy 20 double deckers for 10 million and run them in a continuos cicuit ?hmm, baby maths this one

Busses are great, when there is plenty of spare road to drive them on, like the northern busway.

However Dominion road is not wide enough for an xpress busway. Take a look at smales farm station and try fitting that on dom road. Light rail is narrower and requires far less vehicles. Hence stops are far more compact.

Dom rd and symonds street do not have enough capacity to add more regular busses.

Light rail is also cheaper than the busway options.

The recent goverment / council study that investigated the options is called 'central access plan' if you are interested in the details.

Personally if you are worried about risk, id be far more concerned with transmission gulley. That project has a benefit / cost less than 1, and the patronage is guaranteed by the government. That PPP is going to be a massive taxpayer subsidy to those corporates for years to come.

Exactly my argument. No one has as yet argued that this view is wrong based on costs, economics, data v light rail. Somehow they all want light rail as the fix but cant justify why, maybe it just looks pretty, and I guess they are not the ones paying. For me if its so good why isnt business falling over each other to build? Reading on the outcomes of the Victorian era's rail expansion should give clues.

"Somehow they all want light rail as the fix but cant justify why" - umm yes they can - there won't be any more room for buses in the city centre by around 2040.

perfect... then there will be less people flocking to Auckland. Win-win for Aucklanders and the country.
Oops... are you in the exponential growth forever brigade?

I can't imagine Dominion Road as an effective route for rail. It's a mess now and lines down the middle are going to make it a nightmare.

Go to Melbourne and try driving in peak hour traffic along one of their main roads with trams
It's your worst nightmare

Or just take the tram

And conversely. Go to Melbourne and take a tram in peak hour traffic along one of their main roads with 4 lanes of cars plus a dedicated tram route. It's awesome.

Oh dear - would you believe - done all that

Light Rail are trams

Now the History lesson

Dominion Road used to have double tracked trams running along Dominion Road until about 1959 - up Wellesley Street, turn right into Symonds Street, down Eden Terrace into Dominion road, all the way along to Mt Roskill Terminus at Mt Albert Road. There was provision to extend the line out to Roskill South at Richardson road

Then they tore up all the tram lines around Auckland City and introduced Trolley Buses in their place

Then they tore out all the Trolley Bus overhead wires and went diesel

Phil Goff should know all this - he was born in 1953 - and has been member for Roskill for how long?

Peak oil is now however, within 10 years diesel is going to be expensive and maybe even rationed, electricity? probably we can scale our grid and generation up to 120~140% renewable and run the trolley buses relatively cheaply.

The world is never going to run out of oil. In the same way as it will never run out of coal but their use will decline as alternatives and efficiencies emerge.

You are in-correct on several levels. a) it isnt about running out its about output per day. So sure we have oil til 2050. The problem is at the half way point we reach maximum production per day, in our case about 90mbpd. After peak oil on the run down to none left we have less and less per year. That less and less could be 2 to 8% per year that means a smaller and smaller economy.

Examples, UK coal? in 1913 the British Navy could see UK coal production was peaking and decided to move to oil. Indeed despite their best war driven efforts during WW1 it peaked eventually in 1917 (if I recall correctly) and then never exceeded that peak. This pattern is reflected in oil fields, Alaaska? peaked, Texas? peaked, the north sea despite all the technology peaked in 1999 (or so). Countries? Indonesia went from a net oil producer to an importer so had to leave OPEC. We are on a finite planet, ergo oil is finite, unless maybe you think the owlrd is flat and not a sphere?

b) There is no other replacement for oil with its EROEI of over 15 to 1 and we need 8 to 1 plus to run the economy we now enjoy.

c) there will indeed always be some oil left that over say $150US a barrel (or $200, whatever) our economy wont be able to afford to extract it.

So really your point cannot be substantiated in the real world and makes no sense.

Good to have your voice back in the conversation Steven

So coal peaked and was replaced by oil. Don't you think we will replace oil with something else? We pretty much have the technology to use electricity for cars, that would have to help postpone peak oil demand for a long time (in fact we may have already seen peak demand)

Diesel is replacable by commercially grown vegetable oils at 80 CENTS per litre. It is nonsense.

It was ripped up in the days when mass transit wasn't really needed because the population was much lower.

I remember those Trolley Buses well Icon. 50 years ago I would stroll up to the corner in Balmoral, there would be about three trolley buses just there to take me to Symonds Street and school. And another two buses following within two minutes. Got to Symonds Street super quick - there were no pesky cars much to clog up the journey. Are we sure Auckland has improved since ?

The danger is of course that too few projects get proposed because politicians fear to put their necks out, but this could be ameliorated by setting a best practice test.

Nope. That is NOT the danger. Paying for the huge cost of the council verifying its cost benefit analysis will be the danger. How massive a bureaucracy will need to be employed to perform the analysis or how much will it cost to out source that work to specialists?

Trams won't really reduce congestion though, as they have to interact with the roading network. An elevated or underground network is the only way to do that. Urban intensification is needed, and then you have either an subway or L. With Auckland being so spread out with urban sprawl, any public transport is very expensive to provide. It is somewhat amazing that we used to have trams decades ago, and we are looking at going back to them. They can't have been that expensive to put in originally, as NZ was relatively poor back them, considering our standard of living now is significantly better. Maybe it is a case of wanting gold plated trams, which maybe due to health and safety laws.

The traffic lights are coordinated with the trams so wen they come along the lights stop traffic and the tram goes through, effectively the tram gets the green light all the way, more or less. Of course on Dom road they get slowed down with pedestrians, cars, bikes etc. But the issue is you can't have a dedicated line unless you took all cars off Dom rd.

It's always amusing to see that anti-rail myopia still exists in Auckland. Traffic in Auckland is diabolical. PT is part of the answer. That simple really.