Project Auckland: Moving ahead with light rail

Michael Wood, Minister of Transport. Photo / Mark Mitchell

Transport Minister Michael Wood has long staked his political reputation behind his campaign to bring light rail to Auckland.

But the need to retrofit a sustainable business case by the end of 2023, and, the usual tiresome internecine warfare which has long dogged debate and progress on New Zealand infrastructure projects, means this is no easy feat.

In late January, the Labour Government settled on a $14.6 billion option to take the light rail from the Auckland CBD to the airport.

The problem is that $14.8b cost-effectively doubles to $29.2b when the costs of building the adjoining urban infrastructure, necessary to sustain the base business case in the first place, is added in.

Some six weeks ago, Wood wrote to National Leader Christopher Luxon saying: "We would appreciate a good dialogue about this issue to try and build consensus where we could."

Luxon is on record as saying National does not support the $29b overall ticket saying it is a poor return on investment.

"We haven't received a response of any kind to that yet which is a little disappointing," says Wood.

"But I'll continue to try and find consensus where we can.

"But the absence of that can't be a handbrake on us actually trying to make the progress that we need now in our growing metro centres."

National's transport spokesman Simeon Brown has also chafed at a decision by Labour MPs to block his request for the Auckland Light Rail Establishment Unit to brief a parliamentary select committee on the interim business case.

Brown makes the point the $14.6b light rail project will be the largest ever infrastructure project in the country, however, "Labour is refusing to allow Parliament to scrutinise it".

Irrespective of the politicking — and National does have a point — Wood is adamant that in the case of light rail, "it's one that we campaigned on and very transparently. We are moving forward at pace.

"There will be early works in place next year because we do think it needs to move ahead."

Wood clearly has a passion for light rail. He campaigned on it when successfully contesting the Mt Roskill seat in 2016.

Prime Minister Jacinda Arden took the case up, pledging as Opposition leader at the 2017 election that light rail from the CBD to Auckland airport would be "done within a decade".

Wood is clearly frustrated that it has taken so many years to even get to the point where a date can be set for the first sod to be turned.

But National has said it will scrap the project if it wins next year's election.

Asked if National's warning would have any impact contractually, Wood replies that will depend on where the project is advanced to at that point.

"We certainly expect to be well into the detailed design of the project and we expect to have early works underway," Wood says.

"But look more broadly across the city and politically there is a high level of expectation that we get on with building infrastructure that has been put off for decades."

His contention is that while there is some politics at play, National "might think a little more carefully about it as time moves on and the public expectation that we 'just get it done' continues to build.

"That was the key response when we made the announcement.

"The response I heard back was 'Okay folks, Go and do it now stop talking about it and stop the constant back and forth on it'."

Woods contends the costing exercise by the project's establishment unit was robust, internationally benchmarked and went through a very robust Treasury gateway process that "had international eyes on it".

"When we compare it mile for mile with similar projects overseas, it's probably in about the 75th percentile in terms of costs so its been quite conservatively budgeted."

In a gateway review to the Minister of Finance last October, Treasury advised against deciding on a preferred option out of the three shortlisted light rail options until further analysis had been undertaken.

Treasury considered that there was a case for the project if it was progressed as integrated transport infrastructure and urban redevelopment scheme, where the project took a deliberate and measured approach to securing urban development and the benefits that flow from it. Crucially, Treasury advised it did not consider the key factors influencing the establishment unit's preferred position (urban growth potential, disruption and ability to integrate with the North Shore) sufficiently supported its recommended option, over a surface running light rail option.

The Government delayed its decision from mid-December to late January to take Treasury's concerns on board.

"Broadly speaking, Treasury would have advised us to slow down this process," says Wood. "We took that on board.

"There may be a case for waiting another 10 years and "crossing every t and dotting every i" and having the absolute degree of certainty, but you just don't get anything done".

"So, there has to be a balance struck where we work through a good robust process that can give us confidence about value for money. But at some point you have got to move forward.

"I would note that while we have made the decision to move forward the final investment decision doesn't come until we get the detailed business case.

"So, we are working through an iterative process."

Wood says the final detailed business case will not be available until approximately the end of 2023

Asked by the Herald, whether that meant proceeding with the particular light rail option would now be a post-election call, Wood replied, "Correct, that would be right.

Herald: So you have to look at it in the round because on its own it won't stack up?

Wood: "Correct. About one-quarter of Auckland's housing growth will be accommodated along this corridor out to 2050."

Wood says the light rail unit has now appointed a project director, is shifting to a new permanent governance structure, and market engagement around the detailed design process is now underway.

The Government is also developing plans for the second harbour crossing.

This is a project that both Labour and National agree is necessary.

Spiralling costs impact

The Government had to reprioritise its New Zealand Upgrade transport programme last year after costs blew out from $6.8b to $12-$13b.

Wood contends good progress is being made on a rebalanced programme, pointing to North Link and rail projects in South Auckland with the electrification of the Papakura to Pukekohe mainline, and Penlink shortly going to procurement.

"The focus there is on moving through with those projects, keeping on top of some of the cost and supply chain challenges that everyone in infrastructure is facing, and even more broadly across the system, as we are on a journey about how we transition our transport infrastructure to be more carbon-neutral."

But there is no doubt projects have been impacted when Covid has resulted in fewer people on-site pushing out deadlines.

"Across the big programmes that Waka Kotahi runs, we have effectively built in those ways of managing those challenges on the project budget.

"So, within the NZ Upgrade Programme, when we set it up (again) last year we have put in place different levels of contingencies so we have the ability to make judgements over whether we need to make changes.

"I am just looking at the website of one of the major domestic steel suppliers today, and just this month they have notified increases across their product range of between 5-16 per cent. We are seeing that with a lot of the key products in steel and concrete, and also labour costs.

"To some degree, we are going to have to find ways of absorbing those cost increases but we are also putting positive pressure on our delivery agencies to try to manage them as much as possible within the envelopes that they've been provided.

"They're working pretty hard on that front."

Auckland's city centre

Wood is confident on the prospects for Auckland's city centre. "There is obviously an impact on the city centre at the moment but let's be very clear: there is a long-term trend to great economic and social activity in the cities.

"There is clearly a bump at present in terms of retail activity. But we still have a whole lot of people wanting to live in the city centre and expecting a high level of amenity."

He says the key thing the Government was trying to bring forward when it made the announcements around Auckland light rail, was that it wasn't just about building a link between the city centre and the airport, but a focus on metro areas and building proper linked-up networks. "It's about the second harbour crossing providing access there to the North Shore.

"It's about how we link into the heavy rail network and the other bus priority projects like the Eastern Busway as well. There are a billion dollars of investment going in currently between Pakuranga and Botany to provide high-quality mass rapid transit to that fast-growing part of the city as well."

Light rail plan could cost $29.2b

The Government's plans for light rail in Auckland could cost up to $29.2 billion, according to Treasury papers released last month.

The chosen light rail route will run through a tunnel from Wynyard Quarter to Mt Roskill, which comes to the surface and runs alongside the SH20 motorway to the airport.

It was chosen as the best out of three options at a cost of $14.6b so that rapid transit can be expanded in the future and eventually connect with other lines to the North Shore and the North West.

But Treasury said the cost of building light rail does not include the cost of building infrastructure to realise the additional urban development planned along the route from the central city to the airport which takes the overall figure to $29.2b.

The chosen 24km route features up to 18 stations and stops and enables urban growth to be unlocked from the city centre to Māngere and the airport.

This would bring up to 66,000 new homes by 2051 and 97,000 additional jobs along the corridor in Mt Roskill, Onehunga and Māngere.