Dialogue: This is no way to run a railroad

There is an ancient and universal belief that nice, wet, socially minded folk will squander public money, and that businesslike characters are more careful.

It is a belief held equally by those who vote for caution and those who vote for socialists in the hope they will squander quite a bit of money in the right places.

Even an unbusinesslike government, when it imagines that handing out public money to the private sector might help the economy, will invite a committee of corporate notables to allocate the funds. And it will collect the vote of Nandor Tanczos, MP, who was railing in Melbourne this week against, "the unelected elite of business [who] direct the economics of the world."

But there is nothing especially brilliant, devious or different about businesspeople, except the risks they work under. Remove those risks - which is what you do when you put them in charge of public money - and they are like anybody else. Worse, if anything.

I have sat on school boards with a few and they were less cagey than the rest of us when it came to spending. Unlike, say, schoolteachers, people in business are used to spending a dollar to make a dollar. When it is their own or shareholders' money, they are very careful about it. When nobody stands to lose personally, their enterprise knows no bounds.

Take the late Auckland Regional Services Trust, reconstituted as Infrastructure Auckland. The trust paid off the region's public debt and began to amass substantial cash while the Alliance was in charge. As soon as the Alliance was displaced by more businesslike trustees, the money began to be spent. They sank millions into the Viaduct Basin to provide a base such as the America's Cup had never known. Sir Peter Blake did not want the challengers spread around marinas such as Gulf Harbour, which would have welcomed a few of them at no public cost.

The Viaduct turned out to be splendid in every way except financially. Somehow amid all those crowds the event managers, handsomely paid naturally, managed to lose millions.

Next the board of Infrastructure Auckland intends to buy a railway. I am not kidding. "IA," as it is fondly known now in local government agendas, was constituted to invest the trust funds in Auckland's drainage and transport. Forget the drains: it is transport that really excites local visions. Public transport, that is, especially trains.

Fortunately, New Zealand railways are now run profitably by a company which probably knows its business. Unfortunately there are Aucklanders in public places who think they know better.

In any case, they believe the law would not allow them to spend millions upgrading stations and tracks for Tranz Rail unless the company faced competing bids.

For years the Auckland Regional Council tried to negotiate terms on which competitors might use the tracks. Naturally, Tranz Rail was not anxious to lend its property to a competitor.

Eventually, the ARC handed over to the public body with the money, and money talked. Infrastructure Auckland agreed to buy the lease of the rails in the region for $65 million and $2.25 million a year.

That means, as Tranz Rail understands it, the maintenance, traffic control, complete management and financial responsibility for the lines from the city to Southdown and Swanson. In every sense that section of the railway will revert to public ownership.

Tranz Rail would retain only the right to run freight trains into Northland between 1 am and 5 am.

Things could get worse. Public transport planners might yet urge Infrastructure Auckland to also buy the eastern loop, which is actually the main trunk, if it decides the $2.25 million annual rental of that stretch does not allow it to run enough trains.

If Tranz Rail parts with that line, which gives it access to industrial areas and the port, the total price will far exceed $100 million.

All this before any money is spent on extending lines, an inner-city circuit, or light railcars. And it remains entirely possible that the most practical rapid transit scheme will involve Tranz Rail anyway.

We may end up buying a section of railway that only Tranz Rail will continue to use.

How can this be happening? Everyone remembers the constant calls on the taxpayer when rail was trying to run profitably as a public corporation.

It is happening only because the money is there.

Unfortunately, when money is entrusted to people at no personal risk, they can overlook the collective risk. What if the best little light-rail system in the world could not induce Aucklanders to get out of their cars? It is quite likely.

Everybody likes the idea of swept-up passenger transport - for everybody else.

If Tranz Rail were paid to provide the desired service and few used it, we could cut our losses. With public ownership we could be feeding a white elephant for the rest of our lives.

The deal depends upon the Government sharing cost of the repurchase of the railway. Fortunately, we do not have a businesslike Government. It seems reluctant. The details were to be worked out by the end of this month but now they aim for the end of the year.

Alliance people are said to fear that the body set up to take over the tracks would be too easily privatised. It's an odd view but if it stops the railway reverting to public ownership, bless 'em.