Dialogue: What's all the fuss over new rail network deal?

On December 8, the Auckland Regional Council entered into a variation of the agreement with Tranz Rail to give effect to what is known as the double assignment option for the acquisition of rail corridor assets.

So what's the big fuss? There has been some uncertainty and misunderstanding as to what that variation to the original agreement consists of, even among some of my colleagues across the Auckland region. Yet over the past month each council has voted to support the variation, and all the details of the agreement have been sent to them several times.

Essentially, the deal is about the region buying from Tranz Rail the tracks, signalling, stations and all other infrastructure, and being assigned the lease to the tracks for the whole region.

A previous government sold all of these assets into private ownership in 1993, without consideration of how the passenger rail services in Auckland could be upgraded to cope with the growing demands of Auckland into the 21st century.

The first deal, signed on June 30, was for the region to buy just the western part of the the tracks and be assigned the lease for that. The price was $65 million upfront, and an annual fee of $2.25 million to $4.25 million for access to the main trunk line.

The variation on the deal sees the region buying the tracks and so on and being assigned the lease for the entire region for $112 million.

Tranz Rail will pay an annual fee of $2 million to the region for access to the network for its freight activities.

The net cost of the two deals is very similar. According to the detailed analysis undertaken by our commercial advisers, Macquarie Bank, the net cost in today's dollars for the new variation is, in fact, $2 million less.

Also, there are substantial benefits to the region from gaining assignment of the lease and the assets across the whole network because it places the development of this corridor much more strongly in the region's control. These benefits are over and above the straight financial costs.

All councils (including the regional council) as well as the Government have expressed concern about the price.

We are now applying to Transfund and to Infrastructure Auckland for the $112 million. The value of the deal to the region must be proved through their robust decision-making processes.

Last week, Transit New Zealand announced a $1 billion package to complete Auckland's motorway network, which was greeted with praise from people in the business community.

Aucklanders also want the public transport network to be completed. A recent Automobile Association survey showed 86 per cent wanted both the motorway and public transport networks completed, while only 9 per cent and 4 per cent respectively wanted only motorways or rail networks completed.

This rail deal is the crucial start to the building of the motorways for public transport or rapid-transit corridors, which will form the backbone to the public transport network.

The price tag is $112 million to buy the infrastructure that even now carries 2.5 million people a year.

Our plans after the purchase of the railroad are to increase this to 14 million passengers a year within 10 years - the equivalent of an eight-lane motorway to and from both the west and the south.

It's not our fault that the Crown sold these assets earlier, but it is our problem, as we grapple to provide the best infrastructure for a growing world city, that we cannot gain access to them to provide the transport to support our growing communities.

Although we can make and are making a lot of improvements to buses and ferries, we will not be able to improve the rail service without having access to the tracks.

It is a fact that Tranz Rail, as a private company, cannot wait forever for local and central government to think about this deal. There are other options. It could sell the entire network to another private company and our transport needs could be held to ransom for the next 70 years by private interests.

The next important milestone is February 15, by which time agreement in principle from the Government is required.

The land under the tracks is owned by the Crown, through its agency the Railways Corporation. The Government has to allow Rail Corp to enable the region to take over the lease to the land. The region has been talking to Rail Corp about its issues for some months and now we're talking directly to the Government about outstanding issues.

It is essential that we do this deal. It is difficult doing a commercial deal like this with five local councils, the regional council and several Government agencies involved, as well as Tranz Rail.

A large number of councillors and officers from all councils have been working very hard to make the deal with Tranz Rail a reality.

I can see a light at the end of the tunnel as long as we all keep pushing the wagons together.

It is clearly the Government's turn to give it a push, and I will be looking forward to that by February 15.

Supporting this deal means making a serious commitment to improving Auckland's public transport, as well as our roads.

* Phil Warren is chairman of the Auckland Regional Council.

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