Michael Barnett: Rail progress defining issue for city's first super council

A fast and efficient rail network for Auckland makes sense but will be expensive to build and run. Photo / Steven McNicholl

Transport is Auckland's number one issue, according to many surveys.

Concerns cover under-investment and slow progress to build a modern motorway network for moving people and freight efficiently, our poor public transport services for a city of 1.2 million, the safety of cyclists and that a city with two of the world's finest harbours hasn't made a greater effort to provide ferry services linking our many seaside suburbs and outdoor lifestyle.

In this ongoing debate, a frequent suggestion - now a mayoral promise - has been the expansion of Auckland's rail system with new links to the North Shore, to Auckland Airport and an inner city loop from Britomart Station to the western line.

Progress on these three projects over the next three years will help define the success or otherwise of the inaugural Auckland Council and in particular Mayor Len Brown.

At first glance, the idea of fast and convenient rail services crisscrossing Auckland seems a logical development for a rapidly growing city aspiring to become the world's most liveable. But they will require significant capital expenditure to build and large subsidies and operational costs to run - costs which have not yet been identified. What seems a "good idea" now may well receive less support when all the costs are presented to Aucklanders - as they should be before we go much further.

By any measure the central business district rail loop at $2 billion is a very big project. It comes on top of the $1.6 billion that central government has allocated for electrifying the existing commuter rail network - a project scheduled for completion by 2013.

Prime Minister John Key has said that Government will contribute "its fair share" of the CBD rail loop. But what is that - 75 per cent, 50 per cent, less? We don't yet know.

The pledge of the mayor to not lift rates beyond inflation seems to rule out using ratepayers as cash cows for the project.

So what are other realistic funding options?

We also don't yet know what the size of the subsidies per trip will be for running the service. It is about $7 per trip now. Will it increase to $10 or $16 or go higher, as some commentators predict?

If central Government doesn't provide capital funding, what are other options? Auckland Council commands an asset pool of around $32 billion. If evidence shows that a CBD rail loop will generate a sustainable profit for Auckland, then using our asset base to leverage an investment plan might be an attractive option. However, we need to see a proper business plan setting out innovative funding options before agreeing to this option.

But it's not the only funding option Auckland should be exploring. Three stations have been indicated for the link - near Aotea Square, Karangahape Rd, and Symonds St - along with an estimate that some 40,000 new jobs could be generated.

Other benefits identified include opportunities for new commercial development and accommodation, especially in the Upper Symonds St area. I agree that this area needs upgrading, and that the rail loop might just be the catalyst required.

A benefit-cost ratio of 1.1 which stretches to 3.5 when local employment benefits are assessed has been indicated for the project. This means that for every dollar spent a return in the range of $1.10 and $3.50 could be generated.

If correct, these numbers give Auckland options to substantially fund the project without making the first call on Wellington's purse. At the very least, if the new Auckland governance arrangement is to give meaning to the idea that we are a "can do" city of scale, the business case will identify innovative funding options other than ratepayers and taxpayers.

An obvious option is to test the interest of the private sector to participate. There are examples from overseas cities in which property developers have built underground rail stations for free, under commercial arrangements to establish businesses within them and/or progress associated commercial and accommodation projects above ground that benefit from having a rail service nearby.

If the private sector is interested enough to carry most of the project risks, why not let it? The Vector Stadium was funded by a PPP with Auckland City and seems to be working well.

Just as important, however, Aucklanders deserve to be told what the operating costs of the rail service will be.

If it's true that the current subsidy is $7 per trip (against around $2 per trip in Wellington) and will rise to around $12 per trip, we need to know. If subsidies to run a rail service used by just 10 per of the population keep increasing, the other 90 per cent of tax payers are going to reach a point of saying "enough".

An even bigger project likely to command an even bigger taxpayer subsidy to run and with far greater uncertainty as to its viability is the long entertained suggestion of a rail link between the CBD and Auckland Airport.

Michael Barnett is chief executive of the Auckland Chamber of Commerce.