Graeme Easte: Funding the City Rail Link

The future of an Auckland City Rail link is up in the air - and how to pay for it. Photo / Brett Phibbs

Mayor Len Brown has kicked off a debate about how to fund the City Rail Link [Herald Dialogue Page, 30th January]. But before figuring out how to raise the money to pay for it we should first discuss what the funding gap for Auckland Council will actually be. The two issues I particularly want to explore are the probable order of costs, and the likely contribution from Government.

I am not going to deviate into discussing the merits of the proposed link under the central city except to say that while a few argue that it is unaffordable, many more of us know that we simply cannot afford not to build it. My model is Sydney which began developing its underground system 85 years ago when its population had also just passed 1.5 million people heading rapidly towards 2 million.

Costs
The most authoritative costing for the Link was in the May 2011 Parsons-Brinkerhoff business case which gave a range of costs from $1.99 to $2.38 billion. At the behest of Government, Council has ordered a thorough review of the costs and projected benefits which is due for release in a few months. In the meantime I shall use the average of those two figures: $2.2 billion.

Although that is a huge amount of money, it will not require payment all at once. About $200 million will be required this year and next for planning and land purchase. The rest of the cost will be incurred as a series of progress payments during construction which is expected to take about four years. Assuming that the target date for completion is 2018, repayment could be manageably spread over the next six years. Payments could be smoothed over an even longer time by using debt funding, though this would add interest charges to the bill.

Thus the annual repayments would never exceed $500 million per year - still eye-watering but manageable. By comparison, Auckland Transport has already budgeted $586 million for capital works this year. While they could use part of existing budgets for some of the Link expenditure, Auckland Transport cannot be expected to cancel most of their other capital projects for years on end in order to pay for it all.

So Mayor Brown is correct in saying that we need to investigate other sources of funding specifically for this project. However, the gap looks a whole lot less frightening when put into proper perspective.

Government Share
Whether the Government should or will share in the cost of this project has been a vexed issue for years. Although Mr Brown has championed this project, it was being actively discussed in Auckland (and rejected by Wellington) even before candidate Brown announced that this was one of his top priorities.

But knowing that the Government has not completely closed the door, the Mayor has chosen his words very carefully, saying that "so far, the Government has declined to contribute to the project". While they are certainly playing very hard to get, I believe that he is correct to believe that they must eventually come to the party.

Government has literally heaps of cash available in their GPS (Government Policy Statement) which allocates $35.75 billion for nation-wide transport expenditure over the 2012-22 decade. This money is collected for that purpose and can only be spent on transport projects. Aucklanders will pay one third of that sum in taxes and levies as we make up a third of the nation by both population and economic activity. It is only fair therefore to expect that expenditure in Auckland will approximately match our contribution (about $12 billion dollars).

About two-thirds of that $12 billion or so share from the GPS will be required for necessary maintenance, local road projects, minor safety works, public transport operations, etc. But that still leaves several billions available for major new transport projects in our region. A decent share of that should go into Auckland's priority of connecting up our public transport network and the City Link in particular.

Some rural and small town mayors were very quick to bleat that Government funding of yet another major project in Jaffa country would come at the expense of their country roads. Sensitivity to this false but potent argument may partly explain why Governments over many years have been reluctant to fund a series of commuter rail projects in Auckland. Curiously however, it has not stopped them from spending up large on new motorways even when Auckland has consistently lobbied over many years for action on railway infrastructure as its greatest priority.

Mr Brown and the Council could make it easier for the Government if they offered them a quid pro quo: in return for Auckland agreeing to a moratorium on new motorway projects in the region for the rest of this decade, Government should fund a half share in the City Rail Link.

* Graeme Easte is a former Auckland City Councillor and long time member of the Campaign for Better Transport