ACT light rail: an expensive vanity project

ScreenHunter_06 Jun. 06 09.33

By Leith van Onselen

Little by little, the stupidity of the 12-kilometre ACT light rail project, connecting Gungahlin in the north and Civic, is coming to light.

As noted previously, this project only came to fruition because Labor lacked the numbers to form government and needed to gain support from the Greens sole MLA, Shane Rattenbury, who held the balance of power. And the 12 kilometre rail link from Gungahlin to Civic was the price paid.

Now a study has been released by Bob Nairn, a retired traffic and transport planning consultant and transport economics specialist, confirming what we already know – that the ACT light rail project is likely to be an epic waste of taxpayer dollars. From the Canberra Times:

…Mr Nairn calculates it would need to borrow $915 million for construction and a fleet of trams, costing $4.81 million each…

He comes up with a benefit to cost ratio of 0.43, indicating the project has significantly more costs than benefits…

He finds the line would have a considerable effect on ACTION bus services, causing falls in passenger numbers, fewer viable bus routes and job losses…

At least the realities of the project are starting to dawn on the ACT Labor Government, with Chief Minister, Katy Gallagher, drawing a line in the sand and stating that it would not spend more than $614 million on light rail:

Asked whether  the team was working on a figure of $800 million to $900 million, Ms Gallagher said she hadn’t seen that estimate, but $614 million was the figure put on the project in 2011, and “cabinet’s tolerance is in that order, updated for 2014 dollars”.

“People are very keen to make sure we can build it within a reasonable cost estimate, no one wants to be pursuing something that is getting to costs that you’re indicating,” she said. “The tolerance is that we want it to be done as efficiently and cheaply as possible for the stage one outlined.”

Last month it was revealed that the light rail project faced significant cost blowouts due to the exorbitant costs of relocating underground pipes and wires, as well as trees, calling into question the initial $614 million estimate.

The key problem with the project, as noted in the Canberra Times earlier this week, is that Canberra lacks the density to make light rail viable:

“Passenger intensity” is a key measure of the viability of light rail, and in its rapid business case the Capital Metro agency found only the short, three-kilometre route from the city to Exhibition Park reached the minimum passenger intensity numbers.

As soon as you add in the extra nine kilometres to Gungahlin the passenger intensity number falls off – because it is calculated as the number of kilometres travelled as a proportion of the line length. This is a problem that will follow light rail around Canberra, with long distances between town centres…

Asked about the problem of passenger intensity, Ms Gallagher said it was one of the issues being “actively examined” by Capital Metro at the moment.

Indeed, in a desperate bid to make the project more viable, the Government has flagged route changes and directing development along the rail line. So instead of being a way of complementing the existing urban structure, the Government plans to forcefully change the urban structure via regulation in order to ‘force’ citizens to use the project and improve its viability.

If the Government was truly concerned about improving public transport options across the capital, rather than only along this narrow 12 kilometre strip, then it would expand the existing bus service across the entire city, and save significant taxpayer expense in the process. Such an option would also be far more equitable than forcing taxpayers everywhere, other than along the Gungahlin to Civic corridor, to subsidise a dubious project to which they gain little benefit (either directly or indirectly).

No amount of spin can polish this infrastructure turd, and the ACT Government should immediately cut its losses and abandon the project before more taxpayer funds are wasted.

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Unconventional Economist


  1. Leith, you continue to impress me with your common sense assessments of multiple controversial issues.

    Another promising young fellow is Jason Krupp at the NZ Initiative in Wellington:

    “…..Rail is capital and land intensive as you need to buy the land at market prices in order to put a track on it. Even in the case of light rail, the capital costs are high, have to be paid up front, budget blowouts are frequent, and if passenger usage projections do not pan out – tough, you are stuck with a fixed network.

    Buses, on the other hand, are relatively light on capital expenditure as you do not need to build a rail network for the trains to run on. Buses can also be leased instead of bought, and if passenger usage changes, you can either move the route or hand the buses back (if they were leased in the first place).

    That’s presumably why Wellington officials walked away from a plan to build a light rail network earlier this year. Even Mayor Celia Wade-Brown, who had previously championed the idea, voted against it.

    The wisdom behind this decision was recently underscored by a number of press reports coming out of Australia, detailing just what a nightmare the Australian Capital Territory is going through trying to install a 12-kilometer light rail line in the capital city…..”

    And he quotes you a para or 2 later…..

  2. The common factor in many totally irrational policy decisions with seeming “strong support” these days, is rent-seeking.

    Joel Kotkin analyses the two aspects of the contemporary power elite quite well here:

    “…… the Clerisy, for all their concerns about inequality, have thrived, unlike most Americans, in recent years. They also enjoy strong relations with the power structure in Washington, Silicon Valley, Hollywood and Wall Street…..”

    That is, the politically correct culture shapers and the rent seekers are each other’s useful idiots. I couldn’t agree more.

    Commenter Luke Lea in the comments thread:

    “The old Clerisy supported the monarchy and vice versa; the new one supports the plutocracy (if unwittingly) and vice versa.”

    Nowhere is this more glaring than on “save the planet” ideology, urban planning and transport planning.

  3. arescarti42MEMBER


    You neglect to mention that the study produced by Bob Nairn was commissioned by the Canberra Liberals, which I would say destroys any credibility the study may have had.

    You also neglect to mention the ACT Government’s response to the report, which claims that it assumes the most expensive option and ignores many of the benefits (i.e. it was written to achieve a specific outcome).

    In all honesty the project may be a boondoggle, but who knows. My view is you’re yet again letting your personal bias against rail get in the way of evidence based, unbiased analysis.

  4. I did a cost benefit analysis for the Gungahlin light rail at Uni in the mid 90s. Another student got hold of the official ACT govt CBA report at the time. Conclusion from it (and everyone else) was very comprehensively that light rail (and rail in general) doesn’t make sense in such a low-medium density population area.

    Looks like nothing’s changed

    • Yep.

      However, the point is that not only in Scotland, but here as well, designers of such systems resolutely ignore world’s most mediocre practice, and aim for world’s most expensive practice.

      I suspect that the fee structure for the merchant bank advisors might have something to do with it. More expensive project, more fees and commissions. Make the project more expensive than it need be, and hey presto, more commission income….as long as no-one tells the mug punters.

      Perhaps a forensic look at the financing, rather than worrying about the transport mode would be a more fruitful avenue of approach?

      This is but one project. If there is a structural flaw at work in our infrastructure development model, then it transcends the implications of just one project in one particular city.

      I would suspect that all our major cities infrastructure developments are now vastly overpriced, with the bulk of the billions going in fees and commissions to the merchant bank which has had the most influence on the design of the system.

      • Hear, hear. That, and bureaucratic self-interest, and rentier interests in the focus of travel to narrow corridors where they own property.

        One of my favourite papers on the subject with the title saying it all:

        “Analysis of Rail Transit Project Selection Bias With an Incentive Approach”

        Wenling Chen (World Bank)

        There are also excellent papers by Bent Flyvbjerg and co-authors that use the terms “optimism bias” and “strategic misrepresentation”.

        Flyvbjerg et al suggest that public watchdogs should make “corrections” to the forecasted costs and ridership based on prior experience with comparable projects. They also point out that a track record of expensively wrong forecasting does not seem to have repercussions for the same famous consultancy firms that are called on every time by the bureaucrats. In fact consultancy firms that are more honest get no work.

  5. “If the Government was truly concerned about improving public transport options across the capital, rather than only along this narrow 12 kilometre strip, then it would expand the existing bus service across the entire city, and save significant taxpayer expense in the process.”

    I suspect that an expansion of ACTION buses further into the suburbs would have a worse benefit cost ratio than the planned light rail. The existing network runs at losses of nearly $100 million per year.

    Removing zoning restrictions on higher densities along major transport routes is good policy and this will need to be complemented by upgraded public transport links.

    • That just results in big fat rent-seeking rackets. Look what has happened in Portland. Sites remain undeveloped, with the owners “holding out” to extract the maximum possible subsidies because they know the planners and politicians reputations are riding on the “success” of the plans.

      Far better to upzone or abolish density restrictions wholesale, anywhere and everywhere, and promise to revise bus routes according to where the intensification ends up taking place. Something would work out. Cities need a bit of intensification somewhere if they have a balance of economic activities.

      Also, lower income earners generally end up in particular locations, usually not the more central areas as cities mature and gentrify. Bus routes should be revised to reflect this.

      Fixed rail based systems and the associated urban planning are part of the whole problem these days with rising inequality. Lower income people end up not benefiting at all, CBD property owners and yuppie workforces capture all the benefit, and the subsidies get swallowed by this and suburban bus services that the poor need, are starved of funding. Again, just like Portland.

      Best-selling author Matt Ridley, true to form as one of the world’s clearest thinkers, made the following assessment in a recent column in the Times of London, regarding the inequality debate provoked by French economist Thomas Piketty’s book:

      “…..Well, knock me down with a feather. You mean to say that during three decades when the government encouraged asset bubbles in house prices; gave tax breaks to pensions; lightly taxed wealthy non-doms; and severely restricted the supply of land for housing, pushing up the premium earned by planning permission for development, the wealthy owners of capital saw their relative wealth increase slightly? Well, I’ll be…….

      “……..Neither Britain nor the world is especially unequal right now compared with most of the past two centuries. If you want to reduce wealth inequality in Britain, then the quickest way is to liberalise the planning laws to bring down house prices……”

      I would add to that, stop doing “transit oriented planning” based on fixed rail routes. Or if you are hell-bent on doing that, then compulsorily acquire the land on the routes and integrate the capture of land rent with the PT system, just like HK and Tokyo do. Then watch the “popularity” of light rail go down like a lead balloon. The “popularity” is always generated artificially by the vested interests who are out to capture every $1 of benefit while the $5+ of cost is borne by “other people” – car drivers, suburban ratepayers, retailers (sales taxes) etc etc and every other ploy in the rent-seekers book.

      • + many

        That point about Tokyo is important – if you are going to build a mass transit extract the cost from the benefit accruing to property along the route – no benefit no profit.

        Deriving a base and some sort of formula to determine the benefit subject to taxation would not be too difficult.

        That would be a very effective form of cost benefit risk sharing.

        You build a dud project no harvesting of rents for you!

  6. If taxpayers are going to be on the hook for urban infrastructure, including public transport, then some zoning is necessary to manage those costs.

    The northern corridor is a logical place for Canberra to grow. Some upgrade of public transport along this corridor will be necessary as density increases. As the author of the study commissioned by the ACT Liberals acknowledged, at some point some kind of light rail system along this corridor will be viable.