The Grattan Institute’s latest report, entitled Roads to riches: Better transport investment, contained a scathing assessment of the ACT Government’s Light Rail Project – the $700 million 12-kilometre line connecting Gungahlin in the north and Civic.
Here’s what the Grattan Institute noted about the ACT Light Rail Project:
Canberra’s light rail, now being built, is likely to provide no more benefits than bus rapid transit but cost more than twice as much…
In February 2016, the ACT government announced the successful bidder to build the first stage of Canberra’s light rail network. The network will include 12km of light rail track and 13 stops, with operations due to begin in 2019.
According to the ACT Government’s submission to Infrastructure Australia in 2012, the light rail network will deliver similar benefits to bus rapid transit, but at over twice the cost. The benefit-cost ratio for light rail was estimated at 1.02, whereas for bus rapid transit it was 1.98. On this basis, the ACT Government’s submission found that bus rapid transit would deliver higher economic returns than the economically marginal light rail proposal.
The ACT Government subsequently decided to proceed with the light rail proposal, without a valid explanation for why it chose a project that its own analysis suggested was not the best option available. Light rail was a key element of the parliamentary agreement that returned the Labor government with the support of Greens MLA Shane Rattenbury.
The business case for Canberra light rail, published in 2014, reported an estimated business cost ratio of 1.2. However, land use benefits and wider economic impacts, which are typically excluded from project evaluations by Infrastructure Australia because the risks of overestimating them are so high, account for almost three fifths of the projected benefits.88 If these land use benefits and wider economic impacts are excluded, the benefit- cost ratio is just 0.5 – well below the level needed to deliver a net benefit to the community. This example demonstrates the need to undertake cost-benefit analysis with care using consistent methodologies to ensure true like-for-like comparisons of potential projects…
The Productivity Comission (PC) made similar arguments in its 2014 report into the provision of public infrastructure:
The ACT Government’s decision to proceed with a light rail project appears to be an example of where the results of cost–benefit analysis have been ignored without a valid explanation…
In a submission to Infrastructure Australia in 2012, the ACT Government analysed a number of options including bus rapid transit (BRT) and light rail rapid transit (LRT). The analysis estimated that the upfront capital costs for the BRT and LRT would be $276 million and $614 million respectively (on an undiscounted basis) (ACT Government 2012).
In its economic appraisal (which is essentially a cost–benefit analysis), the ACT Government found net present values of $243.3 million for BRT and $10.8 million for LRT. The benefit–cost ratio for BRT was estimated at 1.98, with 1.02 for LRT. In the assessment, the benefits of BRT and LRT were similar ($491.8 million against $534.9 million respectively), but the cost of BRT was less than half that of LRT ($248.5 million against $524.1 million, when discounted by 7 per cent). The cost–benefit analysis took into account a range of factors including journey times, and avoided environmental impacts and accidents (ACT Government 2012)…
In summary, a cost–benefit analysis showed BRT to be a greatly superior option than LRT…
Following the scathing assessment from the Grattan Institute, the ACT Government has hit back, releasing an “expert review” of the business case supporting the Light Rail Project from European transport consultant and academic Roger Vickerman. From The Canberra Times:
Professor Vickerman concludes the business case overall is sound, careful and robust, and gives a “reasonable estimate” of the impact on the corridor…
Mr Corbell said Professor Vickerman’s report had confirmed the government’s approach.
“The government has been very clear: this is not just a transport project. This is a city building project,” he said.
“Economic analysis is important in a government’s decision-making but there are a range of other considerations governments have to take into account as well.”
Personally, I side with the Grattan Institute and PC’s assessment over the ACT Government’s.
The Light Rail 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.
Any objective analysis would conclude that Canberra lacks the density to make light rail viable from either an economic or social perspective. The city is highly decentralised, with its small population spread-out around six primary centres: Civic (the tiny CBD), the Parliamentary Triangle, Belconnen, Woden, Tuggeranong, and Gungahlin (where the rail line is proposed to travel to).
If the Government was genuinely 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. 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).
While it won’t admit it publicly, the ACT Government knows that the Light Rail Project is an uneconomic dud, which is why it plans to force people to relocate along the rail corridor in order to boost the Project’s viability, thus putting the cart before the horse:
“Spot rezoning” will be used as the ACT government plans for at least another 45,000 residents along Northbourne Avenue while land and buildings will be sold to increase density and commercialise the corridor, alongside works for the 13-stop tram line.
The Government has also said that it would double parking fees across adjacent areas in order to force people to use light rail, thus representing a transfer from one part of society (those who park) to another part (the government).
Ultimately, the ACT Light Rail Project represents a text book example of what happens when political motivations are placed ahead of the public interest. Grattan and the PC are right to voice their concern.
