Yesterday, the ACT Government signed the $710 million contract to build a 12-kilometre light rail line connecting Gungahlin in the north and Civic, thus locking taxpayers in to paying for the project. From The Canberra Times:
Canberrans will pay an upfront $375 million to the Canberra Metro consortium, plus an average $64 million a year over 20 years, to build and operate the much-debated tram line from Gungahlin to the city.
The final price of the project is $710 million, Capital Metro Minister Simon Corbell said on Tuesday, announcing that the contract had now been signed with the Pacific Partnerships-led consortium.
But because the payments are spread over time, the taxpayer is committed to the $375 million lump sum when construction is complete, plus an annual operations payment, $48 million in the first year and $75 million in 2038, or an annual average of $64 million over the life of the project…
The 12-kilometre line is a big gamble for the government in an election year, given the cost to a budget already deeply in the red, and the strong opposition from sectors of the public…
The sign-off also sets up a stark contrast between Labor and the Liberals, with the Liberals promising to tear up the contract with Canberra Metro if they win government. Cancelling the contracts will mean a big compensation payment to the consortium, although no one has yet provided an exact figure.
Signing the contract only months before the Territory election is due is a cynical move by the Labor Government and has similarities to Melbourne’s dodgy East-West Link project, whereby the contracts were signed just prior to an election being announced, before being cancelled by the new Government at great cost to taxpayers.
Given the highly controversial nature of the ACT Light Rail Project, the Labor Government should have used the election as a referendum on the issue, and attempted to gain a mandate, rather than locking taxpayers in to what is a very costly project with dubious benefits.
May I remind readers that 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. And Light Rail was the ‘price paid’ for the Greens’ support.
Indeed, the Productivity Commission (PC) provided a scathing assessment of the ACT Light Rail Project 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…
And the Grattan Institute has provided a similarly scathing assessment:
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…
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).
Ultimately, the ACT Light Rail Project represents a text book example of what happens when political motivations are placed ahead of the public interest.
The Labor Government has thrown due process out the window in a bid for power. And ACT taxpayers are the losers.
