Follow us on Twitter

Examining the CBD Rail Tunnel business case

After waiting months and months for the business case of the CBD Rail Tunnel to be released, it’s quite weird to now have literally so much information on the project at my fingertrips I don’t quite know what to do with it all. As I noted in my quick post earlier, my general feeling is that an exceptionally sound and detailed business case has been undertaken here which provides a very good argument for moving forwards on the project.

As I had expected, the real benefits of the project relate to what might be called its secondary benefits – the way in which it enables Auckland’s CBD to be transformed and the level of ‘agglomeration’ that it provides for. The argument that this is key to Auckland’s – and New Zealand’s future economic growth – is very sound. This is shown in the level of benefits – as outlined in the table below: Effectively, the transport benefits of the project (faster rail travel times, reduced congestion and so forth) cover the cost of the project with the “net value added from CBD increased productivity” providing the real benefits – and to a highly significant extent.

What the business case points out quite well is the relationship between this project and Auckland’s future economic development  - this is the basis of the increased productivity measure that provides the bulk of the project’s benefits. This is summarised in the following few paragraphs from the business case’s executive summary:The business case goes through a variety of “alternatives” to the CBD Rail Tunnel – masses of bus lanes on every CBD street, an underground busway tunnel that turns out to be much more expensive than this current proposal and – perhaps the most likely outcome should the project not proceed in the desired timeframe – that the poor access to Auckland’s CBD will incentivise businesses to locate elsewhere in the region (or elsewhere in the country, or somewhere overseas) and the result will be a loss of agglomeration benefits, a loss of productivity and in the long run a loss of economic growth and development for the region and country as a whole. Therefore I think the business case is highly justified in saying that the project is critical to Auckland’s transformation into a globally competitive urban centre.

In fact, if I was to criticise the business case I would do so on the basis that it’s a bit too conservative. A large chunk of the benefits come from the project “making possible” employment growth in the Auckland CBD – but this is dependent upon what modelling system you use to calculate likely future levels of employment in the central city. The business case uses the model that informed the Regional Land Transport Strategy, but more recent ARC studies suggest this might under-estimate employment level quite significantly (this is true for both sprawl and compact land-use patterns). This is shown in the graph below:

Faster rates of employment growth (and this is dependent upon the speed of economic recovery in Auckland) will increase the requirement for the CBD Rail Tunnel project, and therefore increase its cost-effectiveness.

If we look at the transport benefits of the project, it’s interesting to get an idea about how much quicker it will become to travel on the rail network from various parts of Auckland to the CBD. This is outlined in the table below: Some of the time improvements are truly spectacular. New Lynn to Aotea (midtown) goes from 45 minutes to 23 minutes. Morningside to Aotea decreases from nearly half an hour to only eight minutes! The project is going to make these places particularly attractive propositions to live in – if I were a property investor I’d start land-banking now.

There’s plenty of further interesting stuff in the business case, which I’m sure I’ll dig up over the next few days (or commenter may wish to draw attention to particular things they think are worth noting). I must say overall the robustness, the detail and the effort that has gone into this business case is very impressive. It definitely puts the Puhoi-Wellsford business case to shame.

37 comments to Examining the CBD Rail Tunnel business case

  • Matt L

    A couple of things I have noticed are
    The suggested operating pattern doesn’t seem that good in that it, Southern line and Manukau services are split between the Southern and Sastern lines, as terminate at Henderson or Swanson respectively so while Glen Innes gets 6 trans per hour to the CBD, there are 12 per hour between Henderson and Newton. The Onehunga line is the only one to service Grafton and it is only 3 trains per hour each way. The only advantage to this is at least they should build all the connections so we can modify those patterns at a later date.

    We will definitely need more EMUs, the ones we are getting will handle the tunnel fine but our existing SA carriages which are planned to be run using electric loco’s will need replacing, this isn’t unexpected.

    Diesel services will operate between Henderson and Huapai (which it states will start again next year). This means a lot of services will be terminating at Henderson, I wonder if it will need upgrading.

    The Onehunga line will get an upgrade as this indicates it will run 6 trains per hour, the current setup once the signaling is finished is only 4 so there will be some more double tracking along there.

    The signaling currently being installed is enough to handle 15 trains per hour in each direction on the main lines or 1 train every 4 minutes

    The times listed above are very conservative, it shows Britomart to New Lynn as 34 minutes and Henderson as 47 minutes where as the current timetable is 32 and 44 minutes. Papakura is shown here as 55 minutes to Britomart however the current timetable is either 52 or 53 minutes depending which line is taken.

    • I certainly agree the operating patterns are rather non-ideal, but they can be easily messed around with. I wonder whether we might want to trade Wellington some SA trains for their EMUs – as it seems the SA trains won’t be able to run through the tunnel due to its grade and due to some sort of fire rating problem.

      • obi

        What is an “SA train”? Why would they be unsuitable for the CBD tunnel, but suitable for Wellington where just about all the lines run through tunnels at some stage?

        • An SA is a carriage train hauled by a locomotive, with only one set of drive wheels to try and pull six carriages up an extra steep incline. The EMUs will have four powered carriages per six carriage set, and be designed for the grade from the start.

        • Matt L

          An SA train is the current locomotive hauled carriages that we mainly use now during the peak periods and are either 4 or 6 cars long plus a loco. It is not that they run through tunnels but that they can’t operate for an extended period in tunnels due to the fire risk. Passing through short tunnel isn’t an issue and they all do that every day at either Parnell, Purewea or Britomart. After electrification they will be pushed/pulled by an electric loco instead of a diesel one. The carriages are about 40 years old but have been rebuilt for use in Auckland by The Hillside workshops in Dunedin.

          http://upload.wikimedia.org/wikipedia/commons/e/e4/SD_masterton.jpg

      • Nick R

        Don’t worry, looking at the report a bit closer it seems that the proposed operating patterns are based around maximising patronage in the model, to use as a base case. In real life they will probably want to cut back on the complexity and keep things pretty simple.

      • kegan

        “I wonder whether we might want to trade Wellington some SA trains for their EMUs”
        Fortunately voltage rules that out…

        Flog the SAs to Christchurch perhaps? Convert some for regional services? …

  • Matt L

    Another thing, if we are having the kind of frequencies suggested in the base case then we will seriously need to grade separate some roads, particularly on the western line or some of them will grind to a halt. Already they can get huge queues when a couple of trains pass and while I would rather see the money invested in PT if we don’t sort that out I can see there being some big opponents to increasing frequencies.

    Also the BC indicates that while farebox recovery will be impacted initially from running more services, long term with the patronage projections they have it will push up quite a bit on now due to being more efficient.

  • obi

    From the business case, describing the productivity benefits:

    “In response to this congestion, real estate developers will move to create secondary and tertiary centres of employment outside the motorway loop. This decentralisation of economic activity and urban energy reduces the dynamism of Auckland and compromises its future ability to compete for the highly skilled labour force in the global context.”

    The business case describes OECD and other studies that show agglomeration benefits from urban areas at a whole, but seems to rely on assumptions in council planning documents to attribute agglomeration benefits to CBDs inside urban areas. That feels weak to me. We have plenty of examples of cities that lack any sort of real CBD but have vibrant internationally-healthy economies. Los Angeles and Houston being examples. Certainly Kiwirail agree, locating themselves on the Shore rather than in the CBD. I think it is debatable that businesses that are currently located in Albany or Manukau will see any benefit from relocating to the CBD, and therefore I don’t see the benefit to the country.

    There are reasons to favour a concentrated busy CBD, but they’re lifestyle ones rather than productivity related. The business case has a crack at saying that a vibrant CBD will result in more tourism, but it is half hearted and I suspect that any benefit to Auckland tourism would be matched by a drop in tourism elsewhere.

    As far as I can see, the transport benefits make the project worthwhile. I don’t know enough about discount rates to tell what is fair, since it is only just viable at 8 percent. But I don’t think the wider economic benefits are justified well enough.

  • Luke

    Kiwirail did not choose to locate at Smales Farm, that was a ridiculous decision by the nasty Michael Beard in the dying days of Tranz Rail. Kiwirail are in the process of relocating to offices in Parnell.

    • Ross Clark

      Luke: don’t get me started. Please don’t get me started.

      I was working for Tranz Rail in Wellington over those years, when the head office was relocated to Smales Farm in an operation which cost a fortune and didn’t make a damn bit of difference. At the time it was justified as being necessary to change the culture in the company, but the staff involved described it as an exercise in re-arranging the deck chairs. Mind you, even at that stage (2001) the writing was on the wall for Tranz Rail, for a horde of reasons mostly based in the freight group.

      • obi

        I visited the Railways head office at Wellington Railway Station as a student, around 1985. I remember one vast office full of clerks sitting at rows of desks while they worked with paper and pen. A supervisor sat at the front with his desk facing the rest. There was a single computer terminal at the rear of the room. I was with a technician and we dicked around with the computer for about 15minutes. During that entire time there wasn’t a single word from any of the workers, except occasionally one would get up to discuss something in whispers with the supervisor. It is the single strangest moment I have ever had in the workplace, outside of Italy… like falling through a time warp and ending up in Dickensian England.

  • Obi perhaps it is personal bias on your part, perhaps you prefer the suburban world to the urban, and that’s all good for you, but there is no doubt in the literature that urban centres generate activity and productivity at exponential levels compared with lower density outlying areas. This is what agglomeration means. One reason for opposing the sprawl inducing and de-centralising policies that have reigned in AK since the fifties is that they help make this town dull and vapid and entirely lacking in energy, creativity and action. Action that ultimately means business. This is not to dump on the suburbs, they can be great places to live, but without any kind of primary centre with efficient movement to and from it Auckland will become even more of a by word for boring… [CHCH is in an even worse state- and is smaller too]. NZ has been run by people [often from the sticks, but not always] who harbour a thinly fear of all things ‘urban’. The Freeman’s Bay and Newton motorways were promoted as slum clearance… and the means for flight from the old immoral centre to the clean new suburbs.

    It is my view that the best way to ‘catch’ Australia, and the only way we can, is to make Ak such a great place to live on a quality level, and right now we’re a long way short of that. And one reason is we have an ailing centre that desperately needs more sexing up than Joyce’s HH numbers. And how can we achieve that? The city has to work and be a great place to be: it needs people and it needs a hell of a lot fewer cars. Build this tunnel. As we sure aren’t able to pay each other what they can over at China’s big mine.

    • obi

      My bias is towards CBDs. That’s where I live and work and I get between the two by walking. But that is for lifestyle reasons, which is where I see the benefits of having a vibrant CBD come from. But, the business case tries to make a case for PRODUCTIVITY benefits of concentration WITHIN Auckland. Like I said, they list sources for the benefits of concentration within a country. However they fail to mention your “no doubt in the literature” sources, falling back on Auckland council policy instead.

      There are plenty of examples of concentration of “industry” outside of a CBD that yields productivity benefits. San Jose has a piss poor city center but has driven world IT for the past 50 years. Hollywood has an internationally competitive film industry despite existing in a center-free city. Canberra locates most government activity outside the city’s CBD.

      • David

        Good “lifestyle” does have an economic benefit. A city with a liveable and exciting centre makes it easier to attract and keep good people. As you have pointed out, people will move to any sort of rat-hole for compelling economic reasons and help reinforce the economy there, but they will also move to a place with excellent living conditions and contribute to the local economy if given the chance. The report also quotes research showing that workers in the CBD contribute more to the economy than those outside it (see page 74). And this:

        In qualitative terms, these benefits can be thought of in the following ways:
        CBD businesses with improved peak hour access to the regional labour market provided by
        the Rail Link have more personnel choice and therefore are able to be more selective in
        hiring. These businesses benefit by getting more output per unit of salary input.
        Having a larger concentration of employees in the CBD induces more of these employees
        to live in or near the CBD. The larger local market supports a greater variety of restaurants,
        shops, entertainment and cultural facilities.
        A city centre that has a greater variety of restaurants, shops entertainment and cultural
        facilities in a pedestrian friendly environment is likely to attract visitors to spend more time
        and money in Auckland.
        That same vibrant and exciting urban environment will allow New Zealand to improve its
        odds of retaining its own younger workers and attracting these workers from other
        countries.

      • OK Obi, so you’re just a contrarian then, what fun. Should I then make a list of cities with centres where the land is more valuable and the workers earn than outside of it? Obviously NY, but hey also Auckland. Already this is the case in Auckland, let’s increase it. And anyway what’s your point? Are you arguing for more and bigger St Lukes centres that we can all sit in cars around… will this make AK the location of choice for businesses, theatre companies, active engaged people like yourself?

        • obi

          I’m not a contrarian. I’m just not going to assume that my personal preferences have billions of dollars of economic value for the country.

          A city that concentrates economic activity in a CBD is almost certainly going to have higher than average incomes for those workers who are in the CBD. No argument there… higher real estate values will mean that low value activity will locate outside the CBD. But the examples of Los Angeles and San Jose show that people can also enjoy high incomes in a city that isn’t based on a CBD. If the business case writers are going to list $7billion worth of productivity benefits (4% discount rate scenario) from moving workers from Manukau and Albancy in to the CBD, then they really need to justify how they came up with the figure. Unless I’m missing something, they don’t.

          As for St Lukes… Are you arguing that elimination of suburban shopping centers and concentration of retail activity in the CBD will yield part of the $7billion productivity benefits? It doesn’t feel likely that this would cause business to relocate to Auckland, especially internationally. Or for people to build theatres. I’m guessing the total retail spending would stay about the same, so unless CBD retailing is significantly more efficient than suburban retailing then I don’t see any productivity or agglomeration benefits at all.

      • encouraging business to locate in the CBD does have wider economic benefits due to labour mobility. Increased mobility makes it easier for growing businesses to recruit the skill sets they need. Location is a big factor in accepting a job. If i live in howick I am not going to want to commute to albany, so businesses in albany have a smaller pool of employees to recruit from. If moving from job A to job B means i only have to walk 100m in a different direction down queen street from aotea station, that is not going to put me off accepting a job.

        A wetter summer means my plants grow bigger. The fact that cacti grow in the desert does not disprove that.

        London’s financial centre is split in two between the city, and canary wharf ( about 15mins apart by train ). Is it a financial powerhouse because it is spread out or despite it being spread out? I just refused to renew my contract because i am tired of cycling 10miles each way out to canary wharf and have accepted a job in the city.

  • James B

    Page A6 of the Herald already has Stephen Joyce complaining that the WEBs of the project are invalid.

    • Matt L

      I just read that, its a bit rich of him to do so but it is something I expected and I think I even posted a comment on here a few weeks ago saying that is what he would do. Even soso the tunnel without WEB’s performs better than P2W with them.

      He is also saying “oh they didn’t include the cost of tracks and new trains needed”

      • Doloras

        …? BUT THEY DO. The report explicitly includes costs for 24 new EMUs. He’s just blatantly lying and hoping he won’t get called on it. Which he won’t, because the media are bigoted and conservative and anti-PT.

  • to which I say ‘you started it!’ If he wants to count WEBs for the HH then he has to take them for CBDRL so it’s either 0.4 to 1.4 or 1.1 to 6.6, your call minister…..

  • arnie03

    It was no surprise this morning to read Stephen Joyce’s comments. We are never going to change his mind on the benefits of rail over road. To me the real action point is around convincing the local MPs, many of who are national party MPs, that the local body elections were not a one off and that important and useful infrastructure is required over poorly thought out megaprojects with limited benefits (benefits which could be achieved far more cheaply).

    I wrote to my local MP who trumpted the investment of the previous government, the generous loan to buy the new rolling stock (you know the one- it replaced the regional fuel tax and is now apparently partially responsible for a blowout in operating costs of passenger rail in Auckland). She is apparently going to be ‘…to be involved in discussions on funding priorities for these projects with the Minister of Transport and the new Auckland Council.’ without outlining her position on this. I think all of the MPs in the area need to hear that the position should be on projects with positive benefits given the huge sum of money involved. I’ll certainly be following up with her now that the report is out as she was waiting to read this before committing one way or another.

    On another slightly related matter, in Rod Oram’s report in the Sunday Star Times in the weekend, was it reported that the Greens had the consultants report on the cost benefits for the highway supplied under the official information act but weren’t allowed to distribute it in any way. Why is this? Is doesn’t strike me as in any way secret for any justifiable reason under the act. The fact that a ‘revised’ report came out to follow the draft is even more reason the initial report should be available. The consultants and the government should be able to explain the difference between the conclusions…shouldn’t they?

  • “It’s massively expensive”

    Yes it is. The question is do the benefits outweigh the cost? In this case a very comprehensive report suggests the benefits outweigh the costs by a factor of at least 3.

    “There are a few things that are missing at this point. It’s not apparent from the business case for example, just how many people would be travelling on it in addition to those that are already projected to be travelling on the network with what we’re spending currently.”

    Is that true? I would have thought that a capacity analysis would be pretty straightforward.

    • Matt L

      Capacity analysis would only show the maximum theoretical use and not everyday use, in saying that however they have used modelling to determine how many people would use the stations and even the Symonds St station would have more using it in 2041 than Britomart does today.

  • Er, they did cover that in Appendix G:

    Benchmark scenario, rail constrained, no CBD Rail Link
    12,100

    Benchmark scenario, rail unconstrained, with CBD Rail Link
    29,000

    Perhaps I’m interpreting this wrong but they seem to predict that building the CBD Rail Link will result in an additional 16,900 daily rail trips to the CBD than over the base case, or in other workds 2.3 times as many (or about 340 busloads!).

    If they want a theoretical maximum capacity the numbers are there: theoretical max of 30 trains per hour per direction x 2 directions x 750 people per six car EMU = up to 45,000 people through any of the new stations.

  • ingolfson

    “But I don’t think the wider economic benefits are justified well enough.”

    Lol, maybe not, but what’s good enough for the goose is good enough for the gander (except when SJ talks). Unlike at Puhoi, the benefits themselves are much less in doubt, only the level of them is.

    Of course he will fight, fight, fight against this. We always knew this, no surprise. Any billion one squeezes out of him is one less for motorways.

    Maybe the fight should go over his head? Len Brown should talk to John Key more.

    • Matt

      Problem is, Key listens to B’linglish and Bill doesn’t want to spend any money at all. If, however, he has to spend money, he’d rather spend it on something that’ll get National MPs elected in rural/rural-fringe electorates than on something that’ll cement the position of a Labour-aligned politician who represents a third of the population.

  • Christopher T

    Looks like Labour’s coming to the party: http://www.labour.org.nz/news/rail-case-should-give-national-jolt-it-needs. First time I’ve heard Darren Hughes actually say something about Auckland transport.

  • Akarana

    Joyce needs to reread page 98 of the business case, 51% of the transport benefits of the CBD Rail Tunnel are the decongestion benefits for ROAD USERS AKA THE TRUCKING LOBBY!!!! There are ways to increase traffic flow other than expanding on existing road infrastructure!

  • Tony

    Having read all the above comments, I do not find much real analysis of the Business Case (apart from the main article thanks jarbury) . . . just a venting of frustration that railfans cannot get the lid off the government “pot of gold” because the grumpy Steven O’Joyce is sitting on it even he has already been opened once for rail electricification.

    In my opinion the most interesting aspects of the Rail Business Case is how it buries the “next best option” being a CBD Bus Tunnel with 3 stations (extending the Northern Busway from Fanshaw Street through to McKinnon Drive and Khyber Pass Road). What little detail is down in Appendix D section 4.7 where they estimate such an option would have similar benefits to a CBD Rail Tunnel but the bus tunnel would cost 50% more. This could be (the document is not clear) because TWO 2-lane bus tunnels would be required . . . hence the much higher costs.

    Of course, if Auckland can be served with a single 2-lane bus tunnel (noting that both Brisbane and Seattle manage with such a set-up), then presumably the bus tunnel option can give public transport benefits similar to the rail tunnel at a significantly lower cost and everyone is a winner ;)

    • Matt

      Tony, electrification was started by Labour. Joyce hasn’t really “started” anything for rail expenditure, he’s just been good enough not to stop funding for projects already commenced. Not at all the same thing.

      There’s not much analysis because we don’t see the need. Joyce saying that Puford has a BCR of 1.1 only comes from him taking the “wider economic benefits” version. The WEBs version of the CBD rail loop, against the same criteria, comes in at 3.3. Using the standard BCR calculations, which are non-contentious, the BCRs are 0.4 and 1.13. What’s to analyse, other than the demonstrable hollowness of National’s claims to be fiscally-responsible and in the slightest bit interested in improving NZ’s economic performance.

  • Tony, the report clearly states that the costed option is for a single two lane bus tunnel. The much higher costs come from the fact that bus tunnels must by much larger in cross section and have extensive ventilation and fire control systems, not to metion that the proposed route was longer than the rail option.

    in the case of Brisbane it is probably important to note that in addition to it’s *two* bus tunnels it also has four track city rail tunnel and a second rail tunnel in the planning stages.

Leave a Reply