For sale -- one underground railway
By Richard Harman (author)
No one knows who will own Auckland’s $4.4 billion Central Rail link.
Though the Central Rail Link company was established to build it in 2017, no further progress has been made on what happens once the job is finished – now not expected till 2024.
Transport Minister Phil Twyford confirmed to POLITIK last night that negotiations between the Council and Government over future ownership are continuing, but no final agreement has been reached.
The CRL construction project is a 50/50 partnership between the Government and the Auckland Council.
It was assumed by most people with an interest in Auckland transport that the Council’s organisation, Auckland Transport (AT) would own it.
But whoever does end up owing it will be liable for debt servicing, operating expenditure and insurance costs on the tunnels and stations.
That could be an extra cost for taxpayers across New Zealand – or an extra unexpected cost for Auckland ratepayers. Or both.
The Business Case prepared for the project in 2015 suggested that operating costs would be around $50 million per year when the project opens rising to nearly $80 million by 2046.
However, as the project cost blows out, finance costs will be rising.
The Council met with the CRL chair and CEO on May 2 to approve the Council's half share of a $1 billion blowout in construction funding.
CRL chair, Sir Brian Roche dismissed the idea that the increase was a blowout and said it was a product of "scope creep".
But when Councillor Wayne Walker asked “after delivery, who actually owns the CRL” the Council’s Director of Infrastructure and Environmental Services, Barry Potter said it was still a work in progress.
“It doesn't impact on the construction costs or costs associated with delivering CRL,” he said.
“We have some time to be able to work through the process, and that has started already; the discussions around what kind of ownership structure there should be.
“So it's a little early stage.
“We have time to resolve it. It doesn't impact on the funding decision.”
Walker then asked whether Kiwirail might end up owning all the rail (and presumably maintain it).
Auckland Council CEO Stephen Town said that negotiations would start once the extra funding was approved by the Council. (which it now has been).
“We are going to push the acceleration button on that ownership structure,” he said.
“I think it's safe with this current Government too … we already have a model that is in place for Auckland and has been working well. (presumably the 50/50 CRL partnership)
“I would expect to see that model expanded.
“But that is still to be determined by the Crown and the Council. and we want to do that within the next six months. “
Heart of the City CEO, Viv Beck, submitted to the Council during the meeting on the CRL funding.
“Work will also progress with the Crown to confirm who will own the CRL when it’s completed and therefore meet future maintenance and servicing costs," she wrote in a newsletter to her members yesterday.
“It was a surprise to find this hasn’t been done - surely that is the role of central Government - but we’ll watch this space closely on behalf of city centre ratepayers.”
National’s Transport spokesperson, Paul Goldsmith, said that part of the problem was that the Labour-led Government had transferred management of the CRL from the Treasury to NZTA which has been undergoing internal problems with a large number of resignations including its chair and CEO.
“There was always going to be a discussion about how it was divided up,” he said.
“Perhaps the Government could have owned the rail and the Council the stations.
“But I would have thought that would have been sorted out by now.
“But it’s part and parcel of a project showing alarming delays and cost, and I wonder whether there has been sufficient focus on it from the government."
The problem goes back to the last Government, which ended Auckland Transport's management of the construction of the loop; obviously, they would have been well placed to own it once it was completed.
But in June 2017, the National Government established the Central Rail Line Ltd, a joint venture between the Government and the Auckland Council which also allowed the Government to provide 50% of the funding.
In its 2017 Statement of Intent, it said quite explicitly: "The Company has been established with the understanding that its primary purpose is to deliver the Project, and has a finite life span.”
Beck, in her submission to the Council, questioned whether the Council itself had looked at all the range of funding options that might be available to it.
She suggested that perhaps the NZ Super Fund or even iwi might want to come in at some point in the future.
“We were disappointed too that provision had not been made to assess the viability of other funding models for this project as the potential for increased cost has been in the wind for some time," she said.
“It’s not a great position to be in to find half a billion dollars in a couple of weeks (and you could ask why some of the ideas hadn’t been found before).
“However, there was some good news that provision for the long talked about Special Purpose Vehicles may not be that far away.”
But how much the Labour-led Government will be prepared to drop its political objections to public-private partnerships and private sector funding for public projects like the link remains to be seen.