Thursday, 2 June 2016

Mayor starts CRL before any funding agreement

“Many Aucklanders will be pleased to see Mayor Len Brown turning the first sod today to mark the start of construction on the City Rail Link. However ratepayers should be concerned the Auckland Council has still not secured a formal funding agreement for this massive project with central government,” says Auckland Councillor for Orakei, Cameron Brewer.

“Good on the Government for bringing forward its commitment. Today is a significant milestone for the project, but dare I say plenty of red flags remain for Auckland’s ratepayers.

“Ratepayers still don’t know how much the Government is going to put in and who carries the risk if costs blow out. It’s quite unusual to start the physical construction on such a huge project without any formal agreement in place as to who pays how much, when, and for what.”

Mr Brewer says it’s positive for Auckland ratepayers that the Government earlier this year stated its commitment to enable the City Rail Link’s main works to start sooner. However at this stage it is not a 50/50 Government/Auckland Council funded project as the Mayor tries his best to imply.

“The funding split at this stage is actually more like 40/60 Government/Auckland Council. The council’s 2015-2025 budget forecasts assume the Government will commit $1.039b and the council will fund $1.490b – taking the total capital expenditure cost to $2.529b. This is largely because the Government is yet to give any commitment to fund the costly three-year enabling works now underway.

“The Government’s commitment to date is to share the costs of the main construction works from 2018. The Prime Minister has made that explicitly clear in his January speech. For the sake of local ratepayers, council negotiators now need to get Government’s commitment up to at least 50% of the entire project.

“At this point, the cost of the enabling works until then fall entirely on ratepayers simply because an overly enthusiastic Len Brown effectively started the project without the Government. What’s more, the council still has no idea how it’s going to fund its half. Auckland Council’s debt to revenue ratio remains an issue and any initiative like tolling the region’s motorway network is years away.”

Mr Brewer says cost containment will be the biggest challenge for the City Rail Link project with ratepayers not taxpayers still most exposed given it remains council-led.

“Let’s not forget that in 2005 the City Rail Link was reported to cost from $500m. By 2010 it hit $2 billion and despite dropping Newton Station it’s now forecast to cost over $2.5 billion.

“Given the expected cost went up five-fold over the past decade, future cost escalation remains a real worry. There are plenty of international case studies which show massive blow-outs when it comes to large scale rail and tunneling projects.”

Mr Brewer says another concern for ratepayers is the fact that Auckland Council’s long-term operational budget forecasts show that once built, the City Rail Link will require an operational subsidy of over $100m each and every year – and that’s after receiving NZTA subsidies and passenger farebox revenue. Where is that money going to come from each and every year, he asks.

Ends

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