Super Fund Mess will delay Light Rail by years

We’ve been incredibly concerned for some time with what is happening with light rail. From a project that was almost ready to start construction, at least on an early works package, it is now mired in delay and uncertainty.

I had initially written this post as a more general outline of my frustration at these delays. However, an article in the Sunday Star Times yesterday dropped a bombshell of information, highlighting what an absolute mess the light-rail project has become due to the Government’s quite bizarre approach of upending the whole process to favour a highly undeveloped proposal from the NZ Super Fund and their Canadian Partners CDPQ.

Another flagship Labour policy, Auckland’s light rail, is in crisis as deep divisions are revealed over a potential cost blowout of billions of dollars amid delays.

Firms involved in the project say the problems have cost them millions of dollars and are wrecking New Zealand’s business reputation.

Much of the finger pointing is being directed at six power point slides submitted by the New Zealand Superannuation fund and which sources say effectively stopped the project in its tracks, and undid nearly a year of work

….

In the long letter interim board chairman Nick Rogers wrote to his fellow board members, obtained by Stuff, the NZTA lashed the Government for dithering over whether to seriously look at the NZ Super Fund bid, which it made as NZ Infra, formed of the fund and another large Canadian fund.

According to another piece of correspondence from Rogers, the letter was written after a fractious meeting with Twyford where it’s understood he blamed the agency for light rail delays. The letter was written to outline the board’s position, after what was seen as an unfair smear.

Most observers had assumed the NZ Infra bid was something quite incredible, given it had made the Government rethink its own plans to let NZTA build the project. But the letter claims NZ Infra’s proposal was ” little more than an idea set out on 6 pages of a powerpoint presentation”. It also claimed that the “details of the project were vague”.

Light-rail (along with KiwiBuild) was one of the Labour Party’s flagship policies ahead of the 2017 election – the very first major policy announced after Jacinda Ardern took over as the leader. Yet it’s now around two years since this Government took office and:

• We don’t even have a confirmed route
• There still hasn’t been any public engagement or consultation on the project’s details leading to a lot of FUD.
• There hasn’t been a final business case yet completed (contrary to some claims, there were earlier business cases completed by Auckland Transport)
• We don’t even know who will be delivering the project
• It seems like little has been done to progress design work or consenting

Back in August Transport Minister Phil Twyford had to concede that the project wouldn’t commence construction in 2020 – like he had previously said and was in the government’s agreement with the Greens.

“This process will take up to six months and will mean we won’t have spades in the ground in 2020. But it will provide us with the certainty we need to progress a multi-billion dollar project which will transform Auckland.”

Yesterday’s Stuff article highlights how damaging this “new process” has been to making progress on light-rail – as well as rocking the confidence of potential partners in the project’s development more generally.

This didn’t just slow down the light rail, but it hurt many of the businesses who for ten months had been gearing up to work on the NZTA project, who were now unsure they’d get work.

The problem for NZTA is it had already gone to market looking for firms to build its rail line. Unsurprisingly, many of those firms are furious at money potentially wasted bidding for a project that may never be built.

Paul Evans, the chief executive of the Association of Consulting Engineers, representing engineering firms, wrote to Twyford in July. He complained that “at every step [engineering firms] have answered the Government’s call, invested heavily in building light rail expertise within their firms,” and spent considerable amounts of money bidding for work.

But Evans said work had now “ground to a halt”, and engineers had “a distinct lack of clarity around, if and when [light rail] will proceed”.

He said firms had spent “many millions of dollars” putting bids together – money that could be wasted if the Government backs down and goes with NZ Infra.

Now maybe (and it is a stretch) this process might have made sense if NZ Infra (the partnership between the Super Fund and CDPQ) had a really strong track record and had put together a detailed and compelling proposal. However, as I pointed out recently, a quick Google of CDPQ’s track record should have sent the Government running a million miles away from them. And it now seems there was only a six slide powerpoint presentation that made up their initial bid.

Combined with CDPQ’s dodgy financial schemes, earlier this year there were suggestions the NZ Infra proposal was an entirely underground and/or elevated design similar to their projects in Canada and something that will likely be completely unaffordable and/or unconsentable. The letter from the NZTA board suggests that as well as these issues, NZ Infra’s plan also ignores any of the original objectives of the project and that it seems the NZTA are being made to match this.

In his letter to the NZTA board, Rogers says that the goals of the initial light rail plan appear to have gone by the wayside in the NZ Infra proposal.

Instead of densification, the NZ Infra plan wants to get people to the airport as quickly as possible, meaning fewer stops and less intensification.

But it says this essentially doubles-up on another transport project to improve the connection between the existing rail line, ending at Puhinui station, to the airport.

In future, this will be the fastest way to travel between the CBD and the airport. The letter says building fast light rail, essentially creates a double-up: two fast ways to get to the airport, but no light rail line to help increase density in Auckland.

…….

NZTA fears the game is already up. Rogers’ letter says despite the fact that work is already quite advanced on the NZTA proposal, it appears the NZ Infra plan is now “the benchmark against which the NZTA proposal will be considered”.

The letter airs NZTA’s concerns that the Government’s indecision over whether it wanted fast or slow rail has meant it “no longer understands what the project objectives are”.

I think it’s a little unfair to characteristic the original light rail proposal as slow. Even with it running at 30km/h in the city centre and at 50km/h along Dominion Rd, it still would have only taken just 40 minutes to get from the middle of the city to the airport – faster than the Western Line achieves on average. The real benefit of the original light rail proposal was in connecting all the various and varied communities along the route to the city, the airport and to each other.

A focus on just serving the airport as fast as possible is classic case of what I like to call Airport Derangement Syndrome, where people over-estimate the value of the importance of city to airport trips. It also means we’d still need to be running buses on Dominion Rd and that we wouldn’t have done much to address bus congestion issues in the city centre.

If speed is the most important aspect, there are other ways to achieve that, for example if we implement intercity services properly they could run express from Britomart to Puhinui in 15-20 minutes with a shuttle from there to the airport for a total trip time of 25-30 minutes – potentially a great way to use up any spare capacity on, and help pay for, those services.

However, no matter who takes the project forward we will have lost at least two and a half years in terms of delivery timeframes from what would have been possible if NZTA has simply picked up the design that Auckland Transport had been working on since around 2014/15 and taken it forward. As well as the lost time, there’s also the millions of dollars that have already gone into that design that will be lost.

Furthermore, what’s the point in comparing two near identical designs and funding models. Surely the NZTA would be better here to be the voice of reason by presenting a practical plan that is actually possible to deliver.

I do believe that the Government – especially Phil Twyford, Julie Anne Genter and Jacinda Ardern – are serious about wanting to see light-rail become a reality. However, it does sound like the government and possibly some key officials have been won over by what is essentially a glossy brochure and lobbying from NZ Infra. They’ve fallen for the claims that light rail, as originally planned was slow, created congestion (it would replace the existing bus lanes on Dominion Rd), that serving the airport as fast as possible was the only thing that mattered and that NZ Infra could deliver the project without the government having to borrow money.

Yesterdays article makes it clear that MOT and Treasury were keen to thoroughly investigate the NZ Infra proposal:

NZTA was asked to do an assessment of the NZ Infra proposal using a standard Treasury methodology, essentially to see whether it was up to the standard expected of bids for Government contracts.

The assessment was scathing, comparing the NZ Infra bid to a similar unsolicited proposal made by a Chinese company to build the Penlink road.

“Neither unsolicited bid had sufficient merit to warrant taking them to the next stage,” said Rogers in the letter.

Despite NZTA’s objections, Twyford still claims that the Ministry of Transport (separate from NZTA) and Treasury “both advised that the NZ Infra proposal was sufficiently unique and worth investigating thoroughly”.

Government agencies have treated this project in the past similar to how they treated the City Rail Link and other PT and rail projects – with much disdain and acrimony. Many of the same people inside the Ministry of Transport, Treasury and even NZTA are likely still involved. So it’s not too much of a leap to think that there has been some concerted effort to make as little progress as possible, perhaps in the hope that the Government will change at next year’s election. Or at least make the project so expensive and difficult it never happens. It’s unfortunate that the politicians don’t seem to have seen through this.

At this rate, we’ll be lucky to see a spade in the ground within the next decade.

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