Boring into the numbers 2

Written By: - Date published: 6:32 am, May 14th, 2009 - 15 comments
Categories: transport - Tags:

National has released its Waterview plan. Basically a trench rather than a tunnel, and a few hundred more homes knocked down. They reckon it will cost $1.4 billion. What’s missing from the costing?

Financing costs were included in the cost of the tunnel to inflate it to $2.77 billion but are excluded from the trench option. The excuse for that is there is enough money in the National Land Transport Programme for the cheaper option but that doesn’t stack up. The opportunity cost is still the amount the Government could reduce borrowing if it weren’t paying for the motorway, so if the tunnel needed finance costs included so does the trench. If we’re comparing apples with apples, that’s going to be another $300 million on top of the $1.4 billion before even turning a spadeful of soil.

The route uses a designated rail corridor, so there’s an opportunity cost there too. Again, unaccounted for.

Then, there’s the lost amenity value to the community. That’s isn’t just nice fuzzy stuff. It will be reflected in decreases in the value of hundreds of houses – the ones standing beside the ones that have been bulldozed. Full costings include amenity value – this one doesn’t.

Add to that the cost of delay. The community has vowed to fight this plan to the end. So we’re going to see years and years of hold ups in the Environment Court. National is planning an end run around that with its RMA reforms and roads of national significance but that’s going to end in more law suits taking even more time

$1.4 billion doesn’t such a bargain when you start to add the real costs, eh?

NZTA hopes to start bulldozing in two years. They’ll be lucky. If they start before the next oil shock they’ll be doing well. Even without another oil shock the already falling traffic volumes and improvements to Dominion Rd are easing congestion in Mt Albert.

If National is still in government when their trench is completed, they might just find they’re left with a six-lane white elephant.
-Marty G

15 comments on “Boring into the numbers 2”

  1. gingercrush 1

    Better than a wholly expensive tunnel.The plan is brilliant and these people in Mt. Albert are just moaners. They just want to see 2 billion+ spent on a tunnel with no regard to the cost for taxpayers. The rest of New Zealand are not going to have much sympathy for these people. Could you imagine the outrage of the left if a 2 billion+ tunnel was designed for an upmarket electorate like Epsom? You’d all be screaming the cost. Yet here most of you are defending billions spent on a tunnel. It looks silly.

    Of course this plan is already a compromise and is much better than a completely open motorway.

  2. Marty G 2

    “Better than a wholly expensive tunnel” – maybe. I’m not a big supporter of the Waterview project at all. I reckon there’s a good chance it will never be built consent delays will push out the start of construction past the next oil shock and that will be its death knell.

    “the plan is brilliant” – whoa, calm down. its a roading project and there are legitimate points for and agaisnt it ‘brilliant’ is a pretty strong word for a roading project I would have thought.

    “people in Mt ALbert are just moaners” – all of them or just the ones getting their houses knocked down? Maybe they need to step back and realsie how brilliant this plan is.

    • gingercrush 2.1

      I’m not sure there will be much delays whatsoever. I have no doubt they’ll try and get it to go through the environment court etc. But I would say there is a very good chance this project will go as scheduled.

      I take it you’re now a regular contributor here? If so welcome. Appreciate your posts thought don’t often agree with them.

  3. The inclusion of an interest charge IMHO cannot be justified.

    This is from Transit’s Auckland State Highway Plan and Forecast published in 2008:

    “Provision for completion of the Western Ring Route has been included in Transit’s State Highway Forecast, but in order to complete by 2015, as planned since August 2005, additional revenue will be needed to fund the required debt.”

    (http://www.transit.govt.nz/content_files/planning/forecast-08-09/summaries/Auckland.pdf)

    The 2008 National Land Transport Program only had $9m for investigation, nothing for construction.

    (http://www.landtransport.govt.nz/funding/nltp/2008/index.html)

    Nor will Joyce’s rejig of finances towards State Highway construction help. In his press release he said the extra $1b over 3 years would be spent on “important roading projects like the Waikato Expressway, the Christchurch Southern Motorway, State Highway 1 from Puhoi to Wellsford and Victoria Park in Auckland”.

    (http://www.beehive.govt.nz/release/1+billion+more+state+highways+0)

    The Minister should be asked to confirm how the project will be funded and what will be sacrificed.

  4. infused 4

    Oil shock? Not for awhile… we are always going to need roads matey. Cars are not going to change, the engine and fuel will.

  5. Pat 5

    Exactly infused. There was a news item in the weekend about a chinese company that have manufactured a low price electric car that can travel 100km on the battery, and be recharged in the garage at night.

    Once the collective will of the car manufacturing world focuses on electric cars, we will see massive changes very quickly.

    • Maynard J 5.1

      I agree with you and infused here. I do not buy into the Greens’ ‘we don’t need motorways’, it is the internal combustion engine that is the problem. The only way we will not need them is if the worst case scenario comes to bear: oil peaks strongly, and there is no decent replacement.

      Decent mass transit would double the life of what we already have though.

    • Draco T Bastard 5.2

      Where are they getting the charge from?

  6. Jared 6

    Clearly you dont understand how financing works. The 500 million is the cost of raising the additional capital for the project, opportunity cost is irrelevant. The financing could be in the form of bonds, or wholesale capital financing from offshore sources, which i suspect will happen considering the lack of available capital in the local market at the moment.

    • Maynard J 6.1

      As was pointed out last night on Close Up – $500 million cost to raise $800 million. maybe joyce needs a better financier.

      Key wanted 40% of kiwisaver in our economy, that would be a start for him.

    • Draco T Bastard 6.2

      Actually, from what you say, you’re the one who doesn’t understand financing. In fact, I’d go so far as to say you don’t have even a basic understanding of economics.

  7. Errors here:
    1, “The opportunity cost is still the amount the Government could reduce borrowing if it weren’t paying for the motorway” No it isn’t, the NLTF isn’t there to be pillaged to pay for other activities. Labour made no provision to pay back the debt for a PPP funded Waterview connection. Waterview is now being funded on a PAYGO basis, not debt financed through a PPP. The saving is interest and contract negotiation costs for NZ’s first ever road PPP, the saving is real.
    2. “The route uses a designated rail corridor, so there’s an opportunity cost there too. Again, unaccounted for” The corridor isn’t gone, the motorway is parallel to the rail designation for a short distance. Besides, ARTA’s rail plan says the railway wont be built till 2030, hardly a big deal.
    3. “Add to that the cost of delay” no the BCR goes up as the project is delayed, as traffic growth continues. Delay means not spending money on the project sooner, which means spending that money on something else instead.

    It wont be a white elephant, anymore than Mt Roskill, Manukau, Greenhithe or Hobsonville motorway extensions already funded will be. There will always be a need for roads, it is the most flexible mode there is. The real issue should be when this road should be built. I’d argue it should be delayed until all the other segments are completed.

  8. Scribe 8

    National has released its Waterview plan. Basically a trench rather than a tunnel, and a few hundred more homes knocked down.

    Marty G, congrats on getting to the second sentence before making false statements.

    Oh, and thanks for doing that, too. Saves me reading the rest of the post because I know it’s going to be ideological, not a worthwhile analysis of the situation.

  9. Zaphod Beeblebrox 9

    Until we see how the NLTF is affected it is still uncosted. During nine years of decisions and consultations, this option has never been explored. This means that this is still a lot of investigation to be done re the engineering and legal issues. It may be quite a long term before we know all this

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