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ACT Government releases second tram business case review

The ACT government has released an expert review of the tram's business case, 18 months after it was written, in an attempt to counter criticism from the Grattan Institute.

The release on Tuesday comes after repeated refusals by Capital Metro Minister Simon Corbell to make the review, written by European transport consultant and academic Roger Vickerman, public.

A cross-party parliamentary committee called in August for the review to be released by the end of 2015 and this newspaper made several requests, all declined by Mr Corbell.

He said the release was timed to give "context" to the Grattan Institute report, which questioned the inclusion of "wider economic benefits" in the business case for the city to Gungahlin tram.

Including wider benefits, such as increased activity on Northbourne Avenue, job creation and reduced travel time, the Grattan Institute report gave the project a benefit-cost ratio of 1.2, meaning $1.20 in benefits for every $1 spent. But if only the narrower transport benefits are included, and a more traditional and conservative approach taken, the benefits of the tram amounted to just half the costs.

Professor Vickerman concludes the business case overall is sound, careful and robust, and gives a "reasonable estimate" of the impact on the corridor. Commissioned to consider the broad approach for the business case, he did not audit detailed data or values used.

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He points to extra benefits for public health that could have been included, and warns against double counting in some areas.

The review also highlights the difficulty of assessing some benefits, and says it is tenuous to directly link an expected improvement in job outcomes – because skills are better matched to jobs through closer proximity.

Professor Vickerman questions the way enhancements to the Northbourne corridor are counted.

"It does raise interesting questions about visual perception and the measurement and monetary valuation of this remains an area of some speculation," Professor Vickerman commented, asking how you can measure visual attraction and put a value on it.

" Clearly the argument here is not so much about the visual impact itself … but about attracting new investment.

"I have some doubts about the ability to identify a separate impact of this, and about the linking of this directly to the LRT development as one of its benefits."

The report also points to a danger for the taxpayer, in that passenger fares are set by the government, with no patronage risk taken by the private consortium chosen to run the tram. Failure to deliver the project could result in the consortium seeking to review the contract or the government seeking termination, he warned, urging careful contract negotiations.

Professor Vickerman said a big unknown was whether a completely new transport option would change behaviour. Evidence from around the world showed rail did not perform as well as forecast, but light rail outperformed busways.

The tramline was not a major enough change "as to expect a wholesale change in behaviour".

The review is the second of two government commissioned reviews of the business case, with both released to counter negative publicity.

The first review, by former South Australian Transport Authority chief Derek Scrafton​, was released by Mr Corbell in April 2015, after academics at the Australian National University and the University of Canberra criticised the tram.

Professor Scrafton's review said the business case was "fit for purpose" and made realistic conclusions about the project. He found the cost was subject to change based on the final design. The inclusion of wider economic impacts was standard international practice, he said.

Mr Corbell said Professor Vickerman's report had confirmed the government's approach.

"The government has been very clear: this is not just a transport project. This is a city building project," he said.

"Economic analysis is important in a government's decision-making but there are a range of other considerations governments have to take into account as well."

He said the public-private partnership was designed to ensure significant private sector risk. Late delivery would see the consortium's private costs increase above the set $698 million bid price, he said.

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