ACT News

Light Rail to deliver $1 billion in benefits: ACT Government

The ACT government has unveiled its full business case for the Gungahlin tram line, saying it will cost $783 million and deliver $1 billion in benefits to the territory.

The price tag comes with a 75 per cent confidence measure, which means 25 per cent risk the project could run over.

Capital Metro Minister Simon Corbell, Chief Minister Katy Gallagher and Capital Metro Agency Project Board chairman John ...
Capital Metro Minister Simon Corbell, Chief Minister Katy Gallagher and Capital Metro Agency Project Board chairman John Fitzgerald at the light rail business case launch. Photo: Matt Bedford

The business case says the benefits outweigh the costs by 1.2 to 1 – so every dollar spent brings $1.20 of benefits to the territory.

Capital Metro Minister Simon Corbell stressed the $783 million project cost was not the amount spent by the Government. Instead, the tram line will be built, owned and operated by a private consortium, which will be paid an annual fee by the Government. That amount of that fee remains undisclosed, Mr Corbell saying it would be "absolutely crazy" to release it.

"It's very very important that we maintain a competitive bidding environment, we want to get value for money for taxpayers and the way that we do that is not to disclose what we're prepared to pay for the day-to-day operation of this project," he said.

He also revealed that the government is preparing another business case for a possible extension of the tram line from the terminus on Northbourne Avenue at Alinga Street through the city to Russell. That extension could be included in the tender phase of the project early in 2015, he said.

The government released its expressions of interest documents with the business case on Friday, open until December 19. One consortium, led by transport giant Keolis Downer, has already put up its hand to bid, and Mr Corbell welcomed Keolis's entry into the contest, describing it as "a great vote of confidence" which proved critics who doubted there would be private sector interest wrong.

Mr Corbell rejected a south-north divide among Canberrans in support for the tram.

"The business case sets out very clearly $1 billion worth of economic benefit for our community, 3500 jobs. That's supporting families, supporting family budgets, supporting activity in our economy, supporting spending in our economy, those are good things for everyone in Canberra."

The business case cites a cost per kilometre for the 12 kilometre line of $65 million, compared with the Gold Coast tram, costed at  $73 million per kilometre assuming a total cost Gold Coast coat of $949 million (recent estimates suggest it actually cost $1.2 billion).

But the business  case says benchmarking light rail against other projects was difficult because of the limited information available and because of the differences between networks. The Gold Coast line included a bridge and viaduct, $170 million of property resumptions, 16 stations instead of 13, and  a more expensive depot than the "modest" depot planned here.

The business case cites 75 percent confidence in the $783 million project cost, which Mr Corbell said was industry standard. At the 90 per cent confidence level, the figure rises to $806 million.

The government would share responsibility for moving underground pipes and wires with the private partners, negotiating who paid what during the tender phase, Mr Corbell said.

The patronage figures in the business case predict 15,120 passengers a day on the 12 kilometre line by 2021, two years after it begins operation, rising to 20,207 by 2031. In the morning peak, 3946 passengers would use the tram in 2021, and in the afternoon peak 3607.

Former senior Treasury official David Hughes, who has dismissed the project as a "folly", said  the business case was clearer and in some parts more realistic than previous government analysis.

But he said a benefit cost ratio of 1.2 meant the project was marginal. It also relied on "unsubstantiated claims that light rail will increase urban density and productivity", and when they were removed from the equation the radio was just 0.5, meaning costs were twice benefits.

Opposition transport spokesman Alistair Coe said the government had for a long time been spruiking the project as having a very favourable benefit-cost ratio. 

"They're saying it's a $1 billion benefit, for spending about $1 billion. That to me sounds like a very high risk proposition and it's not going to take much in this project to go wrong for the economic benefits to be thrown out the window," he said. 

Asked about the importance of light rail to the government's election chances in 2016, Chief Minister Katy Gallagher said the government was not looking to winning an election but to "doing the right thing" for the city.

"I'm not going to take a bit of push back from the commentariat, a couple of bad front pages, and say hang on a minute, we'd better not do this because we might lose the election in 2016," she said. "It's not the approach I've taken in any other decision I make as chief minister and I'm not going to do it in public transport. Do we wait until people are sitting for two hours in their cars between Gungahlin and Civic?

ACT Greens Member for Molonglo Shane Rattenbury welcomed the announcement as a win for Greens-Labor parliamentary agreement.