More than 50 years after trams last rattled from the city to Randwick, the state government has announced they will run again.
Releasing its transport plan for the next 20 years on Thursday morning, the government said it would spend $1.6 billion on a 12-kilometre track linking Circular Quay and Central, George Street, Moore Park and the University of NSW. Construction will begin in 2014.
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NSW Transport Minister Gladys Berejiklian announces a light rail network from Circular Quay to Kingsford and Randwick aimed at reducing congestion in the CBD.
In the CBD, about 40 per cent of George Street, between Bathurst and Hunter streets, will be open only to pedestrians and trams.
"This is a once-in-a-generation project to revitalise the centre of Sydney by reducing congestion and offering a fast, attractive public transport option," Premier Barry O'Farrell said.
The light rail line is the big announcement from the government, which has already said it would build a 33-kilometre WestConnex motorway through Sydney.
The motorway, the tram line, the north-west rail link from Epping to Rouse Hill and potentially another motorway linking the F3 and M2 are now confirmed as the transport priorities of the O'Farrell government.
At a media conference this morning, Mr O'Farrell stressed the "balance" in the package of projects.
"Over the next four years $25 billion will be spent on transport in this city," he said.
"Under the balanced announcement we are making today, 56 per cent of that will be spent on public transport and 44 per cent will be spent on roads. That's because we understand the need to do both."
The light rail announcement represents a victory for Transport Minister Gladys Berejiklian against a rival proposal pushed by Infrastructure NSW and its chairman, Nick Greiner, for a bus tunnel underneath the CBD.
Ms Berejiklian said the light rail line would be more reliable than buses, only a small proportion of which ran on time between the city and along Anzac Parade in the eastern suburbs.
"Congestion on roads in the Sydney CBD and surrounding areas will only get worse as the number of jobs in the city grows and the population increases. We have to act now and in a significant way."
Construction will probably start first on the eastern section of the line, from Central Station to Randwick. But the whole line will open at the same time. Construction will take between five and six years.
The government had been debating whether to run the trams through Surry Hills or in a tunnel. Ms Berejiklian said it had decided on a street-level option, with trams running down Devonshire Street.
This would save hundreds of millions of dollars, she said, but also had the benefit of providing another street-level stop in Surry Hills. People travelling from Randwick to the city would lose a couple of minutes in travel time against the tunnel option.
The government estimates it will take 24 minutes for the trip from Randwick to Central Station and 15 minutes to get from Central to Circular Quay. It now takes 30 minutes in peak hour from Central to Circular Quay .
The new light rail will be able to carry up to 9000 passengers an hour in each direction.
The government also announced an overhaul of the city's bus network to reduce peak-hour buses in the CBD.
Bus reforms include improvements to interchanges, more cross-city routes and higher priority for buses. The government estimates this will mean 220 fewer buses enter the city an hour in peak morning traffic. During the busiest two hours of morning traffic, about 1500 buses normally converge on a few narrow and congested corridors in the middle of Sydney.
The government also unveiled plans to reduce congestion around Sydney Airport, including building an underpass for the rail line at General Holmes Drive, making airport approach roads one way and widening Mill Pond Road.
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"The NSW government does not support a second airport in the Sydney basin, which is why we need to ensure the existing asset is being fully utilised," Mr O'Farrell said.
The projects will cost $300 million and take three to five years to complete.
Trams in the Sydney CBD. Click for more photos
Mr O'Farrell and Ms Berejiklian made Thursday's announcement in Castle Hill, the site of an information centre for the north-west rail link.
In the announcement they not only released Transport for NSW's final masterplan, but also responded to a separate state infrastructure strategy written by Infrastructure NSW.
They endorsed Infrastructure NSW's main recommendation, the 33-kilometre WestConnex motorway. But they dismissed its recommendation for a bus tunnel in Sydney's CBD to take the place of light rail.
Mr Greiner said putting light rail in the city would only create a problem. But Mr O'Farrell said the bus tunnel idea would have cost more for not as much benefit. Transport for NSW said the bus tunnel might not be feasible, in part because of its effect on underground CBD railway stations.
Randwick was one of the first destinations for Sydney's first tram network, soon after steam-powered trams were first introduced to the city in 1879.
"The first destination was Randwick racecourse," said Robert Lee, a professor of history at the University of Western Sydney. "This really is history repeating itself."
Sydney's Lord Mayor, Clover Moore, welcomed the announcement as a ''huge win for Sydney''.
''It's a massive investment in the future if our city – the global city of Australia,'' she said.
Cr Moore said the city had lobbied hard for light rail down George Street as a way to reduce the city's congestion.
''Congestion costs Sydney businesses and residents an estimated $5.1 billion a year, and that's projected to more than double to $8.8 billion by 2021,'' she said.
The city was also ''very pleased'' that the government had backed its calls to pedestrianise part of George Street, she said.
The council last year committed $180 million towards the project, to be used for street improvements like widened footpaths, better lighting, landscaping and traffic management.
''As part of that work we will open up a network of vibrant lanes and small plazas which will help shops, bars and other small businesses to thrive,'' she said.
''This will give Sydney the inviting main street it needs to remain commercially competitive and draw tourists to our city.''
Randwick Mayor Tony Bowen also welcomed the announcement as ''great news'' for the area's residents and visitors.
The return of light rail to the eastern suburbs was something the council had strongly advocated for many years, he said.
"Randwick City is unique – no other area in Sydney contains four major hospitals, a leading university and TAFE, a nationally significant racecourse, major sporting stadiums and parklands, and yet has no dedicated rail transport,'' he said.
"I would also like to see the Government commit to maintaining or improving the current bus services in the eastern suburbs, and also consider providing a dedicated bicycle path alongside the light rail route.''