ACT government report says light rail can't compete with rapid bus

ACT government report says light rail can't compete with rapid bus

An internal report to government in 2013 concedes what critics have long claimed, that the Gungahlin tram doesn't stack up as a transport project alongside rapid buses.

The discussion paper from the Chief Minister's directorate says as a transport project, bus rapid transit would remain more attractive, given the cost difference.

ACT ministers turn the first sods of Canberra's light rail project in July.

ACT ministers turn the first sods of Canberra's light rail project in July.Credit:Rohan Thomson

"The difficulty with framing [light rail] as a transport project is that a relatively lower cost alternative is readily identifiable, that is bus rapid transit," the paper, released after a freedom of information request, says.

"The project needs to be viewed differently – as an integrated land use, transport and planning policy project."


The paper advised against selling Exhibition Park to fund light rail, saying, "Such an approach will continue to frame the project as a transport link with its inevitable counterfactual of a lower cost option [in the form of bus rapid transport]."

Once light rail was "redefined" as about urban development and the economy, the government could pay for it through "value capture" – clawing back some of the benefits that would flow to developers and property owners on each side of the line through taxes and rates.

Counting those wider benefits turns a project of marginal benefit in transport terms into one the report said could deliver benefits in the order of three to four times the costs.

"The business case needs to be revisited," it said. "This is not unusual for large and complex projects – scopes need to be refined, and sometimes, redefined – business cases develop iteratively."

The 2012 business case to which this refers has not been released. But the discussion paper said bus rapid transit would cost $279 million, and light rail $615 million. If the corridor remained as is, the cost-benefit ratio for the tram was 1.02 ($1.02 of benefits for every $1 spent), and for bus rapid transit 1.98. Under the "higher-density scenario", light rail had a cost-benefit ratio 2.34, and the bus option 4.78.

The paper points out that betterment taxes have been abandoned elsewhere because they are difficult to put in place – and fiercely opposed.

But it says the ACT is "an ideal place" for the approach because land is leasehold rather than freehold, allowing the government to recover windfall increases in value through the lease variation tax, and because it controlled rates.

Land in the corridor – up to 1000 metres each side of Northbourne Avenue, was worth $585 million now, but would be worth $3.4 billion with high-density development, of which $2.4 billion could be attributed to the tram, the paper said.

It envisages the government making $575 million from lease sales and $1.34 billion from lease variation tax, as well as much more from rates, adding to $2.3 billion, which it sets against $2.24 billion in total costs (although those costs have been superseded since 2013).

The Chief Minister's department includes $300 million for relocating the Northbourne public housing among tram costs – but this is a cost that the government has never included in the project in any public statements.

The paper, called Funding and Financing, suggests changing planning rules to allow still-higher buildings, to push returns higher. And it suggests removing the cap that limits rates increases to the wage-price index in the project corridor. Land values for determining rates also needed to be market value, it says.

But a spokesman for Chief Minister Andrew Barr said none of those ideas would be pursued.

Building heights were determined by the National Capital Authority, which specified that no buildings would be higher than the flag pole at Parliament House.

"The document in question is a draft prepared for a discussion three years ago. It has no formal status. Nothing about government policy can be inferred from it," he said.

The benefits of light rail had always been much more than transport.

"Light rail is an investment to avoid gridlock. It will cut congestion, take thousands of cars off the road and ... free up more than a million bus kilometres that have been allocated across Canberra."

The economic benefits of developing the corridor were "real and realisable financially", as stated in the report.

"People want to live and work near light rail. You can already see that in the demand for homes along the corridor ...

"If you're building an office block or opening a shop or buying a home the certainty provided by tracks in the ground is very attractive. This stimulates economic activity."

The discussion paper says the government should do more work to get Infrastructure Australia on board, not so much for the funding, which was not likely to be significant, but for the symbolic impact.

"Its support, even if symbolic, will be of significant benefit in shaping the public discussion on that project."

The government refused to release the same document after an FOI request almost two years ago.

A separate paper from the Capital Metro Agency in January 2014, Value Capture Options and Assessment, was also released under FOI this month, but most of the document has been redacted, so it is not clear what recommendations were made.


"There is merit in assessing a district or direct levy, tax increment finance constructs, development impact fees, negotiated exactions and air rights," the document's summary says. In 2014, the government ruled out a special levy.

Reports on value capture in April, May and June 2014 have been withheld from release on the grounds they were prepared for cabinet.

Kirsten Lawson is news director at The Canberra Times

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