Former senior Treasury official David Hughes has again weighed into the debate around Canberra's $800 million light rail line, offering a damning analysis of the project's business case.
In an opinion piece for Monday's Canberra Times, Mr Hughes furthers his criticism of the project from October, calling the 12-kilometre tram line "worse than a folly".
"It is a fantasy," he writes, pointing to the Capital Metro business case released on October 31, which he argues puts unrealistic weight on attracting developers to the Northbourne Avenue corridor and the economic benefits of having people live closer to where they work.
An economist and former academic, Mr Hughes was manager of major project analysis for the ACT Treasury and director of the economics branch.
He casts doubt on the assumptions behind the benefits identified by the business case, citing a lack of detailed figures or analysis to back the claims and arguing the estimated benefit-cost ratio of 1.2 means the project has only marginal benefit achieved with unsubstantiated and implausible claims.
"In 2012, the government said light rail had benefits 2.3 times the costs," Mr Hughes said.
"But three-quarters of the benefits came from higher parking fees and policies to increase population and employment in the transit corridor. The real result was 0.6 – that's 60¢ of benefits for every dollar in costs.
"Now, the government says the benefits are 1.2 times the costs. Benefits are nearly $1 billion and costs are over $800 million. But three-fifths of the benefits are unsubstantiated claims about increased land values and productivity. Without them, benefits are $400 million, which is half the costs."
Mr Hughes has proved a thorn in the government's side on light rail. He has worked as an adviser to leaders on both sides of politics, including to Prime Minister Tony Abbott while he was in opposition. He worked in the ACT Audit Office, completing an investigation into the Bruce Stadium project. He is not a member of any political party.
Last month, Mr Hughes said a tram line was highly unlikely to deliver the benefits claimed by the government and would not transform the city or change transport habits.
"During debate in the Legislative Assembly in November 2013, the Capital Metro Minister, [Simon] Corbell, rightly set the bar higher than 1.2 when he said 'anything over two is considered a beneficial project'. This is a poor project that will redirect community resources away from better private and public uses," Mr Hughes writes.
Mr Corbell said there was no secret how the benefit-cost ratio was calculated.
"It may well be that the project does actually generate higher benefits than what has been assumed," he said. "For the purpose of making an investment decision, however, the ACT government has relied upon a conservative BCR assessment. This was a responsible and prudent approach.
"The methodology adopted in the business case does not amount to 'unsubstantiated claims'. Rather, they have been calculated in accordance with industry-recognised principles, guidelines and accepted economic principles. The government has made no secret as to the methodology adopted."
Mr Corbell said the British transport appraisal methodology would have given Canberra's tram line a headline benefit-cost ratio as high as 1.7.
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