If your support for the tram line depends on it stacking up in economic terms – and it has to be said there probably are few people for whom this is the primary concern – Friday's cost-benefit analysis had the numbers you will have been waiting for. The official ratio is 1:1.2, which means for every dollar spent on the project, the tram line from Gungahlin to the city will bring $1.20 worth of benefits.
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It's not a big figure; one expert has already labelled it marginal, but Capital Metro Minister Simon Corbell argues it is better than other infrastructure projects around the country – including the Dulwich Hill light rail extension in Sydney that had a ratio of 1, just breaking even.
Such is the confusion of benefit-cost ratio figures on the Gungahlin tram project that you could be forgiven for doubting or ignoring all of them. We've had a number as low as 0.43 from transport consultant Bob Nairn, tasked by the Liberal Party, and a figure as high as 2.34 from the Government's 2012 submission to Infrastructure Australia.
No doubt we'll have experts in transport economics analysing the latest figure over the coming days and arguing about the myriad benefits counted and the dollar figures attached to them.
Already, former Treasury heavyweight David Hughes is disputing the inclusion of the redevelopment and densification of Northbourne, since the changes to Northbourne are not intrinsic to light rail – they can happen with or without the project.
The Government's figure of 1.2 comes from adding up $984 million of project benefits (Mr Corbell's trumpeted $1 billion of economic benefits to the wider Canberra community) and setting it against $823 million of project costs. You don't want to get too mired in the detail here, because if you do you start to wonder how they came up with total project costs of $823 million, when the headline project cost released yesterday was $783 million (the detailed explanation is elusive, but the benefit-cost analysis uses slightly different figures – a lower project cost at the 50 per cent confidence level rather than the 75 per cent confidence level represented by $783 million, and it includes operating costs also, but that's one best left to the esoteric world of transport economics).
On the benefits side of the ledger, the biggest weight is given to transport benefits, primarily time saved in travel, but also a substantial value attributed to the "residual value" of the trams at the end of 30 years, and savings on buses. Almost as much weight is given to benefits from changing land use - the value of land in new commercial and residential developments and the savings on infrastructure that come with high-density living.
The analysis also counts wider economic benefits and it's feasible (although you would hesitate to make a call) that this will be where some of the debate coalesces. The document acknowledges that Australia has no official guidelines on how to include wider economic benefits in benefit-cost analyses, but says Infrastructure Australia is requesting their inclusion, based on British guidelines. So in they go, the more the better, after all.
These benefits (which add up to $200 million of the $984 million) include the improvements in productivity from workers living close to work, and increased tax from more people in the workforce.
Make what you will of all this. No one will be surprised that the benefits have been found to outweigh the costs; that much was clear even from the confidential rapid business case released earlier this year which spent not a small amount of effort discussing ways to "enhance" the figures by including various new benefits. You might be surprised at the narrowness of the benefit margin; 1.2 satisfies Mr Corbell, who describes the analysis as robust, professional prudent and conservative, but with a 20 per cent increase in capital costs, the figure slumps to 1 and suddenly the costs come near to outweighing the benefits.
Or you might also say, to blazes with a complicated comparison of costs and benefits so bedevilled with assumptions and projections, just build me a tram.
Whichever way you lean, the public release of the full business case will not only bring hours of number-crunching fun to the experts on either side of the debate, but is a big step in accountability and transparency.
