A rail consultant asked by the Liberal Party to assess the ACT government’s light rail project says it will cost $915 million and is not viable.
Consultant Bob Nairn conducted a cost-benefit analysis of the Gungahlin-to-city tram line and concluded it fell well short of being economically or financially viable.
“At this stage of Canberra’s development it does not appear to be possible to achieve an adequate financial result and it is highly unlikely that any equity partner would express an interest in the project,” he concludes.
The government's full business plan is yet to be completed, but Mr Nairn calculates it would need to borrow $915 million for construction and a fleet of trams, costing $4.81 million each.
His analysis keeps it simple. It assumes the government borrows the entire sum, which covers the costs of the track, the trams and construction, and repays the loan at 5 per cent interest over 15 years.
Mr Nairn takes into account the costs of repaying the loan and operating the line, and loss of income from bus fares, then factors in the income from tram fares and other benefits. These include higher property rates, savings on the bus fleet, savings on road construction and maintenance.
Other savings come from less carpark construction, fewer road accidents, shorter travel times and pollution benefits.
Mr Nairn assumes a tram fare of $4, plus 10 cents for every kilometre after the first. He also tested the numbers with a fare of $5 a ride – but says this still could not make the project viable.
He comes up with a benefit to cost ratio of 0.43, indicating the project has significantly more costs than benefits. A benefit-to-cost ratio greater than 1 shows more benefits than costs, but Mr Nairn comments that few projects are funded with a benefit-cost ratio of less than 2. Usually 2.5 is expected.
He finds the line would have a considerable effect on ACTION bus services, causing falls in passenger numbers, fewer viable bus routes and job losses.
Mr Nairn has not taken into account the expected increase in passenger numbers the government is factoring in as a result of its massive land development in the Northbourne corridor.
He describes his analysis as a "brief report" and includes the caveat that while patronage and operating estimates reflects best practice, the cost of building and operating the tram line are not known and are based on the cost of similar projects elsewhere.
He based his calculation of cost on "recent relevant" light rail projects in the United States – in Houston, Minneapolis, Virginia, California, and Arizona, which averaged $US29.4 million a kilometre. Converted to today’s dollars and to Australian dollars, the cost would be $44 million a kilometre, but Mr Nairn has adjusted the total to reflect that some of the US tracks were single direction.
He assumed a cost per tram of $4.8 million, also based on the US projects.
ACT Chief Minister Katy Gallagher said on Wednesday the government would not support a total cost significantly greater than $614 million, adjusted to today's dollars.
The government expects construction to begin by 2016.
Mr Nairn is a retired traffic and transport planning consultant. He also specialises in transport economics.
Based in Canberra, he contributed to an Infrastructure Australia application for the light rail project and has also worked on Sydney's light rail network.
He was involved in light rail feasibility studies for public-private partnerships at Busan Airport and in the city of Uijeongbu in South Korea.
The Canberra Times is yet to speak to Mr Nairn about his report or his $19,000 consultancy to the Canberra Liberals, which includes other work on light rail projects.