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Speaker: Economics of the Waterview Tunnel

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  • Sofie Bribiesca,

    I think the Editorial ( in the herald) I quickly glanced at this morn has prompted my curiosity also.The different route proposed sounded great but has previously been ignored, and why is Freemans bay tunnel (expensive option) being prefered over Waterview tunnel (because it's sooo expensive) The whole bloody lot sux big one. I am just glad all but ACT and National are trying to save us Aucklanders by holding out (Ak reorganisation bill)in the House as long as possible plus all other Parties are speaking in Maori. :)

    here and there. • Since Nov 2007 • 6796 posts Report Reply

  • Richard Norton,

    Won't the houses next to the motorway be cheaper after the motorway is built... so Ontrack won't have to pay so much if they want to build the railway after all. If they did it the other way round (rail before road) then the houses wouldn't have lost their value. Win, win!!

    UK • Since Aug 2008 • 4 posts Report Reply

  • Rhema Vaithianathan,

    The $550 million which appears as a "finance cost" on the deep tunnel but appears nowhere in the current proposal is in my opinion a fabrication. There is no justification for it. The issues are rather technical. The $550 m reflects the fact that the funding of the deep-tunnel will exceed the LTA ring-fence. This means that it will have to come from somewhere else. In the case of the Transmission Gully it came from the Consolidated Account (i,e, Stephen Joyce) and therefore had no finance costs. It appears that Joyce has REFUSED to fund the deep-tunnel which means that LTA has to fund it elsewhere. It seems they are putting it on their credit card (or perhaps the Money Shop on Dominion Rd????) hence the outrageously high finance costs. It's a fiddle, plain, simple and outrageous. The difference in price has been over-stated by 100%.

    Auckland • Since May 2009 • 2 posts Report Reply

  • Sofie Bribiesca,

    There is no justification for it.

    Hear Hear.

    here and there. • Since Nov 2007 • 6796 posts Report Reply

  • Joshua Arbury,

    Paul - yes I guess you could run the conspiracy theory argument. But what I don't get in that regards is why the Road Transport Forum doesn't support public transport, as better public transport would surely reduce the congestion which holds up shifting freight?

    Sofie - I am a bit worried about the railway designation (more talk on it here: http://transportblog.co.nz/2009/05/14/another-waterview-connection-post/ ). It seems like life will be difficult for Ontrack to ever build the Avondale-Southdown railway line as most of their designation will have been eaten. Maybe NZTA will ensure that their designation is wide enough to provide for a rail alignment, but that might get messy from a legal perspective as NZTA are not the proper requiring authority for railway works (and therefore wouldn't be able to designate for railway purposes).

    Richard - there already is a railway designation though. Therefore, if Steven Joyce was interesting in a balanced transport policy he COULD instruct Ontrack to prepare designs for the Avondale-Southdown railway line, put in an Outline Plan of Works to Auckland City and start building the line in a few months time. Easy peasy. Annoyingly, this motorway looks like it will make that task - if it ever happens - much harder.

    Rhema - you make an interesting point. What is obvious (now) is that the NLTF can support $1.4 billion in roading expenditure for the Waterview Connection. Given that the cost of building the full tunnels plus the SH16 upgrade would be ($1.98b + $240 million) $2.38 billion, only a billion would need to be borrowed. So therefore financing would only need to be paid on a billion and not on $2.38 billion. Finance costs seem to be around 23% of the construction cost ($550 million of $2.38 billion), so that would mean around $230 million of finance cost would be necessary - not $550 million.

    So we add that up and we realise that the full tunnels could be built for $1.98 billion construction, $240 million SH16 upgrade and $230 million financing. That comes to a total of $2.45 billion, not $2.77 billion. There's still a difference of around $1 billion, but not the $1.5 billion rubbish being thrown about.

    Auckland • Since May 2009 • 237 posts Report Reply

  • Richard Norton,

    Sorry Josh. I agree whole-heartedly with public transport getting a fair deal and I too am very concerned that after this motorway is built it will then be very difficult to justify the expense of building a railway along an undesignated corridor. However, my point was IF the government was committed to building both rail and road, then they could build the road first, watch neighbouring property prices plummet, then buy cheap houses for the rail corridor. This wouldn't work if you did rail before road... but I don't believe for a second that the government is interested in building a railway so I'm just being silly.

    UK • Since Aug 2008 • 4 posts Report Reply

  • Joshua Arbury,

    Well to be honest I wouldn't build the Avondale-Southdown railway line until after a CBD loop, rail to the airport, turning the northern busway into a railway line AND building a Botany/Howick railway line.

    It may be an important freight line in the future, but as for passenger trains generally cross-town routes aren't particularly popular internationally.

    We have more pressing rail needs.

    Auckland • Since May 2009 • 237 posts Report Reply

  • Rhema Vaithianathan,

    The question of whether there should be extra financing costs simply because it is outside the Fund is questionable. I have never seen such a cost added. The ring fence is an artifice to Government accounting,. and financing costs should reflect the opportunity cost of funding. So either all options should have financing costs (i.e. opportunity cost) or none.

    It's sort of like taking a cash advance on your credit card, and then pretending that the option which uses your cash is free, and the one which uses your credit card costs 25% .

    It flies in the face of the theory of economic costing - which is that if accounting rules can influence our relative costs, then the costs are not "economic" but "accounting".

    This is why most economists think PPP for roading is a rort - it is just a way of getting the debt off the Govt. Books- but does not in any meaningful way reduce Crown risk. Nice for accountants but not for economists.

    I am getting pretty frustrated at the lack of proper costings. I was supposed to be on morning report debating it with LTA but got bumped by the Mellissa Lee car wreck. (Mind you - not the sort of topic to be debating in the morning before fully awake!)

    Auckland • Since May 2009 • 2 posts Report Reply

  • Christopher Dempsey,

    Wearing my community board beanie...

    As I've pointed out in a press release, Enron style accounting is expected of failed finance companies and shady firms, but not governments. It is disappointing to see the government hold itself to this standard in this issue.

    Whipping said beanie off...

    Parnell / Tamaki-Auckland… • Since Sep 2008 • 659 posts Report Reply

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