Light rail may have been a little late but the final bill is less than expected

Ian Bushnell 13 May 2019 72

Passenger numbers for light rail are exceeding expectations. Photo: George Tsotsos.

The final cost of building light rail Stage 1 between the city and Gungahlin has come in at $675 million – under budget by $32 million on the contract and $109 million on the original business case.

The contract with Canberra Metro for design and construction with a 2018 start was worth $707 million, compared with the business case estimate of $783 million and a 2019 start.

Stage 1 was due to be delivered by the end of December 2018 but did not start operating until Easter, four months later.

Chief Minister Andrew Barr said the final result was due to Government’s foresight to establish a dedicated project team with sound governance, talented leadership, motivated staff and expert advisers from across the country, and the project partner, Canberra Metro.

He said Canberra Metro went above and beyond in delivering light rail, and, through CMET, continued to provide a high level of service as the light rail operator.

“The final result has verified the ACT Government’s commitment to delivering an affordable and sustainable light rail network for the city. Light rail is already proving incredibly popular, moving thousands of Canberrans every day and we’ve delivered it substantially under budget,” Mr Barr said.

He said the lower than anticipated cost meant the benefit-cost ratio would increase to at least 1.3, rather than the original, conservative estimate of 1.2.

“That means for every dollar invested, Canberrans get $1.30 back in benefits, including better transport, lower congestion, more jobs and the increasing value of homes and businesses along the route,” Mr Barr said.

Minister for Transport Meegan Fitzharris said light rail was also beating the business case predictions on patronage, with passenger numbers already exceeding 2021 levels.

“Light rail is proving to be hugely popular already, with more people using it every day, and as a result we’ve added more frequent services during peak times to manage this demand,” she said.

“Along the light rail corridor the benefits are plain to see: with light rail getting people to work, opening up new customers to local businesses and seeing hundreds of Canberrans employed on building and construction projects along the alignment that are already using their proximity to light rail to attract buyers.”

Ms Fitzharris said Stage 1 saw around 5000 people work on the project, and the Government hoped to build on that industry knowledge as it continued planning for Stage Two to Woden, which is expected to cost about $1.6 billion.

“Indeed we are already funding early works to prepare the Woden interchange for the next stage of light rail,” she said.

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72 Responses to Light rail may have been a little late but the final bill is less than expected
chewy14 chewy14 8:19 am 13 May 19

“He said the lower than anticipated cost meant the benefit-cost ratio would increase to at least 1.3, rather than the original, conservative estimate of 1.2.”.

This is the only thing that matters here. So the project has gone from a completely woeful cost benefit ratio of 1.2 to a completely woeful cost benefit ratio of 1.3.

A ratio that no investment manager or infrastructure planner would go near with a barge pole. Especially when the majority of that benefit doesn’t come from transport benefits but rather development benefits and land price increases.

Although it’s definitely provided a boon for the well off inner city property owners who’ve been gifted hundreds of thousands of dollars in property price rises paid for by the general ACT taxpayer.

Capital Retro Capital Retro 9:24 am 13 May 19

“hundreds of thousands of dollars in property price rises”

Recent reports indicate the exact opposite. The length of time the tram takes is 50% higher than planned also. Overall, the “regeneration” plan has been a massive failure.

    chewy14 chewy14 12:46 pm 13 May 19

    This is simply wrong.

    Property prices along the light rail route have monstrously outpaced property price gains in other areas of Canberra over the last few years, largely driven by the prospect of the project being completed. Any look at the data on Allhomes will cure you of your misconceptions.

    Capital Retro Capital Retro 9:11 pm 13 May 19

    Your information is dated – the real story is what is happening now:

    I had already posted this link on another thread but no one commented. I hope you didn’t buy shares in the tram.

    chewy14 chewy14 7:36 am 14 May 19

    I knew that that report was going to be your reference but it actually proves my point rather than yours. When house prices in a couple of areas drop near 10% after increasing more than 50% in a few years, are you seriously going to claim that is a reduction in price over the entire light rail route?

    The article even tells you why it’s occurred. Investors may have gotten too exuberant over light rail and overshot the peak. Now that light rail has started, they’re holding off slightly to see what the actual effects and performance of the network is like.

    The facts are that since the announcement of light rail, property prices along the route have significantly outpaced growth in other areas of Canberra. You need to look at 5 years of data, not 5 minutes.

    Recent small drops in a few areas do not in any way countenance that point.

    Capital Retro Capital Retro 11:26 am 14 May 19

    Property prices have increased 50% in many areas over the past 5 years, not just the artificially created light rail corridor/catchment area. The recent biggest falls in house prices have been in Franklin which is light rail heartland and there have been unit price falls in Dickson and Canberra City.

    Do you really believe that in the current financial climate sales of thousands more units in Northbourne Avenue will be supported?

    chewy14 chewy14 11:57 am 14 May 19

    “Property prices have increased 50% in many areas over the past 5 years, not just the artificially created light rail”

    No, they really haven’t, you’re just making stuff up.

    You mention house prices in Franklin, even with the recent drops, the suburb growth has exceeded ACT wide growth in the last 5 years.

    The inner North as a whole is up around 50% in the last five years, far outpacing the overall Canberra growth average of around 30%.

    And that’s even being generous as if you pick the pockets of land closest to the light rail routes, the gains are far in excess of those wider averages.

    “Do you really believe that in the current financial climate sales of thousands more units in Northbourne Avenue will be supported?”

    This has very little to do with the price effects of light rail, you’re talking about market oversupply which will affect the whole of Canberra in a similar fashion across the board.

    Once again, despite what you think, the data disagrees. Land values around the light rail route have grown and will continue to grow higher than City wide averages as the urban intensification continues along the route.

    Arjay Arjay 12:53 pm 13 May 19

    Would you care to source that travel-time claim, Capital? Both planned and actual.

    Capital Retro Capital Retro 9:03 pm 13 May 19

    It is on page 23 of 09 May 2019 Canberra Weekly which should be accessible online tomorrow. If you want to read it immediately you can pick up a free (printed) copy almost anywhere in Canberra. The comments were by Libby Kimber & Denholm Samaras who quoted different travel times of 34 mins 50 seconds and 37 mins 45 secs.
    This is the only report I have seen anywhere – I don’t believe Transport Canberra have claimed any times near the 24 minutes they planned but if you have any other information please share same.

    Arjay Arjay 1:43 pm 14 May 19

    Capital, methinks you are being a bit misleading here. The 37/34 minute travel times you quoted here include the dwelling time at the original station and the time spent walking between the termini and the respective libraries at Civic and Gungahlin. They don’t represent the time it takes for the light rail vehicle to travel between the Alinga Street and Hibberson Street stations, which is what TC’s 24 minute travel time refers to.

    Capital Retro Capital Retro 2:20 pm 14 May 19

    So, how long is it taking?

    Arjay Arjay 3:08 pm 14 May 19

    I can’t speak for others, but I haven’t had a run between Alinga and Hibberson Streets that lasted more than 30 minutes, with the shortest run being a speedy 18 minutes.

    Capital Retro Capital Retro 8:10 am 15 May 19

    Did the 18 minute run stop at all stations?

    Arjay Arjay 2:07 pm 15 May 19

    It did, but it was an early morning weekend service so there weren’t too many people getting on/off at each stop.

gooterz gooterz 9:28 am 13 May 19

Apples and oranges. Are they saying the cost of the contract is equal to the cost of the project?

Ongoing costs, legal costs. Remediation work. Auditor said over 1 billion.

Also saying you spent 600m doesn’t equate to 700m value because of the business case. There’s an assumption that light rail will actually ease congestion but it won’t.

Martin Miller Martin Miller 10:40 am 13 May 19

But it's not the final bill! There will be payments of around $60 million every year for 20years.

    Grant Robertson Grant Robertson 10:49 am 13 May 19

    Martin Miller yeah, a yearly cost which is normal for a support contract. The actual build contract is a fixed price that has an end point. Not making this distinction is misleading and a poor way to criticise the project

    Martin Miller Martin Miller 10:52 am 13 May 19

    Grant Robertson not really the consortium will be paid this as part of the overall contract for theproject. While construction is complete the ongoing running costs will be an ongoing cost. Until it is paid off in 20 years time.

    Stephen Page-Murray Stephen Page-Murray 10:58 am 13 May 19

    Martin Miller

    Support, not build. Every infrastructure project anywhere, has to have support. Nice try

    Martin Miller Martin Miller 11:12 am 13 May 19

    Not really. If it was a Gov build only. The there wouldn't have been a 20 year ongoing contractual arrangements. Plus the cost would have been much higher. It's the maintain cost to the government in the contract. The full cost will be completed in 20 years. Overall cost close to $1 billion. ' But as far as taxpayers and the ACT budget are concerned, the relevant figure is $939 million, which is the net present cost of the entire 20-year project – the cost in 2016 dollars of the construction, operations and financing.'

    Warwick Bradly Warwick Bradly 11:40 am 13 May 19

    Martin Miller that’s more than half the entire Action bus budget per annum... for one 13km route. Ouch!

    Warren Young Warren Young 12:06 pm 13 May 19

    Martin Miller: yes, the RiotAct article clearly says the saving was only in relation to the construction portion of the contract.

    In the first two paragraphs even state the original business case cost, the revised cost, and the final cost of construction.

    The table at the end of the article also shows the amount of contingency included, and contrasts the varying amounts from the business case, through contract signing, to construction completion.

    Admittedly, the rest of the article is stuffed full of fluff, which detracts considerably from the actually outcome.

    So, purely on a construction cost estimate basis, it has turned out rather well, given most government contracts for construction alone are rather terrible, without even including the separate and ongoing operational and support costs.

    Justin Watson Justin Watson 12:43 pm 13 May 19

    I'm not sure if the construction costs are paid for at completion or not, but the total cost of the project is around 50 million a year for 20 years. The actual running/support costs are 300 million of 20 years, so about 15 million a year. The total cost works out to be less than 1% of the ACT budget for 20 years. To put it into perspective, we spend over 3 billion a year on health and education every year, they are both well funded, but perhaps not well managed.

    Martin Miller Martin Miller 2:41 pm 13 May 19

    Justin Watson As I understand it from the CT article : 'the consortium would be paid a $375 million lump sum at the end of construction – then a monthly "availability" payment for 20 years. The availability payment averages $64 million a year for 20 years, starting at $47 million in the first 12 months of operations, and reaching about $75 million in 2038.' So you can say they almost saved one years worth's of 'Availability payment' just 19 more years to go . And this is without Light rail stage 2. Cost ? $1.3 - $1.6 Billion . Hope we get a 50 year repayment for that!

    Ashley Wright Ashley Wright 5:13 pm 13 May 19

    Martin Miller The construction cost is not an upfront cost. The contract was consortium builds and finances the lot. They got a payment of around $375m on completion. Then over 20 years they get the annual payment of $64m (average), which covers the remainder of the construction costs, plus operating costs and a mid life overhaul of the trams. Transport Canberra keeps all fares.

    Justin Watson Justin Watson 6:52 pm 13 May 19

    Martin Miller its a lot of money, but its really not in the grand scheme of the budget and the fact the ACT's budget will also grow over time as more people live here. IF our hospitals were not the highest funded per capita in Australia I'd be far more concerned, but the facts are they are well funded and light rail is not even 1% of the ongoing annual budget. Cities need new infrastructure, we are going to need a new football stadium and I daresay that may be on the 2020 election cards. It is going to cost money, but no city in the world has ever prospered by not spending money on infrastructure.

    Martin Miller Martin Miller 7:27 pm 13 May 19

    Justin Watson $1.6 billion is more than 1% of the ACT budget let me tell you. I'm talking about other infrastructure that is much needed for our town centres. I like light rail but the price when BRT can work just as well if not better at a far cheaper cost.

    Jim Jim Jim Jim 12:27 am 14 May 19

    Justin Watson I keep hearing how our hospitals are the best funded in Australia from all the ‘top fans’ on why is there a gent waiting 800 days for elective surgery????

D.c. Haas D.c. Haas 10:46 am 13 May 19

Outstanding result and vindication for the supporters of light rail 🚊👍 We must get started on stages two and three as soon as possible 😃

    Trish Roberts Trish Roberts 1:46 pm 13 May 19

    Not everyone agrees. My useful bus from Civic to my family in Palmerston no longer exists. As an older person with health issues, no car (because I USED to believe in public transport), my transport routes are reduced to about 25% of what they used to be.

    D.c. Haas D.c. Haas 2:37 pm 13 May 19

    Trish Roberts you now have these options 👍 Services to Palmerston have not been reduced 🚌

    John Denison John Denison 5:18 am 14 May 19

    Trish Roberts Good for RiotACT, over on this side of the planet, CrossRail which goes under London has gone way over budget and is very over due.

James Daniels James Daniels 10:58 am 13 May 19

So where does that saving come into play for the ACT taxpayer? Is the up front lump sum payment of $375m reduced or does it come from the ongoing payments?

    Justin Watson Justin Watson 12:45 pm 13 May 19

    The construction cost is under budget. the running costs are $300 odd million over 20 years, which is where the total cost of ~1 billion comes from.

    James Daniels James Daniels 12:53 pm 13 May 19

    Justin Watson thanks but that doesn't answer the question. My understanding was the lump sum payment once it was operational was $375m and then there were availability payments averaging $60-70m p.a. for 20 years, being part interest on the construction cost and part operating subsidy. My question still stands as to where the saving to the taxpayer arises. Is there a reduced lump sum payment or are the availability payments reduced?

Amanda Evans Amanda Evans 11:03 am 13 May 19

Some left over for Canberra Hospital ...and our street trees maybe?

    Justin Watson Justin Watson 12:38 pm 13 May 19

    I'm all for health spending, but our hospitals are the best funded in Australia, so clearly the problems they have there are probably not funding related and perhaps how the money is being spent.

    Francisco Antonio Vega Francisco Antonio Vega 1:04 am 14 May 19

    Um no just look how understaffed they are and how nurses are run off their feet... Obviously you haven't been a patient there or if you have not for a long period.

    Margaret Welsh Margaret Welsh 9:42 am 14 May 19

    Francisco, I agree that the hospitals are understaffed and the nurses run off their feet. That just highlights what Justin said. Where is the money going? Our hospitals in the ACT get more funding than elsewhere in Australia. There is no excuse for understaffing. Perhaps all hospitals are under funded. I know that the Commonwealth contribution to health funding has reduced in real terms.

Ryan Daniel Ryan Daniel 11:34 am 13 May 19

I think it’s actually cheaper because it’s late. Not in spite of it. I heard that the contracts were well written for once, such that any lateness of delivery incurred a financial penalty. They should do this in future for the roads as well.

    Michael Egan Michael Egan 11:39 am 13 May 19

    Ryan Daniel same as court contracts, public private partnership.

    If the contractors don't deliver on time they're heavily penalised

Annie Andcooper Pike Annie Andcooper Pike 11:45 am 13 May 19

Saved $$$ can now be used to repair Northbourne Ave back to a respectable state?

    Lori J Tas Lori J Tas 7:57 am 14 May 19

    Annie Andcooper Pike it's actually looking pretty nice now? I saw the full length in both directions yesterday, it's really really close to done.

Lucian Burca Lucian Burca 11:51 am 13 May 19

Wow, that's quite an achievement, if it was back in Romania it would have costed so far double, and it would have been done only the foundation of the rails, no reinforcement or concrete yet...

William William William William 12:33 pm 13 May 19

as miz fitzharris pockets the $32,000,000. that could of helper the incovience the passengers that now sit home as there is no tranport for them any more $$$ Miz fitzharris bank account as the inconvienced passengers that are nolonger with a service as no one i now supported barr boycotted the eletrition go in have name crossed off walked out ever person i know or spoken too did this

Trish Roberts Trish Roberts 1:42 pm 13 May 19

By skipping useful stops like Mitchell.

    Gerard Dwyer Gerard Dwyer 11:04 pm 13 May 19

    Trish Roberts sadly lots of Michell businesses complained about it. While others wanted it. Looks like naysayers won. Hopefully Mitchell gets it built in the future.

    Pearl Hasher Pearl Hasher 5:03 am 14 May 19

    Trish Roberts not in our lifetime

    Trish Roberts Trish Roberts 5:59 am 14 May 19

    Gerard Dwyer Yes, Gerard, earlier this year I had to make 4 trips to Mitchell. I then expected there would be a stop. But no.

Rob Smith Rob Smith 1:50 pm 13 May 19

Off course it reports being under budget when they transferred costs to other depts to cover up the real cost of this white elephant

Chris Finnigan Chris Finnigan 3:27 pm 13 May 19

It’s cheap in the same way that originally making Gungahlin Drive Extension single lane was cheap: So we can ad hoc upgrade it in a few years.

It’s more expensive to do it this way of course and will cause heaps of unnecessary additional congestion when we do upgrade it, but it allows the Govt to postpone the hit on the budget in the short term.

Leo Mastoris Leo Mastoris 5:00 pm 13 May 19

Hristo Vizovitis I told u

DJA DJA 6:02 pm 13 May 19

The table showing Actual costs under “Contingency” is misleading. Actual costs are against the base design and construction costs, leading to total of 675 in the first row.
“Contingency” is magic money used during planning to cost risk and risk treatments. That they had to dip into contingency is not good news; it means that [something unwanted] happened and they had to dip into the magic money (which does happen in the real world). Or, that [something unwanted] did not happen and the cost of the base design and construction over-ran due to poor forecasting of expected costs.
Bottom line is there is a degree of spin in the table and the figures provided. We will probably never know.

Francisco Antonio Vega Francisco Antonio Vega 6:09 pm 13 May 19

Meanwhile Canberra hospital needs MAJOR improvements...

Brad Moyo Brad Moyo 6:14 pm 13 May 19

Meanwhile how much money was waisted on NBN???

🤣 5G will wipe it out

HiddenDragon HiddenDragon 7:04 pm 13 May 19

“That means for every dollar invested, Canberrans get $1.30 back in benefits, including better transport, lower congestion, more jobs and the increasing value of homes and businesses along the route,” Mr Barr said.”

Those of us who live nowhere near the current, or any likely future, tramline will be thrilled to see some of this bonanza of benefits quantified and reaped through a value capture tax on all those lucky homes and business along the route – that should help to keep annual rates rises to a slightly less terrifying level, and pay for some of the stuff that needs doing around the town.

Brett Back-Crane Brett Back-Crane 7:16 pm 13 May 19

Hopefully they can use some of the remainder to fix the roads they've made such a mess of.

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