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Speaker: Economics of the Waterview Tunnel

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  • Kumara Republic,

    Whatever happened to Mr Key's pledge that "NZ has a growth problem, not a debt problem?"

    The southernmost capital … • Since Nov 2006 • 5420 posts Report Reply

  • Joshua Arbury,

    So the $2.77 billion option has a cost-benefit ratio of 1.15, even when you consider that 73% of those benefits are from time savings benefits that are criticised internationally as to whether they actually exist. Not only is the whole idea of time-savings benefits questionable, but the fact that NZTA documents expect 98% of people going from the North Shore to the airport to use this tunnel is also questionable. Once you have less people using the tunnel, your time-savings benefits are reduced and you BCR is lowered.

    Because it's a tunnel, the $2.77 billion option doesn't affect the houses and open space above it, so therefore doesn't include as 'costs' the social & environmental effects of a surface option. Therefore, even though a surface option is $600 million cheaper than a full tunnel, if the extra costs (social and environmental ones) are more than $600 million then the BCR drops even lower.

    Auckland • Since May 2009 • 237 posts Report Reply

  • FletcherB,

    I have no trouble believing that "financing costs" can change and have changed...

    I'm having trouble understanding why they might change a great deal for one proposal and not another. If you have two options that differ in cost by 5-10% is it reasonable to suggest that any changes in financing cost for each will probably also only differ by about that same margin? It may not be an exact match-up but they shouldnt double for one while the other stays the same, no?

    West Auckland • Since Nov 2006 • 887 posts Report Reply

  • Joshua Arbury,

    And what a lot of fiddling! How did the original $2 billion price tag become almost $3 billion within the last six months? Having done cost-benefit analysis for major projects myself, I know that costings of this kind are always hairy.

    $290 million was added for SH16 upgrades, $550 million for financing and I think the ACTUAL increase in cost for the project was around $100 million.

    As FletcherB says, any option will need to include the $290 million SH16 upgrade, and even a $1.5 billion open cut option (the cheapest option presented by NZTA) will probably have around $450 million in financing costs. That's why, all up, the cheapest option available is still $2.2 billion. The same price as a railway link from Avondale to Manukau City via Onehunga and the Airport.

    Auckland • Since May 2009 • 237 posts Report Reply

  • James Littlewood*,

    the cheapest option available is still $2.2 billion. The same price as a railway link from Avondale to Manukau City via Onehunga and the Airport.

    Ummm, would that be an underground rail link or a surface rail link? If the former, might it not combine with a car tunnel? If the latter, might that not require the eradication of people's houses?

    Auckland • Since Mar 2008 • 410 posts Report Reply

  • Bart Janssen,

    So it really doesn't make economic sense to change from a tunnel to overground. Or if it does it's a very small real cost and not the $1 billion being advertised, perhaps more in the order of $1-200 million.

    That doesn't seen like a huge cost to make the project less damaging to that suburb.

    So the question becomes...

    "Why does the government really want to avoid the tunnel option?"

    I have no idea what the answer could be. How about a nice conspiracy theory?

    But on a personal note if we can't have a tunnel, which I personally kind of think is a cool option how about something more exciting - maybe a catapult that tosses cars and occupants across the gap??

    Auckland • Since Nov 2006 • 4451 posts Report Reply

  • Joshua Arbury,

    Ummm, would that be an underground rail link or a surface rail link? If the former, might it not combine with a car tunnel? If the latter, might that not require the eradication of people's houses?

    The Avondale-Onehunga section of the railway line has been designated since the 1940s. The Onehunga-Airport section would run next to SH20 and SH20A so therefore wouldn't require the demolition of any/many houses. The airport-Manukau section is basically across farmland.

    So it would be overground.

    Auckland • Since May 2009 • 237 posts Report Reply

  • Sacha,

    I haven't heard the bfm interview but Melissa Lee blurted on Q&A that she wanted the cheapest option.

    Given the small actual marginal cost difference discussed here and elsewhere, and in the absence of any other proposed benefit to the public, explaining the government's preference becomes problematic.

    Presumably above-ground construction can be finished faster? I suspect that the number of contractors able to bid for above-ground construction may be greater, and perhaps the profit margins are higher minus specialised tunneling gear.

    I guess Joyce will explain everything today or we'll have to await the openly-released Cabinet papers.

    Ak • Since May 2008 • 19688 posts Report Reply

  • Gareth Ward,

    I am at a loss to understand how with the current exceptionally low interest rates

    What has the sovereign borrowing rate done over the last 3-4 years? My Google fu ain't up to finding that...

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Gareth Ward,

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Sacha,

    OK, now someone fisk the numbers...

    Ak • Since May 2008 • 19688 posts Report Reply

  • Gareth Ward,

    Mr Jarbury? (Presuming you haven't been rendered speechless...)

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Sam F,

    The Herald's take is a little different.

    Auckland • Since Nov 2006 • 1609 posts Report Reply

  • Sam F,

    And Josh is already on it...

    Auckland • Since Nov 2006 • 1609 posts Report Reply

  • Tom Semmens,

    Melissa Lee might as well go home now and save herself some money. I am at a loss to explain Joyce's decision, except maybe in ideological terms.

    Sevilla, Espana • Since Nov 2006 • 2213 posts Report Reply

  • Sacha,

    But both reports claim $1.4b. Here's Joshua recently.

    Ak • Since May 2008 • 19688 posts Report Reply

  • Gareth Ward,

    Josh wrote that before confirmation though, and was hoping they were wrong. Fraid not.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Sofie Bribiesca,

    HOLY SHIT!

    I am surprised you are surprised.It's the National Party. LIQUIDATE!

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

  • Sacha,

    And earlier post by Josh on other thread comparing numbers (cross-posted elsewhere I know).

    Ak • Since May 2008 • 19688 posts Report Reply

  • Russell Brown,

    So yet again, National walks away from an extensive consultative process and merrily shits on Aucklanders.

    Bastards.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Joshua Arbury,

    Have been rendered speechless....

    LOL, here's my response: http://transportblog.co.nz/2009/05/12/goodbye-tunnel-and-oakley-creek-waterfall/

    The $1.456 billion open cut option I suspect would have placed the motorway in some sort of trench, so that the noise & visual effects of it were lessened. That was the cheapest and nastiest option that NZTA were previously considering, but obviously Joyce wanted them to go cheaper and nastier so we have something cheaper and nastier.

    Goodbye Oakley Creek waterfall, goodbye Alan Wood Reserve, Phyllis Street Reserve and so forth.....

    I wonder what compensation Auckland City Council will want for all this loss of open space?

    Auckland • Since May 2009 • 237 posts Report Reply

  • Sacha,

    It's about being decisive.

    Ak • Since May 2008 • 19688 posts Report Reply

  • Sofie Bribiesca,

    Parliament TV will be worth a watch at 2 o'clock

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

  • Sacha,

    So if I'm reading the media release and your post correctly Josh, a large part of the "savings" is burying the credit funding in the regular NZTA fund?

    But that there's still a huge unexplained variance between earlier estimates for a surface route and the price of 1-1.4b quoted today?

    Ak • Since May 2008 • 19688 posts Report Reply

  • Sam F,

    Josh: so I'm assuming this is the budget open cut with no central exchange option ($1.3b to $1.45b) in the business case you linked to before?

    Auckland • Since Nov 2006 • 1609 posts Report Reply

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