Auckland councillors OK passing extra $500 million CRL cost to ratepayers

Thursday, 2 May 2019

Auckland's City Rail Link could cost a lot more than the original estimate of $3.4 billion.

Auckland councillors have agreed that ratepayers will pick up $500 million of extra costs for the city's underground rail project, City Rail Link.

The vote was needed after the announcement three weeks ago that the twin downtown rail tunnels could cost $4.4 billion, $1b more than previously calculated.

The council will for a second time ask the government to pay for more than half of CRL. A past request from Auckland Mayor Phil Goff was declined.

The City Rail Link is a joint council-government project, with unanimous formal agreement from the council in 2017 that costs would be split 50-50.

A breakthrough ceremony in December 2018 as two sections of CRL tunnel connect.

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Auckland Mayor Phil Goff told a six and-a-half-hour council meeting on Thursday that a quick decision on additional funding was needed in order to secure the construction contract with the preferred bidder.

'If we can't confirm with them in the next month, they won't hang around,' Goff said.

'We need to confirm this contract now, or run the risk of losing or delaying it.'

The higher price is due to increased construction costs, previously announced design changes and a provision for further rising costs due to a 'hot' construction sector.

The council's increased contribution will be funded by cost savings, most of which were already being explored before the cost increase became known.

The biggest single amount would come from re-negotiating short-term council loans to take advantage of lower interest rates, saving an estimated $120 million.

A further $100 million would come from halving the size of the council's cash 'float'.

Councillors ruled out the proposed option of possibly selling carpark buildings, and $50 million is expected to come from the possible leasing out of carpark operations in up to four downtown parking buildings, or ideas such as the sale of air rights above the buildings.

The biggest sum of $327 million is due to the higher cost of construction since the previous 2014 estimate.

A further $310 million is a contingency fund to cover possible future cost escalation due to a stretched construction sector.

Last year's decision to make stations wider and longer to accommodate nine-car trains instead of six-car trains, is a future-proofing move costing $250 million.

Additional costs around the project, but not directly due to construction, add a further $152 million.

Councillor Daniel Newman didn't oppose continuing with CRL, but said the government was unfairly pushing additional costs onto Auckland ratepayers, who already paid more through the regional fuel tax.

Mike Lee called unsuccessfully for a delay to the funding decision, arguing that too little detail was available on the nature of the cost increases.

The council-government company City Rail Link Limited told councillors the current cost estimate was the result of rigorous work and most of any future risks had been taken into account.

'I've never been involved in such an exhaustive process in my career,' the chief executive Sean Sweeney said.

'We are now so much further through [the project], design is complete, major procurement is complete – those are the major uncertainties and we are through those now,' he said.

CRLL's chair Sir Brian Roche said use of the word 'blowout' to description the increased cost was 'emotional and sensational'.

Sweeney said the growth in infrastructure work, especially in Australia, had created a 'sellers'' market favouring construction firms.

'They get to pick and choose what work they do,' he said.

Sweeney said in the past six months, the Australian states of Victoria and New South Wales had announced $60 billion worth of new rail projects.

The twin tunnels, stretching 3.5 km from Britomart rail terminus to the existing line at Mt Eden, is the biggest transport project in the country and due to open in late 2024.

It will create a rail loop through the CBD, adding two new stations, doubling the capacity of the rail network and cutting train journey times into the city centre, for example by 17 minutes from Henderson.

The first section, building tunnels from the Britomart terminus, up the lower section of Albert Street, began two years ago, in advance of the major tunnelling contract being finalised.

That work has cost the council $700 million so far.