Waterview Connection – $2.2 billion or more

Parliament yesterday had some interesting discussion about progress on deciding which option of the Waterview Connection is likely to be built, if any at all. It seems like Steven Joyce has got it into his head that the poor cost-benefit ratio of the Waterview Connection (only 1.15 and I have my suspicions that’s vastly over-estimated) can be fixed simply by finding a much cheaper option – never mind the environmental or social effects it will have.

Hon STEVEN JOYCE: I share the member’s concern about the cost-benefit ratio of the twin two-lane tunnels proposed by the previous Government. The cost estimates for that project were extraordinarily high, and that is why I have asked officials to consider ways to save costs. We are still working through the final decision on that.

The reason Mr Joyce is still working on this, is simply because there is no significantly cheaper and better value option. For a start, the cost difference between a full tunnel option and other potential options is not nearly as big as people make it out to be. The Ministry of Transport’s review of the Waterview Connection clearly pointed that out (see page 18 of that document).

To paraphrase (all costs in 2015 dollars)

1) Cost of full tunnel option: $2.005 billion for 4 lanes, $2.335 billion for 6 lanes
2) Cost of cut and partial cover options: $1.790 billion for 4 lanes, $1.813 for 6 lanes
3) Cut and extended cover: $1.988 billion for 4 lanes, $2.205 billion for 6 lanes
4) Open cut (no tunnel at all): $1.456 billion for 4 lanes, $1.585 billion for 6 lanes

So therefore, there is no cheap option. If we compare apples with apples we see that a cut & partial cover option is only around $200 million cheap than a full tunnel option, a cut & extended cover option is around the same cost. An open cut option is $500 million cheaper, but that must be counter-balanced against the huge environmental and social costs that this option would generate. These environmental and social costs would be included in a cost benefit ratio analysis, and may well outweigh the $200-500 million in saved construction costs. Speaking of cost benefit ratios, let’s have a look at the Waterview Connection’s one:

waterview-bcrI do have my doubts about time-savings benefits, as research has shown that these time savings never actually eventuate – people just drive further. But that’s not really my point (for now). The main point is that the above BCR, which is based upon the full tunnel option, does not include anything for environmental costs, like the loss of parkland that would result from a surface option or the vehicle emissions that would no longer be pumped out 25m up in the air from a ventilation stack. These are significant costs that would be included in a surface level option (or should be) that may well end up counter-balancing lower construction costs. We have a cost benefit ratio of 1.16 at the moment, it might be not be any better with a surface option, and could even be worse.

Now, to take the theory that the Waterview Connection ‘would pay for itself’. The Ministry of Transport’s report was clear that neither NZTA nor ARTA view the Waterview Connection as a priority – so therefore it would not be funded out of traditional funding sources any time soon. This is largely due to its low cost-benefit ratio.

Page 11 of the report I link to above states this quite clearly:

“Funding the entire project from any single source would place a considerable strain on that source, making a combination a more feasible approach to take. All the sources of funding other than Crown funding or tolling require agreement from the Board of the NZTA, Auckland Regional Transport Authority (ARTA) or both. To date, neither the Board of the NZTA nor ARTA have indicated that they view the Waterview Connection as a priority project within existing funding levels.”

If the Waterview Connection was to be funded any time soon it will be through crown debt – as this is why financing costs were included in the reporting of the Waterview Connection’s cost going from $1.89 billion to $2.77 billion. This means that it will be general taxation that pays for it, not users of the connection themselves. If it is going to be built any time in the next 20-30 years it will not be via petrol taxes, as NZTA and ARTA do not view this link as a priority.

I just can’t see any option here being justifiable. There is no cheap alternative – we start at $1.5 billion (plus financing costs, plus upgrades to SH16 costs) and work our way up from there. The $1.5 billion option (Open Cut) would have huge environmental and social effects and it is still enormously expensive.

Financing costs & SH16 upgrades added arond $800 million to the price of the full tunnel option, and I can’t see them adding much less to the costs of an open cut option. That means we are looking at the cheapest option being around $2.2 billion AND having massive environmental and social effects.

Leave a comment