Auckland’s underground now $1.28m a metre
The cornerstone of Auckland's transport and development planning, the City Rail Link underground line, will now cost at least $4.4 billion, up $1 billion from the much-argued launch in 2014 and pricing it at $1.28 million a metre.
The new price is set using a formula which means there is a 50 percent chance the costs could be even higher.
Auckland ratepayers will need to contribute half of the one thousand million dollar cost escalation with taxpayers covering the rest - although the Labour-led coalition will apparently let Auckland Council delay some parts of its payment so the council doesn't exceed its tight overall debt limit.
The new number was set by two independent studies and reviewed by the Crown and council's advisers. It comes as the CRL project readies itself for letting the contract for the biggest segment of the 3.45 km link.
Two main parts of the CRL project are already being built - tunnelling out of the Britomart station under the former Downtown shopping centre and tunnels up the first blocks of Albert St.
A preferred bidder for the third, biggest, section of tunnels from Albert St to Karangahape Rd and Mt Eden plus two new underground stations has been selected. The Government and council are expected to confirm their extra funding next month.
The man leading the project, CRL Ltd chief executive Sean Sweeney, said the $4.419 billion cost estimate was the result of rigorous analysis and was "the most likely cost of the CRL at this time". It gave him a "high level of confidence".
Those compiling costings in 2014 could not have foreseen the increase in construction costs or state of the infrastructure market worldwide and, in particular in Australia and New Zealand, Sweeney said.
"Eighteen months ago, the value of work in the infrastructure pipeline on both sides of the Tasman was $80 billion - the value of that work is now estimated at $230 billion."
It was usually only when procurement and design had been finalised on such major projects that a true cost picture was available. That had now occurred.
Sweeney said he could not look backwards at the 2014 calculations as he had to keep the CRL progressing to its nominated completion in late 2024. But the independent cost analysis believed provisions made for contingencies and cost escalation had been way too low.
CRL had now built in realistic estimates. "We basically said [to the cost reviewers] we are not interested in optimistic numbers."
The $4.4b total includes $310m more for contingency and escalation, $327m for extra construction costs, $250m extra following a decision to build stations to accommodate bigger, nine-car trains, and a further $152m in 'non-direct' costs.
"New Zealand is an expensive place to build," Sweeney said.
He could not guarantee the 2024 completion date, saying an informal survey of major projects found nine out of 10 had experienced delays. "That's our intention," he said of the target date five years away, adding "late... in 2024"
For Auckland Council the extra $500m cost is a headache but not entirely unexpected. While Sweeney said the 'sponsors' - the council and Government - learned of the new total cost just last week, the drums had been beating since late last year when reviews were conducted.
Mayor Phil Goff said the Government had offered the council some relief in agreeing to "phase the timing" of its contribution to stay within its budget limits.
He argued it was "unfair for Aucklanders to meet half the cost of the CRL when no other part of the country has to do so and I’ve argued that case to Government. The Government has refused to revisit the deal saying that was what was agreed between the previous Auckland Council and National Government".
Among Goff's first suggestions for making up the shortfall was using proceeds of possible sales of three city carparking buildings, an option already under study.
“Council will make changes in financial management that will enable it to keep under its debt to revenue ratio. It will benefit from current lower market interest rates. Council will also dispose of some non-strategic assets including some parking buildings."
The CRL project is vital to transport plans and important in the Auckland Plan and Unitary Plan, through which other residential and infrastructure developments will occur. There is no room for either the council or Government to refuse to pay for its completion, or to try to cut corners or negotiate the new number down.
It will link the current dead-end city station at Britomart with the western line at Mt Eden and is estimated to double the peak capacity of the network to 54,000 passengers an hour.
When the previous National government finally agreed to back the council's long-proposed rail loop, there was much argument about what the cost could be and what might be acceptable to both parties.
Yesterday, Sweeney hinted at what might have been a root cause of the original underestimate. "There's always pressure to keep the costs within an envelope."
The new total did not result from that approach. "The two peer reviews were instructed to give us the most realistic cost to complete... a very hard-headed look" that did not start with a figure and work backwards to meet it.
CRL announced the Link Alliance (Vinci Construction, Downer, Soletanche Bachy International, WSP Opus, AECOM and Tonkin & Taylor) was CRL's preferred bidder for the substantive remaining work, with a contract likely to be finalised in May. The other bidder was a consortium of CPB Contractors, UGL, Beca, Jacobs and McMillen Jacobs.
"The calibre of both tenders was exceptional. Aucklanders can be confident the project will be delivered to a high standard leaving behind an outstanding legacy for the city," Sweeney said.