Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
New Zealand Passenger Rail – Network
Development Economic Case
Executive Summary
This report:
• Introduces the concept of New Zealand’s passenger rail services as a nationwide
network (as distinct from individual services), and the implications this has for how
the network should be planned,
• Should be read in conjunction with other KiwiRail documents, notably the evaluation
methodologies and research data contained in the Preliminary Economic Evaluation
Handbook and Passenger Rail Technical Notes,
• Reviews the nationwide passenger rail network, including an outline of preliminary
economic evaluation of existing and some possible new services, which shows a
strong economic case for service enhancements and network expansion,
• Concludes by identifying cases for potential additional services, or service
enhancements, which merit further investigation.
An Appendix also outlines the background situation to the funding of passenger rail in
general, including the role and criteria of different funding sources, and relationships
between them.
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
Contents
Page
Introduction
3
Rail as a Network
5
The Network Reviewed
9
Future Development
12
The Way Ahead: A Development Programme
19
References
20
Appendix – Funding for New Zealand’s Passenger Rail
21
Maps
1: Existing and Potential Passenger Rail Network
6
2: Prospective Passenger Rail Network Expansion
15
Tables
1: Annual Costs and Revenues of Existing Network
10
2: Route-Specific Economic Data for Existing Services
10
3: Re-worked 2001 ‘Southerner’ Evaluation
13
4: Economic Performance of Selected Further Additional Services
14
5: Prospective Enhancements to Existing Services
16
6: Prospective Expansion of Passenger Rail Services Network
17
All photographs by Roger Boulter
2
Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
Introduction
This document shows that New Zealand’s nationwide passenger rail network is not only
extremely good value for money in the economic benefits it delivers to New Zealand, but
also that there is strong economic justification for enhancement of existing services, and
expansion beyond the existing network.
It should be read in conjunction with other KiwiRail documents, most notably the
Preliminary Economic Evaluation Handbook. This Handbook covers measurements of the
range of costs and benefits associated with passenger rail, and is based on research into
international best practice. Where appropriate, application of this research has been tested
and refined through surveys in New Zealand.
Because some benefit types are relatively new for New Zealand, the Handbook uses
conservative values where knowledge is less fully developed, and also incorporates the
findings of a professional ‘peer review’ by a leading world authority.
The Handbook may be subject to adaptation as the quality of the data is improved, for
example through further New Zealand survey work. Further summaries of supporting data
are available as Passenger Rail Technical Notes.
This document, New Zealand Passenger Rail – Network Development Economic Benefits
provides an overview of New Zealand’s whole passenger rail network. Its main focus is on
regional and long-distance services.
‘Urban’ rail – the Auckland and Wellington
commuter networks – has for many years
Regional Rail’s Competiveness.
received funding support from the NZ
Regional rail services could be very
Transport Agency’s National Land Transport
competitive, from the experience of the
Fund, since it has significant benefits to
Masterton-Wellington
Wairarapa
motorists.
Connection
(which
forms
part
of
Wellington Region’s TranzMetro network,
However, ‘regional’ commuting, and long-
but has a ‘regional’ function). Each day
distance rail, each brings different types of
the
Masterton-Wellington
Wairarapa
major benefit to New Zealand’s economy.
Connection runs five weekday trains in
each direction, which are well-supported
‘Regional’ rail typical links major centres
and shown by KiwiRail survey work to be
with settlements beyond them (in some
highly valued by the communities served.
cases
neighbouring
regions),
with
Commuters can travel and work in
commuting times of about 45 to 90
comfort, while avoiding the state highway
minutes, and limited stopping patterns
2 Rimutaka Hill Road, which is unpleasant,
within the urban areas. It helps focus
often windy, and sometimes blocked by
settlement patterns around mixed-use
ice or land slips. Consequently, this
centres, with rail stations helping to
service is used by over 60% of Wairarapa-
concentrate community and commercial
Wellington commuters.
activity. Within the major centres
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
themselves, other benefits include ‘agglomeration benefits’ (concentrating a higher level of
economic activity within a given central city area), as well as reducing demand for road
space, reducing car parking need, and encouraging walking, cycling and bus use for other
journeys within the centre. At a more localised level ‘transit-oriented’ commercial and
community areas are encouraged around rail stations.
Long-distance rail, with journey times typically 3 hours or more, brings tourism benefits
arising from the comfort of the ‘rail experience’ (which makes it distinctly different from
more functional coach travel). This particularly benefits New Zealand when overseas
tourists are involved, not only from the money spent directly, but also because this
generates further tourism and investment through the reports the tourists take home with
them. Tourism is one of New Zealand’s biggest export earners, and KiwiRail is one of New
Zealand’s largest tourism operators.
Subsidy levels – international
At present, New Zealand’s long-distance and
comparison.
‘regional’
services
network
is
unique
65% of all Australian rail service
internationally, in that it receives no public
operating costs, 51% of all England
sector funding support. This means the network
and Wales rail service operating
breaks even in ‘commercial’ or ‘business case’
costs, and 52% of all Unites States
terms (in that revenue meets operating costs).
long-distance rail service operating
However, when the wider economic benefits to
costs, were met by public sector
New Zealand are taken into account, such as
subsidy. New Zealand regional and
national and regional economic growth benefits,
long-distance services receive no
preliminary analysis shows that expansion of
such subsidy (KiwiRail research,
regional and long-distance services would be
November 2009)
deliver substantial added economic value.
New Zealand’s great train rides would be even greater ‘drawcards’ with improvements to
their speed, reliability and comfort.
Linked with this is applicability to rail of a
Rail Journeys or Rail (Cycle) ‘Trails’?
concept commonly used in planning road
projects – ‘level of service’. It might be
Closing rail lines to provide cycle trails (as
helpful
(especially
for
identifying
sometimes suggested) would harm the
prospective development projects, as
economy. Each year, nearly six times as many
outlined below) for rail ‘level of service’
people use the Overlander rail service as use
measures to be defined, and used to set
the Central Otago Rail Trail. 18 times as many
appropriate standards.
use the TranzAlpine. The Overlander delivers
five times the economic benefit, and per
To follow this report’s essential point –
kilometre the benefits are $48,000 from the
that improvement and expansion of New
Rail Trail, $55,000 for the Overlander. Better
Zealand’s passenger rail services makes
to see rail lines as helping cycle trails by
sound economic sense – an outline
delivering tourists – for example, to the
knowledge of New Zealand’s transport
Central Otago Rail Trail via a re-instated
funding and evaluation processes is
Southerner service (see separate box) and the
useful. This outline is provided in an
Taieri Gorge Railway.
Appendix, Funding for New Zealand’s
Passenger Rail.
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Passenger Rail Network Development Economic Case
April 2010
Rail as a Network
The concept of a ‘network’ underlies all transport planning theory. The network concept
allows for the fact that people may want to travel, or transport goods, to any destination, at
any time, and for a range of purposes. Having a network rather than isolated individual
routes enables, for example, local services to ‘feed’ passengers to or from long-distance
services. Research has shown that through this, the different rail services benefit each
other, resulting in overall economic benefits greater than the total of the benefits from
individual lines in isolation. This is similar to how ‘local road’ traffic feeds onto and off an
‘arterial road’ network, enabling a road system to cater for a high proportion of the journey
demand. It is logical for rail to be planned in the same way.
Rail also has wider benefits if
planned as a network, through
providing people with a viable
alternative to car use. An
individual rail line or service will
be limited in the range of car
journeys for which it could offer
a viable alternative. If planned
as a network, integrated with
planning for walking, cycling and
bus use, there is potential for
rail to substitute for a significant
proportion of car trips. This
helps to break ‘car dependency’
– people being obliged to drive
because they have no realistic
alternative to meeting their transport needs.
To maximise economic return on public investment, different forms of transport need to be
planned together. People would then be able to make the most rational and economic
choice for them. For some types of journey, the car may be the most appropriate choice,
especially at times and to destinations where not a lot of other people are making the same
journey (and it is too long to be walked or cycled).
In other cases, however, rail services would meet people’s needs more comfortably, more
conveniently, and at less cost. Cities by their nature are places where large numbers of
people are making the same journeys at the same times. It is here that rail services can
‘deliver’ journeys with significant savings to road traffic congestion, land resources and the
environment, as well as savings in crashes and injuries – but for choice to be possible, the
alternatives need to be developed and made available.
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Passenger Rail Network Development Economic Case
April 2010
The following schematic map shows New Zealand’s current regional and long-distance
network, together with routes with passenger potential.
Map 1: Existing and Potential Passenger Rail Network
Bay of Islands
KEY
Rail routes with passenger potential
Existing passenger rail services
Whangarei
Dargaville
Waitakere
Auckland
Mt Maunganui
Hamilton
Tauranga
Gisborne
Rotorua
New Plymouth
Napier
Palmerston N.
Hastings
Masterton
Wellington
Picton
Kaikoura
Westport
Christchurch
Greymouth
Lyttelton
Ashburton
Diamond Harbour
Invercargill
Dunedin
Note: The map shows existing routes and infrastructure, where they are considered to have
potential (subject to economic justification) for a nationwide passenger rail network. In
some cases, rail lines have been physically removed, but could possibly be replaced (e.g. to
the Bay of Islands and Rotorua). Those identified for prospective preliminary economic
analysis are shown on Map 2, later in the document.
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Passenger Rail Network Development Economic Case
April 2010
Rather than debate service continuation or closure on an isolated, case-by-case basis, it is
important for services to be planned as a network, building on the particular strengths of
nationwide passenger rail travel – in much the same way as the state highway network is
planned and funded.
Rail lines serve most parts of New
Zealand, and most main urban
centres, but some of these have no
passenger services. Even some of
New Zealand’s largest urban centres
lack any commuter rail services,
despite having usable rail lines. This
places the whole strain of mass
commuting on already-clogged roads.
Frequently, transport planning has
amounted to a rear-guard fight to
damp
down
rising
road
traffic
congestion – congestion which not
only damages the economy through
wasted time, but damages a city’s
attractiveness, because people don’t
want to do business in a place full of
cars, and where journey times are
uncertain. This is one reason why it’s
sensible to plan rail and road together
– so that people can make the best
choices for them.
Human settlements have spread out beyond the major centres over several decades. This
means that people often commute from smaller towns, outside the urban centres where
they work. With significant numbers of journeys made over the same routes at similar
times of day, increased commuter rail at a regional scale would potentially cater for these
journeys with greater comfort, and potentially reap significant savings in journey time, road
space and central city car parking space. It could also encourage greater local public
transport use for commuters’ travel within the city.
There are other cases of regions beyond the major centres where regional commuter rail
services may make sound economic sense – for example, the regions north and south of
Auckland, near the Bay of Plenty conurbation, and in Canterbury. With growing government
interest in the ‘spatial plan’ concept, it would be possible to plan and provide regional
commuter rail services in conjunction with planning for urban growth settlements along the
line. The potential economic prospects of some of these are outlined below in Future
Development: New Zealand’s Passenger Rail Network.
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
For long-distance services especially, other benefits to New Zealand’s economy are
important. Tourism is key, especially when this brings investment from overseas. Survey
work
has
found
38%
of
Overlander passengers to be
Tourism benefits.
from overseas. Tourists spend
Tourism makes a large surplus (in government terms)
money not only in smaller
from indirect taxes and levies, compared with
regional communities, such as
tourism-related public investment. Examples include
Ohakune,
Kaikoura
and
taxes and levies on tourism marketing, public
Greymouth, but also in Auckland,
services (such as museums and national/ regional
Hamilton,
Wellington
and
parks) and transport (such as local tourist-related
Christchurch. With appropriate
road and public transport use). Tourism also acts as
quality and marketing, more
a stimulus to regional economic activity in many
tourists may be attracted who
ways. For example, the TranzAlpine rail service from
would not have come to New
Christchurch contributes $38 million each year to the
Zealand were it not for the rail
economy of the small West Coast town of
service.
Greymouth.
“Tourism is one of our biggest export earners, employs about one in
ten working Kiwis, and its performance ultimately affects all New
Zealanders. A strong tourism brand lifts our profile overseas and
helps other exporters sell their products” (Prime Minister/ Minister of
Tourism John Key, ‘Key Notes’ newsletter, 6 November 2009)
“ . . it is often forgotten that we [KiwiRail] are one of the largest
tourism operators in the country” – Jim Quinn, CEO KiwiRail (Logistics
and Transport NZ journal, December 2009)
Some rail lines serve remote areas, where they may bring in economic prosperity from
elsewhere (for example, from New Zealand tourists), or provide a safeguard where the
corresponding road route cannot be used (such as during natural emergencies).
In a network, the availability of different routes and services act to each other’s advantage.
Just as a proposed state highway improvement is justifiable because of benefits beyond its
local area, so a rail service may serve not just the areas it serves directly, but also others
who may want to make a longer journey, or link journeys together.
However, for these benefits to be realised, the rail services need to be there so that people
are free to choose them. To determine which of these services represent value for money,
economic evaluation processes need to fully recognise the benefits accruing from rail
transport investment, such as in KiwiRail’s Preliminary Economic Evaluation Handbook.
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
The Network Reviewed
New Zealand passenger rail should not just be seen as two urban systems (Greater Auckland
and Greater Wellington), one inter-regional commuter service (the Palmerston North-
Wellington Capital Connection) and three longer-distance lines ‘mainly for tourists’ (the
Auckland-Wellington Overlander, Picton-Christchurch TranzCoastal and Christchurch-
Greymouth TranzAlpine). Rather, they should be planned as a continuous nationwide
network.
In transport project economic analysis, care is needed to measure economic costs and
benefits fairly, and in particular to
neither
omit
nor
double-count
Economic Analysis Techniques
particular benefit types. The
Preliminary
Economic
Evaluation
Which of the various economic evaluation
Handbook covers some benefit types
techniques to use depends on which costs and
not previously covered in New
benefits are of greatest concern to the investor:
Zealand procedures (such as in the
•
‘Business case analysis’ uses financial
NZ Transport Agency’s Economic
accounting, and is usually appropriate for
Evaluation Manual), but takes a
forms of partnerships between public and
conservative approach in estimating
private sectors, which also involves some
their values. To ensure professional
form of direct payment (e.g. road tolls, train/
rigour, the work has been peer-
bus fares).
reviewed
by
Christopher
Nash,
•
‘Transport cost-benefit analysis’ uses dollar
Professor of Transport Economics,
values given to costs and benefits, where
and
James
Jackson,
doctoral
possible, but doesn’t usually cover society-
candidate,
at
the
UK’s
Leeds
wide impacts, or wider spending ‘multiplier
University Institute for Transport
effects’.
Studies, and their insights are
•
‘Regional economic impact assessment’,
incorporated in the Handbook.
looks at impacts on particular sectors of the
economy, and is often appropriate where
Table 1 below, Annual Costs and
‘multiplier’ effects are important, in that
Revenues of Existing Network (based
these affect business turnover, profit levels
on 2009/ 10 figures), forecasts
and employment levels. It is often the
financial performance of the existing
appropriate technique for assessing the
TranzScenic
network
(i.e.
the
economic impact of long-distance passenger
Overlander,
TranzCoastal,
rail services, in conjunction with transport
TranzAlpine and Capital Connection)
cost-benefit analysis.
over the period July 2009 to June
2010. These operated at a surplus,
representing a 10.1% return on expenditure.
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Passenger Rail Network Development Economic Case
April 2010
S9(2)(b)(i)
Table1: Annual Costs and Revenues of Existing Network
Total revenue
Total costs
Surplus/ profit
1st-year rate of return
$27.2m
$24.7m
$2.5m
10.1%
Table 2 below, Route-Specific Economic Data for Existing Services, from a 2009 base year
forecast, shows an appraisal of the network’s performance over the next 30 years, using the
methodology contained in KiwiRail’s Preliminary Economic Evaluation Handbook.
Table2: Route-Specific Economic Data for Existing Services
Current passenger rail services
Discounted
Discounted
Discounted
Benefit/cost
network (excluding ‘urban’
economic
loss
profit
ratio
services)
benefits
Capital Connection (Palmerston
$69.2m
Not
$1.3m
Infinity
North-Wellington)
applicable
TranzCoastal (Picton-Christchurch)
$43.3m
$3.3m
Not
13.2
applicable
TranzAlpine (Christchurch-
$143.6m
Not
$61.2m
Infinity
Greymouth)
applicable
Overlander (Auckland-Wellington)
$92.6m
$16.1m
Not
5.7
applicable
Existing network economic
$348.2m
Not
$43.0m
Infinity
performance
applicable
Note: the figures above are derived using Kiwirail’s ‘Preliminary Economic Evaluation Handbook’ March 2010
edition
In contrast with the TranzMetro Wairarapa Connection (see box Regional Rail’s
Competiveness), the Palmerston North-Wellington Capital Connection straddles the
Wellington and Manawatu Regions. Although also well-supported and highly valued by
the Palmerston North and other communities served (such as Levin, Otaki and Waikanae),
the single daily weekday train in each direction (at time of writing) receives no funding
support from the National Land Transport Fund. This is despite an extremely strong
economic case on the basis of its benefit-cost ratio, well in excess of scores typically
derived for many high-profile proposed road projects.
In one case – the Christchurch-Greymouth TranzAlpine – the service fully covers all its costs
and delivers a commercial profit to KiwiRail, even before counting the further economic
benefits to New Zealand. This means its cost to public funding is zero, and therefore its
benefit-cost score (national benefits divided by costs) is infinity – something which is also
true of the existing long-distance and ‘regional’ services network as a whole.
Some of the other services, even though they may not individually deliver a commercial
profit, do very well in delivering benefits to New Zealand (instead of only the finance raised
from rail service users, counted by measures of ‘commercial profit’) compared with costs.
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Passenger Rail Network Development Economic Case
April 2010
The benefit-cost scores of the TranzCoastal and Overlander are healthy – comparable to
typical scores for road schemes considered to merit investment of public funds.
The substantial benefits from rail services, compared to the very low (and sometimes zero)
net costs of providing them, suggests that New Zealand is under-investing in its passenger
rail network. Although further investment may bring the system out of commercial net
profit, it may nevertheless deliver an exceptionally high benefit-cost ratio, network-wide, as
a national economic benefit.
On the other hand, if we only consider whether particular lines should be retained, or
expect individual services to show a commercial profit quite apart from the wider economic
benefits, we would be selling the New Zealand public short on the economic benefits they
could potentially gain from carefully considered improvements and expansion.
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Passenger Rail Network Development Economic Case
April 2010
Future Development
The strong overall case for enhancement and expansion raises the question of which service
enhancements or network expansion possibilities would give best value for money.
Ideally, the ‘level of service’ concept, commonly applied in the planning of roads, should
also be applied to the selection of rail investment projects. ‘Level of service’ implies
measurement, in defined areas, of what the traveller (motorist, or rail passenger) ‘receives’
from the transport facility. For motorists, ‘level of service’ measures typically include
engineering standards, traffic congestion, crash hazard incidence or road surface roughness.
For rail, ‘level of service’ may include travel time, punctuality, service frequency, carriage
quality, station environment, and other travel experience factors. Measuring ‘level of
service’ could be used to define ‘standards’ in areas such as these, with the aim of ensuring
that projects deliver a certain quality of experience. For long-distance services, this would
be crucial for tourism benefits, since it would affect the ‘message’ visitors took away from
New Zealand and disseminated abroad. For commuter services, comfort, speed and
reliability are likely to be critical.
When considering rail service possibilities, several variations should be tested, not only for
their individual benefit-cost case, but also for the overall (benefit-cost) economic value of
the resulting network, including enhancement and expansion possibilities.
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Passenger Rail Network Development Economic Case
April 2010
For illustrative purposes, one expansion
possibility has been tested – a Christchurch-
Evaluation of ‘The Southerner’ (closed
Dunedin-Invercargill service, based on the
in 2002)
former
Southerner
service,
which
was
withdrawn in 2002. This should not be taken
The Southerner Christchurch-Dunedin-
to imply it has a stronger economic case than
Invercargill service closed in 2002, after
other possibilities covered in this report.
an evaluation found its cost broadly
equalled its economic impact. Re-
The Southerner was the subject of an
working this, the Southerner’s economic
evaluation study just prior to its closure. If
contribution
has
in
fact
been
this were reworked today using improved
substantially under-stated:
techniques and survey data, preliminary
•
A more realistic 30-year discount
evaluation suggests different likely results, as
period (rather than the study’s 10
indicated in the box opposite.
years) boosts economic impact
from $1.0 million to $1.7million.
The outcome of the Southerner study’s
•
A lower discount rate of 8%-4%, as
reworking (which is more fully described in a
now recommended (rather than the
KiwiRail Passenger Rail Technical Note) is
study’s 10%), with the extended
shown in Table 3 below, which gives its
discount period, boosts economic
benefits, costs, and a benefit-cost ratio of
impact further to $2.7-$6.3 million.
1.72.
•
If a 2009 Overlander survey showing
38% of passengers being from
Table 3: Re-worked 2001 ‘Southerner’
overseas were also true for the
Southerner (rather than the study’s
Evaluation
25%, which was not based on any
Benefits
Net costs
Benefit-cost
survey data), this would boost
ratio
economic impact still further to
$26,248,038
$15,226,225
1.72
$20-$35 million, with a 1.46-1.5
S9(2)(b)(i)
economic impact-cost ratio.
A further KiwiRail Passenger Rail Technical
Although (see box Economic Analysis
Note also outlines a preliminary evaluation of
Techniques)
the
report’s
Regional
a possible Hamilton-Auckland commuter
Economic Impact Analysis approach may
service, using the methodology contained in
be appropriate for this type of service,
the
Preliminary
Economic
Evaluation
by omitting to use this in conjunction
Handbook. This possibility has also been
with a transport cost-benefit approach
subject to studies in recent years, enjoys
(as is usually done), several other
support from local authorities in both centres,
benefit types were omitted (e.g. option
and has even been assumed in the sub-
values, consumer surplus). With these
regional Future Proof strategy’s proposals for
included, the service’s benefit-cost ratio
urban form along the route.
would have been about 1.7.
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Passenger Rail Network Development Economic Case
April 2010
In order to test further possible network expansion, the findings of the Christchurch-
Dunedin-Invercargill re-worked evaluation (for long-distance services) and Hamilton-
Auckland preliminary evaluation (for regional services) were extrapolated and applied to
several further possible services. Table 4, Economic Performance of Selected Additional
Services, shows the estimated performance results:
Table 4: Economic Performance of Selected Further Additional Services
Service type
Service route
Service basis (daily)
Benefits
Net
Benefit-
costs
cost
ratio
Long-distance
Auckland-Mount
One train each way
$10.6m
$6.2m
1.72
Maunganui
Long-distance
Wellington-Hawke’s
Bay One train each way
$16.7m
$9.6m
1.72
(via Palmerston North)
Long-distance
Christchurch-Dunedin-
One train each way
$26.3m
$15.2m
1.72
Invercargill
Regional
Hamilton-Auckland
Two trains each way
$32.8m
$12.0m
2.74
Regional
Palmerston
North-
Two trains (i.e. one
$4.5m
$3.5m
1.31
Wellington
additional
train)
each way
Regional
Christchurch-Waipara
Three trains each
$11.7m
$7.5m
1.55
way
Regional
Christchurch-Ashburton
Three trains each
$11.7m
$7.5m
1.55
way
Regional
Christchurch-Springfield
Three trains each
$11.7m
$7.5m
1.55
way
Total
Above selected services
As above
$126.0m $69.1m
1.8
Total
Existing
network
plus As
existing
plus $472.2m $26.1m
18.2
above selected services
above
The additional $126 million generated by the above additional selected services would give
an incremental benefit-cost ratio of 1.8. When added to the existing services, the overall
network would perform very well with a total benefit of $472 million, and an 18.2 benefit-
cost ratio. The overall network could cost about $26 million, representing an average
investment (in ‘net present value’ terms) of about $0.9 million per year over the 30-year
appraisal period (and a tiny proportion of that spent on the state highway network).
S9(2)(b)(i)
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Passenger Rail Network Development Economic Case
April 2010
Map 2 below covers the selected additional services, together with other service
improvements and network expansion considered to merit at least preliminary evaluation.
Except for Hamilton-Auckland, these have not been subject to any recent economic analysis,
and so the various prospective network expansion possibilities cannot be placed in any
priority order.
Map 2: Prospective Passenger Rail Network Expansion
Bay of Islands
KEY
Rail routes with passenger potential
Existing passenger rail services
Whangarei
Dargaville
Prospective passenger rail services
Waitakere
Auckland
Mt Maunganui
Hamilton
Tauranga
Gisborne
Rotorua
New Plymouth
Napier
Palmerston N.
Hastings
Masterton
Wellington
Picton
Kaikoura
Westport
Rangiora
Christchurch
Greymouth
Lyttelton
Springfield
Diamond Harbour
Ashburton
Invercargill
Dunedin
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Passenger Rail Network Development Economic Case
April 2010
Table 6 below lists improvements to existing services which are considered to merit at least
preliminary evaluation, on the basis of the previous tables’ positive benefit-cost scores for
existing services and some possible additional services.
Table 5: Prospective Enhancements to Existing Services
Potential
service Outline of expected benefits
enhancement
Wellington-
This service exists without public sector funding support. Such support would
Palmerston North
enable retention of the existing Palmerston North service, should this be at
risk of closure following completion of electrification south of Waikanae.
Bearing in mind that the existing single daily train (in each direction) is well-
used and highly valued, additional services (i.e. a second train) would be likely
to be justified. Urban form benefits include encouragement to ‘transit-
oriented development’ in intervening corridor settlements, especially those
without urban (TranzMetro) services. Road traffic de-congestion benefits
within Greater Wellington urbanised area.
Auckland-Wellington A night service (the ‘Northerner’) used to exist until 2004. It was marketed to
night service
backpackers as saving a night’s accommodation, but there may be a separate
‘luxury’ market, which would require sleeper accommodation (which could
possibly be on the same train). Apart from characteristic long-distance type
benefits (notably tourism), it would be useful to also include any synergistic
benefits of operating this service in conjunction with the existing daytime
Overlander (e.g. shared stock or staff).
Auckland-Wellington Addition of an extra train in each direction. Possibilities include adding a train
Overlander daytime similar to the existing, or differentiating by type of service (e.g. introducing a
enhancement
‘luxury’ train). There would need to be some evidence that demand existed,
but this might be possible given appropriate marketing. Benefits tourism and
remote area access.
Picton-Christchurch
Addition of an extra train in each direction. Possibilities include adding a train
Tranz-Coastal
similar to the existing, or differentiating by type of service (e.g. introducing a
enhancement
‘luxury’ train). There would need to be some evidence that demand existed,
but this might be possible given appropriate marketing. Benefits tourism.
Christchurch-
Addition of an extra Christchurch-Greymouth-Christchurch train. Possibilities
Greymouth
Tranz-
include adding a train similar to the existing, or differentiating by type of
Alpine enhancement
service (e.g. introducing a ‘luxury’ train). Benefits tourism and some limited
remote area access, and route security (notably snow-blocked mountain road
passes).
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Passenger Rail Network Development Economic Case
April 2010
Table 7 lists expansion possibilities beyond the existing network, and is compiled on the
basis of existence of rail routes and infrastructure, and of significantly-sized urban centres.
In many cases, services had been running in the recent past, and had been discontinued
without the benefit of the broader-based economic analysis which is now possible.
Table 6: Prospective Expansion of Passenger Rail Services Network
Potential
network Outline of expected benefits
expansion
Auckland-Hamilton
Strong regional commuter benefits. Strong urban form benefits to
intervening corridor settlements, especially if planned in conjunction with
Waikato Expressway Road of National Significance (e.g. each for
complementary different types of movement). Road traffic de-congestion
and car parking space benefits within Auckland. Some ‘event tourism’
benefits.
Auckland-Mount
Some possible commuting benefits to and from Hamilton, bearing in mind
Maunganui
generally high population concentration within the wider Waikato & Bay of
Plenty regions. Some leisure travel, and limited tourism benefits reflecting
Tauranga & Mount Maunganui’s holiday resort value.
Auckland-Rotorua
Strong tourist value if a high quality service, with good marketing to the
tourist sector, could be provided. Some urban form benefits, although less
than Auckland-Tauranga.
Wellington-Napier
Tourism benefits, especially if linked to art-deco-themed and wine tourism
via
Palmerston promotion of Hawkes Bay. Security of access benefits in relation to potential
North
Manawatu Gorge road closure incidents.
Wellington-Napier
Tourism and commuter benefits similar to Wellington-Napier via Palmerston
via Masterton
North, but also some utility travel between Wairarapa and Hawkes Bay,
because of the strong economic relationship between settlements along the
route. Some potential to enhance Wairarapa-Wellington travel benefits,
depending on timetable.
Christchurch urban There is potential for both urban commuting within the Christchurch built-up
and
regional area, and for regional commuter services linking with various Canterbury
network
townships (e.g. Springfield, Ashburton, Rangiora), both with potential road
de-congestion, and associated safety and environmental, benefits within
Christchurch. Regional services especially would also have potential traffic
growth demand mitigation effects on radial state highway links, and urban
form benefits through encouraging ‘transit-oriented’ development patterns.
Christchurch-
Significant tourism benefits from linking the nationwide rail network to
Dunedin-Invercargill
Dunedin, and with this also to Taieri Gorge Railway and Central Otago Rail
Trail attractions. Remote area regeneration benefits from the latter, and in
Southland.
The Table 6 and Table 7 lists are not exhaustive. There may be other possibilities, not listed
here, which would also have a strong economic case. However, the lists do cover New
Zealand’s most significant urban centres, and would be an appropriate starting point for
preliminary evaluation studies.
Since the main focus of this document is regional and long-distance aspects of the network,
a comprehensive review of urban commuter services has not been attempted. Christchurch
regional and urban services have been identified as particularly obvious, because of the
sheer size of the centre, forecasts of rapid traffic growth, and given that it currently has no
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
regional or urban passenger rail services at all. However, urban rail services within other
centres may also have a positive economic case.
Each scenario may have several possible formats (for example, the Hamilton-Auckland
analysis considered three variants). Choosing the appropriate format of a possible service
enhancement or network expansion possibility requires judgment as to what would keep
net costs low, while meeting any strategic objectives and ‘level of service’ measures
defined, and practical need (so as to attract patronage and fare revenue).
Another variable factor, which should be tested in any preliminary evaluation, is the setting
of fares. Higher fares would tend to reduce net operating costs, but may also depress
potential patronage, which in turn would limit (or possibly reverse) any resultant revenue
increases. Higher fares would also tend to reduce user benefits and other wider economic
benefits. For example, if user numbers are reduced, then other benefits such as from health
and tourism will also tend to be reduced.
Other potentially negative economic effects associated with a high fares policy include
increased road traffic demand, such as congestion and land required for car parking. For
these reasons, it may be useful to ‘sensitivity-test’ several different fare and service level
scenarios against revenue and other objectives, before selecting a particular proposal. The
effect of combining selected scenarios with the rest of the network should also be tested.
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
The Way Ahead: A Development Programme
Prospective service enhancements and network expansion proposals should be analysed
before being formed into a development and investment programme. The range of
possibilities involved, and the nature of the investment, make it sensible for such a
programme to be phased over several years.
Opportunities should be taken to integrate passenger rail network development with other
forms of planning, such as urban form studies, spatial plans, the National Infrastructure
Plan, and tourism development strategies. In these, there is increasing recognition of the
potential for infrastructure investment to ‘lead’ economic and urban growth.
Rail investment can stimulate economic growth in several ways. For example:
• Regional commuting services have potential to ‘lead’ development, such as focusing
urban centres around rail stations. This contrasts with road-based development,
which tends to encourage ‘ribbon development’ all the way along the road.
• Longer distance rail can ‘lead’ tourism development, and also integrate with other
tourism initiatives, such as the New Zealand Cycle Trail.
It would also help if road
and rail proposals were
evaluated together in a
high
level
‘strategic
assessment’. This would
mean
comparing
different
or
complementary ways of
meeting
corresponding
access need or journey
demands (e.g. potential
road
and
rail
developments within the
same
‘corridor’),
by
reference to common
objectives, criteria and
assessment techniques.
However, even without this the economic evidence for network-wide service improvement
and expansion is compelling. It is time New Zealanders were provided with the economic
benefits of a high quality passenger rail network, including improvements to and expansion
of services.
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Boulter Consulting in association with Transport Futures Ltd for KiwiRail
Passenger Rail Network Development Economic Case
April 2010
References
KiwiRail, Preliminary Economic Evaluation Handbook, 2010
KiwiRail, Passenger Rail Research Notes series, 2010
Boulter R, Wignall D, Identifying the Economic Value of Rail Services: Issues in Transport
Assessment and Evaluation, Australasian Transport Research Forum, Auckland, 2009
Boulter R, Urban Form, Passenger Rail and Transport Programmes – Mind The Gap, NZ
Planning Institute Planning Quarterly Journal, June 2009.
Boulter R, Wignall D, Identifying the Value of Long Distance Rail Services, Victoria Transport
Policy Institute, June 2008 http://www.vtpi.org/rail_evaluation.pdf
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Passenger Rail Network Development Economic Case
April 2010
Appendix – Funding for New Zealand’s
Passenger Rail
Historically and up to the present, New Zealand’s rail network has been planned and
managed separately from the nation’s road system.
For many years, rail infrastructure (until 2004) and operations (until 2008) were in the
private sector. Since 2008, both have been within the public sector. Even with possibly
wider use of private sector finance and franchising, this raises the possibility for road and
rail to be planned and funded in conjunction with each other. This is important for
economic growth and benefit to New Zealand from transport investment, whether that
investment is in road, rail or other transport alternatives.
This requires a common set of strategic objectives, a common and comprehensive
assessment framework and techniques, and a common set of values by which the costs and
benefits of any investment can be measured. Common strategic objectives already exist as
the Government Policy Statement on Land Transport Funding (May 2009).
KiwiRail’s Preliminary Economic Evaluation Handbook outlines methodologies by which
costs and benefits arising from potential investment in rail can be assessed. Some
differences between road and rail appraisal will be inevitable (for example, because one is
free at the point of use and the other is not), but the Handbook moves towards more
common and integrated treatment through its fuller coverage of economic benefits of rail
investment. The Handbook complements, and is designed to be used in conjunction with,
the NZ Transport Agency’s Economic Evaluation Manual.
The Economic Evaluation Manual has existed for many years. It originated as a Project
Evaluation Manual to assess possible roading investments, with a second volume added
later to cover benefits from Alternatives to Roading (which has included some public
transport investment).
The Economic Evaluation Manual has tended to include fuller coverage of costs and benefits
where these accrue to private motorists and truck operators. In one sense this is logical,
since the National Land Transport Fund derives its income from hypothecated taxation from
these road user groups. This encourages a ‘user-pays’ view, whereby the taxes raised are
seen as ‘charges’, and thus to be used for the user’s (i.e. payer’s) benefit.
However, road investment affects everyone, whether they choose to drive or not, and the
government’s priority of economic growth for the benefit of New Zealand as a whole
implies that a broader view should be taken. The Preliminary Economic Evaluation
Handbook partly addresses this by covering particular benefits accruing from passenger rail,
many of which are either given incomplete coverage in the Economic Evaluation Manual, or
not covered at all. These include urban form benefits (for regional services), tourism
benefits (for long-distance services), option and non-use values, consumer surplus, security
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Passenger Rail Network Development Economic Case
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of access, remote area accessibility, property value factors, and some types of
environmental effect.
Because of New Zealand rail’s private sector past history, the government’s relationship
with the rail sector was previously led by Treasury. This was transferred to the Ministry of
Transport in 2008, but rail funding support may still be assessed according to commercial
rather than national benefit/ cost criteria. An exception has been urban commuter services
in Wellington and Auckland, which have received National Land Transport Fund subsidy,
with assessment based on the NZ Transport Agency’s Economic Evaluation Manual. This is
because benefits to motorists were involved (e.g. through potential road traffic de-
congestion through increased rail use). Meanwhile, New Zealand’s long-distance passenger
rail services have been funded from fare revenue, without Government support.
Another issue affecting the passenger rail network is that discussions regarding the
network’s role and future prospects has tended to focus on its freight function, and thus the
needs of freight logistics and freight operators. This could lead to a problem of long-
distance passenger rail services being ‘caught by default’ in arguments about the economic
viability of freight on specific rail lines routes.
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