Interesting to see yesterday the government make a decision on the Clifford Bay ferry terminal. I say interesting because the more you look at the details the more it shows just how much transport policy is being driven by political agendas rather than based on facts. First up here is Gerry Brownlee’s press release
The outcome of a study into the commercial viability of a ferry terminal at Clifford Bay in Marlborough has concluded Picton should remain as the southern terminal for the inter-island ferries, Transport Minister Gerry Brownlee announced today.
Over the past year a Ministry of Transport-led expert team has been testing whether Clifford Bay could be delivered as a fully privately funded project.
“We have been delivered a thorough and robust report which clearly shows Clifford Bay is not commercially viable as a fully privately funded project, and the level of investment required at Picton over the next decade to extend its life would be substantially less than previously estimated,” Mr Brownlee says.
The project team estimated a ferry terminal at Clifford Bay could be delivered by 2022, at a cost of $525 million. This left a gap the Government would have been required to fill to induce private sector investment in the construction and operation of the terminal.
Meanwhile, the investigation found Picton’s facilities are not expected to fail or become constrained due to asset age or condition, or growth in freight volumes, over the next 30 years. It also found the level of investment required at Picton by its owner Port Marlborough over the next decade to extend its life and adapt its facilities is approximately half the cost estimated in 2012.
Mr Brownlee says it was concluded a number of significant financial risks would exist in the development and early operating phase of a ferry terminal at Clifford Bay.
“While it was expected these would be manageable, mitigation and management cost would have fallen to the Government.
“In the end, the government cost, remaining risks, and the lack of a compelling constraint at Picton have led us to decide the Clifford Bay option should be set aside at this time,” Mr Brownlee says.
“I hope this announcement will provide some planning certainty for Marlborough communities.”
To read the report, Clifford Bay Investigation 2013, and the paper Mr Brownlee took to Cabinet, visit www.transport.govt.nz
For those that aren’t familiar with the proposal, the idea is to create a new ferry terminal further south of Picton as shown in this image from the Ministry report.
It would be a substantial project though with the report stating there would need to be
- the construction of a breakwater 1.8km into Clifford Bay with a single-pier dual-berth facility for the two ferry operators
- associated shore-side facilities for the marshalling of passengers, vehicles and rail wagons
- the upgrade to Marfells Beach Rd to SH1
- a rail link to the main trunk line
None of that is going to come cheap and the report costs the terminal at $525 million – although positively Kiwirail already own most of the land needed so land acquisition wouldn’t be as high. The problem comes that the berthing fees for ferry companies simply wouldn’t be able to cover the costs of building the terminal and so the project isn’t viable from a commercial perspective. But what about the economic benefits of the project?
There are a couple of massive benefits for the project first of all it’s a shorter route (~15km) as well as one that also has no speed restrictions on it which means faster journey times. In addition as most people and freight are travelling south it would also provide some substantial travel time savings for both roads and rail due to being further south and not having to deal with the climb out of Picton and the Dashwood Pass north of Clifford Bay. For rail that journey incurs not just a time penalty but an additional operational one too as either an extra locomotive is needed or trains need to be shorter. The time savings are listed below. Compare those savings with something like Puhoi to Wellsford which would save 10 minutes if we’re lucky.
So while the costs are high at $525 million, the overall economic benefits are substantial enough to outweigh them with the report stating that the project has a Benefit Cost Ratio of 1.3. Unfortunately we can’t see all of the details relating to the benefits as most of that has been blacked out. However interestingly the report does state that the BCR of 1.3 doesn’t include the wider economic benefits (WEBs) that might occur (which have been assessed) and also uses an 8% discount rate and 30 year evaluation period.
This in itself is interesting as the NZTA recently changed their economic evaluation manual to assess projects with a 6% discount rate and 40 year evaluation period. The report states that an assessment with a 6% discount rate was done but the result is blacked out. I think it’s pretty safe to say the result would have been much higher if all of those bits were included. Why this is particularly interesting is that the government/NZTA have long been talking about the BCRs of the RoNS projects like Transmissions Gully using the new assessment criteria as well as included the WEBs figures too.
The project even scores highly on the NZTAs new assessment criteria which asks about Strategic/Policy Fit as the crossing is considered a key part in both the national road and rail networks.
Now let me be clear, I have no problem with the government saying they that they won’t support the project – despite being economically viable – due to it not being commercially viable. Sure there might be a positive benefit to the economy but if we can’t afford to build the project then that is fine. But I do have a problem when the same approach isn’t being taken when it comes to other areas of transport policy like what is happening with the RoNS. Projects like the Kapati Expressway have a BCR of 0.2 and Transmission Gully isn’t much better yet the government are pushing them ahead as fast as possible.
What all of this means is that the government are clearly picking and choosing which types of projects they want to support regardless of the facts. There would be no issue with this if they just said we’re building roads because we like them better but they don’t, instead they pretend they are building stuff that will really help the economy.