Light Rail Costs Taxpayer $2.7bn
The light rail project spanning the 12km route from the heart of the CBD to South East Sydney is designed to alleviate congestion in Sydney and surrounding areas. However, after a plague of delays and costs adjustment for the project, the latest update indicated that the NSW government will pay an additional $576 million to complete it. The extra cost brought the total taxpayer cost to at least $2.7 billion.
The project was proposed back in 2012 when the Transport for New South Wales (TfNSW) had appointed ALTRAC Light Rail Partners for the delivery and operation of Sydney’s CBD and South East Sydney light rail project. The ALTRAC Light Rail consists of Transdev Sydney, Alstom Transport Australia, Acciona Infrastructure Australia and Capella Capital. The light rail public-private partnership (PPP) was expected to begin in 2014 and become operational in early 2019, with an initial budget cost of $1.6 billion.
In the latest update, the new agreement of a $129 million payout from the NSW government will occur to the consortium, if milestones are met. One milestone will be the opening up of light rail services to passengers travelling between Circular Quay and Randwick by December 2019, and the second milestone will consist of services operating between Circular Quay and Kingsford by March 2020. The incentive will be an attempt to complete the already delayed project as soon as possible.
Sydney light rail delay
The consortium commenced construction in late 2015, beginning in a section of George Street. Major construction was projected to conclude in April 2018. However, the construction had suffered significant delays and the cost increased throughout.
In 2014, sources had indicated that the cost of building the light rail line had increased by $600 million more than the initial budget, bringing the total cost to $2.1 billion. The minister of the TfNSW blamed the extra cost to a 4500 increase in passenger capacity, which was originally estimated to be 9000.
The first sign of delays came in 2016 when it was revealed that 400 disused utilities, including underground pipes and cables disrupted the construction progress. TfNSW Coordinator General Marg Prendergast said the “redundant utility” takes a “two to four week process to validate it, because if we snip it, something really bad could happen and we could take a telecommunication cable or something.” The discovery of two zones of “disused-utilities” in the CBD had pushed the original finish date of December 2016 to April 2017.
By the beginning of 2018, it was clear the whole project was significantly delayed. The project was faced with numerous technical and legal issues. Sub-contractor of Altrac PPP – Acciona – alleged the TfNSW of engaging in “misleading or deceptive” conduct in relation to the complexity of Ausgrid’s electricity cables running across George Street. A NSW Labor spokesman said, “Every time the contractor digs a hole there is something underneath the ground that they weren’t told about.” The Spanish group sued the government, seeking $1.1 billion in additional funding.
A further delay occurred when the Managing Director of Acciona Infrastructure Australia, Bede Noonan, told the NSW government that the project will not be completed until May 2020. He said the government had “vastly misunderstood” the risk related to utilities and the biggest challenge Acciona had faced was the Ausgid’s power assets and underground pits.
Implication of the light rail project
Throughout the light rail project, the construction was met with disgruntled pedestrians, businesses and political parties. Action for Public Transport argued that the project will not have sufficient capacity to replace the eliminated buses. Save Randwick’s Trees protested the loss of almost 1000 trees. Many businesses were affected as a result of reduced footfall and the noise, with some forced to shut down. There was no compensation from the government to the affected businesses. However, Randwick City Council had allocated $68 million to mitigate the impacts of the light rail, including replacing car parking spaces, improving traffic flow and creation of public domain works.
The delays and criticisms have turned the CBD into an urban construction nightmare. In response to the problematic project, the NSW Transport Minister Andrew Constance said that the government would be more careful to structure future contracts better. Through this project, the TfNSW acknowledged it has learned some lessons.
In the lead up to the Parramatta Light Rail, the NSW government said it was running “a highly interactive tendering process” which allows bidders to explore “risk sharing, value enhancements and innovation.”.
The incomplete light rail project may create further contingency costs in the future. Taxpayers are wondering whether the final cost will surpass $3 billion. Transport minister Andrew Constance admitted that further expenses would be required to complete the project, though he would not confirm the amount of the final cost until passenger services began. However, it is clear that TfNSW’s promises are extremely temperamental, which will most likely translate to an increased burden for taxpayers if more funds are needed.
By Jack Lee
Click here for a one month free trial to our Lotus Blue Portal.