Selective interpretations of reports have misled people to think light rail is a money-spinner.
By David Hughes
In 2012 the Barr government’s analysis showed the proposed Gungahlin-Civic light rail line was twice as costly as a busway for the same benefits.
Worse, the estimated benefits incorrectly included the effects of unrelated government policies to increase parking charges and to promote development along the project corridor by selling government land, rezoning land such as the racecourse, and “constraining” housing supply outside the corridor. Without these other policies the tram’s benefits were two-thirds the size of its costs.
In 2014, the business case showed that transport benefits were only half the size of the costs. Transport benefits were broadly defined and included improved travel times; reliability and comfort; reduced road vehicle operating costs; fewer accidents and other health benefits; less noise and air pollution; lower greenhouse emissions; and savings on road maintenance and bus operations. This time, total benefits exceeded costs only by including a range of new “economic” benefits. Essentially the government claimed that replacing some buses with some trams would increase the efficiency and productivity of Canberra. No evidence was provided for this claim.
The draft environmental impact statement, released last month, shows how unimportant transport benefits have become in justifying this project. The Environmental Impact Statement (EIS) lists nine key benefits of the project. The first is “create jobs”. Transport benefits such as less congestion and pollution are well down the list.
This is understandable. Latest traffic modelling presented in the EIS compares expected traffic conditions with and without a tram in 2021 and 2031. The tram will be operating from late 2019. By 2021 it will result in “a slight decrease in total vehicle volume” in the morning peak period. Average speeds are slower, delays are longer, and congestion is “slightly higher”. The evening peak has a smaller decrease in vehicle numbers, much slower average speeds, a large increase in delays, and “significant congestion”. By 2031, “the impact of the project would be negligible”. Morning peak performance would be “slightly improved”; evening peak performance would be “slightly worse”.
As in 2012 and 2014 some other benefit is needed to justify the project. The EIS says building the tram “would support up to 3500 jobs” and operating the tram would create a further 125 jobs. “Additionally, the corridor development could result in up to 26,000 additional jobs along the corridor. Taking into account the flow-on jobs from industry and consumption effects, this could result in up to 50,000 additional jobs along the corridor.”
This focus has found support from Unions ACT. Polling it commissioned in May found 38.8 per cent of ACT voters supported light rail, 46.3 per cent were opposed, and 14.9 per cent were undecided. Unions ACT reports that “when the job creation benefits are explained, support increases to 52.6 per cent”. It has launched a campaign to promote awareness that there will be “over 3500 jobs created during construction” and, “following construction, more than 26,000 new long-term jobs will be created due to increased economic activity and growth along the light rail corridor”.
The job numbers are taken from a Job Creation Analysis released by the government in 2014. The analysis estimates “the likely job creation” from public expenditure on the tram and from private expenditure on retail and commercial development in the corridor. The analysis presents figures for direct and indirect employment effects, and gross and net employment effects.
The tram is to be built, operated and financed by a private consortium under an agreement covering three years of construction from 2016 to 2018 and 20 years of operation from 2019 to 2038.
Table 1 shows that building the tram directly creates 1450 jobs from 2016 to 2018 (in this article a job means employment of one person for one year). This creates a further 2110 jobs in businesses providing goods and services to the construction consortium and in businesses meeting the consumer demands of construction workers. But, the analysis explains, the demand for more workers in these activities increases wages, reducing employment in other parts of the ACT economy. The gross indirect figure of 2110 becomes a net figure of 480. The number of additional jobs in the ACT created by building light rail is 1930 not 3560. And to repeat: these are jobs for one year, not permanent jobs.
Table 2 shows the gross and net jobs created by operating light rail from 2019 onwards. The tram directly employs 55 staff. This creates 70 gross indirect jobs but only 20 net indirect jobs. The number of additional jobs is 75 not 125. Over the consortium’s 20 years of operation, 1500 additional jobs (employment of one person for one year) are created, of which 1100 are direct and 400 are indirect.
This leaves the big numbers: 26,000 and 50,000. According to the government’s analysis, by 2049 “additional floor space to accommodate around 26,000 jobs along the corridor” will have been built and occupied. This will indirectly create a further 24,000 jobs in the ACT. But, the analysis warns, most of the jobs in the corridor will come from somewhere else in the territory. “Estimating the share of the additional corridor jobs that are additional to ACT is not a straightforward task. For the purpose of this analysis we assume that 10 per cent of the additional jobs to the corridor are additional to ACT.”
David Hughes, an economist and former academic, was head of major project analysis for ACT Treasury and director of the economics branch from 2002 to 2005. Before that, he worked in the Audit Office, where he investigated the Bruce Stadium project.
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