Extra highway costs ‘inflation’
The Green Party has questioned the financial viability of Auckland’s East West link highway, saying the Government’s own business case has costs outweighing benefits.
Green Party transport spokesperson Julie Anne Genter says a dramatic jump of $200-800 million in estimated cost at the beginning of 2016 casts doubts over the project’s legitimacy.
‘‘I think the people of Auckland would be appalled if they realised just how little proper analysis has gone into this project,’’ Genter said.
‘‘I think they’ve gone for a much more expensive option because of political pressure to be seen to be delivering an expressway and it’s turned out to be far more costly than they initially thought it would be,’’ Genter said.
The New Zealand Transport Agency (NZTA) produced a detailed business case for the East West Link on December 23, 2015, estimating total capital costs for the project at $1.05 billion.
One month later, January 27, 2016, the Government released a media statement announcing it was fast-tracking the project at a total estimated cost of $1.25 billion to $1.85 billion.
Both Transport Minister Simon Bridges and NZTA Auckland highway manager Brett Gliddon said the initial cost estimate of $1.05 billion was an ‘‘unescalated cost’’.
‘‘Adjusting for inflation, the estimated project cost equates to an ‘escalated cost’ range of between $1.25 billion and $1.85 billion, so the cost hasn’t changed,’’ Gliddon said.
However, former chief econ- omist at the Commerce Commission Michael Pickford said it was strange that inflation could have such an effect in such a short time frame.
‘‘A characteristic of the current economy, for some years, is the very, very low rates of inflation in everything. So, it seems implausible for them to suggest such a large cost increase based on inflation when there hasn’t been any,’’ Pickford said.
On page 82 of the NZTA business case, it says ‘‘capital costs would need to increase by some $800 million for the BCR [benefitcost ratio] to reduce below zero’’.
A benefit-cost ratio below zero would mean the real-life benefits of the East West link, such as time-saving for motorists and fewer road accidents, would not be greater than its cost to build.
Simon Bridges, John Key and Len Brown at the sod turning for the East West Link in September 2016.