Mounting bill shows need for prudence
There is a phrase which ought to guide policymakers and politicians when considering big projects — on time and within budget. The latest public sector venture to fail at least the budget element of this test is the Northern Motorway extension between Warkworth and Wellsford.
In 2009, the 24km section was expected to cost $494 million. That estimate doubled to $1 billion when a revised calculation surfaced in 2012.
The latest figure, which the Government supplied in answers to written questions, put the price tag between $1.4 and $1.9b. The upper level of that span is almost four times the initial forecast, though the link now goes just north of Wellsford to Te Hana and though motorway planners suggest that the final cost could come down.
The benefit cost ratio is just 0.25 — that is, for every dollar invested in the road the return is 25 cents. The New Zealand Transport Agency, which is planning the route from Puhoi to Wellsford, notes the overall link has a benefit cost ratio of 1.1.
Cost escalation on this scale in the private sector would have shareholders and investors alarmed. There is no reason why prudence should not apply to this enterprise.
In economic terms it is becoming harder to sustain a case for the use of public funds which the northern end of the highway seems destined to swallow. The route is not an easy one. The geology is challenging and the region gets intense storms, which will makes its maintenance costly.
A plan published by NZTA even shows a potential tunnel.
The agency’s count of traffic volumes shows the stretch of State Highway 1 from Wellsford to Warkworth carries about 10,000 vehicles a day, fewer than roads in Auckland and hardly the large volume which roads of national significance are meant to support.
The agency suggests the motorway will make travel safer by creating passing lanes and separating north and southbound traffic. Its research suggests the fatal and serious crash injury rate could be cut by as much as 80 per cent through this area. The Green Party argues safety gains could be achieved with barriers and road widening.
The physical realities were known before the highway track was identified almost a decade ago. This makes it all the more difficult to accept the rising cost of the project, and the diminishing return for the final leg.
It appears the cabinet is determined to proceed, regardless of evidence which ought it give it reason to pause. Transport Minister Simon Bridges responded to calls to scrap the project by arguing that the four-lane highway was a “game changer” , economically and socially.
He pointed out the road, which could shave seven minutes off the journey between Wellsford and Warkworth, was incredibly popular in Northland.
Roads, in particular links which could cost as much as $2b, should not be constructed on the basis of popularity. That is not a reassuring sign for completing the project, in time and within budget.