NEW REPORT: City Rail Link project throws good money after bad

A new report published by the New Zealand Taxpayers’ Union exposes the bad decision-making that led to a 61% cost blowout in Auckland’s City Rail Link and shows that the costs of the project now significantly outweigh any benefits.

‘The City Rail Link: A Great Big Sucking Sound for Taxpayer and Auckland Ratepayer Dollars’ provides the first in-depth analysis of cost overruns and benefit shortfalls in the Auckland City Rail Link (CRL). The report’s author, economist Jim Rose, argues that key decisions made first by the Government and Auckland Council were premised on a flawed business case.

As of December 2022, total costs for the CRL project were estimated to be $5.5 billion, 61% higher than the original cost estimate. While project managers blame COVID-19 for this big cost over-run, the evidence suggests that the project should never have gone ahead.

Key findings of the report are:

1. Auckland Transport originally estimated a cost-benefit ratio of between 0.4 and 0.9 in 2011
2. The business case presented to Cabinet in 2019 assumed $1 billion in wider network improvements not included in the project cost
3. In 2022, a review by the Auditor-General found that KiwiRail and Auckland Transport would have to spend a further $6.7 billion between 2022 and 2036 before the full benefits of the CRL could be realised
4. With rail patronage down 30-40% on pre-COVID levels, it is unlikely that the supposed travel time savings will ever be realised
5. As of December 2022, the cost of the project exceeded the $5.1 billion of benefits estimated by PricewaterhouseCoopers in 2019
6. It is therefore more likely than not that the cost-benefit ratio has dropped below 1, meaning the costs of the projects now outweigh the benefits
7. A briefing summarising the key points of the report and the full report have been sent to the Auckland mayor and councillors ahead of a meeting tomorrow (Thursday 23 March) to discuss the $1 billion increase in projected costs.

Taxpayers’ Union Campaigns Manager, Callum Purves, said:

“The City Rail Link will go down in history as a monument to the sunken costs fallacy as we continue to throw good money after bad. It is clear that the benefits of this project are now more likely than not to be outweighed by the costs of the project that have been allowed to spiral out of control. 

“The planners at Auckland Transport who dreamt up this project shouldn’t be let anywhere near the public purse again. If there is a silver-lining from this, it’s that Cabinet ministers and Auckland councillors might think twice before trusting the advice they get from Auckland Transport in the future.”

The briefing can be downloaded here.

The full report can be downloaded here.

Jim Rose is a Research Fellow at the New Zealand Taxpayers’ Union and has worked at the Ministry of Business, Innovation and Employment, the Department of Labour, the Ministry of Social Development, and the New Zealand Treasury. In Australia he has worked in Canberra for the Productivity Commission, the Department of Prime Minister and Cabinet, and the Department of Finance.

Jim has a Masters degrees in economics and in public policy from the Australian National University and from the National Graduate Institute for Policy Studies in Tokyo, respectively.