What’s a new rail line worth?

This is hilarious! (click) Men in Suits choir - Metro Trains Melbourne Regrets...

One way to answer this question is to consider what else the money could be spent on.

One possibility is the 1,235 people with disabilities in Victoria who, according to this article, are registered with the Department of Human Services for supported accommodation.

One of them is David Graham, a 44 year old who is legally blind, has an intellectual disability and suffers from epilepsy. Last month his 70 year old mother died of cancer. She had looked after him all his life since he was born premature at 24 weeks. Now Mr Graham is on the waiting list for supported accommodation.

Mr Graham’s plight illustrates the importance of opportunity cost, something I’ve banged on about here at length. In plain terms, when you spend money it refers to what else you could have spent the money on i.e. the opportunities you’re foregoing.

The writer of the article, Carol Nader, refers specifically to the $50 million that Ted Baillieu promised he would spend in his first term to commence building a rail line from the CBD to Avalon Airport. The full cost would be $250 million.

She implies that $50 million could instead be spent on something else, like supported accommodation for people with disabilities. It costs $1.5 million on average she says to provide a unit for five residents and an average annual cost of $125,000 to support each resident.

I’ve looked quickly at the policies of the major parties. Labor has a range of initiatives including providing 50 places for people with disabilities who have an older carer. The Opposition says it will ‘champion’ a new national disability insurance scheme to provide lifetime support to people with a disability. The Greens express sympathy but don’t appear to propose much in the way of specific action.

Of course we still have to spend money on economic infrastructure. And there’s no question Ms Nader has chosen an extreme example in the proposed Avalon rail line – you would go a long way to find a more valueless way to spend such a large sum of money. But there are plenty of other transport projects of doubtful value when examined in the context of the broader society’s needs.

For example, it disturbs me that so many people rabbit on about replacing perfectly good bus rapid transit services with new rail lines – whether to the airport, Doncaster or Mernda – when we can’t find enough money to support profoundly disabled people. And it really upsets me when some organisations propose massive transport infrastructure programs as if there weren’t any competing priorities that might also warrant funding.

I recognise that disability is a complex moral, medical and social issue. It is also an emotive issue, but it highlights starkly how every decision has a cost.

People like to think they could get the freeways or the rail lines they want if only governments weren’t incompetent, inefficient, disorganised or spent money on the “wrong” things.  There’s an element of truth in that but it’s mostly a self-serving delusion. For the most part you only get what you want if someone else misses out. It is a zero sum game.

21 Comments on “What’s a new rail line worth?”

  1. Matthew says:

    Avalon doesn’t need a train service, but Tullamarine does as it isn’t a perfectly good airport bus service.

    There is a time when well patronised bus services should be upgraded to rail, and there is no doubting the fact that to get people out of cars onto public transport, trains can and do, do better than buses.

    Casting it as an either/or, is disingenuous. Maybe Mr Graham, would be one of the people who too would benefit from improved public transport.

    If we need more money for basic human services we should tax the big end of town more, or I don’t know, have a resources super-profit tax.

    Hey Alan, next Red Shield Appeal you give the Salvos twenty bucks or this kitten gets it. Bah humbug.

    • Alan Davies says:

      There does come a time when buses don’t cut it anymore. The questions then in relation to a Tullamarine rail line are (a) has that time come yet?, and (b) even if it has, are there better things we could do with the money? My answer to the first question is “no”.

      Yes, disability is an emotive issue as I acknowledged. Just because money isn’t spent on transport doesn’t mean it will be spent on causes as worthy as addressing disability. But I selected disability to emphasise the point that there are always other choices.

      • Matthew says:

        As you said before your answer to “is it time yet for a Tullamarine train service?” is “no”, and I am going to say it is long overdue.

        I’m also going to say that the Seymour and Bendigo V-line routes could be built into a new airport station from the north, and then go south to the Albion-Jacana line, freeing up capacity on the Sunbury and Craigieburn lines for more Metlink trains. Then you could have the Bendigo trains via Tullamarine. You could have the Shepparton and Wodonga trains (are they even running beyond Seymour at the moment – what’s going on there?) via Tullamarine. You could have a Tullamarine to Southern Cross Express and you could have a new Sunshine, Albion, Airport West, Jacana, Broadmeadows Metlink service. Plus you could keep Albion-Jacana as a freight line.

        Heaps of service improvements there.

  2. With the exception of the Mernda busway (which you only approved of because it wasn’t spending more money on a train line!) I’m yet to read one of your posts that does approve of public transport infrastructure projects.

    In passing you’ve said you approve of duplication and triplication of some sections of track, but that’s about it.

    Can you give me one example of a major transport project you do agree with? When do you see a cost-benefit analysis?

    • Alan Davies says:

      Projects I agree with:
      1. Doncaster Area Rapid Transit (DART)
      2. Orbital Smartbus

      Also, I agree in principle with:
      3. Regional Rail Link
      4. Melbourne Metro rail tunnel

      I support the latter two on the basis that they are claimed to increase the capacity of the network.

      I would not as a general principle give a high priority to building new rail lines aimed at expanding coverage.

      I would instead give priority to expanding capacity and improving utilisation of the existing rail network (more rolling stock, duplications, etc); improving connectivity across modes (better coordination, interchanges, etc); and improving feeder services to existing rail lines (feeder buses; car parking, etc).

      More rail lines would always be nice but it simply should not be a priority when we have these other options and when we have competing non-transport investment priorities.

      • Michael says:

        You have framed the opportunity cost as a choice between social services and public transport. I know you have made caveats yourself but I think it’s really stretching it. If you take that approach you can go on forever with an almost infinite number of possible services and spending alternatives, with varying degrees of emotional impacts. Grand Prix anyone?
        How about comparing transport with transport. How would you evaluate the “missing” Northern link that both major parties plan to build?

      • Alan Davies says:

        Michael, your points are fair enough (although the GP crops up all the time!). I wanted to point out that there are always trade-offs because it seems many advocates of more investment in transport infrastructure don’t seem to get it.

        The way to resolve the “disability” vs “transport” choice is to invest in transport projects that give a big economic return. Then the community is more likely to feel it can “afford” to invest in things like supported accommodation.

  3. Michael says:

    You have raised an interesting point about people feeling better off and therefore more willing to invest in supported accommodation. Has this always followed historically? Have we ever been as well off as we are now? If you take house prices, consumer goods and SUV’s then we aren’t short of a bob or two. Does this mean we are feeling more generous towards the less well off, the unlucky or those in need of support? The Zeitgeist of the last decade feels more like “too much consumer gratification is barely enough and stuff everything else”. So more wealth isn’t going to necessarily translate into more for social services more likely it will be cutting stamp duty and tax cuts for the well off. Is there evidence to the contrary?

    • Alan Davies says:

      Over say the last 50-60 years real incomes have risen strongly and so has the amount of money put into various forms of social welfare.

      Not so sure about the short term. But if you look at the link I gave to Labor’s policy on disability (and also take note of the profile Bill Shorten gave to disability during the Fed election campaign) there’re some grounds for optimism, at least on this issue.

  4. Moss says:

    Surprising blog.
    You can’t frame the whole thing as “opportunity cost” – it’s way too simplistic. As you allude to in a reply above, look at these as investments rather than costs.
    Spending on the disability services is certainly a worthwhile thing to do, particularly for civilised states, but the return is pretty limited to social and some minor economic returns. Spending on improved public transport has a much greater “triple bottom line” – social, economic, environmental. Therefore the return on investment is magnitudes higher. Add in the fact that an investment in infrastructure is an “open horizon”-type of thing, with potential unknown or non-modelled benefits in the future, and you end up with a convincing argument for spending on the rail link. But of course it shouldn’t be either or, and in this case I don’t believe it is.

  5. Alexander says:

    The real issue here is that you’re muddying the waters by comparing social services, with low capital costs and high ongoing and per person costs, with public transport infrastructure, with high capital but low ongoing per person costs. They’re completely different kettles of fish and should not be competing at all.

    • Alan Davies says:

      The impact of the recurrent cost of public transport on the State budget is not insignificant. Let’s also not forget that debt has to be serviced.

      I don’t buy the “completely different” kettles of fish argument. Sure, they’re different, but they’re the same in the most important sense that they both add to the bottom line. If you increase the size of the subsidy to PT, then there’s less recurrent funding for other things – not saying that shouldn’t be done, but it’s a choice that has to be made.

      • Moss says:

        “both add to the bottom line”… well sure, but that argument would make spending 50 million bucks on a submarine ferry service to Frankston reasonable!
        As mentioned in my post above, there are magnitude differences between the bottom lines of these two projects.
        And, with respect, something that you continually ignore in your discussion of public infrastructure spending is that by creating resource/capacity in certain areas, you open up new opportunities that are difficult to foresee. I know that such “visioning” is generally the antithesis of analysis, but it generally limits your arguments to short term, “black hat” kind of thinking. Which is fine, I suppose. That’s why I read (and like) your blog.

      • Alan Davies says:

        Moss, re the “vision” thing. Theres no sense in investing for outcomes that you can’t reasonably foresee. They might be good but they might be bad.

        And views of what’s visionary differ – Vicroads 1969 vision for Melbourne isn’t acclaimed today by many people.

      • The recurrent cost of public transport on the State budget is certainly significant. However a large part of this is due to the massive inefficiencies of our systems.

        In cities with efficient public transport farebox revenue often makes up more than 60% of the total costs of running the systems. In Victoria it’s more about the 30-40% mark.

        I know you’ve said that changing administration structures won’t be a silver bullet to fixing the inefficiencies, and I agree it won’t happen automatically, but with real experts managing the whole system I believe it will help “improving connectivity across modes (better coordination, interchanges, etc); and improving feeder services to existing rail lines (feeder buses; car parking, etc).”.

        (Made some minor adjustments there. Adding more car parks at stations is a poor way to spend money and use valuable land.)

        Which in turn will help bring farebox revenue up, in comparison to total spenditure and total passengers.

      • Alan Davies says:

        “Adding more car parks at stations is a poor way to spend money and use valuable land”

        Why subsidise buses for travellers who can pay their own way? They’re only driving a relatively short distance. Just charge ’em for parking.

  6. Because a car will generally carry 1 or 2 people then sit in a park for a good portion of the day. So you either build on ground parking at a reasonable cost, but sacrificing a lot of valuable space to cater for a small number of commuters, or alternatively you use the same footprint to build multi-story parks that cost absurd amounts of money and even with revenue for parking will take forever to pay off.

    Either way the costs are high, you either sacrifice a lot of space for a small number of people, or you sacrifice a lot of money for a slightly larger amount of people.

    Glen Waverly parking spaces are costing $68,000 per bay. Even at $20 revenue a day that will take more than 9 years to pay off and will do little to increase farebox revenue.

    • Alan Davies says:

      Julian, I’ve seen that $68,000 figure somewhere before. Do you have a source for it?

      • It was discussed on Twitter after Martin Pakula made the announcement for the new multi-deck park.

        MartinPakulaMLC Martin Pakula
        With Maxine Morand this morning announcing $24.5m to build new multi deck 500 space car park at Glen Waverley station.


        danielbowen Daniel Bowen
        Last tweet on Glen Waverley Stn: 140 existing spaces, 360 new=500 total. So incremental cost is $68,000 per space #VicVotes

        However, now I can’t find any record of this new station in any of Martin Pakula’s press releases. In fact I can’t find any mention of the new car park anywhere but the PTUA website and Twitter…

      • Alan Davies says:

        Thanks, this DTF election costing report looks like it. Between $30,0000 and $49,000 per space to build a 500 car space building. However as there are already 140 spaces on the site, Daniel Bowen’s point is that the net increase works out at $68,000 per space (using the upper estimate). Fair enough, as long as people don’t start thinking it costs $68,000 to build a new space. But I don’t think it’s a very useful way to look at it.

        P.S. Donnybrook station and Montmorency station parking costed at $10,000/space

      • It’s a useful figure to look at if you’re talking about building new car parks at already established stations because most of the time you will be building them on top of the old spots.

        The $10,000 figures would be acceptable if such a large amount of space wasn’t sacrificed for such a small number of parks though. They’re all on ground parking, which means a lot of space for a relatively small number of people.

        You can’t start charging too much for parking, because then people will just drive to their destination as the costs become comparable. Therefore you will get a better rate of return by increasing passenger numbers via feeder buses.

        Even 50 parking spots could comfortably fit a bus exchange for 4 buses (different feeder routes). If the buses came every 20 minutes, to meet each train carrying even just 5 passengers each that’s still 60 passengers an hour.

        Compare this to a car park. I arrive at my station at around 8am every morning. The car park is virtually always full. When I arrive at the station again at around 6pm the car park is usually roughly 2/3rds full with the same cars that were there in the morning. Most of the people getting into cars are alone. If we’re generous we’ll pretend there are 3 passengers per vehicle and 3 vehicles use each car space between 7am – 7pm.

        So for some figures.

        Buses @60 passengers an hour @$3 a ticket = $180 or $2160 from 7am -> 7pm

        Cars @50 car parks @3 cars per bay @$5 each space = $750

        Passengers in cars @3 per car, @3 cars per bay, @50 bays @$3 a ticket = $1350

        Total revenue for the car space is $2100 per day or $60 less and that is with very conservative figures for the bus numbers (especially considering 7am-7pm covers both the morning and evening peaks) and very generous figures for the car parks.

        Of course you have to factor in the costs of running buses, etc but in most cases the buses are already running they’re just very poorly managed/integrated making them unattractive options.

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