The exhibit above purports to show that the cost of infrastructure associated with building a new dwelling within 10 km of the CBD of a city like Melbourne is, on average, $50,503. In contrast, it costs $136,401 to provide infrastructure for an outer suburban dwelling i.e. located more than 40 km from the CBD. That’s a huge difference: $85,538 per dwelling.
The figures come from a 2007 report, Assessing the costs of alternative development paths in Australian cities, written by three Curtin University academics, Roman Trubka, Peter Newman and Darren Bilsborough. I’ve mentioned this report before, but that was primarily in the context of The Age and some public sector agencies tending to conflate economic costs with infrastructure outlays (they’re not the same!).
The figures above however are solely infrastructure outlays (not economic costs). Judging by the extent to which Trubka et al’s report is cited by government agencies, there appears to be strong demand for this type of information. It seems, however, that these are the only numbers on this topic around. That’s unfortunate because they have some very serious shortcomings as an indicator of the relative cost of providing infrastructure in inner and outer locations.
The key deficiencies are they’re old; they don’t relate to Melbourne; and they’re not transparent. Trubka et al sourced them from a 2001 report, Future Perth, prepared by the WA Planning Commission to assess infrastructure costs in Perth. Future Perth didn’t calculate its estimates from first principles but rather surveyed 22 earlier studies, some dating from as far back as 1972 and some relating to costs in the USA and Canada.
Future Perth is a working paper and hasn’t been published – hence the rigour of its methodology and those of the 22 studies it drew from hasn’t been tested. Unfortunately, Trubka et al provide scant explanation of their infrastructure estimates, relying instead on a reference to Future Perth.
I can’t say for sure the Trubka et al estimates are wrong, but I can say they’re unlikely to be right. I can also say they’re far too flaky to be relied upon to guide significant policy or investment decisions here in Melbourne. There’s clearly a demand for this sort of information so it would be sensible for the State Government to undertake its own rigorous and up-to-date assessment of the costs of metropolitan infrastructure provision.
Although not as decisive as the shortcomings discussed above, I also have some issues with how Trubka et al have set up their cost comparison. Actually, because the report doesn’t elaborate much on the various infrastructure items, I’ll treat these as questions, or areas that need clarification. Read the rest of this entry »
Under-estimating the cost of major infrastructure projects and over-estimating the demand is so chronic that forecasters deserve some harsh medicine, according to Professor Bent Flyvbjerg from Oxford University’s Said Business School. He says “some forecasts are so grossly misrepresented that we need to consider not only firing the forecasters but suing them too – perhaps even having a few serve time”.
Australians have plenty of experience with underperforming infrastructure projects. For starters, just in transport alone, there’s Brisbane’s Clem 7 road tunnel, Sydney’s Lane Cove and Cross City tunnels, the Brisbane and Sydney airport trains, Melbourne’s Myki ticketing fiasco, and the 2,250 km Freightlink rail line connecting Adelaide and Darwin. And they’re just the ones we know about!
Professor Flyvbjerg says cost overruns in the order of 50% in real terms are common for major infrastructure projects and overruns above 100% are not uncommon. Writing in the Oxford Review of Economic Policy, he argues that demand and benefit forecasts that are wrong by 20–70% compared with the actual outcome are also common.
Transport projects are among the worst performers (see exhibit). Professor Flyvbjerg examined 258 transport projects in 20 nations over a 70 year time frame. He found the average cost overrun for rail projects is 44.7% measured in constant prices from the build decision. For bridges and tunnels, the equivalent figure is 33.8%, and for roads 20.4%. The difference in cost overrun between the three project types is statistically significant and the size of the standard deviations shown in the first exhibit demonstrate the high degree of uncertainty and risk associated with these sorts of projects.
He also found that nine out of 10 projects have cost overruns; they happen in all nations; they’ve been a constant over the last 70 years; and cost estimates have not improved over time.
And it’s not just under-estimation of costs. Errors in forecasts of travel demand for rail and road infrastructure are also endemic. He found that actual passenger traffic for rail projects is on average 51.4% lower than forecast traffic. He says:
This is equivalent to an average overestimate in rail passenger forecasts of no less than 105.6 per cent. The result is large benefit shortfalls for rail. For roads, actual vehicle traffic is on average 9.5 per cent higher than forecasted traffic. We see that rail passenger forecasts are biased, whereas this is less the case for road traffic forecasts.
He also found that nine out of ten rail projects over-estimate traffic; 84% are wrong by over ±20%; it occurs in all countries studied; and has not improved over time.
Thus the risk associated with rail projects in particular is extraordinary. They face both an average cost overrun of 44.7% and an average traffic shortfall of 51.4%. Read the rest of this entry »
It seems the water conservation message is starting to recede as the Government and water authorities come to grips with the breaking of the drought and the oceanic task of paying for new infrastructure like the desalination plant and north-south pipeline. Some small evidence of this trend is evident from the latest invoice my household got from our water retailer, Yarra Valley Water.
Our consumption for the three months to 25 May was 626 litres per day. The invoice has the familiar graphic showing how to convert household consumption to per capita consumption, but there’s no longer any target to compare your performance against. We consumed 157 litres per day per person but there’s nothing to help make sense of that number. Unless you can recall the now-abandoned daily target of 150 litres per person, you won’t know if you’re consuming too much water or too little.
The other thing is water consumption charges still account for only a small proportion of the bill – in fact our 626 litres make up slightly less than a third of the total amount. The rest of it is made up of standing costs for “drainage”, “sewage” and “service” charges, which customers have no real control over*. So even if we worked harder at reducing our consumption, the financial pay-off would be pretty small. The pricing of water continues to offer little incentive for conservation, a point I made nine months ago.
Discouraging water use is now a financial liability for the Government and water authorities. They’re in deep water primarily because the former Government had a political problem – it needed to show it wasn’t out of its depth but had a plan to deal with the drought. But rather than navigate the politically troubled waters of low-cost measures like stronger conservation incentives (for example, by raising water prices) it did what governments usually do – spend big licks of money and rely on the costs being diffused over time across large numbers of customers.
This pattern of spending rather than managing is pretty much standard practice for governments. We currently have the possibility of immense sums being spent to address the congestion and capacity problems of Hoddle Street, when the vastly more efficient solution would be to price access to roads. We have the more likely prospect of even bigger sums being spent to construct a rail line to Doncaster when effective public transport can be provided by bus at much lower cost. Read the rest of this entry »
There is little doubt that Melbourne Airport needs action to improve land-side access for passengers arriving and departing from the airport.
Many observers argue the solution is a rail line from the CBD to the airport. I think there’s a much bigger picture they’re missing. They would be well advised to look at the Airport Monitoring Report 2009-10, just released by the ACCC (see chart).
It shows that only 39% of trips to Sydney Airport are made by private car (on-airport parking, rentals and kerbside drop-off), compared to 69% for Melbourne Airport. Since Sydney has a train and Melbourne doesn’t, it’s tempting to conclude that a train is the answer to Melbourne’s woes.
However the ACCC’s report says that more people travel to Melbourne Airport by public transport (14% – all by bus) than is the case for Sydney Airport (12% – train and bus).
A key difference between the two airports is that taxis (incl ‘mini buses’) are far more popular in Sydney, where they account for 49% of all airport trips. The comparable figure for Melbourne is just 17%.
Part of the reason for this difference is taxis are more competitive in Sydney against cars and against the train – Kingsford Smith is 8 km from the CBD and hence is relatively central. In contrast, Melbourne is 22 km from the CBD so taxis are not as competitive with either buses or cars (other reasons for the difference include more tourists at Sydney, as well as higher parking charges).
As I discussed last week, Brisbane’s airport – like Melbourne’s – is also located a considerable distance from the city centre. It might be that the location of both airports on the edge of their respective metropolitan areas – well away from the centre of gravity of population in both cities – is a key reason for their high private car use (and low taxi use).
Yet distance can’t be the whole explanation. The Brisbane airport train only captures 5% of trips and all up, public transport carries 8% of airport journeys. That’s considerably less than either Sydney or train-free Melbourne.
Given the experience of Sydney and Brisbane, it cannot simply be assumed that constructing a rail line from the CBD to Melbourne Airport will inevitably lead to a significant increase in public transport use – at the expense of cars – over and above the already substantial mode share enjoyed by buses. Read the rest of this entry »
The centre of the city of the future will be the airport, according to a book by John D Kasarda of the University of Carolina and journalist Greg Lindsay to be published next month.
They say in Aerotropolis (subtitled, to emphasise its inevitability, The Way We’ll Live Next), that “not so long ago, airports were built near cities, and roads connected the one to the other. This pattern—the city in the center, the airport on the periphery— shaped life in the twentieth century, from the central city to exurban sprawl”. But things, they say, have changed:
Today, the ubiquity of jet travel, round-the-clock workdays, overnight shipping, and global business networks has turned the pattern inside out. Soon the airport will be at the center and the city will be built around it, the better to keep workers, suppliers, executives, and goods in touch with the global market.
Soon the airport will be the centre of the city?!!! I am, to put it mildly, sceptical about this view of the future.
Yes, cities have almost always developed around transport infrastructure – first ports and rivers and more recently railheads and freeway nodes. Yes, local concentrations of economic activity have sprung up in various places to provide logistics services in close proximity to major airports, some of which are very large. And of course, as this preview of the book states, the share of high value freight carried by air is increasing at a much faster rate than trade generally.
Now if some marketer wants to start calling Melbourne airport and the surrounding area ‘Tullamarine Aerotropolis’ or something similar (‘Tullatropolis’?) that’s OK by me. It is after all one of the biggest concentrations of jobs in the suburbs of Melbourne and a fair number of those jobs are doubtless related in some way to aviation.
But arguing that the city of the future will “be built around the airport” is silly. Read the rest of this entry »
According to Paul Austin in The Age (29/11/10), there’s little doubt that infrastructure inadequacies weighed heavily on voters’ minds in last Saturday’s election. His list of problems includes overcrowded trains, congested roads, the Myki debacle and long hospital waiting lists.
The pressure to “fix” these problems from voters in the eastern suburbs and sandbelt electorates that fell to the Coalition on Saturday will be immense.
Dr Gruen contends that governments in Australia have focussed on the cost of debt but have ignored the benefits. They’ve reduced the budget deficit to zero but exchanged it for an infrastructure deficit. Their constituents have saved on debt repayments, but:
they are paying inflated tolls on roads and heavy mortgage repayments that reflect the lack of land release and the loading of infrastructure charges onto the land that has been released. And they are paying with their time as they wait at peak hour in traffic that has slowed to a crawl or crowd into late trains and buses.
Thanks to the culture of strict fiscal rectitude that dominates modern government thinking, new debt has been kept off the government’s balance sheet by funding infrastructure in other ways – partly through asset sell-offs but mostly via Public Private Partnerships (PPPs). Read the rest of this entry »
The map shows what residents call the “black hole” and this story in The Age gives the history of high school closures in the area:
“The troubled Moreland City College closed in 2004. Coburg High School shut its doors in 1993 and is now the site for a planned 510 apartments. Newlands High School, now part of the Pentridge Prison development, folded in 1993. Moreland High School taught its final class in 1991 and is now Kangan Batman TAFE”.
The Education Department says there isn’t sufficient demand to meet the minimum size requirements for a junior high school and that there are others nearby with adequate capacity to take Coburg children from year seven. The residents argue that these schools are either too far away or unsuitable.
There are two existing high schools within the circle, shown in grey on the map, but they are not full-service schools. One is Coburg Senior High (co-ed, year 10 upwards) and the other is Preston Girls College (girls 7-12 only). The obvious “new junior school” solution is to expand Coburg Senior High.
I’m not concerned with the reasonableness of either side’s case, but I am interested in the issue of how far teenagers should reasonably be expected to travel to school. I also think there’s some insight to be had here into the issue of whether or not there is spare infrastructure capacity in inner suburbs. Read the rest of this entry »
I watched Anthony Albanese foreshadow on Lateline on Wednesday night that the Government, if re-elected, would fund a $20 million feasibility study of a high speed rail connection between Sydney and Newcastle as part of a Sydney-Brisbane route.
The Minister’s subseqent announcement on Thursday puts more emphasis on an east coast Brisbane-Sydney-Melbourne HSR but it seems clear the Central Coast is a key target of the initiative (Robertson is a marginal seat).
The announcement was greeted with some scepticism – an HSR link between Sydney and Newcastle was announced by Bob Carr twelve years ago. Crikey’s Canberra correspondent, Bernard Keane, reckons Labor isn’t serious about HSR and is only pretending.
Provided the focus is on Sydney-Newcastle, I think there are some reasonable aspects to this initiative notwithstanding its apparent political motivation. Read the rest of this entry »
Yesterday I looked at the carbon reduction justification for high speed rail between Sydney and Melbourne. Today I want to discuss another argument – that high speed rail will promote the development of regional centres. It is argued that this could in turn relieve capital cities of much of the burden of projected population growth.
I have no doubt that improving connection times between regional centres like Albury-Wodonga and Melbourne will benefit both.
But if regional centres are to be a serious alternative for growth, they will need to provide new arrivals with jobs. The question I ask is: where are those jobs going to come from?
One way could be that regional centres provide a “dormitory” for workers who can live in the country but commute to work in capital cities like Melbourne by high speed rail. Read the rest of this entry »
Bob Brown let us know yesterday with his call for a high speed rail link from Brisbane to Melbourne that the Greens are just as susceptible to populism as Julia Gillard and Tony Abbott.
In April he costed a Sydney-Canberra-Melbourne link at more than $40 billion. Yesterday he pointed to a survey commissioned by the Greens showing 74% of Australians support high speed rail. That’s not surprising because it is an attractive and beguiling idea – 94% of readers of The Age support it. After all, China and Europe can’t seem to build enough high speed rail and President Obama has grand plans for an extensive network in the US.
The idea of some form of very fast train service connecting Sydney-Canberra-Melbourne has been around at least since the 1980s. A number of feasibility studies have been undertaken, all of which concluded that it wouldn’t be feasible without massive Government assistance. So it’s worth asking a few questions:
- why would we want to commit billions in Government subsidies to replace one form of public transport (planes) with another (trains)?
- why would we want to replace the four airlines that currently compete vigorously on price and service on this route with a single monopoly rail operator? Read the rest of this entry »
A common objection to wind turbines is that they’re dangerous for birds. Alex Tabarrok at Marginal Revolution reports that the number of birds killed by wind turbines in the US is between 20,000 and 37,000 annually.
He draws on data from this report by the Committee on Environmental Impacts of Wind Energy Projects, (US) National Research Council of the National Academies.
The report puts the bird strikes from turbines into context with annual estimates for deaths in the US from other causes (the wide ranges in the estimates indicate this is not an exact science):
Collisions with buildings: 97 – 976 million
Collisions with high tension lines: 130 – 1,000 million
Collisions with communication towers: 4 – 50 million
Collisions with cars: more than 80 million
Toxic chemicals: more than 72 million
Cats: more than a billion
BP oil spill: more than two thousand to date Read the rest of this entry »
This photograph, via Paul Romer, shows students in Guinea who go to the airport to study for exams because they don’t have electricity at home.
The BBC reports that petrol stations, airports and even spaces under security lamps outside upmarket homes have become pockets of learning, where determined students are to be found in large numbers.
Access to light is a serious problem due to the “deterioration of power supplies, which started in 2003 when the country’s economy went into freefall:
The national power company, Electricite de Guinee, provides light to consumers on a rotational basis of 12 hours a day – but even so, these schedules often prove erratic, with dozens of outages before dawn…..
Between 1999 and 2002, schools in Guinea had a modest pass rate of 30-35%. Since 2003, that has dropped to between 20 and 25%”. Read the rest of this entry »
We’ve seen some high profile examples in recent years of how hard it is to forecast patronage on new transport infrastructure.
The Cross City tunnel in Sydney and the Clem 7 in Brisbane, for example, have both performed well below forecasts. Even when it was free, the Cross City tunnel did not approach the forecast volumes of 90,000 vehicles per day. Traffic volumes on the cross-river tunnel in Brisbane fell from almost 60,000 during the free period to around 20,000 in the first week of tolling.
California’s planned $42 billion High Speed Rail (HSR) project provides another example of the difficulties of forecasting demand. Although there are important differences between the design of the California HSR system and proposals for a Very Fast Train (VFT) between Sydney-Canberra-Melbourne, the former nevertheless has important lessons for us. I have previously discussed the VFT here, here, here and here.
A new analysis by the Institute of Transportation Studies, University of California Berkeley, found significant problems with the demand modelling and analysis undertaken for the California project by Cambridge Systematics (CS) “that render the key demand forecasting models unreliable for policy analysis”. Read the rest of this entry »