Will Baillieu abandon Melbourne Metro (in favour of the East-West road tunnel)?

Melbourne Metro - proposed tunnel alignment and stations

From Wednesday’s Crikey newsletter (gated), in the Tips and Rumours section:

Vic government tunnels under greenies. A Victorian political spy reckons the Baillieu government is about to resurrect the East-West road tunnel underneath Royal Park at the expense of the Labor government’s planned Melbourne Metro scheme. It’s “a big up-yours to all the inner-city greenies that gave the old government such a run-around,” they say.

Assuming the Crikey report is well-founded (and it might not be – it is only a rumour, after all), I wouldn’t expect any government would be silly enough to announce it is abandoning a rail project in favour of a road project. No, it would say it’s going to do both.

The road would simply get priority over the rail project when scarce capital funds are doled out. The $40 million already allocated from Infrastructure Australia for Melbourne Metro will continue to be applied to feasibility studies and planning approvals, but if Crikey’s report is true, the project will languish for want of the billions needed to build it.

If that’s what’s intended by the Government, it could create an enormous problem. I’m not so much concerned that the Government might dare to build a new freeway as I am about the possible loss of the Melbourne Metro project.

Melbourne Metro is a response to the looming shortfall in capacity in the city’s rail system. What’s needed to expand capacity, according to the Eddington Report, is a new line in the CBD, essentially linking Flinders St and Southern Cross stations.

This could be achieved with a relatively short tunnel. However Eddington recommended that it be done with a much more ambitious tunnel running from Footscray to The Domain (and ultimately Caulfield) with new stations at North Melbourne, Parkville, the CBD (two) and The Domain – see exhibit. The first option costs a lot less but the second provides more capacity and has wider economic benefits, especially in terms of enhanced urban development.

If funding for Melbourne Metro is to be delayed (and again I emphasise the “if”), the Government needs to explain how it’s going to deal with the looming rail capacity problem in the city centre.

Do public transport and road pricing go together?

Animation of US expansion from 1700-1900 - post office openings

It surprises me who’s still lukewarm about congestion pricing of roads. I’d have thought the focus on the carbon tax over the last year would’ve heightened understanding of the role of the price mechanism in managing resources better. Obviously governments find it too hard politically but even organisations like The Greens and the Public Transport Users Association (PTUA) offer only heavily qualified support for congestion pricing.

The PTUA doesn’t support congestion pricing in the absence of alternatives, arguing that it would be unlikely to win community support and would be socially inequitable. It’s position is public transport must first be improved to a competitive level. The Greens take a similar view. Senator Scott Ludlum says the party believes a congestion tax “would be an unfair impost unless significant improvements to public transport and other non-driving modes of commuting, such as walking and cycling facilities, are made at the same time”.

What this means in practice is neither organisation has much to say in favour of congestion pricing – neither could be regarded as a staunch advocate of this potential reform. I think that’s a real pity because congestion pricing and improvements in public transport go hand-in-hand. They are the veritable horse and carriage – you won’t get one without the other.

Cars are a very attractive transport option, especially in our dispersed cities. But even the streets of a dense city like Manhattan are full of cars. We could wait generations in the hope that land use changes will make Melbourne so dense that cars will necessarily become a minority mode. Or we could ignore the probability that motorists will shift to more fuel-efficient vehicles or to ones powered by alternative fuels and instead bet that higher fuel prices will drive cars off  Melbourne’s roads.

But waiting and hoping aren’t a good basis for policy. Realistically, we can’t expect Australians will forego the private benefits of a car unless they’re forced to. The only reason most CBD workers don’t drive is because they can’t – traffic congestion and high parking charges rule driving out. Even so, around a quarter of CBD workers in Melbourne still drive and that proportion rises pretty rapidly to 50% and higher once you move even a few hundred metres away from the city rail loop. It would be a bit hard to argue they make this choice because public transport isn’t good enough.

Investing in public transport without simultaneously constraining the car will only achieve a modest increase in public transport’s existing 15% share of all motorised travel in Melbourne. Consider that Melbourne’s train, tram and bus system would cost an unthinkable amount if we had to build it from scratch today – hundreds of billions of dollars – yet 85% of motorised trips are still made by car. It should be obvious that simply providing the infrastructure isn’t enough.

Congestion pricing is the only way to reduce the considerable competitive advantage cars have over public transport (in most situations) within a reasonable time frame and at a reasonable cost. It’s therefore the only way to significantly increase public transport’s share of motorised trips. Of course good public transport has to be in place at the time congestion pricing is introduced. But what The Greens and the PTUA are missing is that you have to positively and enthusiastically embrace both.

The efficiency case for pricing is very strong and rejected by few. It’s the only practical way to manage traffic congestion. Its great virtue is that it prioritises travellers according to the value of their trip purpose. It also reduces accidents, as well as transport-related emissions and pollution.

The key concern of those with misgivings is the equity implications of congestion pricing. I don’t think it can be doubted that richer people will be better placed to buy road space. But I think there are a number of other issues that also need to be considered here. Read the rest of this entry »

Why do the worst infrastructure projects get built?

Inaccuracy of transportation project cost and benefit estimates by type of project, in constant prices (Flyvbjerg)

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 »