Application under the Australian Government’s Building Better Regions Fund

Brisbane Valley Rail Trail Business Case

Brisbane Valley Rail Trail – Business Case Page 1

Table of contents

1 Executive summary ...... 4

2 Project objective ...... 6 2.1 Community need ...... 6

3 Background...... 7 3.1 Market analysis ...... 7 3.1.1 Trends in cycling and walking ...... 8 3.1.2 Cycle tourism ...... 8 3.1.3 Cycle tourism is a growth market in Australia ...... 8 3.1.4 Recreational cycling markets ...... 9 3.1.5 Overnight travel cycling market ...... 9 3.1.6 Cycling visitors expenditure ...... 10 3.2 Overview of Cycling Tourism and Rail Trails ...... 11 3.2.1 Cycling is becoming a tourism product and travel motivator ...... 11 3.2.2 Growth in rail trails and other multi use trails ...... 11 3.2.3 Rail trails as a visitor attractant ...... 11 3.2.4 Rail trails appeal to a broad range of markets ...... 12 3.2.5 The economic impact of rail trail tourism is strong ...... 12 3.2.6 Rail trails provide opportunities for business diversification ...... 14 3.2.7 Social and health benefits of cycling ...... 14 3.2.8 Cycling industry ...... 15

4 Competitor review and SWOT analysis ...... 16 4.1 Overview ...... 16 4.2 Competitor review ...... 16 4.2.1 Rail trails versus other recreational trails and roads ...... 16 4.2.2 Competitor rail trails in Queensland to a completed Brisbane Valley Rail Trail .... 16 4.2.3 Competitor rail trails elsewhere in Australia and New Zealand to a completed Brisbane Valley Rail Trail ...... 17 4.3 Strengths ...... 17 4.4 Weaknesses ...... 19 4.5 Opportunities ...... 19 4.6 Threats ...... 20

5 Options considered ...... 21

6 Impact on Somerset Regional Council as proponent ...... 22

7 Cost benefit analysis and approach ...... 24 7.1 Forecast demand ...... 24 7.2 Visitor days per visit ...... 25 7.3 Per visitor expenditure per day ...... 25 7.4 Increased value added to the regional economy ...... 26 7.5 Brisbane Valley Rail Trail operating and maintenance costs ...... 26 7.6 Queensland Government maintenance contributions ...... 27 Brisbane Valley Rail Trail – Business Case Page 2

7.7 Cost benefit assessment...... 27 7.8 Socio-economic outcomes ...... 28

8 Conclusion ...... 31

Brisbane Valley Rail Trail – Business Case Page 3

1 Executive summary

Council seeks funding for the completion of the Brisbane Valley Rail Trail.

This involves the re-development of 27.25 km of disused rail corridor from Toogoolawah to Moore in the Brisbane Valley of Queensland into a recreational trail to connect the existing Wulkuraka to Toogoolawah and Moore to Yarraman Rail Trails.

By 31 March 2018, this will create a shared use rail trail spanning a total length of 160 km for non-motorised recreational users including walkers and mountain bikers that will be the longest in Australia.

Brisbane Valley Rail Trail will travel through Somerset, South Burnett, Toowoomba Regional and Ipswich City local government areas linking towns and communities and benefitting associated businesses in Wulkuraka, Fernvale, Lowood, Coominya, Esk, Toogoolawah, Harlin, Moore, Linville, Benarkin, Blackbutt and Yarraman.

Investment of $3.354 million in the construction of the rail trail is likely to bring socio economic benefit to the region that is quantifiable by reference to other rail trails in Australia and New Zealand.

The Queensland Government has made $1.8 million available for constructing this project until 30 June 2018 provided the trail is owned (via a 50 year sublease) and maintained by local government following completion.

Unemployment and median household income indicators for the Somerset and South Burnett target areas are significantly worse than those for Queensland as a whole. The project aims to improve these indicators.

The business case concludes that at five years post construction it is estimated the Brisbane Valley Rail Trail would increase direct tourism expenditure in the region by $1.5 million per annum. In addition, the Queensland Government has pledged to contribute $2.0 million towards maintenance of the rail trail over the first 15 years following construction. The flow-on impacts of this expenditure in the region are expected to be significant. This increase in economic activity is estimated to support 49 jobs in the region at the median income level for Queensland.

The impact of the Brisbane Valley Rail Trail is expected to become progressively greater at ten and fifteen years post construction due to greater usage rates.

At fifteen years post construction the Brisbane Valley Rail Trail is estimated to increase economic output in the region by $2.2 million per annum and support 58 jobs.

Brisbane Valley Rail Trail – Business Case Page 4

The employment impact of the rail trail will be significant for the communities of Somerset and South Burnett given that a large proportion of the jobs created would be within the local region. Employment opportunities in regional areas can be limited and the rail trail will provide a well-needed boost to these communities.

Participation in rail trail activities offers many social, health-related and cultural benefits to residents of Somerset, South Burnett and other areas. It is envisaged that the participation rate in cycling in south east Queensland will increase with the development of the rail trail. The trail has the capacity to increase social morale as well as providing health benefits for the local population.

This investment will provide a significant enhancement to the existing 130 km Wulkuraka to Toogoolawah and Moore to Yarraman Rail Trails making the region a competitive tourism and cycling destination.

Brisbane Valley Rail Trail – Business Case Page 5

2 Project objective

2.1 Community need

The project will address economic disadvantage in the Somerset and South Burnett local government areas. This economic disadvantage is evidenced by poor economic indicators for unemployment and income in these areas.

Table 1 Selected indicators, Queensland, Somerset (R) and South Burnett (R) LGA / State September 2016 Median total Median total unemployment household income personal income rate 2011 2011 % $/week $/week Queensland 6.1 1,235 587 Somerset (R) 9.3 928 445 South Burnett (R) 8.6 789 397

The project will also have social and health benefits.

The specific benefits from the Brisbane Valley Rail Trail that address this disadvantage are identified as:

Short term benefits • Creation of short term jobs through rail trail construction • Creation of demand for secondary services throughout region as construction progresses • Creation of community, government, and business engagement

Medium term benefits • Employment growth directly related to rail trail operations • Employment growth indirectly related to the Brisbane Valley Rail Trail, in the tourism, accommodation and services sectors • Regional investment in the cycle trails and related businesses • Increased complementary benefits for local residents such as active transport, recreation, health, social and cultural experiences • Diversification of the region’s tourism product mix • Increased national and international awareness of the region through branding and marketing of Australia’s longest rail trail • Greater attraction of a high value and fast growing segment of Queensland’s visitor market (cycle tourists)

Long term benefits • Increased employment and economic development opportunities for the regional economy • Enhances Queensland’s reputation as a cycle tourism destination

Brisbane Valley Rail Trail – Business Case Page 6

3 Background

The Brisbane Valley Rail Trail development opportunity has been identified as being part of a potential solution to low levels of economic development in the wider region in plans including:

• the Regional Development Australia Ipswich and West Moreton Regional Roadmap 2016-2020 • Brisbane Valley Rail Trail Plan (Queensland Department of Infrastructure and Planning 2008) • Active Trails: A Strategy for Regional Trails in South East Queensland (Queensland Co-ordinator-General 2007) • Somerset Destination Management Plan and Destination Marketing Brand, March 2014 (The Stafford Group)

This report provides an assessment of the estimated market demand and socio- economic impact of completing the Brisbane Valley Rail Trail.

It considers the type and extent of the potential visitor markets and makes a preliminary assessment of the markets offering the most potential for the Brisbane Valley Rail Trail. The report considers the potential economic benefit of rail trail tourism and draws on research and anecdotal evidence from established rail trails in Australia and elsewhere.

The analysis has been completed using best available data as well as case studies from the development of similar trail networks in comparable destinations in Australia and New Zealand.

Relevant data, reports and strategies include: • “Growing Cycling Tourism in Victoria” (full September 2015 research report by EY Sweeney/ Tourism Research Australia • “Economic benefits of recreation trails” Mike Halliburton Associates November 2016 • Australian Bureau of Statistics - census and other data • Queensland Government Statistician - Queensland Regional Profiles • Australian Sports Commission. Exercise, Recreation and Sport Surveys (ERASS) • Data and reports provided by South Burnett Regional Council and Dorset Council is gratefully acknowledged

3.1 Market analysis An assessment of the potential market for the Brisbane Valley Rail Trail has been undertaken to provide a basis for forecasting demand. The assessment has considered participation in recreation, usage of trail networks, recent trail developments and visitor preferences as well as general trends in cycling tourism.

Brisbane Valley Rail Trail – Business Case Page 7

3.1.1 Trends in cycling and walking The market for the Brisbane Valley Rail Trail experience will be a combination of those who already walk or cycle while away from home (e.g. tourists), recreational cyclists and walkers (e.g. those who cycle and walk at home) and a broader potential market that does not cycle currently.

Council’s main objective with this project is to increase economic activity in the region and this application focuses on the cycling market because of its rapid growth, propensity to spend while travelling and availability of data as outlined below.

3.1.2 Cycle tourism Cycle tourism includes visits to places outside the home region for the purpose of holiday, pleasure or sport, where participation in cycling is either a primary or secondary activity.

Cycle tourism is a growing market within the Australian tourism sector, particularly within the nature based tourism segment. It includes both domestic and international visitors, mostly staying overnight but can include day trippers. It includes cycle tourers, mountain bikers and road cyclists.

Data sourced from the “Growing Cycling Tourism in Victoria” (full September 2015 research report by EY Sweeney/ Tourism Research Australia and TRC Tourism Pty Ltd provide useful information on cycle tourism in Australia which is summarized below.

3.1.3 Cycle tourism is a growth market in Australia In 2012/13, approximately 1.3 million domestic overnight visitors in Australia participated in cycling during their trip representing 21% growth in this market since 2005/06.

In 2012/13 over 1 million visitors went cycling on a day trip representing an increase of 33% over the period from 2005/06 (TRC Tourism Pty Ltd).

Cycling participation rates as a percentage of total population in Queensland increased from 8.4% in 2001 to 11.1% in 2010 (source: ERASS annual reports, Australian Sports Commission) and this trend is reflected nationally. Almost all of the reported participation was non-organised cycling.

15% of travellers cycle while on holidays and 21% of these travellers reported cycling along rail trails that have been converted to bike paths in the previous two years (3.1% overall). (EY Sweeney)

Brisbane Valley Rail Trail – Business Case Page 8

3.1.4 Recreational cycling markets Participation in recreational activities by Australian and Queensland residents aged 15 or more years has been measured annually by the Australian Sports Commission (ASC) over the period from 2001 to 2010.

Cycling was rated as the fourth most popular physical activity in Australia in 2010, with an estimated 2.1 million participants.

A summary of recent participation rates and numbers for Queensland are presented in the table below and confirm the growth in cycling.

Table 2: Cycling participation in Queensland – source: ERASS reports Year Cycling total participation Total participation rate – - Queensland Queensland (%) 2010 389,600 11.1 2009 364,400 10.6 2008 333,300 10.2 2007 326,500 10.2 2006 273,200 8.7 2005 308,600 9.9 2004 291,100 9.6 2003 274,600 9.3 2002 243,200 8.5 2001 235,100 8.4

Cycling participation in Queensland increased 65% per cent over the period 2001- 2010.

3.1.5 Overnight travel cycling market Most people who cycle while on holidays engage in a cycling experience that is an overnight trip or a day trip more than 50km and/or more than four hours away from home and most people who cycle while on holidays stay overnight as part of the experience.

This group of people is the main target market for the Brisbane Valley Rail Trail as these visitors would spend the most with local accommodation businesses, food outlets and other businesses.

The most common length of stay for visitors to regional areas who cycle while on holidays is 3 nights.

Table 3: Duration of stay by surveyed holidaymakers who had cycled in regional areas during their most recent holiday – source: EY Sweeney, September 2015 Length of stay Percentage of total A day trip 16%

Brisbane Valley Rail Trail – Business Case Page 9

1 night 15% 2 nights 22% 3 nights 25% 4 nights 3% 5 nights or more 19%

Table 4: The average length of stay reported for long distance competitor rail trails: Competitor rail trails of similar Leng Average Source total length th number of (km) days spent riding trail

Murray to the Mountains Rail Trail, 98 2.5 days TRC Tourism Pty Ltd Vic

Central Otago Rail Trail, NZ 150 3.5 days Central Otago District Council

3.1.6 Cycling visitors expenditure There is evidence that recreational cyclists are a high yield, high spending market and provide numerous economic and social opportunities for regions.

53% of people who had cycled while on holidays report household incomes of greater than $78,000 per annum.

While EY Sweeney (September 2015) report much higher average expenditure by holidaying cyclists, a report prepared for the purpose of this grant application by Mike Halliburton Associates Consultants confirmed expenditure by users of rail trails (including cyclists) as follows:

Table 5: Trail user expenditure by category for visitors (source: Mike Halliburton Associates 2016) Category Trail user expenditure for Trail user expenditure by overnight visitors day-trippers (average per (average per day) day) Accommodation $29.19 $0.00 Food and beverage $67.83 $30.03 Transport $24.08 $24.27 Retail $20.95 $0.00 Other including cycle $14.87 $38.52 maintenance Total $156.92 $92.82 For the purpose of this application, which is for the construction of a link between two existing shorter rail trails to form a very long rail trail, it is assumed that the

Brisbane Valley Rail Trail – Business Case Page 10

additional benefit to the local economy from completing the trail will be from additional overnight visitors rather than additional day trippers.

3.2 Overview of Cycling Tourism and Rail Trails

3.2.1 Cycling is becoming a tourism product and travel motivator Following on from increasing participation in outdoor recreation is an increase in travel with an adventure or outdoor recreation component. Walking and cycling holidays and related services have become familiar products in the tourism industry. This is evidenced by the development of trails and associated products, notably in Victoria and New Zealand where Government investment has assisted in the development of a range of trails.

3.2.2 Growth in rail trails and other multi use trails

Rail trails have been developed in all states of Australia. They are also well established in New Zealand, Europe and North America.

Victoria and South Australia have led the way with the development of a range of high standard cycling trails. Victoria’s Cycle Tourism Action Plan 2011-2015 establishes the priority trails selected on the basis of their potential to attract interstate and intrastate visitation and increase length of stay. Victoria now has over 850km of high standard rail trails, the most economically successful being the 98km Murray to the Mountains Rail Trail.

The Victorian government and Tourism Research Australia commissioned a major research report into growing cycling tourism in that state by EY Sweeney in September 2015 including rail trail matters. Data from this report provides valuable insight into how economically successful a completed Brisbane Valley Rail Trail might be.

South Australia possesses a highly developed product offering, including rail trails and a number of cycle friendly businesses. Cycle friendly businesses are typically businesses that encourage cycle tourists by offering safe bicycle storage, providing water and are able to inform the cyclist on tracks and trails as well as maintenance and support services. The Riesling Trail is a successful rail trail through the Claire Valley.

New Zealand is a strong competitor in rail trails and cycling trails generally. Renowned cycling products in New Zealand include the 150km Central Otago Rail Trail and the 82km Hauraki Rail Trail.

3.2.3 Rail trails as a visitor attractant

Brisbane Valley Rail Trail – Business Case Page 11

Tourism to some of the country’s key cycling areas demonstrates the growth and importance of cycling. A summary of reported visitor numbers using the popular rail trails in NZ and Australia is presented below:

Table 6: Reported rail trail visitor numbers Competitor rail trails of Lengt Visitors Overnight Source 40km to 150km total h pa visitors length (km) pa/ whole trail users Hauraki Rail Trail, NZ TRC Tourism Pty Ltd 82 21,000 14,000 Central Otago Rail Trail, TRC Tourism Pty Ltd/ Mike NZ 150 20,000 14,000 Halliburton Associates 2016 Lilydale Warburton Rail Mike Halliburton Associates Trail, Vic 40 105,000 5,000 2016 Murray to the Mountains np TRC Tourism Pty Ltd Rail Trail, Vic 98 26,550 Moore to Blackbutt Rail np South Burnett Regional Trail, Qld 30 12,500 Council (2013 traffic counter 5 km west Linville) Great Victorian Rail Trail, np Mike Halliburton Associates Vic 134 27,500 2016

Further details of trail usage is included in the Mike Halliburton Associates report which was commissioned for the purpose of this application.

3.2.4 Rail trails appeal to a broad range of markets

A key advantage of rail trail construction is the gradient – given most rail lines have a gradient of less than three degrees, this allows and encourages use by almost all population groups, regardless of age. They also provide excellent opportunities for people with mobility disabilities, e.g. wheelchair users, special cycles, walking with support, or sight/ hearing impediments.

EY Sweeney 2015 reported that recent holiday cycling participants (such as rail trail users) were mainly aged between 18 and 34 years and most commonly included young couples, with or without children, but that there was broad representation across many age groups and household types.

The one standout statistic for cycling holidaymakers reported was that the majority had household incomes in excess of $78,000.

3.2.5 The economic impact of rail trail tourism is strong

There is strong evidence that rail trails provide numerous economic and social opportunities for regional Australia. The following examples provide an indication of the types of economic impacts of rail trail tourism:

Brisbane Valley Rail Trail – Business Case Page 12

• Research by the Central Otago District Council in May 2015 showed that trail tourism on the 150 km cycling and walking Central Otago Rail Trail in New Zealand had positive impacts on many local businesses and the local economy. • The largest impacts are in the areas of accommodation, package operators as well as food and consumables.

Table 7: Economic benefits of the Central Otago Rail Trail (Source: User Survey 2014-2015, Central Otago District Council) Impact summary Direct impact Total direct and indirect impact Output $6.90 million $10.39 million GDP $3.55 million $5.27 million Employment (FTE’s) 81.0 102.4

Table 8: Breakdown of positive employment impact of the Central Otago Rail Trail by sector (Source: User Survey 2014-2015, Central Otago District Council) Sector Direct impact - Total direct and FTE’s indirect impact – FTE’s Accommodation 41.1 48.9 Food and consumables 17.1 20.5 Retail 3.4 4.1 Road passenger transport 6.7 9.2 Vehicle and equipment hire 4.2 6.8 Business admin and management services 7.5 11.6 Entertainment 0.9 1.2 Total 81.0 102.4

• Research in respect of other recreational trails showed similar positive results for the associated regional economies. The total estimated expenditure for the year ending December 2010 by domestic overnight, daytrip and international overnight visitors that participated in cycling in Victoria was $362 million (Source: Victoria’s Cycle Tourism Action Plan (2011-2015). The Action Plan)

Table 9: Economic impacts from recreational trail user expenditure (Source: Economic benefits of recreation trails: a brief summary – November 2016, Mike Halliburton Associates (commissioned for BVRT grant applications)) Recreational trail Location Annual user Description of expenditure/ impact benefit Mundaring Trails 1 hour from Perth $12.62 million Annual benefit to Network CBD the local economy (2001)

Brisbane Valley Rail Trail – Business Case Page 13

Riesling Trail Claire Valley, $1.08 million Annual trail user South Australia expenditure by visitors (2004) Bibbulmun Track Western Australia $13.1 million Annual trail user expenditure by visitors (2015)

3.2.6 Rail trails provide opportunities for business diversification

Rail trails present opportunities for businesses to develop products and services to meet the needs of visiting cyclists and walkers. This includes transport, merchandise, accommodation or provisioning and guiding services.

Cyclists do more while on holiday when compared with other tourists, making them a stronger source of income for regional economies. This pattern of use has resulted in the diversification of the tourism product mix in some regional areas.

According to TRC Tourism Pty Ltd, research undertaken in New Zealand suggests that a modest number of businesses have been started as a result of the trails as follows:

• One in seven local businesses surveyed in rail trail regions in NZ said that they had expanded their business (added capacity or added new service) as a result of the trail opening in their region. In some cases these expansions were significant in terms of either capacity or services, but the majority were smaller, such as accommodation providers purchasing several bicycles for hire.

3.2.7 Social and health benefits of cycling

A well-built, well-planned rail trail that is set in an attractive environment will actively encourage people to exercise more to maintain their health. This will contribute to physical and mental health improvements, assisting with disease prevention particularly cardiovascular, musculoskeletal, respiratory, nervous and endocrine systems as well as reducing obesity, hypertension, depression and anxiety.

The economic benefit to society of getting an inactive person to walk or cycle is calculated between $5,000 and $7,000/year. The economic benefit to society of getting an active person to walk or cycle is between $850 and $2,550/year. The obesity epidemic alone is now estimated to cost Australia $1.3 billion/year (Australian Bicycle Council). One heart attack is estimated to cost in the vicinity of $400,000 in direct and indirect costs.

Brisbane Valley Rail Trail – Business Case Page 14

A cost-benefit analysis in Norway (Institute of Transport Economics, 2002) assessed cycle network improvements that encouraged commuting and local exercise and costed their economic value to society. The study found that there was a significant reduction in severe diseases stemming from increased exercise activity on cycle networks. The costs savings to society from this reduction made up 50-66% of the total benefit of investment in cycle networks.

There is a significant communal benefit to rail trails in regional and remote areas. Importantly, they assist in connecting people to places, and people to people, bringing new residents into small rural communities and enhancing social interaction.

Opportunities can be created for community participation in conservation and revegetation work, fostering a sense of pride and community identity. Rail trails also often provide opportunities for the community to experience natural and cultural environments previously unseen in their own area.

3.2.8 Cycling industry

Bicycle sales can also be seen as a reflection of Australians interest in cycling. Annual bikes sales in Australia have increased from $131 million in 2002-2003 to $240 million in 2008-09 (Source: TRC Tourism Pty Ltd). The industry today has a wider variety of products being sold to a greater range of consumers.

Bicycles are now more comfortable, reliable and function specific and cater to the needs of a broader market from beginners to novices.

Brisbane Valley Rail Trail – Business Case Page 15

4 Competitor review and SWOT analysis

4.1 Overview This section will comprise an analysis of the strengths, weaknesses, opportunities, threats and constraints impacting on completing a major recreational trail in the region as well as a review of other recreational trails and how the Brisbane Valley Rail Trail might compete in the recreational trail market.

Economic indicators for the Somerset and South Burnett target areas are significantly worse than those for Queensland as a whole. The project aims to improve these indicators.

Investment of $3.354 million in the construction of the Brisbane Valley Rail Trail is likely to bring significant socio economic benefit to the region.

4.2 Competitor review

4.2.1 Rail trails versus other recreational trails and roads It is considered that cycle tourists want easy multi-day trips with good supporting services or events. The holidays can also be location-based and utilise nearby trail networks. They require trips that take in the region’s landscape, natural environment and culture.

Above all, cycle tourists and recreational riders are looking for easy access to safe and traffic-free trails.

Rail trails have advantages over other recreational trails for cyclists and other potential visitors including: • Rail trails have a gentle grade which may suit less fit riders than transport routes such as roads and trails that were not designed for wheeled transport which may have steep grades. The difference in elevation between Wulkuraka and Yarraman over the full 160 kilometre length of the Brisbane Valley Rail Trail is 358 metres • Rail trails are safe off-road trails. Many rural roads and rural highways lack the width to safely carry bicycle traffic. • Rail trails are hard surface trails mainly comprising compacted stone ballast. Many off-road recreational trails have soft surfaces that are not suitable for cycling other than mountain biking.

4.2.2 Competitor rail trails in Queensland to a completed Brisbane Valley Rail Trail BVRT’s southern terminus is a railway station within the Brisbane train network with frequent services to the major population centres of Brisbane and the Gold Coast.

Brisbane Valley Rail Trail – Business Case Page 16

The only other known open rail trail in Queensland with a length greater than 40 kilometres is the 55 km Mt Garnet to Lappa Junction rail trail in Tropical North Queensland. This trail is not considered to offer direct competition to the BVRT because of its distance to major population centres.

The unopened 60 kilometre Kingaroy to Kilkivan Rail Trail similarly has terminuses that are 212 and 217 kilometres respectively from the Brisbane CBD and which might be considered to attract a different market to BVRT.

4.2.3 Competitor rail trails elsewhere in Australia and New Zealand to a completed Brisbane Valley Rail Trail Rail trails in Victoria and New Zealand in particular are long-established and offer the strongest competition to the Brisbane Valley Rail Trail for users who are prepared to travel greater distances to experience a rail trail cycling holiday.

Australasian competitor rail trails of 40km to 150km total length include: • Hauraki Rail Trail, NZ (82 km) • Otago Central Rail Trail, NZ (150 km) • Lilydale Warburton Rail Trail, Victoria (40 km) • Murray to the Mountains Rail Trail, Victoria (98 km) • Great Victorian Rail Trail, Victoria (134 km)

These rail trails are: • Well known by cyclists • Generally close to major population centres • Link businesses providing good services • Provide access to scenic areas

The 2015 Tourism Research Australia report, “Growing Cycling Tourism in Victoria” sets the tone for the challenge for new rail trails competing against Victorian rail trails as follows:

“There are some clear points of difference on offer for those seeking cycling tourism experiences in Victoria compared to other states, not the least being the diversity of potential experiences available...The diversity of natural settings on offer (ranging from stunning coastal roadways through to diverse mountain and forest trails and everything in between) suggests that Victoria is a premium setting for cycling tourism.”

Notwithstanding these challenges, the Brisbane Valley Rail Trail has some clear competitive strengths.

4.3 Strengths The strengths for the Brisbane Valley Rail Trail project including when compared to other rail trails around Australasia can be summarized as follows:

Brisbane Valley Rail Trail – Business Case Page 17

• The $1.8 million construction subsidy and $2.0 million maintenance subsidy offered by the Queensland Government for this $3.354 million project (provided it is built before 30 June 2018) would represent a substantial boost to the local economy and to local construction industry employment even if expected ongoing regional economic benefits from tourism cannot be achieved.

• The Brisbane Valley Rail Trail will be the longest rail trail in Australia. This will greatly support efforts in marketing the trail to visitors.

• There are heritage aspects to the Brisbane Valley Rail Trail in the project area including a 1910 built 100 metre rail tunnel which provides a marketing advantage compared to other trails.

• Trail gradient is a critical factor in successfully designing a trail for a specific market or type of rider. For a large portion of the location-based cycling and cycling holiday market average trail gradients of 2-3° are required. The Brisbane Valley Rail Trail has an average gradient of around 1 in 400 that will appeal to a broad market.

• The proposal is a relatively low cost solution for the provision of a long rail trail because it involves the linking of two existing shorter segments of rail trail (the 85 km Wulkuraka to Toogoolawah rail trail and the 45 km Moore to Yarraman rail trail)

• Data and research is available in respect of other rail trails (particularly Victorian rail trails) that allows for a quantification of potential use and demand and economic benefits at the completion of the project.

• The rail trail will be situated within freehold land that will be controlled by the proponent under a sublease that will provide broad legal powers to enable effective ongoing management of the trail.

• The proposal has the strong support of the local community and businesses.

• Council as the project’s proponent is financially sound and has extensive experience in delivering projects of this scale and greater as well as having experience in maintaining and operating a 10km section of the BVRT since 2003.

• The Brisbane Valley Rail Trail provides multiple access points and a safe, easy trail for beginners and families and will be wide enough for cyclists to ride two or three abreast enhance the social aspect of the cycle experience.

• The BVRT can leverage off Queensland’s established, high profile reputation as a nature-based and soft adventure tourism destination, with the potential to bundle rail trail activities with other tourism products, including food and water-based activities in the region.

Brisbane Valley Rail Trail – Business Case Page 18

• The BVRT offers opportunities for cyclists and walkers to experience a range of landscapes within a short period of time and explore the villages and communities along the way.

• The BVRT is in close proximity to Brisbane, a significant source market for cycle tourism and opportunities for the short break market.

• Brisbane/ Ipswich provides a central base – a variety of riding exists within close range and has a strong cycling network in the community.

• Communities along the BVRT route have good road access.

• Stable temperate weather (relative to Victorian and New Zealand areas) makes the Brisbane Valley Rail Trail an attractive destination in winter when riding on many competing rail trails may be uncomfortable for many riders.

• Regular cycle-friendly public train services to Wulkuraka (the southern terminus of the BVRT) offer a unique opportunity to raise the profile of the region as a long distance cycling destination.

• The BVRT has the potential to leverage off the profile of events such as the Rio Tinto Ride for Cancer (previously held in Somerset Region in 2011) and other events.

• Attractiveness of small communities – places like Esk, Yarraman and Fernvale are experiences in themselves.

4.4 Weaknesses • While the BVRT has a gentle average gradient, the section between Linville and Blackbutt is steep and this may be a deterrent to some potential users.

• While consulting engineers are confident in their designs, there is necessarily some geotechnical and construction risk with the project. The consequences of the risk are in respect to potential delays in delivery timeframes and in cost overruns. These risks are managed through the holding of cash reserves by Council for asset management purposes.

• Most competing long rail trails are situated in more temperate areas. Temperatures on the BVRT in summer may deter some potential users.

• The BVRT has a gravel surface that may deter some potential users who would prefer a sealed or partly sealed surface.

4.5 Opportunities • Major unlinked components of the Brisbane Valley Rail Trail representing 82% of the whole trail already exist. The unlinked existing trails simply

Brisbane Valley Rail Trail – Business Case Page 19

cannot be marketed as effectively as a single 160 kilometre Brisbane Valley Rail Trail. The completion of a 27 kilometre link between two existing trails represents an opportunity to achieve a far more significant asset for relatively little additional cost.

• A Stafford and Associates Pty Ltd noted in the document “Destination Management Plan” prepared for Somerset Region in March 2014 that the region has a limited built attraction base for tourism. The BVRT will be both a significant built attraction and a potential attractant of new tourism assets.

• A Stafford and Associates Pty Ltd also noted in the “Destination Management Plan” prepared for Somerset Region, that many people do not know where Somerset is. The BVRT provides an opportunity to raise awareness about the region.

• A key focus of the 2009 Somerset Economic Development Plan is the attraction of new residents and business. Improved outcomes for local tourism-related industries may lead to the attraction of new residents and businesses which may in turn lead to developments both inside and outside these industries which contribute to economic growth.

• Completion of the project may provide an impetus for increased cooperation between tourism businesses and Council. Closer cooperation between Council and these businesses may bring further economic benefits.

4.6 Threats • The $1.8 million construction subsidy and $2.0 million maintenance subsidy are only offered by the Queensland Government for this $3.354 million project provided it is built before 30 June 2018. Inability to obtain the balance capital funding for this project represents a threat to the local economy and local construction industry employment to the extent of these offered subsidies.

• The large scale of the Brisbane Valley Rail Trail presents potentially costly ongoing risk and management issues including public liability and land and asset management issues for which Council will not receive commensurate revenue. This may in turn present political risk for the project if expected local economic benefits are not realised.

• Unless economic opportunities are provided in the local economy, residents may choose to relocate to places where higher median income levels apply.

• The interest of future residents relocating to the catchment area may be detrimentally impacted on once they become aware of the existing limited opportunities for participation in the local economy due in part to lack of built attractants such as a completed rail trail.

Brisbane Valley Rail Trail – Business Case Page 20

5 Options considered

There are no identified options to achieve a project of this scale for the estimated cost because:

• Major unlinked components of the Brisbane Valley Rail Trail representing 82% of the whole trail already exist. The building of a 27 kilometre section of trail will result in a 160 kilometre major tourism asset

• The Queensland Government has confirmed its offer of capital funding for the project of $1.8 million and of $2.0 million in maintenance funding over 15 years provided the link section of the BVRT is built before 30 June 2018.

Council has considered the option of detouring cycle traffic between the Wulkuraka to Toogoolawah rail trail and Moore to Yarraman rail trail onto the public highway and other roads and not constructing the link rail trail.

This option is not recommended because:

• The 100 km per hour Brisbane Valley Highway (the main road between Toogoolawah and Moore) has no shoulders for almost all of the relevant section and carries around 2,800 vehicles per day including 17% heavy vehicles. (Source: Department of Transport and Main Roads Traffic and Speed Census 2013) There would be significant public safety concerns in recommending that cycle and other recreation traffic use this highway instead of using a completed Toogoolawah to Moore link of the Brisbane Valley Rail Trail.

• Local roads in the area which might also provide an alternative route for cyclists and other recreational users have an average width of 5.83 metres, significantly narrower than the Brisbane Valley Highway (typically 9 metres wide). These are also 100 km/hour roads and carry a high percentage of commercial traffic.

• Apart from safety concerns, cyclists may also be deterred by the gradient of roads as opposed to the gentle grade of the formed rail corridor.

• Council is unable to effectively market the two unlinked existing rail trails in the Brisbane Valley without constructing the link between the two.

Brisbane Valley Rail Trail – Business Case Page 21

6 Impact on Somerset Regional Council as proponent

Somerset Regional Council’s motivation with completing the Brisbane Valley Rail Trail is improving regional economic indicators such as unemployment.

Council and the Queensland Government (via the Department of Transport and Main Roads) have agreed that on completion of the Brisbane Valley Rail Trail, ownership and responsibility for the trail within the Somerset Regional Council boundaries will transfer to Council via a 50 year sub-lease.

Council recognises that there will be a net ongoing cost to Council as an entity with owning and operating the Brisbane Valley Rail Trail notwithstanding that the Queensland Government will contribute to the ongoing operating and maintenance costs on a declining annual basis.

Table 10 – Brisbane Valley Rail Trail expected maintenance costs by Somerset Regional Council and State Government maintenance funding to Council

Expected Maintenance maintenance and contributions operating costs confirmed - (gross) by Queensland Net (operating) cash Somerset Regional Government outflow by Somerset Financial year Council ($) ($) Regional Council ($) FY2019 628,556 296,000 332,556 FY2020 636,727 200,000 436,727 FY2021 645,004 200,000 445,004 FY2022 653,389 200,000 453,389 FY2023 661,883 200,000 461,883 FY2024 670,487 200,000 470,487 FY2025 679,203 200,000 479,203 FY2026 688,033 200,000 488,033 FY2027 696,977 49,000 647,977 FY2028 706,038 49,000 657,038 FY2029 715,216 49,000 666,216 FY2030 724,514 49,000 675,514 FY2031 733,933 49,000 684,933 FY2032 743,474 49,000 694,474 FY2033 753,139 49,000 704,139

Council is not anticipating receiving any other revenues from the Brisbane Valley Rail Trail such as user fees.

Brisbane Valley Rail Trail – Business Case Page 22

Council has a statutory responsibility to operate on a long term financially sustainable basis including the achievement of a long term operating surplus ratio (operating surplus divided by operating revenue) of at least 0%. This statutory target requires the generation of operating surpluses.

Council is aware of the adverse operating cost impact of the Brisbane Valley Rail Trail and submits that the additional costs are less than the average annual operating surpluses achieved by Council over the past four years as confirmed by audited financial statements.

On this basis, Council is confident that it can absorb the additional costs of maintaining and operating the Brisbane Valley Rail Trail in its area and continue meeting its financial sustainability targets without significant changes to its current operations.

Table 11 – Somerset Regional Council operating surpluses (deficits) confirmed by audited financial statements – FY2013 to FY2016 Audited operating surpluses/ (deficits) - Somerset Regional Financial year Council ($) FY2016 563,000 FY2015 3,790,000 FY2014 5,918,600 FY2013 ( 5,959,100) Average annual operating surplus 1,078,125

Brisbane Valley Rail Trail – Business Case Page 23

7 Cost benefit analysis and approach

The cost benefit analysis is prepared on the basis of costs and benefits to the local community and economy as a whole including Council.

7.1 Forecast demand There is no survey data to specifically quantify the market demand for the Brisbane Valley Rail Trail.

Instead the market demand has been estimated through analysis of other data sources. These included: • Competitor data – e.g. usage of other Rails Trails in Australia and New Zealand • Traffic count data on existing sections of rail trail near to the project area • Recreational activities undertaken by people in Queensland (via ERASS data) • Market trends in cycling participation • Market trends in visitor behaviour.

The cost benefit analysis model focuses on overnight stays in determining the regional economic benefit rather than day trippers. The 160 km length of the Brisbane Valley Rail Trail lends itself to multi-day adventures rather than day trips and it is considered that most single day expenditure would tend to be made by trail users before and after their day’s activities and outside the target area.

The data sources were used to estimate the usage of the trail up to fifteen years post-construction. Assumptions made in the calculations have been documented including as follows:

• The start point for estimating year one demand was the annual number of overnight visitors reported for competing rail trails of 40+ kilometres in length

• The competing rail trail where the lowest number of overnight visitors was reported was the Lilydale Warburton Rail Trail in Victoria (5,000 per annum)

• The reported overnight visitors for this rail trail was then reduced by the difference in cycling participants between Queensland and Victoria based on Australian Sports Commission data in order to derive a final year one estimated demand. This reduction reflects the lower population of Queensland versus Victoria as well as climactic and other differences. (29.8% reduction or 3,509 overnight visitors for year one)

• Growth in demand for the Brisbane Valley Rail Trail beyond year one was estimated using growth rates reported for cycling participation in Queensland by the Australian Sports Commission in the most recent four

Brisbane Valley Rail Trail – Business Case Page 24

reports published by the ASC. The lowest annual percentage growth rate in cycling participation reported for those years was applied to the year one demand for the Brisbane Valley Rail Trail (2.08%).

It is estimated that five years post-construction there would be 3,811 trips made on the Brisbane Valley Rail Trail involving overnight travel during the year.

7.2 Visitor days per visit The dominant tourism attractions in the Somerset Regional Council area are the major south east Queensland water impoundments of Lake Somerset and Lake Wivenhoe.

It is reported that these day-use lakes receive around 1 million visitors per year. Anecdotally, it is believed that visitors to the lakes typically tend to bring their own supplies for their visits, purchased from major south east Queensland urban centres and do not use either accommodation providers or food outlets.

The completed 160 kilometre Brisbane Valley Rail Trail’s status as the longest in Australia will allow local businesses to capture proportionately greater visitor expenditure because the rail trail will be a multi-day attraction.

The visitor expenditure is a function of total visitor numbers, visitor days and per- visitor expenditure per day.

Data from competing rail trails were used to estimate the average days spent on the trail per visitor. Assumptions made in the calculations have been documented including as follows:

• Operators of competing rail trails of a similar length to the Brisbane Valley Rail Trail published the average number of days visitors spent riding or otherwise using their trails based on user surveys.

• The lowest number of days reported for any trail was 2.5 days for the Murray to the Mountains Rail Trail in Victoria which is 98 kilometres long

• It was assumed that visitors to a completed 160 kilometre Brisbane Valley Rail Trail would also spend an average of 2.5 days each on the trail per visit.

No growth in average days per visit over the 15 years of the forecast has been assumed in the cost benefit analysis.

7.3 Per visitor expenditure per day A report from Mike Halliburton Associates was commissioned for the purpose of this funding application. Mr Halliburton derived estimates of per visitor per day expenditure from an “amalgam of existing research data” with the results shown in table 5.

Brisbane Valley Rail Trail – Business Case Page 25

Table 5: Trail user expenditure by category for visitors (source: Mike Halliburton Associates 2016) Category Trail user expenditure for Trail user expenditure by overnight visitors day-trippers (average per (average per day) day) Accommodation $29.19 $0.00 Food and beverage $67.83 $30.03 Transport $24.08 $24.27 Retail $20.95 $0.00 Other including cycle $14.87 $38.52 maintenance Total $156.92 $92.82

Data sighted from Tourism Research Australia and the Central Otago District Council suggests typically per visitor per day expenditure on rail trails in Victoria and Otago, New Zealand is higher than that estimated above.

Growth in average daily expenditure has been assumed for the cost benefit analysis of 1.3% per annum which reflects the consumer price index (Australia) for the year to 30 September 2016.

7.4 Increased value added to the regional economy Increased value to the regional economy has been calculated as a function of expected overnight visitors by average days per visit per person by average per day expenditure by overnight visitors (ie direct expenditure).

The increased value to the regional economy does not consider an estimate of indirect expenditures from the rail trail, consumer surplus/ cost of goods sold, indirect benefits such as public health costs savings or other indirect outcomes.

It is understood that a multiplier of 0.91 (of direct expenditure) is used by Tourism Research Australia to calculate indirect expenditure at a national level.

7.5 Brisbane Valley Rail Trail operating and maintenance costs Somerset Regional Council will operate and maintain the Brisbane Valley Rail Trail within its boundaries for 50 years under a sublease from the State Government on completion of the Toogoolawah to Moore section of the trail. The total length to be maintained by Somerset Regional Council will be 124 kilometres out of the 160 kilometre total Brisbane Valley Rail Trail (78%). Other local governments will similarly maintain the 22% of the BVRT in their areas.

A detailed asset management plan for the asset has been adopted which outlines maintenance standards for each section of the trail.

Somerset Regional Council has commissioned a survey of the Brisbane Valley Rail Trail by engineering firm Shepherd Services Pty Ltd which incorporates international roughness index (IRI) data, imagery of the trail and other data.

Brisbane Valley Rail Trail – Business Case Page 26

Council has maintained a 10 kilometre long section of the Brisbane Valley Rail Trail (between Fernvale and Lowood) since 2003 and has good data about the operating and maintenance costs of this section of the BVRT as a result.

The adopted asset management plan projects an annual cost to maintain the Brisbane valley Rail Trail to the standard specified in that plan in 2016 dollars as $628,556.

7.6 Queensland Government maintenance contributions A letter from the Queensland Department of Transport and Main Roads dated 1 December 2016 is held confirming that the State will contribute towards the maintenance of the Brisbane Valley Rail Trail on a declining annual basis until 2036.

Contributions to be paid to Somerset Regional Council will reduce from $296,000 in year one down to $49,000 in 2036 (quoted in the dollars for those years).

The letter contains additional assurances from the Queensland Government regarding Council’s control over the Brisbane Valley Rail Trail and this project.

7.7 Cost benefit assessment The results of the cost benefit analysis for the Brisbane Valley Rail Trail are calculated as the total discounted present value direct incremental cost and benefits and resulting net present value (NPV) and benefit cost ratio (BCR):

• Net Present Value (NPV) – the difference between the PV of total incremental benefits and the PV of the total incremental costs, which allows the project options to be compared on the same basis to allow determination of the greatest net benefit to the community or the most efficient use of resources. Project options that yield a positive NPV indicate that the (discounted) incremental benefits of a scenario exceed the incremental costs over the evaluation period. • Benefit Cost Ratio (BCR) – ratio of the PV of total incremental benefits to the PV of total incremental costs. A BCR greater than 1.0 indicates that project benefits exceed project costs. However, generally, a project with a higher BCR may be preferred to protect against unexpected project delays, optimism bias or cost overruns.

A discount rate of 6% has been applied reflecting a rate recommended for similar projects by the Queensland Department of State Development.

The BCR is calculated on the total project cost.

The NPV and BCR are calculated as: NPV @6% (to FY2033) 7,572,441 Benefit to cost ratio 3.26

Brisbane Valley Rail Trail – Business Case Page 27

7.8 Socio-economic outcomes The socio-economic impact of the proposed Brisbane Valley Rail Trail to the Somerset/South Burnett region has been estimated based on an assessment of the economic, social and environment impacts from developing the rail trail.

Whilst, the cost benefit analysis has been based on total expected visitor expenditure, there are broader benefits expected to accrue from the BVRT including:

• the broader impact that the rail trail such as its impact on increasing the region’s profile as a cycling or adventure destination as a whole • construction impacts • health and other benefits

The impact of the rail trail from the additional expenditure undertaken as a consequence of the rail trail includes factors other than market demand and average expenditure.

The economic impact has been determined at two different stages: • During construction of the rail trail • Post-construction of the rail trail

Construction period It is estimated that the construction of the trail will support employment of 13 full- time equivalents (FTEs) across the region during the nine month period of trail construction.

It is believed the majority of this employment would be local to the region given the nature of the construction activities.

Assumptions: • 1 FTE is supported per annum for every $250,000 in construction expenditure in the region • 85% of employment is generated is local to the region (i.e. within Somerset/ South Burnett), with the remaining 15% from other areas of south east Queensland • Construction is completed over a nine month period • Total construction cost is $3.354 million as per the breakdown in the project plan

Post-construction period The annual economic impact of the rail trail has been estimated up to fifteen years post construction. This is shown in Table 12.

Table 12: expected employment impact of Brisbane Valley Rail Trail Financial year Total direct Annual median Jobs represented by economic personal income BVRT contribution at

Brisbane Valley Rail Trail – Business Case Page 28

contribution level for the median personal from tourism Somerset Regional income level (ie not and State Council area ($) full time equivalent Government (FTE) jobs) trail maintenance contributions FY2023 $1.77 M $34,253 52 FY2028 $1.91 M $36,538 52 FY2033 $2.25 M $38,975 58

At five years post construction it is estimated the rail trail would increase direct tourism expenditure in the region by $1.57 million per annum and the maintenance contributions from the State would be $0.2 million.

The tourism impact of the rail trail is expected to become progressively greater at ten and fifteen years post construction due to greater participation on the BVRT while the level of maintenance contributions from the State Government declines.

Following construction the jobs created from the rail trail will be primarily in the hospitality, accommodation and food and services industries. However, the employment benefits can be far reaching and impact other trades and services.

Health and lifestyle benefits for the community Participation in rail trail activities offers many social, health-related and cultural benefits to residents and visitors alike. Often it is difficult for these benefits to be quantified in market economy terms. However this does not detract from the importance of these benefits that highlights the purpose of their provision; long term health, leisure, family, community, wellbeing and societal benefits to be gained by all.

It is envisaged that the participation rate in cycling in the region may increase with the development of the rail trail. This has the capacity to increase social morale as well as providing health benefits for the local population.

An increased profile for the region as a result of the rail trail may also contribute towards enhancing regional pride within the local communities. Other regional locations in Australia have successfully increased community participation and spirit through similar tourism-related projects.

There is a significant communal benefit to rail trails in regional and remote areas. Importantly, they assist in connecting people to places, and people to people, bringing new residents into small rural communities and enhancing social interaction. An increase in visitation and economic activity in the region is likely to also increase investment and development of service and support industries such as in hospitality. This may give local residents more choice and variety of cafés or restaurants.

Brisbane Valley Rail Trail – Business Case Page 29

Investment attraction and regional stimulus Increased visitation and expenditure in the region as a result of the rail trail is also likely to attract further investment within the Somerset/ South Burnett Region. TRC Tourism Pty Ltd report that an Otago Central Rail Trail survey indicates that 29% of survey respondents said that the rail trail was very important in their decision to buy or start their business.

The Brisbane Valley Rail Trail presents an opportunity for entrepreneurs to develop products and services to meet the needs of visiting cyclists. This could include transport, merchandise, accommodation or provisioning and guiding services.

There are existing operators in the region that may also stand to benefit considerably from the increase in visitation. They are likely to capitalise on this opportunity and provide additional services, products and experiences for the rail trail users.

The increased expenditure may also provide significant stimulus to the regional communities of Somerset/ South Burnett. There may be increased expenditure particularly within the accommodation and food services industry. An increased length of stay for existing markets may improve the occupancy rate of accommodation facilities and may also result in investment in new accommodation infrastructure to meet market needs.

Brisbane Valley Rail Trail – Business Case Page 30

8 Conclusion

The assessment of the proposed Brisbane Valley Rail Trail indicates that it is likely to provide a tourism and recreational product of regional significance, capable of generating new and complimentary tourism investment along its length and contributing to the economic growth of the region.

It is likely to provide positive economic returns to the region while representing a net annual cost to Somerset Regional Council that is less than recent operating surpluses generated by the Council.

The short to medium term benefits that are likely to arise from the construction of the Brisbane Valley Rail Trail are: • creation of short term jobs through trail construction • employment growth directly related to Brisbane Valley Rail Trail operations • increased complementary benefits for Somerset / South Burnett residents such as active transport, recreation, health, social and cultural experiences • increased awareness of Somerset / South Burnett through branding and marketing

Longer term benefits are likely to be: • increased employment and economic development opportunities for regional economies

Brisbane Valley Rail Trail – Business Case Page 31