Tasmanian Government Department of Infrastructure, Energy and Resources 11 December 2012 Hobart Northern Suburbs Light Rail Business Case Peer Review AECOM Hobart Northern Suburbs Light Rail Hobart Northern Suburbs Light Rail Business Case Peer Review Prepared for Tasmanian Government Department of Infrastructure, Energy and Resources Prepared by AECOM Australia Pty Ltd Level 8, 540 Wickham Street, PO Box 1307, Fortitude Valley QLD 4006, Australia T +61 7 3553 2000 F +61 7 3553 2050 www.aecom.com ABN 20 093 846 925 11 December 2012 60277500 AECOM in Australia and New Zealand is certified to the latest version of ISO9001 and ISO14001. © AECOM Australia Pty Ltd (AECOM). All rights reserved. AECOM has prepared this document for the sole use of the Client and for a specific purpose, each as expressly stated in the document. No other party should rely on this document without the prior written consent of AECOM. AECOM undertakes no duty, nor accepts any responsibility, to any third party who may rely upon or use this document. This document has been prepared based on the Client’s description of its requirements and AECOM’s experience, having regard to assumptions that AECOM can reasonably be expected to make in accordance with sound professional principles. AECOM may also have relied upon information provided by the Client and other third parties to prepare this document, some of which may not have been verified. Subject to the above conditions, this document may be transmitted, reproduced or disseminated only in its entirety. \\aubne1fp003\Projects\Projects\60277500\6. Draft Docs\6.1 Reports\HNSLR Business Case Peer Review_Final Report.docx Revision 1 - 11 December 2012 AECOM Hobart Northern Suburbs Light Rail Acronyms ABS Australian Bureau of Statistics AT ACIL Tasman ATC Australian Transport Council BCR Benefit Cost Ratio BITRE Bureau of Infrastructure, Transport and Regional Economics BVG Berlin Transport Services (Germany) CAP Community Advisory Panel CBA Cost Benefit Analysis CBD Central business district CD Census Collection Districts CPI Consumer price index DDA Disability Discrimination Act DIER Department of Infrastructure, Energy and Resources FTT Future Transport Tasmania HNSLR Hobart Northern Suburbs Light Rail HNSRAG The Hobart Northern Suburbs Rail Action Group Inc IA Infrastructure Australia KPI Key Performance Indicator LGA Local Government Association LRBC Light Rail Business Case LRS Light Rail System MONA Museum of Old and New Art, Tasmania NPV Net present value NSLRS Northern Suburbs Light Rail System (another term for the HNSLR) NSW New South Wales OOSM Optimal operating service model PA Per annum PIA Planning Institute of Australia PT Public transport PTA Public Transport Authority PV Present value QLD Queensland RACT Royal Automobile Club of Tasmania RTA Roads and Traffic Authority, now called the Roads and Maritime Services (NSW Government) SEIFA Socio-Economic Indexes for Areas SMT Strategic merit test TMR Department of Transport and Main Roads (Queensland Government) TOD Transit orientated development UK United Kingdom VOC Vehicle Operating Cost VOT Value of Time WA Western Australia WEB Wider Economic Benefits \\aubne1fp003\Projects\Projects\60277500\6. Draft Docs\6.1 Reports\HNSLR Business Case Peer Review_Final Report.docx Revision 1 - 11 December 2012 AECOM Hobart Northern Suburbs Light Rail Table of Contents Executive Summary i Part One 1 1.0 Peer Review of HNSLR Business Case 2 1.1 Introduction 2 1.1.1 Project Overview 2 1.1.2 Peer Review Terms of Reference 2 1.1.3 An Introduction to Cost Benefit Analysis 2 1.1.4 Definition of Base and Project Cases 3 1.1.5 Context of the Business Case 3 1.1.6 Key Reference Documents 3 1.1.7 Definition of Light Rail 4 1.2 Economic Parameters 5 1.3 Demand Generators 6 1.3.1 Transit Orientated Development 6 1.3.2 Sparks Effect 8 1.4 Calculation of Benefits 13 1.4.1 Overall Approach 13 1.4.2 Benefit Stream Items 14 1.5 Cost Parameters 19 1.5.1 Overview 19 1.5.2 Track and Related Infrastructure Capital Costs 19 1.5.3 Comparison of Stage 1 and Stage 3 Capital Costs 20 1.5.4 Operating Costs - Maintenance 22 1.5.5 Park and Ride Facility 22 1.5.6 Rolling Stock 22 1.5.7 Summary of Findings 22 1.6 Consumer and Producer Surplus 23 1.6.1 Consumer Surplus 23 1.6.2 Producer Surplus 25 1.6.3 Benefit Cost Ratio 25 1.7 Non-Monetised Costs and Benefits 27 1.7.1 Use of non-monetised costs and benefits in HNSLR Business Case 27 1.7.2 Review of the non-monetised costs and benefits in the HNSLR Business Case 28 1.8 Sensitivity Testing 31 1.9 Assessment of the Optimal Length of the HNSLR Line 33 1.9.1 HNSLR Business Case Approach 33 1.9.2 AECOM Approach 34 1.10 Conclusions 39 Part Two 41 2.0 Community Advisory Panel Submissions 42 2.1 Glenorchy City Council 43 2.2 Hobart Northern Suburbs Rail Action Group 48 2.3 Planning Institute of Australia 60 2.4 Dr Stewart Williams, University of Tasmania 63 2.5 Future Transport Tasmania 66 2.6 Hobart City Council 73 Reference List 74 Appendix A Community Advisory Panel Submissions A \\aubne1fp003\Projects\Projects\60277500\6. Draft Docs\6.1 Reports\HNSLR Business Case Peer Review_Final Report.docx Revision 1 - 11 December 2012 AECOM Hobart Northern Suburbs Light Rail i Executive Summary Overview AECOM has been commissioned by Tasmanian Government Department of Infrastructure, Energy and Resources (DIER) to undertake an independent review of the Hobart to Northern Suburbs Light Rail (HNSLR) Business Case prepared by ACIL Tasman during 2011. The purpose of this document is to detail the findings of the peer review process, and is split in to two sections: - Part One documents the findings of the peer review of the HNSLR business case - Part Two outlines the Community Advisory Panel submissions regarding the HNSLR business case, and provides responses where possible in line with the business case peer review process. A further overview of the key findings from the two parts of the report is set out below, before an overall summary of findings is provided. Part One: Peer Review of HNSLR Business Case The objective of the Peer Review was to ensure that the assessment of economic benefits and costs associated with the light rail business case was justified and appropriate. This was particularly relevant to Stages 1 and 3 of the original HNSLR business Case. In order to complete this work, the peer review process has two key components: 1) Review the economic parameters and the values assigned to those parameters. 2) Review the approach taken, including benefits considered and methodology used to forecast passenger demand. Part One of this report documents the outcomes of the findings of the peer review, within the following sections: Section 1.1: introduction to the peer review and the approach used. Section 1.2: the appropriateness of the economic parameters used. Section 1.3: the use of the key demand generators, namely the inclusion of transit orientated development and the use of the Sparks Effect. Section 1.4: the calculation of the benefit stream. Section 1.5: the appropriateness of the cost parameters used. Section 1.6: the cost-benefit analysis approach, particularly with regard to consumer and producer surplus. Section 1.7: the use of non-monetised costs and benefits to describe difficult to quantify and wider economic costs and benefits. Section 1.8: The appropriateness of the sensitivity testing application. Section 1.9: The application of Value Management Optimisation in the assessment of the optimal length of the HNSLR Line In addition, throughout Part One, comment has been made as to whether the method used is in alignment with Infrastructure Australia (IA) requirements (Infrastructure Australia, 2012). Summary of Findings It is the Peer Review team’s finding that the HNSLR Business Case prepared by ACIL Tasman for the Tasmanian Government Department of Infrastructure, Energy and Resources (DIER) is in essence a fair and sound appraisal of the economic benefits and costs of the HNSLR project. It also generally adheres to the requirements of Infrastructure Australia. However, overall the Business Case is likely on the optimistic side, with some capital and operating costs below what could be expected for this project. In addition, there are some capital costs, operating costs and operational caveats that have not been appropriately accounted for in the project case and when these adjustments are accounted for, inevitably the project will not have a positive NPV or favourable BCR. \\aubne1fp003\Projects\Projects\60277500\6. Draft Docs\6.1 Reports\HNSLR Business Case Peer Review_Final Report.docx Revision 1 - 11 December 2012 AECOM Hobart Northern Suburbs Light Rail ii In addition, the inclusion of the strong demand generators (TODs and ‘Sparks Effect’) has also likely artificially increased patronage, and therefore the benefit stream. While the implications of TOD development on HNSLR patronage and consumer surplus have been applied by ACIL Tasman using a satisfactory method, it must be recognised that their assumptions are highly optimistic and in reality, the overall impact of TOD development on the light rail patronage may not be realised in full given the population, timing and regulatory environment in which it will operate. Further, the inclusion of the strong Sparks Effects artificially inflates demand and there is limited evidence the effect exists let alone if it can be generated practically by changing the utility and costs of each passenger trip. Unless other attributes are apparent, the presence of having rail based mode on its own cannot be assumed to generate such significant levels of additional patronage. It is acknowledged that the provision of a Light Rail system in Hobart may offer some benefits such as: - Providing reliable travel times and a comfortable journey for users - Supporting the consolidation of urban form, such as supporting the development of identified TODs in Glenorchy and Moonah, in the medium to long term - Reducing congestion on the roads in the long term, should people switch to using the light rail - Improving access to the rest of the city for residents of Bridgewater and Brighton.