Horizons Regional Council /
Greater Wellington Regional
Council
Palmerston North-Wellington Rail
Passenger
Business Case
October 2017
TDG Ref: 14588 171031 pn-wellington rail passenger business
case - final es.docx
Horizons Regional Council / Greater
Wellington Regional Council
Palmerston North-Wellington Rail
Passenger
Business Case
Quality Assurance Statement
Prepared by:
Doug Weir
Sector Leader Public Transport
Reviewed by:
Bridget Burdett
Principal Researcher
Approved for Issue by:
Mark Georgeson
Director/Wellington Branch Manager
Status:
Final with Executive Summary
Date:
31 October 2017
PO Box 30-721, Lower Hutt 5040
New Zealand
P: +64 4 569 8497
www.tdg.co.nz
31 October 2017
14588 171031 PN-Wellington Rail Passenger Business Case - Final ES
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Horizons Regional Council / Greater Wellington Regional Council, Palmerston North-Wellington Rail Passenger
Business Case
Table of Contents
1.
Introduction .................................................................................................................................. 4
2.
Strategic Case ................................................................................................................................ 6
2.1
Strategic Assessment .......................................................................................................... 6
2.2
Strategic Context ................................................................................................................ 8
2.3
Conclusion ........................................................................................................................ 13
3.
Indicative Case ............................................................................................................................ 14
3.1
Option Description ............................................................................................................ 14
3.2
Option Assessment ........................................................................................................... 21
3.3
Conclusion ........................................................................................................................ 27
4.
Detailed Case .............................................................................................................................. 29
4.1
Description ........................................................................................................................ 29
4.2
Costs ................................................................................................................................. 30
4.3
Benefits ............................................................................................................................. 31
4.4
Economic Analysis ............................................................................................................ 32
4.5
Assessment Profile ............................................................................................................ 34
4.6
Risks .................................................................................................................................. 35
4.7
Financial ............................................................................................................................ 36
4.8
Commercial ....................................................................................................................... 38
4.9
Management .................................................................................................................... 39
4.10 Conclusion ........................................................................................................................ 39
Appendix A
1
Cashflow Components
1
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Horizons Regional Council / Greater Wellington Regional Council, Palmerston North-Wellington Rail Passenger
Business Case
Page 1
Executive Summary
This business case has been prepared for Horizons Regional Council and Greater Wellington
Regional Council by TDG, and peer reviewed by John Bolland. It assesses the case for
continued public investment in a Palmerston North-Wellington rail passenger service.
The corridor is currently served by the Capital Connection, a weekday return commuter
service operated by KiwiRail. This was commercially operated prior to July 2015, but
declining financial performance and increased maintenance expenditure have required
joint funding support from the regional councils since that time. The current temporary
funding arrangement is due to expire in June 2018, and an investment decision is required
on whether to support continued operation in the short term, normalise the funding
arrangement, and enable implementation of a sustainable solution for the longer term.
The existing service is a well-patronised, being used by an average of 250 peak period
passengers each way per day, and integral part of the transport system on the corridor,
having run since 1991. It has been found to respond well to clear and ongoing problems
resulting from a large and growing population and limited roading links on the corridor, and
provides accessibility, productivity, transport system capacity, and transport system
resilience benefits that align with regional and national priorities. These provide strategic
justification for current and future investment in a rail passenger option. Continued
investment is supported by stakeholders, who have been involved in developing the
options.
Six options have been identified as potential responses. These are the:
do-minimum, which relates to the withdrawal of the train when the full level of existing
funding support commitment ceases in June 2018;
through train option, which relates to the continued operation of a conventional
locomotive-hauled through train service between Palmerston North and Wellington,
providing a single trip in each peak;
through Diesel Electric Multiple Unit (DEMU) (single trip) option, which relates to the
replacement of the existing train with a DEMU train set that would operate between
Palmerston North and Wellington, providing a single trip in each peak;
through DEMU (double trip) option, which relates to the replacement of the existing
train with DEMU train sets that would operate two trips in each peak, one between
Palmerston North and Wellington, and the other between Levin and Wellington where
demand is greatest;
connecting DEMU option, which relates to the replacement of the existing train with a
feeder DEMU service that would provide one peak direction trip between Palmerston
North and Waikanae and a return trip between Levin and Waikanae in each peak; and
connecting coach option, which relates to the replacement of the existing train with a
feeder coach service that would provide one peak direction trip between Palmerston
North and Waikanae and a return trip between Levin and Waikanae in each peak.
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The options have been assessed against their passenger response, cost and revenue, and an
option effectiveness assessment framework consisting of:
four investment objectives: maintain or improve accessibility for residents of the
corridor, maintain or improve commuter productivity, maintain or improve transport
system capacity, and maintain or improve transport system resilience; and
six critical success factors: strategic fit, value for money, service provider capacity,
affordability - operating costs, affordability - capital costs, and achievability.
The assessment finds that the through DEMU (double trip) option ranks as the best option,
despite having highest present value capital cost. It:
has high ratings for eight of the ten effectiveness criteria, including all four investment
objectives;
has the highest patronage potential, and therefore offers high benefits and a low
funding gap (the lowest on a per passenger basis) over 40-year evaluation period;
offers potential economies of scale and scope; and
allows capacity to be matched to demand (in both spatial and temporal terms) and is
best matched to the changing needs of a high-growth corridor.
The resulting investment proposal entails the continued operation of the existing train
between Palmerston North and Wellington until the beginning of the 2021-22 financial
year, when it will be replaced by two new four-car DEMU train sets. One will then run a
Palmerston North-Wellington service and the other a Levin-Wellington service, to double
service frequency from Levin southwards and drive patronage growth.
The overall proposal has a present value net cost of $11.35m, and direct transport benefits
of $106.74m over the 40-year evaluation period, which give it a benefit cost ratio of 9.4.
Assessment against the NZ Transport Agency’s draft 2018-21 Investment Assessment
Framework gives a results alignment rating of ‘High’, which gives it a rank of 3 when
combined with the benefit cost ratio, making it eligible for longer-term funding through the
National Land Transport Programme.
Risks around dependency, timeframe, revenue, costs and public funding will need to be
managed. Of note are the dependency of the DEMU aspect of the proposal on the
outcome of a separate business case (dealing with wider Wellington Region rolling stock
requirements), a timeframe constraint imposed by the required withdrawal of the existing
train by April 2022, and a $6.2m three-year funding shortfall to enable its continued
operation and maintain service levels until the DEMUs are introduced. The latter is a
significant barrier to service continuity in the short term.
However, the business case concludes that the investment proposal clearly responds to the
identified problems and provides clear benefits. These support economic growth and
productivity on a high-growth corridor at a critical point on the transport network, and
provide a strong case for investment. It recommends that key investors give strong
consideration to the proposal.
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Decision Sought from the Crown by Horizons Regional Council and Greater Wellington
Regional Council
Agree that continued operation of a rail passenger service between Palmerston North
and Wellington provides significant regional and national benefits;
Agree that the current service shall remain in operation for at least the next three
years, funded by the Crown at a total cost of $6.2m over that period;
Agree to secure the funding decision prior to February 2018, so sufficient lead time is
available to clearly communicate to the staff and the public the intention of ceasing the
service from 1 July 2018 if funding cannot be established; and
Agree that further work should be undertaken by Greater Wellington Regional Council,
to prepare a business case for a larger rolling stock procurement order that should
provide a longer-term solution for the corridor.
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Business Case
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1. Introduction
This business case has been prepared for Horizons Regional Council (HRC) and Greater
Wellington Regional Council (GWRC) by TDG, and peer reviewed by John Bolland. It
assesses the case for continued public investment in a Palmerston North-Wellington rail
passenger service.
The Palmerston North-Wellington corridor is currently served by the Capital Connection
(CC), a weekday return commuter service operated by KiwiRail. This runs southwards in the
morning peak and northwards in the evening peak, and links Palmerston North, Shannon,
Levin, Otaki, Waikanae, Paraparaumu and surrounding areas of the Palmerston North city
and Horowhenua and Kapiti Coast districts with each other and Wellington. It is the only
peak rail passenger service on this corridor north of Waikanae1, and the only long-distance
commuter train that crosses a regional boundary in New Zealand.
The CC commenced running in 1991, and is an established and integral part of the transport
system on the corridor. It runs on a 125-minute express schedule over the 136 kilometres
between its end points, which is competitive with the car alternative, and typically carries
around 250 passengers per trip. It provides amenities that are appropriate for a long-
distance commuter service, such as table seating and at-seat power facilities that allow
passengers to work while travelling, toilet facilities, and an on-board cafe.
The CC was commercially operated by KiwiRail and its predecessors prior to July 2015, but
declining financial performance and increased maintenance expenditure have required
joint funding support from HRC and GWRC since that time. The current funding
arrangement is due to expire in June 2018 and the service will likely be withdrawn if public
support ceases at that point. An investment decision is required on whether to support
continued public transport service in the short term, normalise the funding arrangement,
and enable implementation of a sustainable solution for the longer term.
The business case follows a 2012 GWRC business case, which was prepared on behalf of
both regional councils and looked at integrating the CC into GWRC’s Metlink suburban rail
commuter operation, and earlier HRC investigations into the value of rail on the corridor. It
has been developed with input from the regional councils, KiwiRail, the New Zealand
Transport Agency (NZTA), the Te Hononga Capital Connection Community group (THCCC)2,
and other members of the Passenger Rail Working Party, which is composed of key
stakeholders and responsible for providing direction and investigating long term options for
the Palmerston North-Wellington corridor. Additional input has been sought from other
parties as required.
The business case takes the form of a Detailed Business Case following the NZ Transport
Agency Business Case Approach, with the subsequent following sections:
Chapter 2 summarises the strategic case;
Chapter 3 provides an outline of the indicative case options and option selection; and
Chapter 4 describes the detailed case for investment in the preferred option.
1 KiwiRail also runs the tourism-focussed thrice-weekly Auckland-Wellington Northern Explorer on the corridor, which runs in the
opposite direction to peak commuter requirements and stops at Palmerston North and Wellington only.
2 The THCCC represents the train’s users. It was established in response to uncertainty about the CC’s future, and prepared its own
business case to support the continuance if the train in 2015.
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It should be noted that this business case is unusual, since most such cases involve new
investment in new services or infrastructure. The subject of this business case is an existing
service that is the subject of existing public investment, and the business case revolves
around whether continued investment in it or another public transport option is the most
effective way of addressing the problems and providing the benefits identified.
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2. Strategic Case
2.1
Strategic Assessment
2.1.1
Problem Description
The CC was intended to capitalise on two key problems when it commenced operation in
1991:
a large and growing population along the corridor, which is reliant on Wellington for
many employment, educational and other opportunities and services; and
limited roading links, which are susceptible to congestion and resilience issues and
can be unreliable.
These problems remain pertinent in 2017. For example, the train serves a total catchment
population of approximately 170,000, 75% of which lies north of Waikanae. Statistics New
Zealand estimates that this population increased by 7% over the 2006-2016 period, and
projects a similar 8% population increase over the 2013-2023 period of its most recent
projections3. However, the Statistics New Zealand projections may underestimate future
population growth. A recent report into the impact of roading improvements on the
corridor for Horowhenua District Council by NZIER4 suggests that the Horowhenua
population may increase at the much faster rate of 1.2% per annum. A similar effect may
also be seen on the Kapiti Coast, which will also benefit from the roading improvements.
Employment, educational and other opportunities are available in the communities along
the corridor, particularly in Palmerston North. However, many are only available in
Wellington5, which serves as the key lower North Island metropolitan area and, with its
government functions, is a destination of national significance. The travel purposes of CC
passengers reflect the dominance of Wellington as a destination, with around 76%
travelling to or for work (rising to 90% from the Kapiti Coast urban area), 8% to education
and the remaining 16% for other purposes6.
The Palmerston North-Wellington rail corridor parallels State Highway 57 north of Levin and
State Highway 1 south of that point. State Highway 1 carries large traffic volumes over the
Levin-Wellington section, which lacks an alternative road route and is limited to a single
lane in each direction for much of its length by geographical constraints. This makes it
susceptible to congestion, particularly at peak times, and vulnerable to resilience issues.
The CC and other rail passenger services on the corridor provide a useful alternative when
the highway is congested or closed.
State Highway 1 south of Otaki is currently being upgraded to expressway standard, and
congestion and resilience form a key part of the justification for the upgrade. Long term
3 Based on Statistics New Zealand subnational population statistics for the three territorial authorities that are directly served by the
train, which showed estimated increases of 7% in Palmerston North city, 4% in the Horowhenua district, and 10% in Kapiti Coast
district over the 2006-2016 period, and project similar population increases in each area over the 2013-2023 period. Some of the
train’s passengers are also likely to come from the neighbouring Manawatu district.
4 Investment in Transport Infrastructure: Effects on Economic and Demographic Outlook by NZIER (2015).
5 For example, Paraparaumu and Waikanae lie within the Capital Coast District Health Board area and residents of those places access
key health services in Wellington. Residents north of Waikanae also access health services in Wellington, since Wellington Hospital is a
tertiary hospital that provides the highest level of medical care for an area that encompasses the whole of the lower North Island.
6 Based on the findings of a THCCC passenger survey, which was conducted in March 2015.
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NZTA observations of the Ngauranga Gorge to MacKays Crossing section of the highway for
the Transmission Gully motorway project exemplify the issue, showing that peak period and
direction travel times are much higher (31-50%) and more variable (17-23%) than in other
periods and directions7, suggesting that the highway suffers from both recurrent and non-
recurrent congestion. The expressway is expected to alleviate this when it is completed in
2020, but congestion continues to be an issue during construction8 and is expected to
remain a constraint at the Wellington end of the corridor after that point. Upgrades are
also planned for State Highway 1 north of Otaki, but are not expected to be completed until
2024-25.
2.1.2
Benefits of Investment
The CC provides four key benefits that provide justification for current and continued
investment in a rail passenger option on the corridor. These are:
better accessibility for residents of the corridor, particularly those with limited access
to private vehicle such as the young and the elderly, by connecting them with
employment, educational and other opportunities and services;
better productivity, by providing a work-in-travel option;
better transport system capacity, by providing a transport alternative that reduces
vehicle numbers and congestion (with associated road travel time reliability and
safety benefits) and crowding on other peak public transport services from Waikanae
southwards; and
better transport system resilience, by providing a separate route and right of way
from the road system and a different power source from the electrified Metlink
suburban rail commuter service.
The 2012 GWRC business case identified accessibility, transport system capacity, and
optimisation-related benefits. The latter were associated with synergies that were central
to the preferred option in that case, which proposed changes to rolling stock ownership
and operation. Productivity and transport system resilience were not included in the 2012
case, but are recognised as being valid long-distance rail commuter service investment
benefits and are applicable in the current situation as described above.
The four benefits can be reinterpreted as investment objectives, which form part of the
assessment framework that the options are assessed against in
Section 3.2.3. Associated
investment effectiveness can be monitored over the life of any investment in the following
ways:
accessibility through maintained or increased public transport mode share in the
areas served by the train;
productivity through maintained or increased availability of features that enable
productivity, such as table seating, at-seat power facilities and Wi-Fi;
transport system capacity through maintained or increased peak public transport
boardings, for either the train or any services that replace it; and
7 Sourced from Transmission Gully Project: Assessment of Traffic &Transportation Effects by Sinclair Knight Merz (2011). Variability is
measured as the standard deviation of observed travel times.
8 Reports suggest that it has been exacerbated (see http://www.stuff.co.nz/motoring/90938322/motorists-say-kapiti-expressway-had-
made-commute-into-wellington-twice-as-long).
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Horizons Regional Council / Greater Wellington Regional Council, Palmerston North-Wellington Rail Passenger
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transport system resilience through maintained or improved reliability, for either the
train or any services that replace it.
2.2
Strategic Context
2.2.1
Background
The CC operated commercially for most of its life, with high patronage and farebox cost
recovery. Patronage peaked at around 350 passengers each way per day in 2009 and 2010
when suburban rail commuter service reliability was problematic, but declined following
the extension of the full electrified Metlink suburban service to Waikanae in February 2011.
Fare increases in November 2011, May 2013 and November 2014 had an additional effect
on demand. However, patronage has stabilised at around 250 passengers each way per day
since late 2013 (approximately 70-80% of pre-2010 levels), as sho
wn in Figure 1.
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Figure 1: Average Daily Morning Peak Patronage
Figure 2 (following page) shows how morning peak boardings changed at each station
between May 2010 and May 20169. It shows that the patronage decline was largely
confined to the Kapiti Coast district, and particularly to Waikanae, which directly benefited
from the higher service levels that resulted from the extension. The extension also brought
Otaki into closer proximity to the suburban rail services. The Metlink service has a lower
amenity level than the CC, but uses a separate fare structure with lower fares10, which are
likely to have contributed to the Kapiti Coast decline in CC patronage.
9 May is a typical business as usual month that is unaffected by school or public holidays.
10 Metlink fares are 14%-15% cheaper than the comparable Waikanae/Paraparaumu CC fare. CC and Metlink fare products are not
transferable, so passengers who use a multi-trip product (ten trip ticket, monthly pass or quarterly pass) must commit to one service,
or pay a separate fare if they use the other service for some trips.
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The patronage change elsewhere on the corridor was not as dramatic. Palmerston North
patronage declined, but not by as much as the Kapiti Coast stations. Shannon and Levin
patronage levels remained at similar levels to 2010, which indicates that passengers at
those stations are fairly reliant on the train.
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Figure 2: Average Daily Morning Peak Boardings by Station - May 2010 Compared to May 2016
The patronage decline affected the train’s commercial viability, although patronage has
remained strong and farebox cost recovery continues to be high compared to most public
transport services11. KiwiRail responded by increasing fares as noted above and then by
reducing capacity from seven to six passenger cars (plus the café car). Current patronage
occupies approximately 70% of available capacity.
KiwiRail signalled that the service had become commercially unviable in 201112, and sought
regional council funding to enable its continuance. This led to the development of the
GWRC business case in 2012, which proposed integrating the CC into GWRC’s Metlink
suburban rail commuter operation with GWRC, HRC and NZTA funding support. The
business case determined that the proposed investment would have high strategic fit,
medium effectiveness, and a low to medium benefit cost ratio (BCR). The proposal did not
proceed, and KiwiRail committed to continue operating the train until June 2015.
During the lead-up to the June 2015 deadline, KiwiRail indicated that the CC would likely be
discontinued without public funding support, given its commercial situation and the cost of
essential deferred heavy maintenance. Following advocacy by several parties, an
agreement was reached to continue operation until to June 2018, with joint funding
support from HRC ($0.5m over 3 years) and GWRC ($0.55m over 5 years). KiwiRail agreed
to carry out the deferred heavy maintenance. The Passenger Rail Working Party was also
established at this point, to provide direction and investigate options for the corridor.
11 Farebox revenue covered an average of 85% of operating costs over the three years between 2013/14 and 2015/16.
12 KiwiRail had previously indicated on several occasions that extension of the Metlink suburban rail service would undermine the
commercial viability of the service.
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2.2.2
Wider Context
2.2.2.1 KiwiRail
KiwiRail is committed to the continued operation of the CC, if it makes financial sense for
that organisation. However, hook and tow charges (for locomotive hire) have recently
increased for all KiwiRail passenger services, reflecting the cost of passenger locomotive
refurbishment to meet new regulatory requirements, and the inclusion of shunt and
generator fuel costs and a return on the locomotive asset, both of which were not
previously accounted for. The higher costs have been included in future year forecasts,
which show an operating shortfall of c.$1.2m per annum over the three years from June
2018. This shortfall is substantially higher than the current shortfall that regional council
investment covers, and will consequently require a higher level of public investment and /
or increased farebox revenue if the train continues to run beyond June 2018.
Previously deferred rolling stock heavy maintenance has now been completed, but further
heavy maintenance will be required to maintain operation and meet additional regulatory
requirements. This is expected to cost $2.8m over the period to April 2022, when full
refurbishment will be required13. Refurbishment will extend the cars’ life by 15 years and
cost an additional $8.6m. They will need to be replaced at the end of that period.
KiwiRail will redeploy the cars to other services if the train is withdrawn.
2.2.2.2 Regional Transport Plans
The CC classified as an exempt service under the Land Transport Management Act 2003
(LTMA), due to its status an inter-regional public transport service. This exempts it from the
requirement to be provided under contract to a regional council, but previously
complicated the provision of public funding, which is usually only provided to contracted
services14. However, cross-regional public transport services are becoming more common
nationally, and include a trial off-peak bus service between Levin and Waikanae. The NZTA
has confirmed that such services may become eligible for national funding if defined as a
public transport unit in the relevant regions’ Regional Public Transport Plans (RPTPs).
The current RPTPs date from 2015 (HRC) and 2014 (GWRC), and are due for review in the
next year. Little mention is made of a Palmerston North-Wellington rail passenger service
in either plan, other than noting that the CC is exempt, but the current HRC plan does state
that
consideration will be given to subsidising this service in the future if it is identified as
the most efficient and effective means of providing a commuter service between Palmerston
North and Horowhenua, and Wellington.
Higher level regional strategic direction is shown in each region’s Regional Land Transport
Plan, which date from 2015 and are also due for review in the next year. These differ in
content and approach, but both place an emphasis on the developing and maintaining a
resilient, integrated multi-modal transport system, particularly on key corridors.
13 A 17 February 2017 letter from KiwiRail’s Chief Executive to the Chief Executives of HRC and GWRC indicated that annual capital
expenditure of $0.2m to $0.4m would be required over the evaluation period, but KiwiRail has subsequently confirmed that annual
expenditure of $0.7m to $1.4m will be required to maintain operation up to the 2021/22 year.
14 Current public funding support for the CC falls outside of LTMA requirements, since it does not involve NLTP (see Sectio
n 2.2.2.4) or
other national funding contribution.
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The regional strategic priorities are supported by the NZTA’s Long Term Strategic View,
which identifies Palmerston North-Wellington as a key inter-regional journey.
2.2.2.3 Regional Rail Investment
Rail is a key component of the Wellington regional public transport network, carrying
around one third of all passengers. The regional rail network comprises electrified
suburban services on four lines from Waikanae and Upper Hutt southwards, and longer-
distance locomotive-hauled Wairarapa services from Masterton. Consideration has
previously been given to including the Palmerston North-Wellington service in this network,
as noted in earlier sections of this business case.
Regional rail investment plans are detailed in GWRC’s Wellington Regional Rail Plan
(WRRP), which supplements the RPTP and RLTP. The last (2013) update of the plan focused
on upgrades to the electrified network that were underway at that time, and specifically
excluded consideration of the CC. However, the plan anticipated that any future Metlink
service extension north of Waikanae would be demand-driven and based on shuttle or
interlined services delivered by non-electrified rolling stock.
The WRRP will shortly be refreshed, and is expected to place more emphasis on:
Wairarapa services, which are nearing capacity and the subject of ongoing reliability
issues;
emerging capacity constraints within the wider network; and
network resilience (e.g. power outages).
Several rolling stock options have been investigated for the Wairarapa and will be the
subject of a separate business case. Diesel electric multiple units (DEMUs)15 are favoured
due to their speed and efficiency compared to locomotive-hauled trains, and operational
flexibility compared to locomotive-hauled trains and electric multiple units (EMUs).
Furthermore, they could be used to address the capacity constraints and resilience issues
on the wider network if purchased in sufficient quantity16. They would also be suitable for
the Palmerston North-Wellington corridor, where they offer similar benefits, and would
logically be procured as part of a wider GWRC DEMU order.
2.2.2.4 Strategic Considerations
National transport investment is specified in the National Land Transport Programme
(NLTP), and allocated from the National Land Transport Fund (NLTF) by the NZTA. NLTP
funding priorities are based on the priorities of the Government Policy Statement on Land
Transport (GPS). The draft GPS 2018/19-2027/28 has been published and will inform the
2018-2021 NLTP when finalised.
The draft GPS specifies three strategic priorities: economic growth and productivity, road
safety and value for money. Each has supporting objectives and desired results. The
economic growth and productivity strategic priority is most relevant to the Palmerston
15 DEMUs use a diesel generator to power on-board systems and electric traction motors, and could be configured to draw power from
the electric overhead within the electrified network area.
16 Capacity constraints could be addressed by purchasing a small number of additional EMUs, but a small EMU order is expected to be
expensive and be subject to long lead times. An expanded DEMU order would bring economies of scale and can therefore be expected
to be more cost-effective overall. It would also provide a means of addressing resilience issues associated with power outages on the
electrified network.
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North-Wellington rail passenger service (although the other strategic priorities also have
some relevance),
and Table 1 shows its objectives and relevant results.
National Land Transport
Long Term Results -
Short to Medium Term Results -
Objectives
Planning Direction
Investment Priorities (Selected)
10+ years
3-6+ years
A land transport system that Support economic growth
Public transport is provided
addresses current and
and productivity through
where there is sufficient
future demand for access to
provision of better access to
demand, particularly for
economic and social
markets, employment,
services that connect
opportunities.
business areas and housing
people to employment and
development
education
Support economic growth of Regional networks are
regional New Zealand
connected and resilient, and
through provision of better
journey times on key
access to markets and
regional freight routes are
tourist destinations.
reliable and predictable.
A land transport system that Improved network
Regional and local system
is resilient.
resilience at the most
approaches, including
critical points.
investment in non-transport
infrastructure where this
has clear transport benefits,
are used to improve
resilience at the
economically and socially
most critical points of the
network.
A land transport system that Provide appropriate travel
Appropriate public
provides appropriate
choices, particularly for
transport is available to
transport choice.
people with limited access
system users with limited
to a private vehicle.
access to a private vehicle,
including disabled people,
where there is sufficient
demand to support
scheduled public transport.
Table 1: Economic Growth and Productivity Objectives and Results
There are clear links between the Government’s economic growth and productivity priority
objectives and results shown in the table, regional strategic priorities for transport, and the two
problems and four benefits specified in Section 2.1. Of particular note is the combined focus on:
access, particularly for services that connect people to employment and education,
and access that supports economic growth in regional areas17;
transport system resilience, particularly regional and local system approaches that
improve resilience at the economically and socially most critical points of the
network; and
transport choice, where there is sufficient demand to support scheduled public
transport (as is demonstrated by the level of use of the current service).
17 The GPS focus on regional growth is supported other strategic documents that link it to transport on the northern end of the
corridor. For example, the 2015 Manawatu-Whanganui Growth Study by the Ministry for Primary Industries and the Ministry of
Business, Innovation and Employment, and its subsequent implementation programme Accelerate 25, note the importance of
transport as a key enabler of economic growth for that region.
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2.3
Conclusion
The Palmerston North-Wellington corridor is served by an established rail passenger
service, which is well-patronised and an integral part of the transport system on the
corridor. It responds to clear and ongoing problems in a fast-growing part of the country,
and provides accessibility, productivity, transport system capacity, and transport system
resilience benefits that align with regional and national priorities. These provide strategic
justification for current and future investment in a rail passenger option on the corridor.
Continued investment is supported by stakeholders, who have been involved in developing
options for the corridor.
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3. Indicative Case
3.1
Option Description
Six options have been identified by Passenger Rail Working Party stakeholders as potential
responses: a do-minimum, and five investment options that respond to the problems
identified in
Section 2.1 in different ways. These are a:
locomotive-hauled through train service between Palmerston North and Wellington,
providing a single trip in each peak;
through DEMU service between Palmerston North and Wellington, providing a single
trip in each peak;
through DEMU service providing two trips in each peak, one between Palmerston
North and Wellington and the other between Levin and Wellington;
DEMU feeder service to Metlink services in Waikanae, providing one peak direction
trip between Palmerston North and Waikanae and a return trip between Levin and
Waikanae in each peak; and
coach feeder service to Metlink services in Waikanae, providing one peak direction
trip between Palmerston North and Waikanae and a return trip between Levin and
Waikanae in each peak.
A high-level overview of each option is provided in the following sections.
3.1.1
Do-Minimum
The NZTA defines the do-minimum option as
the most likely transport situation over the
course of the appraisal period if no intervention were to occur. In this case, the do-
minimum is the withdrawal of the CC at the end of June 2018, or soon after that point,
when the full level of the existing funding support commitment ceases18.
Passengers would lose a travel alternative under this scenario, although GWRC would
replace the CC with an EMU-run suburban rail service in the same train path and timetable
between Waikanae and Wellington, to respond to increased demand and maintain network
capacity at Waikanae and Paraparaumu19. In this environment, and in the absence of any
new alternatives that might emerge20, passengers would be expected to respond in one of
the following ways:
some would cease current travel, particularly those with limited access to private
vehicle, the young, and the elderly21;
some would switch to the commercial coach services that run via the state highways,
but the number taking this option is expected to be small, since those services
18 HRC funding support ends in June 2018. GWRC funding is committed for a further two years, but is insufficient in isolation.
19 In the absence of the CC or a Metlink replacement in that train path, passengers would be most likely to switch to Metlink services
that arrive at Wellington at 8:14 and 8:30 in the morning peak and depart Wellington at 17:17 in the evening peak, which currently
have sufficient standing (but not seated) capacity at the Wellington end of the trip to cater to additional demand. The morning trains
may be able to be expanded to provide additional capacity, but the evening train cannot be expanded beyond its current maximum
size, and passengers would consequently need to adjust their travel times. Capacity would be a significant issue in the longer term.
20 A commercial coach service was investigated in 2012, and it is possible that such a service might emerge in the absence of the train.
21 Some of this group would cease travel entirely, while others would make a different trip (e.g. to a new job or school).
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primarily serve Palmerston North and Levin and are generally not conveniently timed
for commuting-related journeys;
some would use the Metlink Route 290 Otaki bus service to connect with Metlink
suburban rail services at Waikanae, although the timetable would need to be
adjusted to provide a conveniently-timed evening peak rail to bus connection;
some with access to a private vehicle would use that to reach Metlink suburban rail
services at Waikanae, which would increase pressure on road space to the north of
that point, and on parking availability at Waikanae in the longer term22;
some with direct access to Metlink suburban rail services would switch to those
services; and
some with access to a private vehicle would switch to driving all the way to
Wellington, which would increase pressure on road space along the corridor.
Table 2 provides an indication of the anticipated passenger response, based on the
available travel options in each area23.
Indicative Response – Do-Minimum
North of Waikanae
Waikanae &
(c.60% of passengers)
Paraparaumu
(c.40% of passengers)
Cease travel
15-20%
5-10%
Commercial coach service
5-10%
0-5%
Bus to Waikanae rail connection
5-10%
-
Private vehicle to Waikanae rail connection
45-50%
-
Metlink suburban rail only
-
80-85%
Private vehicle to Wellington
20-25%
10-15%
Table 2: Indicative Passenger Response to the Do-Minimum
The data in the table show that a significant number of all passengers (around 10-15%)
would be expected to cease travel under this scenario. Another 40-50% would use an all
public transport option (commercial coach, bus and rail, or all rail), and 40-50% would
change to using private vehicle for some of the journey (via park and ride) or the entire
journey.
This option would partially respond to the problems resulting from a large and growing
population and limited roading links, by maintaining rail capacity from Waikanae
southwards, but would have accessibility, productivity, transport system capacity and
transport system resilience disbenefits. Worsening accessibility would have negative
economic and social impacts on individuals and negative economic growth impacts for the
communities along the corridor. Reduced transport system capacity would have
congestion impacts north of Waikanae, which would be more acute while the parallel road
construction takes place. The removal of a route and motive power alternative would
make the whole transport system less resilient and more vulnerable to adverse events.
22 A June 2017 extension to the Waikanae park & ride carpark adds 227 spaces, which should be sufficient to cater to short and
medium-term demand, including any demand resulting from the withdrawal of the CC.
23 Experience with travel change following long-distance public transport service withdrawal is limited, and this response is based on
professional experience, but it is consistent with the findings of the March 2015 THCCC passenger survey.
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The replacement Waikanae-Wellington EMU-run suburban rail service would have an
estimated funding gap24 of c.$1.1m in the first three years25, and an overall 40-year present
value funding gap of $13.6m-$16.6m. These estimates include all rolling stock-related
capital costs, including $16.0m for the procurement of three two-car EMU sets in 2021-22
to run the replacement EMU service and maintain longer-term network capacity26. The
option would also have wider and ongoing economic costs to the community, as noted
above.
3.1.2
Through Train Option
This option is the status quo option, and is based on continued operation of a locomotive-
hauled through train between Palmerston North and Wellington using conventional rolling
stock, running a single service in each peak to the current timetable. This would require
refurbishment of the existing rolling stock fleet prior to April 2022 and full replacement of it
by 2037.
It is expected that the train would continue to be owned and operated by KiwiRail in the
short term. However, substantial public investment would be required to fund fleet
refurbishment / replacement and maintain operation, and it would be appropriate for
ownership and operational responsibility to be transferred to one of the regional councils in
the longer term, similarly to the 2012 GWRC business case proposal. GWRC would be best-
placed to take on this role given its established rail capability.
The option has been clearly shown to respond to the two problems and provide the four
investment benefits identified in
Section 2.1. It would continue to address these through
ongoing patronage growth, reflecting passenger familiarity with the existing service,
certainty around its continued availability as a transport alternative, and population growth
along the length of the corridor.
The option would require significantly increased direct public investment compared to the
present, with an estimated three-year funding gap of c.$6.2m, and an overall 40-year
present value funding gap of $28.1m-$31.1m. These estimates include all capital costs,
including $8.6m for rolling stock refurbishment and $16.0m for its later replacement.
3.1.3
Through DEMU (Single Trip) Option
This option is similar to the though train option, but would replace the existing train with an
eight-car DEMU, which would operate between Palmerston North and Wellington on the
existing train path and a similar timetable27.
The option essentially implements Rail Scenario B from the most-recent update of the
WRRP, and it is closely linked to GWRC’s solution to the Wairarapa, capacity and resilience
issues noted in
Section 2.2.2.3. It is therefore expected that GWRC would procure the
DEMUs as part of its response to those issues (which these DEMUs would also help to
address), and incorporate their operation into its Metlink operation. This would deliver
24 The funding gap is the difference between revenue and cost that is funded through public investment.
25 This estimate assumes that this service would cater primarily to passengers transferring from the CC.
26 This option assumes that this train would use EMUs from the existing fleet prior to 2021-22.
27 DEMUs would be expected to have improved acceleration characteristics and consequently a faster running time than the current
train, but would need to operate within the existing train path within the Wellington urban area.
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economies of scale (e.g. from fleet size) and economies of scope (e.g. from flexibility and
coordination).
The option would provide similar capacity to the through train option, and offer similar
features, such as table seating, at-seat power facilities and toilet facilities, but being
modern and purpose-built, would offer a higher standard of amenity, particularly with
regards to passenger comfort (e.g. air conditioning, improved ride quality etc.). It would
therefore be expected to provide a similar or better response to the two problems and four
investment benefits identified in
Section 2.1, and all existing passengers would
consequently be expected switch to the new train.
Implementation of the option is predicated on the outcome of a separate GWRC business
case, and it requires a minimum three to four-year lead time to enable DEMU funding,
design and construction. It is therefore unlikely that DEMUs would be available prior to the
beginning of the 2021-22 financial year, and the option assumes the continued operation of
the existing train until then to provide continuity of service to passengers and other
transport system users. The DEMUs would need to be available prior to April 2022 when
the existing rolling stock would need to be withdrawn, placing a key timeframe constraint
on the option and GWRC’s response to the other rail investment priorities.
The option has an estimated three-year funding gap of c.$6.2m, reflecting the cost of
continued operation of the existing train over that period, and an overall 40-year present
value funding gap of $15.3m-$18.3m. These estimates include all capital costs, including
$28.5m for the procurement of two four-car DEMU sets and basic stabling facilities in
Palmerston North.
An alternative fall back sub-option is also available, but is not recommended due to its
impact on passengers and other transport system users and has not been taken forward for
assessment. It would replace the existing train with a temporary connecting coach and
EMU between mid-2018 and delivery of the DEMUs in 2021-22, and have similar features
over that period to the to the connecting coach option described in
Section 3.1.6. This
would reduce the three-year funding gap to c.$1.1m28, the overall 40-year present value
funding gap to $11.8m-$14.8m, and eliminate the timeframe constraint.
However, passenger uncertainty around the sub-option temporary measure would likely
lead to significant mode shift in the short term, which would reduce short-term patronage
by 20-30% (more if the DEMU replacement was delayed), and consequently reduce the
response to the two problems and four investment benefits. Much of the mode shift would
be to road, where it would worsen the existing congestion and resilience issues described in
Section 2.1.1. The new DEMUs would likely draw most passengers back over time, but
some passengers would not return to public transport and such mode shift would take time
to achieve. Overall 40-year patronage would therefore be lower than under the standard
through DEMU (single trip) option, by approximately 5%.
3.1.4
Through DEMU (Double Trip) Option
This option is similar though to the DEMU (single trip) option, but would replace the
existing single train with two separate four-car DEMU trains. One DEMU would run
28 This three-year funding gap is higher than the connecting coach option, since the passenger response to the temporary coach is
expected to be lower than for the permanent coach, at approximately 50%.
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Palmerston North-Wellington in the morning peak and return in the evening peak, and the
other would run Levin-Wellington in the morning peak and return in the evening peak.
Additional morning and evening train paths would be required for this option, which would
double service frequency from Levin southwards, providing service level benefits to most
passengers.
The option is closely linked to GWRC’s solution to the Wairarapa, capacity and resilience
issues, and it is expected that GWRC would procure and operate the DEMUs similarly to the
through DEMU (single trip) option (see
Section 3.1.3). It would likewise provide economies
of scale and scope.
Like the through DEMU (single trip) option, it would offer a higher standard of amenity than
the through train, particularly with regards to passenger comfort. It would offer similar or
better capacity, and the enhanced frequency would make the train more attractive as a
travel option, and would be expected to boost patronage and in turn provide an enhanced
response to the two problems and four investment benefits identified in
Section 2.1. The
additional patronage would require additional capacity from 2049-50.
As with the through DEMU (single trip) option, implementation of this option is predicated
on the outcome of a separate GWRC business case, and the three to four-year lead time
would require continued operation of the existing train until 2021-22 to provide continuity
of service to passengers and other transport system users. The April 2022 withdrawal of
existing rolling stock would again be a key timeframe constraint on the option and GWRC’s
response to the other rail investment priorities.
The option has an estimated three-year funding gap of c.$6.2m, reflecting the cost of
continued operation of the existing train over that period, and an overall 40-year present
value funding gap of $9.8m-$12.8m. These estimates include all capital costs, including
$28.6m for the procurement of two four-car DEMU sets and basic stabling facilities in
Palmerston North and Levin. It also includes the cost of the additional four-car DEMU set
that is required to respond to patronage demand in 2049-50. The patronage boost offsets
an increase in costs compared to the through DEMU (single trip) option.
An alternative fall back sub-option is also available, similarly to the through DEMU (single
trip) option, but is not recommended due to its impact on passengers and other transport
system users and has not been taken forward for assessment. As with that option, it would
replace the existing train with a connecting coach and EMU between mid-2018 and delivery
of the DEMUs in 2021-22. This would reduce the three-year funding gap to c.$1.1m, the
overall 40-year present value funding gap to $6.5m-$9.5m, and eliminate the timeframe
constraint. However, passenger uncertainty around the temporary measure would lead to
significant mode shift, which would reduce short-term patronage by 20-30% (more if the
DEMU replacement was delayed), reduce the response to the problems and investment
benefits, and worsen already-problematic congestion and resilience issues. Overall 40-year
patronage would be approximately 5% lower than under the standard through DEMU
(double trip) option.
3.1.5
Connecting DEMU Option
This option is similar to the through DEMU (double trip) option, but would replace the
existing through train with a rail feeder service, which would connect with Metlink
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suburban rail services at Waikanae29. This would use a single four-car DEMU to run a
Palmerston North-Waikanae-Levin-Waikanae pattern in the morning peak, and the reverse
pattern in the evening peak, which would double peak-direction service frequency from
Levin to Waikanae compared to the single trip options. It would also enable some counter-
peak direction travel, and thus provide more travel choices for residents of the corridor and
potentially facilitate other travel such as for tourism.
The option is closely linked to GWRC’s solution to the Wairarapa, capacity and resilience
issues, and it is expected that GWRC would procure and operate the DEMUs, similarly to
the through DEMU option. This would offer economies of scale, but economies of scope
would be more limited as it would not help address wider Metlink network capacity and
resilience issues. The option would also incur additional maintenance-related costs
compared to the other DEMU options, due to the remote nature of the DEMU operation.
The option would provide reduced capacity compared to the through train, but sufficient to
cater to projected demand north of Waikanae. It would offer a higher standard of amenity
like the other DEMU options.
Patronage would be expected to be lower under this option than under the through
options. The increased travel time and reduced convenience of the new rail to rail transfer
requirement would likely deter some passengers north of Waikanae, although this would
be partially offset by integrated fares30 and improved service frequency from Levin and
Otaki. Existing passengers from Waikanae southwards would lose a travel alternative and
be expected to respond similarly to the do-minimum option.
Table 3 provides an indication of the anticipated passenger response. It shows that around
5-10% of passengers would be expected to cease travel under this scenario. Another 75-
85% would use an all public transport option (commercial coach, bus and rail, or all rail),
and 10-20% would change to using private vehicle for some of the journey (via park and
ride) or the entire journey.
Indicative Response – Connecting DEMU Option
North of Waikanae
Waikanae &
(c.60% of passengers)
Paraparaumu
(c.40% of passengers)
Cease travel
5-10%
5-10%
Commercial coach service
0-5%
0-5%
Bus to Waikanae rail connection
0-5%
-
Private vehicle to Waikanae rail connection
5-10%
-
Metlink suburban rail only
-
80-85%
Private vehicle to Wellington
10-15%
10-15%
Connecting train to Waikanae rail connection
70-75%
-
Table 3: Indicative Passenger Response to the Connecting DEMU Option
The option would provide a reduced response to the two problems and four investment
benefits identified in
Section 2.1 north of Waikanae. It would have a similar effect to the
do-minimum from Waikanae southwards.
29 This option assumes a replacement EMU-run suburban rail service in the same path and timetable as the CC from 2021-22.
30 Integrated fares would eliminate the transfer cost penalty and thus minimise the impact of the new transfer requirement.
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As with the other DEMU options, implementation of this option is predicated on the
outcome of a separate GWRC business case, and the three to four-year lead time would
require continued operation of the existing train until 2021-22 to provide continuity of
service to passengers and other transport system users. The April 2022 withdrawal of
existing rolling stock would again be a key timeframe constraint on the option and GWRC’s
response to the other rail investment priorities.
The option has an estimated three-year funding gap of c.$6.2m, reflecting the cost of
continued operation of the existing train over that period, and an overall 40-year present
value funding gap of $28.4m-$31.4m. These estimates include all capital costs, including
$14.3m for the procurement of a four-car DEMU set and basic stabling facilities in
Palmerston North, and $16.0m for the procurement of three two-car EMU sets in 2021-22
to run the replacement EMU service and maintain longer-term network capacity. They do
not include additional maintenance costs that may result from the remote nature of the
DEMU operation.
An alternative fall back sub-option is also available, similarly to the other DEMU options
option, but is not recommended due to its impact on passengers and other transport
system users and has not been taken forward for assessment. As with those options, it
would replace the existing train with a connecting coach and EMU between mid-2018 and
delivery of the DEMUs in 2021-22. This would reduce the three-year funding gap to
c.$1.1m, the overall 40-year present value funding gap to $23.6m-$26.6m, and eliminate
the timeframe constraint. However, passenger uncertainty around the temporary measure
would lead to significant mode shift, which would reduce short-term patronage by 20-30%
(more if the DEMU replacement was delayed), reduce the response to the problems and
investment benefits, and worsen already-problematic congestion and resilience issues.
Overall 40-year patronage would be approximately 5% lower than under the standard
connecting DEMU option.
3.1.6
Connecting Coach Option
This option is similar to the connecting DEMU option, but would replace the existing
through train with a luxury coach (bus) feeder service, which would connect with Metlink
suburban rail services at Waikanae31. The coach would run a similar Palmerston North-
Waikanae-Levin-Waikanae (and reverse) pattern to the connecting DEMU option, and
therefore offer similar frequency and travel choice benefits to that option. It is expected
that it would be operated under contract to one of the regional councils.
The option would utilise a double-deck coach to provide sufficient capacity to cater to
projected demand north of Waikanae32 . This would provide similar amenities to the rail
options, such as tray table seating, at-seat power facilities, Wi-Fi and air conditioning.
The deterrent effect of the transfer requirement, use of integrated fares, and impact of
improved service frequency would be expected to have a similar effect to the connecting
DEMU option north of Waikanae. However, patronage would be expected to be lower than
that option, reflecting the lower passenger value that is typically placed on bus-based
31 This option assumes that GWRC would add a replacement EMU-run suburban rail service in the same path and timetable as the CC,
similarly to the do-minimum.
32 The use of a standard-sized coach would likely restrict this service to passengers travelling from/to Levin and points north in the
medium and longer term, requiring Otaki passengers to use the existing Metlink bus service, which might in turn require service
enhancements.
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options33. Patronage growth would require an additional coach from 2048-49. Existing
passengers from Waikanae southwards would lose a travel alternative and be expected to
respond similarly to the do-minimum option.
Table 4 provides an indication of the anticipated passenger response. It shows that around
5-10% of passengers would be expected to cease travel under this scenario, 70-80% would
use an all public transport option (coach, bus and rail, or all rail), and 15-25% would change
to using private vehicle for some of the journey (via park and ride) or the entire journey.
Indicative Response – Connecting Coach Option
North of Waikanae
Waikanae &
(c.60% of passengers)
Paraparaumu
(c.40% of passengers)
Cease travel
5-10%
5-10%
Commercial coach service
0-5%
0-5%
Bus to Waikanae rail connection
0-5%
-
Private vehicle to Waikanae rail connection
10-15%
-
Metlink suburban rail only
-
80-85%
Private vehicle to Wellington
10-15%
10-15%
Connecting coach to Waikanae rail connection
60-65%
-
Table 4: Indicative Passenger Response to the Connecting Coach Option
The option would provide a reduced response to the two problems and accessibility,
productivity, and transport system capacity benefits identified in
Section 2.1 north of
Waikanae. It would provide only limited transport system resilience benefits, due to the
loss of the modal alternative on that section of the corridor. It would have a similar effect
to the do-minimum from Waikanae southwards.
The option would be relatively easy to implement, as it would not require the procurement
of new equipment. It could therefore potentially be in place to take effect in July 2018,
subject to planning, funding and contracting processes. It has been assessed on this basis.
The option has an estimated three-year funding gap of c.$0.6m, and an overall 40-year
present value funding gap of $9.2m-$12.2m. These estimates include all capital costs,
including the cost of the additional coach that is required to respond to patronage demand
in 2048-49, and $16.0m for the procurement of three two-car EMU sets in 2021-22 to run
the replacement EMU service and maintain longer-term network capacity34.
3.2
Option Assessment
The following sections compare the options in three areas – passenger response, revenue
and cost, and option effectiveness. The option effectiveness assessment takes account of
the passenger response and cost and revenue in its overall assessment.
33 Bus-based options typically have a lower response rate than the equivalent rail-based option, reflecting the smoother ride and
greater space and amenity of the rail alternative. A high-amenity coach is likely to counter this difference to some extent.
34 This option assumes that this train would use EMUs from the existing fleet prior to 2021-22, similarly to the do-minimum.
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3.2.1
Passenger Response
Under the through train and through DEMU (single trip) options, passengers would
continue to use the train as they do now, with associated benefits, while the increased
frequency of the through DEMU (double trip) option would boost patronage and provide
increased benefits. Under each of the other options, passengers would cease travel or
switch to the option or an alternative travel method, with reduced patronage and benefits
compared to the present.
Table 5 summarises the anticipated passenger response north of Waikanae under each
option.
Indicative Response –
n
i
)
North of Waikanae
MU
)
MU
p
m
p
g
g
Tra
DE
i
DE
n
n
h
Tri
i
i
mui
g
hg Tr
hg el
ct
ct
n
u
u
el
e
e
g
u
b
n
n
ro
ro
n
u
Mi
i
ro
n
MU
n
ach
-
o
Th
Th
S(
Th
Do(
Co
DE
Co
C
Do
Through train to Wellington
100%
100%
125-
-
-
-
130%
Cease travel
-
-
-
5-10%
5-10%
15-20%
Commercial coach service
-
-
-
0-5%
0-5%
5-10%
Bus to Waikanae rail connection
-
-
-
0-5%
0-5%
5-10%
Pte vehicle to Waikanae rail connection
-
-
-
5-10%
10-15% 45-50%
Train to Waikanae rail connection
-
-
-
70-75%
-
-
Coach to Waikanae rail connection
-
-
-
-
60-65%
-
Private vehicle to Wellington
-
-
-
10-15% 10-15% 20-25%
Table 5: Indicative Passenger Response Comparison - North of Waikanae
Table 6 summarises the anticipated passenger response from Waikanae southwards under
each option.
Indicative Response –
n
Waikanae Southwards
i
MU
)
)
MU
p
p
Tra
DE
i
DE
h
Tri
r
g
hg Tr
hg el
e
s
u
u
el
h
n
g
u
b
t
oi
ro
ro
n
u
O
i
ro
l
t
p
Th
Th
S(
Th
Do(
Al
O
Through train to Wellington
100%
100%
125-
-
130%
Cease travel
-
-
-
5-10%
Commercial coach service
-
-
-
0-5%
Metlink suburban rail only
-
-
-
80-85%
Private vehicle to Wellington
-
-
-
10-15%
Table 6: Indicative Passenger Response Comparison – Waikanae Southwards
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Horizons Regional Council / Greater Wellington Regional Council, Palmerston North-Wellington Rail Passenger
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Table 7 compares the 40-year public transport patronage impact of each option compared
to the through train.
Patronage Impact
n
m
i
MU
)
)
MU
p
p
g
g
mu
i
n
n
i
Tra
DE
DE
Tri
i
i
n
hg
hg Tr
h
e
e
l
ct
ct
l
g
b
e
e
Mi
u
u
u
-
g
n
n
ro
ro
n
u
i
ro
n
MU
n
ach
o
Do
Th
Th
S(
Th
Do(
Co
DE
Co
C
Projected 40-year patronage
4.53m
6.92m
6.92m
8.76m
6.00m
5.71m
Compared to through train
-35%
0%
0%
+27%
-13%
-17%
Table 7: Patronage Impact – 40 Year Evaluation Period35
The data in the tables show the extent to which the through train and DEMU options
perform compared to the other options. The 27% patronage increase under the through
DEMU (double trip) option would result in significant mode shift from private vehicle to
public transport.
The connecting DEMU and connecting coach options perform similarly to each other, but
well behind the through options. Both connecting options would increase peak Metlink rail
passenger demand by c.225 passengers per direction per day in 2021-22, which the extra
EMU service would comfortably accommodate, but result in mode shift from public
transport to private vehicle.
Public transport patronage and mode share would significantly reduce under the do-
minimum option, which would see greatly increased motor vehicle use and up to 40
passengers ceasing travel.
3.2.2
Revenue and Cost
Table 8 provides a summary of the present value revenue and costs associated with each
option over a full 40-year evaluation period. They are expressed as ranges36, reflecting the
high-level indicative nature of this assessment. Coach-related capital costs are included in
the operating cost.
35 This assessment is based on the following: the KiwiRail 2018-19 patronage projection, May 2016 boardings by station patronage
profile, a passenger response from within the ranges noted in Table 5 and Table 6, patronage growth of 2.0% (arithmetic growth), and
a service level elasticity of 0.35.
36 Revenue, operating cost and capital cost are expressed as +/-$0.5m around the mid-point estimate, which in-turn provides a $2m
range for the operating funding gap and a $3m range for the total funding gap.
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Present Value Revenue
ni
)
& Costs
m
MU
)
MU
p
p
g
g
mu
i
n
n
i
Tra
DE
DE
Tri
i
i
n
hg
hg Tr
h
e
e
l
ct
ct
l
g
b
e
e
Mi
u
u
u
-
g
n
n
ro
ro
n
u
i
ro
n
MU
n
ach
Do
Th
Th
S(
Th
Do(
Co
DE
Co
Co
Revenue
($12.5)-
($34.2)-
($34.2)-
($42.3-
($27.2-
($23.4-
($13.5)
($35.2)
($35.2)
$43.3)
$28.2)
$24.4)
Operating cost
$12.5-
$46.0-
$21.3-
$21.5-
$25.8-
$19.0-
$13.5
$47.0
$22.3
$22.5
$26.8
$20.0
Operating funding gap
($1.0)-
$10.9-
($11.9-
($19.8-
($0.4-
($3.4-
$1.0
$12.9
$13.9)
$21.8)
$2.4)
$5.4)
Capital cost
$14.6-
$17.3-
$29.2-
$31.7-
$30.8-
$14.6-
$15.6
$18.3
$30.2
$32.7
$31.8
$15.6
Total funding gap
$13.6-
$28.1-
$15.3-
$9.8-
$28.4-
$9.2-
$16.6
$31.1
$18.3
$12.8
$31.4
$12.2
Incremental funding
-
$14.5
$1.7
($3.8)
$14.8
($4.4)
gap (over do-minimum)
Table 8: Present Value Revenue and Cost – 40 Year Evaluation Period ($m)37
The data in the table show that the through DEMU (double trip) option performs best from
an operating perspective, with a clear surplus that is linked to its high patronage. The
through DEMU (single trip) option and connecting coach options also achieve operating
surpluses. The do-minimum and connecting DEMU options are essentially cost neutral
from an operating perspective. The through train option requires significant operating
subsidy.
The connecting coach option performs best from a total funding perspective, with a 40-year
present value funding gap of $9.2-$12.2m (c.$4.4m less than the do-minimum). The
through DEMU (double trip) option follows quite closely, with a 40-year present value
funding gap of $9.8-$12.8m (c.$3.8 less than the do-minimum). The through DEMU (single
trip) option has a similar total funding gap to the do-minimum, while the through train and
connecting DEMU options have a significantly greater funding requirement.
The through DEMU (double trip) option performs best on a per-passenger funding basis, at
c.$1.30. It is followed by the connecting coach at c.$1.88, through DEMU (single trip) at
c.$2.43, do-minimum at c.$3.34, through train at c.$4.28, and connecting DEMU at $4.99.
3.2.3
Option Effectiveness
The options have been screened using an assessment framework based on the approach
recommended by Treasury for the Better Business Case five case model. This uses a multi-
criteria analysis approach, with four investment objectives and six critical success factors, to
assess the effectiveness of each option and identify a preferred option.
37 This cost assessment is based on KiwiRail 2018-19 projections, DEMU costs assessed by GWRC for the Wairarapa (including track
access), EMU contract variation costs, indicative coach costs provided by HRC, and the patronage assumptions that suppor
t Table 7.
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3.2.3.1 Investment objectives
Investment objectives specify the desired outcomes of any proposed investment. The four
investment objectives reflect the four benefits of investment that are described in
Section
2.1.2. They are that an option must:
maintain or improve accessibility for residents of the corridor;
maintain or improve commuter productivity;
maintain or improve transport system capacity; and
maintain or improve transport system resilience.
Each option is assessed on how it achieves the outcomes over the 40-year period.
3.2.3.2 Critical Success Factors
Critical success factors are the attributes that are essential to successful delivery of the
option. The six critical success factors are based on those recommended for the Better
Business Case five case model, as defined to reflect the key considerations in this business
case. They are:
strategic fit: how well the option meets the investment objectives and associated
service requirements, and fits with relevant strategies, programmes and projects;
value for money: how well the option optimises value for money across the mix of
benefits, costs and risks;
service provider capacity: the ability of suppliers to deliver and how likely the option
will result in a sustainable arrangement that optimises in value for money;
affordability - operating costs: the scale of the net operational costs (i.e. operating
funding gap) and the likelihood that they can be met from available funding;
affordability - capital costs: the scale of capital expenditure and the likelihood that
this can be met from available funding; and
achievability: the likelihood of successful implementation within the available
timeframe, given constraints such as lead times and implementation risks.
Each option is assessed on how it achieves the outcomes over the 40-year period.
3.2.3.3 Assessment
Table 9 shows the results of the assessment of the five options against the assessment
criteria (as defined above) using a three-point scale (high/medium/low). The results have
been used to rank each option.
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n
m
i
MU
)
)
MU
p
p
g
g
mu
i
n
n
i
Tra
DE
DE
Tri
i
i
n
hg
hg Tr
h
e
e
l
ct
ct
l
g
b
e
e
Mi
u
u
u
-
g
n
n
ro
ro
n
u
i
ro
n
MU
n
ach
Do
Th
Th
S(
Th
Do(
Co
DE
Co
Co
Investment Objectives
Maintains or improves accessibility
Low
High
High
High
Med
Med
Maintains or improves productivity
-
High
High
High
Med
Med
Maintains or improves system capacity
Low
High
High
High
Med
Med
Maintains or improves system resilience
-
High
High
High
Med
Low
Critical Success Factors
Strategic fit
Low
Med
High
High
Med
Med
Value for money
Low
Med
Med
High
Low
Med
Service provider capacity and capability
High
High
High
High
High
High
Affordability - operating costs (net)
Med
Low
High
High
Med
High
Affordability - capital costs
Med
Med
Low
Low
Low
Med
Achievability
High
High
Med
Med
Med
High
Overall Ranking
6
3
2
1
5
4
Table 9: Option Effectiveness
The through DEMU (double trip) option has the highest ranking, with high ratings against
eight of the ten criteria, including all four investment objectives, and the strategic fit, value
for money (high benefits, low costs, and medium risks), service provider capacity and
capability, and affordability - operating costs criteria. Its medium rating relates to the
achievability criterion, reflecting the reliance on the outcome of a separate business case
and the long lead time, and the low rating to affordability - capital costs (although this is
partly driven by the extra patronage demand associated with this option).
The through DEMU (single trip) option has the second highest ranking, with high ratings
against seven of the ten criteria, including all four investment objectives, and the strategic
fit, service provider capacity and capability, and affordability - operating costs criteria. Its
medium ratings relate to the value for money (medium benefits, costs and risks) and
achievability criteria, and low ratings to the affordability - capital costs criterion.
The through train option has the third highest ranking, with high ratings against six of the
ten criteria, including all four investment objectives, and the service provider capacity and
capability and achievability criteria. Its medium ratings relate to the strategic fit, value for
money (medium benefits, high costs, and low risks) and affordability - capital costs criteria.
Its low rating relates to and affordability - operating costs criterion.
The connecting coach option has the fourth highest ranking, with high ratings against three
of the ten criteria. It does not achieve a high rating for any of the investment objectives
(the primary reason that it ranks behind the above options), due to the impact of the
transfer requirement, the lower amenity (compared to the present) from Waikanae
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southwards, and the reduced transport system capacity and resilience that result from the
removal of capacity and a modal alternative. Its high ratings relate to the service provider
capacity and capability, achievability and affordability - operating costs. Its medium ratings
relate to strategic fit, reflecting its lower rating against the investment objectives and lack
of specific mention in planning documents, affordability - capital costs, and value for money
(low benefits, low costs, and medium risks).
The connecting DEMU option has the fifth highest ranking. It achieves a high rating for
supplier capacity and capability, and medium ratings for the investment objectives and the
strategic fit, affordability – operating costs, and achievability criteria. Its low ratings relate
to value for money (medium benefits, high costs, medium risks) and affordability – capital
costs. The option is generally hurt by the transfer requirement and resulting low
patronage, while not offering the cost and achievability advantages of the similar
connecting coach option.
The do-minimum achieves low ratings for two of the investment objectives, which reflect
the replacement of the CC with a Metlink service, but is unrated against two others, and is
therefore ranked last.
3.3
Conclusion
Six options have been identified as potential responses in the current circumstances. These
are the:
do-minimum, which relates to the withdrawal of the CC when the full level of existing
funding support commitment ceases;
through train option, which relates to the continued operation of a through train
service between Palmerston North and Wellington, providing a single trip in each
peak;
through DEMU (single trip) option, which relates to the replacement of the existing
train with a DEMU that would operate between Palmerston North and Wellington,
providing a single trip in each peak;
through DEMU (double trip) option, which relates to the replacement of the existing
train with DEMUs that would operate two trips in each peak, one between
Palmerston North and Wellington and the other between Levin and Wellington;
connecting DEMU option, which relates to the replacement of the existing train with
a feeder DEMU service that would provide one peak direction trip between
Palmerston North and Waikanae and a return trip between Levin and Waikanae in
each peak; and
connecting coach option, which relates to the replacement of the existing train with
a feeder coach service that would provide one peak direction trip between
Palmerston North and Waikanae and a return trip between Levin and Waikanae in
each peak.
The options have been assessed against their passenger response, cost and revenue, and an
option effectiveness assessment framework consisting of:
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four investment objectives: maintain or improve accessibility for residents of the
corridor, maintain or improve commuter productivity, maintain or improve transport
system capacity, and maintain or improve transport system resilience; and
six critical success factors: strategic fit, value for money, service provider capacity,
affordability - operating costs, affordability - capital costs, and achievability.
The assessment finds that the through DEMU (double trip) option ranks as the best option,
despite having highest present value capital cost. It:
has high ratings for eight of the ten effectiveness criteria, including all four
investment objectives;
has the highest patronage potential, and therefore offers high benefits and a low
funding gap (the lowest on a per passenger basis) over 40-year evaluation period;
offers potential economies of scale and scope; and
allows capacity to be matched to demand (in both spatial and temporal terms) and is
best matched to the changing needs of a high-growth corridor.
The option is subject to some risk and urgency, in that it is reliant on a separate business
case choosing DEMUs as an immediate and preferred option, although the relevant costs
have been included in this assessment to enable a longer-term perspective to be taken. It
also has a long lead time that requires the existing train to continue running (at relatively
high cost) until DEMUs are available. However, given the above advantages, it is
appropriate to take this option forward for assessment as the investment proposal in the
Detailed Case component of this business case.
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4. Detailed Case
4.1
Description
The investment proposal entails the continued operation of the existing train until the
beginning of the 2021-22 financial year (or as soon after that point as possible)38, when it
will be replaced by two new four-car DEMUs. One DEMU will then run a Palmerston North-
Wellington service on the existing train path and timetable, while the other will run a new
Levin-Wellington service on a new train path and timetable. Both trains will run
southwards in the morning peak and northwards in the evening peak, between 15 to 60
minutes apart, to double service frequency from Levin southwards. This will improve
passenger options and drive patronage growth on that section of the network, while
maintaining existing passenger options elsewhere, and match capacity to demand.
Table 10 provides an indicative post-2021 timetable for the service. The actual timetable
will be dependent on a suitable train path being available for the additional train, which will
likely require some adjustment to other train times. The DEMUs can be expected to have
improved acceleration characteristics, which could enable a faster running time and / or
allow for additional stops within the existing timetable, such as at Porirua (see below).
Station
Distance
Southbound
Northbound
(km)
(am)
(pm)
Additional
Existing
Existing
Additional
Service
Service
Service
Service
Palmerston north
136.23
-
6:15
7:20
-
Shannon
106.63
-
6:38
6:57
-
Levin
90.32
6:33
6:53
6:42
6:57
Otaki
70.49
6:53
7:13
6:22
6:37
Waikanae
55.43
7:05
7:25
6:10
6:25
Paraparaumu
48.26
7:12
7:32
6:03
6:18
Wellington
0
8:00
8:20
5:15
5:30
Table 10: Indicative Post-2021 Timetable
The DEMUs will provide similar or better capacity to the existing train, but patronage
growth from the increased frequency will require an extra four-car DEMU to be added to
one of the trains in 2049-50. The DEMUs will offer similar features to the existing train,
such as table seating, at-seat power facilities and toilet facilities, but being modern and
purpose-built, will provide a higher standard of amenity and passenger comfort (e.g. air
conditioning, better acoustics, improved ride quality etc.).
It is expected that GWRC will procure the DEMUs and incorporate their operation into its
Metlink operation. The investment proposal is therefore linked to the outcome of a
38 An alternative fall back approach is also available for the period between mid-2018 and delivery of the DEMUs in 2021-22. This
would replace the existing train with a connecting coach and EMU, but is not recommended due to its impact on passengers and other
transport system users.
Section 3.1.4 provides further details of the impacts of this approach, with supporting information in
Section
3.1.3.
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separate GWRC business case, which will identify the case for investment in a preferred
option to address the Wairarapa, capacity and resilience issues noted in
Section 2.2.2.3. It
is dependent on that business case being completed as soon as possible, selecting DEMUs
as its preference (to achieve the necessary economies of scale), and targeting their
introduction for the 2021-22 financial year (and prior to April 2022 when the existing rolling
stock will need to be withdrawn). If this is the outcome, then the DEMUs will be used to
address several different issues across and beyond the Metlink network, which is likely to
offer economies of scope. Examples could include adding a Porirua stop and / or boosting
the capacity of one or both Palmerston North / Levin trains (beyond that noted above) to
address capacity issues in the electrified area, using this corridor’s DEMUs (and the wider
DEMU fleet) to address power outages in the electrified area, and potentially adding
counter-peak direction services to provide more travel choices for residents and facilitate
other travel such as for tourism.
4.2
Costs
The investment proposal has two cost elements, the:
operating funding gap or net operating cost (operating cost less revenue); and
capital cost.
These costs combine to form the total funding gap that must be funded by central and local
government. They are considered separately, as they are subject to different cost and
demand drivers and may possibly be funded through different funding channels.
The operating cost is made up of direct labour, fuel, track access, maintenance, hook and
tow charges (for the existing train) and other costs. These total $2.92m per annum for the
first three years, reflecting the high cost of running the existing train. Half of that cost
relates to the hook and tow (locomotive hire) charge, which is specific to the existing train
and won’t apply to DEMU operation. The operating cost is projected to drop to $1.02m per
annum in 2021-22, reflecting reduced DEMU operating costs, before increasing to $1.35m
per annum when the third four-car DEMU is added in 2049-50.
Revenue is composed of fare revenue and catering revenue. These are projected to total
$1.74m in the 2018-19 year, and then increase in line with patronage, which is projected to
increase at a rate of 2% (arithmetic growth) 39, with a step change service level elasticity
increase of 0.35 when service levels are increased with the introduction of the DEMUs in
2021-2240.
The capital cost includes costs associated with heavy maintenance of the existing rolling
stock for the first three years, the purchase of new DEMUs, construction of basic stabling
facilities in Palmerston North and Levin41, and heavy maintenance of the DEMUs over the
remainder of the period. Heavy maintenance of existing rolling stock totals $2.8m over the
first three years, reflecting the cost of required bogie overhauls, a safety system upgrade
(regulatory requirement), an end egress upgrade (regulatory requirement), concertina
39 This growth rate is consistent with the KiwiRail forecast and post-2014 growth rates, but lower than pre-2010 growth rates.
40 This service level elasticity is higher than the 0.25 peak short term elasticity recommended in the EEM. However, the EEM rate is an
average, and the EEM notes that elasticities will be higher when service frequency is low (as in this situation) and roughly double in the
long term. The 0.35 rate can therefore be regarded as being conservative.
41 All maintenance will be carried out in Wellington, so these facilities will only provide secure overnight storage and comprise only a
small portion of the capital cost.
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replacement, and overhauls of one car and one van, which are required to maintain
operation until 2021-22. Each of the four-car DEMUs has a $14.17m procurement cost,
which includes all costs associated with their introduction. DEMU heavy maintenance costs
total $9.9m over the 37 years of their use, and include both the regular heavy maintenance
and mid-life refurbishment.
No other direct costs are associated with the proposal, other than contract management
and administration costs for investors, which are assumed to be relatively minor.
4.3
Benefits
4.3.1
Direct Benefits
The investment proposal provides three types of direct transport benefit:
road traffic reduction benefit;
public transport user benefit; and
public transport travel time saving benefit.
Road user benefits include travel time savings (including congestion reduction), vehicle
operating cost savings, crash cost savings and environmental benefits (including CO2
reduction), and apply to each passenger who would otherwise switch to driving for part of
the journey or the full journey. These benefits are based on the Wellington rail values42
from Table SP10.143 of the NZTA Economic Evaluation Manual (EEM)44, updated using the
2016 update factors and prorated for distance45. Peak values are applied south of
Waikanae where congestion is greatest, and off-peak values north of that point, reflecting
the less congested conditions on the northern end of the corridor.
Public transport user benefits include a range of passenger benefits, and apply to each
passenger who would otherwise cease travel or switch to driving for part of the journey or
the full journey. These benefits are also based on the Wellington rail values from Table
SP10.1 of the EEM, and updated, prorated and applied similarly to the road user benefits.
Public transport travel time saving benefits apply to each passenger who would otherwise
switch to commercial coach, Metlink rail via connection, or solely to Metlink rail. These are
based on the passenger value of time46 and savings of 15, 8, and 3 minutes respectively47.
Table 11 shows the resulting benefit values that have been applied. The public transport
user benefit is combined for passengers from north of Waikanae, who would otherwise
cease travel or drive to Wellington, reflecting the complete loss of public transport user
42 The Wellington rail values best reflect the valuation of train users, the substantial majority of who travel to Wellington.
43 SP10 is the EEM simplified procedure for improvements to existing public transport services.
44 The investment proposal has an undiscounted operational funding gap of $3.42m over the first three years, which is less than the $5
million simplified procedure threshold. Capital expenditure adds $2.79m, which lifts the funding gap to $6.21m, but this is skewed by a
high cost in the second year, which reflects the costs of overhaul and upgrades to meet new regulatory requirements. The costs meet
simplified procedure requirements if these additional costs are excluded.
45 Distance is prorated on the weighted average journey distance, separately for north of Waikanae and Waikanae southwards.
46 The passenger value of time is a weighted average, based on the EEM base values of time, and a travel purpose split based on the
EEM standard split and the findings of the March 2015 THCCC passenger survey, and has been updated using 2016 update factors.
47 These times are based on scheduled trip times, and a five-minute transfer time for the connection to rail. They do not include
additional travel time savings that may result from the improved acceleration characteristics of the DEMUs.
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benefits for these passengers.
Waikanae
North of
Commercial
Southwards
Waikanae
Coach
Road user benefit
$47.68
$4.19
-
Public transport user benefit
$44.28
$23.10
-
Public transport travel time saving benefit
$0.67
$1.12
$3.36
Table 11: Per Passenger Benefit Values
Table 12 shows the effect of each type of passenger response in the do-minimum situation.
The opposite responses apply as the direct transport benefits of the investment proposal.
Origin
Response
CC User Benefit
Road User Benefit
Impact
Impact
North of Waikanae
Cease travel
PT user loss
-
Commercial coach
Travel time increase
-
Bus to rail connect
Travel time increase
-
Drive to rail connect
Travel time increase
Road user loss
PT user loss
Drive to Wellington
PT user loss
Road user loss
Waikanae Southwards
Cease travel
PT user loss
-
Commercial coach
Travel time increase
-
Metlink rail
Travel time increase
-
Drive to Wellington
PT user loss
Road user loss
Table 12: Do Minimum Benefit Impact
4.3.2
Other Benefits
The investment proposal is likely to provide a wider range of social, economic and
environmental benefits in addition to the direct transport benefits described above, which
can be expected to improve the liveability of the corridor and quality of life of residents48.
These are difficult to directly quantify, but are likely to support the investment case and the
broader objectives of the GPS.
4.4
Economic Analysis
The economic assessment is based on the change compared to the do-minimum case in
accordance with EEM guidance. This uses the following as inputs:
a 40-year evaluation period from the beginning of the 2018/19 financial year;
the standard 6% discount rate from the EEM;
48 These benefits include other accessibility, productivity and resilience-related benefits, option and non-use benefits, and wider
economic benefits.
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the midpoint of the do-minimum response range noted in
Table 2;
the 2% patronage growth rate noted in
Section 4.2;
the 0.35 service level elasticity noted in
Section 4.2;
the benefits from
Table 11, which apply in accordance with the responses noted in
Table 12; and
the operating costs, revenue and capital costs noted in
Section 4.2.
Table 13 summarises the parameters of the central case, based on the above, and the
lower bound and upper bound cases that form the BCR range.
Factor
Lower Bound
Central Case
Upper Bound
Costs
5% higher
As noted in
Section 4.2.
5% lower
Patronage growth
1%
2%
3%
Service level elasticity
0.25
0.35
0.45
Response
The responses of
The midpoint of the do-
The responses of
passengers who cease
minimum response
passengers who cease
travel, drive to a rail
range noted
in Table 2
travel, drive to a rail
connection or to
connection or to
Wellington are at the
Wellington are at the
low end of the
range,
high end of the range,
and the other
and the other
responses are at the
responses are at the
high end of the range
low end of the range
Table 13: BCR Range Parameters
Table 14 shows the results of the BCR assessment for the three scenarios. The BCRs shown
are government BCRs, which show the value for money that the investment provides from
a central and local government perspective.
Factor
Lower Bound
Central Case
Upper Bound
PV benefits
$82.24m
$106.74m
$137.53m
PV costs (funding gap)
$17.57m
$11.35m
$5.78m
Benefit Cost Ratio
4.7
9.4
24
Table 14: Cost Benefit Appraisal Results
The data in the table show that the investment proposal provides a positive BCR under all
three scenarios and is expected to provide a very positive return on investment, with a
central case BCR of 9.4. The lower bound case, which has lower patronage and benefits
and higher costs, gives a healthy BCR of 4.7, and returns a positive BCR of 3.3 even if costs
are 20% higher than the central case. The upper bound case, which has higher patronage
and benefits, and lower costs, covers a significant portion of costs from revenue over the 40
years, resulting in a high BCR of 24.
The BCR is very sensitive to the patronage growth and service elasticity assumptions, but
these are evidence-based. The high-growth nature of the corridor supports the central
patronage growth parameter, which is based on the current growth trajectory, while the
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service level elasticity can be regarded as conservative, particularly over the long run. Both
are supported by recent experience in the Wellington region, where new rolling stock has
driven significant patronage growth.
The mid-range BCR of 9.4 is taken forward to the assessment profile, since it is best
supported by the available evidence.
4.5
Assessment Profile
The investment proposal has been assessed against the NZTA’s draft Investment
Assessment Framework for the 2018-21 NLTP, which rates a proposal on two factors:
results alignment and cost benefit appraisal. The ratings are then brought together to form
an overall assessment profile that determines a proposal’s priority for NLTP investment.
4.5.1
Results Alignment
The results alignment factor is used to determine the significance of a problem, issue or
opportunity relative to the desired results set out in the GPS. There are four rating bands –
low, medium, high and very high – each of which has specific criteria.
The investment proposal meets criteria for both a medium and high rating. It achieves a
medium rating on the basis that:
There is an identified gap in meeting customer levels of service on the parallel state
highways and increasingly will be on the Metlink suburban rail network, and the
proposal delivers on the draft GPS 2018/19-2027/28 priority objectives of:
a land transport system that addresses current and future demand for access
to economic and social opportunities, with the specific short / med term
investment priorities of
public transport is provided where there is sufficient
demand, particularly for services that connect people to employment and
education (based on current patronage and trip purposes), and
regional
networks are connected and resilient, and journey times on key regional freight
routes are reliable and predictable; and
a land transport system that is resilient, with the specific short/med term
investment priority of
regional and local system approaches, including
investment in non-transport infrastructure where this has clear transport
benefits, are used to improve resilience at the economically and socially most
critical points of the network (since this diesel rail passenger option is a
regional approach that improves resilience at an economically and socially
critical point of the regional and national transport networks).
The proposal addresses the specific medium rating criterion of
the provision of access
to economic and social opportunities, particularly for those with limited access to a
private motor vehicle.
It achieves a high rating on the basis that:
the gap in meeting appropriate customer levels of service on the parallel state
highways is significant, particularly while current and planned construction takes
place, and would worsen if the rail passenger option was to be withdrawn;
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withdrawal of a rail passenger option on the corridor would significantly worsen
capacity issues on the Metlink suburban rail network, while enhancing it in this way
will help address those issues;
the investment proposal addresses a situation where
specific types of customer
journeys support economic growth and productivity (as identified in Chapt
er 2); and
the investment proposal provides capacity that can be matched to demand (in both
spatial and temporal terms) in a situation where
capacity and demand are
mismatched for journeys in a major urban and high growth urban area.
The investment proposal is therefore assigned a results alignment rating of ‘High’.
4.5.2
Cost Benefit Appraisal
The NZTA classifies BCR ratings into four bands: between 1 and 2.9, between 3 and 4.9,
between 5 and 9.9, and 10 or above. The investment proposal has a mid-range BCR of 9.4,
as described in
Section 4.4, and is therefore classified as being in the ‘between 5 and 9.9’
band.
The results alignment rating of ‘High’ and cost benefit appraisal rating of ‘between 5 and
9.9’ give the investment proposal a rank of 3 (in a scale of 1 to 6), which makes it eligible for
NLTP funding under the draft Investment Assessment Framework49.
4.6
Risks
The investment proposal carries some risks. The key risks and recommended responses are
summari
sed in Table 15.
Risk Type
Risk Description
Risk Response
Dependency
Implementation of the
Prompt completion of the GWRC business case will need
longer-term DEMU aspect
to be a priority, to determine whether DEMUs are the
of the proposal is
preferred option for the Metlink network, as DEMUs are
dependent on the outcome
unlikely to be viable on the Palmerston North-Wellington
of a separate GWRC
corridor in isolation. If the GWRC business case does not
business case for the
select DEMUs, then this business case will need to be
Wairarapa (and capacity
revisited to identify an appropriate long-term alternative
and resilience).
for the corridor. This risk is closely linked to the
timeframe risk below.
Timeframe
DEMUs are not available to
The DEMUs require a minimum three to four-year lead
replace the existing train by
time to enable funding, design and construction. This will
April 2022, when it must be
require the above business case to be completed as soon
withdrawn.
as possible, and funding, design and procurement
decisions to be made promptly, so that the DEMUs can
be introduced at the beginning of the 2021-22 financial
year, or as soon after that point as possible.
Revenue
Patronage increases at a
The high-growth nature of the corridor and current
slower rate than
growth trajectory support the patronage growth
49 Programming of activities is also informed by the NZTA’s Programming Support urgency rating, which provides a view of when the
issue or opportunity needs to be addressed. Programming is influenced by the availability of funding within the overall NLTP, the
individual activity classes, and other funding sources including local funding.
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anticipated, resulting in
projection, and the service level elasticity can be
lower revenue.
regarded as conservative. Both are supported by recent
experience in the Wellington region. However, scenario
testing shows that the BCR remains positive if patronage
growth is lower than projected.
The economies of scope that are likely to result from
incorporating the DEMU operation into the Metlink
operation are likely to support patronage and revenue
growth through better marketing and coordination of
services.
Costs
The operating and capital
Operating and capital cost forecasts for the existing train
expenditure forecasts may
are based on those provided by KiwiRail. It may be
change.
appropriate to formally specify them and the agreed level
of public funding support in a service contract.
Longer-term DEMU costs are based on detailed GWRC
analysis of the DEMU option. These are subject to
further confirmation through the design and
procurement process, but a conservative DEMU capital
cost has been deliberately selected, to allow for a higher
than anticipated cost and/or higher specification (e.g. to
allow the DEMUs to draw power from the electric
overhead within the electrified area).
Public
Public funding support is
The key investment partners (HRC, GWRC and NZTA)
funding
not confirmed.
have participated previous assessments of the train, the
current Passenger Rail Working Party, and this business
case. All will consider the financial implications of this
investment, which are significant for each organisation
(see
Section 4.7), before committing funding support. It
would not be appropriate for investment proceed
without contributions from all three organisations.
Public
A short-term funding
The investment proposal is very viable over the long
Funding
shortfall could affect the
term, but continued operation of the existing train is
viability of the proposal.
subject to a $6.2m three-year funding shortfall. This
shortfall is likely to be a significant barrier to continued
operation of the train and a special funding arrangement
may be required to maintain levels of service until the
DEMUs enter service.
Table 15: Risks and risk responses
4.7
Financial
Table 16 provides a breakdown of the cashflow components over the 10-year planning
horizon in 2016 dollars50. These include:
revenue, from passenger fares and catering;
operating expenditure, which include the components noted in Section
4.2, and
change with the type and number of rolling stock in operation;
the resulting operating funding gap that may be funded separately from capital
expenditure;
50 Revenue and expenditure exclude the effects of any future cost inflation. It is assumed that fare levels would increase to match
inflation over the period.
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capital expenditure, which includes the purchase of new DEMUs in 2021-22 and
2049-50, construction of basic stabling facilities in Palmerston North and Levin in
2021-22, and heavy maintenance throughout the period, as noted in Section
4.2; and
the total funding gap that will need to be covered through public investment by local
and / or central government.
Appendix A provides a breakdown over the full 40-year evaluation period.
Financial Year
Revenue
Operating
Capital
Operating
Funding Gap
Ending
($m)
Expenditure
Expenditure
Funding Gap
($m)
($m)
($m)
($m)
2019
($1.74)
$2.92
$0.66
$1.17
$1.83
2020
($1.78)
$2.92
$1.42
$1.14
$2.56
2021
($1.81)
$2.92
$0.72
$1.10
$1.82
2022
($2.33)
$1.02
$28.56
($1.31)
$27.25
2023
($2.38)
$1.02
-
($1.36)
($1.36)
2024
($2.42)
$1.02
-
($1.40)
($1.40)
2025
($2.47)
$1.02
-
($1.45)
($1.45)
2026
($2.52)
$1.02
-
($1.50)
($1.50)
2027
($2.56)
$1.02
$0.33
($1.54)
($1.21)
2028
($2.61)
$1.02
$0.43
($1.59)
($1.16)
Table 16: Cashflow Components Over the 10-Year Planning Horizon
Of immediate note is the high cost associated with the continued operation of the existing
train in the first three years, which results in a $6.21m funding gap that must be funded
through public investment.
Table 17 shows the cost to each investor over this period,
assuming a NZTA share at the standard 51% NZTA Funding Assistance Rate. The NZTA has
not provided a formal position on whether NLTP funding is likely to be available.
Financial Year
Funding Gap
NZTA Share
Share for Each
Ending
($m)
($m)
Regional Council ($m)
2019
$1.83
$0.93
$0.45
2020
$2.56
$1.30
$0.63
2021
$1.82
$0.93
$0.45
Table 17: Forecast Investor Cost Impact
HRC currently contributes $0.175m and GWRC $0.110m, so each regional council would
need to significantly increase its contribution with a NZTA contribution of the level shown in
Table 17. The costs to each council would more than double again if a NZTA contribution
was not available. A special funding arrangement may therefore be required to allow the
train to continue running and maintain road and public transport service levels until the
new DEMUs can be introduced.
The arrival of the DEMUs is projected to bring a reduction in operating expenditure, which
along with the frequency-related patronage increase, is expected to result an operating
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surplus over the remainder of the period. The full funding gap from 2021-22, inclusive of
capital expenditure, will depend on the commercial arrangements that are agreed with the
manufacturer of the new DEMUs. The impact on the investment partners will be
dependent on that, the funding arrangement that supports the purchase, and the degree to
which the capital cost is operationalised
. Table 18 provides an example, showing the 10-
year planning horizon impact of operationalising the capital cost of the DEMUs over 25
years at a 6% discount rate.
Financial Year
Operating
Operationalised
Funding Gap ($m)
Ending
Funding Gap ($m)
Capital
Expenditure
($m)
2019
$1.17
$0.66
$1.83
2020
$1.14
$1.42
$2.56
2021
$1.10
$0.72
$1.82
2022
($1.31)
$2.42
$1.11
2023
($1.36)
$2.22
$0.86
2024
($1.40)
$2.22
$0.81
2025
($1.45)
$2.22
$0.77
2026
($1.50)
$2.22
$0.72
2027
($1.54)
$2.55
$1.00
2028
($1.59)
$2.65
$1.06
Table 18: Example Operationalised Capital Cost Over 25 Years (10-Year Planning Horizon)
4.8
Commercial
There are several commercial aspects to the investment proposal – those relating to the
continued operation of the existing train, those related to the procurement of the new
DEMUs, and those related to their operation.
4.8.1
Existing Train
The current public funding arrangement has been provided outside of a formal contractual
relationship since 2015. However, the scale of public investment required to maintain
operation of the existing train over the 2018-19 to 2020-21 period is substantial, and it may
be appropriate to establish a formal agreement between the regional councils and KiwiRail
to cover this period.
Such a contractual relationship would be consistent with the LTMA, which envisages that all
services that receive public funding will be contracted, and with the NZTA requirement that
the service be defined as a public transport unit in both regions’ RPTP. An agreement could
set clear service expectations and provide certainty around costs in a way that is fair to the
investors and KiwiRail.
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4.8.2
DEMU Procurement
Implementation of the longer-term DEMU related aspect of the investment proposal is
dependent on the outcome of a separate GWRC business case, which will determine
whether DEMUs are the best option to address a wider set of issues. That business case
will identify the commercial arrangements for their procurement.
Procurement is likely to require a minimum three to four-year lead time to enable DEMU
funding, design and construction, and it is unlikely that they will be available prior to the
beginning of the 2021-22 financial year. The DEMUs will need to be available prior to April
2022 when the existing rolling stock would need to be withdrawn, placing a key timeframe
constraint on the procurement process.
4.8.3
DEMU Operation
GWRC currently contracts the operation of its Metlink suburban rail services to Transdev
Australasia. It is expected that Transdev will operate the DEMUs on the remainder of the
Metlink network if DEMUs are chosen for that role, and it will be appropriate to extend that
contract to include the operation of the services on Palmerston North-Wellington corridor
commuter services to enable them to be efficiently operated and take advantages of
economies of scale and scope.
4.9
Management
If the investment proposal proceeds as recommended, both regional councils will need to
define rail commuter services on the corridor as a public transport unit in their RPTP as
noted above. However, it will be important for one region to take a lead in managing the
relationship with KiwiRail in the short term, particularly if the relationship is formally
defined in a formal service contract. GWRC has considerable experience managing rail
contracts, and it is therefore appropriate for GWRC to take a lead in managing the
relationship with KiwiRail on behalf of both councils.
It will also be appropriate for GWRC lead the procurement of the DEMUs and manage their
future operation. The GWRC business case will determine the appropriate project and
contract management frameworks under which these will be managed.
4.10 Conclusion
The investment proposal entails the continued operation of the existing train between
Palmerston North and Wellington until the beginning of the 2021-22 financial year, when it
will be replaced by two new four-car DEMUs. One will then run a Palmerston North-
Wellington service and the other a Levin-Wellington service, to double service frequency
from Levin southwards and drive patronage growth.
The proposal has a PV net cost of $11.35m, and direct transport benefits of $106.74m over
the 40-year evaluation period, which give it a BCR of 9.4. Assessment against the NZTA’s
draft 2018-21 Investment Assessment Framework gives a results alignment rating of ‘High’,
which gives it a rank of 3 when combined with the BCR, making it eligible for NLTP funding.
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Risks around dependency, timeframe, revenue, costs and public funding will need to be
managed. Of note are the dependency of the DEMU aspect of the proposal on the
outcome of a separate GWRC business case (dealing with wider Metlink network issues), a
timeframe constraint imposed by the required withdrawal of the existing train by April
2022, and a $6.2m three-year funding shortfall to enable its operation and maintain service
levels until the DEMUs are introduced.
However, the proposal clearly responds to the problems resulting from a large and growing
population and limited roading links on the corridor, and has accessibility, productivity,
transport system capacity and transport system resilience benefits. These support
economic growth and productivity on a high-growth corridor at a critical point on the
transport network, and provide a strong case for investment. It is therefore recommended
that the Passenger Rail Working Party and key investors give strong consideration to the
proposal.
TDG
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Appendix A
Cashflow Components
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Financial Year
Revenue
Operating
Capital
Operating
Funding Gap
Ending
($m)
Expenditure
Expenditure
Funding Gap
($m)
($m)
($m)
($m)
2019
($1.74)
$2.92
$0.66
$1.17
$1.83
2020
($1.78)
$2.92
$1.42
$1.14
$2.56
2021
($1.81)
$2.92
$0.72
$1.10
$1.82
2022
($2.33)
$1.02
$28.56
($1.31)
$27.25
2023
($2.38)
$1.02
-
($1.36)
($1.36)
2024
($2.42)
$1.02
-
($1.40)
($1.40)
2025
($2.47)
$1.02
-
($1.45)
($1.45)
2026
($2.52)
$1.02
-
($1.50)
($1.50)
2027
($2.56)
$1.02
$0.33
($1.54)
($1.21)
2028
($2.61)
$1.02
$0.43
($1.59)
($1.16)
2029
($2.66)
$1.02
-
($1.64)
($1.64)
2030
($2.70)
$1.02
$0.33
($1.68)
($1.35)
2031
($2.75)
$1.02
$0.43
($1.73)
($1.30)
2032
($2.80)
$1.02
-
($1.78)
($1.78)
2033
($2.84)
$1.02
$0.43
($1.82)
($1.39)
2034
($2.89)
$1.02
$0.58
($1.87)
($1.29)
2035
($2.94)
$1.02
-
($1.92)
($1.92)
2036
($2.98)
$1.02
$0.79
($1.96)
($1.17)
2037
($3.03)
$1.02
$1.05
($2.01)
($0.96)
2038
($3.08)
$1.02
-
($2.06)
($2.06)
2039
($3.12)
$1.02
$1.13
($2.10)
($0.97)
2040
($3.17)
$1.02
$1.51
($2.15)
($0.64)
2041
($3.22)
$1.02
-
($2.20)
($2.20)
2042
($3.26)
$1.02
-
($2.24)
($2.24)
2043
($3.31)
$1.02
-
($2.29)
($2.29)
2044
($3.36)
$1.02
-
($2.34)
($2.34)
2045
($3.40)
$1.02
$0.43
($2.38)
($1.95)
2046
($3.45)
$1.02
$0.58
($2.43)
($1.85)
2047
($3.50)
$1.02
-
($2.48)
($2.48)
2048
($3.54)
$1.02
$0.33
($2.52)
($2.19)
2049
($3.59)
$1.02
$0.43
($2.57)
($2.14)
2050
($3.64)
$1.35
$14.17
($2.29)
$11.88
2051
($3.68)
$1.35
-
($2.34)
($2.34)
2052
($3.73)
$1.35
-
($2.38)
($2.38)
2053
($3.78)
$1.35
-
($2.43)
($2.43)
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2054
($3.82)
$1.35
-
($2.48)
($2.48)
2055
($3.87)
$1.35
-
($2.52)
($2.52)
2056
($3.92)
$1.35
-
($2.57)
($2.57)
2057
($3.96)
$1.35
$0.49
($2.62)
($2.13)
2058
($4.01)
$1.35
$0.65
($2.66)
($2.01)
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