Government pledges taxpayers' money to fund half the cost of Auckland's estimated $2.8b to $3.4b City Rail Link

The Government has signed a deal with Auckland Council pledging up to $1.7 billion of taxpayers’ money for Auckland’s City Rail Link.

Associate Finance Minister Steven Joyce and Transport Minister Simon Bridges say the Government has agreed for taxpayers to fund half the cost of the 3.4 kilometre underground train line, which has an estimated total cost of between $2.8 billion and $3.4 billion.

“The Government and Auckland Council will need to develop several agreements to bring the funding, governance and risk management arrangements into effect, principal among which is a sponsors’ agreement [The principals to the agreement, referred to as ‘sponsors,’ are the Government and Auckland Council],” Joyce and Bridges say.

“The Sponsors’ Agreement will set out the detailed terms of the Crown and Auckland Council’s partnership to deliver the City Rail Link, including a target cost for the project and framework for responding to cost overruns, the parties’ requirements for the project and how the project will be governed and delivered.” 

Auckland Mayor Len Brown described the signing of an agreement with the government on 50/50 funding between the council and government for the City Rail Link as “unprecedented and an historic milestone.”

Here’s the Government’s statement

Government confirms City Rail Link funding 

The Government has agreed to fund half the cost of Auckland’s City Rail Link (CRL), Associate Finance Minister Steven Joyce and Transport Minister Simon Bridges have announced. 

The Government and Auckland Council today signed a Heads of Agreement, under which the Crown will fund 50 per cent of the CRL. The total cost of the project is estimated to be between $2.8 billion and $3.4 billion, and the Crown will make its 50 per cent funding progressively available once a Sponsors’ Agreement is in place. 

“In January this year, the Prime Minister announced the Government would accelerate delivery of the CRL to help address Auckland’s transport issues. This agreement is an important milestone in the project and it underlines the Government’s commitment to keeping Auckland moving,” Mr Joyce says. 

“The Heads of Agreement sets out in-principle commitments from Government and Auckland Council, and contains broader funding, governance and risk management arrangements. 

“The Heads of Agreement also outlines arrangements for establishing an independent Special Purpose Entity to deliver the CRL, working with Auckland Transport, KiwiRail and others as necessary.” 

A more detailed Sponsors’ Agreement will be developed in the coming months to give effect to the Crown’s and Council’s commitments. The Government will start to make the Crown funding available once this is in place – which may be as early as 2017. 

Once complete, the CRL will be one of New Zealand’s largest-ever transport projects. The 3.4 kilometre underground train line will run from Britomart station in downtown Auckland through the CBD to connect with the existing western line at Mt Eden station. 

“CRL is one of Auckland’s top transport priorities It will double the capacity of the metro rail network and provide significant travel time savings for commuters, particularly those travelling from fast-growing western suburbs,” Mr Bridges says. 

“The Government’s commitment to the CRL has been driven by strong growth in rail patronage in recent years and the need to provide investment certainty for large-scale property developments around Auckland’s CBD, including around the new and improved stations at Aotea Square, Karangahape Road and Mount Eden,” Mr Bridges says. 

“The investment in City Rail Link reflects the Government’s strong commitment to meeting Auckland’s transport needs, with improvements to the transport network focused on accommodating the growing population as well as supporting ongoing economic growth,” Mr Bridges says. 

CRL – Q&A

1. What is the City Rail Link (CRL)?

The City Rail Link is a 3.4km double track underground rail line that will turn Britomart into a through station, and link it to two new central city stations (near Aotea Square and Karangahape Road). The new line will connect to a redeveloped Mount Eden station, where it will rise to the surface to meet the existing Western line.

2. What are the benefits of CRL?

The City Rail Link will improve access into Auckland’s city centre, reduce journey times for rail commuters in Auckland and double the capacity of Auckland’s rail passenger network.

3. What is the total cost of CRL expected to be?

Auckland Transport’s 2015 business case for the CRL estimated the cost of the project to be between $2 and $3 billion, applying a 20% cost range. After completion of more detailed design work to further refine the needs of the project, officials put the current estimated cost at between $2.8 billion and $3.4 billion. This is an estimate and will be subject to further changes following formal engagement with the market. The Government will be expecting the final cost to represent best value for money for taxpayers and ratepayers.

4. Why have the costs increased?

As is common with large infrastructure projects, early estimates of the costs represent a best-informed estimate at the time, and are subject to change as planning and design progresses. More detailed design work by Auckland Transport to further refine the needs of the project has allowed cost estimates to be more accurately developed. However, these still reflect a best-informed estimate using the information currently available and are subject to further changes following formal engagement with the market.

5. Why is the Government providing funding?

The Government’s commitment to the CRL reflects strong growth in rail patronage in recent years and provides more investment certainty for property developments around Auckland’s CBD, including around the new and improved stations at Aotea Square, Karangahape Road and Mount Eden.

6. What is a “Heads of Agreement”?

A Heads of Agreement sets out the main issues relevant to a partnership, including the roles and responsibilities of the parties involved, before a more detailed partnership agreement is drawn up.

7. What does the Heads of Agreement cover?

The Heads of Agreement contains an in-principle commitment from the Crown and Auckland Council to fund the CRL on an equal basis, subject to a number of arrangements around the funding, governance and risk management of the CRL.

8. What does the Heads of Agreement mean for CRL construction?

The Heads of Agreement provides certainty to suppliers of the Government’s involvement in the project on an equal basis with Auckland Council and both party’s intention to establish an independent Special Purpose Vehicle to deliver the CRL, working with Auckland Transport, KiwiRail and others as necessary. Auckland Transport will continue to deliver the project in the interim period.

9. What is yet to be agreed?

The Government and Auckland Council will need to develop several agreements to bring the funding, governance and risk management arrangements into effect, principal among which is a Sponsors’ Agreement.

10. What will be covered in the Sponsors’ Agreement?

The Sponsors’ Agreement will set out the detailed terms of the Crown and Auckland Council’s partnership to deliver the CRL, including a target cost for the project and framework for responding to cost overruns, the parties’ requirements for the project and how the project will be governed and delivered.

11. When will a Sponsors’ Agreement be signed?

The Sponsors’ Agreement is likely to be signed in early 2017.

12. When will CRL be completed?

The CRL is expected to be completed by 2023/24.

And here’s a statement from Auckland Mayor Len Brown

Auckland Mayor Len Brown describes today’s signing of an agreement with the government on funding for the City Rail Link (CRL) as unprecedented and an historic milestone. 

“Central Government and Auckland Council are now in clear agreement that the CRL is at the heart of dealing with the city’s growth, with propelling our economy, and creating a future Aucklanders deserve.” 

Today Len Brown and Transport Minister Simon Bridges signed an agreement on the contractual relationship between the parties including procurement structure and a 50/50 funding arrangement of the entire project. 

This will allow the “main works” tendering process to begin and for specialist constructors to make available the people and machinery needed to build the CRL. 

Features of the Heads of Agreement include:

· A 50/50 funding arrangement where Auckland Council and the Crown each pay half of the total capitalised costs of the project.
· The principals to the agreement, referred to as “sponsors”, are the Government and Auckland Council.
· The establishment of a company (City Rail Link Limited) through which the Government and Council will oversee the delivery of the project.
· Joint share in development opportunities arising from the project.
· The technical and operational aspects of project delivery are to be carried out by Auckland Transport working to the City Rail Link company.
· KiwiRail have a formal role in ensuring the CRL’s interoperability with the wider rail network and the services it provides, such as freight. 

Today’s signing took place at the Victoria St underground shaft from where tunnel boring machines will start the work. 

The Mayor said the CRL had been his number one priority and today’s agreement was the culmination of six years of Auckland negotiating with the government. 

“Today I am very incredibly proud to stand with the Minister of Transport and together ensure this project can now proceed and be funded for the future benefit of all Aucklanders.”

The City Rail Link is New Zealand’s largest public transport project. It will more than double the number of people able to use Auckland’s rail network. 

Both Len Brown and Simon Bridges, along with Prime Minister John Key and other dignitaries, had formally marked the start of the construction of the CRL with a groundbreaking ceremony at the downtown Britomart Train Station on 3 June 2016.