If light rail heads south, who benefits? “The existing landowners from capital gains created by a multi-billion-dollar government project that has little or no public benefit,” say JOHN STANHOPE & KHALID AHMED.

Last week we highlighted the inexplicable appearance of a light rail business case option that diverts the route to Barton, through the so-called “dog leg”.  

While this recommended option appears in the executive summary, it is different from the corresponding option in the economic analysis, which is based on the direct route through State Circle to Woden.

The “dog leg” has a longer transit time, and lower patronage, clearly suggesting that the interests of commuters are not the primary interest of its proponents. Cui bono? (Who benefits?) is the question that, if pursued and answered, may shed light on the inexplicable and confounding decisions and choices incorporated in the 2018 business case. 

We have previously raised this question in the context of the federal Infrastructure Minister Catherine King’s unusual, unqualified and pre-emptive support for this stage of light rail.

We are drawing from the Light Rail Stage 2 Business Case prepared by Transport and City Services in 2018. 

It was this business case – and one in 2019 – that the Labor Party, along with the Greens, did not want Canberrans to see, necessitating a motion in the Legislative Assembly, a prolonged debate, claims of executive privilege and a review by an independent arbiter before the documents saw the light of the day.

The claimed benefits incorporated in the economic analysis in the 2018 business case are in three categories: transport benefits, city-shaping benefits and wider economic benefits. 

Bizarrely, while the executive summary of the business case presents the costs and benefits in 2017 dollars, the economic analysis is presented in 2019 dollars.

Table 1 is a summary of the economic analysis as detailed in the business case for the following options:

• Option 1: City – State Circle – Woden

• Option 2: City – Capital Circle – Woden

• Option 3: City – Parkes – Barton – Woden

Inexplicably, inflating the costs and benefits from 2017 to 2019 dollars, as has been done, results in a decrease of 22 per cent and 14 per cent  in capital costs for options 1 and 2 respectively, and more than a doubling of benefits, leading to a doubling of the benefit to cost ratio – all within the same business case.

We have previously outlined why the ACT government’s cost estimates are not credible. Likewise, we are unable to give any credence to the estimate of benefits. 

No information is provided on the assumptions used to estimate transport benefits, however, they can only eventuate at this magnitude through a significant increase in patronage share and an assumption of slowing bus travel over the project period.

It is well known that the government’s projections on increased public transport share have been wrong for more than a decade. For example, public transport usage dropped from 6.9 per cent in 2016 to 5.9 per cent in 2021 while data from the ABS reveals that despite the almost $2 billion expended on Stage 1 of light rail, there has been a mere substitution of patronage from bus travel to light rail. 

City shaping and wider economic benefits comprise 70 per cent to 80 per cent of the total benefits identified by the government. However, in Report No. 8 of 2021 on Stage 2A (Civic to Commonwealth Park), the auditor-general questioned the inclusion of such benefits due to the absence of evidence supporting their realisation.

That is also the case in this analysis. We also note that such benefits, if they exist, could also be achieved through other means, and as such, should not be attributable only to light rail. 

Almost all the claimed wider economic benefits relate to land use agglomeration benefits – more than $400 million for either of the options. It is clearly far-fetched to believe that this claimed increase in employment and productivity are inhibited because of the absence of light rail, or conversely, that such a boost could only be achieved through light rail. 

Inclusion of city shaping benefits should not be recognised under the Australian Transport Planning and Assessment Guidelines issued by the Commonwealth Government. In any event, pursuit of “city shaping” benefits in a planned city are very odd. It also suggests the existence of anticipated changes in the form of Canberra, that have not been revealed or openly discussed because of a  lack of information or due to misinformation.

Fellow columnist Michael Moore recently noted the 1984-style propaganda around densification and the presentation of an indisputable reduction in housing choices as more housing choices. 

The ACT government’s claimed justification for or validation of the light rail project is a further example of its rhetoric not matching the facts.

For example, the business case estimates about a million square metres of potential development in the various precincts along the light rail route and an approximate increase in population of 25,000 through substitution from other areas.

The much-touted infrastructure cost savings from densification are estimated at $29 million over a 30-year period. That amounts to less than $1 million a year (in present value terms), or about $40 for every person squeezed into high-rise living. 

In other words, that is the government’s assessment of the extent of infrastructure cost savings through “city-shaping”. However, it is concerning that the obviously significant costs of densification have, on the other hand, been excluded from the analysis.

About 8 per cent of the city shaping benefits, around $325 million, relate to “land value uplift”. This may certainly be good news for the existing landowners along the route, but is bad news for home buyers and renters.

The justification for including these benefits is: “A change in land use will generate net economic benefit if the value of new use is higher than the value of current use, plus the cost of achieving change. 

“In an unfettered market, such benefits would be exhausted by developers and land owners. However, the property markets face many constraints, including planning regulations and transactional taxes and levies. 

“If the introduction of the project unlocks, enables or attracts additional development into the corridor, away from other parts of the ACT, the balance of these constraints may [our emphasis] add up to a net benefit.”

The government goes on to state that the benefit from higher density, as well as the inevitable increase in GST and stamp duty paid are captured as a land use benefit.

The constraints on the housing market, relating to planning regulations and land supply, are entirely under the ACT government’s control. As for stamp duty – it is a tax that the ACT government promised over a decade ago to abolish.

In short, the economic analysis assumes that there will be no housing supply in other parts of Canberra – constraints – and then assumes that those self-imposed constraints will and can only be removed by the light rail project and then assumes that a by then supposedly non-existent stamp duty will still be collected. 

This is a prime example of circular reasoning and muddled thinking. It would be deeply concerning for Canberrans and indeed all Australians if the Commonwealth Departments of Finance and Infrastructure accepted the above as the basis for the federal government’s funding of this project.

It is indisputable that the estimates of transport, wider economic and city shaping benefits outlined in the light rail business case are deeply problematic. Cui bono? The existing landowners from capital gains created by a multi-billion-dollar government project that has little or no public benefit. 

Jon Stanhope is a former chief minister of the ACT and Dr Khalid Ahmed a former senior ACT Treasury official.