Saturday, August 30, 2008

Report blinded by bad case of tunnel vision

THERE have been two extremes in many of the comments reported by The Age on the East-West (Eddington) transport report. Infrastructure construction interests have pressed to get on with building a $7 billion road tunnel and an $8 billion rail tunnel, and never mind the bad economics.

Public transport advocates have pressed for rail investments and no road investments, ignoring the congestion related to road freight (which cannot use public transport), especially near the port.

The technical reports underlying the East-West study show that neither tunnel is economically sound. Even allowing for indirect agglomeration benefits, the cost-benefit ratio for the rail tunnel is only 1.2 and for the road tunnel is well below 1.0. The ratio for the combined road and rail solutions is 1.0. Normally projects need at least 1.5 to pass muster, and there are other road projects in the queue with ratios much better than that. The reason for the bad economics is simply that tunnels are very expensive.

There is, however, a clear case for doing something - Eddington was right in saying that doing nothing is not an option. The abrupt end of the Eastern Freeway is inefficient, and there is severe congestion on and around the Westgate Bridge, and the port area. Urban rail lines on the inner north-west side of Melbourne are clogged with both Connex and V/Line trains. The trains are overcrowded and patronage there is growing fast.

But big, expensive tunnels are not the best solution. A disappointing aspect of the technical papers is that they do not thoroughly explore more modest (but still substantial) alternatives - apart from a good "truck plan" to handle growing road freight while reducing the negative impact on residents in Yarraville and Footscray.

The road problems are local rather than corridor-like and could be eased without a large tunnel by widening streets where possible, adding a river crossing, and building underpasses at the busiest intersections. (Underpasses would also be a great help in other busy parts of greater Melbourne.)

The rail congestion problems can also be eased without a expensive tunnel by using spare tracks and land in the inner north-west area and building flyovers at junctions to improve the capacity and make better use of some of the lines.

This could be supported by more efficient use of Flinders Street Station (covered in the report), newer signalling to boost line capacity (discussed only briefly in a technical paper), and by convincing passengers to abandon the strange local custom of standing in doorways, which slows the exit and entry of peak period passengers and extends "dwell" time at stations.

The cost of such alternatives, although in the billions, would be a fraction of what the tunnels cost.

These more modest alternatives could be implemented much more quickly than tunnels. The current road and rail problems will become severe before tunnels could be completed.

Good alternatives would also achieve most of the benefits, should have good economics, and would allow the financial room to address other pressing transport problems.

Some of these problems are indicated on a map in one of the technical papers, which shows the streets in greater Melbourne that are the most congested - many of them are not those covered by the East-West study. And there are other rail demands; new high capacity trains, planned for 2013, will need to be financed.

It is possible that tunnels, perhaps shorter than those proposed, will be justified at some later stage. Experience shows it is rash to project short periods of high growth well into the future - as the study did.

Any justification will also depend on other developments such as carbon prices, and greater efforts in "demand management" to spread peak periods. The study mentions congestion pricing in 10-plus years - not long after the tunnels (yet reducing the need for tunnels).

There is a good economic case for congestion pricing; it has been successful overseas, and can be popular when the proceeds go to transport improvements. It would be best accompanied by peak/off-peak public transport pricing, possible when the Myki electronic ticketing eventually works.

The wise approach (using the economics technique known as "real options") is to address future uncertainty by proceeding with adequate capacity improvements while preserving easements for larger projects later.

The Victorian government is considering the east-west study and developing a wider transport policy it will announce in November. It will be finding that the tunnels would crowd out many other good transport options across Melbourne.

David Greig is an Executive Director in the economic consulting firm ACIL Tasman.

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