Cost and Funding
The first stage of light rail for Canberra is being constructed under a Public Private Partnership (PPP), with the contract operating period being 20 years. The project is also being partially funded by the Asset Recycling Scheme.
What is the construction cost of the light rail project?
After successful negotiations and strong collaboration with the contracted consortium, Canberra Metro, the construction cost of stage one, inclusive of additional project enhancements, is $707 million.
These enhancements include the Civic Plaza, Alinga Street terminal and a dynamic lighting system at light rail stops.
What will the availability payment be?
Over the 20 year operating term, the annual availability payment will commence at approximately $47 million for the first year (2018-19, less than a full year of operation) and finish at approximately $75 million for the last 12 months of the contact term (in 2031), with an annual availability payment of approximately $64 million.
The annual availability payment includes the operational costs of running light rail (such as electricity, drivers, and maintenance) and includes the capital cost of building stage one.
What is a Private Public Partnership (PPP)?
A PPP is a long-term contract, generally between 20 and 50 years, between the public and private sectors to deliver public infrastructure projects and/or related privately operated public services. Its defining characteristic is that the contract delivers public infrastructure assets or services using private sector finance.
The key benefits of a PPP approach include the government harnessing private sector efficiencies and innovation during construction, whole-of-life cost efficiencies, outcome-focused service delivery and effective risk transfer to the private sector.
PPPs have been used in Australia (and around the world) to deliver a range of social and economic infrastructure including courts, schools, hospitals, convention centres, correctional facilities, roads, public transportation networks and ports. PPP delivery methodology has been used in Australia for more than 25 years.
This approach means the ACT Government does not begin paying for the light rail service until it is fully operational to the government's specified standards. Once the system is up and running, the government will start making regular payments over time. This means that the cost of the infrastructure is spread over future decades, around 20 years following construction completion.
When do we start paying?
The ACT Government will commence making regular monthly payments once operations begin.
Can Canberra afford it?
Yes. The government will pay a capital contribution of $375 million to the Canberra light rail project (following completion of construction) from two areas.
The first is from the Australian Government's Asset Recycling Scheme. The Australian Government has also demonstrated its support by increasing its contribution to the project by $7 million to $67 million.
The second is from proceeds from selling surplus assets.
This type of contribution is like paying a lump sum on your mortgage or car loan. That is the more money you put towards your loan, the less money you have to borrow, and the less you pay in repayments over the life of the loan.
Over the 2015-16 financial year, the ACT Government will spend $2.6 billion on health and education, $502 million on economic growth and diversification, $660 million on suburban renewal and transport and $933 million on liveability and social inclusion.
In the context of government spending this project will account for less than 1 percent of the government's expenditure over the life of the PPP. Over the same period the ACT Government will spend 34 times as much on health and 25 times as much on education.
Why have we come in under the cost?
In the early stages of the project, through its own rigorous analysis, the government made a conservative estimate for the delivery of the project of $783 million.
The project is within the previous estimate of $698 milion (plus or minus 5%). The ACT Government has included additional scope in the project around civic plaza and the enhanced Alinga Street stop.
Will my rates increase due to light rail?
General rates are an important source of revenue used to fund a broad range of government services, including health, education, waste management, roads and public transport infrastructure.
Increases in rates are part of the significant reforms to the Territory's taxation system, which the government commenced in the 2012-13 Budget.
The main reform initiative relates to the abolition of inefficient taxes, including conveyance duty (over a twenty year period) and insurance duty (over a five year period). The revenue lost through the abolition of these inefficient taxes will be replaced through the general rates system.
This will ensure revenue neutrality overall, while preserving capacity for government services and ensuring future generations do not bear the higher economic costs of an unfair and inefficient tax system.
The government is committed to making the Territory's taxation system fairer, simpler and more efficient for the future.
I don't live on the stage one route, how will light rail benefit me?
All Canberrans will benefit from the introduction of light rail. It is beneficial to all who live and work in Canberra through the creation of jobs, encouraging investment opportunities and supporting the integrating public transport solution through the redistribution of network services.