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Cash-strapped Tranz Rail washes its hands of commuter rail mess

By Karl du Fresne

Friday 2nd May 2003

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When Wellington Regional Council deputy chairman Terry McDavitt says suburban train services are run on chewing gum and No 8 wire, he's only half joking.

His comment underlines the rundown state of commuter rail services after 10 years of state-subsidised monopoly operation by Tranz Rail, a company that has never shown more than a half-hearted interested in passenger trains.

In Wellington and Auckland, local authorities are now grappling with the massive challenge of trying to reinvigorate suburban rail. The aim is to persuade people to get out of their cars and on to trains, thus easing the traffic congestion that ­ in Auckland at least ­ results in daily gridlock.

A crucial part of that process involves wresting control of suburban trains back from Tranz Rail, which the councils blame for the poor state of the rail networks. For its part Tranz Rail has been only too happy to oblige ­ provided the price is right.

The catch is that the cost of reclaiming suburban rail in the name of the people is massive and no one seems to know exactly where the money is going to come from. The one certainty is that ratepayers will pick up a large share of the tab, which has serious implications for the business sector that pays roughly 50% of local authority rates nationwide.

Central government has already been stung once, paying what is now generally accepted to have been an outrageously high $81 million in December 2001 to buy back the Auckland rail network from Tranz Rail on behalf of Auckland councils dissatisfied with the way it was being run.

Three weeks ago, when beleaguered Tranz Rail took a savage hammering on the share market, that sum would have bought the entire company. Small wonder that Finance Minister Michael Cullen, who was left licking his smoking fingers, shows a distinct lack of enthusiasm for using more government money to shore up rail.

But that $81 million was just the start. Getting Auckland's suburban rail system up to par is estimated to cost $388 million ­ $222 million for infrastructure (meaning tracks and stations) and $166 million for trains. And no one can be sure that even when the money is spent, Aucklanders will abandon their cars.

Wellington, which faces similar problems but on a less daunting scale, at least has the advantage of a historical pattern of high rail usage. Its hills-and-valleys topography is highly suited to rail transport, providing natural transport corridors.

Though rail patronage in the capital has declined since the public service was slimmed down in the restructurings of the 1980s, Tranz Rail's subsidiary Tranz Metro still provides 10 million passenger trips annually on Wellington suburban lines.

Wellington Railway Station, part of which is being sold as Tranz Rail struggles to improve its liquidity, is a natural hub through which tens of thousands of public servants, office workers, retail staff and school pupils pour each day.

Auckland, besides being several times bigger, is a much more diffuse metropolitan area where commuters tend to criss-cross the city each day rather than converge on its centre.

Transport commentators regard it as not conducive to rail travel and some wonder at the wisdom of investing vast amounts of public money in tracks and trains. When Auckland's Britomart project was first announced, then transport minister Richard Prebble suggested it would be cheaper for local councils in Auckland to give each commuter a taxi voucher to get to work every day.

Today Mr Prebble is, if anything, even more sceptical about Auckland's suburban rail plan, dismissing it as a pup on every count.

Tranz Rail has never made a secret of its lack of enthusiasm for passenger services, either long-distance or local. The company announced in October 2000 that it wanted out of carrying people and in 2001 it sold a 50% stake in Tranz Scenic, its long-distance service, to Australian-based operator West Coast Railway for $33 million. Tranz Rail retains the other 50% as a silent partner.

Long-distance services have been attenuated over time and now depend heavily on tourists rather than the traditional budget-conscious Kiwi traveller going back to university or heading to the big smoke in search of work.

Steadily increasing car ownership since the 1950s, pushed along by the flow of cheap used Japanese imports since the 1980s, has meant that the train journeys once celebrated in songs such as Taumarunui On The Main Trunk Line are no longer part of the New Zealand cultural matrix.

The Tranz Scenic map showing long-distance passenger routes is now blank south of Christchurch following the axing of the Southerner service to Invercargill early last year, and charters to tour operators and corporate clients are the growth sector of the business.

Tranz Rail's attempts to exit suburban passenger services have not been so clean. In Wellington, efforts to sell the Tranz Metro suburban service to a joint venture involving Wellington Regional Council and multinational transport operator Stagecoach disintegrated in acrimony late last year when the company refused to open its books to facilitate the due diligence process.

Tranz Rail is proceeding with attempts to sell Tranz Metro but the only known interested party is French company Transdev, in partnership with Paris Metro operator RATP.

Mr McDavitt, who chairs the council's land transport committee, says the joint-venture proposal with Stagecoach is now "parked in the garage." A low-level state of guerrilla warfare prevails between the council and Tranz Rail, with the council using the withholding of subsidies as a means of putting pressure on the rail operator.

The council recently announced it had withheld $650,000 in subsidies to cover the cost of cancelled services during a hellish summer in which train services were repeatedly abandoned or delayed as a result of heat-buckled lines. The disruptions ­ caused by Tranz Rail's failure to "de-stress" welded rail joints to allow for heat expansion ­ provoked massive public disaffection and resulted in 110,000 fewer passenger trips than expected.

Tranz Metro gets nearly $18 million in subsidies from the council, of which about $11 million is refunded by government agency Transfund.

The council recently took a new tack in its feud with Tranz Rail, asking consultants to look at the possibility of replacing rail commuter services with alternatives such as buses ­ a possibility described by Wellington deputy mayor Alick Shaw as "too awful to bear."

The consequences of allowing Tranz Metro to stop for even a day were almost mind-boggling, Mr Shaw said.

Whoever ends up running Wellington's suburban rail services, it will cost an estimated $100 million over the next 10 years to upgrade trains and tracks to make up for a lack of maintenance and investment under Tranz Rail's stewardship. How that cost will be met is not clear, though the council has optimistically provided in its long-term financial strategy for extra income from subsidies aimed at getting people off roads and on to public transport.

Otherwise, Mr McDavitt says, the burden will fall on ratepayers. And in the meantime the system ­ which still uses some English Electric units dating to the 1950s ­ continues to deteriorate.

The only consolation is that Auckland's problems are even more daunting. Champagne flowed at Auckland railway station last December when, amid much PR hoop-la, the Auckland Regional Council unveiled the first of 10 refurbished silver-and-blue trains the council hopes will entice Aucklanders on to rail.

The refurbishment package, which will cost $8.5 million, is aimed for completion in time for the opening of the $211 million Britomart transport centre later this year. That will be just the first step toward the development of what the regional council envisages as a rapid transit network enabling "fast, frequent and reliable transit across the region, free from road congestion."

Only 2.25 million passenger trips per year are made by rail commuters in Auckland, less than a quarter of the number in Wellington. The council's ambition is to increase that fivefold, with a fleet of modern trains running every 10 minutes by 2006.

The council admits that it's a slow and "painfully political" process. It will also be hellishly expensive.

The deputy chairman of the council's passenger transport committee, Michael Barnett, agrees a substantial part of that cost will fall on the business sector through increased rate demands. But Mr Barnett says that for business as for private citizens, it's a matter of having to pay the price for the refusal of councils in the past to make hard decisions about public transport.

* Last week's National Business Review referred to John Loughlin as a surprise appointee to the board of Tranz Rail. In fact Mr Loughlin was already on the board ­ the "surprise" referred to his appointment as acting chief financial officer.

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