The NSW government decided to spend hundreds of millions of dollars of public funds on a Newcastle light rail line without a business case and without consulting the community.
That is one of the extraordinary findings of a NSW Auditor-General’s report released on Wednesday into the government’s Revitalising Newcastle program.
The report said the cost of the tram, which had ballooned from $165 million to $368 million since it was announced in 2013, was not justified by “conventional cost-benefit analysis”.
The report confirmed what many observers have long suspected: the government did no planning before announcing the light rail project in June 2013, six months after saying it would cut the heavy rail line and replace trains with buses.
“There was no business case or other preliminary planning work done before this announcement,” the report said.
“This is important for transparency and accountability in the use of public funds.”
The lack of a business case contravened government policy requiring detailed analyses of infrastructure proposals and alternative options.
The report said a business case had been prepared belatedly, after the project was announced, but this document had not been released publicly.
“An executive summary of a preliminary business case was presented to Cabinet, but Transport for NSW could not locate a final approved version of this document when we requested it for this audit,” it said.
A business case provided to Cabinet after the light rail announcement had been “overly optimistic”.
“The analysis also underestimated the costs of the project because the project scope had not been completed at the time and subsequently increased several times.
“ … The analysis in the program business case showed there is no strong economic rationale for light rail in Newcastle.”
The report said a business case for the overall revitalisation program had conceded the tram would have only “small transport benefits” but “increase property values and private investment” along the route.
The government had used several overseas examples of light rail to help justify the project, but these were not comparable to Newcastle.
“Recent policy statements from Transport for NSW have compounded this by incorrectly stating that investment decisions in Newcastle were influenced by the light rail, including the Newcastle court house development and University of Newcastle city centre expansion,” the report said.
The light rail takes up 53 per cent of the overall Revitalising Newcastle program budget, and the report said government agencies needed to demonstrate that this investment “provided value for money”.
The Auditor-General also took aim at the lack of community consultation on cutting the rail line and building a tram line.
The report said the program’s overseers, UrbanGrowth NSW then Hunter and Central Coast Development Corporation, had consulted industry representatives but not the wider community.
The transformation program’s initial budget, for closing the rail line and building a new train terminus, had been $220 million. The “estimated” cost of the program had grown to $693 million in March 2017.
The cost of the light rail alone has increased by 44 per cent since the final business case was approved in 2014 at $245 million.
The audit said $42 million of extra money was for additional road works to allow the tram to run down Hunter Street. Delays caused by Save Our Rail’s legal challenge to cutting the rail line had increased costs by another $36 million.
Outside its criticism of the light rail project, the report said the planned uses of the former rail corridor land had achieved a balance between the economic and social objectives of the urban transformation program at a reasonable cost.
It said the implementation of the project had improved in the past two years since the government had appointed a new program director and established a multi-agency steering committee.
A Revitalising Newcastle spokesperson adopted an overtly political tone in a statement to the Newcastle Herald: “Ten years ago Newcastle sent the NSW government a message: ‘fix our city’. The government listened, and in the years since the heavy rail was truncated at Wickham, billions of dollars in private investment have flowed into the city – a vote of confidence in Newcastle’s future.”
The spokesperson said the Auditor-General’s reported demonstrated that “consultation, governance and probity have been in line with best practice in recent years”.
Light rail was an “integral part” of the Revitalising Newcastle program, leaving a “positive legacy” for Novocastrians by attracting investment, bringing people to the city and creating new jobs.
“The results of the NSW government’s investment of more than $650 million in Newcastle are today on show for all to see, with the city centre opened to the waterfront, new public spaces on the old heavy rail corridor, and Australia’s first wire-free light rail being put through its paces,” the spokesperson said.
Newcastle Labor MP Tim Crakanthorp said the Auditor-General’s report had backed up his repeated assertions that the tram was “unplanned and un-costed” and would contribute little to the city’s economy.
“The Newcastle taxpayers are the ones footing the bill for this project and yet have been kept in the dark throughout the whole project,” he said.
He said the government had ignored the community’s wishes and kept the tram business case under wraps to avoid scrutiny.
“[Transport] Minister Andrew Constance publicly said that he ‘took a punt’ on Newcastle last year. How can we trust a government that relies on estimates and not real facts. Newcastle deserves better.”
The audit report includes written responses from HCCDC chief executive Michael Cassel and Transport for NSW secretary Rodd Staples defending the project.
Mr Cassel’s letter said he “firmly believes” the overall program and light rail had contributed significantly to investment in the city.
Mr Staples’ letter said the program had created jobs, improved transport and created more public space.
The government’s parliamentary secretary for the Hunter, Scot MacDonald, said Labor had “dogged the hard decisions” by not investing in Newcastle in the past.
”It was always the case the infrastructure project was part of the renewal of the CBD. Not all the benefits can be costed,” he said.
He said the government had acted after decades of public debate on the city’s revitalisation and “Newcastle will never look back”.
Hunter Business Chamber chief executive Bob Hawes, a former Hunter Development Corporation boss, said the government program had stimulated investment, but the impact on traders during construction had to be a higher priority in the planning process.
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