Light Rail in Canberra Project Evaluation Management - Case Study Example

Light Rail in Canberra Project Evaluation Name Institution Course Date Executive Summary The transport system has undergone transformation in the 21st century as engineers invent better transport system. These changes have been possible due to the fast growing population in the cities, their complex needs and lifestyles as well advancement in technology. It’s becoming pressing for governments to meet this concern or otherwise suffer serious economic decline which could result from an efficient transport system. This report presents the costs versus benefits analyses for the construction of the Light rail in Canberra so as to help determine whether the project will be worthwhile to the community. The benefits calculated here are of the next over 30 years and they amount to approximately 3.5 billion US dollars from the time the rail is put in use. This means the project will manage to deliver a cost benefit ratio of 1.2 which includes a transport and land use value of approximately 1.0 while the rests incorporates the other indirect social and economic benefits. The reports consist of the background of the project, problem statement, project costs, key principles, economic guidelines and a detailed evaluation of the social, economic as well as environmental benefits. Description of the project Overview of the project Canberra is one of fast growing cities n Austrian capital Territory. This rapid growth in the number and magnificence of economic activities as well as the density of its population has led to a transport challenge. In 2013 the population of Canberra as estimated at 381,500 and the expectations are that it will rise immensely in the future. As of 2016 the population is at 390 000 and according to the projections that have been made by 2025 the population will be at 550 000. Therefore this calls for a transport system that will be able to meet the needs and expectations of such huge number of people. To begin with so many people are depended on the road transport especially the bus which has led to lots of congestion in the city. The light Rail project constitutes a 12 km rail that connects Gungahlin to North Bourne Avenue with a total of 13 stop overs at different points. The light rail will offer Canberra some public transport value which will be realise through a moderate road based transport benefits provided cost effectively with a myriad social, economic and environmental benefits. This project was preferred unlike the street tramways because of its ability to operate off mixed traffic those results in delay. The light rail has its own rights of way which are separated from other modes of transport like roads. Problem Statement Owing to the robust growth of the Canberra city, the construction of the light rail is expected to revolutionise the future of the transport network in the ACT. Over the years the Austrian government has disproportionately invested in roads such a huge amounts and yet research shows that dependency on what type/mode of transports especially in busy and heavily dense cities can lead to inefficiency in the transport system thus failing to meet the basic needs of the resident population. It is the realisation of this inefficiency that has prompted the government to come with alternate transport system which is the light rail project. The expectations are that this light rail should transform city of Canberra generally as well as other development projects that are ongoing or in the pipeline. The concern is whether the amount that has been invested in the project will bring more accrued benefits to the society that lives in this area or not Project objectives The projects aims at building a 12km rail in the ACT with the hope that it will improve transportation, ease congestion, encourage investors to come to this particular city as well as enhance sustainable urban redevelopment and densification in the area. While the project presents some constraints in terms of deploring green land for development in the area, generally it is expected that the project will have substantial social, economic and other indirect benefits to the local community in this area. Project Objectives The main purpose of this project is to revolutionise the transport system in the Canberra city. Documented evidence shows that light rail projects have various benefits especially to fast growing cities such as this one. The aim of the project it to increase the transport capacity, make the transport system in ATC efficient and more reliable and improve access to important amenities like schools, hospitals recreation centres among others. Because of the improved mobility, the project will provide a stimulating investment environment especially in residential and commercial housing, renewal of the urban centres and increased land value use. Estimated Project Costs After a thorough consultation with arisk assessment expert, the estimated cost for the project is as follows: Particulars $m Nominal Roads and utilities Infrastructure 13 Stops and Precincts 124 Rail Alignment 87 Signalling, Rail Systems and Power 143 Depot and Stabling 63 Contractors Cost 66 Total Costs 482 Rolling Stock 67 Total Alignment Cost 551 Escalation 53 Sub Total 625 Contingency 169 Total Project Cost 800 The estimated costs do not include costs of other projects that are linked to the rail such as roads, parks, bus terminal because they have an independent budget and are outsisde the scope of this project. Linking Objectives and Benefits Cost Benefit Analysis According to Transport Canberra (2017), cost benefit analysis refers to the evaluation of the economic, financial, social and all other benefits of a given project. This then informs the decision making process so as to determines bot the negative as well as the positive impact of a given project to a society. In this case, the Canberra light rail project has been evaluated to determine its accrued benefits on its local community for a period of about 30 year since the commencement of the normal use of the rail. The analyses were carried out with the help of a competent expert on this matter. The general approach that was applied here is as follows: Key Principles The analyses contained in this report are guided by the following principles; In calculating the land benefits the focus will be on the incremental value that occurs with the introduction of the rail. When it comes to transport benefits the focus will be on the expected impacts such as time saving, nice travelling experience and the social economic as well as the environmental costs to be borne by the community members. Other benefits will be calculated basing on the linkages the project has on other projects such as roads, markets, parks, bus terminal, hospitals, schools and the impact thereof. Economic Guidelines The cost benefits analyses incorporated in this report were guided by ratified government policies and guidelines which include; the ATC National guidelines for Transport Management in Australia and Austroads Guide to project evaluation. Project Benefits This project will have a range of economic, social and environmental benefits. They are presented in this report as follows; 1. Transport benefits These will include both the financial and non-financial benefits. It consists of some of the direct benefits that will be accrued from the light rail. To begin with it will save a lot of time for the passengers who want to go about their businesses in the city. The projects will also contribution to the general health of the population as they walk or cycle to the rail terminals. It will also contribute to having a nice journey experience by travelling in comfort. The car owners will have some costs reduced especially if they decide to use the rails sometimes. To the larger community it will help in environmental benefits as a result of reduced car emissions, it’s also expected that the project will reduce the number of car accidents that are common in Canberra, reduction in noise pollution and since the rail service is likely to be cheaper the community members can afford some savings from transport. Summary of Transport Benefits Transport Benefits Total PV Time Savings 851 224 Accident Costs 26 9 Health benefits 18 6 Amenity and Reliability benefits 61 13 Net externalities 55 11 Vehicle Operating Costs 49 12 Residual Value 778 90 Public Transport Operating savings 178 57 Total 418 From the above table one realise that the largest transport benefit from this project will be in terms of time savings which accounts for about $851m. 2. Land Use Benefits This project will definitely bring about changes in land use around the TCA. However, it’s important to note that this will only happen if we have supportive government policies in place. These befits will accrues over and above from what is expected on transport benefits. For instance there are expected benefits that will arise from realising higher density. For instance when investors will come into Canberra and engage in development activities especially close to the light rail, that will make better use of the land upon which those projects will be situated and thus resulting in their value increment. These projects will increase the value of the new land use. Additionally, the light rail has the capacity trigger densification efficiency savings. For instance in the next 10 year or so the kind of services that the people living in Canberra will have to meet the pressure of the day. This will now compel the government to already take care of what is available now as progress is made into the future. This will then result in infrastructure and service provision savings. There is a high chance that a lot of changes will occur in the housing sector especially in these areas close to the rail. It’s expected that new and better house designs will be adopted so as to correspond to the standards of the light rail. Low density housing will be replaced with high density houses. This will add to the accrued urban densification benefits. Other land use benefits will include agglomeration and productivity benefits hence making labours and business firms to migrate closer to their place of work as a result of an efficient and cheap transport network Summary of land Use Benefits Land Use Benefits Total PV Urban densification benefits 225 69 Land value benefits 288 166 Infrastructure efficiency savings 244 137 Total land benefits 747 392 3. Other Benefits This section includes other benefits that may not fit in the cost benefit analyses model. The light rail project will have other impacts which are considered indirect like increase connectivity, improvement in business and development of land. In this report they are termed as agglomeration benefits, additional tax revenue and imperfect competition. Nin the developed countries like Britain and New Zealand these benefits are usually used because their cost benefit analysis practices are at an advanced stage to the extent that they become part of guidelines or policies. This is not yet the case in Australia but in most cases project managers usually borrow from the Britain’s guidelines. The agglomeration benefits referred to her are the benefits that business firm will accrues as a result of being located close to the light rail corridor. The benefits are realised in terms of the relations that businesses enjoy by close to each other. They are able to reach their suppliers easily and are able to carry out market research easily as well. The additional tax revenue that occurs as a result of increased supply happens when the labour force gets close to the work place. Summary of the other benefits Other benefits Total PV Agglomeration Benefits 612 167 Tax from Increased labour Supply 9 2 Imperfect Competition 4 9 733 178 This table shows that among the other benefits of this projects is the agglomeration benefits. Summary of Cost Benefit analysis The total value of the transport benefits are expected to be $418 The land benefits are expected to stand at $747 while the other benefits will be $733 Cost Value ($m) Project Benefits 409 Transport Benefits 377 Land Use Benefits 194 Other Benefits 197 Total Benefits 981 Project costs Capex 618 Opex 207 Total costs 824 Project Economic Indicators BCR (transport and land use) 1.0 Net Present value 167 BCR (Tansport, land and other benefits) 1.2 Sensitivity Analysis This will be shown in the table below BCR Base scenario 1.2 Capital Costs +25% 1.0 -25% 1.3 Operation and Mantainance Costs +25% 1.2 -25% 1.3 Transport Benefits +25% 1.3 -25% 1.1 Land use benefits +25% 1.2 -25% 1.1 Other benefits +25% 1.2 -25% 1.1 Discount rate 5% 1.4 10% 1.0 Value of time 1% 1.2 2% 1.2 UK Evaluation guideline 1.7 Conclusion This reports shows that there are substantial social economic as well as environmental benefits that will result from the light rail in Canberra. This therefore implies that the project is cost effective. Bibliography ACT Government Transport Canberra and City Service, (2016), ACT Government. ACT light rail project assessment of the impacts on workers, (2015), UNIONSACT, http://www.unionsact.org.au/wp-content/uploads/2015/07/ACTLightRailProject_UnionsACT_2015.pdf LIGHT RAIL NETWORK Delivering a modern transport system for a growing city. (n,d). ACT Government Transport Canberra and City Service. http://www.tccs.act.gov.au/__data/assets/pdf_file/0011/984638/Transport-Canberra-Light-Rail-Network.PDF Transport Canberra, (2017), ACT Government, https://www.transport.act.gov.au/light-rail-project/faq#decisions_governance Read More