Auckland's shiny new $5.5b underground leaves political landmines

Newsroom

a day ago

If you thought the Government's operating deficit announced in the Budget last month sounded on the high side, it was – it included a $700 million 'impairment' that the Crown is swallowing on the Auckland underground rail project.
The one-off amount took the 2025/26 projected operating balance, excluding ACC, to a deficit of $12.1 billion. It is not an extra injection of cash, but a way of accounting for the fact the Crown is getting less value back in assets than it put in to help build the City Rail Link.
Either way, it blew out Finance Minister Nicola Willis' Budget 'Obegalx' figure by a further 6 percent while the Government and ministers were trying to lower that number through public spending cuts and reprioritisation.
The Treasury has been matter-of-fact about the $700m impairment, saying it is 'non-cash' and an accounting necessity as the firm building the project, City Rail Link Ltd, begins to go out of existence and hands the assets to others.
The Government and Auckland Council went halves on the cost of the nine-year, $5.5b project and are about to have the assets handed over to be listed on the books of KiwiRail and Auckland Transport.
In broad terms, KiwiRail gets the tracks and tunnels; AT the stations, passenger facilities and precincts.
Auckland Council forecast in its Long-Term Plan 2024-2034 that its Auckland Transport company would receive assets totalling $2.8b. The central government Budget suggested $1.4b in assets would come to KiwiRail, with that gnarly $700m hit from the impairment to be accounted for.
In total, it appears the $5.5b spend is delivering assets tentatively valued at $4.2b to the new public owners.
Passenger turnstiles at the midtown Te Waihorotui station between Victoria and Wellesley streets.
It's getting close – and politicians are nervous
The rail lines and stations are due to open to paying passengers in just over a year, around July 1 2026.
The existing train routes will be changed to a south and city loop line, an East-West line and an Onehunga to west line, and the frequency of services in and through Britomart station will rise from 20 an hour to 30 initially, 15 each way.
The Crown has had to fund extensive upgrades and rebuilds to existing rail tracks to cater for the new and increased services – with the whole network closing again over June and October long weekends, and seven weekends of partial closures until September. Next summer a further six weeks of closures will be needed.
KiwiRail is already employing 55 extra drivers and train managers. AT's contractor is recruiting 56 station staff, maintenance and cleaning teams.
Auckland is buying 23 new three-car trains, taking the fleet from 72 to 95, with 11 already in service or in testing; the existing fleet is being modified to be compatible with the CRL tunnels and tracks – 13 are complete, 33 are being done now and 26 are yet to be done.
As the final months of CRL Ltd work take place, and train and systems testing occur underground and at the new above-ground station at Mt Eden, that date has started to focus the minds of city politicians.
The asset carve-up carries financial risks for Auckland Council, and the mayor and councillors are starting to fret about political risks as well. Mayor Wayne Brown told a transport committee meeting: 'Next year's increase in rates is largely down to the fact that the opex [operating expenditure] for this thing was not included in anyone's budget.
'So it's becoming my problem,' he said. 'Half the buck, probably more than that, rests with us.'
The Maungawhau station and entrance road for taxi and Uber dropoffs.
Mayoral 'meddling'
Brown, by his own admission, has started to 'meddle' in the late-stage planning for the Maungawhau station precinct at Mt Eden, after learning buses and cars won't go into the station area off the main roads to drop off and pick up.
Land the council had transferred to the project for proposed residential development, expecting to be valued at $180m, has also not seen a project materialise, leaving the mayor looking at ways 'to get the money back'.
On the asset values, an Auckland Council spokesperson told Newsroom: 'It's important to note that the value of assets relative to the value of investment by each of the two CRL funders creates a book-entry surplus or deficit, not a cash windfall or shortfall.
'Whatever the final figures, there are no implications for Aucklanders in terms of the delivery of rail services on the new lines.'
And at this point, there are no rumblings from any party that the $5.5b total construction cost could rise, with one final demand to the two partners as the project rolls towards completion.
The council Long-Term Plan issued last year says the asset values would be reflected on the council group's balance sheet in the year they are vested from CRL Ltd to Auckland Transport, with lower investment costs into CRL Ltd but a substantial increase in the value of council Property, Plant and Equipment (PPE).
Test trains have reached the 70 km/h maximum in the new tunnels.
The ongoing cost
The plan says there will be an annual net operating cost once the trains and passengers start moving of about $235m. How that is funded – and what the Beehive might kick in – is not determined.
The $235m includes the cost of interest the city will pay on the billions it borrowed to get the CRL built, maintenance, station running costs, depreciation, charges to KiwiRail and the cost of the extra rail services.
The asset transfers, valuations, effect on balance sheets and then the annual cost of the new trains are one area of challenge.
Another is the cost to Auckland ratepayers of developing smart precincts around new stations at Wellesley St in the city, Karangahape Rd and at Mt Eden/Maungawhau.
The Maungawhau precinct from the air, with undeveloped land towards Mt Eden Rd
Here, it is Maungwhau that is the flashpoint, causing Brown political anxiety and prompting other councillors to question how some aspects of the CRL have been run in the transition period, citing too many agencies and not enough accountability.
As mayor, Brown is one of two co-sponsors of the overall project with the Minister of Transport, Chris Bishop. He says 'both myself and the other co-sponsor are pretty worried about that $180m'.
A separate agreement was announced Thursday between the Government and Auckland Council on special legal measures to help the city plan and consent high-rise, dense housing around Maungawhau and the Kingsland and Morningside zones along the western rail line.
Resource Management Act reform minister Chris Bishop said: 'Auckland Council must enable, within a walkable distance from these stations, heights and densities reflective of the higher demand for housing and business in these areas.' The new rules would go further than national planning rules for urban development had to this point.
It is possible the greater planning flexibility might now help Brown to realise back the value in the land Auckland Council had contributed to the Maungawhau CRL development – but any development is unlikely to be quick.
On current plans, the station would risk opening with 'a Gaza-like piece of land in front of the station' that rail users could not be driven through by bus or car.
Adding to the late, unfinished state of the station precinct, a multi-level residential development earmarked for the site by Kāinga Ora was also now off the table.
The mayor says: 'KO, which is a major player, is now a sunken ship.' The Government basically wants the council to now sort out the Kāinga Ora failure as well, he argues.
Mayor Wayne Brown at the Maungawhau station construction site just after being elected in late 2022. Photo: Our Auckland
Brown says he is a backer of the City Rail Link. 'I've always said it is a good project but it was not set up particularly well.'
He believes the council decision two years ago to turn the task of precinct development for the stations to its property arm Eke Panuku (which is about to be merged with the council operations) had not worked out.
'We canned Eke Panuku because they were not as successful as they thought they were. Their efforts here have been access reducing and value reducing.
'I have the 100 percent support of the other sponsor just to make sure we get the maximum valuation out of the area.'
Artists' impressions shown to councillors confirm taxis and Ubers would be able to drive to the station entrance, and a review of possible bus routes at or through the station had begun with Auckland Transport.
Though Brown claims 'we are going to have a drive-through' at the station, any realignment of Mt Eden Rd and New North Rd bus services presents AT with a major late headache.
Council expert Barry Potter, the director of resilience and infrastructure, has now been put in overall charge of the final stage transition plans for the CRL.
Passengers exiting at Te Waihorotiu station will see this kauri carving on the ceiling, representing Horotiu – the 'kaitiaki' or guardian looking after the people and supporting the abundance of life-giving energy in the area
'We will hang'
The Maungawhau problems have prompted wider concerns from some councillors, keen to work out who made decisions, by what authority and when over the course of the CRL development.
Maurice Williamson, of the Howick ward, is concerned how Auckland Transport and KiwiRail plan to launch the new route and services to the public.
'We will hang if this turns out to be a disaster. I really hope we do a soft launch not a hard one. The disasters that could come back to bite us could be dreadful.
'If we start with two or three routes, and bring some trains on board over a two or three month period so that finally when it is all running we had ironed out any bugs. If we do a hard launch and it fails then, holy hell, I'm going to be on the first plane out of here.'
Deputy Mayor Desley Simpson said she and Brown had met Sydney Metro to learn from its launch of a new line and services. 'And also talk about how we don't go out all guns blazing on day one.'
Some councillors encouraged colleagues not to start focusing on blame over past decisions or potential problems ahead.
Chris Darby: 'I think we need to check ourselves on the finger-pointing … I'm optimistic that the project will open and be stunningly beautiful, impactful and deliver beyond what was promised.'
Shane Henderson: 'Whenever we talk about the CRL around this table the tone is extremely negative. I'm not getting it. It's a city-shaping project. We should be positive champions.'