Reopening the Napier to Wairoa rail line might not generate revenue for the Hawke's Bay Regional Council until 2020, and could instead cost them $300,000 a year.
In October it was announced Napier Port and KiwiRail signed a deal to reopen the Napier-to-Wairoa rail line for a dedicated log service from Wairoa to Napier Port, beginning October next year.
An update on the service proposal will be provided to the Regional Transport Committee today.
As well as outlining details for the service's operation, a paper to the committee states the break-even volume on the line - of 185,000 tonnes per annum - was not expected to be achieved until 2020.
Although Napier Port and KiwiRail would "take their commercial returns from day one", committee chairman Alan Dick said the regional council would not generate revenue from the line until after the break-even volume was reached.
The regional council had designated $5.4 million in their annual plan to facilitate the reopening of the line, but Mr Dick said it would not be spending this much because of the commercial arrangement between the Port and KiwiRail.
"So it may cost the Regional Council $200,000, $300,000 a year for a couple of years or so until the volumes build up, but that's far less than the $5.4 million," he said.
"We consider this a small price to pay to achieve the objectives of the exercise."
These objectives included assisting economic development in the north of Hawke's Bay, providing competition through transport modes to keep costs down for exporters, "and of paramount importance, to ensure the safety of State Highway 2 which otherwise will be overwhelmed by heavy traffic congestion which poses dangers".
Although it was expected the line would generate revenue for the council after 2020, Mr Dick was not sure how much this would be.
Early projections estimated in a business plan for a separate, proposed short line rail operation placed profit near a million dollars a year, he said, but that would be when volumes reached between 500,000 and 700,000 tons a year.
The paper also included how space on the service would be contracted, when services would run, and that the contract could be terminated with three months' notice or immediately, if excessive or unexpected track maintenance, or reinstatement costs made continuing uneconomic.
Today's meeting could also be a chance for members to discuss a recent Expressions of Interest (EOI) request from KiwiRail for tourism operators interested in running services on the Wairoa to Gisborne section of the Napier - Gisborne rail line.
An EOI request 18 months ago for the full line between the two cities attracted a lot of interest. However the full line is no longer available, due to the Napier Port agreement and a deal with Gisborne City Vintage Railway.
So, KiwiRail were looking for innovative tourism ventures to help grow the region and retain critical track infrastructure without requiring any capital expenditure or maintenance.
Mr Dick said this raised concerns, as it had been anticipated "from the outset" that logs would need to be hauled from as far north as Nuhaka within a few years.
To do so, there would need to be no conflicting traffic on the line, he said.