National warns taxpayer will have to foot railway bill

New Zealand's railway tracks are in even worse shape than previously thought and National is warning that taxpayers will foot the extra cost.

Last year, the Government and Toll agreed to plough $200 million into upgrading the track after the Government bought it for $1.

The track is maintained by state-owned OnTrack. Toll operates the trains, after taking over TranzRail in late 2003.

But Finance Minister Michael Cullen told Parliament's finance and expenditure select committee yesterday that the Government would probably have to pledge more than $200 million. How much more is not yet known.

"Both we and Toll have discovered that what we thought was a very bad situation left by the previous private-sector owners of TranzRail is actually an appalling situation.

"We will need to be putting in more capital above the $200 million without an economic return on that directly from Toll," said Cullen.

"There are also issues around whether it is possible to have a renegotiation, perhaps taking a longer-term view. I'm not averse to that because Toll has demonstrated a strong commitment to try and improve the rail system."

National's finance spokesman, John Key, who raised the issue at the committee, said he had always warned that the Government would have to spend more money than it expected.

"The assurances they gave me that this wouldn't be a taxpayer-funded bill have proven to be illusionary.

"The unanswered questions remain: How big is the black hole and how much of it is as a result of them grossly underestimating the cost of repairs?"

A spokesman for Cullen said ministers would consider upgrades case-by-case once the $200 million was spent.

He pointed out that Cullen warned last year it would cost more than $200 million to upgrade the track.

An assessment of the total cost was still being done, said the spokesman.

Toll and OnTrack are negotiating the track access charge that would apply to the operator in the 2005-06 financial year.

The spokesman said they were also talking with Toll about future access charging regimes beyond the current financial year, and how upgrade work should be funded.

Evidence of the network's decrepit state came last month when a rail bridge being fixed on the Napier-Gisborne line collapsed, sending a rail crane fixing it tumbling into the Nuhaka River and leaving two rail trucks hanging from the bridge.

A marine worm has been blamed for weakening the bridge by gnawing at timber below the waterline.

OnTrack spokesman Kevin Ramshaw said last night the network was safe and did not think the collapse could be cited as an example of the deteriorated state of the network.

"There are short-term issues that we are addressing and they involve deferred maintenance. We would not be using the word appalling but that's the minister's perogative."

Toll managing director Paul Little could not be contacted last night.

Track trouble

* Finance Minister Michael Cullen says the nation's rail tracks are worse than "bad" - they are "appalling".
* He says the Government may have to spend more than the $200 million it has already pledged to upgrade them.
* The Government bought the tracks back off Australian transport company Toll last year. It paid just $1.
* State-owned company OnTrack, which maintains the tracks, says they are still safe.