City Rail's $1b budget blowout linked to political pressure: Infrastructure NZ

City Rail Link's Sean Sweeney and Scott Elwarth inspect the railway's huge tunnels. It now has a vast budget to match. Photo / Jason Oxenham

A $1 billion budget blowout on Auckland's City Rail Link is partly due to political pressure to underplay costs so taxpayers weren't scared off by the price tag, Infrastructure NZ's chief executive says.

It has meant the country's largest transport project is now expected to cost $4.419 billion, compared with the $3.4b estimate given in 2014.

City Rail chief executive Sean Sweeney told media yesterday the budget blowout had been due to a range of factors, including higher construction costs and a decision to build bigger platforms to allow longer trains to pull up.

Construction teams at work. Photo / Jason Oxenham

But pressure to "keep costs within an envelope" had also played a part, he said.

Infrastructure NZ chief executive Stephen Selwood said it was an unfortunate reality of mega-projects around the world that their costs were often undersold.

This was partly because politicians wanted the lowest number possible to present to taxpayers and partly because short election cycles forced them to push projects through before detailed cost analysis could be done.

"Politicians are keen to make progress fast, they are in a very short-term election cycle - only three years in New Zealand ... and numbers are quoted that are usually not that well-researched and robustly analysed," he said.

"Then when you launch a full scoping of a project you almost inevitably find it is much more complex and costs go up."

He said City Rail's budget blowout highlighted the need for "detailed and robust" cost-analysis to be undertaken before governments commit to large projects.

City Rail Link chief executive Dr Sean Sweeney, left, and construction manager Scott Elwarth deep underground. Photo / Jason Oxenham

But City Rail boss Sweeney said yesterday's "rigorous" project review was the first time an accurate price tag could be put on the project.

Earlier estimates, by contrast, were based on uncertain information.

The authors of yesterday's review had also been told not to keep a lid on costs, unlike earlier reports where there had been pressure to keep costs "within an envelope".

Designed to double the capacity of trains in Auckland's inner city, the 3.4km underground City Rail railway is expected to be completed by 2024 and run from Britomart Station to Mt Eden Station.

The Government and Auckland Council, which own the City Rail Link joint venture company, agreed in 2016 to split the project costs equally.

Mayor Phil Goff yesterday pledged to fund council's $500 million share of the extra costs without raising rates or breaching the council's debt limit.

This would be partly achieved by selling or leasing the 4500 car parks in the four inner-city parking buildings.

Infrastructure NZ's Selwood, meanwhile, said part of the problem with earlier cost estimates had been that Central Government was a reluctant partner in the project and former Auckland mayor Len Brown had needed to convince them to invest.

"That drives an incentive for him to minimise the cost so he can sell it to Central Government," he said.

"But also we the public are partly at blame because we always want things done for the lowest cost and focus strongly on minimising cost rather than maximising value."

The focus should now move past the project's cost, he said.

"The costs are what they are - you kind of have to wear that," he said.

"The challenge now is how can we leverage the benefits of this project to the maximum."

To do this it was important to get as many people as possible on public transport by building high-density residential apartments and office spaces near the city's train stations, he said.

As part of this, Auckland Council and the Government needed to identify land they owned near each station and see how it could be used to encourage development.

He pointed to Hong Kong's underground metro system where the train stations had been paid for by the commercial developments surrounding them as an example of what could be achieved.

"That is where the real value from the central rail link will be derived," he said.