Dialogue: Partial buyout best idea for solving rail problems

If Greater Auckland were an island, and if its local authorities knew how to run a railroad, buying Auckland rail lines might make sense. But it's not, they don't, and the proposed $65 million deal is under the public microscope.

Tranz Rail's announcement of plans to quit everything but its rail freight, distribution and ferry services is an even bigger reason to reconsider local authority decisions to buy Greater Auckland rail corridor leases.

Tranz Rail's desire to get out of passenger transport, its readiness to bail out of rail in Auckland, proposals to sell its Tranz Scenic passenger services which run throughout the country, and plans to close the Waitara branch line, which would trigger a 90-day Government buyback option, must be ringing alarm bells in Wellington.

The North Shore City Council strongly supports the Government taking a controlling interest in Tranz Rail, and will convene a regionwide political meeting to discuss this. There may not be rail lines in North Shore City, and for this reason the city council has not been party to regional Tranz Rail negotiations, but its citizens stand to benefit from regional improvements to the passenger transport network.

Its citizens, local companies, regional economies and the national economy must be able to rely on an accessible, efficient and integrated people and freight rail service running throughout the country.

The escalating cost of diesel and increasing recognition of the true costs of heavy truck ecological damage, noise mitigation and road construction point to the need for rail and shipping-based alternatives.

Telecom still complains about the Kiwi Share obligation that went with its privatisation. But it ensured every citizen had access to telephone services at the same cost and that has not prevented Telecom from making hundreds of millions of dollars in profits annually.

No such obligation applies to Tranz Rail as it embarks on a programme of network fragmentation by which the best bits of its business are offered to the international marketplace and the bits it wants to shut down are offered on a take-it-or-leave-it basis to the Government.

Even if all parts of the network could be parcelled up and sold to different interests - some private and some public - service operators would have to negotiate a tortuous path of interconnection agreements and access fees.

Remember Telecom v Clear? There have been millions spent, books written and entire academic and legal careers dedicated to the economics of interconnection in the fragmented American rail network. We need that sort of regulatory gravy train like a rail disaster.

Britain's rail privatisation experience has not been positive. Accidents have been blamed on deferred maintenance. Some assessments suggest as much as $15 billion is needed to bring Britain's rail network up to scratch. Thankfully, there have not been similar accidents here, although Tranz Rail's employee health and safety record has not been good.

The issue of line management raises questions that need answering. If Auckland public authorities bought control of local rail lines, who would take responsibility for maintenance and repair? What state is the asset in and what capital expenditure programme would be needed to ensure the lines met standards for increased passenger transport use? Where would the funding to service that spending be sourced?

There have been calls for the establishment of a Greater Auckland Passenger Transport Authority. However, in the interim a local authority trading enterprise has been established by the Auckland, Waitakere and Manukau City councils to hold and manage rail assets that might be bought from Tranz Rail.

This would suddenly have to take on management responsibility and the staffing needed for all freight and passenger transport activities on those lines, as well as their maintenance.

Similar start-ups would be needed across New Zealand, with all of the associated duplication and economic inefficiencies, let alone the nightmare of interconnection.

It might be argued that the Rail Corporation - set up to lease all rail corridors to Tranz Rail - could be funded by the Government to buy back uneconomic lines and lines needed for passenger transport.

But that would be another form of fragmentation. It would separate freight from passenger traffic, although they share the same lines, and it would separate ferry services from rail. What is needed is an integrated network and service.

If the management of Tranz Rail does not want to provide passenger transport services, it cannot be made to. No reasonable form of regulation could force Tranz Rail to run businesses it no longer supports.

However, that leaves New Zealanders looking down the barrel of rail network fragmentation and dire economic consequences. The Government needs to intervene strategically and demonstrate its support for passenger transport and an integrated rail network.

Outright renationalisation could be avoided through the purchase of a controlling interest in Tranz Rail, which would combine the benefits of private-sector efficiency and public-interest protection.

* Joel Cayford is a North Shore City councillor.