Aucklanders may have to stump up an extra $300 million for the City Rail Link after confirmation the cost has blown out to between $2.8 billion and $3.4 billion.

The Government today formally agreed to pay half the cost of the 3.4km underground rail tunnel, but the good news was tempered by the higher cost - previously put at $2.5 billion.

Mayor Len Brown announced the "historic agreement" on funding with Transport Minister Simon Bridges at a deep hole on a project site in the city.

"This is Auckland's number one transport project...that will be hugely helpful in dealing with congestion that Aucklanders feel," Brown said.


He said the council had $1.4 billion in the 10-year budget for the rail link, saying "by and large" it had the cost covered even if it climbs towards the upper limit.

However, if the cost reaches $3.4 billion, Auckland ratepayers may have to dig deeper into their pockets. Their half share will rise from $1.4 billion to $1.7 billion, or an extra $300 million.

The cost blowout, weeks out from the Super City elections and a new council, has the mayoral frontrunner and Labour MP Phil Goff calling for an explanation for why local and central agencies may have underestimated the costs.

People understood the rail link was a necessary part of stopping congestion, Goff said, "but if the prices continues to escalate it puts more pressure on Auckland ratepayers".

In July, the Herald reported the cost had jumped to more than $3 billion, prompting a complaint from Auckland Transport boss David Warburton who said the figure was "wrong" and the cost estimate remained at $2.5 billion, plus or minus 20 per cent.

Yesterday, Warburton was sticking to his guns, saying nothing in the statements issued "reflect a cost blowout on the CRL project".

He said the Government announcement was a funding agreement, not a cost statement. It reflected a flexible approach as design and development progresses and provides a "small buffer" beyond the original estimates, he said.

Last night, Bridges said ministers had known about the $2.8bn to $3.4bn cost estimate since June, based on material provided by Auckland Transport.

Bridges said once Prime Minister John Key announced in January the Government would pay half the cost, the Government did its homework and worked with Auckland Transport on design work and refining the cost.

"On the basis of that our realistic estimate at the moment is $2.8bn to $3.4bn. Chances are there will be further refinement. The ultimate arbiter is going to be the market," Bridges said.

A heads of agreement signed between the Government and council yesterday set out the main issues for the funding partnership.

Detailed terms of the agreement will be written into a sponsor's agreement, including a target cost and framework for responding to cost overruns.

The Government and council are also setting up a "special purpose vehicle" to deliver the city rail link between now and when it is due for completion in 2023-2024.

City Rail Link


: $2.8bn to $3.4bn


: 3.4km underground tunnel


: Turns Britomart into a through station, creates new stations near Aotea Square and Karangahape Rd, and connects to Mt Eden station to meet the existing western line