Can you credit it? Our national superannuation fund wants to invest in an Auckland tram line. "Can you credit it", is essentially the question cooler heads in public administration are now asking.
When the Super Fund's interest was made known by the Government this week, one or two excited reports said work was about to start on light rail for Auckland. The truth is, jackhammers will not be tearing up the city's streets any time soon. The work about to begin will be on paper in Wellington.
The Cabinet has agreed the Transport Agency, working with the Treasury and the Ministry of Transport, should work out "a robust process to explore a range of possible procurement, financing and project delivery options". Thank God for faceless bureaucrats, they are often the only people standing between political enthusiasm and economic lunacy.
Transport Minister Phil Twyford was probably willing to grab the Super Fund's capital with both hands when its unsolicited indication of interest came in last month. He is now predicting his trams will be up and running within six years.
But the "robust process" of evaluation that will be recommended by officials will probably involve first, a competitive tender, second, that a convincing business case should show how the trams will be sufficiently well patronised to provide the investor with a competitive return, and, third — most important — that any commercial investor must face a financial risk.
That last condition is the whole point of so-called "public-private partnerships". The benefit commercial investment can bring to a public project is not just capital that doesn't weigh on the public balance sheet, though that is usually its main attraction to governments. The real value to the public is that the project will be subjected to a hard-headed assessment of its worth by investors who stand to lose if they miscalculate its likely return.
Return on investment — all investment, public and private — is the essence of a strong economy and all the social benefits that depend on an economy. The Treasury will tell you that but it is always surprising how few outside the core public service are aware of it.
Local government seems unaware of it, even in the business world there's a tendency to think public investment doesn't need to show a return, especially if it is for infrastructure their business can use.
Far too often, "public-private partnerships" are set up in such a way that the private partner cannot lose. The commercial participant raises the capital to build the project and gets to operate it, receiving fares and subsidies agreed at the outset.
If it has calculated the likely patronage correctly, the revenue will give the private partner a good return on its capital. But if the project turns out to be not as well used as its public promoters and private investors thought it would be, the Government will probably raise the subsidy, or maybe just take over the operation, lower its charges and run it at a loss.
Often this is even agreed at the outset with the Government underwriting the private partner's risk. Heads, the company wins, tails, the taxpayer loses. It's called privatising the profit and socialising the loss.
But the real loser is the national economy. Every poor public investment takes resources that could be used for a better return, and a project such as public transport can influence many other activities and investments in its region. Too much unduly costly and inefficient infrastructure makes an economy deeply and chronically poorer than it should be.
Fortunately, Labour governments particularly detest the idea of privatising a profit and socialising a loss. National tends not to mind so much, happy just to have the capital provided off-budget and believing even a heavily subsidised private company will run the operation more efficiently than a public body in any case.
But a Labour government might not be so averse to underwriting the risk of a commercial partner when it is a public pension fund, especially this fund.
Its investment decisions have been very sound over the past 10 years, probably because they had to be. National never thought the "Cullen" fund was needed and suspended contributions while the Budget was in deficit. It was in no hurry to resume when a surplus returned.
Now the guardians have come in from the cold and looking forward to more capital contributions resuming, probably in the Budget on Thursday.
Public superannuation funds are always liable to become a ready source of capital for poorly conceived, wildly ambitious political schemes such as fixed rail transport that can provide only a fraction of the daily travel in Auckland.
If the Super Fund thinks it can earn a return on our money, good luck to it. But it is vital to face that test.