QTS-042 · Business case chapter or appendix · 2020
Appendix D Economic Case (D1 Economics Peer Review; D2 Technical Note 26: Unmet Demand; D3 Breakdown of EEM Benefits; D4 Cost Estimates)
Part of: Rapid transit evidence →
Appendix D supports the Economic Case of the NZUP Queenstown Transport Business Case. D1 holds two peer reviews for NZTA (Waka Kotahi), both addressed to Tony Sizemore. In the first, EY (29 October 2020) concludes that the Wider Economic Benefit analysis is 'robust and defensible' and probably a lower bound. It flags a communications risk in using international tourism as a proxy for unmet demand, and queries the low agglomeration assumption. In the second, Flow Transportation Specialists (20 October 2020) finds 'some level of risk' in the fixed-trip-matrix evaluation and the treatment of NZUP in the Do Minimum. Flow cut travel time and vehicle operating cost benefits by 20% and 33% and removed double-counted farebox recovery. With those changes, BCRs fall to between 2.9 and 1.2 across the five cumulative scenarios but stay above 1.0. D2 is Technical Note 26 (Final, 7 September 2020). It estimates GDP effects of unmet SH6A travel demand using international tourism as a proxy. It states that after on-road capacity (about 55,900 person-trips per day) is reached in 25-30 years, 'another step-wise intervention, possibly an MRT system such as a gondola, will then be required'. It puts the NZ GDP benefit of capacity beyond 2051 at $187 million (PV). D3 tabulates EEM benefits by scenario. D4 contains about 330 pages of NZTA-format cost estimate forms: for example, the Frankton package is $68.7m expected ($83.5m 95th percentile) and SH6A Frankton-Queenstown $28.0m ($34.3m).
What the document says
Context: Appendix D is the Economic Case appendix of the 2020 NZUP Queenstown Transport Business Case (NZTA Contract 2018235). Author and reviewer names are largely redacted under s 9(2)(a).
D1, EY peer review of Wider Economic Benefits (pp.2-11). EY was engaged under an IPA contract of 14 August 2020 and reviewed the October 2020 draft business case and Stantec et al methodology papers. It did not review the wider models (p.7). It found the WEB analysis 'robust and defensible' and aligned with Waka Kotahi guidance, using a 4% discount rate and 60-year period. Conservative assumptions mean estimates 'likely represent the lower-bound of benefits' (p.7). Pedestrian amenity (PERS/VURT, 4x multiplier) is judged robust (p.9). On unmet demand, EY notes Waka Kotahi guidance that 'Tourism benefits must not be included in any BCR calculation'. It accepts that tourism is used as a proxy for travel demand rather than monetised, calls this 'a potential communications risk', and recommends the point be highlighted to Treasury or IDM assurance officials (pp.10-11). It also queries the low agglomeration judgement and the omission of non-CO2 pollutants, and notes COVID-19 forecast uncertainty (p.11).
D1, Flow Transportation Specialists review of monetised benefits (pp.12-20). Flow reviewed the Economic Case report (7 October 2020), the economics spreadsheet, the Abley TRACKS modelling report, the Stantec FMOR and WSP TN3b (p.13). Its findings (p.14):
- NZUP was moved into the Do Minimum without a matching model scenario.
- NZUP may worsen general traffic performance.
- A Variable Trip Matrix assessment was needed but could not be done on the current platforms.
A proxy cross-load test 'switch[ed] from a positive benefit stream, to a negative benefit stream for general traffic' (p.17). Flow's sensitivity BCRs for the five cumulative scenarios are 3.9/3.6/2.5/2.1/1.6 (20% cut) and 3.4/3.2/2.2/1.9/1.4 (33% cut) (p.18). After also removing double-counted farebox recovery they are 2.9/2.8/1.9/1.7/1.3 and 2.6/2.5/1.7/1.5/1.2 (p.19). Costs use Expected Estimates with a ±20% test rather than 95th percentile (p.19). Flow concludes there is 'sufficient confidence... to progress to the next stage' and supports a new single modelling platform for the DBC (pp.14, 18).
D2, TN26 Effect of Transport Constraint on Tourism (pp.21-56; Final 7 September 2020). Using SH6A daily flows decomposed into residents, domestic and international visitors, and a 38,000 vehicles per day capacity, it estimates:
- Unmet demand on 126 days in 2028 and 338 days in 2048, or 268,000 vehicle-trips in 2028 rising to 3.5 million in 2048 (p.28).
- Foregone Queenstown direct GDP of about $1.1 billion PV, $748 million net of investment costs, and an NZ effect of about $174 million (40 years at 6%), or $2.3 billion and $0.5 billion at 60 years and 4% (pp.24, 30-34).
Benefits applied in the business case: $61 million for 2,100 unmodelled person-trips per day attributed to NZUP, and $187 million for capacity beyond 55,900 person-trips per day from 2051 (pp.22-23). The standard modelled user benefit is $407 million (p.23). Behaviour change of 2% a year (18% by 2028) would eliminate the foregone GDP (pp.33-34). Airport capacity of 5.1 million arrivals is a potential competing constraint within 18-43 years depending on the scenario (pp.32-33).
D3, Breakdown of EEM benefits (pp.57-58): 2018/2028/2048 benefits by component for cumulative scenarios, e.g. about $37.4m in 2048 for DM + NZUP + Arterial Stages 2-3 + Bus Hub (p.58).
D4, Cost estimates (pp.59-396): NZTA estimate pro-formas for Queenstown Town Centre items. Examples are TC14C Stanley Street full hub $45.9m expected, and Arterial Stages 1 to 3 at $88.3m, $44.1m and $97.1m expected. The SH6 Frankton SSBC summary is $68.7m expected and $83.5m 95th percentile, excluding the Humphrey Street Link at $10.6m (p.311). The SH6A Frankton to Queenstown summary is $28.0m expected and $34.3m 95th percentile (p.341).
Mass rapid transit: TN26 treats an offline system as the expected next stage. It states that on-road capacity will reach a limit 'probably in 25-30 years', and that 'another step-wise intervention, possibly an MRT system such as a gondola, will then be required to meet the travel demand between Frankton and Queenstown Central' (p.22). It values meeting demand above 55,900 person-trips per day from 2051 at $187 million of NZ GDP (PV) (p.23). It describes staged interventions: 'initial interventions (i.e. more buses)' followed by 'a second intervention (e.g. gondola) enabling even higher travel demand to be met' (p.27). It also notes 'more buses now may avoid an initial capacity constraint for many years but eventually further changes (e.g. a gondola) will also be required' (p.34). It flags 'economies of scale around a gondola node' and property value gains 'near a gondola station' as possible additional benefits (pp.25, 32). The peer reviews do not discuss MRT.
Key figures
- Flow sensitivity BCRs (20% VOT/VOC cut, farebox removed): 2.9, 2.8, 1.9, 1.7, 1.3 across five cumulative scenarios; 33% cut: 2.6, 2.5, 1.7, 1.5, 1.2 (p.19)
- Flow BCRs with 20% / 33% cut only: 3.9-1.6 / 3.4-1.4 (p.18)
- Second capacity cap 55,900 person-trips/day; NZ GDP benefit of capacity beyond it from 2051 $187m PV (p.23)
- Unmodelled 2,100 person-trips/day benefit $61m applied to NZUP; standard modelled user benefit $407m (p.23)
- Foregone Queenstown GDP ~$1.1b PV gross, $748m net; NZ ~$174m (40yr/6%); $2.3b and $0.5b (60yr/4%) (pp.24, 34)
- SH6A capacity assumed 38,000 vpd; unmet demand on 126 days (2028) and 338 days (2048) (p.28)
- SH6 Frankton SSBC estimate $68.7m expected / $83.5m 95th percentile, excl. Humphrey St Link $10.6m (p.311)
- SH6A Frankton to Queenstown estimate $28.0m expected / $34.3m 95th percentile (p.341)
- TC14C Stanley Street full hub $45.9m expected; Arterial Stage 1 $88.3m, Stage 2 $44.1m, Stage 3 $97.1m expected (pp.177, 277, 288, 309)
- Evaluation: EEM, 60 years at 4% discount; 40 years at 6% sensitivity (p.8)
Rapid transit
Mass rapid transit means light rail, gondola/cable car, bus rapid transit and similar dedicated rapid-transit technologies. It does not include ordinary bus services or ferries.
Substantive. Discusses, assesses, recommends or programmes mass rapid transit.
Expects mass rapid transit once on-road capacity is reached (about 25-30 years; from 2051).
TN26 (Appendix D2) sets out a staged capacity model for SH6A. Vehicle capacity (Cap 1) will soon be reached. Higher occupancy through PT will reach a second limit 'probably in 25-30 years' (Cap 2). Then 'another step-wise intervention, possibly an MRT system such as a gondola, will then be required to meet the travel demand between Frankton and Queenstown Central' (p.22). The modelling implies Cap 2 equals 55,900 person-trips per day. Providing capacity beyond it 'from 2051 would be expected to generate an extra $187 million GDP for New Zealand' in PV terms, excluding welfare gains to the other 60% of users (p.23). It explains that mass rapid transit 'would leave the SH6A vehicle capacity... unchanged and instead would shift the unmet demand to an alternative route and mode'. It adds that 'a second intervention (e.g. gondola)' would capture area C benefits (p.27), and that 'eventually further changes (e.g. a gondola) will also be required to avoid a later capacity constraint' (p.34). Possible additional benefits are 'economies of scale around a gondola node' (p.25) and property value gains 'near a gondola station' (p.32). It notes that the effectiveness of interventions is not assessed and 'This stage of work is ongoing' (p.28). The EY and Flow reviews do not address MRT.
"another step-wise intervention, possibly an MRT system such as a gondola, will then be required to meet the travel demand between Frankton and Queenstown Central." (p.22) | "THEN providing extra capacity from 2051 would be expected to generate an extra $187 million GDP for New Zealand, expressed in present value terms today" (p.23) | "It is likely that interventions will be staged, with initial interventions (i.e. more buses) meeting demand up to the point of the dashed black line, say, and a second intervention (e.g. gondola) enabling even higher travel demand to be met." (p.27) | "more buses now may avoid an initial capacity constraint for many years but eventually further changes (e.g. a gondola) will also be required to avoid a later capacity constraint." (p.34)
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Actions recorded
Invest in a new single transport modelling platform for general vehicle and PT demand, for use in the Detailed Business Case
Not assessed · Way to Go · Next phase (DBC)
We would support this investment and its use in the next phases of this project
Undertake a Variable Trip Matrix assessment (at least between Phase 1 and Phase 2) to address the step change in demand between Do Minimum and options
Not assessed · Next phase
our preference would have been for the evaluation to be based on a VTM method between Phase 1 and Phase 2
Remove double-counted farebox recovery from the benefit stream (Flow applied this correction in its sensitivity BCRs)
Not assessed
farebox recovery had been double counted
Highlight that tourism is a proxy for travel demand, not a monetised benefit, if unmet demand results are presented to Treasury or IDM assurance officials
Not assessed · When presenting to Treasury / assurance
We recommend that this point be highlighted if the programme team ever presents their results to Treasury
Clarify the unmet demand and productivity wording in TN26 before presenting detailed analysis to external parties
Not assessed · Before external presentation
The programme team may wish to clarify this section of the technical note
Reconsider agglomeration benefits, judged low by Stantec, given the programme aims to enable higher density, higher amenity development
Not assessed · Stantec · Follow-up assessment
We would appreciate an opportunity to better understand Stantec's reasoning
Consider non-monetised benefits and health impacts of non-CO2 pollutants (NOx, particulates) in follow-up assessment
Not assessed · Follow-up assessment
Subsequent analysis may wish to take account of these EEM / MBCM benefit categories.
Assess the effectiveness of alternative interventions (e.g. more buses, mass rapid transit) in removing the SH6A constraint; TN26 estimates potential benefit only
Not assessed · 'This stage of work is ongoing' · Relevant to rapid transit
This report does not consider the effectiveness of alternative interventions... This stage of work is ongoing.
Study cost
A study cost has been requested under the Official Information Act or LGOIMA. No figure has been received.
Citation
NZTA (Waka Kotahi). Appendix D Economic Case (D1 Economics Peer Review; D2 Technical Note 26: Unmet Demand; D3 Breakdown of EEM Benefits; D4 Cost Estimates) (2020). NZTA Contract 2018235 - Technical Note #26; WSP/Stantec project no. 310201227.