Northern Ireland Assembly Flax Flower Logo

COMMITTEE FOR REGIONAL DEVELOPMENT

 

Committee Office Room 402
Parliament Buildings
Belfast
BT4 3XX

Tel: 02890 521970
Fax: 02890 525927
Email committee.regionaldevelopment@niassembly.gov.uk

Mr Conor Murphy MP, MLA
Regional Development Minister
Clarence Court
10-18 Adelaide Street
Belfast
BT2 8GB

29 May 2008

Rapid Transit for Belfast: Committee comments

Dear

I refer to your letter dated 3 April 2008, in which you requested that Members note, and comment on, the content of the strategic outline case for rapid transit in Belfast.

The Committee considered this issue at its meetings of 9 April, 7 May, and 28 May 2008, and had the opportunity to view some of the proposed routes on the network via a guided site visit accompanied by Departmental officials on 21 May 2008.

In principle, the Committee would support the development of a rapid transit system for Belfast, as bringing positive economic, social and environmental benefits to the city. In addition, the Committee would like to make the following points, and Committee’s response will focus on five broad areas:

(a) A general view on a proposed rapid transit system for Belfast;

(b) The alternative technologies discussed in the strategic outline case;

(c) The preconditions or concomitant requirements to ensure the successful implementation of a bus based rapid transit system;

(d) Stakeholder engagement; and

(e) Procurement, funding and affordability.

Proposed routes

The Committee notes that the Atkins KPMG report assessed the following proposed routes:

Members also noted that the consultants’ report identified the following findings for each of the proposed routes:

In the course of its findings on routes identified as worthwhile, the Committee notes that the consultants’ report recommends further consideration of issues such as:

The Committee would encourage the Minister to resolve these issues as soon as possible so that they can be reflected in the preliminary detailed design stage and outline business case.

Choice of technologies

The Committee noted that in developing their analysis of all the above proposed routes, the consultants evaluated two technological options: a light rail based system and a bus-based system (with and without guidance technology). The Committee noted that the consultants’ report identified a cost benefit ratio for the whole bus-based network (the best performing CITI, EWAY and WWAY routes) of 2.8. This is a positive result, with schemes over 2 generally being acceptable to government 1.

On the basis of the evidence presented in the Atkins KPMG report, the Economic Research Institute of Northern Ireland (ERINI) is of the view that, under present circumstances, Belfast is too small a city to generate the necessary passenger traffic density to justify a light rail system 2. The choice of technology would therefore appear to tend towards a bus-based model. If the choice of system is bus-based, the Committee is of the view that the necessary physical infrastructure should be put in place now to ensure the future adaptability of the system towards a light rail based system, should the situation change.

In terms of guidance technologies, on the basis of the briefing the Committee has received to date 3, it is not clear to Members that a single type of guidance system delivers consistent and significantly enhanced performance over others. In light of the infrastructure cost implications associated with investment in a guidance system, the Committee is of the view that further consideration and evaluation is needed before any decision can be made to invest in a particular guidance technology. However, the Committee is of the view that physical guidance measures, in the form of raised contoured platforms, offer potential benefits if properly employed.

Key features of any rapid transit scheme

In the course of its preliminary briefing on rapid transit, the Committee met with executives from rapid transit manufacturers and operators in Northern Ireland and the Netherlands, and participated in a study visit to view rapid transit schemes in operation in Amsterdam, Eindhoven and Utrecht in the Netherlands 4. The key lesson from these engagements, in the view of the Committee, is that in order to maximise the passenger numbers and positive passenger experience, and to ensure that the social, economic and environmental benefits accrue from the proposed schemes, the following elements must be incorporated into any proposed bus-based rapid transit scheme:

Stakeholder engagement

Since the publication of the strategic outline case, the Committee has received a volume of correspondence from residents concerned that the proposed EWAY route from Belfast city centre to Dundonald will destroy the existing amenity value created by the nature walkway and cycle path Belfast to Comber Greenway along sections of the old Belfast to Dundonald railway line. The walking and cycling route is currently being extended to Comber.

The Committee wrote to the Department on this matter on 25 April 2008, and the Department’s response of 9 May 2008 makes the following points:

The Committee is of the view that the Department should continue its engagements with stakeholder and user groups on this issue, as well as investigating alternative routes in the EWAY corridor, in particular as the more detailed outline business case and more detailed design work is developed. The Committee understands that there may be some EU Regulations governing health and safety issues in this type of shared space development, and would urge the Department to ensure that the highest standards of safety are maintained for both rapid transit passengers and those availing of the walkway and cycle path amenities.

The Committee also understands that the Department has undertaken a range of stakeholder consultations on the strategic outline case. The Committee welcomes as wide an engagement as possible in the development of any rapid transit system for Belfast, and would request that the Committee be briefed on the outcome of the consultations to date.

Procurement, funding and affordability

At the Committee’s request ERINI produced a paper reflecting on the economic arguments for a rapid transport system and the analysis of the options identified by Atkins and KPMG. A copy of this paper is included at annex A to this letter.

Specifically, this paper highlights alternative procurement options for rapid transit that the Department may wish to explore in more detail. The Committee would ask the Department to look at ways in which the private sector may become involved in certain aspects of the project.

The Committee also notes that many opportunities exist within the proposed routes to capitalise on developer contributions within some of the proposed areas, for example Titanic Quarter, the leisure development in Dundonald and redevelopment of the Monagh Bypass area. The Committee would urge the Department to actively explore these options to maximise potential investment in the overall rapid transit system whilst ensuring best value for money for the public purse.

Finally, the Committee welcomes this opportunity to comment on the strategic outline case and looks forward to the take note debate in the Assembly and to working with the Department further on this extremely important area of work.

Yours sincerely

Jim Wells, MLA
Deputy Chairperson
Regional Development Committee

Annex A
Belfast Rapid Transit Programme: Strategic Outline Case

Comments by the Economic Research Institute of Northern Ireland

Introduction

At the instruction of the department of Regional Development (DRD) Atkins and KPMG have produced a Strategic Outline Business Case (SOC) for a rapid transit network in the Greater Belfast area. The SOC is a high level assessment of the objectives, needs and options for a rapid transit system. The finer details of preferred options would have to be examined in a specific business case.

The need for some form of rapid transit system in Belfast has been mooted in several strategic documents going back several years. These include the Regional Development Strategy and the associated Regional Transportation Strategy in 2001 and, more recently, the Investment Strategy for Northern Ireland and the Belfast Metropolitan Transport Plan. However, the Atkins and KPMG study is the first comprehensive examination of the options for advancing a rapid transit network and as such requires close examination.

Rapid transit systems employ a variety of technologies and can be applied to several geographical routes. In the SOC the technologies considered are of two types, bus based systems (with or without guidance) and light rail systems. The routes examined were :

CITI – from Belfast city centre to Titanic Quarter.

EWAY- from Belfast city centre to Dundonald in the east.

WWAY- from Belfast city centre to West Belfast

The Programme for Government identifies a rapid transit system as a priority for the Executive with work expected to commence in 2011 backed by an allocation of £111 million in the Budget.

The purpose of this paper is to reflect on the economic arguments for a rapid transport system and the analysis of the options identified by Atkins and KPMG.

Objectives

Large scale investment in public transport schemes does not take place in a vacuum but rather in the context of one or more policy objectives. Unfortunately transport in particular seems to find itself embedded in a wide range of policies, quite often without much coherence in the objectives being pursued. For example, the Atkins and KPMG study identify at least 8 main objectives in the Belfast Metropolitan Transport Plan and a further 18 sub-objectives. The range is considerable, extending from environmental issues to promoting equality of opportunity. All of this valid in itself but because there is no explicit prioritisation between objectives none of it is much help in sorting out the benefits of one scheme over another. In their report Atkins and KPMG focus on 8 objectives of which 4 are singled out for particular mention, namely, shifting travel away from car use, promoting economic growth, equality and accessibility and supporting the image building of Belfast.

In practice the study does not make much use of the objectives in assessing the options for each of the three routes. The implication is that the technologies under consideration all contribute more or less equally to the achievement of the objectives. This also has implications for the economic assessment.

Economic Assessment

The standard framework for assessing the economics of transport options such as those identified in the Atkins and KPMG report is cost-benefit analysis suitably modified to take account of wider issues such as environmental factors. The guidance is provided by the Department for Transport (WebTag) and is based on the standard ‘Green Book’ guidance for assessing government expenditure. The essential idea is to quantify, where possible, all the benefits of an option and all of the costs over its full lifetime and to compare one with the other to see if the option yields an expected net benefit or alternatively a net cost. Benefits which cannot be quantified can be listed qualitatively and a judgement made as to their value. Another way of presenting the outcome is in the form of a benefit to cost ratio. If this is in excess of 2 (to allow for a margin of error) the project is acceptable but if it falls below 1 it is not.

Since all of these schemes concern moving essentially the same quantity of people between Belfast city centre and another destination with each technological option using broadly the same route there is an opportunity to simplify the economic assessment without doing too much violence to the veracity of the outcome. If each technological option does the same thing in broad terms then the benefits each generates can be argued to be roughly the same. The assessment therefore becomes one where the cost of each option is the relevant factor. Technically this is known as a cost effectiveness appraisal. The issue can be further simplified by focusing on the costs incurred in the peak hour for each option since this is the point where the option is fully utilised and where revenues are greatest.

This reasoning can most easily be applied to the CITI route, which is basically the same for all the technologies. Using the data from the Atkins and KPMG study it is quite clear that on economic grounds upgrading the standard bus service at a capital cost of £1.07 million and a total operating cost of £360k is much cheaper than any of the Bus Rapid Transport options with capital cost ranging from £5.2 million to £8.8 million and operating costs of £326k per annum. Indeed the standard bus service costs are perhaps inflated since they are based on a greater frequency for the existing 26b service which has a longer existing route than any of the other options. The light rail system is entirely in a different class in terms of cost since the capital costs are of the order of £92 million and operating costs are estimated to be £1.26 million per year.

The much more complex analysis undertaken by Atkins and KPMG makes use of the Belfast Transportation model which is a sophisticated way of taking into account factors such as time savings, the split between different transport modes (buses, cars, taxis etc) and issues such as car parking requirements and revenue. However, as noted above as a first approximation the values of the benefits can be taken to be close for every option so the deciding factor comes down to costs. In Table 8.8 of the report the detail of the costs and benefits of the CITI options is laid out in full. For all of the bus options the value of benefits is essentially the same. The benefits from the light rail option are larger but this seems to hinge on the assumption that psychologically this is a more attractive form of transport and so will bring in more passengers (about 0.4 million more per year) than the bus options. Just what the evidence is for this is unclear but regardless it is quite insufficient to offset the very much greater capital costs of the rail option.

The simplification of assuming similar benefits does not work with either the EWAY or the WWAY routes since in each case there are multiple alternative routes for the system whether bus or light rail based and each of these has its own combination of costs and benefits. A full cost benefit analysis is required to sort out the options in terms of the net economic benefits (or costs). These are summarised in the Atkins and KPMG report in Tables 13.8 to 13.10 for EWAY and Tables 18.8 to 18.10 for WWAY. In both cases the capital costs for a light rail system are so high as to completely overwhelm the value of its benefits.

The disparity in the costs of light rail as opposed to other systems stems from the need to construct a dedicated ‘permanent way’, that is, the track. The permanent way for the bus solutions is, of course, the road which is shared with other traffic. Since road costs are not apportioned between different traffic types (cars, trucks and buses) the road is treated as a free good for the bus options so the comparison with light rail is not exactly on a like for like basis. Overall this is not likely to change the cost ranking of the schemes but it does bring out the fact that rail is in a significant sense different. Rail is also different in an economic sense because the capital costs of the permanent way are true sunk costs. While the road can be used by multiple types of vehicle the track is dedicated to the train or tram so that it has minimal alternative value (this refers to the track and not the land). Before making such an investment therefore it is important to have evidence that it will produce an adequate return and for light rail systems in particular this means that the traffic density has to be high. On the evidence presented in this report Belfast is too small a city to generate the necessary traffic density to justify a light rail system.

Procurement and Finance

The report discusses essentially two procurement options for a rapid transit system; conventional procurement where the Department of Regional Development essentially funds the capital and operating costs of the system offset by whatever revenue it can generate through fares and developers contributions extracted through the planning system and a Public Private Partnership (PPP) solution where the private sector at a minimum funds the construction and maintenance of the asset in return for a annual payment guaranteed over a long period (say 60 years). In the first case both the full capital cost and the resource cost will score to the DRD budget while in the second the annual payment will certainly score to the DRD resource budget and the asset may well end up on the department’s balance sheet (depending on the view of the Audit Office) and so score to the department’s capital budget. PPP solutions, it is argued, place risk where it is best managed although in practice they can be difficult to police and their attractiveness varies in inverse proportion to the extent to which the underlying asset ends up on the public sector balance sheet.

What the report does not consider is a full private sector solution or one where the department’s contribution is confined to a specific subsidy. For example, it should be possible to auction a licence for the CITI route leaving it up to the private sector to fund and operate the service. The same can probably be applied to the EWAY and WWAY routes in so far as the bus solutions are concerned. Because of the high risks of sunk costs it is most unlikely that the private sector would provide a light rail solution for any route without substantial subsidies and guarantees. There would need to be compelling evidence that there were additional social benefits over and above those captured in the commercial transaction between passengers and provider to justify such a subsidy. There is a common misconception that because these services are called public transport they have to be provided in all instances by the public sector. However, other than for ideological reasons there is really no case for government or its subsidiaries to be directly involved in commercial activities such as bus services which the private sector is perfectly capable of providing, even if specific routes require some degree of subsidy for social reasons. Indeed if the economy is actually to be the first priority of the Executive every opportunity should be taken to give the private sector the opportunity to flourish rather than excluding it from important areas of economic activity.

The underlying premise in this report is that the DRD and its transport agency will make the choices over routes, the form of the technology and the means of procurement. In short this is to be a very centrally controlled project. An alternative would be for the department to concentrate on the output specifications it requires (frequency of service and peak load capacity, for example) and any technical, legal or financial constraints that will apply (e.g. maximum fares) and then invite providers, including Translink, to tender with their solution. This would give an opportunity for innovative proposals to emerge that the centrally planned and controlled approach does not provide.

This is also the conclusion of ERINI in their paper reflecting on the analysis in the consultants’ report.

ERINI report prepared for the Committee for Regional Development, 23 May 2008

Discussion and correspondence with executives from bus based rapid transit manufacturers and operators in Northern Ireland, Utrecht, Eindhoven and Amsterdam, in February 2008.

In February 2008.