Melbourne’s Suburban Rail Loop
A vision should be explained — on why a solution might end up a problem
Introduction
Over the last two decades, Melbourne has grown rapidly and the pains of this growth are showing. The suburbs stretch more than one hundred kilometres from west to east to give an urban area of over 10,000 km2. The social and economic impact of this sprawl is now largely negative.
In 2014, a new Victorian Labor government came to power with a mission to address these problems. The new government had a particular intent to deal with Melbourne’s long neglected public transport system. In the subsequent eight years, it undertook an enormous portfolio of transport renewal, upgrading and major extension projects.
The suburban rail loop project (SRL), is now the major project of the government as it seeks a third term. The SRL is to be a 90-kilometre orbital dual tunnel metro rail built in three stages over many decades. The first stage of the SRL is estimated to cost $35 billion with all three stages likely to cost well over $100 billion. It is the largest single infrastructure project ever implemented in Victoria.
The SRL is badged transformational for Melbourne, now the biggest city in Australia. The government sees a trilogy of improvements via the SRL — there is to be a city that is better connected, more productive yet still liveable.
So, we are told the SRL is the vanguard of change. It might yet be but we haven’t yet had the debate about this. With an election coming, the debate is now happening.
The path towards the SRL
Melbourne’s radial rail network has long been a constraint to development except in the Central Business District (CBD) and inner suburbs. It could be said to vacuum the vast suburbia of vitality and enterprise.
In 2017, the government released a new metropolitan planning strategy for Melbourne — Plan Melbourne, 2017- 2050. Plan Melbourne identifies the problems of growth and presents a planning strategy with an emphasis of bringing people and work closer together. It presents seven outcomes needed to improve the trilogy of productivity, connectivity and affordability.
In late 2018, in the lead up to the Victorian election, the SRL was announced as a new major government commitment. Whilst there was no prior canvassing of the SRL, it proved to be an election winner.
In August 2021 a business case — Suburban Rail Loop, Business and Investment Case was released for stages 1 and 2 of the project (Cheltenham to the Airport). Early works for stage 1 (Cheltenham to Box Hill) commenced in early 2022.
For a colourful journalistic account of how the decision to build the SRL was made, I refer you to the Melbourne Age of 15 August 2021 — Thrown in a loop: How Daniel Andrews’ biggest project was cooked up behind closed doors. This article suggests the SRL is the brainchild of a select group and evolved without input from government’s own transport professionals, external and independent transport experts or the community.
In September 2022, the Victorian Auditor-General’s Office (VAGO) assessed the SRL.
The auditor and the audit
VAGO is independent of government and defines its role as:
promoting confidence in the public sector. We conduct audits to ensure that public sector entities are transparent and accountable to the Victorian Parliament and the community.
The VAGO audit is presented in — Quality of Major Transport Infrastructure Project Business Cases, Independent assurance report to Parliament, September 2022. The VAGO audit is set against the Department of Treasury and Finance’s (DTF) guidelines for large project assessment — Investment Lifecycle and High Value High Risk (ILHVHR) guidelines. The audit covers both the development and the content of the business case.
The audit part 1: business case development process and timing
The VAGO response to how the government has developed the project is:
Commonly accepted better practice suggests that a well-formulated business case should precede and inform investment decisions.
VAGO argued that the actual approach adopted by government had risks:
This approach creates risks that the advice to the government on these investments is not sufficiently comprehensive.
The government has disagreed with VAGO arguing that the SRL project, because it is city-shaping and a multi-generational program of integrated transport and precinct development, required a tailored rather than a standard assessment process.
VAGO noted that business cases would not be prepared for either the whole project or stage 1. This is contrary to government’s own guidelines.
The audit part 2: the business case content
VAGO has detailed three major concerns about the business case content. These concerns are:
· the high-level problems and benefits articulated in the SRL business case lacked necessary and sufficient supporting evidence;
Imposing the SRL on Melbourne’s transport framework will certainly change future transport and land use patterns but to what extent? The intended transformation is a leap in an unknown direction. Hence, the transport demand and land-use change modelling assumptions have a high level of uncertainty. Such modelling is useful for option comparison but cannot be relied on for definitive predictions of change that is required for the purpose of quantifying benefits.
· a narrow set of options were considered and analysed both before and as part of the business case development;
The business case actually does not canvass any options. As Henry Ford might say, “you can have any orbital transport option you like as long as it is the SRL.” The so-called second option is only an implementation variation. Other more flexible options are feasible but have not been considered.
· the economic analysis does not cover the entire SRL program and lacks consistency with the guidance in key areas.
The economic analysis applies a lower discount rate than recommended in the guidelines, does not present findings with a range of discount rates, extends benefits beyond the conventional direct ones and whilst presenting the CBA results as a range does not include all the uncertainties.
The auditor-general’s report is essentially advice to government that need not be heeded. However, the VAGO report might be considered akin to the canary in the coalmine in that it provides messages that are best not ignored.
Business case or promotional manifesto?
VAGO questioned the incompleteness of the business case and government’s decision not to follow its own project assessment guidelines for the SRL.
The business case was not the basis of the decision to build the SRL. It was a document prepared and released well after the decision was made to build the SRL. This makes it only window dressing for the decision. This is a breathtaking act of disregard for proper process for this the largest infrastructure project ever undertaken by a Victorian government.
This business case is neither an adequate and complete diagnostic of problems nor an analysis of all reasonable solutions to these problems. The outcome of this is uncertainty regarding the SRL and with this comes the risk of way less than optimum use of taxpayers’ money.
The main risk of this waiving of proper process is a solution that lacks flexibility.
The SRL benefits will not be realised for decades because it relies on the project stimulating higher density development rather than serving existing such development. Stage 1 is scheduled for completion in 2035 and stage 2 by either 2043 or 2053. Hence it is likely to be somewhere in the 2060s or even later before the benefits of the project approach full potential. Stage 1 is unlikely to be viable as a standalone project (N.B. government is not providing a business case for this). It is possible that any government elected in 2028 will not extend the project onto stage2.
The business case considerably underplays the challenges to be faced in precinct development. The business case insists the precincts will be liveable and affordable but does not give a path for how this will be achieved. It provides a very broad framework/guideline for precinct development (appendix B3) but no actual model, process or responsibilities for the redevelopment.
Local governments are preparing structure plans that have revised building heights. However the actual redevelopment appears to be in the hands of property developers who will need to deal with land assembly constrained by multiple small allotments. In any case private developers do not, as a rule, build affordable apartments for young families and essential workers. Also, core elements of a liveable community — well connected open space, community centres and other features of what is referred to in the business case as a “transformative civic heart” — will require land, time and public investment. Clear project management responsibility is essential for the whole precinct development process.
The business case relies on the assumptions of precinct growth that are questionable because the task of redevelopment is not given the same emphasis and funding as is given to the SRL. Attracting people to the precincts is as crucial to success as is building the SRL.
In summary, there is no clear path for how the precinct development will proceed.
The claim that affordable apartments will be a result of the project is spurious. There are many factors influencing the property price boom with a significant element being to do with a range of government policies. A new SRL metro line won’t sort out this grave and chronic problem.
If liveable and affordable housing is not provided within the precincts, the urban fringe will continue to expand because it is one of the few places, young families and others on low income can find homes that meet their needs and are within their means.
The business case has given no consideration to the possibility of a slowing in population growth. The business case assumes Melbourne’s population will be nine million by 2056. This is a very optimistic projection whose only justification seems to be that the rapid growth of the last decade or so will continue for the next three or more decades. The Covid-19 pandemic aside, we know the political mood is shifting from a past focus on temporary migration towards permanent migration and that means both a shift from quantity to quality and from more to less.
Finally, there is no recognition in the business case of the existing trends of urban renewal that are at work across the suburbs. Much of the detached housing stock built in the 20th Century has the potential for redevelopment into multiple dwellings that would increase population densities up to four times what they are now. However the pace of this redevelopment is difficult to predict both spatially and temporally. The business case ignores this market led “transformation”. The business case is completely focussed on the creation of a city of centres and lacks any recognition of the social and economic dynamics that are already at play and that are already re-shaping Melbourne and will continue to do so.
In predicting the future we need to better understand and acknowledge what is already happening. The business case fails this test.
Where to from here?
The Labor government is very likely to be returned for another four years in November 2022. There is no doubt that its commitment to rebuilding and rejuvenating the long neglected public transport of Melbourne is strongly supported by Melbournians. However, as for the SRL, in the longer term, I am not so sure.
Given the near certainty of an election win, the government is “not for turning” in its pursuit of the SRL. By the time of the next election in 2028, the SRL stage 1 will be well advanced. As for SRL stage 2 the picture is less clear.
The state of the economy is the key variable for the future. If the current uncertainties dissipate and Australia continues to attract immigrants, Melbourne will continue to grow and so will the pressure to complete the SRL as soon as possible. If the economy slows or retracts, the risk of a halt to the project will be very high. Already for this election, the Liberal opposition has declared it will halt the project and redirect the funding to hospitals.
The consequence of any failure in precinct development is that the SRL stage 1 will be an under-utilised semi-stranded asset for many decades. Future governments may choose to invest elsewhere or not at all.
The enormous financial commitment to one very large piece of public transport infrastructure to be built over three decades is a major mistake. How can the government reasonably argue for something this big without a proper and fully argued business case justification? It appears to be too far ahead of its time given population densities in suburban Melbourne remain relatively low. At the society level, it is doubtful that Melbournians can be press ganged into living in poorly designed high-density precincts. This is a society that favours evolution over revolution.
For more than one hundred years we have lived a suburban life with a lifestyle based on backyard living. This lifestyle is on the wane and the young are uneasy about what will replace it and resentful that what previous generations had is pretty much gone. The concept of a city of centres may work if properly developed. However the SRL project is mainly about the rail loop. Precinct development is a black box consideration which means it will proceed in a laissez-faire fashion in competition with the medium density development that is now the dominant form of redevelopment across Melbourne’s older and more accessible suburbs.
Plan Melbourne sets out a vision for reshaping the city. Whilst the SRL is a project in line with the outcomes presented in Plan Melbourne the intended method of implementation is not. Because of the huge scale of the project it must be considered in several stages but in terms of benefits it will need the whole lot or at least stages 1 and 2 before the benefits reach near their claimed potential. The political reality is that this could be a very long time in fruition.
The urban fringe will remain the only location a low salaried family can afford a home that matches their means to their needs. Hence, the major social benefit claimed for the SRL, namely reduced social isolation and increased employment opportunities will not be realised. It is this aspiration so well presented in the business case as:
More people are living further away from key centres and their places of work. Key workers, such as teachers, nurses, paramedics and fire and emergency workers, and non-public sector workers such as cleaners, retail and hospitality staff are especially affected as they are increasingly unable to afford to buy a home near their jobs.
All of the above are issues that should have been raised, analysed and addressed in the business case. This did not happen.
Postscript 1 — politicians and infrastructure is a cocktail made in hell
It seems that politicians either do not understand or choose not to understand how decisions on what to build should be made. The Auditor-General’s report on the SRL has highlighted this but it is, unfortunately, not an isolated example of “a cowboy in charge”.
What is it about a large infrastructure project, particularly of a civil engineering nature, that brings a gleam to a politician eyes. A past prime minister donned his leather jacket for a helicopter ride into the Snowy Mountains to announce Snowy 2.0 before any sign of a business case. Then there is the treasurer who said on a national political talk show words to the effect that business cases are to fill out the detail after the government makes a decision. Then there is the premier who, in commenting on the cost- benefit analysis process, said that like choosing a house to buy you don’t consider what the utility costs are do you!” In saying this he showed he didn’t understand how CBA works.
The same premier has also stated that beyond the SRL stage 1 and 2, it is for others to decide. Whilst this is correct, it is disingenuous in that it denies that the whole project has been conceived as one. In reality the current government is only going to be responsible for stage 1 and therefore there should be, as VAGO highlighted, a business case justifying the investment in stage 1.
Postscript 2 — Why we need to treasure due and proper process
It is clear that the Victorian government has followed a pretty shoddy process and secretive process in defining the SRL. Yes, the intention to build it was announced prior to the 2018 election but really, who knew enough about it then?
Does due and proper process matter?
It does matter because it is public money. Also, what a proper evaluation process gives you is the best possible understanding of the problem(s) to be solved and the available options for solving the problem(s). These problems are often complex and a due and proper process steers the understanding of need. A key part of this process is risk evaluation. How can serious risk analysis be done if the problems are not properly defined, there isn’t a comprehensive evaluation of viable options and if a decision on the project has already been made?
However, who am I to deny that the SRL might yet prove to be a great visionary project; a real winner you could say like a bet on a long odds horse in the Melbourne Cup. We know anything can happen on the first Tuesday of November. Unfortunately in this case, the bookies window won’t open for a while. We won’t know the success of the SRL until those who made the decision to proceed with stage 1 are in their recliners mumbling to themselves or even worse, have passed on. Accountability must be now or in the future the politicians will continue to make these “political” decisions unencumbered by the rigor of a full and proper business case.