I’m planning of posting a few ideas for tram extensions, so I thought it might be an idea to lay the groundwork by looking at how much the fixed infrastructure is likely to cost. An easy way of doing this is to look at how much recent Melbourne tram extensions have cost.
The Box Hill extension, opened in 2003, is 2.2 kilometres long and cost $28 million.
The Vermont South extension, opened in 2005, is 3 kilometres long. The exact capital cost is tricky to work out, given that the works included upgrading the 732 bus and funding the operation of these services for 4 years (god knows why). Of the $42.5 million total cost, $12 million was allocated to future service operation, leaving us with a construction cost of $30.5 million. This probably overestimates the cost somewhat, given that it includes capital works on the 732 bus.
The Docklands Drive extension, also opened in 2005, is just under a kilometre long (my Melway says 940 metres) and cost $7.5 million.
Indexation and calculating an average per-kilometre cost
Using the RBA’s inflation calculator to work out these prices in 2006 dollars* (2007 dollars not yet available), we find that Box Hill would cost $30.46 million; Vermont South $31.58 million and Docklands Drive $7.77 million. This yields an average per-kilometre cost of $10.87 million in 2006 dollars.
*These price increases are based on the Consumer Price Index, not an index of infrastructure costs, so it is conceivable that they may be a little bit out. However given how close we are to the base year, the difference is probably negligible.
Note about economies of scale
I’d say that the provision of tram infrastructure faces an l-shaped long run average cost curve (LRAC) on the scale that occurs in Melbourne, indicating there are economies of scale. Now of course if every city in Australia decided to each build 200 kilometres of tram lines, then we’re going to see some diseconomies of scale due to insufficient skilled engineers and workers – pointing to a u-shaped LRAC. As stated, however, for this to occur, the scale of production would have be implausibly high; so on a city wide scale we can assume that infrastructure investment LRACs are probably only downward sloping. This suggests that a 10 kilometre tram extension ought to cost less per-kilometre than a 500 metre tram extension.
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