DCC to consider sale or lease of trains

Dunedin Railways is wholly owned by Dunedin City Council. Photo: ODT
Dunedin Railways is wholly owned by Dunedin City Council. Photo: ODT
Trains could be sold or leased to an organisation that wants to run a tourism rail service from Dunedin.

Negotiating with an unnamed partner about a sale or lease of Dunedin Railways Ltd (DRL) assets is one of four short-listed options Dunedin city councillors will consider next week.

The other options are to wind up the council-owned company, have the city maintain ownership of the trains but limit the operation to using KiwiRail tracks, or to retain city ownership and run a service that also includes using the Taieri Gorge line.

However, keeping the Taieri Gorge line open could come with a price tag of up to $14.8 million for maintenance and a full upgrade in the next 10 years.

That's the estimated cost of maintaining and improving the condition of the line between Wingatui and Middlemarch.

Upgrading a smaller section of the track - from Wingatui to Hindon - would cost about $6.5 million, and extending that to Pukerangi would push up the cost to about $11.8 million.

Winding up Dunedin Railways would cost about $370,000, but this could be offset by asset sales that could yield about $225,000.

Next week's council meeting where the future of the train operation will be debated comes a year after councillors decided to put DRL into hibernation.

The company had operated tourist and charter train services using both KiwiRail's New Zealand rail network and the Taieri Gorge line for years, but its viability had eroded and fallout from Covid-19 led to the operation being mothballed.

However - amid plummeting business from international tourism and in the absence of customers from cruise ships - a summer trial designed to get a gauge on domestic market possibilities was run.

Sunday trips from Dunedin to Hindon and Waitati - which ran from just before Christmas until last month - sold out, councillors have been informed.

In a comprehensive report provided by Dunedin City Holdings Ltd (DCHL), which owns DRL, Taieri Gorge was described as a key fixture in Dunedin's tourist offering.

The excursion train was established through community and volunteer efforts and, with support from the city, had developed into a renowned service.

The short-listed options boiled down to two questions, DCHL reported: Does the council wish to have continued train operations in the city? If so, should trains continue to operate on none, some or all of the Taieri Gorge line?

The cost of running a train service has been put at between $1.3 million and $2.3 million a year, depending on how well the tourism market recovers.

The council would need to provide financial support of up to $1.6 million a year while international tourism activity remained low.

Long-term costs of at least $6.5 million over 10 years would be added, if the Taieri Gorge line was used.

Little information is publicly available about the implications of the option to sell or lease DRL assets.

Councillors have, however, been provided with a confidential full proposal.

The description provided publicly by DCHL was that a proposal had been received from an external party proposing to use DRL assets to run a tourism rail service from Dunedin.

That could take the form of a purchase or joint venture. Rolling stock would stay in the city.

There would be further discussion about potential structures if councillors decided they should pursue a sale or lease.

Short-term costs of the option were labelled in DCHL's public report as commercially sensitive.

Long-term costs would be at least $6.5 million if the Taieri Gorge line was used.

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