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 run them on KiwiRail’s national network of tracks only, or to retain city ownership of DRL and run a service that also includes using the Taieri Gorge line.
The 60km gorge line is known for its scenic qualities but paying for its upkeep is a significant challenge.
Former Otago Excursion Train Trust chairman Clark Simmonds said having another operator take over the train service was a good idea and he was comfortable with the alternative of the council company operating both coastal and inland services.
It would be a great shame if the Taieri Gorge line was not used, he said.
Mr Simmonds was part of a group that got a tourist train running and, when the track was under threat of closure in about 1990, a $1.2 million community fundraising campaign staved that off, he pointed out.
The line, now owned by Dunedin Railways, runs along the banks of the Taieri River, through tunnels and the gorge to Middlemarch.
Mr Simmonds said shutting down the company would be an unpopular move.
Next week’s council meeting, at which the future of the train operation will be debated, comes a year after councillors decided to put DRL into hibernation.
The company had run tourist and charter train services but the operation’s viability eroded and fallout from Covid-19 led to it being mothballed last year.
However, amid plummeting business from international tourism and in the absence of customers from cruise ships, a summer trial was run to gauge domestic market possibilities.
Sunday trips from Dunedin to Hindon and Waitati during the three months sold out, councillors have been informed.
The council underwrote the trial with $50,000 and could get half of that back.
In a comprehensive report provided by Dunedin City Holdings Ltd (DCHL), Taieri Gorge was described as a key fixture in Dunedin’s tourist offering.
Federation of Rail Organisations of New Zealand (Fronz) president Grant Craig said the line between Wingatui and Middlemarch was an important part of New Zealand history.
"Fronz is behind retention of the line and a train service," he said.
However, keeping the line open could come with a price tag of up to $14.8 million for maintenance and catching up on upkeep in the next 10 years.
That is the estimated cost of maintaining and improving the condition of the line between Wingatui and Middlemarch.
Upgrading a smaller section of the track — running from Wingatui to Hindon — would cost about $6.5million, and extending that to Pukerangi would increase the amount to about $11.8million.
Winding up Dunedin Railways would cost about $370,000, but this could be offset by asset sales that could yield about $225,000.
Little information was publicly available about the implications of the option to sell or lease DRL assets.
However, councillors have been provided with a confidential full proposal.
DCHL said that the tourism rail service could take the form of a joint venture or a purchase.
The company’s rolling stock would remain in the city.
There would be further discussion about possible structures if councillors decided they should pursue a sale or lease.
Short-term costs of the option were labelled in DCHL’s report as commercially sensitive.
The cost of Dunedin Railways 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 have to provide financial support of up to $1.6million a year while international tourism activity remained low.
Long-term costs of at least $6.5million over 10 years would be added, if the Taieri Gorge line was used.
The city council has not included financial support for Dunedin Railways in its draft 10-year plan.
The cost of putting Dunedin Railways into hibernation is also tracking well above budget — an 18 month allocation by the council of just over $1 million is set to cover only 12 months.
