Councillors are instead looking to push ahead with keeping the operation under council control, rebuilding services in the Taieri Gorge and ensuring up to $2 million a year is given to Dunedin Railways for renewal of the line.
Retaining the firm, its operations and the track through to Middlemarch will be the council’s preferred option for public consultation on the 2025-34 draft long-term plan.
A different set of choices was put forward by the Pounamu Tourism Group in council papers and by its managing director Paul Jackson at a council meeting yesterday.
The group proposed a long-term lease by Pounamu of Dunedin Railways assets and infrastructure for four years and then an option to renew for five years.
Pounamu would provide a $5m return to ratepayers for the nine-year lease and take on the operational costs and risks, Mr Jackson said.
The council would look after the tracks.
It was essentially facing a bill for this anyway, Mr Jackson pointed out.
Pounamu recommended the council approve funding for track repairs and maintenance, but "press pause" on appointing the rail service operator.
Mr Jackson said a committee could then compare the Dunedin Railways and Pounamu proposals and decide on the best operator.
He described the rival proposal as the council keeping control of a loss-making asset.
No pause button was pushed yesterday and it was argued at the meeting if services were viable for a commercial operator, they should also stack up for the council company pursuing them itself.
Dunedin Railways executive chairman Adrian Januszkiewicz said the Pounamu proposal would lock in losses for the council approaching $1.5m a year.
He believed Dunedin Railways could get to the level Pounamu offered in three years "and then better beyond, as we grow our markets back".
Dunedin Railways was placed in hibernation in 2020 because of the impact of the Covid-19 pandemic and Pounamu Tourism Group had since run a charter service for the firm, targeting passengers from cruise ships.
The Otago Daily Times obtained an email late last year that showed a cruise firm questioned the suitability of Pounamu as an operator, citing "significant and ongoing challenges".
Asked by Cr Lee Vandervis how soon trains might return to Middlemarch, Dunedin Railways general manager Rebekah Jenkins said getting the tracks ready was estimated to cost about $600,000.
It could be about a two-year project, although work to explore this in any detail had yet to occur, she said.
The council voted unanimously to direct Dunedin City Holdings Ltd (DCHL) to provide up to $2m a year for Dunedin Railways to fund renewal of the Taieri Gorge rail corridor while noting a dividend from DCHL would be reduced by $2m for two years.
