The Dunedin City Council is expected to give Dunedin Railways permission to operate at a million dollar loss for the coming year.
Dunedin Railways operated the Taieri Gorge Railway excursion before it was mothballed last year. Photo: Dunedin Railways
Dunedin Railways Limited (DRL) operated the iconic Taieri Gorge Railway excursion which was mothballed last year due to Covid-19 restrictions, as well others in the wider Dunedin area.
A report, which will go to council on Wednesday, says Dunedin Railways will cost about $2.2 million to operate in the coming financial year.
The council will vote on whether to approve the cost and direct to Dunedin City Holdings Limited (DCHL) - the council-owned holding company which owns Dunedin Railways (DRL) - to cover the loss through debt and/or revenue.
The loss would not directly impact the council's finances, but ratepayers would ultimately foot the bill with Dunedin City Holdings responsible.
Dunedin Railways would try to recover losses through revenue generated by excursion trips but that was expected to be minimal, the report said.
"Excursion trains will aim to generate revenue that covers their cost, although it is accepted there may be some negative return as DRL test the markets with innovative products.
"While DRL, Dunedin Venues Management Ltd and DCHL will seek to operate as efficiently and prudently as possible, it is acknowledged that revenue from rail operations is unlikely to significantly offset the total cost of operating DRL in 2021/22.
"Returning a financial profit or return is not the objective of DRL's 2021/22 operations," the report said.
Wednesday's vote followed earlier discussions about the mothballing of the Taieri Gorge line - potentially permanently - though the council batted back that suggestion.
"Council has determined that DRL will continue to operate in a limited way utilising both the Taieri Gorge line as far as Hindon and the KiwiRail network. This limited operation will run at a loss," the report said.
"As DCHL directors would not normally undertake loss-making activities, the DCHL directors require a clear direction from Council about the operation of DRL for the period 1 July 2021 - 30 June 2022."
Councillors earlier voted to keep Dunedin Railways operating due to its public good by a margin of 13-2.