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Infrastructure Tasmania carried out the evaluation of light rail, which included a review of findings from all previous reports on the project.
Capital costs have previously been estimated at $100 million but the report found that "significant operational losses" were projected, providing a major impediment.
Despite the assessment, the Government is promising to "preserve the rail corridor from Hobart to Granton" so its potential for light rail can be considered in the future.
Infrastructure Minister Rene Hidding said the Government would work with both Glenorchy and Hobart City councils to look at land use and zoning adjacent to the rail corridor, to encourage development.
The Hobart Northern Suburbs Rail Action Group has welcomed the overall findings, including the Government's pledge to work with councils and the private sector to identify development opportunities around the rail stations.
"These land use benefits have not been considered in previous light rail studies and will bolster the economic case," president Ben Johnston said.
"A small operating subsidy [for light rail] may be required but this is normal and needs to be considered in light of the enormous socio-economic benefits and avoided costs of road upgrades."
The Government has asked the councils if they would be prepared to contribute to the running costs of any future service.
This article first appeared on www.abc.net.au
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