East West Link: Victorian taxpayers lumped with $339 million bill for toll road that won’t be built

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East West Link: Victorian taxpayers lumped with $339 million bill for toll road that won’t be built Clay Lucas City Editor, The Age

Daniel Andrews, with Treasurer Tim Pallas, announces complete dumping of East West Link. Photo: Josh Robenstone

Victorian taxpayers have been lumped with a $339 million bill for the dumped East West Link, under a deal announced by Premier Daniel Andrews.

The payment prompted Prime Minister Tony Abbott to leave open the option of taking back from Victoria nearly $1.5 billion that Canberra gave to Victoria to build the road.

Mr Andrews said the money was not compensation but payment for services – and would not say what the money was spent on.

For $1, Victoria has bought the East West Connect consortium, which the Napthine government signed up to deliver the 5.3-kilometre toll road from Clifton Hill to Flemington.

In exchange the five companies behind East West Connect will walk away from the deal, leaving Victoria to take over debt totalling $3 billion.

The consortium had already spent $339 million, a figure that almost certainly included “success fees” for reaching contractual milestones.

The Andrews government would not disclose any details about these fees.

Nor could the government explain, beyond “the bid process and design and pre-construction”, what the East West Connect consortium had spent $339 million on.

Mr Andrews said that the process would only now begin to account for where the millions had been spent.

“There is a process to verify, to validate, to appropriately account for, all of the monies that have already been spent by the East West consortium,” he said. “They will need to provide their receipt books as it were to verify that these were genuine, legitimate costs that have occurred.”

Mr Andrews said that this process “will take some time, but that effectively caps the liability of the state”.

He blamed the massive cost on the former Napthine government, in particular its treasurer Michael O’Brien, who signed Victoria up to a secret side contract, which was to compensate the consortium if the road was not built.

But Mr O’Brien and state Opposition Leader Matthew Guy blamed Labor for spending hundreds of millions of dollars on nothing.

Mr Guy said that not building the road was irresponsible and short-sighted, because Melbourne was growing so quickly and badly needed the infrastructure.

“This reckless action by the Labor Government will leave Melbourne and Victoria with no major infrastructure projects currently underway, nothing,” Mr Guy said.

Mr Abbott, whose government funded the East West Link but will not fund urban rail projects, described the deal to not build the road as “a massive set back”.

“The East West Link is the only major shovel-ready project in Victoria,” he said. “It is the only answer to easing Victoria’s traffic congestion.”

Mr Abbott said Victorians should “feel let down by Daniel Andrews who promised before the election that no compensation would be paid”.

On top of the $339 million cost to taxpayers of not building the road, an additional cost of $81 million will be borne by Victorians.

This represents fees already spent by East West Connect setting up a $3 billion loan facility, which Mr Andrews said was lent by banks led by the Commonwealth Bank.

Mr Andrews said this money would now be shifted across towards funding its proposed Melbourne Metro underground rail tunnel.

But the rail project has no start date, no confirmed route and will cost between $9 billion and $11 billion.

The East West Connect consortium was a made up of the Queensland Investment Corporation, Lend Lease, UK public private partnership investor John Laing – which each owned 30 per cent – and French group Bouygues, and Spanish company Acciona, which each owned five per cent.

Key East West Connect consortium director Stephen McDonough – who The Age has been told was instrumental in negotiations with the government – would not say how much money had been collected by consortium members in success fees.

Labor in opposition promised to abandon the project, and said there could be some modest compensation paid to the consortium to not proceed with the road.

Mr Andrews conceded that the government could have legislated and walked away from the project, paying East West Connect nothing. But there would have been a consequence for that, he said.

The government also released the contracts for the toll road that had been kept secret since last September when they were signed.

Many of the residents whose homes were compulsorily acquired to make way for the road had grown tired of waiting to find out if they would get their homes back.

The Tuxworth family bought a new home in January, after their Wellington Street four-bedroom property in Clifton Hill was acquired last year.

Gillian Tuxworth said she was extremely angry with the Andrews government, who she said had failed in their promise to communicate with affected residents.

“[They’re] out there talking to the consortium, making multimillion-dollar deals,” she said. “What about the little people? We didn’t ask them to take our house. None of this was our fault.”

Standard & Poors confirmed Victoria’s AAA credit rating would remain following the dumping of the road.

Meanwhile, Auditor-General John Doyle confirmed the East West Link project would be audited “as a matter of priority”.