The Age: Victoria’s $1 billion per kilometre road – who wouldn’t rail against that? August 2, 2014, Michael West, Business columnist
Illustration: Michael Mucci.
Guess which road in Australia is shaping up to cost $1 billion per kilometre to build? Read on.
The most spectacular sharemarket float of the modern era is indubitably BrisConnections. This one really went through the roof, if you happened to be hanging upside-down with your ankles strapped to the ceiling.
BrisCon had three instalments, you see. Those who bought into the float still had another two $1 payments to make. One investor famously went bargain hunting when the stock was one-tenth of a cent. Forking out $47,923 for 48 million shares, he soon discovered that, as this was a partly paid stock, he was up for a cool $96 million.
The class action lawsuit from litigation funder IMF finally arrived this week. Proceedings were filed against Arup, the consultant that concocted the exuberant traffic estimates for the underlying project, Brisbane’s Airport Link.
Rather than conducting a traffic model first, the tradition in privatised road projects on the eastern seaboard has been to build the traffic model around the financial model. This was the case with BrisCon, its traffic estimates way over the mark.
For the public and for government, too, such hopelessly high traffic forecasts have not been a bad thing. The state gets its road, banks and sharemarket investors pay for it, their project goes belly up and creditors take a huge haircut. Sydney’s Cross City Tunnel, Lane Cove Tunnel, Brisbane’s RiverCity Motorway and Airport Link spring to mind.
Naturally, the real winners from the road deals are bankers, lawyers, accountants and assorted experts who so indispensably provide their advice. These people are the road pushers. There is more money in roads than rail, and besides, rail is for the peasants.
It should be said that in Melbourne, these advisers do, on the odd occasion, catch public transport, tramming it up Collins Street for lunch when there are no cabs around. At least they pay the CityLink on the way in. In Sydney, even the toll roads are just for the peasants, as there are no tolls to be paid en route to an underground car park in the CBD from the eastern suburbs.
To be fair, they might cop a Harbour Bridge toll if they live in Mosman, but this brings us to the second tradition in transport planning, the bias for road over rail. The fees are bigger.
The third hallowed tradition in transport is secrecy. This reporter was once asked by the NSW roads authority to pay $74,000 to see the Sydney toll road contracts under Freedom of Information. The regime in Victoria has been more open over the years, but the NSW ritual of secrecy is catching on.
As the state election nears, the Napthine government is declaring all sorts of unfunded public works, some $27 billion in infrastructure projects crowned by the controversial East West Link. Conceptually, this road is not a bad thing, even though the city’s trains are clogged, but the price is stupefying.
Actuary Ian Bell has kindly put some figures around this for us, deploying what scant information is in the public domain. Bell puts the capital cost of this road at up to $18 billion for 18 kilometres, a grand $1 billion per kilometre. One could be forgiven for thinking that the business case for the East West should be made public so the people who are paying for it could discuss it. Alas, not so.
One of the bidders for the East West deal, giant contractor Leighton Holdings, recently pulled out of the tender saying it was too risky. (Even though they didn’t win the deal, they were still reimbursed $12 million for their spot of paper shuffling).
How would this be funded anyway? There has been some talk of access rather than usage charges, that is “rego” as well as tolls, which would be an unfair outcome for regional Victorians. Were it a usage charge, Bell estimates the East West Link toll at $24 a full car trip. That racks up against an estimated $13 toll for Sydney’s big WestConnex project for a trip from Parramatta to the airport.
Bell is pulling his data from a leaked Macquarie Bank report. The NSW government is also keeping the WestConnex base case a secret (capital cost estimated at $15.6 billion). Both these are seriously big tunneling projects – West Connex goes underground beneath Parramatta Road.
Incidentally, some observers have suggested that it is going in the wrong direction. You see, the WC decision preceded the federal government’s green light for a second airport at Badgerys Creek but the decision to spend so much taking people to Mascot Airport has not been revisited.
The answer is that transport planning in Australia is missing. Despite budget constraints, the feds are chucking money at road projects willy-nilly, contingent on states flogging public assets, such as electricity networks.
In all this, the question of whether rail might be a better long-term option than road is passed over with the speed of a merchant banker fanging up the toll road to Mount Buller for the weekend, or out of Sydney to the southern highlands for that matter. The hoi polloi as usual have no say. Road versus rail? In the least, we could do with a comparative national study looking 50 years ahead.