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Results of road tolling inquiry

The NSW senate road tolling inquiry has just released an eye-opening report. It recommends more transparency in tolling agreements and the companies involved with them. Motorists have no idea how much of their tax, or their tolls, is going to private financiers to bear which risks. Nor how much profit these companies expect from public infrastructure.

Recommendations

The main themes of the road tolling inquiry recommendations are transparency, independence and evidence. These are precisely what is lacking in tolling arrangements:

  1. Publish the expected profit for future privately operated toll roads
  2. Disclose strategic business cases, base case financial models, cost benefit analyses and traffic forecast modelling for all major infrastructure spending
  3. Limit road tolls increase to no more than CPI (many are higher than this)
  4. Publish evidence why truck tolls are three times higher than for cars
  5. Assess costs and benefits of capping tolls across the roads network
  6. Treat Sydney Motorway Corporation like other public sector agencies, including publishing pay of senior executives
  7. Ask an independent body to assess whether tolling arrangements safeguard the public interest
  8. Ensure future tolling arrangements help governments manage the roads network, not just one road.

Confidentiality

Currently, many financial details are commercial-in-confidence. This makes it very difficult to decide whether or not tolling arrangements are in the public interest.

The government claims the more it discloses what is commercially confidential, the less parties are willing to come forward with proposals that are “of value to the public”. This begs the question what kind of proposals come forward when they are confidential.

The inquiry has recommended an independent body view private information to assess whether a tolling arrangement is in the public interest.

Saving time

During the inquiry, business, academic and government spokespeople gave their views on toll roads.

For example, Transport for NSW claimed driver usage or satisfaction is not based on the price of a toll but how much time they save. Is it true motorists will pay whatever it costs to save them time? Unfortunately, many toll roads are the most congested in Sydney and do not save time.

On congestion, Transurban (primary toll road operator) says this:

Traffic volumes are still ramping up and the travel time savings are not as large as in later years. Travel time savings on the tolled road are expected to be larger in later years on account of increased congestion resulting from population and employment growth.

Congestion

Transurban seems to be saying the roads are not yet congested sufficiently for motorists to save as much travel time as they will in the future! However, one infrastructure academic claims the opposite:

You have to wonder at some times of the day whether, in fact, it is worth using the toll road, given the relative congestion. What that tells me is we have got the toll wrong. If the toll is there to generate efficient use, given the value of travel time savings, we should be changing the toll to reflect that in order to generate a benefit.”

He implies the toll roads are now so congested it is not worth using the toll road. But he says the problem is actually the toll is not expensive enough to give us the benefit!

A monopoly or not

Transurban now has seven concession agreements with the NSW government for toll roads and it bought five of these after the initial tender process. It has 13 of 17 toll roads nationally (but pays minimal or no tax on income).

The company argues it does not have a “traditional” monopoly, for two main reasons: “the availability of an alternative route is number one and unfettered price increases, which we do not have.

It is true motorists can still freely choose to drive on a free, highly congested local road instead. But if truck drivers on NorthConnex prefer to drive on local roads, Roads and Maritime Services will have to compensate Transurban for loss of revenue. Not a monopoly?

Transurban says it does not have “unfettered” price increases. But how many other Australian businesses can lift prices every three months, often higher than CPI? It can do this even if the service has got worse. Not a monopoly?

Look at the network

The inquiry urges the government to consider the whole road network – not just individual roads. If one company is responsible for nearly the whole road network, how will governments be able to safeguard public interest?

Motorists do not consider each toll separately, as providers do. They consider how much it costs them for their personal journeys – to work, to visit family, to the airport. They may pay several different tolls for just one journey and these can really add up. It is definitely time to consider a daily or weekly cap on tolls, as there is on public transport.

There are already 14 tolls in Sydney, including Westconnex and Northconnex, with at least another three on the way.

Who will be able to afford to drive in five years? Even with two wage rises in that time, you will pay 20 price increases on every toll road you use!

See more on the secrets of road tolls.

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