On 4 September 2012 the Government of New South Wales released its Draft Long Term Transport Master Plan. 

The draft plan is broad and ambitious, aiming to establish a strategic framework across all modes of commuter and freight transportation in the State for the next 20 years. Some of the more notable and imminent recommendations relate to Sydney’s motorway network, and we discuss a few of the recommended actions below.

Action: investigate, develop and test a distance-based tolling regime for Sydney’s motorways, in consultation with private sector tollway operators and cross-disciplinary experts

The draft master plan notes that parts of the Sydney motorway network are already subject to pricing through tolls, but that the structure and price of the tolls on each motorway is different.  Moreover, the different tolls across the network are not priced to influence or optimise the use of the network, meaning (according to the draft plan) the network is not used as efficiently as it could be.

According to the draft master plan, the development of a standardised cents-per-kilometre toll across the entire Sydney motorway network has the potential to deliver significant benefits, including:

  • Consistency for motorway users – regardless of the part of the network people use regularly or where they live, charges to use the motorways will be directly linked to motorists’ level of use of the motorways. 
  • New funds for roads – new revenues could be generated and directed towards completing the motorway network, maintaining existing roads and increasing investment in public transport alternatives.

Commentary

Implementation of such a regime would require the agreement of each of the private sector tollway operators currently managing key components of the network - the M2, M5 south west, M7, Eastern Distributor and the tunnels, Sydney Harbour, Lane Cove and Cross-City. Developing a scheme that would be attractive enough for each existing private sector tollway operator to relinquish its existing tolling structures and systems will be no small feat.

Additionally, there is a substantial difference in the cost of operations and maintenance between bridges, tunnels and an ‘open road’ motorway. It is difficult to see how a standardised cents-per-kilometre charge accommodates that difference. Potential solution includes an additional ‘flag-fall’ charge for bridges and tunnels.

Regardless of these challenges, in the short to medium term the proposal represents an interesting opportunity for traffic modellers and designers of tolling systems.

Action: a long term program to complete critical missing links on Sydney’s motorway network, with Infrastructure NSW to advise on the next motorway project

Projects for consideration include M5 East duplication, M4 extension, Inner West Bypass, and in the medium term, the F3 to M2 and planning for the F6.

The Australian and NSW Governments appear to agree that the highest priority project is the M5 East.

In a recent paper1, the National Infrastructure Coordinator, Michael Deegan, explains that this conclusion is aligned with the objective of improving freight movement to and from Port Botany, in particular via an intermodal terminal at Moorebank. As currently proposed, the Moorebank intermodal terminal will connect with Port Botany by road (the M5) and rail.

According to the Deegan paper, Sydney Ports Corporation considers that any proposal to expand the M5 East must ensure additional capacity is provided directly to Port Botany: ‘previous M5 East proposal[s] failed to provide an effective connection to/from the Port’.

Infrastructure NSW is expected to outline its preferred design and alignment of the project in its ’20 year infrastructure strategy’ paper, due for release later this month.

Action: creation of the Infrastructure Financing Unit

In the 2012–13 State Budget, the NSW Government announced the creation of the Infrastructure Financing Unit within NSW Treasury to provide oversight of alternative procurement models – particularly PPPs. The Infrastructure Financing Unit will examine opportunities to leverage private sector financing in a way that ensures value for money for the State. It will also explore variations to the standard PPP model to achieve the optimum mix of public and private finance and risk allocation.

We expect that among the mechanisms the Infrastructure Financing Unit will consider are:

  • traffic risk sharing – options include a minimum revenue guarantee and/or revenue sharing
  • traffic risk support – staged grants paid during the traffic ‘ramp-up’ period
  • government provided debt during the construction and traffic ‘ramp-up’ periods, potentially at interest rates reflecting the government’s cost of borrowing rather than the (higher) private sector interest rates.

These types of mechanisms already have support at a federal level having been recently considered by the Infrastructure Finance Working Group (advising Infrastructure Australia and federal Minister for Infrastructure, Anthony Albanese).

An additional option could involve the government contributing equity to a project. A key issue for governments is the accounting treatment of any given project model and the consequential impact on its budget  / balance sheet. An equity contribution could be viewed favourably if it were capitalised as an asset on the government balance sheet rather than expensed as a budget outgoing.  

The government could sell-down this ownership interest at a later time when a more mature asset would attract strong interest from the likes of pension and superannuation funds.