The Guardian 19 October, 2005
Sydney’s private road tunnel disaster
Peter Mac
Horrified NSW taxpayers have discovered that under a Private Public Partnership contract they will have to make huge compensation payments to the private operators of the new cross-city traffic tunnel if the number of motorists using it does not rise, or if future improvements in public transport adversely affect the level of use.
There is mounting public rage over this deal. Initial street and lane closures associated with the tunnel have already created major traffic disruption, and are bankrupting small businesses around the city’s William Street entry point.
Angry motorists have refused to use the 2.1 km tunnel because of the exorbitant $3.56 charge and have opted to use the normal road system, even if this involves traffic jams and longer travel times.
To counter this, the state Labor Government has proposed blocking off streets (described most inappropriately as "traffic calming") in 12 suburbs around the city, and in several streets in the city itself, in order to force the public to use the tunnel.
Moreover, street lanes which have been closed in order to direct cars into the tunnel entry can only be opened up in the future on the payment of an undisclosed amount of damages to the operators by the government (i.e. the taxpayer).Wording to this effect is apparently included in the tunnel contract, which has still not been made public.
The facts behind the tunnel fiasco were disclosed after Greens politician Lee Rhiannon demanded that the government table a previously withheld document, the Cross City Tunnel Pre-signing Report.
That document shows that the Labor Government and the Roads and Traffic Authority accepted that the tunnel operators, Cross City Motorway, would be financially disadvantaged by improvements in the city’s public transport.
Under the contract, the government is still entitled to make improvements in public transport, but the consortium is also entitled to claim for potentially massive damages at the public expense.
The consortium is already insulated against inflationary cost increases. In a "money for jam" deal, they can raise the toll by four percent every year until 2012, and after that by an annual three percent until 2018, even if inflation does not reach those levels.
In the face of public anger, the tunnel operators have offered to open the tunnel free of charge from October 24 to November 13. This is obviously intended to get motorists "hooked" on the tunnel system and to consolidate unpopular traffic measures. The tunnel operators will also peg the toll for 12 months, as well as removing a $1.10 monthly e-tag fee, a $3.30 registration fee, and a $1.60 administration fee for temporary (i.e. non e-tag) passes.
However, the hefty entry charge will not be lowered, and it is likely that the removed fees will be re-imposed in future.
The NSW Liberal leader, Peter Debnam, has quite rightly demanded that the tunnel contract be disclosed in full — an interesting demand considering the Liberals are all for "commercial in confidence" contracts. Beyond that he has only advocated "persuading" the tunnel operators to review toll pricing and fees for non e-tag motorists. This would involve renegotiating the contract, but still falls hopelessly short of identifying the real culprit, i.e. the privatisation of government services.
Such contracts carry secrecy provisions. They are not open to public scrutiny and accountability. A breach of this agreement by the government, together with a demand for renegotiation of the contract, could see the government facing a damages claim by the tunnel operators.
In what was, in effect, an admission of complicity against the public interest, the NSW Government declared last week that the Opposition’s proposals would not be possible because they could bankrupt the state as a result of a claim for damages. This astonishing statement raises the question of just how much of the state’s public assets have been put at risk by signing the tunnel contract (and numerous other agreements).
In Melbourne, the controversial Committee for Melbourne report claimed that financing the construction of freeways by government could not be justified, because it was "imprudent given recent fiscal consolidation and debt reduction". In plain language, they claim that the private financing involved in most Private-Public Partnerships will cost the public less.
However, two of the members of the Committee for Melbourne have been involved in major PPP deals in that city, including the disastrously expensive Citylink road system.
In complete contrast, a report by the Allen Consulting Group concluded recently that infrastructure financed by public debt was cheaper than the alternatives. As Kenneth Davidson in The Age put it, "the PPP option allows the financial consortiums that set up these structures to earn at least twice the amount they would earn if they bought government bonds to finance these projects."
The disastrous Cross City Tunnel contract was signed by the NSW ALP Government, which has become indelibly associated with deals with big developers and major construction firms. That government was headed by Bob Carr, who has now left parliament and has been hired as a special consultant by Macquarie Bank, described by Anne Davies in the Sydney Morning Hearld as "the biggest private funder of public infrastructure in NSW" and "likely to bid for large infrastructure projects including the planned desalination plant and the M7 (expressway)".
Last week Ms Rhiannon commented: "We now know that the public are the big losers in the Cross City Tunnel contract. It is shocking that this government agreed to compensate the tunnel operators if public transport impacts on the tunnel’s traffic flow. … The people of NSW were betrayed when this secret Cross City Tunnel contract was signed. The only good that may come out of this debacle is that people have been alerted to the dangers of public-private partnerships."