Government: Pay tolls on a motorway you're not using

Húrin

From the Indo, 10/08/2009

TAXPAYERS will have to compensate the operators of the controversial M3 motorway if the number of vehicles using it falls below target.

It is understood this is the first time such a guaranteed minimum toll income has been agreed.

There will be downward pressure on the numbers using the M3, which opens early next year, because drivers could face €11.20-a- day in tolls and there will also be a new rail service to Navan.

The Dunboyne to Clonsilla leg of the rail link to Dublin opens next year, with the full line coming on stream in 2015.

The 'minimum traffic level' clause for the M3 was included in the contract for the €650m motorway through Co Meath. It means the State will have to pay the toll operators, Eurolink, compensation if traffic flows (predicted at up to 60,000 drivers per day) fail to meet the agreed minimum target. But the National Roads Authority (NRA) has not revealed what this target is.

Labour transport spokesman Tommy Broughan warned the State might have to compensate Eurolink if the planned rail service persuaded drivers to abandon their cars.

"It seems to be running counter to what would be generally accepted public transport policy. From every point of view, it seems mad," he said.

There is no such 'minimum traffic' agreement for another toll road operated by the same company -- the Kinnegad-Kilcock section of the Dublin-Galway route.

The National Roads Authority said the minimum traffic target was "competitive" and was based on annual rather than weekly or monthly traffic levels. But it said it was unable to reveal it because the expert in that field was on holidays.

The re-opening of the Navan rail line is due to take place in two phases. The first is the 7.5km line from the planned M3 Interchange at Pace through to Clonsilla station, which is due to open next year.

Defended

It will include three new stations -- Hansfield, Dunboyne and Pace. There will be 15-minute peak hour frequency commuter services into Docklands Station in Dublin city centre. Phase two of the project will extend the rail line to Navan. It is due to be completed by 2015.

The NRA defended its decision to include a minimum traffic guarantee. A spokesman said they needed to attract as many bidders as possible to the project.

A spokeswoman for Transport Minister Noel Dempsey played down the risk of the State having to pay the toll operators compensation.

"The NRA is confident that, based on traffic volumes, the minimum traffic level will be realised," she said.

- Michael Brennan Political Correspondent


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The "I told you so" reaction is hard to resist. I and others like me have always warned that the simultaneous development of a new motorway and a new railway line will hinder the efforts of both projects to break even. In a continuous boom there might be enough demand to justify the existence of both but that assumption has never been rationally acceptable.

AlekSmart

http://www.boards.ie/vbulletin/showthread.php?t=2055362204


Máith an fhear a húrin...and as you may see the article was discussed above .....Does it really surprise anybody anymore in this era of Namadness......The Irish Government`s approach to road tolling has stank to high heaven since the Original West-Link deal was slithered in under the radar and has not improved since.....This is just another nice-little-earner for yet another well connected group of cronies.....so just shut-up and pay-up...it`s what we Irish do best :mad:

SeanW

In this case I must agree, the whole M3 deal stinks to heaven. Even though I am a strong supporter of developing a wide variety of infrastructure including motorways, the M3 was always questionable, the whole idea just seemed ill considered and half baked. At best.

Unfortunately the Navan railway line will never be built. Meath County Council built over the alignment with sewer lines and the M3 project destroyed parts of the alignment with a regional road realignment and the "bridge" at Cannistown (there's a lot of dodgy goings on surrounding that, suffice to say that all the relevant authorities had/have no interest in protecting the Navan alignment at Cannistown either, and that to build a railway under the M3 there would add an obscene amount to the cost).

The Navan railway was promised in the Fianna Fail manifesto of 1997, to be delivered by 2000. Then 2004. Then 2006. Then 2015 (promise made before the bubble collapsed).

Then there was the whole Tara Valley environmental question, and more recently we've found that the whole thing was a Public Private "Partnership" where the Private Partner was given a guarantee of minimum revenue via tolling.

Let's examine that for a second. The PPP is the rough equivalent of a Hire-Purchase, which anyone doing Leaving Cert Business can tell you is an expensive and complicated form of finance only used in certain circumstances. Much like with HP, The private partner in a PPP is supposed to take a certain amount of risk in exchange for a premium.

Now the article says of the NRA that "they needed to attract as many bidders as possible to the project."

Consider the wisdom of an individual or small business taking out something potentially crappy, like a Fiat car, or a 2nd rate 'widget' of any kind, on Hire Purchase. But, since the financing company might be unhappy about being the 'owner' of 2nd rate merchandise for a period of time, you offer to keep the item even it breaks down and waive all your rights of return, while at the same time, agreeing to normal HP costs, becuase you need to have "as many options for HP financing as possible."

It wouldn't happen unless the person needed the 2nd rate goods desperately and the normal options of bank loan + extended warranty were not available.

That the government felt it was essential to do this, seriously begs a lot of very hard questions.

Victor

AlekSmart wrote: »

Namadness

Amadán-ness?

antoinolachtnai

SeanW wrote: »

Consider the wisdom of an individual or small business taking out something potentially crappy, like a Fiat car, or a 2nd rate 'widget' of any kind, on Hire Purchase. But, since the financing company might be unhappy about being the 'owner' of 2nd rate merchandise for a period of time, you offer to keep the item even it breaks down and waive all your rights of return, while at the same time, agreeing to normal HP costs, becuase you need to have "as many options for HP financing as possible."

It wouldn't happen unless the person needed the 2nd rate goods desperately and the normal options of bank loan + extended warranty were not available.

That the government felt it was essential to do this, seriously begs a lot of very hard questions.

To be fair, there are three different types of risk here:

- commercial risk - is there going to be enough demand and cashflow to make the project financially viable?

- project risk - will the road/car be provided for the price expected and on the timescale accepted?

- technical risk - will the road/car work as intended?

To be fair, the contractor seems to have taken on the project and technical risk, but it can't necessarily be expected to take on the commercial risk. If they do, they are going to naturally want to charge more (potentially a lot more, since there were always question marks over whether there was really enough demand to justify these roads).

AlekSmart

(potentially a lot more, since there were always question marks over whether there was really enough demand to justify these roads).

Indeed,and it is exactly the lack of such questioning which has exposed us all to incredible levels of risk-exposure going forward.

The level of Commercial risk to which any of the contractors are exposed is just that,a commercial decision which both parties freely enter into,having first performed due diligence checks on their abilities to meet the contractural requirements.

What this relatively localized bit of tweaking exposes is the removal of such commercial considerations from the contractual process.

What is even worse is the attempt to cloud the thing in secrecy,citing the usual oul cobblers regarding "Commercial Confidentiality" as if the Irish Government are actively considering a further tranche of Motorway construction to far flung corners of our empire.

There is also,of course,the broader question of EU aid and infrastructural grants,many of which appear to paid under different headings at different times....again the entire process is designed to keep the details from the salivating gaze of the public.....lest they suffer an attack of the heebie-jeebies

murphaph

antoinolachtnai wrote: »

To be fair, the contractor seems to have taken on the project and technical risk, but it can't necessarily be expected to take on the commercial risk. If they do, they are going to naturally want to charge more (potentially a lot more, since there were always question marks over whether there was really enough demand to justify these roads).

The contractor/consortium isn't being blamed at all here, I hope. They will naturally try to get the best deal possible for themselves. We depended on our government to make sure we got a good deal. The bit in bold is the crux of the matter-the N3 never warranted upgrade to motorway status in the first place as it has no major city along its route apart from Dublin and could have been easily upgraded (bypasses of Dunshaughlin and Navan were long fingered for years in anticipation of this fabled motorway). It is primarily a commuter route from Meath. Now the chickens are coming home to roost for building a motorway purely for political reasons.

Stark

So much for market pressures forcing them to reduce the 5.60 each way toll in order to attract traffic. They can just claim it directly off the taxpayer instead.

AlekSmart

So much for market pressures forcing them to reduce the 5.60 each way toll in order to attract traffic. They can just claim it directly off the taxpayer instead.

Sadly Stark,when dealing with the fall-out from Political Pygmies as typfied by the current Minister for Transport,all of the usual checks and balances stuff must be suspended.

This little scam represents nothing more and nothing less than fraud,extortion or deception all dressed up to represent "Policy".

One this IS certain however,and that is the Traffic Count figures for this (and other) Toll Facilities are not going to come anywhere near the fanciful "developer led" projections which our Cabinet dutifully swallowed up when assessing crackpot schemes.

Slightly OT I know,but has anybody got any up to date info in the Blanchardstown Ski-Slope.....seemed a good idea at the time.?????

westtip

Just read all the posts in this thread and me thinks - does this sound like the kind of deal we grew to familiar with on the M50 West link bridge? A great deal for the private part of the PPP but not so good for the Public part - and they call this partnership.

Sooner they are gone the better.

antoinolachtnai

It's sort of the same thing, but in reverse.

Remember, when the Roches built the original bridge, people laughed. It was a bridge from nowhere to nowhere. Joe Duffy went out to have a look and everything.

As I understand it, in that case, the Roches were taking the commercial risk.

westtip

antoinolachtnai wrote: »

It's sort of the same thing, but in reverse.

Remember, when the Roches built the original bridge, people laughed. It was a bridge from nowhere to nowhere. Joe Duffy went out to have a look and everything.

As I understand it, in that case, the Roches were taking the commercial risk.

Yes I recall all that - the thing that got me about the infamous Roche deal is the taxpayer was to fund the motorway feeding all the cars to the bridge, it was a no brainer for NTR, but the thick idiots (or not so thick depending on the bungs they got) just gave the whole coin machine away. This new deal on the M3 smacks of a similiar level of incompetence - for goodness sake why not build the road with publically borrowed capital loan funds and take the toll for the state until it is paid off - Why do we have to involve the private sector at all? Or even build all these toll roads as part of the National Pension Fund, I am sure most people would not mind tolls if they knew there was an end game - ie when it is paid for it is free with maintenance paid for by road tax; or if the profit was goind to the national pension fund. I am deeply suspicsious of all these PPP's due to the incomptence of those who negotiate them on our behalf and seem to get endless bad deals for us.

antoinolachtnai

The reason (as I understand it) has to do with avoiding direct government borrowing. Government borrowing could only be done within strict EU limits.

The other thing was to control the technical and project risk. This aspect of the approach seems to have been very successful.

If the government had done as you had suggested (and I am not saying it is a bad idea) it would still be in the situation now where it would have to dip into the exchequer to pay for the road, because the tolls collected would not be enough to pay off the interest and capital. It would not make headlines, but the net cash situation would be the same.

We often assume that because you have built the road or other infrastructure, and it has been paid for, that that's it. In fact, roads (like any infrastructure) require regular ongoing investment to keep them up to spec. In the case of many of the roads and light railways we've put in, we haven't yet seen the full extent of this bill, because the projects are so new that they don't need much maintenance.

You never really pay off these roads. Although the initial land costs are certainly dealt with, the actual infrastructure investment is a treadmill.

As I understand it, these PPP projects revert to the State after 30 years, and they have to be delivered to the state at a certain spec, i.e., with all the current maintenance complete.

I am not necessarily defending the PPP system, I'm just saying there is another side to it, and the downside would not necessarily have been reduced if we had taken the public funding approach.

Re the M50 - I don't know if the Roches really didn't know for sure whether the whole road would actually be built, or when. The whole thing seemed like a crazy project at the time, and there were many delays and nonsense along the way. I am not making a case for anybody, certainly not the Roches/NTR, but there are two sides to the thing.

PS: according to this, http://www.nra.ie/PublicPrivatePartnership/ProjectTracker/M50SecondWest-LinkBridge/ NTR was also responsible for building and maintaining a stretch of the motorway. They also didnt get to keep the full toll. It still turned out a great deal, no doubt about it, but it wasn't as ridiculous as is sometimes portrayed.

marinbike

Thats typical of Fianna Fail assholes..... Time for a general election before we find ourselves in a mess with all these stupid new taxes.


We pay the most expensive Road Tax in the EU, Road Tax should also cover the use of these Highways.

marinbike

murphaph wrote: »

The contractor/consortium isn't being blamed at all here, I hope. They will naturally try to get the best deal possible for themselves. We depended on our government to make sure we got a good deal. The bit in bold is the crux of the matter-the N3 never warranted upgrade to motorway status in the first place as it has no major city along its route apart from Dublin and could have been easily upgraded (bypasses of Dunshaughlin and Navan were long fingered for years in anticipation of this fabled motorway). It is primarily a commuter route from Meath. Now the chickens are coming home to roost for building a motorway purely for political reasons.

Its just another Fianna Fail way to milk the public of money. They don't care what the consequences of increased taxes are, even though it will lead us deeper into recession.

serfboard

Húrin wrote: »

The National Roads Authority said the minimum traffic target was "competitive" and was based on annual rather than weekly or monthly traffic levels. But it said it was unable to reveal it because the expert in that field was on holidays.

As I said in the other thread, I hope the Indo keeps on top of this. We need to know what the minimum traffic target is.

AlekSmart

We need to know what the minimum traffic target is.

WE,as in the usual eejits who fund the whimsical madness of Fianna Fáil Ministers,are not going to get that Minimum Traffic Target without a VERY long and arduous struggle.

Expect to hear the term "Commercial Confidentiality" whispered behind the backs of hands etc...the hope being that something more appealing will come along and distract the great unwashed

Re the M50 - I don't know if the Roches really didn't know for sure whether the whole road would actually be built, or when. The whole thing seemed like a crazy project at the time, and there were many delays and nonsense along the way. I am not making a case for anybody, certainly not the Roches/NTR, but there are two sides to the thing.

I`m not for a moment suggesting that Antoin o l needs to make a case for the NTR/Roche Family at all.
However to suggest that Tom Roche took a punt without "really" knowing what would develop is,I feel,fanciful

I remember the free news sheet dropping in my letterbox in advance of the WestLink opening and by golly was Tom Roche praised to the fullest in it.....

Visionary,he was,far Sighted in extremis....yes well....with the combined expertise of Mssrs Liam Lawlor,Frank Dunlop,George Redmond and a host of B rated administrative extras all offering the benefit of their "consultancy" experience the WestLink scam had one VERY well connected set of backers.......Fail.....Not on your life !!!