State paid two million euro in 2015 for white elephant

PeadarCo

end of the road wrote:

so let the users of the road pay. how many trucks for example use it. the money being spent on a form of subsidy to the toll company could have been spent on something else.

Ye but remember if private sector money wasn't provided the government who have had to take money away from other projects to make up the shortfall. There's going to be an opportunity cost if you do that. So you can't look at the tolls or the 2 million on their own you also have to look at the cost of the alternatives to work out which was better value.

Wanderer78

PeadarCo wrote: »

The thing is no one makes money on this per say. Even the private company who loan out the money can still make a loss if the return they get is lower than their cost of capital for the funds they lend. The return is macro as in improvements in the quality of life for the people living in the towns and villages on the old road due to reduced traffic volumes and additional investment generated in the areas near the motorway.



The loan is reputablely 30 years(I'm open to correction on how long the tolls will last for). I don't see the big deal with private companies lending money and getting a return. Based on the longevity and the relatively low but consistent above inflation return at least some of that money will be going back into people's pension funds. Pension funds generally have the capital to invest and also would be interested in the long loan life.

The question I have is which is cheaper for the taxpayer. If its cheaper with private sector involvement/frees up money for other projects I don't see why you'd get bogged down in ideology. Given the large amounts of money these type of projects require you'd hope and imagine that all funding options would be analyzed on a project by project basis.

id disagree with you to a point there, even though you do make some good points. i suspect the private financial institutions backing the funding for these large projects are nearly always winning no matter what the outcome, as they can engage in high risk activities such as derivatives trading on the back of the debts created from these projects. a lot of these derivatives can be extremely dangerous for society as a whole, as noam chomsky puts it, the externalities of these systems are never taken into account, which could potentially crash the whole system. we have to start taking back control of these complex financial systems before the system as a whole collapses. having the majority of our money supply being created by private financial institutions really isnt working, these systems are too volatile. ultimately i feel the true cost ends up on the backs of the end users, in this case, in toll charges or even bailouts from the public in all its formats.

i think id much rather see these projects publically funded, even if they remain to be tolled, at least we the people would own the infrastructure and could make gains from the projects if they make a profit. these profits can be directed back into the upkeep and/or expansion of the infrastructure for the benefit for all. theres certainly nothing wrong with private companies making a profit from these ventures, but i feel many are simply cash cows that ultimately end up simply costing the end user all round as explained above. privatisation of our monetary systems has some advantages but i feel its disadvantages are extremely dangerous, and have the potential to crash our financial and economic systems with its high risk approach.

the cheaper game is a potentially dangerous game, as from my own experiences in life, the cheapest options arent always the best. id have to agree with critics of neoliberal and free market economic policies, we re being pretty much led down the garden path here. theres growing consensus that these policies are extremely dangerous and are leading to growing inequality amongst other complex problems. i think many of our policy makers have been duped with all these theories, or what american economist michael hudson says, 'junk economics'!

you do make some good points though and these issues are very complex with no clear solutions, but i feel our current monetary systems are simply not working. i do fear we ll end up in serious trouble if we dont get on top of these issues soon.

PeadarCo

Wanderer78 wrote:

you do make some good points though and these issues are very complex with no clear solutions, but i feel our current monetary systems are simply not working. i do fear we ll end up in serious trouble if we dont get on top of these issues soon.

I appreciate you've written a lot but how does all what you've written to the thread topic? Its a fairly boilerplate/generic criticism of the monetary system that I've seen plenty of times on lots of different threads on boards.

How much cheaper do you thing public funding would have been. Remember we're looking at the cost of funding the the project and managing of the project is a separate discussion. A different funding option could still have the same overall cost but not include the 2 million that was paid out. The length of a loan and the interest rate all affect the cost of funding. A good example would be the differences between a credit card or a mortage. Depending on what your looking to fund one may be more suitable than the other. You have to look at the opportunity cost of the government using its own money and any alternative funding options without a toll/higher/lower toll fees. Would you have any idea of the costs of the alternatives?

I'm not interested in getting bogged down in a discussion on ideology thats more suited to the economics or politics forums.

Sam Russell

What is wrong with PPP funding is that the income generated is tied to the Consumer Price Index rather than a Cost of Funding index. Currently, cost of funds is at an all time low and is unrelated to the CPI.

Because CPI is used to index many prices, it causes built in inflation even where it is inappropriate as in this model.

Bray Head

I simply do not understand the public anger on this.
One of the things that a PPP does is make explicit when a project has fallen short of demand expectations. This is just an artifact of the accounting treatment. There are lots of fully Exchequer funded roads where demand has fallen short and no one really notices (most of M9 for example).
If the WRC had been set up as a PPP it would be highly obvious at this point that we were paying for a project that had fallen short of demand projections. Instead this cost is just part of the big amorphous blob of subvention that I gets from the taxpayer every year. I 's annual report is (deliberately) silent on the cost of various routes.

Banjoxed

Bray Head wrote: »

I simply do not understand the public anger on this.
One of the things that a PPP does is make explicit when a project has fallen short of demand expectations. This is just an artifact of the accounting treatment. There are lots of fully Exchequer funded roads where demand has fallen short and no one really notices (most of M9 for example).
If the WRC had been set up as a PPP it would be highly obvious at this point that we were paying for a project that had fallen short of demand projections. Instead this cost is just part of the big amorphous blob of subvention that I gets from the taxpayer every year. I 's annual report is (deliberately) silent on the cost of various routes.

What isn't an artifact of the accounting treatment were the land purchase issues. Without going down the route of Indymedia's coverage, the Meath Chronicle gives a flavour of what was termed on another, much smaller scheme in Kildare "delicate negotiations". http://www.meathchronicle.ie/news/navan/articles/2009/12/03/3993235-onefifth-of-m3/print

The position of a red line on a map is surely the equivalent of a landowner winning the lottery, but without the scrutineer from PWC overseeing the draw.

afatbollix

Sure 2 million wouldn't even cover the maintenance on that road for a year. Bargain.

jackofalltrades

Banjoxed wrote: »

Today's Irish Times runs a piece without comment on the boondoggle that has been the M3. Not content with providing massive outdoor relief at the construction phase, the Government paid out €2m in shadow tolls to the private operator in 2015 alone.

And? How is this small payment thread worthy?
And how is the M3 a white elephant?

That payment is a drop in the ocean compared to the taxes revenue paid by motorists every year.

Logue no2 wrote: »

I agree. There's already a zoo thread on the board where all the WRC haters and greenway campaigners can pat themselves on the back.

"WRC haters":rolleyes:

Banjoxed

_Kaiser_ wrote: »

Whatever about railways, it is ridiculous that an agreement was made whereby the State (ie: us!) would compensate the toll company for any shortfall on their projected revenue.

As with the financial crisis and "bailout", Ireland Inc sure is great when it comes to all reward and no risk.. because even if it fails, the taxpayers will cough up anyway!

Yup. Free pass.