Infrastructure NSW Report (part 3): The ugly

Posted: October 6, 2012 in Transport
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The ideological debate

The transport debate in Sydney seems to be building up on two sides: those who want more public transport, and those who want more roads.

On one side you have those who want funding for public transport prioritised. This includes the Minister for Transport, Gladys Berejiklian, who’s department, Transport for NSW, released a (relatively) pro public transport report: the Transport Master Plan, as well as the Sydney Morning Hearld, which released a (very) pro public transport report: the Independent Public Inquiry into Public Transport and has trashed the idea of the $10bn WestConnex plan as “an awful lot to pay for a bigger traffic jam”.

On the other side you have those who want funding for roads prioritised. This includes Nick Greiner, who’s department, Infrastructure NSW, released a pro roads infrastructure report: First Things First, as well as the Daily Telegraph, which released a (mildly) pro public transport report: The People’s Plan for Sydney (Transport and Driving), then ironically went on to seemingly only focus on the roads aspect of it, dismissing the Transport Master Plan as “vague and cobbled-together”.

The tension between the two sides erupted quietly behind the scenes two months ago when the Director-General of Transport for NSW, Les Wielinga, resigned from the board of Infrastructure NSW due to differing visions that each of the two bodies had towards how transport should be approached in Sydney. The differences of opinion, amongst other things, became so great, that Mr Wielinga no longer felt it appropriate to sit on a board that would sign off on a report that presented recommendations so different to those of his own department’s report.

Interestingly, when asked what the best way to reduce traffic congestion was at the recent Community Cabinet this past August, Roads Minister Duncan Gay said it was to get as many people out of their cars and into public transport. That puts the 2 most important members of the cabinet more or less on the side of public transport, while the biggest supporter of roads, Mr Greiner, sits as the chairman of an independent body that advices cabinet but does not make the final decisions.

Where the risk lies

The poor financial experiences of both the Lane Cove Tunnel and Cross City Tunnel, which saw the private sector take on the risk of unknown levels of traffic, have put a dent in the viability of private public partnerships. Many private infrastructure funds are now hesitant to invest in road projects, given the uncertainty of toll revenues that may come from it. However, it hasn’t all been doom and gloom – both the M7 and M2 have performed well, with the latter being widened to meet higher than expected traffic levels. The difference, I think, was the higher costs of tunnels, making recouping the initial investment more difficult – if you raise the toll then you also reduce traffic, which further reduces your revenues.

The Infrastructure NSW report seeks to lessen the risk to private investors by shifting some of that risk back to the government. Presumably, if traffic forecasts, do not eventuate, then it will be the government that is left to pay the costs of the project, rather than the private investor. This will increase the number of potential investors, but at what cost?

The point of PPP projects is precisely that it shifts the risk away from the government and into private hands. And risk goes in two ways – you might get a dud (like the CCT or LCT), but you might also land what is effectively a license to print money (like the M2 and M7). It’s the basic risk vs return concept that you learn in every introductory business subject in the first year of university. If the government is now suggesting that it will accept the downside risk, while letting the private investors take all the upside risk, then it defeats the purpose of doing a PPP in the first place! You may as well get the government to build it.

In reality, the way to lure more private investors is to find ways of building new roads more cheaply. Tunnels are expensive, building on open land is not. This where the WestConnex plan of digging a slot under Parramatta Road came from – it’s cheaper than building a tunnel, thus making it a more viable project. It can then be tolled and given over almost entirely to private investors, who will then take on the risk of what the actual traffic volumes will be. But if the government takes on the downside risk, then that estimated $2.5bn government contribution could balloon. Suddenly that Second Harbour Crossing won’t seem so expensive after all.

The cost of priorities

Barry O’Farrell’s landslide victory in 2011 was based in large part on a promise to build new infrastructure. His biggest promise was to build the Northwest Rail Link, which is progressing and will be built by the end of the decade. (The Second Harbour Crossing is not quite guaranteed to happen, no matter how many times the government wants to reassure the people of Sydney that it will also complete it.) He also promised to build a new motorway, but declined to specify which one, instead choosing to commission Infrastructure NSW to decide which one. The release of its report this week meant the government will now get started on building the WestConnex. The price tag for these 3 projects is $29bn, or over $6,000 per person in Sydney. Excluding the Second Harbour Crossing, and assuming that three quarters of the WestConnex will be paid for by tolls still leaves the government with a cost of $11.5bn.

This has to be paid for. And it would be difficult to pay for under normal conditions. But this government doesn’t have normal conditions. It is facing a revenue black hole, led by a slow NSW economy and lower than expected GST receipts. This is why the government has been cutting spending so much: $1.7bn cut from education, $3bn cut from health, $2.2bn from capping salary increases to 2.5%, amongst others. It has also put privatisation on the table: the power generators, Port Botany, the desalination plant, everything except the poles and wires might be sold off by the government. Many of these are unpopular, but the government has made the decision that its priorities lie in funding infrastructure investment and that this means other areas must have their priorities reduced in order to achieve that goal.

The government has not considered deficit spending to build new infrastructure, and this is a shame. A budget deficit now means spending tomorrow’s money today. If spending that money today results in a stronger economy tomorrow, one that creates greater tax revenues tomorrow, then deficit spending makes sense. Spending on infrastructure or education, things that create a more productive workforce and/or economy, are different to spending on social programs or handing out tax cuts. But don’t expect that to happen if it puts our AAA credit rating at risk.

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Comments
  1. Aaron K says:

    Thanks for this, a very well presented blog.
    I sent an e-mail to INSW yesyerday imploring them to ‘change their plans’ and put in PRT instead.
    We just cannot physically fit any more cars and trucks on the road.

    The reason INSW is so car based in it’s views is the make up of the board of INSW, you only have to look at people like Max the Axe and Mr. Greiner to see that.

    I sent this pdf document to them:
    http://www.ultraglobalprt.com/wp-content/uploads/2012/07/Ultra-Global-Brochure-PDF.pdf

    PRT (POD cars) aka the last mile/km solution, is the only way to make train,bus,tram travel in this city more viable, it’s cheap to build and run, and will enable most Sydney siders to see the existing public transport as an alternate to the car, in fact if implmented properly it would make the car obsolete for City wide commuting.

  2. Vito says:

    From what I’ve read, putting 2 more rail lines ont he harbour bridge will increase overall capacity. Surely this is better than digging another tunnel.

  3. Personal Rapid Transit (PRT), along with car share and bike share, is a great way of discouraging people from owning their own car “just in case” and, as you said, providing a solution for the last mile problem. The main disadvantage of PRT at the moment is that it’s a long way from large scale use, and is currently more applicable to airports or business parks.

    Of course, PRT also doesn’t have the sort of high capacity of public transport, and must be seen as a supplement and compliment, rather than replacement, for a good train/bus/tram/ferry network.

  4. It would seem that idea is on the right track. Putting the Second Harbour Crossing either on or hanging under the Harbour Bridge are cheaper alternatives to a new underwater tunnel. Even reclaiming the Eastern Lanes of the Bridge for rail, then building a road tunnel under the Harbour should be cheaper than the current proposal of a rail tunnel. I’ve yet to hear a reason why these proposals have not been considered.

  5. Vito says:

    My argument is that if two more rail tracks are put on the harbour bridge and enough peak hour people use the new train capacity then even with two less lanes on the harbour bridge traffic will move more quickly. That is, take the two lanes, use them for rail and stop there. Every wins. Or am i missing something?

  6. Trains definitely has a much higher capacity than cars.With one train every 3 minutes, each seating 900 passengers, that’s a capacity of 18,000 per hour, all seated. A lane of cars on the other hand, each 2 seconds apart, has a capacity of 1,800 vehicles per hour, most of which will be occupied by the driver only. In other words, rail has 10 times the capacity of roads. Done properly, congestion over the bridge should drop, even though road capacity drops from 7 lanes to 5.

  7. Vito says:

    An inexpensive second rail harbour crossing thereby dramatically increasing rail capacity all over Sydney (and allowing the NWRL to go all the way) and less car congestion on the bridge. what is the government waiting for?

  8. moonetau says:

    The issue may be that the route south from Wynyard via the Pitt street alignment to Central Platforms 26 and 27, may be blocked by basements of high rise buildings. Does anyone have any reliable information on this?

  9. I’m assuming there must be a good reason, and lack of access due to existing buildings would probably be the most likely.

    Though I don’t see why the new line through the CBD has to use the Metro Pitt alignment, when the Metro West alignment (see link below) provides an easier link up to the Harbour Bridge. You wouldn’t be able to use Platforms 26 and 27 at Central, so it would require new platforms under Railway Square. But that is a lot cheaper than an under Harbour tunnel.

  10. […] Infrastructure NSW Report (part 3): The ugly […]

  11. moonetau says:

    I’m with Vito on this one: use Lanes 7 and 8 on the bridge > Wynyard Platforms 1 and 2 > resume / demolish one or two buildings in CBD on Metro Pitt alignment > tunnel to Platforms 26 and 27 at Central > Western Relied line to Redfern, Olympic Park, Parramatta. So people in western Sydney get fast access to CBD.
    Much much cheaper than a deep tunnel. Will lift bridge capacity to 128 trains per hour.
    And while we’re at it, retain double deckers and overcome the dwell time issues at Wynyard and Town Hall by making triple doors per side carriages.

  12. Vito says:

    Using Lanes 7 and 8 on the bridge for rail appears to be a no brainer. Everyone wins once things settle down. I wonder why the state government is hesitating.

    The only reason I can see is that while works are occurring, there will be two less car lanes on the bridge and the car congestion relief won’t come until the trains are running and people start using the trains. So there will be a year or so where things are worse. And here is the problem. Governments are voted in for 3 or 4 years. They will do whatever it takes to be re-elected, even if it means that in the long run things are a disaster. So the state government is propping things up to maximise their chances of re-election and the deterioration of Sydney continues.

    What is needed is an organisation commissioned by the government that is independent; a bit like the reserve bank. Rather than keeping inflation between 2 and 3%, this organisation’s role, which will transcend which political party is in power, will be responsible for the long term transport for Sydney. I’ve been led to believe that the London undergrounding works like this. There is a government organization that gets constant funding and the organisation works out the best approach. This way the objective is long term benefit.

    The more I think about it, the more I realise that governments are incorrectly setup to look after the long term prosperity of the people they represent! This explains why governments of both persuasions are failing to do anything to move Sydney forward (apart from some window dressing).

  13. Be careful what you wish for. An independent organisation is also one with much less accountability, and independence does not mean unbiased. Infrastructure NSW is independent, but it had a definite pro-roads bias. And although it is not accountable to the people of NSW, the state government (who will make the final decision) is accountable.

  14. […] Infrastructure NSW Report (part 3): The ugly 6 October 2012 (13 comments) […]

  15. […] and Paul Broad, the Chairman and CEO of Infrastructure NSW (iNSW), was the eventual result of a battle of ideas within the NSW Government. On one side was those who supported a large scale expansion of Sydney’s roads network via […]

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