Cross City Tunnel collapse an opportunity, not failure

Posted: September 10, 2013 in Transport
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The financial collapse of the Cross City Tunnel, likely resulting in it entering into receivership for the second time since it was opened in 2005, has started a debate over the role of private public partnerships (PPP) in delivering transport infrastructure. The Greens have used the collapse to call on the state government to scrap its plans for the WestConnex freeway, which will be delivered and operated as a PPP.

Despite going into receivership, the Cross City Tunnel will remain open to the driving public. Click to enlarge. (Source: Ben Harris-Roxas)

Despite probably going into receivership for a second time, the Cross City Tunnel will remain open to the driving public. Click to enlarge. (Source: Ben Harris-Roxas)

This is rather ironic, as the financial collapse of the Cross City Tunnel actually represents a benefit, not a disadvantage of the PPP model. Despite the financial collapse, for the driving public the tunnel will continue to operate as though nothing had changed. Meanwhile, the cost of the financial collapse will be felt by the private owners, just as any financial benefit would be received by the owners had traffic on the tunnel boomed. The government and driving public benefit from improved transport infrastructure regardless of the financial success or failure of the company that owns the tunnel. That the private sector ended up paying for it, and not the taxpayer, puts the taxpayer ahead.

In fact, the government should use this opportunity to consider whether they could buy back the Cross City Tunnel, at a fraction of its construction cost. If it can do so, it should seriously think about doing so. This would make it much easier at some point in the future to introduce a congestion charge on the CBD surface streets by making the tunnel free and giving drivers an alternative route if not travelling into the CBD itself.

  1. Joni says:

    Very good points, Bambul.

  2. Sam says:

    yep. As long as govts protect contractrually protect themselves in any BOOT so that they aren’t viable when the thing goes broke there are a lot of benefits.

  3. mich says:

    The problem is, the taxpayers do pay. The collapse of the original airport railway scheme and the waratah train scheme, cost taxpayers a huge amount of money.

  4. Sam says:

    Hi Mich, I agree with the airport railway scheme but the cross city tunnel is an exception where the govt did not take on the risk. The waratah train can’t really be compared as the govt is just trying to buy a product.

  5. PsyberG says:

    the latest PPP model trend (here in Victoria in any case) is that payment is made on an availability basis and that the government (=taxpayers) take on all the traffic risk. I struggle to see the advantage for a PPP in this case, as we are effectively paying private consortium to provide equity (at a rate higher than the government could borrow it) with a guaranteed profit margin built in and no risk to them.

  6. David B says:

    This approach also ignores the concomitant issues around PPP, that is that the Govt, as a teaser to private enterprise, alters existing infrastructure to force uses into the tunnels. Witness the road narrowing that took place on Epping Road to force users into the Lane Cove tunnel, that subsequently went into receivership regardless. It also ignores the fact that Govt can borrow money much cheaper than private enterprise. And finally, why do these organisations go broke? Because the tolls are relatively higher than they should otherwise be while the PPP tries to turn a profit, something that the Govt – as the primary infrastructure provider – would not be doing. So yes, the little people do end up paying for it.

  7. Craig says:

    no one would mind paying a reasonable toll of a few dollars to skip under the city say from the West to get to the East – but with current cost of living, you want to save the extra $5 or so for the parking when you get there… Govt should take it on with a longer time frame of re-payment

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