Posts Tagged ‘Tolls’

The Prime Minister Julia Gillard has offered $1bn in funding for Sydney’s WestConnex, based on it meeting 3 conditions. It must go all the way to the CBD, it must go all the way to Port Botany, and the government must not impose tolls on currently untolled roads. None of these are currently part of the WestConnex proposal. The Premier Barry O’Farrell immediately dismissed the offer, claiming that doing these three would cost $5bn to $9bn in additional construction and lost revenue.

Map of the proposed WestConnex route. Click on image for higher resolution. (Source: Open Street Map.)

Map of the proposed WestConnex route. Click on image for higher resolution. (Source: Open Street Map.)

It is the first point, on linking WestConnex through to the CBD, that has obtained the most attention, and here Mr O’Farrell has got it right. Many transport experts support the decision to not send WestConnex right into the CBD. It’s worth remembering that private vehicles on roads do a terrible job of moving large numbers of people to a single place: a single track of rail has ten times the capacity of a single lane of road. Congestion on the roads leading into the CBD cannot be solved by building more roads into the CBD, it won’t eliminate the bottleneck – it will merely shift it closer to the CBD. Not only is CBD road space limited, but so are parking spaces, and both of these are a poor use of the very limited space available in the city centre.

The only way to improve capacity into the CBD is to improve public transport, and that means more investment in train, buses, and trams. Public transport (and to a lesser extent, active transport – walking and cycling) are effective to areas with a high employment density.

So if WestConnex will do a bad job of transporting people into the CBD, then why isn’t it being scrapped entirely? Answering that question needs a non-CBD centric perspective on jobs and commuting in Sydney. One of the experts opposing the CBD link, Dr Garry Glazebrook of UTS, points out that “the point about motorways is not to service the CBD. It’s cross-regional traffic”.

Location of jobs in Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney's Centres, 1996 - 2006, page 2.)

Location of jobs in Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney’s Centres, 1996 – 2006, page 2.)

The Bureau of Transport Statistics compiled these figures from the 2006 census and released it in a document called Employment and Commuting in Sydney’s Centres, 1996 – 2006. These show that 1,923,900 were employed in 2006 in the Sydney statistical district, an area which includes the Central Coast. It then breaks these jobs down by location, into one of 33 activity centres and the remainder of Sydney, while excluding the 110,342 who’s employment location is listed as “unknown”. The largest centre is the CBD, with 230,049 jobs (12.7% of the total), with all other centres collectively employing 484,447 people (26.7% of the total). The remaining 1,099,062 work in the rest of Sydney or have “no fixed address” (60.6% of the total).

Sydney CBD has an employment density of 546 jobs/Ha, and hence a very high public and active transport share of of journeys to work of 76.6%, with only 19.5% of journeys primarily made by car (combination of driver and passenger).

Journey to work modal share for Sydney CBD. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney's Centres, 1996 - 2006, page 10.)

Journey to work modal share for Sydney CBD. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney’s Centres, 1996 – 2006, page 10.)

The 32 other centres are classified based on type, which include Central Sydney (e.g. Redfern), Commercial/Business Park (e.g. North Sydney), Education/Health (e.g. Westmead), Industrial (e.g. Port Botany), Regional (e.g. Liverpool), and retail (e.g. Castle Hill). These centres have a large range in employment density, from 1 job/Ha in Eastern Creek to 369 jobs/Ha in North Sydney. However, these are both outliers, and all other centres range from 11 jobs/Ha to 271 jobs/Ha. This lower employment density leads to a lower public and active transport share of 30.0%, with 69.1% of journeys primarily made by car.

Journey to work mode share for other centres in Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney's Centres, 1996 - 2006, page 10.)

Journey to work mode share for other centres in Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney’s Centres, 1996 – 2006, page 10.)

That leaves the rest of Sydney, where 60.6% of people work. These are dispersed and have a very low employment density of 0.8 jobs/Ha. This is very difficult to service by public transport, so these parts of Sydney have a public and active transport share of only 14.0%, with 85.2%  of journeys primarily made by car.

Journey to work mode share for rest of Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney's Centres, 1996 - 2006, page 10.)

Journey to work mode share for rest of Sydney. Click on image for higher resolution. (Source: Bureau of Transport Statistics, Employment and Commuting in Sydney’s Centres, 1996 – 2006, page 10.)

By not linking directly to the CBD, it is precisely these dispersed jobs that WestConnex is best equipped to serve. Critics of WestConnex who (rightly) point out that dumping more cars into the CBD will not solve Sydney’s congestion problem fail to acknowledge that this is a very CBD-centric view of roads planning. With over 60% of jobs outside of major centres, and 87% outside the CBD, roads have and will continue to play a role in providing the appropriate mobility to the people of Sydney.

It is in the CBD, and to a lesser extent the inner city and other major centres, that public transport should and must be the priority.

Despite the conflicting views between the Transport for NSW Transport Master Plan and Infrastructure NSW First Things First report, the two reports actually agree on quite a few things. Both endorse the construction of one large rail project: the Northwest Rail Link, and both endorse the construction of one large road project: the WestConnex. Both endorse distance tolling and time of day tolling (i.e. congestion charging).

A summary of the projects recommended, along with the timetable for their construction, is included below. It is split up by transport corridors identified as having high and medium constraints by Transport for NSW, and also colour coded by which department supports each project.

Click on image for higher resolution. (Sources: Transport Master Plan, Transport for NSW, and First Things First, Infrastructure NSW.)

Probably the best bit of news is that both agree on what needs to be done in the next 5 years. Even in the medium term, there are only minor differences between the 2 plans, essentially a choice between light rail on George Street or a bus tunnel connecting Town Hall to Wynyard. It’s only in the long term, the 10-20 year window, where serious differences begin to appear.

It will be up to the Premier, Barry O’Farrell, and the Transport Minister, Gladys Berejiklian, to make the final decision on which bits of each report to go along with. In an interview with ABC’s 7.30 NSW program, Mr O’Farrell has recently repeated his promise that congestion charging will not be introduced, despite both plans recommending it, and that a Second Harbour Crossing will occur, despite opposition from Infrastructure NSW.

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.

Infrastructure NSW released its 20 year infrastructure strategy, titled First Things First. Most of it was dedicated to transport, which I will be focusing on, though there were also sections on energy, education, water, etc. The recommendations of the report were summarised in this video below, which is a good 4 minute version of the 200+ page report.

The report agreed with some recommendations of the Transport Master Plan, but disagreed with others. And these weren’t just alternate views, it actually took the time to highlight its points of disagreement and explain why it disagreed with Transport for NSW. The Infrastructure NSW report feels very much like it comes from Treasury, and has what I would classify as a pro-road and anti-rail bias. Even when discussing public transport, the report almost universally discounts rail projects in favour of a bus one. But I’ll save those comments for a later post. For now, I’m just going to focus on some of the things that I thought were good about this report.

Prioritisation of projects

No one likes being the fun police, and when it comes to funding that means being the department that tells you that you can’t afford something. This report does that well, which you could argue that the Transport Master Plan did not. While the Master Plan was a bit of a wish list, this report did a good job of emphasising the limited nature of funding available and promoted projects which it believed give most bang for the government’s buck.

Maximising efficiency

Building entirely new projects – another road or a new rail line – is incredibly expensive. Maximising use of existing infrastructure, on the other hand, does not give the impression to the voters that you are doing much to improve the situation much, but is actually a very effective way of increasing overall capacity.

The Clearways project for Cityrail is a great example, which has helped to increase rail capacity via track amplifications, more turnback platforms and additional stabling yards, none of which make the headlines quite like a new rail line or freeway do, but have increased rail capacity by similar amounts for a fraction of the cost. Time of day tolling on the Harbour Bridge/Tunnel is another example, which used pricing to encourage some people to drive during off peak hours (as you only need a small change in traffic to provide a big improvement in congestion).

Infrastructure NSW is encouraging further use of time of day tolling on the remainder of the road network in order to improve efficient use of Sydney’s freeways. In regards to public transport, it looks at ways that portions of the rail network that are currently under utilised, such as the City Circle, can be better used. It also proposed that off peak travel on public transport be given deeper discounts once Opal is rolled out in order to encourage more off-peak travel where possible, rather than peak hour travel.

Funding new infrastructure at minimal or no cost to the government

Where possible, the report has attempted to minimise how much funding the government itself will have to contribute to projects, usually by emphasising private toll roads. The WestConnex (a combination of the M4 East, M5 East, and the Inner West Bypass), for example, has a price tag of $10bn, of which $7.5bn is expected to be paid by the private sector. A cheaper way of building the M4 East, by digging up Parramatta Road itself, rather than a very expensive tunnel, to bring down the cost was also welcomed. The M2-F3 link would be built if a current private sector proposal to build it entirely with private money were to go ahead. These are achieved through a user pays system, in some cases with some government funding where necessary. But if the government can get new infrastructure built for free, paid for by the user, rather than the taxpayer, then it should get as many of these projects built as possible.

Construction costs would be cut by building the M4 East as a “slotted road”, similarly to how the Eastern Distributor was built. Click on image for higher resolution. (Source: First Things First, page 89.)

A second Sydney airport

The report recommends a new airport be built in Badgerys Creek. Right now this is at odds with the O’Farrell Government, which opposes any second airport in the Sydney basin, and also the federal Liberal and Labor Parties, which support a second airport at Wilton, which is a less optimal site than Badgerys Creek is.

XPT and High Speed Rail

Both regional rail links and high speed rail are played down by the report. Both are on the expensive ends of the scale, with limited benefits. Many XPT routes in regional NSW would probably be better served by buses, which would allow better connections with the limited budget, while high speed rail is just too expensive with its $60bn-$108bn price tag for the improved connectivity that it would provide.

Faster rail to Wollongong and Central Coast

The report calls for an improvement in rail lines to allow for an average 80km/hour link to both Gosford on the Central Coast and Wollongong, which would put them within 1 hour of the Sydney CBD. That trip currently takes 60km/hour on rail. Improvements like this are incremental and affordable, and are what would be required if high speed rail is eventually to be introduced to Australia’s East Coast.

Media Coverage

O’Farrell sets aside $1.8b for new motorway, Sydney Morning Herald

Transport report draws mixed reactions, Sydney Morning Herald

And finally there was movement in Sydney, Daily Telegraph

New roads a fast track to the future, Daily Telegraph

Roads a priority in $30bn plan for NSW, ABC News

NSW unveils 20-year infrastructure plan, ABC Radio

Prior to the 2011 NSW state election, the current Liberal Government promised to build either the M4 East or F3 to M2 Link, or to duplicate the M5 East. To decide which one of the 3 would be built, Infrastructure NSW has been tasked with determining which was most appropriate. That report is to be finalised in September.

M5 and F3 to M2

Current rumours are that Infrastructure NSW will recommend the construction of the M5 East duplication, as its $5 billion price tag is considered more affordable than the larger, but bigger impact, M4 East at $10 billion. Roads minister Duncan Gay has ruled new tolls, but has made an exception for tolls that would be used for the construction of new roads:

“We would only consider tolls as part of the package of improvements and provision of new roads.”Duncan Gay, Roads Minister

As a result, it is speculated that tolls will return to the M4, and be introduced onto the M5 East in order to fund the construction of new roads. Such tolls would raise $250m per year and, together with $2.4 billion  raised from electricity privatisation, would pay for the duplication.

Further North, it is speculated that a new freeway linking the F3 to the M2 would be privately built and operated. The government has been in talks with Transurban, the owner of the M2 and Lane Cover Tunnel and also part owner of the M7, M5 and Eastern Distributor, over the possibility of building such a freeway.

This raises the question over the role of tolls. On one hand, they serve as an excellent form of user pays funding – those that use the freeway are those who pay for its use. And lets not forget that making road usage free while charging for public transport only discourages people from taking the train or bus while encouraging car use. While people should be free to drive, it is also not something that should be encouraged by subsidising it via toll free freeways.

At the same time, a large portion of the community benefit from the existence of a freeway, as it removes cars, traffic and congestion from local streets. Look at the Lane Cove portion of Epping Road, which has seen a big drop in traffic and a reduction in speeds following the opening of the Lane Cove Tunnel.

Ultimately the question therefore becomes not one of “Should there be a toll?” but rather “How much should the toll be?”. And it is here where the problem emerges – many of Sydney’s freeways are privately owned (M2, Lane Cove Tunnel, M5, M7, Cross City Tunnel, Eastern Distributor and Harbour Tunnel), with tolls set based on contractual agreements entered into at the time of construction. Some of these are set to revert to public ownership in the next 10-15 years, but others still have decades left before that happens. In the past this has meant the M4 and M5 have been free (or had a cash back system in place), while freeways North of the Harbour (M2, Lane Cove Tunnel and the Harbour Bridge/Harbour Tunnel) were all tolled.

Any government that can untangle this mess of contracts, tolls and financing, and come away with a city-wide tolling system that will fund the construction of future roads will have done what is generally considered impossible. For that reason, don’t expect it to happen.

Cashless tolls

Posted: February 3, 2012 in Transport
Tags: ,

Sydney’s M2 and Eastern Distributor freeways have just recently gone cash-free on January 31. This leaves the M5 as the only tollway in Sydney that still accepts cash payments, rather than requiring electronic payment via an e-tag. Ironically, the M5 is also the only tollway in Sydney where the government offers a cash back offer, in which it refunds 91% of the toll.

Removing the cash payment option allows a more streamlined movement of cars through toll plazas and also allows for an increase in the speed limit in these areas (which are often 20km/hour lower, even for cars that are using their e-tag).

These M2 and Eastern Distributor, completed in 1997 and 2000 respectively, were the last tollways built in Sydney that accepted cash. All tollways built since then have been completely cashless. The most recent of these, the M7, goes as far as calculating the distance travelled and charging the toll based on the number of kms used. Ideally a fully integrated freeway system in Sydney would be entirely based on distance travelled (with perhaps a premium for going into/through the CBD). However, the mix of private and public ownership of the different freeways, as well as the government’s reluctance to charge tolls for publicly owned freeways means this is unlikely to happen.

As a sidenote, the government does charge a toll on the Harbour Bridge and Harbour Tunnel, but this is because the Harbour Tunnel is part privately owned, and thus requires both for a toll on it and the same toll to exist for the Harbour Bridge.