The latest from Queensland’s exercise in Motordom excess:
Brisbane’s Airportlink M7 tunnel hits milestone but traffic still below forecast
The latest figures show the toll tunnel was hit by another drop in traffic last month, with data revealing an average of 6211 fewer motorists per day used the facility compared to November.
Since opening in late July, the tunnels have not reached ambitious traffic forecasts which predicted it would be used by 136,000 vehicles per day at the end of the initial three-month toll-free period.
.
Airportlink is still in a discount toll period until the next scheduled increase in fees to use the tunnel to hit motorists in April.
But BrisConnections may not last that long. The troubled company is in talks with lenders to avoid receivership, with a decision on its future due by the end of March.
Now here is a project that should make one wonder about the toll projections for the Port Mann bridge, and how much money (that otherwise could have gone to transit) it will end up lifting from the public purse. Note that the Macquarie Group was involved in both projects, and there are allegations that Macquarie Group toll forecasts have been unrealistically inflated.
This is what Wikipedia has to say about the fiasco. As always take Wikipedia with a grain of salt, but this gives a flavor of the controversy:
the financial aspects of the Airport Link project has been mired in controversy from the outset. Macquarie Group charged $110 million in fees for the financial engineering which used the equity from private investors to raise the necessary debt and planned to pay investor distributions from capital, an arrangement which resembles a Ponzi scheme and has been ridiculed as the “dead parrot model”, after the famous Monty Python comedy sketch.[5]
[snip]
BrisConnections was listed as a unit trust on the Australian Securities Exchange (ASX) via a $1.2 billion initial public offering (IPO) of installment receipts (or stapled securities) on 31 July 2008 (ASX: BCS). This was the largest IPO in Australia in 2008 and the most disastrous. The value of initial $1 installments fell by 60 per cent on the first day of trading, and by late November had collapsed to 0.1c, the lowest possible price on the ASX.[8] The dramatic price slide was largely due to the leverage risk associated with stapled securities.[9]
[snip]
It is believed that some of this negative market sentiment was in response to the traffic forecasts contained within the Product Disclosure Statement lodged by BrisConnections. The EIS previously lodged by government showed traffic forecasts in 2012 of 95,000 vehicles per day, rising to 120,000 motorists by 2026. The Product Disclosure Statement prepared by PBA provides forecast of 193,000 vehicles in 2012 rising to 291,000 vehicles by 2026.
http://en.wikipedia.org/wiki/Airport_Link,_Brisbane
Alternate title: “Institutional investors hurting, Aussie taxpayers smiling”?
I wouldn’t call this an abject failure. I would think of this as a success, as long as you don’t own a stake n the tunnel concessionaire. Brisbane gets a major piece of transport infrastructure with what sounds like limited impact to the taxpayers. You can argue if it was overbuilt or if it fits into a long-term strategy of local and regional transport, but brisbane got a tolled road that increases choice for cars and buses.
Unless I am wrong about the brisbane pubic contribution. correct me if i am wrong…
I think you can raise traffic levels by eliminating the toll, but i wouldn’t recommend that.
A similar situation can be seen in north america with Indiana’s Toll Road. Low traffic projections, but a windfall for Indiana.
http://www.ibj.com/indiana-toll-road-came-up-209m-short-in-2010/PARAMS/article/28195
mezzanine,
You may have a point. But the Port Mann Bridge project is different, the public is on the hook for every penny of toll revenue shortfall.
I have a feeling that TL will recoup its money on the GEB and PMB and then some. They won’t do it in the first few years, but by the medium term (10-25 yrs).
I am not sure of the detail of the concession for the PMB, but the GEB concession is for 30 years, with payments to private partner hitting a celling by 2014.
The coquihala highway was way over budget, but tolls finally paid for the construction cost in 2008, 22 years after it was built, They removed the toll, which IMO was a bad idea.
A more topical example of a relative success of a tolled highway in an urban environment meeting travel and cost goals would be the 407 ETR in Toronto. Highly controversial, but important IMO, was the fact that toll rates would rise lock step only if traffic rates rose, regardless of the political environment (ie, populace: “the toll is too high!”; the toll was just raised, why raise it again?”) . They both have done in past decade, dovetailing good public policy and a successful P3, unlike the brisbane tunnel.
http://www.theglobeandmail.com/report-on-business/rob-magazine/the-407-finally-lives-up-to-the-hype/article4256567/
The Port Mann is a critical link and likely would have been upgraded whether or not tolls are used to help recoup the cost – whereas the Brisbane tunnel (and Seattle’s Alaskan Way tunnel) are apparently, bypasses. Which makes those projects all the better for transferrance of risk from the public sector to the private sector.
With tolled projects, the magnifying glass has intensified on usage projections since they are tied to the charging of tolls and the recouping of costs – but in many cases, the decision on whether or not to proceed with the project in the first place was likely a politcal one – whether or not costs are recouped by tolls.
When was the last time you heard about traffic forecasts on the rehabiliated Lions Gate Bridge or the upgraded Island Highway or Sea to Sky Highway?
Just a note that I don’t think Seattle’s tunnel is a P3 – which may make for a major train wreck in the future.
Mez: “The coquihala highway was way over budget, but tolls finally paid for the construction cost in 2008, 22 years after it was built,”
That has only occured in the fantasy world of the BC Government, which is famous to be unable to open his mouth without telling a lie. surpised you believe that.
You can find a better picture here, http://www2.news.gov.bc.ca/nrm_news_releases/2003TRAN0031-000436-Attachment1.htm
* Interest rate was hoovering at 10% at the time of the construction of the Coquihalla highway, toll revenue in the begining 90’s, at $30million, was not even covering 30% of the debt service, and in fact they has never been high enough (~$57M in last year) to just do it…
So not only the toll didn’t pay a single penny of the capital cost, but they were not even enough to prevent the debt of keeping accruing…
Notice that the maintenance cost alone amount at $7 per vehicle (*)- it could finance roughly 200000 hour of coach service year-that is enough to pay for hourly coach service between Vancouver-Kelowna and Vanocuver Kamloops 24h/day… and I will not wander on the social cost of this treachous freeway (how many accident/serious injuries/fatalities per year ?)
Same gonna happen to the Port Mann bridge:
You need to generate $200M/year from toll just to service the debt of the project.
at current toll, you barely generate more than $45M/year from toll.
But yes, I agree that the 407 is a way much better model than what we have here in BC, since it is shielded of populist political interference -which has leaded to the dismounting of the toll booth on the Coquihalla highway, and arbitrary toll pricing on the Port Mann.
(*) PS: As a backcountry skier I use the Coquihalla highway
@ voony,
using my google-fu the 2003 press release you linked to IMO seemed to be released in conjunction with the 2003 attempt to privatize maintenance and operations for the coquihalla.
http://www.cbc.ca/news/canada/british-columbia/story/2003/05/06/bc_tolls_pm20030506.html
My cynical self would think the press release was written to make people think that getting the coke off public hands would be a boon.
As a fan of road-pricing, i would also note the cbc article notes that the coquihala toll had been unchanged for at least 15 years ($10 from 1988 to ~ 2003, and i am unsure if the rate increase went ahead)
Depressingly, it also shows how politically toxic road pricing is. The 2003 plan if it went thru, may have freed up public money for other things, and may have been our own 407 ETR.
“Premier Gordon Campbell said public outcry outweighed the potential business dividends of leasing the operation and maintenance of the Coquihalla Highway to a private company for 55 years. Part of the privatization plan allowed the company to earn money by continuing to charge tolls, which were expected to rise to $13 one-way from its current one-way charge of $10. Regular toll increases were also part of the proposed deal. “
link for the above:
http://www.todaystrucking.com/bc-liberals-scrap-coquihalla-privatization-plan
my google-fu can’t seem to find clear-cut revenue and cost break-downs for the coke. Certainly, Victoria would bring more money in if we maintained the toll, or leased it off to a concessionaire.
On further thought, the press release is also unclear (deliberately, i guess). it seems that they are defining success as covering not only initial capital costs, but operations and scheduled infrastucture maintenance (eg. overpass replacement and the end of its lifespan).
I am also unsure if they consider the amortization schedule when they talk of less than half of the capital costs being paid for by 2003 – (ie. a $55 million payment in the year 1991 will pay mainly interest and a lot of principle will be left. the same payment in 2006 will pay a lot more principle down and there will a lot less debt to be paid off.)
Hmm… it also could be that they collected tolls up to the original capital cost, called it ‘paid for’ and decided to stop…
http://www.cbc.ca/news/canada/british-columbia/story/2008/09/26/bc-coquihalla-highway-tolls-dropped.html
“At total of $845 million in tolls has been collected in the 22 years since the highway opened. It originally cost $848 million to build in three phases, the last of which was completed in 1990 with the opening of the Coquihalla Connector to Kelowna.”
[shrugs] shoulda kept the toll….