Brisbane planner Greg Vann – home of internationally infamous Clem7 tunnel failure – has been keeping an eye on other expamples, documented in this Streetsblog series.
This is the final piece in a three-part series about privately-financed roads. In the first two parts of this series, we looked at the Indiana Toll Road as an example of the growth in privately financed highways, and how financial firms can turn these assets into profits, even if the road itself is a big money loser. In this piece, we examine the shaky assumptions that toll road investments are based on, and how that is putting the public at risk. …
Given the large sums of money involved, even small errors in traffic projections can result in huge problems down the line — and, as Streetsblog has reported, traffic projections everywhere have tended to be wildly off-target. A whole financing scheme, meant to last for generations, can easily be sunk in just a few years by exaggerated traffic projections. The Indiana Toll Road, purchased in 2006 for $3.8 billion, is a great example. The firm that owned it, ITR Concession Co. LLC, declared bankruptcy in September. …
Randy Salzman, associate editor at Thinking Highways North America, has studied these types of deals for years. He’s never seen a case where a private consulting firm like CDM Smith or AECOM underestimated toll revenues on a privately-financed highway. “If there was honest predicting, some percentage of them would under-predict traffic,” he said. “There would be a bell curve. Instead… what we have is these projections that are always immensely above what the actual traffic is.”
There is ample incentive for these firms to inflate numbers. Firms that predict high levels of traffic attract investment dollars and regulatory approvals, which lead to construction projects, and the same firms often end up directly cashing in. …
Marketed to taxpayers as infrastructure they never have to pay for if they don’t want to, many privately-financed highways are actually bailouts waiting to happen.
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Speaking of Brisbane’s Clem7, Peter Berkeley provided this update:
Here’s one for the Department of Irony: Transurban who have purchased the Clem 7 have conducted a survey and found the price is not the overriding factor why people are not using the tunnel. Main reasons are that it is too slow and confusing to use. (Story here.)
Hmm, what was all the rhetoric about travel time savings during the business case and public offering! How many billions did we spend to achieve this magnificent disbenefit? More than $3billion.
I really don’t get people. A cyclists riding through a red light gets more of a pillorying than (the mayor at the time) as had for this monumental F-up. But maybe it matters not about the outcome just than a monument is created in the process.
