This article by The Age’s Josh Gordon last week raises a really good point about the East West Link Stage 1 that needs to be remembered:
The up-front cost of $2 billion contributed by the State is not the total actual cost to Victorians.
It’s also not the construction cost — long thought to be upwards of $6 billion, but now finalised at $6.8 billion.
The consortium building it provides $3.3 billion. The Federal Government (which, remember, refuses to fund urban public transport) is providing $1.5 billion. The state is providing $2 billion.
But the consortium doesn’t do this stuff out of the goodness of its heart; it needs to make its money back, plus a profit.
The state has to pay Availability Payments to the consortium for 25 years. We don’t yet know how much they are because the Business Case has been kept secret, but Josh Gordon “conservatively” speculates that it could be $200 to $300 million annually, but it could be more. That means the Availability Payments would add up to be something in the range of $5 billion to $7.5 billion — a tidy profit to the consortium for a $3.3 billion up-front outlay (though they’d also be paying maintenance costs during that time).
The cost to the state would be offset by the tolls. Again, we don’t know how much they will be or how much income they will bring in. Even if the business case was public, estimates for toll roads are notoriously inaccurate, with many Australian toll roads taking years to get to anywhere near their “steady state” volume of traffic and income levels.
And tolls may extend well beyond the contract period of course.
So remember: when the state government says it’s costing $2 billion, it’s actually costing us a great deal more than that:
$2 billion initially from the State
+ $1.5 billion from the Feds (from taxpayers around Australia)
+ perhaps around $6.5 billion (maybe more, maybe less) in Availability Payments and tolls paid by motorists
+ more in toll money if they continue after that.
That $2 billion road is actually something like a $10 billion road, for 5.5 kilometres. And that’s just, the eastern section, stage 1. — for a road which is unlikely to have any lasting impact on traffic congestion.
- Josh Gordon’s article had one minor error in his article, which he has acknowledged: Citylink can’t get compensation if an airport passenger rail link is built: the contract specifically rules compensation out.
- The Linking Melbourne Authority appears to have no high-resolution photos. Even their Youtube videos are limited to 720p. Perhaps they can’t afford anything better.