July 1st 2000

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Articles from this issue:

Cover Story: The Roebuck Plains land scandal

Editorial: Issues for the Defence White Paper

Canberra Observed: National Party caravan still hitched to Coalition

Economics: World’s farm subsidies rising: wake up Australia

Rural: Dairy deregulation turning sour

Straws in the Wind

News Weekly, National Civic Council, Colin Teese, TRansurban, CityLink, Steve Bracks, Victoria, GST, toll roads, Victorian Labor Government

Economics: Funny flags and Australian shipping

United Nations: Family groups attacked at UN meeting

East Asia: Japanese election: more of the same?

Education: Drugs in schools: adults failing the challenge

Letter: Aboriginal land claims

Letter: Benalla by-election postscript

Letter: 'Pitch Black' obscenities

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News Weekly, National Civic Council, Colin Teese, TRansurban, CityLink, Steve Bracks, Victoria, GST, toll roads, Victorian Labor Government

by Colin Teese

News Weekly, July 1, 2000
Colin Teese examines the latest developments in Victoria’s toll roads saga.

A few issues back I wrote a piece about the operational and financial problems of CityLink. By extension, I projected these problems into the lap of the present Victorian Labor Government, even though, in terms of strict liability, responsibility for them properly belonged to its Liberal predecessor.

News Weekly readers will recall that I suggested that a solution would be for the State Government to levy, say, a fuel tax, and that revenue source could be used to fund the tolls accumulated rather than users pay direct.

By this means, road users would be encouraged to maximise their use of CityLink, rather than avoid it as appears now to be the case. This would be a major financial benefit for Transurban, whose viability some say is at risk. By conferring this important benefit on the company, the government would have been in a strong position to renegotiate, as a trade off, some of the worst features of the contract concluded between Transurban and the Kennett Government. Some of these features threaten the Labor Government with political embarrassment.

Mr Bracks, it seems, has another — most inopportune — idea under consideration. Prompted, apparently by the business community, which seems to be the Premier’s principal, if not only, source of advice, it appears that a deal is in the air which entails the accumulated toll revenues, as recorded by users’ e-tags, would be reimbursed to Transurban on a weekly basis, directly from State consolidated revenue. (There has been no talk of seeking any balancing advantage from Transurban for what would be an enormous concession from the Government.)

The economic and political downsides to this idea are so blindingly obvious that one wonders how it can ever have gained a moment’s currency.

Consider this: Transurban’s cash flow from the City Link project would effectively be sustained, not by users, as was the original intention, but directly by taxpayers — whether or not they can or do use the system. One can only guess how country voters would react to the idea when next Labor faces the polls.

With these changes in the wind, added to what Transurban negotiated with the previous government, taxpayer funds would be used to sustain a guaranteed rate of return to (some say as high as) 18% on company funds. In addition, those holding Transurban paper enjoy the most generous of tax breaks on their returns. And, all of this in circumstances where the project’s investors would be totally quarantined from risk.

In effect, all Transurban would be doing is operating Citylink on behalf of the Government. Such a service would surely warrant no more than an operator’s fee!

Even that arrangement would be less than satisfactory. Because, you see, the project is servicing, with taxpayer-generated funds, the higher interest charges which necessarily attach to privately arranged borrowings. In a privately funded and operated system, with a revenue stream generated by users, and with all the commercial risks with the company (including whether or not users can be persuaded to use the system) that’s fine, but that is no longer what Transurban would be.

Propping the whole project up with taxpayers funds, removing its risk element, and allowing the profit arrangements to remain undisturbed, is something that the Kennett Government, for all its faults, would hardly have been party to.

More acceptable solutions are possible. One I have already suggested. Fund the income stream from a petrol tax — this would at least maintain the user pays idea. (Politically, some arrangement would need to be made to siphon off that part of the tax collected from country people and to use it exclusively for country purposes.)

Perhaps a better approach, given the project’s difficulties, would be for the Government to negotiate itself out of the deal with Transurban, and take over the project itself. Funded with government borrowings at a lower interest rate, Citylink could then obviously be run at a lower cost to the taxpayer.

Don’t expect any of this to influence the Labor Government or its business advisors. Less so still, since, for some reason, the Financial Review — who should have been passionately opposed to what amounts, de facto, to the deprivatisation of Citylink — has endorsed the proposed new arrangements, which it describes as an “innovative shadow payments structure”. Some innovation, some structure!

The hope for a common sense solution in the interest of the state is not, however, entirely lost. There remain the Independents. Whatever Labor decides to do will presumably require legislative changes, and to get those through the Lower House, the Government will have to carry the Independents. Can they be persuaded that the proposed new arrangements serve the interests of country voters?

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