Showing posts with label Tauranga. Show all posts
Showing posts with label Tauranga. Show all posts

Friday, 9 November 2012

News briefs - Australia, Florida, Indiana, Ireland, New Zealand, Philippines, South Africa, Virginia

Australia - Sydney to pursue three new toll funded highways

The Australian Daily Telegraph (via the Herald Sun) reports that the New South Wales State Government’s 20 year infrastructure strategy includes three new major highways in Sydney which are proposed to be funded through tolls, including reforms of existing tolls toward distance based pricing.  Let’s be clear this does not mean a change in technology or full network based charging, but by setting the tolls on toll roads at rates to reflect the distance between tolled points on the network.  The price is estimated to be A$10 billion, although it is thought the price could be lowered by private sector innovation and cut and cover construction techniques. 

The New South Wales Government has been studying options for reforming tolls in the Sydney metropolitan area, to normalise what vehicles pay across the tolled network to reflect distance.  The logic seems simple, but the difficulties are around addressing the costs of different concessionaires, as the motorways that have been built had different construction costs (e.g. tunnels are far more expensive than more rural highways).

Florida - Customers paying in high denomination banknotes can be detained at booth

According to the Newspaper.com, in the case of Chandler vs. Florida Department of Transportation, the US Court of Appeals has found that "Motorists can be held indefinitely at toll booths if they pay with large denomination bills".

The report says: "Under FDOT policies in place at the time, motorists who paid with $50 bills, and occasionally even $5 bills, were not given permission to proceed until the toll collector filled out a "Bill Detection Report" with data about the motorist's vehicle and details from his driver's license".

The court decision, responding to a claim that it was a constitutional violation to stop the vehicle from proceeding is as follows:

"In Florida, a person's right and liberty to use a highway is not absolute; it may be regulated in the public interest through reasonable and reasonably executed regulations."

The judges found it was reasonable for Fanueil to set regulations for use of the road -- including the types of acceptable payment. The court decided that drivers implicitly agreed to those conditions by choosing to use the toll road.

Florida - State Road 408 collects 43% of all toll revenue of the Orlando Orange County Expressway Authority.

The Orlando Sentinel reports that the 22 mile long SR408 toll road generated $108 million in 2011, or 41% of the Orlando Orange County Expressway Authority's total revenue.  It carried over 126 million toll transactions in that year and its revenue effectively cross subsidises the rest of the Expressway Authority's network.

Indiana - toll road privatisation touted as success

According to the Newark Advocate, Michael Cline, Indiana Department of Transportation commissioner, has been touting the successes of the privatisation of the Indiana toll road.

He said that the lease paid off old debt and provided "millions" of dollars to counties the road passes through to complete major projects including the extension of Interstate 69 from Evansville to Bloomington and Indianapolis and the reconstruction of U.S. 24 between Fort Wayne and Toledo "dubbed the highway of death for its high number of fatal crashes".

He claimed it "made sense for Ohio to study a similar plan for its section of the toll road".

The report said:  

The Ohio Department of Transportation is conducting a $3.4 million study with Texas-based KPMG Corporate Finance LLC to examine the ways to maximize the financial benefit of the toll road for the state. Jerry Wray, ODOT director, said the study will be completed by mid-November and he hopes to have a recommendation to the state legislature by Jan. 1.

During Cline’s presentation, he tried to eliminate some myths about the Indiana Toll Road lease, including that toll rates have doubled since 2006. Although the cost to drive the entire stretch across Indiana has risen from $4.65 in 2006 to $9.40 this year for drivers paying cash, tolls have remained frozen for drivers using electronic toll pass technology. Those rates can’t increase until 2016.

Tolls for many Ohio drivers have risen at higher than the cost of inflation during the past two decades. The turnpike operates entirely on its own revenue. It had $11 million in profits last year, and turnpike officials previously stated that more can be found through savings.

It is helpful to have this sort of information, because it is easy for privatisation advocates and opponents to both use slogans and cliches to justify their positions.  The best thing for Ohio will be to weigh up the evidence of what went right and wrong in Indiana, but it seems like a balanced approach has been taken that suits the needs of that state.

Ireland - Sacyr looking to offload debt ridden toll roads

The Independent (Ireland) reports that Spanish owned toll road concessionaire Sacyr is looking to sell its toll road concessions in Ireland.  Infrastructure fund Globalvia is said to be interested in these assets.  The concessions in Ireland are:
- N6 (56km motorway/dual carriageway between Galway and Ballinasloe, with a 7km connection to the Loughrea bypass);
- M50 Dublin (operation and maintenance contract for the 41km of Dublin's part-ring motorway);

New Zealand - unprofitable toll road gets revenue boost but still not enough

According to the Bay of Plenty Times, the Route K toll road has seen a 37% increase in revenues following a 50% increase in the toll for cars.  However, it still remains insufficient to cover the interest costs on the debt of the local authority financed road.

Philippines - Two new toll roads to be pursued in 2013 and Metro Pacific to expand Northern Luzon Expressway


The CALAX project, which will connect the Manila-Cavite Expressway (CAVITEx) and South Luzon Expressway (SLEx), will be among the two projects under the Public Private Partnership (PPP) scheme the Department of Public Works and Highways (DPWH) will pursue in 2013. The PPP section is the 36.01 km length of the expressway from Kawit, Cavite to Sta. Rosa, Laguna. The ODA section is the remaining 11.01 km part of the road from Sta. Rosa, Laguna to SLEx at Mamplasan Exit in Laguna.

"The private proponent shall be responsible for the financing, designing and constructing of the PPP section, and the subsequent operations and maintenance (O&M) of the entire CALAX," the PPP Center explained.

The project is estimated to cost US$1.01 billion.

Meanwhile, Rappler also reports that Metro Pacific Investments Corp  is allocating P2.5 billion (US$61 million) in 2013 to expand and repave parts of the Northern Luzon Expressway.  This includes a P1.6 billion-worth (US$39 million) toll road that will link NLEx Cloverleaf and McArthur Highway near the Valenzuela City Hall with a 2.1-kilometer, 4-lane highway. Depending on how fast the government is in securing right-of-way, construction for Segment 9 will likely start by November or December and will be completed in 2013

South Africa - Gauteng e-tolling allowed, Moody's approves

According to Business Day Live (South Africa), the decision by the Constitutional Court of South Africa to allow the implementation of electronic free flow tolling as part of the Gauteng Freeway Improvement Project, will make a substantial difference to SANRAL's financial position.  Tolling on the project was due to be implemented in April 2012, but was stopped due to a court injunction.  The tolling has been opposed in South Africa on various grounds, but which largely appear to be about the injustice seen in tolling existing as well as new roads, because the existing roads have been upgraded, and because of fears of corruption in the contracts with the foreign suppliers of equipment and tolling services (which have not been substantiated).  The delay has cost SANRAL US$309 million since April.

The report outlines how taxpayers have been providing bridging finance to SANRAL to cover the gap:


Government responded by providing the roads agency with R5.8bn in funds to compensate for the lack of e-toll revenue and to defray operating costs, including debt service payments on the GFIP debt, a large proportion of which government guarantees.

Moody’s said the GFIP was mainly responsible for the rapid surge in Sanral’s debt, which rose to R37.5bn or five times its 2012 annual revenue as of August this year, from R6.2bn in March 2007.

Moody’s downgraded Sanral’s rating to Baa2 from Baa1 in May due to negative pressure on the roads agency’s liquidity.

The rating agency noted that at the end of June, Sanral’s cash reserves and government’s funds totalling R7.1bn were sufficient to cover operating expenditures and short-term obligations, including debt service, over the next 16 months.

Moneyweb reports further on SANRAL's financial position.


Virginia - I-95 HOT lane contract criticised, but doesn't tell the full story and I-495 express lanes about to open

The Newspaper has published an article critical of the PPP contract between the State of Virginia and TransUrban for the I-95 HOT lane project.

The reasons it cites are:

- It is a 73 year contract offering revenue to the concessionaire with no new lanes being added; 

- Casual carpooling will be dissuaded, as all carpoolers (only HOV 3 – meaning at least three people must be in the vehicle to be eligible) must use an EZ Pass tag to “declare” their presence. Those without will be fined; 

- If more than 35% of lane users are HOV (i.e. not paying tolls), the state must pay for each additional HOV vehicle an equivalent to 70% of the tolls that would have applied The state must pay an amount equal to 70% of the toll that would apply TransUrban if more than 35% of lane users are HOV (i.e. not toll paying); 

- If the State wants additional lanes, it must first negotiate an addition with Transurban. If it decides not to adopt an approach including Transurban, it must compensate the firm. The same applies to additional capacity on specific parallel routes. 

- Two-thirds of the project's financing is backed by taxpayers. Virginia is providing US$71 million in grants and US$242 million in revenue bonds. US$300 million comes from the Federal Government with a TIFIA loan.

Certainly it appears like Transurban has a good deal, although it doesn't look that good if traffic levels are flat, and there is a low volume of users with less than 35% of road users being HOV not toll payers.  That's the risk Transurban carries.  If car pooling takes off (which the article suggests is less likely because of the inconvenience of getting an EZ Pass tag), then it will be positive for the state (and users of the existing lanes), and will be because Transurban has encouraged it.   However, it is also understandable that Transurban gets first right of refusal to build new capacity, and that if taxpayers pay for new capacity elsewhere, Transurban gets compensated.  Such is the environment of privately owned lanes vs. government owned lanes. 

Furthermore, the article is plain wrong in asserting no new lanes are being provided.  In fact there will be some new lanes, and some extensions to existing lanes.  The press release announcing Transurban has won the extension specified these, and after all, it does not cost $940 million to do a HOV-HOT lane conversion.  There is a lot of new construction to make these lanes a more complete corridor congestion bypass system.   If you were paying for such improvements, you wouldn't want the state to be suddenly paying for parallel ones to enable motorists to bypass your improvements (and the tolls you need to recoup the costs).

Meanwhile, WAMU reports that the I-495 express lanes are due to open on November 17th.  The report says:


The two new lanes in each direction spanning 14 miles between the Springfield interchange and the Dulles Toll Road will be E-ZPass only.

Everybody needs an E-ZPass to use the express lanes. Carpools need the E-ZFlex for the toll-free trip. So far the Virginia Department of Transportation says signups for E-Z Pass are going well in the local area.

Stewart Schwartz, the executive director of the Coalition for Smarter Growth, criticises the project claiming that it will result in induced demand, filling up the space from vehicles shifting to the express lanes.  This has long been a criticism of any projects involving building new highway capacity, but in an environment where traffic growth has stabilised and there may be a long term trend of flat traffic, does this hypothesis still apply?  If so, does it matter if the new capacity is being charged to ensure it remains efficiently used?

Monday, 24 October 2011

News Briefs - Israel, South Africa, Tajikistan, Sri Lanka, Indonesia, New Zealand, Texas

Israel

Sale of stake in Cross Israel Highway:  The Cross Israel Highway (Route 6) is Israel's great north-south highway corridor extending from the outskirts of Haifa, to be nestled between Tel Aviv and Jerusalem, towards Beersheva.  The road is owned by concessionaire Derech Eretz Highways Ltd.  Globes reports that Shikun u'Binui Holdings has sold 24.6% of Derech Eretz to private equity company Israel Infrastructure Fund for NIS773 million (US$212 million). The sale reduces Shikun u'Binui's shareholding in the company to 25.5%, and the company reports a return on the sale of 8%.

Globes says:

Shikun u'Binui did not sell its 24.5% stake in Derech Eretz Highways Management Ltd., which operates the Road 6 toll road, and is waiting for permission to increase its stake to 35%. The deal reflects a company value of NIS 3 billion  (US$824 million) for Derech Eretz. The sale is part of IIF's effort to block rival Noy Infrastructures and Energy Fund's acquisition of 49% of the government's rights in Derech Eretz for NIS 1.39 billion (US$382 million). Shikun u'Binui said that the price tag was based on Derech Eretz's value in the Noy Fund deal. 

Price schedule is here in Hebrew

South Africa

Toll road success:  For all of the controversy over the Gauteng tolling project, it is clear that toll roads have already proven profitable for private investors in South Africa. The Financial Mail reports on the success of the N3 PPP between Heidelburg and Cedara (the complete N3 connects Johannesburg and Durban). N3 Toll Concession (Pty) Ltd won the concession in 1999 for a 30 year period, so is nearly halfway through the concession to design, construct, finance, operate and maintain the highway.   The concession has quite diverse ownership.   The article contains comments from Old Mutual Life Assurance Company Infrastructure, Development and Environmental Assets Ideas Fund manager Jurie Swart, who says 25% of the fund is invested in toll roads (other roads include the N4 between Pretoria and the Mozambique border, and the N1/N4 toll road).

Swart claims there are benefits beyond simply financing and building the road:"Each road has a pavement management system that has to conform to national road specifications. It has a dedicated engineering team, and a maintenance programme that must be audited independently. Toll toads like the N3 to Durban are also involved in local tourism efforts. " Certainly there is transparency about the contracts, and they do appear to help ensure a high standard of service.

Investors are keen to follow this with the controversial N1-N2 Winelands toll road. 

For all of the controversy over tolling in South Africa, it has worked to develop a lot of new highways, and most of all the PPPs have delivered world class standards of service.

Prices for the N3 toll road, per toll plaza, are here.

Tajikistan

A report from Trend notes that one of Tajikistan's major highways (M34) is a 354-kilometre toll road from Dushanbe to Chinaz. It is state owned, financed through a $280 million loan from China, which the Tajik government is repaying through the toll which started on 1 April 2010.

It wasn't easy to find much information about this road, but it is encouraging that tolling has penetrated central Asia, and I can only hope Tajikistan is making sure it optimises its revenue from tolls.

Sri Lanka

Toll road opening delayed:  Sri Lanka's first toll road opening has been delayed till December 2011 according to Lanka Business.   I reported the details about the road in July, when it was about to open.  Tolls were already controversial then for risking essentially fraud, and creating potential bottlenecks.  Well the Sri Lanka Road Development Authority has created more controversy with the delay, which is due to failure to complete toll booths and fuel stations on the road.   A fibre optic network is to connect toll booths, and the expressway curiously will have its own fire brigade and police patrols to optimise response to incidents.  Tolls are meant to be collected manually with a closed system involving a ticket issued on entry, and used on exit to determine the price.   Yes, you read correctly, and this is in 2011.

Indonesia

Astratel expands toll road portfolio:  The Jakarta Globe reports that Astratel Nusantara, the highway construction unit of Astra International, has bought 95% of the 40.5-km toll-road linking Kertosono and Mojokerto, in East Java (outside Surabaya) for Rp750 billion ($88 million). 

Astratel also owns:
- 79.3% of PT Marga Mandalasakti which owns the 72.5-km toll road linking Merak (Banten province) and Serpong (outer Jakarta); and
- 40% of PT Marga Trans Nusantara, part of a joint venture building the 12.5-kilometer Jakarta Outer Ring Road II project which will link Serpong and Kunciran in Jakarta.

The total value of its toll road assets will be Rp3.4 trillion(US$384 million).

New Zealand

Hapless toll road debt grows: I've written before about the financial disaster that is the Route K toll road in Tauranga.  The bad story continues.  The Bay of Plenty Times reports that debt from the road is now NZ$60 million (US$48 million) on a road that cost NZ$45 million, and daily traffic count is 5,000.  Revenue needs to double for the road to be viable, and at present trucks form 13% of users, but 38% of revenue.  Annual losses just go on debt.  How long can this continue?

Texas, USA

Indra wins contract: 4 Traders reports that Spanish company Indra has won a €10.6 million (US$14.7 million) contract with TexToll services in Texas (itself a subsidiary of Cintra, the subsidiary of Spanish infrastructure investor firm Ferrovial).  The contract is to implement electronic toll collection back office services on the SH-130 toll road near Austin, the LBJ Express project and the North Tarrant Express Highway project.  It reportedly makes a big impact on the firm's presence in the USA.

Spam

I moderate comments for one reason - spam.  If you attempt to post spam you will be blocked, and you will fail.  I have so far allowed one comment with a spam link, and it wont happen again.  This blog does not exist to promote your business.  It exists to publish articles I find of interest that I hope others find of interest as well.  Spam at best wastes time and is a nuisance, at worst it can spread malware.

Monday, 8 August 2011

Uneconomic New Zealand toll road might be nationalised

I’ve written before about the loss-making toll road in the provincial city of Tauranga, New Zealand called Route K. Essentially it was a publicly financed toll road that proved not to attract enough traffic to pay down the debt. Its prospects have slightly improved thanks to a new bypass highway to the south of it, which makes it a more convenient route from the south of the city towards, the centre, but it is unlikely it will make enough of a difference. Route K is a 5km, single carriageway highway, which tells you enough that it is low volume route which always made it questionable as a viable toll road in the first place.  It cost NZ$45 million (US$37 million) to build the road, including buying the land, but debt on the road is now NZ$55 million (US$45 million).  It is only because local government owns it that it stays "solvent".

The Bay of Plenty Times reports that the Crown Agency responsible for the national state highway network, the New Zealand Transport Agency (NZTA), is in talks with the Tauranga City Council to “take over” the road, which presumably would need to include the debt to make it worthwhile for the Council. I expect the Treasury would be opposed.  So this would be a form of nationalisation of an albeit local government owned "asset".  The road would probably be declared a State Highway entitling it to full funding for maintenance and upgrades, whilst the toll may be retained to help offset the debt.

One small step that could be good for the Council would be for the NZTA to pay the Council for maintenance of the route, given the users of the road pay fuel tax and road user charges like everyone else for it, and that this revenue is not being applied to the road. That means the Council could use all net toll revenue for servicing the loan. Unless central government is feeling generous, Tauranga City Council (and ratepayers) face the ongoing burden, helping the case that private investment might have avoided this risk (because it is unlikely any private investors would have bothered had they done their sums right).

I recall that one reason Route K was toll financed by the Council was that the project didn't have a good enough benefit/cost ratio (I believe it was barely over 1:1) to justify full central government funding from the National Land Transport Fund.  That fund is similarly to hypothecated highway accounts elsewhere in the world, in that all fuel tax and road user charges (New Zealand's distance/weight tax charged on all vehicles over 3.5 tonnes and all diesel vehicles) and motor vehicle registration/licensing fee revenue goes into that fund, which is then distributed according to bids for funding from local authorities and the state highway manager.   Given Route K was considered a "poor investment" by the then funding agency Transfund, and there was no expected private sector interest, it gives a good indication that the road probably shouldn't have been built in the first place.

Friday, 10 December 2010

Tauranga: New Zealand's toll road capital got one wrong

There have been very few toll roads in New Zealand's recent history, but for some reason the city that seems to have had the greatest interest in tolling is not a major one, but a relatively fast growing provincial town called Tauranga (population today of around 120,000).   Outside Tauranga, only one other city (Auckland) has had a toll road in the past 25 years.

Its first project was a very successful harbour bridge, which dramatically shortened (halving) the driving time between Tauranga City Centre and the neighbouring upmarket suburban district of Mt. Maunganui (which is also the locality of the Port of Tauranga, one of New Zealand's most dynamic port companies).   Between 1988 and 2001 it was tolled, after which the tolls had fully paid down the debt and interest (and some) of the bridge and tolls were removed.  The result of removing the toll was an 18% increase in traffic across the bridge (with only a 7% reduction in traffic count on the alternative route) which is hardly surprising.  In fact the continued increase in traffic was such that the bridge and its approaches were increasingly congested.  A proposal to toll the bridge again to fund a duplication of capacity and some grade separated approaches was cancelled, because the government of the day needed support from a minor political party, whose leader was then the MP for Tauranga (and who opposed tolls).  (The duplicated bridge has recently opened).

The third project is the forthcoming Tauranga Eastern Link, being led by central government, it is a motorway bypass 23km long which is to include electronic free flow tolling, entirely ANPR based.  It is a four lane motorway that bypasses one town and a rather tortuous stretch of single carriageway.  

Tolling is specifically to help finance the road, which is also being funded from conventional road taxes (fuel tax and road user charges (weight/distance charge on heavy and diesel vehicles)).

The second project is the one that has gone wrong.  Known as Route K, it was commissioned by the Tauranga City Council as a 5 km single carriageway (1 lane each way) highway bypass of its southern suburbs.  It is located on Google Maps as Takitimu Drive between Route J and State Highway 29 only (the northern half of Takitimu Drive is the untolled approach to the Harbour Bridge).

Tauranga City Council commissioned it as a fully toll funded road, but the problems with it were rather apparent from the start.  It cost NZ$45 million (US$33.7 million) to build, but has lost money every year it has been in operation since 2002.  Tauranga City Council now owes NZ$55 million on the road, and it can neither sell it nor will central government take over this liability.  Why has it failed?

First the route it bypassed wasn't particularly congested (or rather the routes, as there are two parallel suburban main roads).  It was primarily expected to be used by residents of growing southern suburbs, which haven't grown, and the time advantage frankly wasn't good enough for a journey this short.  

Route K is between the Pye Pa Bypass and the SH2 Northern Corridor.
Secondly, the route itself was forecast to need 10,000 vehicles a day to break even.  The fact the road is a single carriageway highway, that is not a crossing should be a clue as to whether enough revenue can be generated from tolls to pay for it.  Furthermore, the road went through analysis according to the Economic Evaluation Manual of the then funding body - Transfund New Zealand - and came out with a benefit cost ratio barely over 1.  That was why it was not funded with other road projects because it was poor value for money.   That tells you that no only could it not be justified from a national economic appraisal point of view, but users also perceived it was not worth paying for to use.

Actual traffic volumes are only 4840 daily,  even that is a 28% increase on a year ago.   Assuming all of those vehicles paid fuel tax (not true but just for argument's sake) and were relatively inefficient, they would only generate another NZ$295,000 p.a. if it was shadow tolled.

So Tauranga has a problem.   It borrowed money and built a road that doesn't have enough traffic and is tolling users and has less than half the demand necessary to break even.   The tolls are not high at NZ$1 (US$0.74) for cars and up to NZ$ 4 (US$3) for trucks, and the Council struggles to raise the tolls by 50%.   It is a manual tolling system with a cheap bespoke tag system that appears to have low takeup (and with a NZ$2 monthly rental for a tag and no discount the incentives to use them are low).

What it shows is the mistake of modelling demand based on assumptions about value of time that do not take into account the cost to users of engaging the toll transaction.  Quite simply put, motorists are far less likely to part with money for a toll than money for another discretionary purchase, particularly if they do not part with tolls regularly elsewhere (After all Route K opened a year after the Harbour Bridge toll was abolished).  In particular, if the new road doesn't bypass particularly congested routes, its appeal will be limited.

Demand has increased recently for two reasons, first the duplicated and improve Harbour Bridge corridor which leads to Route K has meant that it is now part of a far less congested major corridor to the Port, secondly the southern end of Route K is connected to the recently opened Pyes Pa Bypass, which itself comprises a recently improved secondary highway to the major town of Rotorua.  In other words, the road itself was built before its time.

As Tauranga grows and the attractiveness of the route given the roads either end of it, becomes more apparent, then the road will become viable.  Meanwhile a Council is stuck with a gamble, based on poor forecasting and assumptions about revenue! Here is a newspaper article explaining the council's troubles.