News briefs - Australia, Canada, Indonesia, Jamaica

Does fuel tax reduce congestion?

The answer to that question is yes, but not very well. Andrew Coyne from the Nanaimo Daily News (Canada) writes a good summary article about why full network congestion pricing is the best single tool for addressing traffic congestion, compared to building more roads, adding more public transport and simple cordon pricing. I'd counter his claim that London and Stockholm congestion charging haven't work so well because of induced demand within the cordons, because this simply isn't true. In London, road space was reallocated to pedestrians, cyclists and buses. Nevertheless, whilst he doesn't address the real concerns people have about privacy (which I believe can be overcome, but cannot be ignored), it isn't a bad article as to why road pricing needs to be comprehensive to properly address congestion. So far, nobody has dared try it.  Singapore may be the first to do so?

South Australia not going to have toll roads

According to Australian public broadcaster, ABC, "Chief executive of the Department of Planning, Transport and Infrastructure, Rod Hook, told 891 Breakfast this morning that Adelaide's road future could come at a toll". His view was quite simply that tolls would be needed as a source of revenue perhaps in order to get continued Federal funding for South Australia's highways. The Labor, Liberal and Family First parties in the state of South Australia all oppose the introduction of tolls, even though tolls are widespread in use on highways in Victoria, New South Wales and Queensland.

Toronto 407 toll road continues to perform well

The Globe and Mail reports that the 407 ETR in Toronto has had a good year. Trips increased 1% year on year, but revenue increased 10.6%. This is due to an increase in tolls at peak times by between 5-10% indicating that users are still willing to pay to use the road at those times. Notable is that revenue in the latest quarter is 83% higher than the same quarter last year. Revenue per trip is around C$6.37 (US$6.28). “Unbilled trips” (those either not identified or not able to be pursued for enforcement) are now at 2.2%, which is attributed to improved technology (presumably better resolution of Automatic Number Plate Recognition images).

407 ETR is owned by the Canada Pension Plan Investment Board (40%) , Spanish infrastructure company Cintra Infraestructuras SA (43.23%) and Canadian engineering firm SNC-Lavalin (16.77%).

Total revenue was C$188.4 million (US$185.9 million) for the year till June 30 up from C$170.3 million (US$168 million).

Tolling pushes ahead in Indonesia but PPPs not yet a success says Minister

The Jakarta Post interviews the Public Works Minister of Indonesia who says that Public-Private Partnerships are not yet a success, but progress has been astonishing:

For instance, when constructing the Jagorawi toll road in 1978, the state set up a company called PT Jasa Marga that acted as a toll road operator. However, Jasa Marga also emerged as regulator because we did not open the service to the private sector. We revised the law on roads and established the Toll Road Authority Agency (BPJT) as regulator in 2004. This law puts Jasa Marga only as operator and it has to compete with other investors if it wants to construct toll roads. It really attracts the private sector to invest in toll roads.

The key problem apparently being that interest rates for borrowing for Indonesian projects are high, demanding a high rate of return from projects.
 

Meanwhile, the Jakarta Globe reports on lending having been approved for a new 34km toll highway southwest of Surabaya.

Decline in demand but increase in revenue on Jamaican toll road

According to Go Jamaica, the Toll Authority of Jamaica has reported a third consecutive annual decline in traffic volumes on its tolled highway. The report says there has been a 5% average decline in 2010/2011 compared to the previous year. However, revenues are up by over 4%, presumably due to higher tolls or longer trips taken by those vehicles on the road. I went to the Authority's website to learn more, but it is not kept up to date, with the latest news release being in November 2010, and there being no annual reports published on its website (or not easily found). Hardly a model of transparency, or maybe this isn't seen to be a key distribution channel to supply information.

It's not easy to find Jamaica Infrastructure Organisation's website, but it does have some more information. JIO is the name of the concessionaire company responsible for the three toll roads. It has up to date prices. Which even its regulator hasn't got. There is even a frequent user discount.

Puerto Rico success in converting to electronic free flow tolling

I've written before about the privatisation of Puerto Rico's toll roads with Goldman Sachs and Abertis, and the plans to transform the territory's toll roads through improved maintenance and service standards.  The two roads involved are Highways 5 and 22. 

Businesswire writes about the success so far in introducing electronic free flow technology to two publicly owned highways.  PR-52 and PR-53.  The Puerto Rico Highway and Transportation Authority contracted Transcore as system supplier.

The PR-52 north to south arterial highway linking San Juan with Ponce, which includes five toll plazas, and PR-53 linking the south and east coasts of the island, with three toll plazas, were part of phase I of the project and were the first to transition. Previously rush hour wait times at high traffic toll plazas ranged from 15 to 20 minutes or more. Now motorists can pass through those same toll plazas at highway speeds, reducing some commute times by up to 45 minutes.

An obvious benefit of removing manual tolls.  Although the report indicated not only that cash lanes were converted to electronic free flow but new lanes were added for free flow - which honestly seems a little odd - true electronic free flow at highway speeds need no more lanes than the road has itself.

The project for conversion cost US$26 million and is branded AutoEspreso, starting with ETC lanes in 2004, and is expected to be completed by mid 2012.  Current ETC market share is 70% across all toll roads.

A key issue, much neglected, is how to deal with the "unbanked" population - people without bank accounts.  45% of the population of Puerto Rico is without a bank account, so 55% of motorists top up their toll accounts with cash over the counter.   Not the traditional direct debit/credit card model elsewhere, demonstrating the need for cash payment to be addressed.   Another innovation is ILR (In Lane Replenishment) allowing motorists to set up accounts on the spot with cash or credit/debit cards, or to top up their accounts (this might explain the "extra lanes" which are not exactly free flow, but provide essentially a retail outlet at the gantry).

The report indicates operational cost savings of US$2-US$3 million p.a. (presumably by eliminating manual toll collection) and reduced "leakage" (people getting free passage by toll booth collectors and thieving from toll takings) of US$10-US$20 million p.a..  I'm astonished that rather simple steps to address this are not being taken already.

Good on Puerto Rico for moving ahead on free flow technologies, especially at congested sites.  The scope for more such conversions is considerable, but the great lessons learned about Puerto Rico are around understanding the local market.  However, it's important to bear in mind the report was largely based on a press release from TransCore, it will be interesting to see any reports based on experiences of the public in Puerto Rico and perceptions of how they see service standards.

Puerto Rico toll road privatisation goes to Abertis and Goldman Sachs

I wrote in December last year, that Puerto Rico was seeking to privatize two toll roads in order to reduce the territory’s public debts and to finance the upgrade of the roads themselves

Now, Cygnus reports that a US$1.436 billion deal has been signed between the Puerto Rico government and an consortium called Autopistas Metropolitanas de Puerto Rico, LLC- which consists of well known Spanish toll operator Abertis (45%) and Goldman Sachs (55%). Second bid was submitted by a group composed of another Spanish toll operator, OHL Concesiones and Morgan Stanley.

According to Landline Mag, the deal for Puerto Rico’s toll roads ranks fourth in size in North America behind the $3.85 billion Indiana Toll Road lease in 2006; the $2.2 billion 407 Express Toll Route lease in Toronto in 1999; and the $1.85 billion paid for the Chicago Skyway in Illinois in 2005. Each of the top three toll projects involved a partnership between Cintra of Spain and Macquarie of Australia.

Full details about the PPP development and selection process are on the Puerto Rico PPP Authority website.

Highways 5 and 22 will be leased to the company which will finance, repair and operate the highways for a 40 year concession period.

The report says that the Puerto-Rico Public Private Partnership Authority gets an upfront payment of US$1.08 billion, and will invest US$56 million in what are described as “accelerated safety improvements” in the first three years to lift standards on the road.

The report also says the concession: “requires the selected consortium to conduct significant investments in the rehabilitation of said toll road. In addition, it must meet rigorous quality and service standards that will bring about recurring investment and will elevate these toll roads to world-class level with respect to paving, signage, lighting, vehicle flow, safety, and service and toll areas, among others. The winning consortium must also meet operation requirements resulting in safer and more durable roads.”

Improvements are expected to be fast as "During the first year of the contract, lighting, signage, off-ramps, toll plazas and landscaping are all set to improve, and over the next two years, paving projects, rehabilitation of elevated ramps and bridges and a system of alerts for drivers are expected to be put in place.Currently, just 50 percent of the lighting along the highway is functioning" according to David Alvarez, executive director of the Public Private Partnership Authority.

Caribbean Business reports other obligations on the new leaseholders include:

-  Building a bus/toll lane along PR-22 for bus rapid transit, to operate as a dynamically priced lane to maintain a high standard of service.  Revenue from this is split with the government;

-   Paying US$450,000 a year for Police patrols of the roads, and an additional amount of US$450,000 every seven years;

-    Tough service standards such as "potholes need to be repaired within 24 hours on a temporary basis and permanently fixed within two months, while spills need to be responded to within 15 minutes and dead animals removed within eight hours. The standards also call for zero graffiti, with responses required within eight hours."

Caribbean Business notes the revenue of the roads is around US$90-US$95 million p.a. indicating that the consortium will recover its investment less than halfway through the term of the concession.  Toll rates are frozen until 2014 and then increased capped to US inflation + 1.5% (which is apparently the average of Puerto Rico inflation over that of the mainland USA). 

All in all, quite a deal.  No doubt a win win for both sides.  The winning consortium expects it can make a healthy profit on the deal, all the while the roads will be upgraded and maintained, whilst the government gets some relief from debt.  Perhaps others have some lessons to learn from Puerto Rico?

Jamaica's toll concession vs railway reopening

Jamaica wisely decided some years ago that a major highway upgrade from Kingston to Montego Bay and Ocho Rios would be commissioned as a PPP concession using tolls. The resulting highway – Highway 2000 – has had 46km completed so far, with another 85km under construction or subject to land acquisition. The total project will be 233km long and form the backbone to the country. It is being tolled with DSRC technology and cash at toll plazas. Clearly, electronic free flow systems were not thought to be worthwhile for Jamaica, or perhaps Bouygues (with little experience) took a cheap, low risk approach.

The first phase has a very positive cost/benefit ratio, the second does not but is more about economic development. However, the Jamaican government has a problem. The concessionaire Bouygues included in its contract that no competing mode can be established to compete directly with the toll road. This, of course, should have been restricted to roads, as it may be seen to restrict aviation, but the issue is not that. It is rail.

Jamaica’s railways have been long neglected and mothballed. However, they are also being revitalised, with passenger services expected this year according to Go Jamaica. I’m not going to express a view on whether that is a good idea or not, but it does raise one issue toll concessionaires often want reassurances over – competition. My view is that as long as competition is not state subsidised, then it should not be restricted. Private roads shouldn’t be seen as a right to a perpetual monopoly. Nevertheless, it does seem that Jamaica’s government might want to have a more integrated approach to transport policy.