Iemma's 'public-private' push under fire

November 17, 1993

Zoe Kenny, Sydney

The pressure on the NSW government to solve the cross city tunnel fiasco is continuing and Premier Morris Iemma is feeling the heat. On February 10, at a Council of Australian Governments meeting, he described the new CEO of CrossCity Motorway (CCM), Graham Mulligan, as a "fuckwit" because the latter had apparently said he had no intention of cutting the $3.56 toll.

The cross city tunnel — which runs for two kilometres underneath Sydney between Darling Harbour and Rushcutters Bay — has been plagued by problems since its inception.

During construction in 2004, 42-year-old worker Rodney Shore died while working on the tunnel due to a rock-fall. Construction, Forestry, Mining and Energy Union (CFMEU) state secretary Andrew Ferguson said at the time that construction firm Baulderstone Hornibrook had "without a doubt" put speed over workers'safety. Three hundred workers downed tools until they were guaranteed full compliance with the safety regulations.

There is also widespread outrage at the deal between the NSW government and CCM — a public-private partnership (PPP). As a private company, the overriding concern for CCM is to reel in big profits. The logic of PPPs is that because the private company takes responsibility for the "risk" associated with the construction of a large infrastructure project, thus relieving the government, it should be rewarded with high profits.

The tunnel cost $680 million to build and the company has budgeted for a 16% return on its investment, based on an estimate that 90,000 commuters would use the tunnel each day. The toll is $3.56 each way, and those without an electronic tag face a $10 fine if they fail to call the company within 48 hours of using the tunnel.

These prices are far higher than other toll roads in Sydney that cover more distance. The company is also allowed to raise tolls on the tunnel at a rate of 4% year, above the Consumer Price Index, until 2012.

The contract allows the cross city tunnel to force commuters into the tunnel with so-called "traffic-calming" — funneling commuters into the tunnel by closing off alternative roads. It also allows for greater "traffic-calming" in suburbs within five kilometers of the tunnel in the future. In addition, a section of the major thoroughfare, William Street, has been designated "bus only" and the government would be forced to pay a penalty to have the lane reopened for commuters.

An incredible aspect of the deal is that the Iemma government is contracted to compensate the cross city tunnel company for any lost tolls as a result of improved public transport! As Peter Abelson, professor of economics at Macquarie University, told ABC Radio's Inside Business on October 16, 2005, this clause is "obviously a disincentive to doing what's in the public interest".

There has been a virtual commuter boycott of the tunnel. Six months after it was opened, just 25,000 cars use it each day. Even the three-week toll-free period in late 2005, a compromise the government forced on the company, didn't reduce the resentment. As one commuter interviewed on the same Inside Business program said: "I'll go out of my way not to use it on principle."

Growing anger about the cross city tunnel has led to speculation that the government may be forced to buy back the tunnel at an estimated $1 billion.

However PPPs are unlikely to go away any time soon. Financing Transport Infrastructure: For Whom the Road Tolls, a study by the Institute of Applied Economics and Social Research at the University of Melbourne published by the Australian Economic Review in December 2005, revealed that in Australia "the private sector funds, manages and operates public roads to a total value of $9 billion".

It also said that the federal government's 2004 Auslink White Paper "suggests that privately operated toll roads are likely to become more common". This is because big financiers are more than happy with the high returns that state and federal governments agree to as plans to privatise essential infrastructure and services proceed apace.

From Green Left Weekly, March 1, 2006.
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