News Ltd’s Terry McCrann launched an extraordinary attack on the Bracks Government this week over its latest deal with tollroad company Transurban. It began as follows:

Citylink has become the money-making machine that is eating
Melbourne. The Government’s latest deal to pour what will become
hundreds of millions of dollars of your money into Citylink’s owner
Transurban and on to its shareholders is a disgrace. It ranks up there
with the very worst of the incompetent policies and deals of this Labor
Government’s predecessor, John Cain and Joan Kirner’s ‘Guilty Party’.
Hell, rescind that. It’s worse and dumber than any of the ‘Guilty
Party’ stuff-ups.

Strong stuff indeed, although I still reckon the stupidest Cain-Kirner
decision was to give Tattersalls a $2 billion pokies licence for free
– but that’s another story. McCrann provides a convincing argument,
which
Treasurer John Brumby failed to address properly in a reply on
McCrann’s page today, and it can be summarised as follows:

The government wants an additional $903 million spent upgrading the
interlinking West Gate freeway and Citylink tollroad to ease traffic
congestion. Under the deal, Transurban will only have to spend $166
million and can recover all of this, plus interest, before the
government gets a cent from the revenue uplift the extra lanes will
deliver.

However, it’s an election year and Victorian state debt is on the rise
again so the Bracks Labor Government, still haunted by the fiscal
incompetence of the Cain-Kirner years, wants to be seen to be fixing
Melbourne’s increasing traffic problems while not blowing the budget.

The solution is simple: surrender $2.9 billion that Transurban is due
to hand over in tax-effective lease payments over the next 26 years in
exchange for a paltry $609 million over the next four years which will fund the state’s share of the construction costs. Now we
all know about the time value of money but a hefty discount of 9.7% is
being used to calculate this deal when the government could have
borrowed the funds at just 5.5%.

All of this is a classic case of taxpayers being screwed in the long
term for the simple goal of being able to claim the state’s finances
are in great shape in an election year, a point Ken Davidson also made in The Age today.

Truth be known, Citylink has been an unmitigated disaster for Victorian
motorists and taxpayers. Jeff Kennett’s original contract was poorly
scoped because less than ten years on we’ve already seen the Exhibition
Street extension, Essendon Airport bypass and now the latest $903
million “amendment”. Why couldn’t all this have been foreseen at the
time?

Despite construction cost blowouts that damaged Baulderstone Hornibrook and almost sent Transfield to the
wall, combined with traffic revenue that still hasn’t met prospectus forecasts,
Transurban’s investors are almost 1000% in front and that’s after the
likes of Macquarie Bank gorged themselves on outrageously large fees.

Imagine how much better off we’d all be today if Jeff Kennett had
come
out and said he was spending $1.5 billion solving most of Melbourne’s
traffic problems with this visionary road system that would carry a
state-run toll for a few years. Rather than funnelling $200 million a
year into Transurban’s pockets for another 26 years and getting screwed
with every renegotiation, the $1.5 billion construction cost would have
been completed recovered by the toll revenue by about 2010, after which
it could have become a freeway.

Sin City residents should stop whingeing about the Cross City Tunnel
because Melbourne motorists spend almost as much with Transurban each
year as Sydneysiders do on all of their tollroads combined. And the
numbers are about to get a whole lot larger after taxpayers shell out
$737 million to boost traffic at what is already one of the world’s biggest and most
lucrative tollroads.

Peter Fray

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