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Tim O'Brien
Irish Times Tuesday, August 28, 2001
The State is to subsidise new toll motorways with up to 60 per cent of construction costs and 30 years of toll receipts, and pay the operators an annual subsidy. But it is not offering a licence to print money, insists the National Roads
Authority. Tim O'Brien reports
The Fermoy bypass in Co Cork, an 18 km stretch of motorway, will cost euro124 million to build. The contractor will
receive up to 60 per cent of that cost, or euro74.4 million, as a subsidy payable on construction of the road. The
contractor will also receive tolls of about euro625 million over the following 30 years in addition to an annual subsidy to
be negotiated from the Exchequer.
According to the National Roads Authority (NRA), however, the figures represent something less than a bonanza for the
contractors. Claiming commercial sensitivity, the authority won't go into the details of the annual subsidy, but the overall
package to the contractor works out at a return of euro700 million on the full construction cost.
The authority is quick to point out that most of the money is spread over 30 years. Quoting from a report commissioned
from consultants KPMG, the NRA man in charge of public-private partnerships, Mr Gerry Murphy, says the bottom line
is that euro700 million over 30 years converts to euro155 million at today's prices.
"That is a return of euro155 million for the euro124 million investment," insists Mr Murphy. "You must take into account
one euro is worth just 32 cents after 15 years and only 10 cents after the full 30 years. Out of that, the contractor must
maintain the road and, in the decade before hand-back, must refurbish the road."
But if the State is to pay more than half the capital cost of the road up front and then an annual subsidy, would it not be
better to pay the full cost of the road and own it outright?
The problem, according to Mr Murphy, is age-old: the State doesn't have the money. The Exchequer will fund almost
euro4 billion, the EU will add just euro0.76 billion, but the remainder, more than euro1 billion, will come from the private
sector.
Borrowing the billion-plus is more expensive and damaging to the State's economic prospects than "front-loading" a large
payment on the construction and making up the difference between tolls and subsidies.
A number of delicate balancing acts are then required, according to Mr Murphy. If the tolls were high enough the State
would not need to pay a subsidy. But people in Fermoy - as is the case with the new Waterford crossing of the Suir and
the Enfield bypass in Co Meath - have claimed that high tolls, or any toll at all, will deter people from using the new
roads.
After years of suffering traffic congestion, they are angry at what they see as a deterrent to use of the new roads. They
are also upset by what some see as an attempt to make money for the private sector out of their congestion.
Many have a problem with the fact that tolls are not distance-related. Drivers travelling from Fermoy to Cork will pay the
same as those travelling from Portlaoise to Cork.
In complete opposition to the motorways themselves, as well as tolls, is the Campaign for Sensible Transport which
points out that the State has suggested the use of "road-pricing" (effectively tolling) in Dublin city centre to deter traffic
while at the same time arguing that traffic will not be deterred by the same process on motorways.
The campaign questions the need for new roads and points out that the NRA study of "National Roads Needs" of 1998
assessed the projected road requirements for 21 years and did not mention motorways. The current motorway
programme, it argues, will deliver unnecessary capacity.
The campaign position has, not surprisingly, been rejected by Mr Murphy. First, he argues that roads don't operate best
at capacity, when they will be essentially a car-park. The threshold for a dual carriageway is between 7,250 and 9,000
vehicles, he points out.
He also maintains the tolls are cheap. On the parity of cost between Fermoy and Cork and Portlaoise and Cork, he says
the Fermoy people get good value and those in Portlaoise get even better value. The charges will stay cheap because the
State will pay a subsidy and because the authority to fix charges will remain with the State, not the operator.
What it boils down to, according to Mr Murphy, is that if you require an inter-urban speed in excess of 80 kph, you have
to have dual carriageway or motorway-type roads. And that, he says, takes a lot of money.
©Irish Times
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