Taxpayer to pay the penalty on tolls

Most people who travel by car would probably agree that the new M3 motorway is a terrific piece of infrastructure which helps journey times to and from the city and bypasses the previous bottlenecks of Dunshaughlin, Navan and Kells. The downside is that most road-users must pay one, if not two, tolls in order to use it - and even worse news is that it could end up costing the taxpayer a lot more in the long run. We now have some idea of how much traffic volumes on the new motorway are below the threshold agreed between the National Roads Authority (NRA) and the Eurolink concessionaire which built and now operates the road. Current traffic counts show traffic is about 22 per cent below the threshold of 26,500 vehicles per day which is the daily 'guarantee’ figure. According to the opponents of the motorway who highlighted this controversial clause in the motorway contract some time ago, the taxpayer will be left footing the bill for the difference between the actual traffic volumes and the 'guarantee’ figure - and this could be as much as €100 million over the lifetime of the motorway contract. Essentially, the NRA agreed that, if the minimum traffic level was not reached, the taxpayer would pick up the tab. It was a great deal for the Spanish-Irish consortium which has delivered the M3, but not so good for the taxpayer unless traffic volumes improve. However, the NRA insists that such revenue-guarantee clauses are common in today’s public-private partnership (PPP) contracts in many countries around the world. It adds that any penalty payments would be calculated on an annual basis and over the typical 30-year term of the contract, allowing for potential growth in traffic using the toll booths in the future to even out the losses currently being incurred. As the road is only open for five months or so, the authority says it is not possible to say yet if any penalty payments would be made. The purpose of the traffic revenue guarantee is apparently to enhance the fundability of the project and attract more competitive funding terms from banks. In the case of the M3, the traffic guarantee was necessary because of the size of the project and the amount of funding that was required by the lending institutions which bankrolled the project, the NRA also claims. The current debate on this issue does focus attention on why tolling can be an inefficient way of generating revenue. It is also inherently unfair in that some people who use the road pay nothing while others going through both M3 toll plazas, for instance, must pay for their journey - and then possibly pay another toll if they aer using the M50 to skirt Dublin. A recent survey by the AA found 17 per cent took alternative routes to avoid paying toll charges. On the M50, for instance, the AA says, the operators made €95m in 2009 but spent €20m collecting it. It advocates higher taxes on fuels as a better, more efficient and more equitable way of raising revenue for the State. Last week, it was also revealed that the Government is to consider a raft of new toll booths on motorways around the country. A Government desperately searching for new revenue sources might well be tempted to seriously consider more tolls on new roads up and down the country and more toll collection points on the M50 ring road around Dublin to try and bring all users of that road into the tolls 'net’. Such a deal as has been struck by the NRA on behalf of the Government on revenue guarantee levels has all too familiar echoes of the banking bailout. If a business performs well, it makes large profits; if it fails, the taxpayer gets to foot the bill. It is in the nature of enterprise that there be risk. However, in this scenario, there is effectively no risk to motorway operators, who cannot lose. The taxpayer, unfortunately, now finds that they cannot win.