Road companies to be compensated for low toll revenues - Gilmore

fricatus

Story on RTE website now (scroll down to the end).

Meanwhile, Mr Gilmore said up to €100m may be needed to compensate road toll companies if traffic falls below certain levels.

The Labour leader said he believes that the National Roads Authority has agreed a secret deal that if traffic levels fell below certain thresholds on certain roads, that a penatlty would be paid to the companies.

He said it appears that traffic on the M3 is 22% below the agreed threshold and that the Limerick tunnel is 26% below.

Speaking during the Order of Business, the Tánaiste said that was a matter for the line Minister to address.

This is just nuts... why should we be paying tolls, and then have to pick up the tab if not enough of us are using the tolled roads?

And if we have to pay out this compensation, why don't we just negotiate with these companies and buy out their interest altogether, so that we don't have to pay tolls at all?

Stupid, incompetent fools running the country! :mad:

serfboard

fricatus wrote: »

Story on RTE website now (scroll down to the end).

This is just nuts... why should we be paying tolls, and then have to pick up the tab if not enough of us are using the tolled roads?

It might be nuts ... but its not 'new's. I didn't know it applied to the Shannon tunnel, but I knew it applied to the M3. This was the only way Noel Dempsey could get his pet project built ...

Minister: Lads, ye can toll it
Builder: But can you guarantee we'll get our money back?
Minister: Ah yeah, no problem! Sure, if the numbers don't add up to X thousand vehicles per day, just send us the bill for the difference ... and we'll pick up the tab!

(And by, 'we' the Minister meant me and you.).

Isn't it a great little country all the same. I'm glad to finance the difference to allow Noel Dempsey to get re-elected.

Telchak

Kind of defeats the basic principal of capitalism. If the toll makes a huge profit it all goes to the private company, if it makes less money than they're losses are covered by the taxpayer... seems to be the way we do things here :rolleyes:

Tech3

The tunnel is picking up a lot more traffic recently. The figures for this month will be interesting. Closer to 15,000 I'd reckon. Still about 85% of traffic getting off at J4

veryangryman

tech2 wrote: »

The tunnel is picking up a lot more traffic recently. The figures for this month will be interesting. Closer to 15,000 I'd reckon. Still about 85% of traffic getting off at J4

Id imagine its because they want to get to Limerick itself in the majority of cases. No way would people go through that city during day to save €1.90

Pete_Cavan

fricatus wrote: »

This is just nuts... why should we be paying tolls, and then have to pick up the tab if not enough of us are using the tolled roads?

And if we have to pay out this compensation, why don't we just negotiate with these companies and buy out their interest altogether, so that we don't have to pay tolls at all?

Stupid, incompetent fools running the country! :mad:

Well of course we have to compensate them, do you really think someone would build us a €1bn motorway without some sort of guarantee that they would get a return on their investment. These are large international consortia, not the likes of Liam Carroll who thought their investments could only go one way. The state was never going to be able to afford to build these roads themself and the only way to get these consortia to invest the money in roads here was to limit their exposure to risk, it was no secret. We were going to have to pay these people for these roads at some stage, unfortunately it has come a little earlier than expected.

Victor

Telchak wrote: »

Kind of defeats the basic principal of capitalism. If the toll makes a huge profit it all goes to the private company, if it makes less money than they're losses are covered by the taxpayer... seems to be the way we do things here :rolleyes:

If it goes over a certain amount, the state would also get a share.

Tech3

veryangryman wrote: »

Id imagine its because they want to get to Limerick itself in the majority of cases. No way would people go through that city during day to save €1.90

I know a few people that never take the toll to get out to the Raheen side.

I use it all the time to get to just the dock rd. It easily saves me at least 10 mins and at peak time a lot more. I can see figures improving when people come to terms with how hassle free it actually is by just using it instead of burning fuel and needless time through the city.

With the traffic lights on the condell rd and the road works near J4 on the old dc it's a no brainer to use it.

jack presley

€100 million's probably a bit of an exaggeration though don't you think? What timeframe is he talking about?

Amtmann

FRANK McDONALD Environment Editor

TAXPAYERS COULD face a bill of at least €100 million for the National Roads Authority to compensate the consortiums that built the M3 motorway and the Limerick Tunnel, because traffic levels are much lower than predicted.

According to PlanBetter, a joint initiative of four groups – An Taisce, Friends of the Earth, Friends of the Irish Environment and Feasta – the bill will be far higher if traffic levels remain static or continue to fall in coming years.

Figures compiled by the group show traffic on the M3, which runs from Clonee to north of Kells, Co Meath, is almost 5,000 vehicles per day below the level at which penalty payments must be made to the Eurolink consortium that built it. Traffic would have to reach 26,250 vehicles per day to avoid penalties; however, daily traffic is “in or around 21,500” vehicles.

In the case of Limerick, the threshold for the new tunnel is 17,000 vehicles per day, but the actual level of traffic is about 13,500 daily, according to the group.

The 900m (0.56 miles) tunnel under the Shannon, west of Limerick city, is part of a 10km dual carriageway and associated roads built by DirectRoute, a consortium comprising Stabag AG, John Sisk, Lagan Holdings, Roadbridge, Meridiam, Sicar and AIB.

Opening the €660 million project last July, Taoiseach Brian Cowen said it would “make life a lot easier for the people of Limerick” by taking up to 40,000 vehicles per day out of the city centre. Tolls for cars are €1.80, while trucks must pay €5.70.

The €900 million M3, which opened last June, was built – after controversy over its route past the Hill of Tara – by Eurolink, a consortium comprising Siac and Spanish firm Ferrovial. Car drivers must pay €1.30 twice to use the route.

“The M3 and Limerick Tunnel contracts are proof . . . that penalty clauses based on never-ending growth hang taxpayers out to dry,” PlanBetter said. “The contracts are naive in that there is no amendment or reset clause. The PPP [public private partnership] contracts highlight another failure by Government to regulate. This time, a public organisation got wrapped up in the myth of high, endless levels of growth.”

It said the road authority’s reputation “has been holed below the waterline with these revelations” as it continued to ignore a 7 per cent fall in traffic over the last two years and still used a 2003 multiplier that assumes traffic growth of over 2 per cent every year.

A roads authority spokesman said a “revenue guarantee arrangement” was a common feature of PPP contracts throughout Europe. Its purpose was to “enhance the fundability of these projects and attract more competitive funding terms”. He added that there had been no payments made to date to either consortium.

Fine Gael transport spokesman Simon Coveney TD said plans to impose a “swathe” of new tolls on motorists “could drive cars and trucks off the motorway network on which the State has spent millions of euro [and] push them back into towns and housing estates”.

http://www.irishtimes.com/newspaper/ireland/2010/1008/1224280636344.html

cnocbui

Tolls are stupid. Just tax fuel at the appropriate level to fund what needs to be done but put in a mechanism to stop fuel revenue being lumped in with general revenue and thereafter being allocated to social welfare or pork barreling. A hugely more efficient way of doing things as you wouldn't impede traffic flow or need to spend millions on tolling infrastructure, running costs and salaries.

munchkin_utd

Am I missing something???

in a nutshell:
- The taxpayer got 1560 MILLION Euro worth of road built for nothing, which otherwise would have set the taxpayer back for that substantial amount.

- Over 30 years, they may have to pay 100 million to the builders of the road as tolls revenue doesnt live up to expectations.

Whats the big deal?
Even at 100 million, thats a lot of road for the money !!!

veryangryman

tech2 wrote: »

I know a few people that never take the toll to get out to the Raheen side.

I use it all the time to get to just the dock rd. It easily saves me at least 10 mins and at peak time a lot more. I can see figures improving when people come to terms with how hassle free it actually is by just using it instead of burning fuel and needless time through the city.

With the traffic lights on the condell rd and the road works near J4 on the old dc it's a no brainer to use it.

It is of course, a city bypass. I dont blame people who are going to places within city limits (Raheen, Thomondgate etc) skipping the toll. I just mean that the 15% or so that are using the toll are likely on a long trip that doesnt involve going near Lim

veryangryman

Question to those more knowledgable of foreign toll roads (Furet im looking in your direction! )

Do these same deal/penalties apply in places like Germany/France? I cant imagine they dont. We are world leaders in copycat activity so surely the contracts would have similar T&Cs?

seamus

munchkin_utd wrote: »

Whats the big deal?
Even at 100 million, thats a lot of road for the money !!!

It's a win-win solution for the private enterprise, that's the problem.

It's the same ridiculous thinking that gave NTR 30-year control over the M50 toll bridge which we then had to buy back from them.

If the company or the government didn't think that these roads would gather a lot of traffic, then they wouldn't build them. The company doesn't need an airbag - if it doesn't get its target income after 30 years, tough ****, that's the risk you take in business. Why in God's name would we do it this way when we can just build the road ourselves and collect the tolls on it? The outcome is identical - either way if it falls short of its target income, we lose.

Pete_Cavan

seamus wrote: »

If the company or the government didn't think that these roads would gather a lot of traffic, then they wouldn't build them. The company doesn't need an airbag - if it doesn't get its target income after 30 years, tough ****, that's the risk you take in business.

Well would you invest a couple of hundred million euro into something to get others to work quicker without the person who it will actually benefit from it taking some of the risk. Id like to see you sell that to a large international bank, these guys are not as stupid as Anglo.

seamus wrote: »

Why in God's name would we do it this way when we can just build the road ourselves and collect the tolls on it? The outcome is identical - either way if it falls short of its target income, we lose.

We cant afford to carry the capital costs of projects like this ourselves, do you really think the government has a couple of hundred million lying about somewhere?

Chris_5339762

And really the NRA had it right. The Limerick Tunnel cost €600 million I think, there is no way any private company would finance such a massive (but completely necessary) outlay with traffic levels less than 17k. The guarantee scheme was a good idea in this case because it got an incredibly expensive bit of road built.

The M3, maybe not so much. The M3 should get way more traffic than say the M6 G-Ballinasloe but yet the latter doesnt have a guarantee scheme.

Amtmann

Besides, we have a baby boom generation on the way towards becoming motorists, and Ireland has become smaller with the road improvements, so the trend, I think, will be for people to make long-distance journeys more often. My generation is certainly more mobile than my parents' generation were.
Also, these PPP contracts last for 30 years. That's the difference between 1980 and 2010 and a lot can happen in the interim. The NRA might have been foolish to predict an annual rate of traffic growth of 2% into the future, but it is equally silly to assume that traffic levels will remain fixed at 17,000 through the Limerick Tunnel for the next three decades. The population may drop significantly with the recession, but after ten years it could well start to climb towards 5 million or more. The bottom line is that infrastructure is in place now for the next century.

Victor

veryangryman wrote: »

Question to those more knowledgable of foreign toll roads (Furet im looking in your direction! )

Do these same deal/penalties apply in places like Germany/France? I cant imagine they dont. We are world leaders in copycat activity so surely the contracts would have similar T&Cs?

Germany is a poor example as few roads have tolls per se. However, all trucks over 12(?) tonnes do have to pay a toll via GPS-based system when using the autobahns.

France is another unusual case as the tolled autoroutes tend to be built by consortia that include the regional government, that might have a 25% shareholding. So its profit sharing via dividend rather than profit sharing by contract, as is the case here.

It may be legally difficult to have a contract where the government takes a cut of the profits if traffic exceeds expectation, but doesn't take the pain if the reality is below expection. After all, it was the government / NRA / council and its advisors that set the expectations.

limklad

Pete_Cavan wrote: »

We cant afford to carry the capital costs of projects like this ourselves, do you really think the government has a couple of hundred million lying about somewhere?

The Government did not have a problem collecting money for NAMA and ANGLO. I believe it will be €80 Billions worth of Bonds that we will have to pay back. What a few Billion more for roads in comparison to that.

Pete_Cavan

limklad wrote: »

The Government did not have a problem collecting money for NAMA and ANGLO. I believe it will be €80 Billions worth of Bonds that we will have to pay back. What a few Billion more for roads in comparison to that.

Your assumption that a few billion could be diverted from Nama and put into road building is wrong. Construction contracts involve the contractor carrying a large proportion of the cost for a long time during the project. You cant give them the money before they have built it so in the case of motorways, the contractor will have to raise a couple of hundred million euro to complete the project. In the case of PPPs the contractor will have to carry the cost for 20 - 30 years. Therefore banks are very important to providing the capital to contractors to finance the building of infrastructure so if the banks have no money the contractor cant finance the project and so it cant be built.

It is not my intention to defend Nama or get drawn into a debate on it but I felt it necessary to reply because the opinion displayed in the post I quoted above is misguided but yet is very prevalent in this country at the minute. I know that this is getting off topic so can we keep any replies relevant to the thread or else start a new thread somewhere else, it would ruin the thread if it became all about Nama.

NewHillel

Pete_Cavan wrote: »

We cant afford to carry the capital costs of projects like this ourselves, do you really think the government has a couple of hundred million lying about somewhere?

Not now, we can't - the revenue from the boom having been pi$$ed down the drain. At the time most of the PPP Contracts were signed, we most certainly could have. Instead, the VAT and Stamp Duty from the excessive building activity was treated as current income (rather than a once off) and used to boost the income of already overpaid "Public Servants". Not only do we not own the roads, we are also stuck with an unsustainable pay and pensions bill for running the country.

NewHillel

Pete_Cavan wrote: »

Your assumption that a few billion could be diverted from Nama and put into road building is wrong.

I didn't see any suggestion of that from limklad - he merley drew a valid comparison between the cost of Nama and the cost of the roads. There is no question but that the country could have funded the roads, at the height of the Celtic Tiger, the decision to use PPP's was driven by ideology, rather than cost constraints.

Pete_Cavan

NewHillel wrote: »

Not now, we can't - the revenue from the boom having been pi$$ed down the drain. At the time most of the PPP Contracts were signed, we most certainly could have. Instead, the VAT and Stamp Duty from the excessive building activity was treated as current income (rather than a once off) and used to boost the income of already overpaid "Public Servants". Not only do we not own the roads, we are also stuck with an unsustainable pay and pensions bill for running the country.

I dont want to get into all this because it is not what the thread is about in is more suited to economics, but for the record I agree with you.

NewHillel wrote: »

I didn't see any suggestion of that from limklad - he merley drew a valid comparison between the cost of Nama and the cost of the roads. There is no question but that the country could have funded the roads, at the height of the Celtic Tiger, the decision to use PPP's was driven by ideology, rather than cost constraints.

If he was merley drawing comparison between the cost of Nama and the cost of the roads it is pointless, that is what I was saying. Nama was the option chosen to solve* the banking crisis, you can draw comparisons between it and other options which were available to sort out the banking crisis but buildings roads doesnt fall into this category. You could draw comparisons between the cost of Nama and anything else but it means nothing unless it also achieves the same objectives as Nama. Again this is not what this thread is for.

As regards PPPs, why spend our own money when you can get someone else to design, build, maintain and operate it for you for 20-30 years. So for we have got well over €3billion euro worth of PPP roads, do you really think we could have paid for all that from VAT and Stamp Duty? Below is a list of some PPPs with their costs (there are more but I cant be arsed looking for the costs of every scheme.

• M3 - €650m
• Limerick tunnel - €660m
• N6 Galway to East Ballinasloe - €475m
• N1/M1 Dundalk Bypass - €340m
• N4 Kilcock-Kinnegad - €550m
• N8 Rathcormac-Fermoy Bypass - €320m
• MSA Tranche 1 - €70m

*I said solve, not solve in the most efficient and cost effect manner

NewHillel

Pete_Cavan wrote: »

As regards PPPs, why spend our own money when you can get someone else to design, build, maintain and operate it for you for 20-30 years. So for we have got well over €3billion euro worth of PPP roads, do you really think we could have paid for all that from VAT and Stamp Duty?

Yes. In 2006 alone, the Stamp Duty receipts from "Land and Property" was €2.989 billion. (See here.) The decision to use PPP's was driven by ideology, rather than cost constraints. I don't necessarily disagree with the approach - however, we have the worst of all worlds. A drive to privatise with no consequent reduction in the size, or cost, of the public service. (Worst of all, the cost savings from the PPP Approach were used to drive up the pay and pensions in that same public sector, contributing enormously to the current mess.)

Pete_Cavan

NewHillel wrote: »

Yes. In 2006 alone, the Stamp Duty receipts from "Land and Property" was €2.989 billion. (See here.) The decision to use PPP's was driven by ideology, rather than cost constraints. I don't necessarily disagree with the approach - however, we have the worst of all worlds. A drive to privatise with no consequent reduction in the size, or cost, of the public service. (Worst of all, the cost savings from the PPP Approach were used to drive up the pay and pensions in that same public sector, contributing enormously to the current mess.)

Stamp Duty receipts in 2006 resulted from the peak of a property bubble, a bubble which should never have been allowed to exist so that figure has little relevance to anything as that situation will (should) never exist again. It was once off income so cannot be used to plan future government spending. Also, if you think that almost all stamp duty should be used to pay for infrastructure then you also think we should spend next to nothing on infrastructure in the next few years as stamp duty take has plummeted (only €39m was collected from property transaction taxes in March 2010 – Stamp Duty in March 2008 was €157m). So no new roads and no metro will get us out of recessions? And even if the income from stamp duty could have covered the cost of new roads, what about all the other things that PPPs will deliver, including;

• 400km of roads including two bridges and one tunnel
• 50km of additional Metro lines
• 50 educational institutions including a school of music and a school of nautical training
• 20 courts
• 15 waste and water treatment/sewerage/drainage plants
• 10 social housing programmes
• six cancer treatment centres
• two prisons
• The National Conference Centre

You dont want any of that because stamp duty wont pay for it?

Your opposition to PPPs seems to be ideological, as opposed to your view that the use of PPPs is driven by ideology. Taking things out of the hands of public servants and giving them to the private sector is a good thing. And I'm not sure what you mean by "a drive to privatise", when the private sector has been used to build infrastructure for years. The only difference with PPPs is the private sector also finances, designs, builds, maintains and operates the infrastructure, all things the private sector can do cheaper and more efficiently than the public sector. Think about it, using PPP for Metro North, not only do we get the metro built, we also get a top international company to run it, giving a better level of service at less cost than CIE could (although having said that a group of primary school children could giving a better level of service at less cost than CIE but thats a different issue).

I dont know why your bringing public sector pay into this, as that problem is systematic and exists whether or not you have PPPs and needs to be tackled regardless. If you want to bitch about PS wages there are plenty of threads in the Irish Economy forum for that.