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2005/10: Should tolls be imposed on the Mitcham-Frankston freeway?
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What they said ...
'How many hospital beds do they want to close and how many schools can the state go without to pay for roads?'
Channel Nine's state politics reporter, David Broadbent
'The motorist already pays for the privilege [of road use] with registration, licensing, the stamp duty on these charges, fuel tax etc'
A contributor to the Darebin Community On-line Forum
The issue at a glance
In April 2003 the Victorian Government, led by Steve Bracks, broke an election promise and announced that the proposed Scoresby Freeway (now known as the Mitcham-Frankston freeway) in Melbourne's eastern suburbs would be a tollway. This was directly contrary to what the Government had stated during the November 2002 elections.
This decision brought about a major dispute with the federal Liberal government of John Howard which has cut off federal funding for the project on the grounds that the Bracks government has reneged on the terms of the federal-state funding agreement.
In October 2004 the leader of the Liberal Opposition in Victoria, Robert Doyle, announced that were his party elected to government it would renegotiate the contract for the Scoresby freeway with the ConnectEast consortium and open the freeway without tolls.
Some critics, including Peter Ryan, the leader of the National Party in Victoria, criticised this proposal. Many, including some within Mr Doyle's own party, believe that buying the Victorian Government's way out of the contract would be too expensive and so the tolls should remain in place.
Unlike Victoria, New South Wales has recently achieved two party agreement on the need for tolls and is using them to finance new road systems.
Background
The Mitcham-Frankston Freeway will be a tolled freeway located in Melbourne's eastern and south-eastern suburbs. It is a part of Melbourne's Metropolitan Ring Road project.
As its name suggests, it will begin from the eastern end of the Eastern Freeway at Mitcham, going under the environmentally-sensitive Mullum-Mullum Creek area through tunnels towards Ringwood. It will then travel 40 km south towards Frankston, going through the suburbs Wantirna, Wantirna South, Scoresby, Rowville, Mulgrave, Dandenong North, Noble Park, Keysborough, Dandenong South, Bangholme and Carrum Downs, before ending at the northern end of the Frankston Freeway.
The Mitcham-Frankston Freeway (formerly known as the Scoresby freeway) is likely to be electronically tolled, using a system similar to the one used on the CityLink freeway.
The Mitcham-Frankston Freeway was combined into a single project from the Eastern Freeway Extension Tunnel and the Scoresby Freeway projects by the Victorian State Government in 2003.
The freeway construction began in 2004 and is scheduled for completion in 2008. During the 2002 election campaign the Bracks Government declared that it would not use tolls to fund the construction of Victorian freeways. When it later announced that the Mitcham-Frankston freeway would be a tollway it was widely condemned for having broken an election promise.
The consortium with which the Victorian Government has contracted to construct the freeway is ConnectEast. Under present arrangements, motorists will pay $4.84 for a weekly trip along the length of the tollway. ConnectEast is expected to gain some $7 billion from the agreement.
Some background information on Government spending on roads
The total amount of road-related expenditure by the Australian, State, Territory and Local Governments in 2001-02 was $7.6 billion. Between 1998-99 and 2001-02 road-related expenditure increased by an average of $99.4 million per year. Over this period Commonwealth and State government road-related expenditure increased while Local government road-related expenditure decreased.
Ownership and control of the road system lies with State and Territory governments and Local governments. However, road expenditure in Australia is financed by all three levels of government. At present, the Australian Government funds the construction and maintenance of the 18,700 kilometre National Highway System and contributes to the construction of Roads of National Importance (RONIs) under the National Highway and RONI Program. It also funds the Roads to Recovery Program and the Black Spot Program, which provide funding for safety works off the National Highway. The Australian Government further supplements Local Government expenditure on local roads through untied grants identified for expenditure on local roads.
Between 1993-94 and 2001-02, prices for inputs to road construction and maintenance have increased by 17.7 per cent.
Revenue collected by the Commonwealth, State and Territory governments from a selection of motor vehicle taxes and charges in 2001-02 was $14.2 billion. The excise raised from petroleum products was $9.1 billion in 2001-02.
Internet information
On April 14 2003 the Victorian Premier, Mr Steve Bracks, released a media statement outlining the reasons why his government had decided to impose a toll on the Mitcham-Frankston freeway.
The full text of this media release can be found at http://www.vic.alp.org.au/media/0403/20001008.html
On October 14 2004 the leader of the Victorian Opposition, Mr Robert Doyle, released a media statement indicating that if his party were elected into office it would remove any tolls on the Mitcham-Frankston freeway.
The full text of this media release can be found at http://www.vic.liberal.org.au/MediaCentre/StateMedia/14102004scoresby.htm
In 2004 the Australian Government released an 'infosheet' titled, 'Public Road-Related Revenue and Expenditure in Australia'.
Much of the expenditure information in the above background material comes from this source.
The full text of this 'infosheet' can be found at http://www.btre.gov.au/docs/infosheets/is23/is23.pdf
Please note, this is a pdf file and requires Adobe Acrobat Reader.
On October 14 2004 ConnectEast released a press statement outlining some of the terms of its successful bid to build the Mitcham-Frankston tollway.
The full text of this document can be found at http://www.connecteast.com.au/pdf/IPOpressrelease.pdf
Please note, this is a pdf file and requires Adobe Acrobat Reader.
The Darebin Community Guide Online Forum has part thread dealing with the Frankston-Scoresby Freeway (Tollway)
Fifteen comments from members of this community can be found at http://www.communityguide.com.au/community.cfm?/darebin/forum/scoresbyfreeway/saynototolls#57
The Public Transport Users Association (PTUA) released a media statement on April 14 2003 explaining its opposition to the Mitcham-Frankston tollway. This was not centred on the mode of funding, rather it focused on what it claims is the misguided reliance on cars and freeways.
The full text of this comment can be found at http://www.ptua.org.au/media/2003/april14.shtml
Arguments in favour of tolls being imposed on the Mitcham-Frankston freeway
1. User-pays is a fairer system to apply in the construction of the Scoresby freeway
The Bracks Government has claimed that financial pressures have forced it to break a 2002 election promise and place tolls on the Mitcham-Frankston tollway.
On April 14, 2003, the Victorian Premier, Steve Bracks, stated, 'Since the last Budget - and the election - a number of issues beyond the Government's control have emerged and put extraordinary pressure on Victoria's strong economic position. The failure of the privatised public transport experiment - which resulted in the withdrawal of private transport operator National Express - has now left a $1 billion bill.
We have also seen the worst bushfires in Victoria's history, the continued deterioration in international markets, a worsening drought, and the impact of the Iraq conflict on the world economy. Since early this year at least an extra $350 million has had to be written down from the 2002-03 surplus due to the continued poor performance of international markets.
The decision we have been forced to make to impose tolls is a difficult one - but it is the right one to protect the bottom line of the Budget.'
The Bracks Government has endorsed the user-pays principle, arguing that it is fairer that a relatively small weekly charge be borne by those actually using the freeway, rather than have all Victorians pay for the freeway through reduced Government-funded services and projects.
With regard to the Mitcham-Frankston freeway the premier, Mr Steve Bracks, has stated, 'The reality is there's no such thing as a free lunch. There's nothing for free. You pay for it through your taxes and your Budget or you pay for it through user pays ...They're the lowest private sector tolls in Australia - and the freeway can't be built without them.'
2. The cost of buying out ConnectEast's franchise would be prohibitive
Accountants Pricewaterhouse-Coopers have estimated that buying out ConnectEast's franchise could leave the state with a debt of some $7 billion.
It has been noted that motorists unlikely to make regular use of this freeway, especially country motorists, would object strongly to any government using billions of dollars of taxpayers' money to buy their way out of the contract with ConnectEast. The leader of the National Party in Victoria, Mr Peter Ryan, has stated, 'If this is supposed in the end to involve the use of billions of dollars to buy out that contract, country Victorians will never ever agree to that stance. Never.'
A number of Victorian Government ministers have argued that the cost of such a buy out would take Government money from services such as health and education, while Government investment in programs to develop tourism and agriculture would be at risk.
3. Using taxpayers money to remove tolls from a freeway used by a minority of Victorians is inappropriate
It has been argued that spending $7 billion to buy back ConnectEast's franchise is an inappropriate use of Victorian taxpayer's money.
According to this line of argument, paying some $7 billion to remove a weekly toll of less than $5 from those living in eastern metropolitan Victoria is not a reasonable use of Government revenue.
The leader of the National Party in Victoria has stated that he would never support diverting billions of dollars from country road projects to buy back the franchise on the Scoresby freeway.
4. Reneging by any Victorian Government on the contract with ConnectEast undermines good business principles
The leader of the National Party in Victoria, Mr Peter Ryan, has stated, 'We're very concerned about the situation at Scoresby in as much as it involves tearing up a contract. Contracts cannot be torn up.'
In an editorial published on December 19, 2004, The Age argued, 'The legality of such a move [to buy back the franchise] would be tenuous at best, according to advice to the State Government and the toll road building authority. Realistically, the only way to break the contract would be through a legislative measure, which would create the perception that Victoria is a "sovereign risk".'
It has been claimed that such legislation would undermine confidence in the validity of contracts in Victoria and would reduce investors' readiness to risk their capital in this state.
A similar point has been made by the current Victorian Government, arguing that when a contract has been entered into in good faith by both parties it cannot simply be withdrawn from because one of those parties subsequently changes their mind.
The Victorian Transport Minister, Mr Peter Batchelor, has stated, 'It's outrageous. It raises the question of sovereign risk. We'd be sued for $7 billion by ConnectEast, the company we signed a contract with to do the tolls.'
5. The Federal Government is behaving unjustly in withholding funds for the building of the Mitcham-Frankston freeway
It has been argued that the Federal Government has no right to withhold road funding from the Scoresby freeway project as the money they are refusing to pass on has been collected from Victorian taxpayers.
In an opinion piece published in The Age on February 13, 2005, David Broadbent, Channel Nine's state political reporter stated, 'Victorian motorists contribute 26 per cent of the $12 billion in fuel taxes collected annually by the Howard Government, and [yet] are entitled to a refund of just 23 per cent under the lopsided Auslink road scheme ...
If John Anderson insists on holding back the $520 million Scoresby money, Victoria's real share of Auslink funding falls to a pathetic 16 per cent.'
The Victorian Transport Minister, Mr Peter Batchelor, has stated, 'Victorian motorists have paid their taxes and deserve to have this money invested in road projects now.'
It has also been repeatedly suggested that the Federal Government is withholding the Scoresby freeway funding for political reasons. It has been claimed that the Howard Government is withholding the money so as to support the Victorian Opposition leader, Mr Robert Doyle, in his bid to embarrass the Bracks' Government over the issue.
Arguments against tolls being imposed on the Mitcham-Frankston freeway
1. Tolls are unjust as Victorian taxpayers have already contributed toward the cost of road building
It has been claimed that it is unfair to impose an additional cost on those who use a freeway as their state and federal taxes, especially those paid for vehicle registration, are supposed to go towards the building and maintenance of roads and freeways.
A contributor to the Darebin Community On-line Forum has argued, 'The motorist already pays for the privilege [of road use] with registration, licensing, the stamp duty on these charges, fuel tax etc.'
According to this line of argument it is not reasonable to ask motorists to pay again merely because they live in an area where it has been decided an additional freeway needs to be built.
Another contributor to the same forum asked, 'Why should we have to pay a toll when we already pay for the roads that we use?'
2. The Brack's Government broke an election commitment when it decided to toll the Mitcham East freeway
The State Government broke a 2002 election promise when it decided to impose tolls on the Mitcham-Frankston freeway.
In an editorial published on December 19, 2004, The Age stated, 'The anti-tolling stance has its origins in a spectacular and dishonest reversal of a pre-election commitment by the Bracks Government that there would be no tolls on the freeway. Soon after its emphatic return to power at the last state election in November 2002, the Government announced that tolls would be imposed.'
A contributor to the Darebin Community On-line Forum has stated, 'A promise is a promise. Mr Bracks has deceived the Victorian voting public as the majority of his winning seats came from the outer South Eastern regions and Geelong.'
3. Improving other roads and public transport in the area to be serviced by the Mitcham-Frankston freeway would reduce the value of the ConnectEast franchise
The contract signed with ConnectEast does not prevent the Government from upgrading roads that compete with the new freeway or from upgrading public transport servicing the area. Were a government of either political persuasion to do this, it would reduce the anticipated toll earnings from the Mitcham-Frankston freeway and so make it cheaper for any government to buy back ConnectEast's franchise.
In an opinion piece published in The Age on February 3, Kenneth Davidson wrote, 'The expenditure of a few hundred million dollars on grade separation along the Ringwood line plus a decent bus service connecting railway stations would allow roads such as Stud Road to compete more effectively with the freeway, [and] allow greater rail frequencies which could be justified by the greater rail catchment area opened up by the upgraded bus service.'
Mr Davidson further suggested that governments 'must be prepared to invest in a decent public transport network in the eastern suburbs to reduce the market value of the franchise'.
4. The Victorian Government has lost federal road funds by its decision to toll the Mitcham-Frankston freeway
The Victorian Government had a roads funding agreement with the Federal Government regarding the Scoresby freeway. Among the terms of this agreement was that the road would not be a tollway. Since the Brack's Government has decided to build the freeway as a tollway the Federal Government has indicated it will not make all the previously promised $1.5 billion available. $542 million of this money was intended for the Mitcham-Frankston freeway. This money will continue to be withheld if the freeway is not toll-free.
The Federal Transport Minister, Mr Anderson, told ABC radio, 'All the other agreed [road] projects will go ahead once we sign the bilateral [Auslink agreement].'
A spokesperson for the Federal Transport Minister, Mr John Anderson, has stated, 'We have an agreement with the State Government to build a toll-free freeway . . . and they've reneged on that agreement ... We want them to go back to it. Our money is on the table. It's ready to be spent.'
In an editorial published on February 10, 2005, The Herald Sun stated, 'Let's get one thing clear: no one other than the Bracks Government is to blame for Victoria missing out on $520 million in federal road funds.
Quite simply, the Howard Government agreed to put this amount towards the Mitcham-Frankston freeway, conditional on the Bracks Government keeping its election promise that it would be toll-free. But Mr Bracks broke his word.'
5. Tollways do not make economic sense
Critics claim that contracts with private consortiums to build freeways and then receive payment in tollway revenue are false economy.
According to this line of argument, Governments save in the short term as they do not have to use taxation revenue to pay for freeway construction. They are spared the need to take out loans that then have to be paid back, with interest, out of state taxes and Federal grants. However, it is argued, somebody has to pay for the construction of major roads. With a tollway, that somebody is the road user.
Critics argue that one of the problems with this arrangement is that the terms negotiated with the road building consortiums usually have the road user paying very much more than the cost of road construction.
In an opinion piece published in The Age on February 3, 2005, Kenneth Davidson wrote, 'CityLink cost $1.8 billion to build. Shareholder equity in the operation is now $5 billion ... The difference reflects the fact that Transurban tolls are at least twice that which would be required to cover the cost of a publicly funded tollway.'
Commenting on the Scoresby freeway Davidson noted that the cost of the freeway was $2.5 billion, while the buy back value of the contract negotiated with ConnectEast is $7 billion.
Davidson concludes, 'The Government has negotiated away about $4.5 billion worth of value from Victorian taxpayers/motorists for no material gain whatsoever.'
Further implications
The immediate further implications of the decision to make the Mitcham-Frankston freeway a tollway are likely to be political. Though the Bracks Government enjoys a large parliamentary majority, the south-eastern suburbs of Melbourne are electorally important, covering ten seats which the Government could lose with a swing of between 3 and 8%.
Given the size of the Labor Government's majority it seems highly unlikely that it will lose government in one election. What seems more likely is that it will lose a significant proportion of these sensitive seats and that the Opposition will then be in a position where it may win office at the following election.
Some commentators have suggested that the rather rash promise made by the Opposition leader, Mr Robert Doyle, that he would remove the toll if elected will tell against him at the polls. However, voters affected by the toll do not have to believe Mr Doyle will be able to remove it in order to want to punish Mr Bracks for having put it on.
Interestingly, unlike when the CityLink tollway was built, the issue of whether tollways are equitable has received relatively little media attention. The focus of discussion has been on the political consequences of the Bracks' Government's policy reversal and then Mr Doyle's supposedly maladroit handling of the opportunity presented by the Bracks' Government's broken promise.
Another issue all but completely ignored in the current debate is the desirability of freeways per se. The groups being given a voice in the media appear to accept the necessity of freeways and so focus instead on the political implications of how they are paid for.
There is little serious discussion in the media of the environmental and social costs of car dependence, freeways and the associated urban sprawl.
Sources
The Age
28/1/05 page 3 news item by Kenneth Nguyen, 'Liberals shy from costings on Scoresby toll reversal'
3/2/05 page 15 comment Kenneth Davidson, 'A tollway buyback would save money and ease traffic'
9/2/05 page 1 news item by Paul Robinson and Kenneth Nguyen, 'Canberra puts $1bn ultimatum on Scoresby tolls'
10/2/05 page 3 news item by Kenneth Nguyen and Farrah Tomazin, 'Canberra relents on $1bn road funds'
13/2/05 page 19 comment by David Broadbent, 'This week's Scoresby: nil all'
17/2/05 page 2 news item by Kenneth Nguyen, 'Freeway without tolls "unimaginable"'
22/2/05 page 2 news item by Darren Gray, 'Doyle's vow on toll-free road suffers new blow'
23/2/05 page 7 news item by Farrah Tomazin, 'Libs uneasy over Doyle tolls pledge'
23/2/05 page 7 analysis by Paul Austin, 'Leader tries to keep his balance as he navigates a dangerous no-tolls tightrope'
24/2/05 page 16 editorial, 'Liberal leader risks going too far out on a limb'
6/3/05 page 21 comment by David Broadbent, 'Ask not for whom the toll bells ...'
The Herald Sun
10/2/05 page 19 news item by Ashley Gardiner, 'Toll war delays money for roads'
10/2/05 page 22 editorial, 'A two-way street'
23/2/05 page 2 news item by Peter Mickelburough and Tanya Giles, 'Tollroads at crossroads'