The question of how to finance and fund major road infrastructure projects in Australia – including the potential role of user-pays charging as a funding solution – was top of mind at the recent Roads Australia National Summit in Sydney. The two-day summit, organised by peak national body Roads Australia, is the largest and most influential annual gathering of industry decision-makers in the country. This year’s summit was held against a backdrop of concern over the future of a raft of major road projects t
NRMA president, Wendy Machin
The Australian road industry looks for answers to finance and fund massive infrastructure backlog – Mark Bowmer reports
The question of how to finance and fund major road infrastructure projects in Australia – including the potential role of user-pays charging as a funding solution – was top of mind at the recentThis year’s summit was held against a backdrop of concern over the future of a raft of major road projects that have been identified by governments as priority infrastructure, yet are currently stymied by a lack of financing and funding solutions.
Australian governments, in particular, have shown a reluctance to go into debt to fund infrastructure because of their collective focus on maintaining AAA ratings. One summit speaker described the effect of this as ‘swapping a fiscal deficit for an infrastructure deficit’.
Addressing the first-day session on Financing Models,
This was coupled with the ‘sudden, belated’ realisation by the private sector that the traffic figures used to underpin successful bids on a number of past projects had been optimistic. “The private sector feedback is: ‘no more traffic risk on greenfield projects’,” he said. “So for the moment, the context of our PPP model for funding road projects doesn’t exist, and we are yet to identify a model in Australia that meets the existing market constraints.”
Neal Johnston, a partner with Ernst & Young, said the crisis was underlined by Infrastructure Australia projections that between $A450 billion and $A770 billion of infrastructure investment (including roads) would be required in the next decade just to keep pace. But he was nevertheless optimistic that the ‘fundamentals’ were in place to address the long-term infrastructure challenge. “In the global context we’re in a very favourable position,” Johnston said. “We’ve got a strong market, a strong government fiscal position and strong infrastructure demand. So the key ingredients are there for what should be a successful, long-term market.”
Johnston said new financing solutions were not the ‘silver bullet’ that would solve the problem, but they would play an important part in delivering some of the key projects to address the infrastructure gap. However, the single biggest blocker to infrastructure development at the moment was the funding challenge, he said. “That’s where the debate has started and is progressing, and it’s where we need real political leadership,” he added. Johnston said that in terms of road project funding, there were really only two sources – either government funding or user charges.
“The (user charging) argument is gathering pace. Realistically, it provides one of the best opportunities for enhancing the funding pool,” he said. On the issue of traffic risk, Johnston agreed that equity investors were clearly uncomfortable with pure ‘greenfield’ projects.
But they continued to be interested in longterm traffic risk, particularly with ‘brownfield’ projects. The same was true of the banks, he added. Johnston said that among the alternative traffic risk sharing models that were currently garnering the most market interest were so-called ‘cap and collar’ (a guaranteed traffic minimum balanced by a cap on revenue), revenue guarantee and debt guarantee models.
However he cautioned that any discussion of alternative financing models also needed to take into account the road pricing debate and where that might lead in the future. The new models also needed to recognise the constraints in the current debt market, including the high debt finance cost, he said. Providing a contracting industry perspective,
Alison said one option was for governments to take a larger share of the ramp-up risk for projects, delivering the projects as toll roads and then deciding whether or not to ‘sell off’ the revenue stream. One of Australia’s leading transport academics, Professor David Hensher from the Institute of Transport and Logistic Studies at the University of Sydney, outlined the case for road pricing reform. Professor Hensher said it was possible to design a system in which many users were financially better off with some form of congestion charge (even an emissionsbased charge). But he said it would first be necessary to remove vehicle registration charges and reduce fuel excise duty, and clearly demonstrate to the community how the revenues would be spent and the broader benefits of reform in terms of personal productivity and mobility.
Professor Hensher also advocated a shift in public transport focus away from trains to buses - including Bus Rapid Transit (BRT) systems - to meet the optimum goals of service capacity, frequency, flexibility and connectivity. He asked, “The question is, how can we move more people per hour and get value for money out of the investment?”
“That’s the key question, and I don’t think it’s being asked enough,” he continued. “The discussion typically starts off with ‘we want to build a railway so let’s find out where to put it and how we do it’, rather than asking ‘is that the best solution?’”
Professor Hensher said that internationally there were far more BRT systems being built than railways because they delivered better value for money in terms of service capacities (as opposed to train set capacity).
The challenges facing Australia state road agencies in terms of network management was also a theme explored over the two-day summit. The deputy chief executive of the
This included the use of overhead gantry signs to manage motorway speeds and the utilisation of hard shoulder lanes to deliver additional capacity when it was needed.
Turner cited the successful hard shoulder pilot on the M42 corridor, which had delivered additional road capacity at a cost of 40-60% lower than conventional lane widening, as well as a 27% increase in journey time reliability. Significantly, personal injury accidents also saw a reduction of 21% during the pilot, he said.
Turner also talked about free-flow tolling technologies, in particular the advantages of number plate recognition linked to accounts, and the potential for in-vehicle communications. The UK motorways network currently has the telecommunications capability to transmit information to vehicles, although key stakeholders, including the car industry, have been reluctant to embrace the opportunities.
The tight budgetary constraints on Australia’s state road agencies and the impacts on their spending priorities - including maintenance spending - was also underlined in presentations by the respective agency heads from New South Wales, Victoria, South Australia and Western Australia. It is widely acknowledged across the industry that not enough is being spent on road maintenance. The problem, particularly in Australia’s eastern states, has been exacerbated in recent years by the impacts of natural disasters in the form of widespread flooding.
Options being explored by all agencies are focused on how to contract and specify better to stretch the maintenance dollar further.
Main Roads WA managing director, Menno Hennenveld told delegates his agency had learnt much from its initial experience with maintenance contracts, and was applying those lessons to the ‘second generation’ of contracts. “We are getting far better value from our contractors because we incentivise those contracts,” he said.
The 2012 summit also included a focus on new technologies and best practice project delivery methods. Dr Ben Guy, the managing director of Urban Circus, talked about the role and application of 3D technology to deliver ‘engineering accurate’ visual models of road infrastructure.
He said increasingly, decisionmakers were turning to what he described as a 3D ‘visualisation platform’ rather than CAD or paper plans to do the ‘big thinking’ in terms of the conceptualisation and planning of projects.
Another international speaker, David Threlfall, the technology director with Hyder Consulting in the UK, focused on another futuristic theme – that of the development of autonomous vehicles and its implications for network management. Threlfall said the reality was that private vehicle use would continue to be the predominant transport option well into the future. There would be modal shift to public transport, but ‘we need to develop our designer traf c control systems with the private car very much in mind’, he said.
Notwithstanding the perceived lack of individual driver freedom and the challenging ‘mind shift’ required of drivers, autonomous vehicle technology provided an opportunity to better manage traffic flow, improve safety and deliver reliability benefits. Threlfall said prototype autonomous vehicles already existed and pilots and research projects were well advanced, and in fact the US state of Nevada had already approved America’s first selfdriven vehicle licence.
This year’s Roads Australia Summit was hailed by organisers as the most successful yet, attracting some 170 industry leaders from across Australia and overseas.
Ken Mathers awarded John Shaw Medal
Linking Melbourne Authority CEO, Ken Mathers, was awarded the Australian road industry’s highest accolade, the John Shaw Medal, at this year’s Roads Australia National Road Summit in Sydney. Widely regarded as one of the genuine ‘good guys’ of the Australian industry, Ken has been responsible for delivering some of the country’s largest road projects, such as CityLink, EastLink, Airport Link and Peninsula Link.
The judging panel of former recipients described Ken as a pioneer of contemporary road design and landscaping, while having mastered the balance of delivering a project, working with the community and getting the best outcome for the environment. In accepting his award at a dinner attended by 370 guests at the Sydney Town Hall, Ken reflected on his career going back to 1965 and thanked those who had been with him on the journey. “Very early on in my career I developed a great appreciation of how tough it is at the sharp end, for those people who actually have to build things,” he said.@The importance of networking and engaging broadly with the community and contractors on projects like City Link were also invaluable lessons learnt along the way, he added.
The John Shaw Medal has a long history and is recognised as one of the most signi cant achievements in the Australian road transport sector. The selection panel comprises previous winners of the Medal and represents a ‘who’s who’ of the Australian industry’s pioneers and champions.
