Proposed Toll Reform Would Blow A Hole In NSW Budget – Treasury Analysis

A government-commissioned review’s proposal to establish a toll collection agency would cost the government $95 billion and potentially damage the state’s credit rating, despite giving the government control over charges, confidential Treasury analysis found in September.

The entity would have the power to set toll rates across the state’s motorways, including on inner Sydney toll roads. However, although it would increase annual revenue by a few billion dollars, the now-disclosed analysis found it would have an extreme negative effect on public finances, as the “obligation to pay concessions” to toll road operators would be a far greater liability.

According to the review, the potential increase in revenue is “negligible” compared with the increase in debt. The analysis estimated that the agency if established as such would accrue approximately $3.4 billion in revenue through 2026, far less than the projected $95 billion liability that would be created.

Government legislation passed in November created NSW Motorways, a new agency which the treasury and roads ministry said “will oversee a reformed toll road network and will be tasked with driving toll reform in conjunction with the owners of the city’s private motorways.”

“NSW Motorways will oversee any future revenue adjustment mechanism to protect private toll concessionaires from losses from a network-wide pricing structure – but also ensure any windfall gains that stem from toll reform go to the NSW public, rather than private operators,” the ministries stated at the time.

Responding to the disclosure, roads minister John Graham said the agency “does not currently have the function of collecting tolls on private motorways or determining toll prices.”

The analysis findings were obtained under freedom of information, as reported by the Sydney Morning Herald.

Opposition sledges government

A recent press release from Liberal leader Mark Speakman and shadow transport and roads minister Natalie Ward accused the government of dragging out reform and wasting millions of dollars in the process.

“After 700 days of talk, press conferences and expensive reports, the Minns Labor Government’s so-called Toll Review has delivered nothing for drivers,” the pair stated.

“Instead, the Minns Labor Government has secretly explored new tolls and longer contracts, meaning motorists will be paying more, for longer.” 

The pair said that the government “has now quietly dumped former Toll Review Chair Allan Fels as lead negotiator and is paying an estimated $990,000 for a replacement, while signing off on a $2,750,000 new legal bill for outside lawyers.”

Fels led the review which was the subject of the now-disclosed Treasury analysis.

At a recent budget estimates hearing, Graham said that contracts signed by the Liberals whilst in government had left motorists with $195 billion to pay in tolls from now until 2060.

Minister endorsed review

In an opinion piece published in March last year, Graham endorsed the Fels review, which also called for the introduction of distance-based tolls on all Sydney toll roads.

Writing for the Herald, Graham argued that toll roads are “a difficult area” in which to achieve reform, “but as the interim report of Allan Fels’ toll review lays out in more than 230 pages of detail, reform is necessary.”

“It must start now or risk creating a more divided city in which people are confined to their own corner of Sydney due to the prohibitive cost of just getting around.”

Graham wrote that under all of the options presented by the review, “the tolls on some journeys would rise to facilitate lower prices overall and to ensure the toll burden is shared more fairly than it is today.”

Making the case for reform, Graham quoted the interim report, which posited that the government has a “responsibility” to achieve reform.

“In the past, it has been suggested that reforms to road tolling are not possible given the nature of the concession agreements. We do not accept this,” the report declared.

“We do accept the proposition that the state needs to act responsibly in achieving reforms in this area and that the reasonable expectations of toll road operators need to be protected and honoured. Our overriding focus, however, is the public interest and toll reform is necessary in the public interest.”