The operators of Sydney’s toll roads will pocket an estimated $123 billion from motorists over the next 37 years—about $195 billion in nominal terms. And it’s because drivers have always come last in the complex negotiations between governments and toll operators, according to the roads minister.
And there’s little the current government can do about it.
The independent NSW Tolling Review report, released March 11, shows many agreements, covering more than a dozen tollways, cannot be renegotiated or altered. One runs until 2060, forcing motorists to keep paying until then.
The report—by former competition watchdog chief Professor Allan Fels and economist David Cousins— found the approach to setting tolls had been “influenced more by the perceived need to cover the concessionaire’s financing costs than by the need to manage traffic on the roads.
“Since tolls have been set administratively rather than by competitive market forces, the likelihood that they have not always been set appropriately becomes a real one,” the report concludes. Most of the government’s agreements with private operators contain a “floor” provision, meaning that even if inflation decreases, the tolls won’t.
“An inappropriate toll base or escalation rate, for example [one that was capable of] taking account of changes in demand or technology over time, could not be readily corrected.
“It has also not had a strong regard to principles of efficiency and fairness in setting individual tolls.”
The agreements are also outdated.
“Most of the concession agreements date from the 1990s and 2000s, and their built-in rates of return have reflected the higher costs of capital prevailing at the times the agreements were concluded,” the report says. “These rates can be regarded as generous compared to rates which would be considered should apply today.”
The 1994 agreement covering Transurban’s Hills M2 in northwest Sydney has a specific provision to protect the operator from adverse impacts arising from any competitive public transport development.
The report recommends the government establish two-way tolling on the Harbour Bridge, Harbour tunnel, and the eastern distributor, which it says would create a “fairer” system that would help reduce other tolls. It also suggests charging motorists an additional infrastructure charge of up to $6 per trip.
The aim is to create a more unified pricing structure, with tolls charged on a decreasing cost-per-kilometre-driven basis.
Government Needs to ‘Take Control’: Report
The government could achieve this by passing legislation to take control of tolls via an agency known as TollCo, and set prices “taking into account the contractual rights of toll operators.”He predicted that Transurban—which operates 11 of the affected roads—may not support the proposals, they may actually help stave off reductions in revenue.
“Motorists are starting to withdraw from the system and clog up [other] roads to avoid having to pay those bills,” he said.
The report found that 87 percent of drivers believe tolls are too high, and 70 percent consider the cost to be unfair.
NSW Roads Minister John Graham said the report confirmed what motorists had long suspected.
“The toll contracts were designed with guaranteed financial returns to their owners and operators as top of mind before the need for an efficient and affordable network for those who use it,” he said. “Drivers came last in that equation.”
NSW Premier Chris Minns said the burden was hitting families who could least afford it.
“This isn’t fair,” he said. “It’s putting a huge burden on Sydneysiders trying get to work, drop their kids at school, and go about their lives.”
The full report is due to be released later in 2024.
