A fortnight ago, ACCC chairman Rod Sims warned state governments against accepting unsolicited bids for infrastructure projects:
“The ACCC considers that state governments should only award new toll road concessions through a competitive bid process, and not following an unsolicited proposal unless there is a truly compelling reason,” Mr Sims said.
“Accepted unsolicited proposals for new toll road concessions generally leads to higher costs for taxpayers, drivers, or both.”
Mr Sims’ comments on unsolicited proposals will put pressure on state governments who often like them as a quick, effective and often cheaper way for dealing with an infrastructure bottleneck or upgrade.
Over the weekend, the AirRail Melbourne consortium – which includes the owner of Southern Cross Station and part owner of Melbourne Airport, IFM Investors – offered to contribute $5 billion (on top of the state and federal government’s $10 billion) to build and ticket the Airport Rail Link. From ABC News:
The AirRail Melbourne consortium includes superannuation fund IMF Investors, Melbourne Airport and Metro Trains and will contribute $5 billion to the plan.
The Federal and Victorian Governments will contribute $5 billion each, and the project would be built in six or seven years starting in late 2020 and opening a year after Melbourne Metro opens in 2027.
“What this means is together with government, this project will now total $15 billion and mean Victoria finally gets a world-class airport rail service and so much more,” project leader Danny Elia said.
Under the plan, 27 kilometres of new track will be built between Southern Cross station in Melbourne’s CBD and Melbourne Airport via a new “super hub” in Sunshine…
The service will deliver a “reliable” 20-minute travel time from the CBD to the airport for $20, with around-the-clock services running every ten minutes, Mr Elia said…
More from the Herald-Sun:
Under the plan, IFM would keep the ticket revenue, with chief Brett Himbury saying the rail link would become a “dependable long-term” investment for a fund that looks after the superannuation of half of Victoria’s working population.
A joint federal-state government business case for the project is expected to be completed by the end of next year, with construction to start in 2022, but the consortium argues work could begin in two years.
Righto, so taxpayers would contribute two-thirds of the cost ($10 billion), but IFM would receive all of the ticketing revenue in addition to funnelling passengers through its existing assets (Southern Cross Station and Melbourne Airport). Sounds sketchy.
Moreover, the suggested train fare of $20 would cost more than the existing SkyBus service ($19), which could easily be expanded at far lower cost to taxpayers:
A train would replace a public transport service that costs Victorian taxpayers nothing (i.e. SkyBus) with one that wouldn’t cover any of its capital costs…
Tickets wouldn’t be cheaper than SkyBus either. It’s virtually certain the government would insist on charging circa $18 one-way as is the case with the Sydney and Brisbane airport rail services…
The key advantage of a rail line at this time is that it would provide a faster trip than SkyBus during Melbourne’s (landside) peak periods…
SkyBus could be made faster in the peak by giving it a dedicated road lane at considerably lower capital and operating cost to taxpayers than building an airport train.
In fact, the current widening of the Tullamarine-City Link motorway offers an opportunity to provide a High Occupancy and Toll (HOT) lane from the airport to the city centre.
Other than tourists and those living in the CBD, I also cannot envisage many locals actually using an airport rail link. Why? Because they would still need to get to the CBD, where the cost of parking is equally exorbitant as the airport. This means passengers would either have to carry luggage on the public transport network, or catch a cab. In which case, why not just go directly to the airport and avoid the changeover hassles?
Let’s be honest, an airport rail link is a nice thing to have, but not at any cost. And certainly not at the projected $10 billion initial taxpayer investment (plus ongoing operational subsidies) when there are so many other more worthy projects screaming for funding.
The fact of the matter is that this project should have been first subjected to a rigorous business case and cost-benefit analysis before funding was committed, not after the fact. That the reverse is true shows just how busted Australia’s infrastructure system is.
