In 2017, the Victorian Government agreed to an unsolicited bid from toll giant Transurban to build the West Gate Tunnel Project – a four kilometre toll road currently under construction in Melbourne to link the West Gate Freeway at Yarraville with the Port of Melbourne and CityLink at Docklands.
Under the project’s terms, Transurban would pay $4 billion to help fund and build the project in exchange for which the toll road company would increase tolls by 4.25% every year for a decade – way above inflation and wage growth – and then rise by CPI. As a result, Transurban would net an extra $37.3 billion in tolls by 2045, according to Parliamentary Budget Office calculations.
Later it was revealed that the Victorian Government approved the West Gate Tunnel Project despite expert advice warning against the deal:
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“Everyone other than a small cadre of experts (most of whom are within Transurban, but also state officials within Treasury and [the transport department]) were shut out of the process of asking whether this project should be undertaken,” the [group of 28] experts wrote…
Victoria’s Auditor-General, Andrew Greaves, also found that the Victorian Government had approved the project without sufficient proof that Transurban’s proposal demonstrated value for money and “unique qualities”.
Fast forward to February 2021 and it is unsurprising to read that Transurban has advised of “substantial cost overruns” on the $6.7 billion West Gate Tunnel project and concedes that the project’s 2023 completion date will no longer be met:
Transurban chief executive Scott Charlton… said the project was facing “substantial overruns” on Thursday, when commenting on the release of the company’s half-year result…
The chief executive would not confirm the project’s current price tag, saying the scale of the overruns were still unknown, but Treasury has predicted a $3 billion cost blowout on the project, internal government documents leaked to The Age have revealed.
Thus, Dan Andrews’ West Gate Tunnel project is shaping up as a disaster for Victorian taxpayers and users. Not only are taxpayers already facing a bill of $2.7 billion to build the project (with the other $4 billion coming from Transurban), but also a decade of escalating toll fees that will deliver Transurban a massive financial windfall at motorists expense.
Transurban has already privatised the gains from this project. It must wear any additional cost blowouts.