Industry questions report's tolls push

Road tolls are on the table as an option to help fund new transport infrastructure. <br /><br /> However, it is one of a swathe of ideas presented in the Infrastructure Finance Working Group’s newly released Infrastructure Finance and Funding Reform report, Infrastructure Australia says.

Industry questions report's tolls push
Industry questions report's tolls call
By Rob McKay | June 14, 2012

Road tolls are on the table as an option to help fund new transport infrastructure.

However, it is just one of a swathe of ideas presented in the Infrastructure Finance Working Group’s newly released Infrastructure Finance and Funding Reform report, Infrastructure Australia says.

"While user charges are one approach discussed, the experts go further, calling for a reform of government balance sheets to create the capacity to invest in new infrastructure assets," the organisation adds.

"They point to opportunities to augment the traditional grant-based approach to infrastructure funding with co-funding between the Commonwealth, states and private sector on nationally significant Public Private Partnership (PPP) projects, to get these to market more quickly."

But the bottom line for infrastructure users is "user pays" and this tops the list of recommendations.

"Governments should implement targeted measures such as user charges to enhance price signals to better balance supply and demand and to increase the funding available for infrastructure investment," Recommendation 1 reads.

Later, the reports says that while other options had been explored, the most effective way to attract private sector investment in economic infrastructure is through user-charging, which "would ensure that projects would be in a better position to deliver an adequate level of return and help secure the benefits of ongoing participation of the private sector by leveraging government support through the market".

However, the response the working group got for freight-specific infrastructure and charging was unsupportive in submissions.

"Only one submission commented explicitly on the concept of freight toll roads," it says.

"It argued somewhat critically that it would be more efficient to allow any vehicle willing to pay the toll to use the toll road rather than exclude non-freight vehicles."

The working group left it to governments to decide on tolling for new and existing projects.

Its proposed solutions cut no ice with the Australian Trucking Association (ATA), which believes what is needed is for governments to do their jobs properly.

"The recent work done by the COAG Road Reform plan shows that most of the benefits from reforming the way roads are built will come from fixing the way state and federal governments build roads, rather than slugging trucking operators," ATA Government Relations and Communications National Manager Bill McKinley says.

"This report does not appear to take this important finding into account."

While not taking quite as hard a line, the Australian Logistics Council (ALC) also had concerns on road pricing

"It is important to remember the freight logistics industry is the victim of congestion rather than the cause," ALC Managing Director Michael Kilgariff says.

"The freight logistics industry could only support road pricing reform on the basis that the revenue is used for freight related infrastructure (and not for consolidated revenue), the reform delivers improved productivity, it does not distort the heavy vehicle industry and the charges are transparent and justified.

"Any road pricing reform must be accompanied by a rigorous compliance and enforcement regime and take into account the current taxes and charges paid by road users.

"It also needs to be applied consistently across all vehicles, including both passengers and freight."

The working group argues for reform by all levels of government to help give a willing private sector the confidence to invest in projects that will help loosen the infrastructure backlog.

It also calls for government sell-offs to provide funds for new projects.

It wants a three-pronged approach on investment:

  • major reform of infrastructure funding
  • improved infrastructure planning to provide a deep pipeline of projects that give industry certainty
  • steps to encourage more flexible and efficient markets that attract private investment.

It also calls for the identification of alternative sources of finance, such as superannuation funds, to build on the already strong interest from this segment of the investor market in established "brownfield" assets.

"A deep pipeline of infrastructure projects will provide industry with certainty and create the conditions for private investment in projects," Infrastructure Coordinator Michael Deegan says.

The working group says that "while the community wants and expects high quality transport infrastructure, it is clear that the current road funding/taxing arrangements will struggle to meet Australia future transport challenges.

"As congestion-related costs rise, so too will the pressure to seek a greater community contribution."

The working group points to a need to adjust community expectations away from regarding tax-paid infrastructure as coming at no cost.

"Here, users do not directly see the contribution they make, resulting in the tendency for infrastructure asserts to be overused", which results in congestion.

The ALC believes that, though more could be done, a number of the key recommendations are welcome.

"These include the report’s recommendation to link infrastructure funding to state and territory governments implementing agreed reforms," Kilgariff says.

"While acknowledging the report’s focus is on reforms designed to increase the states’ capacity to invest in infrastructure, ALC believes this should go further.

"There is also scope to extend the concept of conditional funding to projects and reforms designed to improve supply chain efficiency."

It backs the preparation of 20-year infrastructure strategies that share a common framework and timeframe.

"These reforms must be backed up by a robust monitoring regime to deliver greater accountability and to ensure the strategies are being implemented appropriately," Kilgariff says.

"The report correctly highlights that a more strategic approach to long term planning will help facilitate better planning outcomes, particularly in relation to the preservation of nationally significant land corridors.

"A major inhibitor to improved freight efficiency is a failure to ensure key freight routes are identified and protected."

The report can be found here:

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