We’ve had ghost estates and zombie hotels. Now it seems we have phantom roads. Well at least under-utilised roads. This wouldn’t be too bad in the sense that a nice open road is more pleasant to drive on that one that’s chockerblock, but the problem is that these are PPP toll roads that require a certain level of usage otherwise payment penalties kick in. Plan Better – a joint initiative of An Taisce, Friends of the Earth, Friends of the Irish Environment and Feasta – have published data that shows that M3 traffic (21,500 per day) is 22% below the penalty payments level (26,250) and the Limerick Tunnel (13,500 per day) is 26% below the penalty payments level (17,000) on the Limerick Tunnel. If these traffic levels were to persist then over the lifetime of the PPP contracts the state (i.e. taxpayers) would owe the toll operators over €100m. Plan Better make a case that the NRA has made a fundamental mistake in applying a growth only model of traffic demand on the Irish roads network and they’re calling for a review of the projections used to justify future road building including the proposed motorway between Oilgate and Rosslare (N11/N25), and upgrades to routes such as Blarney to Patrickswell (N20), Clontribret to Moybridge (N2), the Ballyvourney motorway (N22), Abbeyfeale to Clonshire (N21), Kilmeaden to Midleton (N25), Ashbourne to Ardee (N2), and Tuam to Letterkenny (N17). Of course, we would expect traffic to fall off during a recession and to pick back up again as the economy recovers, but on the basis of Plan Better’s analysis it does seem like a recalibration of the models used to justify road building might be due given the drastic changes to Ireland’s economy in the past couple of years, especially given the pitfalls of PPP penalties and the pressure to reduce capital spend. It might well be the case that we need upgraded roads, but we have little need for gold-plated phantom ones (see also this post on Irish Economy).
Rob Kitchin
October 11, 2010 at 4:53 pm
I’m a professional Transport Modeler who’s done many PPP Toll Road projects in China and Australia over the last few decades.
I’ve never seen a situation where the local authorities were expected to make up shortfalls in the toll road revenues. That’s just insane, and an invitation to Moral Hazard.
I know if I’d ever been in that situation, there would have been tremendous pressure from the financiers to have extremely bullish forecasts. Even more pressure than normal on such a project.
The whole point of the PPP schemes is that the private financiers take a risk to make money. If you remove the risk from the equation, you’re just handing money to them.
October 11, 2010 at 7:50 pm
Welcome to Ireland. The country with upward-only rent reviews. The state locked into long-term leases on empty buildings. Routine massive overspend on infrastructure projects. And interestingly structured PPPs … In addition the state subsidised the road building by absorbing land purchase costs for the roads and gave very generous bonuses for early delivery. See http://www.fius.ie/Documents/Rhearne_PIUS_Vol.2.pdf for a discussion PPPs in Ireland.
October 11, 2010 at 8:11 pm
Yet another reason for burying this corrupt government. But. Will the next one be any better?
October 12, 2010 at 10:26 am
Place pressure on those who “own” the rights even yea, unto liquidation for tax evasion etc., so that they are happy to renegotiate or else simply buy back the rights from the liquidator?
Bureaucrats: feel free to refer to this wild threat as if to suggest that the public give a damn!
October 12, 2010 at 10:27 am
odaiwai
You see, in Ireland, the pollies take a cut….. that is why!