By Brian Robins
THE State Government is expected to pay $1.1 billion to the owners of the Sydney Harbour Tunnel over the next 14 years - twice the $550 million construction cost - due to overly optimistic forecasts about toll revenue.
The surprise liability has been disclosed by the NSW Auditor-General, who confirmed the Government paid the tunnel owners - Transfield, Kumagai Gumi and Tenix - $58.9 million in 2007-08 alone. The Auditor-General has forecast this annual payment will rise steadily over the next five years, approaching $100 million a year.
The first of the city's privately owned road tunnels, the Sydney Harbour Tunnel is a growing drag on state finances. It is not alone: two other road tunnels - the $680 million Cross City Tunnel and the $1.1 billion Lane Cove Tunnel - have run into financial difficulties because traffic volumes fell well short of projections. Sydney's other road tunnel, the M5 East, is owned and operated by the Government.
The Lane Cove Tunnel was again downgraded by Moody's Investor Services this week.
Instead of 100,000 cars per day using the road, there were just 70,000 according to the November figures.
Moody's lead analyst, Ian ChanChong, said the poor traffic figures will continue to place "negative" pressure on ratings.
He said the downgrading "reflects increased concerns that the company is likely to be in default in the short term".
Under the original financial agreement with the Sydney Harbour Tunnel's owners, the Government must make top-up payments to ensure its viability.
This payment is now running at more than $1 million a week, even though the project has been operating for more than 15 years. The Auditor-General estimates the Government will pay $1.1 billion to the tunnel's operators over the balance of the operations agreement. Ownership of the tunnel is to revert to the Government in 2022, by which time it will have been in operation for 30 years.
In 2007-08, tolls collected from the tunnel fell to $39.5 million from $43.7 million a year earlier.
"It was always known the tunnel would not produce the revenue sufficient to offset the cost of construction," a former auditor-general, Tony Harris, said yesterday.
One overriding difficulty was the tunnel operator could not fix a toll reflecting the true cost of construction because the toll on the bridge would be significantly cheaper, he said.
with Linton Besser