Under proposals unveiled today cars, travelling in the new West Gate Tunnel from completion in 2022, will pay $4.84 to enter the city in the morning peak and trucks will pay $7.74.
The concept of user pay road funding is being tossed around the back blocks of state and federal bureaucracies and a city charge is one part of that, to try to reduce vehicle use in the CBD.
This is just one access point to Melbourne, but it’s a significant policy breakthrough which could set in train other changes and new charges.
That said, this project is destined to be a political lightning rod, with the state opposition already ruling out supporting an extension of the Transurban monopoly on the so-called CityLink project for 10 years until 2045.
The Victorian government has guaranteed to pay Transurban a top-up of around $3 billion should it not get the necessary legislation through parliament to pass the extension.
Today Labor doesn’t have the numbers in the upper house to pass the law, with the Greens and Liberal Party opposed to the change.
The Greens have some ideological backing for their opposition but the Liberals are engaging in illogical politics as part of the payback for the ALP over its scrapping of the East-West road link.
Inexplicably, the previous Liberal government signed a binding contract three weeks before the election which committed taxpayers to pay compensation for a project the ALP did not support.
The change in policy ended up costing taxpayers around $300 million.
The bill this time will be more like $3 billion but the government has five years to pass the legislation.
The project will proceed no matter what happens and Transurban will be able to charge tolls in the tunnel, so the issue is whether legislation is needed to extend the monopoly on CityLink for another 10 years.
Some argue legislation is not necessary but in any case Transurban boss Scott Charlton has himself covered.
The concept of infrastructure projects being a political football is anathema to anyone with half a brain, but Transurban has walked into another one.
The company, it must be said, does well from its road monopolies, with margins on its Melbourne roads or around 85.5 per cent, or four times the average for ASX200 companies.
It cuts deals with the government to do roadwork in return for an extension of the monopoly.
This time Transurban included in its funding proposal business risks a special section on social licence to operate, noting it “relies on a level of broad public acceptance of its activities”.
The section noted tolls sometimes generate negative sentiment and sometimes operations disrupt the community.
The disclosure has appeared in recent debt offerings but this is its first appearance in an equity raising document.
Transurban’s $1.9 billion rights issue, to help fund its share of the project, is being underwritten by UBS, Morgan Stanley and Macquarie.
The company is effectively upgrading its earnings by confirming its distribution guidance, even though it is raising more money.
Transurban takes risks by committing capital but its rewards are immense.
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Transurban’s $6.7 billion West Gate Tunnel project in Melbourne will introduce peak hour charges for cars travelling into a city for the first time in Australia.