NSW would have suffered a $95 billion budget hit and its credit rating would have been at risk under a major change to toll roads proposed by a government-commissioned review led by former competition regulator Allan Fels, confidential Treasury analysis reveals.
The warnings in the internal modelling come as senior NSW Treasury officials confirm that extending the number of years that motorists are slugged tolls to help pay for network-wide reductions in charges is under consideration amid negotiations with operators.
The calculations about the staggering cost to the budget are disclosed in a Treasury analysis of the “pros and cons” of one of the review’s key recommendations for the government to set up a toll collection entity to enable it to set prices and revenue adjustments across the motorway network.
Transurban controls 11 of Sydney’s 13 toll roads, including WestConnex.Credit: Dominic Lorrimer
Treasury warned that the review’s proposal would have an “extremely negative balance sheet impact” because the obligation to pay toll road operators would become a financial liability.
“Total debt would increase by [circa] $95b,” it states, warning that an advantage from an annual $3.4 billion revenue increase to the budget from tolls is “negligible compared with increase in debt”.
The analysis is dated September 2023 and is among internal documents released under freedom of information laws.
Treasury also cautioned in the analysis that the resulting increase in debt would lead to a deterioration in NSW’s credit rating.
Coalition roads spokeswoman Natalie Ward questioned why the opposition was left to find what the Fels review recommendations would cost the budget and drivers. “Why was this not disclosed when the toll review was published?” she asked.
“A cover-up is on, Allan Fels has been now sidelined and there will be new tolls in Sydney – that is not toll reform; that is a betrayal. The government should come clean on the cost to the budget and drivers, and when motorists will see actual toll reform. It’s been 706 days since the review started.”
A key recommendation in the review’s final report, made public last July, was to introduce laws immediately to establish a NSW Motorways agency as a backstop measure in case complex negotiations with Transurban and other contract holders over a new tolling regime for Sydney failed. The government passed legislation late last year to create NSW Motorways.
Roads Minister John Graham said there would not be any impact on NSW debt “like that identified under a range of superseded earlier options” for the entity.
“The NSW Motorways entity established by legislation in November 2024 does not currently have the function of collecting tolls on private motorways or determining toll prices,” he said.
Graham, who will be grilled about tolls at a budget estimates hearing on Tuesday, said motorists were still on the hook to pay $195 billion in tolls out to 2060 as part of the Liberal Party legacy of private motorway contracts.
Fels, who is engaged by Transport for NSW, is also due to appear at the hearing after the budget estimates committee called on him to attend.
Under Fels’ plans, distanced-based tolls that are gradually reduced the further motorists drove would be rolled out across Sydney’s 13 toll roads.
As well as declining distance-based charges, Fels’ review recommended that revenue from the introduction of two-way tolls on the Harbour Bridge and Harbour Tunnel, along with the Eastern Distributor, be used to lower charges across the system.
The government has been negotiating with toll road giant Transurban and other large investors about a shake-up of tolling contracts since July.
Graham said options including declining distance-based tolling remained on the table as part of the direct-deal process with the toll road operators.
Treasury officials confirmed at a hearing last week that the government was considering extending toll road agreements known as concessions to help fund reform. They revealed that Treasury had modelled the value of extending concessions but declined to reveal the sum, deeming it commercially sensitive.
Royal Bank of Canada is acting as the government’s financial adviser in the negotiations – earning more than $4 million for a 13-month contract – and has assisted in the modelling.
Under existing concessions, tolls will remain on Sydney’s biggest motorway, WestConnex, until 2060, while those on the M2, M7, Lane Cove Tunnel, Eastern Distributor and NorthConnex will last until 2048. The Cross City Tunnel’s tolls will stay until 2035.
The Treasury officials told budget estimates last week that the toll road agreements that expire earliest would provide the most significant uplift in value if they were extended.
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