The case against the NSW Government’s road building agenda in the Sydney region

The traffic forecasts for toll roads

Forecasting the traffic usage of a road has always been uncertain. This has special significance in relation to the promotion of private roads where tolls are imposed on road users and large debts are undertaken to pay for constructing the road. Privatisation has been assisted by government subsidies and tax concessions.

Financial collapse came about mainly because of false and misleading traffic forecasts .The technique used to develop the forecasts usually involved two stages. The first stage was to employ a proprietary computer program which could simulate the interaction of land use and transport. This is the interaction that produces traffic. Generally the forecast traffic numbers generated by this process are too small to provide the toll revenue needed to pay equity investors, operating expenses, management expenses, debt repayment and other demands on the toll revenue collected. Therefore these forecasts were discarded. The second step to obtain the traffic "forecasts" was to use the desired investment outcome as a starting point and then to calculate the traffic numbers and tolls that would satisfy these outcomes. This methodology is known as work back or reverse engineering.

"Forecasts" derived in this way have no transportation meaning. The use of the work back process is usually covered up by falsely attributing the engineered forecasts to the methodology used in the software which originally failed to produce forecasts of the desired magnitude. This process may be observed, for example, in Product Disclosure Statements for a number of toll road projects. This process is reminiscent of the one known as "two sets of books" that was sometimes used in fraudulent accounting. When financial collapse occurs it is usually attributed to "traffic risk "as a cover story. Years after financial collapse the responsible parties are being brought to account in legal class actions. Given the flawed traffic forecasting methodologies used by traffic engineers I believe that it is highly unlikely that the traffic forecasts for current road proposals will be reliable. .

The current government if re-elected may pursue the same approach to road development and financing that has been a comprehensive failure.

The current projects: NorthConnex and WestConnex

The financial arrangement of both appears to be based on public private partnerships involving debt and equity. The taxpayer may end up paying for the it is likely financial shortfall as public money is involved in both these projects while it is likely that road users may gain little or no travel time advantage from using them

NorthConnex.

NorthConnex provides an excellent illustration of the desire to sell the electorate the illusion of free flowing traffic even though it is supposed to carry in excess of 5000 heavy vehicles per day as well as large car volumes. The 9km twin tunnels will be used as a bypass between the M2 Motorway and the M1 freeway. There was no assessment by the NSW Department of Planning and Environment of road safety in the tunnel. The Department appears to have been unaware that comprehensive European studies of crash costs in tunnels have shown that there is at least 10 times the probability that these costs will exceed those from equivalent surface roads carrying the same amount of traffic. Perhaps the Department had predetermined that to consider the critical issue of road safety would detract from the politically inspired image of a safe free-flowing roadway.

The government had accepted an unsolicited proposal by the toll road group Transurban to build and run the tunnel as a toll road. Transurban's agenda was to portray itself as an infrastructure provider of substance, with the help of over $800m of federal and state funding. Transurban contributed $1.05 billion and there was an additional $1.05 billion from two equity partners. There was no cost benefit analysis for this project, despite the fact that public money was involved.

The NSW government clearly did not understand Transurban's impaired financial position or has ignored it. Its total liabilities have increased to $8.9 billion in 2014 but more importantly its security price has been manipulated to produce a gross over statement of the Group's market value. I wrote a brief summary of this matter which was published in the letters section of The Australian Financial Review on 16 January 2015. This letter was based on an earlier submission in 2013 to the Senate Inquiry into ASIC and may be viewed on the website of the Senate Economic References Committee. (Submission (no. 148 Supplement).

The case of Transurban highlights another key aspect of privatisation. An examination of the financial statements over a seven year period between 2008 and 2014 reveals that toll revenue collected from its seven toll roads in Australia amounted to $5433.77m. Road users have collectively paid this huge price while not receiving any substantial benefit in terms of travel time savings because of congestion.