5/7/2013Australia: Another Toll Road Goes Bankrupt
Another Australian toll road joins the worldwide list of failed projects.
Transportation officials in the United States and around the world remain fascinated with tolling public-private partnerships as a method of financing roads, but tolling continue to prove itself an unreliable choice. Last week, the Rivercity Motorway Group's bankruptcy administrators began soliciting bids for the Clem7 toll road in Brisbane, Australia. The 4.2 mile tunnel links five major area roads at a cost of $8.10 per round trip -- a proposition few residents found worthwhile. A bankruptcy judge with the Federal Court of Australia explained the problem.
"I have before me evidence, which I am satisfied discloses the following in relation to the tunnel business and its assets," Justice John Alexander Logan wrote. "Initial modelling and forecasts suggested that the average daily traffic which flowed through the tunnel in or around December 2010 would have been around 90,000 vehicles per day whereas the actual flow in that month was around 25,000 vehicles per day. The value of the tunnel business was written down in the corporate group's financial report for the year ended 30 June 2010 to $258 million."
A recent study concluded many tolling projects suffer from the same optimistic forecasts. Here, it resulted in creditors being owed $1.4 billion, as the latest traffic numbers still hover in the 25,000 range. Bids on the road will be taken until May 13.
"There is every reason to expect, in the context of a sale in respect of companies in liquidation, that very substantial losses indeed loom in prospect," Justice Logan wrote.
Bankrupt toll roads have become a lucrative business for PPB Advisory, the company tapped to run the road until it can be sold. Administrators proposed in 2011 that they be paid $425,000 for their services, given the firm has a great deal of experience with failed public-private partnerships. In February, BrisConnections Group, operator of the Airportlink toll road, went bankrupt. In 2010, Connector Motorways Pty Limited, operator of the Lane Cove Tunnel toll road, went under. In 2007, the Cross City Tunnel toll road went bust.
The same phenomenon is common in Europe. In Spain last year, ten toll concessions, including the Madrid-Toledo highway, became insolvent. The Spanish government provided more than a billion euros in bailout money to the tolling firms Abertis, Acciona, ACS, Bankia, Cintra, OHL and Sacyr Vallehermoso.
Failures are equally common in the United States, beginning with the toll lanes on the 91 freeway in Orange County, California which had to be bought out by county taxpayers in 2003 for more than the original cost of construction. San Diego's South Bay Expressway went bankrupt in 2010 and was also bought out by county government. In South Carolina, the Greenville Southern Connector went bankrupt in 2010. Transurban, the Australian company that runs the Pocahontas Parkway in Richmond, Virginia, wrote down the toll road as having a value of $0 last year.