SUBMISSION: M5 CORRIDOR UPGRADE

March 2010

Infrastructure Partnerships is SUBMISSION: a national forum, comprising public M5 CORRIDOR UPGRADE and private sector CEO Members, advocating the public policy interests of Australia’s infrastructure industry.

FOR MORE INFORMATION PLEASE CONTACT:

LARRY MCGRATH MANAGER, POLICY INFRASTRUCTURE PARTNERSHIPS AUSTRALIA Level 8, 8-10 Loftus Street, NSW 2000 PO Box R1804, Royal Exchange NSW 1225 P | 02 9240 2056 E | [email protected] 2

SUBMISSION: M5 CORRIDOR UPGRADE

CONTENTS

1. INTRODUCTION...... 5 1.1 – INFRASTRUCTURE PARTNERSHIPS AUSTRALIA ...... 5 1.2 – BACKGROUND ...... 5 2. THE M5 UPGRADE ...... 7 2.1 BACKGROUND TO THE UPGRADE...... 7 2.2 – THE CONTINUED NEED FOR ROADS...... 7 2.2.1 – Growth of the Freight Task...... 8 2.2.2 – Passenger and Population Growth...... 10 2.3 – M5 WIDENING ...... 10 2.4 – M5 EAST DUPLICATION...... 11 2.5 – M5 EASTERN SURFACE LINK...... 12 2.6 – THE NEED FOR TOLLING REFORM ...... 12 3. CONCLUSION ...... 14

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SUBMISSION: M5 CORRIDOR UPGRADE

RECOMMENDATIONS

1. The NSW Government continues to undertake community and industry consultation with a view to finalising approval for this project as soon as possible, recognising the critical nature of the corridor upgrade to alleviate congestion and provide for future freight and passenger growth.

2. The NSW Government immediately prioritises the widening of the M5 South West Motorway in partnership with the private sector.

3. The NSW Government allocates funding for the construction of the M5 East duplication, bringing it into a five year timeframe.

4. Further consideration is given to the implementation of a network tolling regime for the Sydney Orbital Network, in line with the model proposed in IPA’s recent paper, Urban Transport Challenge: Driving Reform on Sydney’s Roads, to improve demand management and drive new investment in transport infrastructure. This should also investigate a ‘corridor’ network tolling approach for the M5 South West, M5 East and corridor.

5. Urgent progress is now also required for Sydney’s M4 East, and the F3 to Sydney Orbital, and it would be prudent for the NSW Government to begin obtaining planning approval for these missing links as well as the M5 Corridor.

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SUBMISSION: M5 CORRIDOR UPGRADE

1. Introduction

1.1 – Infrastructure Partnerships Australia

Infrastructure Partnerships Australia (IPA) is the nation’s peak infrastructure organisation.

Our Membership is comprised of Australia’s most senior business leaders and public sector executives from across the infrastructure sector. IPA is the only industry body which brings together the public and private sectors in a spirit of partnership, to build Australia together.

Infrastructure is the lifeblood of the national economy. It is the key to how Australia does business, how we compete in the global economy and how we sustain the quality of life of a growing population.

IPA’s mission is to develop and articulate the best public policy solutions needed to deliver the assets and services that will secure Australia’s productivity and prosperity. IPA is committed to ensure that governments retain all procurement options for the delivery of infrastructure. We believe that procurement models must be selected case by case, with a guiding principle of sustainably delivering better value, better quality infrastructure.

1.2 – Background

New South Wales is Australia’s most populous State, and the nation’s financial centre. Yet progress of critical reform and development of infrastructure has been slow and ad hoc, threatening continued economic prosperity, productivity and liveability.

The road network of is one of the country’s most significant, consisting of 17,932 kilometres of State Roads, 5051 bridges and 3690 traffic signals and other traffic facilities.

The Sydney Orbital Motorway Network incorporates a mix of public and privately owned and operated roadways, and a mix of tolled and untolled sections. All untolled segments are publicly owned and principally include links between the CBD and the major outer- metropolitan motorway links. These untolled links include the Gore Hill and Warringah Freeways as well as and the M5 East, as well as the M4. Analysts recently estimated the corridor has an economic value of $22.7 billion and contributes more than $2 billion to the New South Wales economy each year.

The largest road project currently under construction in Sydney is the Inner West Busway, which is critically important, but has a capital value of less than $200 million. This lack of major projects being undertaken in Sydney is not due to the road network operating optimally, but is rather the result of constrained balance sheets which have forced the stalling of urgently required new motorways.

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SUBMISSION: M5 CORRIDOR UPGRADE

New South Wales urgently requires a new, rigorous and joined-up approach to planning and procuring future infrastructure. This new planning paradigm would fully link infrastructure development and land-use planning, ensuring that it meets the needs of a growing population in a sustainable and responsible manner.

Bold decisions are required around where Sydney will grow – the densities that will be required – and the infrastructure which will support this growth.

The sheer level of infrastructure required means that all procurement and financing options must be on the table to deliver the next generation of economic and social infrastructure.

In spite of a disappointing history of variable, changing transport priorities, it is in the national interest that New South Wales addresses its infrastructure shortfalls. Infrastructure Partnerships Australia is therefore pleased to be able to make the following comments on the M5 Corridor Upgrade.

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SUBMISSION: M5 CORRIDOR UPGRADE

2. The M5 Upgrade

2.1 Background to the Upgrade

The M5 Corridor is a critical component of the Sydney Orbital Motorway, yet it is currently not operating to optimal performance due to a lack of capacity in the road estate.

The Corridor as described consists of the privately owned and operated M5 South West Motorway and the publicly owned M5 East Freeway.

Since the opening of the M5 South West Motorway in 1992, traffic numbers have continuously risen to the point where widening of the motorway is now the only course of action to reduce congestion, improve traffic times and reduce emissions.

Similarly, the M5 East has been the subject of sustained congestion since the time of opening, due to the tunnel being designed only having two lanes in each direction, which is clearly insufficient.

Between 2006-07 and 2007-08, average speeds on the M5 Corridor in the AM peak declined from 40km/h to 34km/h. In the PM peak, all major corridors in Sydney recorded an increase in average travel speeds except for the M5 Corridor, further heightening the need for this road to have additional capacity. Since then, traffic across all corridors has experienced improved travel times due to general improvements to the network, however speeds remain unacceptably low.

Any upgrade of the M5 Corridor is likely to attract significant private sector interest and investment, and there is the potential for the corridor upgrade to be undertaken with only minor costs to the State Government.

2.2 – The Continued Need for Roads

The argument that new roads are not required and that all funds should be directed to public transport ignores a number of important issues:

1. The future freight growth in New South Wales is predicted to be extremely significant, and while rail will inevitably play a greater role than it currently does, semi-trailers and light commercial vehicles will always be needed to undertake ‘last mile’ distribution; 2. Public transport cannot meet the demands of every passenger trip, and will always account for only a small portion of trips which are not ‘journey to work’; 3. The population in Sydney is set to grow dramatically over the next several decades, and Sydney is expected to house at least 7 million people by 2050; 4. While peak oil and a growing concern and awareness over carbon emissions will inevitably present challenges to travel, it is short-sighted to consider that these challenges will alleviate the need for roads; and 5. One of the most important modes of public transport – buses – as well as taxis, operate on the road network and depend on an effective and efficient road system.

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SUBMISSION: M5 CORRIDOR UPGRADE

There will always be a need for personal mobility, and we must continue investing in our urban and interurban road networks in tandem with public transport improvements. Roads are, after all, a major facilitator of public transport journeys, providing space for buses and taxis, and as a means of transport people to and from public transport interchanges. They are also where the majority of the urban freight task is transported, providing a critical link in Australia’s productivity chain.

Personal mobility is a fundamental requirement of today’s modern society and will continue to be for the foreseeable future.

Issues such as “peak oil” and a growing awareness of the damage of carbon emissions from motor vehicles have led some to proclaim the demise of the motor car. Certainly, it is anticipated that a rise in public transport use due to urban congestion is inevitable. However, the demand for personal mobility – that is the need to travel beyond the possible servicing realms of a comprehensive public transport system – will still exist.

This is particularly true for trips which are not ‘journey to work’. Similarly, roads will always be essential for freight transport, and the freight task is expected to grow considerably over the coming decades.

In the face of these challenges, a suite of new road projects and upgrades are now required for New South Wales. Sydney’s Orbital Motorway is complete, however the optimal functioning of the Network is hindered by capacity pinch points and a lack of key expressway-grade feeder roads.

What is required is a sustained and significant level of investment in both road and public transport projects, providing commuters with valid choices in their travel, and ensuring future productivity is not hindered by congestion.

2.2.1 – Growth of the Freight Task

The national freight task will double between 2008 and 2020 and triple to more than 1,540 billion tonne kilometres by 2050, according to modelling commissioned for Infrastructure Partnerships Australia. IPA’s modelling also shows that without major reform, road transport will continue to dominate the freight task to 2020. The modelling indicates that as road capacity is reached, coastal shipping and rail freight will experience renewed growth as a proportion of the total freight task.

In addition to changes at the national level, there will be increased diversity in modal share of the freight task across jurisdictions. For instance, by 2050 the share of road freight in each of the five largest states will vary from 30 per cent in New South Wales to 5.7 per cent in South Australia.

Each day freight, passenger and public transport vehicles travel over 120 million kilometres within the greater Sydney area.

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SUBMISSION: M5 CORRIDOR UPGRADE

These forecasts demand immediate action as key transport links are already experiencing capacity constraints and congestion as a result of inadequate infrastructure. Further growth will increase the demand for transport services at a local, state and national level, placing freight corridors under severe pressure and compounding current inefficiencies.

With many of our key freight transport links already congested, it is critical that efficiency is improved and, where necessary, additional capacity is provided. Supply chain costs represent a significant cost of doing business with up to 10 per cent of both the final cost and carbon footprint of a product derived from its transportation.

If capacity constraints and inefficiencies in the freight transport network remain unaddressed, it will have significant implications not only for the transport and logistics sector, but across the national economy. Every one per cent increase in efficiency will save the economy around $1.5 billion in costs associated with transport and logistics (based on current values).

Sydney Airport and Port Botany are the economic powerhouses of New South Wales. These assets inject billions of dollars worth of economic value into the State’s economy, but both face substantial growth pressures.

The issues surrounding the and Port Botany precinct are not unique to Sydney and reflect a systemic problem manifesting itself in a number of locations around Australia where population is growing and urban density increasing. In this instance, the main challenge is reflected in the ability of the landside transport infrastructure to cope with increased demand pressures.

The third terminal at Port Botany will provide a boost to capacity and efficiency of Sydney’s containerised freight. However, this efficiency will only be truly realised with the creation of new intermodal capacity to cater for this growth. The Moorebank intermodal terminal remains a critical priority for Sydney, and must receive immediate prioritisation. Similarly, any upgrade of the Moorebank facility will, by virtue, change the nature of traffic on the South West Motorway and will require additional capacity.

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SUBMISSION: M5 CORRIDOR UPGRADE

2.2.2 – Passenger and Population Growth

Sydney is expected to grow to a population of 7 million people by the middle of the century, placing immense pressure on the city’s transport infrastructure.

While much of this growth will inevitably be in infill development, an important area of future residential growth will be the South West Growth Centre. While the South West Rail Link will inevitably play a considerable role in moving this passenger task, much of it will also be carried on the M7 and M5 Corridors, requiring new capacity.

South West Sydney will have an additional 50,580 dwellings in the next decade, as well as providing for an extra 35,080 jobs in the region.

Passenger kilometres travelled in Sydney will soar by a further 38 per cent by 2020 – the third highest growth across all capital cities, behind (46 per cent) and Darwin (40 per cent).

It is important that we begin to upgrade the road estate to handle this new demand before the residential development comes to fruition, to ensure that excessive congestion does not stymie urban growth.

It would also be prudent to begin a medium-term investigation of widening of the M7 motorway to also help meet for this future demand.

2.3 – M5 Widening

The initial construction of the included provision for its widening to three lanes when demand reached capacity. In 2006, capacity was reached in the peaks, and the time has undoubtedly arrived to widen this section of the corridor. The project would reduce congestion along the corridor and provide for new heavy and light vehicle traffic.

During 2007, the New South Wales Government committed to the widening of the motorway. In addition, Infrastructure Australia listed the M5 widening as a critical project requiring further analysis its Report to the Council of Australian Governments in 2008. In November 2009, the New South Wales Government announced the commencement of community and industry consultation for the expansion of the M5 corridor including the M5 widening.

An important consideration for the NSW Government, in taking a ‘whole of corridor’ approach to the M5, is investigating methods to reduce congestion on the motorway through improved traffic light signalling in the immediate vicinity of entry and exit ramps to the corridor.

There are a number of options available for funding the widening of the motorway, including through an extension of the private sector concession on the road, which currently ends in 2023.

Industry would welcome further progress and priority on the widening of this road, including action on undertaking an environmental assessment and approval processes, to bring it to financial close as quickly as possible.

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2.4 – M5 East Duplication

In May 2008, former Premier Morris Iemma announced a feasibility study to examine the duplication of the M5 East in order to increase freight movements on the corridor. Following this, in November 2009, the New South Wales Government announced the commencement of community and industry consultation for the expansion of the M5 Corridor including the M5 East duplication.

The proposed duplication of the motorway would most likely involve the construction of a new four-lane tunnel relatively close to the existing tunnel. This would provide a doubling of capacity on this section of the corridor, as well as provide a new alternative tunnel in case of closure or incidents. There is the potential to link the M5 East duplication directly with the Eastern Distributor.

There is also the opportunity to reduce the gradient of the tunnel by extending it slightly further at the western end, meaning less engine power is required for vehicles exiting the tunnel which would in turn lead to less congestion caused by slow running heavy vehicles, as well as less pollution. Similarly, recent improvements in tunnel design, including the creation of ventilation tunnels as opposed to ventilation occurring in the main tunnel, mean that visibility would be improved and smog reduced.

The creation of such a ventilation tunnel, when developed in proximity to the existing M5 East tunnels, could be engineered to provide for improved ventilation from the original tunnels, as well as acting for the new tunnel/s.

One of the lessons learned from the construction of the M5 East is that retrofitting filtration on existing exhaust stacks is a costly and complicated process. It would be sensible to ensure that any future duplication of the M5 East includes filtration from the outset.

If there is one key lesson to be learned from the construction of the original M5 East, it is that building for future capacity growth is critical. It is for this reason that the duplication of the M5 East should be four lanes (and no less) to future-proof for traffic growth.

With regard to funding and financing of the missing road links in the Sydney Orbital Network, there are considerable suite of options available to Government, including (but not limited to):

. Patronage risk . Non-patronage risk (availability-based) . Alternative models, e.g. variable tolling rates for vehicle classes, truck multipliers, truck only tolls etc . Shadow tolling . Extension of concession terms . Inclusion of public road in private concession . Additional motorway entrances and exits (new traffic) . New toll points . Tolling untolled network segments . Advertising

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SUBMISSION: M5 CORRIDOR UPGRADE

There may also the opportunity for this project to be delivered at relatively limited cost if a corridor network tolling regime were established. This is further detailed in section 2.6.

Any decisions around funding and financing of the M5 East duplication would obviously need to form part of a more focused discussion.

2.5 – M5 Eastern Surface Link

The proposed M5 surface link is an important part of the M5 Corridor Upgrade and requires prioritisation and funding.

Without a new surface link road at the eastern end of the M5 Corridor, traffic would bottleneck on the M5 East creating significant congestion on and as a result trailing back to the Eastern Distributor.

It is the case that a substantial portion of traffic on the M5 Corridor would in fact be served by a new surface road link, which distributes traffic into the surrounding regions in the most efficient way possible.

Without this road link, the entire M5 Corridor enhancement strategy merely moves a bottleneck to a new area. IPA does not have a specific view on the exact alignment of this surface route, but we note that while there has been significant community interest in this aspect of the upgrade, it is the case that the new road will largely be on the F6 Corridor, which has been reserved for decades for future road development. To not use this corridor would require expensive tunnelling, or large-scale property acquisition, significantly increasing the cost of upgrading the road.

2.6 – The Need for Tolling Reform

Australia has recently embarked upon a welcome debate about the role of a national road pricing scheme in funding infrastructure and shaping demand for limited road space. While this debate is welcome, such significant reform is likely to be a long-term proposition - meanwhile Sydney faces spiralling congestion that requires immediate action.

The time has now come for debate about the use of tolls to help manage demand across the Sydney Motorway Network. Under a variable tolling model, the price is increased to shape demand during peaks and reduced to stimulate demand when traffic on the network is low.

The Sydney Motorway Network is already the most advanced road network in the country. It forms the arteries of the State’s economy; and provides a vital link for inter and intra state journeys.

Even as Sydney begins to grapple with its urban transport challenge, the cost of congestion continues to mount, already exceeding $4 billion per annum. The lack of cohesion between road segments across the network contributes to perceptions of inequity, with motorists in some regions reimbursed road charges by taxpayers, while others pay relative high daily tolls, because they travel across several segments.

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SUBMISSION: M5 CORRIDOR UPGRADE

Under a customer service model, motorists would be charged a floating toll, pegged to the number of vehicles using the network. It would see a reduction of tolls during quiet periods of low demand, and increased charges at times of high demand.

The various segments of the network would be integrated into a single pricing system that would be set at a rate to ensure the most efficient use of the network at all times, maintaining traffic at optimal levels. This new, integrated pricing model would greatly improve the efficiency and effectiveness of this infrastructure for commuters and businesses alike.

The use of demand management will be critical in ensuring efficient use of Sydney’s road space, which is a finite resource. Pricing is used effectively in other infrastructure classes, such as electricity and water. Of course, to ensure Sydney’s transport network is effective over the longer term, demand management must be accompanied by renewed investment in critical, priority infrastructure.

The application of a network toll, including its extension to currently untolled sections of the Sydney Motorway Network, could provide a valuable source of additional revenue for investment in new infrastructure. This tolling model could provide public investment to seed the development of new road and public transport options, as the city grows and demand increases.

Indeed, a possible sub-set of a broader network tolling system could be undertaking a network tolling approach to the wider M5 corridor, consisting of the M5 South West Motorway, M5 East, and the Eastern Distributor. This option would have the potential to unlock private sector investment for the construction of the new roads, reducing the cost to government, and potentially including demand management options such as time-of- day pricing.

Despite the underlying need and inherent value of tolling reform, it is critical that any change is progressed by consensus and agreement between government and motorway investors. Any move to reform the Network would need to be predicated on the protection of the legitimate commercial interests of existing concessions - and take account of potential new costs and risks posed by bold reform.

Our model proposes a revenue-sharing approach, which ensures existing concession holders are no worse off than under current arrangements. Naturally such a model will be complex and must be negotiated in a considered way.

Over the longer term, Australia will consider the introduction of a broad-based national road pricing system. The introduction of a national road pricing scheme would present a platform for the efficient regulation of infrastructure use, as well as a source for government revenue.

The implementation of such a large and complex scheme, as outlined by Treasury Secretary Ken Henry, could take many years to consider and implement. The introduction of a network toll for the Sydney Motorway Network provides a complementary strategy to drive more efficient use of infrastructure in Sydney in the shorter term.

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3. Conclusion

Progress is required on the upgrade of the M5 Corridor. The decision to undertake feasibility analysis, community consultation and obtain industry feedback on this important corridor upgrade is particularly welcome.

What is required from the State Government now is a clear indication of a timeline to undertake this project, and a commitment of funds to ensure it goes from lines on paper to roads in the ground.

The widening of the M5 South West Motorway is a critical priority, and must be pursued with the private sector as a major priority in Sydney.

Similarly, while the M5 East duplication will require an outlay of capital from the NSW Government, the successful functioning of the port and airport precinct in the future depends on it.

The proposed surface link road is vital to ensure that traffic from the west and southwest is distributed to where it is going with minimal congestion, and the selection of the northern part of the F6 corridor is appropriate for this development.

By 2050, the freight task will have tripled and Sydney will be home to seven million people. It is crucial that we begin to invest in the type of productivity-boosting infrastructure that will be required to ensure the city is not crippled by urban congestion.

Further clarity is also required around other critical road projects for Sydney, including the F3-Sydney Orbital, the M4 East, and the eventual F6 extension.

We look forward to further progress on the M5 Corridor, and these other roads, in the near future.

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Infrastructure Partnerships Australia

Level 8, 8-10 Loftus Street, Sydney NSW 2000 T: 02 9240 2050 F: 02 9240 2055 E: [email protected] www.infrastructure.org.au15