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North East Link Bill 2020 Bill Brief North East Link Bill 2020 Bill Brief Research Note No. 2, March 2020 Ben Huf, Holly Mclean & Annie Wright Research & Inquiries Unit Parliamentary Library & Information Service Department of Parliamentary Services Parliament of Victoria Introduced: 4 March 2020 House: Legislative Assembly Second reading: 5 March 2020 Commencement: On the earlier date of the day of Proclamation or 1 March 2021. Links to key documents including the Bill, Explanatory Memorandum, Statement of Compatibility and Second Reading Speech can be found at the Library’s Infolink page for this Bill. For further information on the progress of this Bill, please visit the Victorian Legislation and Parliamentary Documents website. Acknowledgments The authors would like to thank Debra Reeves and Caley Otter for their help with the preparation of this publication. Image source: freepik ISSN 2204-4779 (Print) 2204-4787 (Online) Research Note: No. 2, March 2020. © 2020 Parliamentary Library & Information Service, Parliament of Victoria Research Notes produced by the Parliamentary Library & Information Service, Department of Parliamentary Services, Parliament of Victoria are released under a Creative Commons 3.0 Attribution-NonCommercial- NoDerivs licence. By using this Creative Commons licence, you are free to share - to copy, distribute and transmit the work under the following conditions: Attribution - You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work). Non-Commercial - You may not use this work for commercial purposes without our permission. No Derivative Works - You may not alter, transform, or build upon this work without our permission. The Creative Commons licence only applies to publications produced by the Library, Department of Parliamentary Services, Parliament of Victoria. All other material produced by the Parliament of Victoria is copyright. If you are unsure please contact us. ii Bill Brief | PARLIAMENTARY LIBRARY & INFORMATION SERVICE Contents Executive summary ................................................................................................................................. 1 Introduction ............................................................................................................................................ 2 Background ............................................................................................................................................. 3 North East Link .................................................................................................................................... 3 History ............................................................................................................................................. 3 Current project ................................................................................................................................ 4 Toll roads and PPPs in Victoria ............................................................................................................ 5 History ............................................................................................................................................. 5 Public-Private Partnerships ............................................................................................................. 5 Second reading speech ........................................................................................................................... 7 The Bill ..................................................................................................................................................... 8 North East Link State Tolling Corporation .............................................................................................. 8 Business case for a state-owned tolling corporation ............................................................................ 10 Toll roads: key assumptions .......................................................................................................... 10 Market scoping and solutions ....................................................................................................... 10 Government risk ........................................................................................................................... 12 Responses ............................................................................................................................................. 13 Inquiry and Advisory Committee .................................................................................................. 13 Media and expert commentary .................................................................................................... 13 Industry ......................................................................................................................................... 14 Party responses ............................................................................................................................. 14 Other jurisdictions ................................................................................................................................ 15 Australian toll roads ...................................................................................................................... 15 International toll roads ................................................................................................................. 19 References ............................................................................................................................................ 21 PARLIAMENTARY LIBRARY & INFORMATION SERVICE | Bill Brief iii Executive summary The North East Link is one of the largest road infrastructure projects in Victorian history. At 26 kilometres, including a major tunnel, and an estimated cost of $15.8 billion, the new toll road will join the Eastern Freeway with the Metropolitan Ring Road (M80) in Melbourne’s north-eastern suburbs, completing the cross-city orbital road network. It is expected to open in 2027. In March 2020, the Victoria Government introduced the North East Link Bill to establish the governing framework for the road. Most significantly, the Bill seeks to establish the North East Link State Tolling Corporation to manage the collection, enforcement and regulation of tolls on the road. This arrangement departs from the procurement and delivery models of past major road infrastructure projects. The North East Link is the first major road project in Australia whose tolling rights are held by the state government since public-private partnerships (PPPs) became popular to develop road infrastructure in the 1990s. Most of Australia’s existing toll roads, including Melbourne’s City Link and EastLink, have been developed using a greenfield toll road model, under a user-charge PPP arrangement. Under this arrangement, private consortia gain the right, and bear the risk, to collect the revenue from the toll road that they finance and build. In contrast, this Bill proposes the North East Link will be delivered as an ‘availability-PPP’, where the Victorian Government retains the revenue stream and associated risks of tolls, while making payments to a private consortium to build, operate and maintain the road in return for keeping specified key performance indicators. Notably, the toll-free Peninsula Link is delivered as an availability-PPP, while the aborted East West Link was likely to be tolled by a state- owned entity under an arrangement similar to that proposed by this Bill. This Bill Brief contextualises the proposed North East Link State Tolling Corporation in the recent history of PPP toll road projects in Victoria, and summarises the business case for the Corporation. Two chief developments—the Global Financial Crisis (GFC), and the recent failure of several user- charge PPP toll road projects in Sydney and Brisbane—have significantly diminished private-sector appetite for bearing the risk and reward of greenfield tolls. Accordingly, the 2018 North East Link Business Case recommended tolling operations be controlled by a separate state-owned entity that would allow the Victorian Government to retain toll revenue and then possibly divest the revenue stream to the private sector in the future, once toll revenues have matured. Experts agree the likely intention of government is to sell the State Tolling Corporation at a later date, while others have some concerns regarding the overall viability of the project. A jurisdictional comparison highlights the relative novelty of this model in both Australian and international contexts. The North East Link project has generated significant public and political scrutiny in relation to several other matters, especially regarding the Victorian Government’s response to an Environmental Effects Statement (EES). However, this Bill Brief focuses exclusively on the proposed State Tolling Corporation. PARLIAMENTARY LIBRARY & INFORMATION SERVICE | Bill Brief 1 Introduction Described by the Victorian Government as filling the ‘missing link’ in Melbourne’s road network, the North East Link is a planned 26-kilometre tolled freeway that will connect the Metropolitan Ring Road (M80) to the Eastern Freeway at Bulleen Rd. The project involves the state’s longest road tunnels— twin three-lane six-kilometre tunnels equipped to allow GPS technology to work underground— 1 several interchanges and express bus lanes on the Eastern Freeway. It
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