Chapter 13 Department of Transport 115 Department of Transport 13.1 West-Link Toll Bridge The M50 is a 40km orbital motorway around Dublin, running from the M1 at Dublin Airport to the N11 at Bray. A 3.2km section of the motorway, from the N3 (Navan Road) to the N4 (Sligo Road) includes two side-by-side bridges spanning the River Liffey (West-Link Bridge). This section of the M50 is a toll road. The first bridge opened in March 1990 and the second in September 2003. This was the second toll scheme in the State. The first was the East-Link toll bridge where tolling rights had been granted to National Toll Roads Ltd (NTR) and which opened in October 1984. Government Decision In 1982, NTR had approached Dublin County Council seeking agreement in principle to construct and operate a toll facility across the River Liffey to the west of the city between the N3 and N4 national primary routes. Following discussions and negotiations involving the State, Dublin County Council and NTR, NTR submitted a proposal to Dublin County Council in May 1984. In October 1984, the Government agreed, in principle, to a proposal from the Minister for the Environment (the Minister) to the conclusion by Dublin County Council of negotiations with NTR19. The memorandum to Government noted that if the State finances were not so constrained and if substantial capital investment was being put into road improvement then it could afford to forgo the possibility of tolling the road and of private sector investment. In the circumstances then prevailing and given the relatively underdeveloped state of the national roads, tolling options had to be considered. The memorandum noted that while tolls were not generally applied to ring roads in European countries, the Western Parkway route was one of only a few routes which could potentially provide an economic return to a private investor without the necessity for State subsidies or guarantees. The proposal to Government noted that the proposed project yielded an after tax return of 18% to NTR by comparison with a gross yield at the time from Government bonds in the region of 15%. The Western Parkway is the section of the M50, approximately 12.2km in length, from the N81 (Tallaght Road) to the N3 (Navan Road). Its construction was completed in 1990 and was funded by the State except for the 3.2km toll road section. Toll Scheme The Local Government (Toll Roads) Act, 1979 provided that road authorities may, with the consent of the Minister, make toll schemes for public roads. Section 9 of the Act provided that the road authorities may, with the consent of the Minister, enter into an agreement (Section 9 Agreement) with another party to provide, maintain, manage and operate toll roads20. In October 1987, Dublin County Council, pursuant to a toll scheme made in 1985 and approved by the Minister in December 1986, entered into a Section 9 agreement (the Agreement) with a private company, 19 The negotiations were conducted with Conor Holdings Ltd, a private company with a major shareholding in National Toll Roads Ltd. 20 Under the Roads Act 1993, as amended by the Planning and Development Act 2000, the power to levy tolls on national roads, make toll bye-laws and enter into agreements with private investors is now vested in the National Road Authority. 116 Department of Transport West-Link Toll Bridge Ltd, a wholly owned subsidiary of NTR, under which that company would construct the 3.2km toll road including the first bridge. In return, the company would be granted tolling rights to the road for a period of 30 years after which the road would revert to the State. Second Bridge Construction While the construction of a second bridge was not covered by the provisions of the 1987 Agreement, it was recognised from the outset that a second bridge would be built if traffic volumes rose to around 56,000 vehicles per day. In 1985 a senior engineer in Dublin County Council had pointed out that at this volume of traffic, the reduced level of service would make it necessary to construct the second bridge. By 1998, the 56,000 per day traffic threshold had been reached. The bridge was opened in 2003, by which time daily traffic was around 40% above the 56,000 threshold. Licence Fee The Agreement provided that NTR would pay a proportion of Gross Toll Revenue (GTR) to the State when the average daily traffic volumes over a year exceeded 27,000. The proportion, referred to as the licence fee, would commence at 30% of the GTR for the first 8,000 vehicles in excess of 27,000 and would rise in accordance with increases in traffic volume measured in intervals or bands as outlined in Table 28. Table 28 Licence Fee Bands Band Average Daily Traffic Limit Proportion of GTR payable to State First 27,000 - 1 27,001 to 35,000 30% 2 35,001 to 45,000 40% 3 Over 45,00050% In June 2001, the NRA entered into a revised agreement with West-Link Toll Bridge Ltd (the supplemental agreement), under which the company would construct a second bridge in return for a revised toll scheme. The revised scheme added a fourth band to the licence fee structure under which the State would receive 80% of GTR for traffic volumes over an agreed fourth band figure for the relevant year, as set out in the supplemental agreement. The fourth band commenced at 79,000, in 2001, and was to increase in annual tranches to 126,000 by 2020. The 80% threshold has not been reached to date. In 2004, the fourth band would have applied if daily traffic volumes exceeded 88,000. The daily traffic volume for that year was around 84,800. On the basis of the agreed bands the yield from licence fees achieved and projected is set out in Table 29. The yields for the years from 2005 onwards are based on agreed forecast traffic volumes. 117 Department of Transport Table 29 Yield from licence fee 1990 to 2020a Period Average daily traffic over the period Licence fee as proportion of GTR 1990 –1994 13,500 - 1995 – 1999 42,300 16.7% 2000 – 2004 75,200 25.3% 2005 – 2009 93,000 32.7% 2010 – 2014 105,800 34.8% 2015 – 2020 114,500 36.0% a Projected yields are shown in italics. Taxation At the time of the 1987 agreement, the rate of Corporation Tax was 50%. It was assumed, at that time, that NTR would not be liable for the payment of municipal rates in respect of the toll road and, at that point, VAT did not apply to toll charges. There have been a number of changes to taxation and other charges in the period from 1990 to date • West-Link Toll Bridge Ltd became liable for municipal rates on the toll road from 1992 • VAT has been applied to toll charges since September 2001 following a ruling by the European Court of Justice • The rate of Corporation Tax has fallen steadily over the period, from 50% in 1987 when agreement was reached to 12.5% from January 2003 • Income tax rates and capital gains tax rates have also changed over this time. Proceeds of Tolling Table 30 sets out the GTR at the bridge and the appropriations to the State, excluding Corporation Tax, for the period from 1990 to 2004. €79,672,000 has been received by the State since the facility was put in place. The gross revenue in the period was €310,056,000. Table 30 Toll Revenue and Licence Fee 1990 to 200421 Appropriations to the State Year Gross Proceeds22 Licence Fees Municipal Rates (excluding Corporation Tax) €000 €000 €000 €000 1990 1,834 - - - 1991 4,046 - - - 1992 5,243 - 294 294 1993 5,940 - 309 309 1994 6,719 - 324 324 1995 8,224 - 335 335 21 The figures in this table have not been adjusted to 2004 values. 22 Excluding VAT 118 Department of Transport 1996 11,296 - 347 347 1997 20,749 3,043 356 3,399 1998 26,689 5,817 367 6,184 1999 29,668 7,309 378 7,687 2000 31,045 8,079 390 8,469 2001 33,703 9,220 2,875 12,095 2002 36,857 7,5853,025 10,610 2003 39,369 8,044 3,176 11,220 2004 48,674 15,094 3,305 18,399 Totals 310,056 64,191 15,481 79,672 Source: Department of Transport (the Department), South County Dublin and Fingal County Councils. Cost of the M50 to date The West-Link facility provides access to a 40km motorway standard ring road around Dublin, which in turn gives access to all national primary routes out of the capital city. The construction of the M50 has been, with the exception of the toll road, funded by the State at a cost of around €1.1bn in 2004 values. Toll charges at the West-Link Bridge are expected to be around a further €1.1bn in 2004 values for the period 1990 to 2020, excluding VAT. When account is taken of direct appropriation of funds (€0.44bn) to the State in the form of licence fee, municipal rates and corporation tax the net cost to the public of the current M50 facility, before taking account of income and capital gains tax, is around €1.76bn in 2004 values. These figures do not take account of the cost of a proposed upgrading of these facilities to cater for user demand.