There’s nothing wrong with tolls on roads. Designed well, they can both pay for roads and ensure they are used efficiently.
Author
David Levinson
Professor of Transport, University of Sydney
Without tolls, drivers considering whether or not to travel on particular roads at particular times need only consider the delays they themselves experience – those caused by the cars in front of them.
They don’t need to consider the delays they impose on the users behind them. It’s one of the reasons we have .
tolls that vary with , location and can make those costs apparent and get drivers to drive in ways that minimise congestion.
But as drivers in Australia’s three largest cities of Sydney, Melbourne and Brisbane know especially well, Australia’s tolls are exceedingly poorly designed.
Sydney might or might not be the “” but many of its tolls are and many of the surrounding roads aren’t tolled at all. This encourages drivers to under-use toll roads and over-use suburban streets, needlessly exposing people on those streets to noise, and .
It is also unfair to those drivers who have no choice but to use toll roads. Other drivers who can use freeways that aren’t tolled don’t have to pay.
Private ownership stops properly designed tolls
Getting a system of tolls that is well designed ought to be easy, but the existing toll road operators have long-term contracts with state governments requiring compensation if what they can charge is changed.
Private ownership of public roads has long been regarded as less than ideal, including by the father of modern economics, Adam Smith, who in 1776 :
The tolls for the maintenance of a high road cannot with any safety be made the property of private persons.
If a state’s government operated toll roads in that state, it could charge for their use sensibly, but in NSW a single corporation, , operates most of them. Transurban is a public company listed on the stock exchange and also runs toll roads in Brisbane, Melbourne, and the United States.
Transurban charges tolls that will maximise the profits accruing to its shareholders, rather than tolls that will ensure its roads are well used.
Some of its contracts with the NSW government allow it to increase its tolls by the each year.
NSW should buy Transurban
Renegotiating the morass of existing contracts, each with its own set of interlocking ownership agreements and counterparties, contract-by-contract, would benefit only lawyers and not enable a comprehensive transformation.
In order to set tolls properly, the NSW government ought to buy Transurban, as well as its partners on individual roads.
With a market value of at the time of writing, buying Transurban might seem daunting.
But only about half of this value relates to Sydney. The rest is split between Victoria (27%), Queensland (16%) and the United States (7%). This means the net cost for NSW would most likely be less than $20 billion after selling off parts.
That cost could be financed by issuing that would be paid off with future toll revenues. The organisations that currently hold Transurban shares might even buy the bonds. As with Transurban, they would be a safe bet.
It would be open to and to buy their parts of what’s left, take back control of their toll roads and issue bonds funded by future tolls to pay for the transaction.
Under public control, tolls could be set properly
Once it had obtained the right to set tolls, NSW could set them in a way that optimised traffic flow and reduced congestion in order to cut travel times.
It could be done without political interference by an organisation such as the NSW , which currently determines maximum public transport fares.
Operations and management of the newly acquired motorways could be contracted out and regulated as appropriate, just as are bus operations, where contractors run the buses but the independent tribunal determines the fares.
Applied to all major roads instead of just some, the toll revenues could be lower on average, and could also be used to .
Navigating the legal complexities and financial risks would be difficult, but the interim report of the NSW released in March made a number of recommendations that would move tolling in this direction, including establishing a state that would negotiate tolls with the operators.
Taking over the operators is the next logical step.
David Levinson receives funding from Australian Research Council. He is affiliated with WalkSydney and Peaceful Bayside. His superannuation fund may own shares in TransUrban.
