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North East Link at risk of becoming ‘financial disaster’: economist

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The Clem7 Tunnel in Brisbane had predicted opening traffic of 126,000 vehicles per day, but actual traffic was 53,000. The Cross City Tunnel in Sydney was expected to attract 90,000 vehicles per day when it opened, but just 34,000 ended up using it daily.

The trend continued on other toll roads, including Lane Cove in Sydney and Brisbane Airport Link.

“These previous toll road projects have overestimated the travel time savings and drivers’ propensity to use the toll road, to the point where the toll roads have been financial disasters,” Mr Rawnsley said in a submission to an independent panel examining the road’s environmental effects.

“By examining these toll road failures, it is evident the application of the standard approaches does not always match the reality.”

The benefit-cost ratio of the North East Link is estimated to be 1.25, which means that for each $1 invested, $1.25 is made in community benefits.

Mr Rawnsley warned that the project was similar to the other toll roads he cited, in that it was being built in an urban area, did not significantly improve access to key jobs hubs, and the road was relatively short in distance which limited travel time savings.

The North East Link connects the M80 Ring Road and the Eastern Freeway via a six-kilometre tunnel and is designed to take thousands of trucks off congested north-eastern routes, such as Rosanna, Greensborough, Bulleen and Manningham roads. A 2016 analysis found that there were 75 crashes on Rosanna Road over a five-year period.

Construction on the project designed to fill the “missing link” in the freeway network will start next year, with the road set to open by 2027.

The Andrews government has decided to take on the task of collecting tolls on the North East Link initially, finding there is “little appetite” in the private sector to take on the risk of the toll road under-performing.

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The project’s business case discusses the same failed toll roads examined by Mr Rawnsley, finding that in each of these cases, “toll revenue forecasting risk is particularly high in the ramp-up phase during the first 12-24 months of operation where actual traffic volumes ranged from 23 per cent to 45 per cent lower than the private sector’s forecasts in the first year of operations.”

By tolling the road in the first stage, the “state remains exposed to the variability of actual toll revenues received being different than forecast,” the business case states.

The North East Link’s tolls are expected to provide 22 per cent of the project’s funding.

The Andrews government has said the North East Link would shave 35 minutes off journeys between the Eastern Freeway and the M80. But in examining the project’s business case, Mr Rawnsley found that most motorists using the road would be doing shorter local trips, rather than driving from one freeway to the other.

Travel time savings of more than five minutes could be difficult to achieve for shorter journeys, raising questions about whether people would choose the road over an un-tolled alternative.

Mr Rawnsley also questioned the project’s claims that 25 per cent of the benefits would be delivered to businesses in La Trobe, Monash, Box Hill, Ringwood and Dandenong, arguing that suburbs set to benefit from the road project were largely residential areas south of Greensborough and north of Epping.

It is very possible that there is no net community benefit from the North East Link.

Terry Rawnsley, economist

Businesses in Greensborough, Eltham, Montmorency, Coburg and Preston would benefit from the toll road, he said.

“When considering the number of benefits that are likely to be overestimated and costs that may have been underestimated, it is very possible that there is no net community benefit from the North East Link.”

A spokeswoman from the North East Link Project said the road would slash travel times for up to 135,000 motorists and create more than 10,000 jobs.

“The project will include better, more-connected open spaces and 25 kilometres of new and upgraded walking and cycling paths,” a spokeswoman said.

“The EES [environmental effects statement] shows that the project will also deliver massive economic benefits across the north-east – connecting thousands of people to jobs and business opportunities.”

The government is running eight weeks of hearings examining the environmental effects of the North East Link in Bulleen.

Toll road giant Transurban is now building the $6.7 billion West Gate Tunnel.

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