Private funds may help pay for Gully

Wellington ratepayers could avoid having to dip into their wallets for Transmission Gully as the Government examines private funding of major roads.
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What are PPPs?

The potential for private investors to pick up the $470 million shortfall for the planned motorway is firmly on the table after the Cabinet agreed to an investigation into private financing of a proposed $2 billion Auckland project.

Transport Minister Annette King said Transmission Gully - which is costed at $955 million - could be next in line for a public-private partnership if the Auckland study showed it was feasible.

Such partnership are widely used for roads overseas, and usually involve private investors funding a project, then earning returns with tolls or a lease-back arrangement.

The planned Waterview Connection in Auckland, linking Mt Roskill to the Northwestern Motorway with a tunnel billed as New Zealand's biggest road project, is seen as potentially attractive to investors.

A working group headed by former chief ombudsman Sir Brian Elwood has the task of seeing whether there is a public-private option for the road that could be applied to or adapted for other projects. The group will also consider traditional public funding methods.

Ms King said the two models would be compared. The winner would not necessarily be the cheaper, but the one offering the better risk-sharing and other innovations. Any resulting public-private model could be used for Transmission Gully.

"The template we develop for Waterview could be a template for other big projects, and the most obvious next one is Transmission Gully."

The view among many analysts that the motorway was not suitable for a public-private partnership because the traffic volume was too small to turn a profit through tolls was too narrow.

"You don't start off with saying we're going to have a toll and then work backwards. You work out what you're going to build, how you're going to build it, how it's going to work and then you get to how you're going to pay for it."

Transmission Gully is the subject of an $80 million geotechnical study to determine whether the road can be built. The Government has promised $485 million toward the road, with the rest to be found by Greater Wellington regional council or through a regional petrol tax - unless a public-private partnership can be devised.

Wellington Mayor Kerry Prendergast said there were doubts whether tolls could operate on the route, but that did not mean partnership funding was impossible.

"There's a huge funding gap for Transmission Gully, and if a public-private partnership is feasible, that's great, but at the end of the day, someone has to bear the risk."

Such partnerships could be an option for other major Wellington projects, including a new tunnel through Mt Victoria and widening the Terrace Tunnel.

Porirua Mayor Jenny Brash said a public-private partnership had always been suggested for the gully road, and she welcomed the study.

WHAT ARE PPPs?

PPPs (public-private partnerships) are a method of funding infrastructure projects, such as roads, which splits the costs and risks between the public and private sectors.

The most obvious method is for private investors to build the road, then charge tolls till they have turned a profit. Other methods include building the road then leasing it to the state for a specified period.

PPPs have been available here for roads since 2003 under the Land Transport Management Act, but none have been agreed upon.

They have been suggested for Transmission Gully, but many analysts think the volume of traffic (less than 30,000 vehicles a day) rules out a toll. This view is not unanimous.

- © Fairfax NZ News