Melbourne’s priced roads: Some facts

Melbourne’s has, or will have, two types of priced roads: The CityLink tolled roads that operate as a radial link from the North and from the East to Melbourne’s city centre and the proposed cross-town road, the Mitcham-Frankston Project that links the Eastern Freeway in Donvale to the Frankston Freeway near Seaford. Neither of these two projects is (or will be) effectively congestion priced. Pricing is based on a ‘user pays’ principle which recovers project costs and yields a return to the private sector operator. There is a case for renegotiating the agreements the State Government of Victoria has with the operators of these projects.

CityLink Roads. Transurban was given the concession to operate these roads in 1996. The concession was generous with the project costing $1.8 billion to build and shareholder equity in the operation now amounting to $5 billion. Revenues are of the order of $250 million which would have been sufficient to support $6 billion of investment which exceeds the cost of both the CityLink and the Mitcham-Frankston projects by $1.5 billion. Tolls are claimed to be at least twice the level required to recover the cost of a publicly-funded tollway. The traffic catchment area for the project covers about half of Melbourne. Transurban is entitled to compensation if future Victorian Governments develop plans to improve alternative forms of transport that would divert revenue from CityLink.

Tolls currently depend on where motorists enter and where they exit CityLink as well as on the type of vehicle used (car, light commercial (LCV), or heavy commercial (HCV)). In the main however charges are independent of the extent of congestion on the roads. A 24 hour day pass ranges from $9-95 for a car to $18-95 for a HCV. The maximum charge on either section of the road is $5-20 for a car and $6-95 for a HCV during day hours discounted to $5-20 between 8pm and 6am. That higher charges are levied for larger vehicles and that a discount is offered to LCVs and HCVs overnight is consistent with the spirit of the congestion pricing philosophy but these effects are modest. Overall charges are congestion-independent. There are substantial ‘boundary problems’ reflecting the accumulation of congestion externalities in areas such as Essendon adjacent to CityLink as motorists divert around the tolled road. These problems would be reduced with congestion-pricing and thus more even traffic flows.

Mitcham-Frankston Road. The concession to operate this project was awarded to the ConnectEast Group led by Macquarie Bank, Thiess Pty Ltd and John Holland Pty Ltd. Thiess and John Holland are responsible for design and construction. The project comprises 39 km of toll road including 1.5 km of tunnels. It will be a fully electronic tollroad using short-range microwave transponder tags and advanced video camera technology. The tags will also operate on CityLink. The project is forecast to cost $2.5 billion and is scheduled to open in late 2008. .

Unlike CityLink the Mitcham-Frankston prospectus states there are no restrictions on government upgrades to competing roads and public transport. Some have suggested that government should upgrade bus services in the area and replace urban level crossings with grade separations along the Ringwood Railway line to allow roads such as Stud Road to compete more effectively with the proposed tollway. This would reduce the market value of the Mitcham-Frankston Road and permit a public buyback of the tollway at reasonable prices as suggested by the Victorian Branch of the Liberal Party.

As it stands the maximum toll set will be $4-43 for cars (in 2004 dollars) with neighbourhood and weekend discounts for cars. While the proposal does not involve congestion pricing, tolls are low enough to minimise boundary problems on substitute routes such as Springvale and Blackburn Roads. With congestion pricing there would be low induced congestion on these congested substitute roads. Indeed traffic pressure on these roads should substantially fall.