Re: Why don't they just build it themselves?

["Andrew Honan" <ahonan@zipworld.com.au>]

"Maurie Daly" <mauried@tpg.com.au> wrote in message
3ad64057.218998@can-news.tpg.com.au">news:3ad64057.218998@can-news.tpg.com.au...
> On Thu, 12 Apr 2001 11:36:05 GMT, "Peter Berrett"
> <pberrett@optushome.com.au> wrote:
>
> >
> >Hi all
> >
> >I appreciate that this is a radical idea but why don't they just spend
the
> >money themselves and build it?
> >
> >As I understand it the cost was about $700+ million and they were
prepared
> >to put in about 2/3 of that to get private sector funding.
> >
> >$500 + million would get a couple of key lines built fully at least,.
Once
> >built the funds generated by imcreased patronage (milked from the private
> >operators by way of impost) could be put towards doing te remaining
lines.
> >
> >Mixing private and public sector funds is not a a good idea IMHO. Better
to
> >go the whole hog yourself.
> >
> >cheers Peter
> >
>
> Yes , its totally unclear to me why private sector investment is
> needed at all for projects like this,and its also unclear just what
> the end benefit to the rail users is from having private sector
> investment, other than higher fares.
> (Look at the fares on the Sydney Airport line.)
> A cynical view would be that making the projects contingent on private
> sector funding means that the Govt can conveniently never build the
> lines when private secror funding isnt forthcoming and not have to
> take any blame itself.
>
> MD
>
There can be several ways that private sector can finance these projects.
One way is to merely issue debt and have the Govt. rail operator meet the
interest and debt repayments. This is similar to the state treasury (Central
Borrowing Authority - CBA) getting pooled debt via the portfolio minister
for the rail project, however if a corporation is formed, that corporation
takes on (more directly) the liability of the finance.
The issue comes down to:
Is there a real market for this traffic? (i.e. is the patronage there as
well as the competitive forces operating efficiently)
Does  the Govt. want to get involved in rail financing (does it see itself
as providing this service as opposed to someone else)
Is the regulatory environment conducive to private participation?

I suggest in Victoria that there is NOT the market for competitive for high
speed rail between regional centres and  Melbourne. This is not to say that
the Govt does not think high speed rail is a worthwhile thing for social
benefits (such as regional development). But it needs to say that (for
example) that 2/3 of the total benefits would be social (external) benefits
and that 1/3 would be direct benefits.Therefore the Govt. would put up 2/3
of the costs while private sector would put up 1/3.

The question then turns to the regulatory environment. How does the private
participation get a fair and equitable return without milking the passengers
or the Govt. dry? I don't believe that any private participation in rail
projects in Australia has been successful (other than perhaps the Sydney
Light rail - which was set up as part of the Better Cities Program).
The commuter service in Sydney for the airport line is interesting in that
the debt was guaranteed by the NSW Govt. I wonder if the patronage on the
line is covering the interest payments (I think not).

I don't think the Victorian Govt has got the regulatory environment right
for Private -Public-Participation in infrastructure projects, and that the
Govt. will ultimately finance the whole project. It then remains to be seen
how the Govt. will support this operation for the next 30 years with Best
Practise management and ongoing financial commitment (when political
imperatives turn to other areas of the political landscape e.g. schools,
hospitals etc). Invariably the long term commitment to these projects which
are under full Govt. control goes only as far as they satisfy political
opportunism and not even social benefits (forget any private participation).

Regards
Andrew Honan