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Options For Financing Eastern Corridor

28 September 2004

Hon John Banks QSO Mayor of Auckland City

Sir Barry Curtis

Mayor of Manukau City

Options For Financing Eastern Corridor Being Explored

Auckland City and Manukau City councils are investigating a variety of private sector financing options for the Eastern Transport Corridor.

Mayors John Banks and Sir Barry Curtis, who are championing the Corridor project, confirmed that officers recently visited Sydney to follow up on their own visit and one is now in Britain.

In Sydney, nine private-public partnership (PPP) roading project agreements have been commissioned involving about $7 billion of investment to complete the Sydney Orbital, including a cross-harbour tunnel. The Sydney Orbital is the equivalent network to the planned Auckland motorway network, embracing both western and eastern loops around the metropolitan area.

Britain pioneered private-public partnerships, and more than 500 large projects have been undertaken mainly using concession agreements in which the private sector builds the roading network under a public sector ownership and tolling arrangement.

“Whichever way we decide to go to finance the project, it’s looking very positive,” the mayors say.

“We don’t yet know exactly how much will be required. The final model for the project won’t be known until next February but the capital investment of around $1.4 billion is clearly proving to be attractive to private sector interests who continue to express interest.”

“Given that Auckland City with Manukau City is the lead agency for the project, there will definitely be some private sector capital required in the Corridor.”

“The message we received in Australia is that the potential to finance the project is not much different to Melbourne and Sydney, although no final decisions or commitments have been made to date,” they emphasised.

As well as looking at financing options, council officials are assessing how a tolling system might operate.

“There is not enough money in public coffers for projects of this size and the private sector providers of the finance would require a return on their capital,” Sir Barry says. "While tolling must be part of the roading section of the Corridor, in the bigger regional picture I would eventually like to see a toll net which would include all the motorways and major roads in the Auckland region, he said. The mayors noted that toll networks are now well established overseas and it is inevitable that Auckland will go down a similar route. A toll in the eastern corridor would serve three purposes, noted Mr Banks. “It will raise money to help pay for the infrastructure, it will act as a transport demand tool by making public transport more attractive to some commuters, and it will give business and commercial traffic a direct through route and thereby reduce congestion on local roads.” “It is now very common for major infrastructure projects around the globe to be privately-funded and operated. Part of making Auckland more internationally competitive and attractive for investment, work and living requires us to get our infrastructure up to the same standards of cities like Sydney, Melbourne and Brisbane.

“Most of the finance for the Corridor can only come from the private sector because the public sector does not have the capacity to come up with such large sums.”

“The region faces a major challenge in coming years in paying for the much-needed upgrades to neglected infrastructure. That includes our water waste and storm water network as well as our inadequate transport system. We should never have allowed things to get to this state, but we have to accept the reality of the expenditure required.”

The three private sector groups the Mayors visited in Sydney - Macquarie Bank, ABN Amro and CBA - all have extensive experience in financing roading and other infrastructure projects in Australia and Sydney in particular.


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