web analytics
The Standard

Transmission Gully: they profit, you pay

Written By: - Date published: 8:53 am, December 4th, 2013 - 34 comments
Categories: privatisation, transport - Tags:

The proponents of Public-Private Partnerships offer two justifications for the extra cost compared to normal government financing: 1) a mystical claim that the private sector will find efficiencies in a PPP that they wouldn’t find if they were just contracted to build a project normally and 2) risk is shared between the taxpayer and the private investors. Except it’s not.

In Australia, the PPPs worked by the private companies building the roads, maintaining them, and collecting tolls to fund it all. When it turned out the traffic projections were catastrophically wrong and people didn’t want to pay tolls, the government ended up bearing costs by paying bailouts and even closing publicly-owned roads to force more people to take the private toll road. But at least the private investors lost their shirts, first, because that’s how investment is meant to work – no reward without risk.

In New Zealand, National has learned from the Australian experience and found a way to make sure that the private investors in Transmission Gully make their profits, no matter what. It’s called an ‘availability model’. Instead of collecting tolls, the private company will be paid by $120-$130m a year by the taxpayer as long as the road is open (not exactly hard). Any tolls will be collected by the state, and go towards covering the cost of that payment (there’s no hope that tolls will actually cover the whole cost of the payments even on the government’s traffic projections because that would require a toll of $15 per trip).

So, in National’s model, all the risk is on the taxpayer. If traffic volumes are lower than expected, as is nearly always the way with these projects and especially likely with Transmission Gully because traffic volumes are already falling, the taxpayer pays just as much to the private investors but get less toll revenue to help offset that cost. The private investors make a mint – $3 billion over 25 yeas for building a $900 million road – no matter what.

That’s National’s New Zealand for you: all the risk is on the taxpayer, all the reward to the private investor. In Transmission Gully’s case, it’s particularly clear but if you look at all National’s corporate deals, it’s clear that any company that can convince National that its failure would impact on National’s political agenda has an effective taxpayer-funded guarantee.

34 comments on “Transmission Gully: they profit, you pay”

  1. Draco T Bastard 1

    Nice for some under this government.

    Always seems to cost the rest of us though.

    • Bob 1.1

      Huh, I though exactly the same thing around WFF and Interest Free Student Loans, these are nice for some, always seem to cost the rest of us though…..

      • Is that right, Bob? Pity for you then that John Key chose not to follow through on his initial criticisms of those “communism by stealth” policies (if I recall his words as opposition leader correctly). Seems he discovered through National’s internal polling that living up to his criticism and campaigning to get rid of these examples of “communism by stealth” would make him unelectable.

        Almost as if those pesky middle class NZ voters are actually far more left wing at heart than they sometimes realise, so much so that it would only vote National if they retain that “communism by stealth”. It’s been a long 5 years, but buyer’s remorse is finally setting in among them.

      • Draco T Bastard 1.1.2

        WfF is a subsidy to business so that they can continue to pay sub-par wages.
        Interest-free student loans shouldn’t exist because education should be freely available as its benefits for the country far outweigh the costs.

        • tc 1.1.2.1

          yes the sort of free education that most of the current MP’s would have enjoyed, especially the slippery one.

      • QoT 1.1.3

        I don’t think you understand the meaning of the word “loan”.

        • Ramsay 1.1.3.1

          I don’t think you understand the meaning of the phrase “interest free”

          • Draco T Bastard 1.1.3.1.1

            You know, it’s been known for thousands of years that charging interest inevitably causes the collapse of the economy and society. This is why all major religions that have come out of the ME ban charging interest.

  2. Tracey 2

    “1) a mystical claim that the private sector will find efficiencies in a PPP that they wouldn’t find if they were just contracted to build a project normally”

    Like up at Kaipara?

  3. vto 3

    This makes me so very cross….. f%#k!!*… arrrgh #@@nt&%$…..

    The National Party are a bunch of fucking losers and wankers.

    Pike River.

    Pike River

    Pike River

    Pike River

    Pike River

    Pike River

    29 men killed by these sorts of policies.

    29 men killed.

    Drop it you National Party arseholes. Drop it. Take your lessons.

    • Tim 3.1

      Don’t you mean “Take your learnings” ?
      That’s the latest buzz – linguistic invention, designed to spin and obfuscate.
      ….. trickle down
      ….. job creators
      ….. corporate citizenry
      …… stakeholders
      ……. etc, etc, etc
      …. Not long before we’ll be hearing “The NZ People” (a la “The American People” or “The Australian People”). I’m surprised Hooten hasn’t already tried it on.

  4. Ennui 4

    Another addition to the John Key Memorial Cycle-way……when the oil runs out!!!!! The “too big to fail” banks will be a long forgotten entity by then as will the debt. Perhaps we will have to swerve the overgrown diggers left on the roadside to rust….

    • infused 4.1

      1970: When the oil runs out…
      1980: When the oil runs out…
      1990: When the oil runs out…
      2000: When the oil runs out…
      2010: When the oil runs out…
      2013: When the oil runs out…

      Ok.

      • BM 4.1.1

        Why do you think they’re fighting the off shore drilling so hard.

        Probably enough oil and gas out in the oceans to last another 10,000 years, if we want to stay with petroleum.

        • Draco T Bastard 4.1.1.1

          There may be enough fossil fuels left to last a few more decades but we want to last the 10,000 years which we won’t be able to do if we burn it.

      • Lightly 4.1.2

        have you seen the price of petrol?

        peak oil isn’t about oil ‘running out’, it’s about not being able to produce enough to meet demand at an affordable price, leading to it become ‘too expensive to burn’, resulting in demand destruction…. which is what we’re seeing in a number of countries as oil demand falls/recession hit.

        • BM 4.1.2.1

          Most of what we pay at the pump is taxes.
          Remove those taxes and all of a sudden petrol’s looking cheap again.

          Thinking about it, if I was Key I’d say “if we strike oil offshore all taxes accept GST will be removed from the price of petrol.

          Then everyone would be like “DRILL,DRILL,DRILL” and National would win the next election by a landslide.

          Hmm, maybe I should email him.

          • fender 4.1.2.1.1

            Those petrol taxes you want to remove help pay for future roading projects, not to mention the extra few cents Bill English whacked on to help balance the budget this time last year. Better not send that email, he doesn’t need reminding how stupid his supporters are, he already knows.

            • BM 4.1.2.1.1.1

              Off shore drilling will pay for all the future roading projects.

              Four lanes + all the way from Auckland to Wellington.

              • fender

                That’s one way to scare the likes of Anadarko off..

                “Auckland to Wellington”

                What happened to the rest of NZ? Did Nact sell it off overnight?

              • McFlock

                Offshore drilling won’t even pay for the last round of tax cuts key gave himself and his cronies.

              • fender

                Reply went into moderation, will try again.

                “Off shore drilling will pay for all the future roading projects.”

                That will scare the Anadarko’s away, good plan.

                “Auckland to Wellington”

                What happened to the rest of NZ? Did National sell it off overnight?

              • Draco T Bastard

                Off shore drilling will pay for all the future roading projects.

                Wow, you really are gullible aren’t you?

                If that were the case then present drilling would be paying for the present roads and it’s clearly not.

          • Lightly 4.1.2.1.2

            no, remove the taxes and the price of petrol has still doubled over the past decade

          • Tracey 4.1.2.1.3

            yo do understand that anadarko isnt a charity right? And the oil will be going far far away if they find it? Even fiji has worked out that if foreigners want to make a shitload of money in their country then 20% has to go to the government coffers.

    • Bob 4.2

      Like the “too big to fail” power companies? We should keep 100% ownership in them then cos they are guaranteed income forever……..

      • Francis 4.2.1

        We should keep 100% ownership in them because power is a necessity for all households and businesses within New Zealand. Makes no difference if the companies are making a trillion dollars a year or 50c per year, we’ll still need the power from them.

        In the case of power generating companies, they’re not too big to fail. They’re too important to fail. Complete government ownership means they’re guaranteed not to fail, particularly if run under a non-profit model like they always used to be…

  5. Will@Welly 5

    Another one of Bill English’s “nice to have’s” unless you’re poor, working class or otherwise. The old double-standard rules. Another example of why the Treasury heads should have been king-hit back in the ’80’s for ever having dis-established the old Ministry of Works. These guys were geniuses – Treasury was/is a ship of fools. Transmission Gully will cost $3 billion – how efficient is that ?

    • Murray Olsen 5.1

      The Ministry of Works gave the nation a strategic ability to do things in a hurry. Now we get Brownlee and Fletchers and Christchurch dies. I’d swap MoW for Treasury any day of the week.

  6. Will@Welly 6

    Another one of Bill English’s “nice to have’s” unless you’re poor, working class or otherwise. The old double-standard rules. Another example of why the Treasury heads should have been king-hit back in the ’80’s for ever having dis-established the old Ministry of Works. These guys were geniuses – Treasury was/is a ship of fools. Transmission Gully will cost $3 billion – how efficient is that ?

  7. Barry 7

    Are the government going to add $3000 million to the national debt when they sign the contract?

  8. Macro 8

    PPPs are simply a massive scam

    Why must we continually repeat the mistakes of the past? Do we learn nothing from History? Can we not look offshore and learn from the mistakes of others?

    The UK has this year woken up to the realisation that PPPs are costing them big time

    http://norightturn.blogspot.co.nz/2012/07/ppps-are-scam.html

    Key and his cronies are nothing more than scammers.

  9. Ian 9

    5 billion extra dollars coming in to this little country courtesy of a few thousand forward thinking dairy farmers. Your a bloody ungrateful , lot that is forever biting the hand that feeds you.

    [this is a post about Transmission Gully. Are dairy farmers happy to pay $3b for the $900m Transmission Gully? JH]

    • Draco T Bastard 9.1

      Actually, the only thing the dairy farmers are doing is costing us billions of dollars because it’s going to cost us that much to clean up after the dirty fuckers.

Recent Comments

Recent Posts

  • Brutal health cuts confirmed, crucial services suffer
    Chronic under-funding by National has seen the health budget slashed by $1.7 billion in just five years, Labour’s Health spokesperson Annette King says. A report by Infometrics, commissioned by Labour, shows health funding has been cut in four of the… ...
    12 hours ago
  • Meth ring under Serco’s nose
    The news that two Serco inmates have been arrested for helping to run a methamphetamine ring from prison should be the final straw and see their contract cancelled, says Labour’s Corrections Spokesperson Kelvin Davis. “National has stood by Serco despite… ...
    17 hours ago
  • Ministers failing women and their own targets
    New figures showing just five Ministers have met the Government’s own reduced targets for appointing women to state sector boards is evidence National is failing Kiwi women, Labour’s Women’s Affairs spokesperson Sue Moroney says. “The Ministry for Women’s 2015 Gender… ...
    17 hours ago
  • Charges up for some as funding up for grabs
    A proposal being considered by the Government would see some people having to pay more for health care and district health boards forced to fight amongst themselves to fund regional health services, Labour’s Health spokesperson Annette King says “Information leaked… ...
    21 hours ago
  • Stop experimenting on kids
    The trouble with the Charter school model is that it is a publicly funded experiment on children. The National Government has consistently put its desire to open charter schools ahead of the safety of the children in them, ignoring repeated… ...
    GreensBy Catherine Delahunty MP
    2 days ago
  • Bank puts the squeeze on mid Canterbury farmers
    News that an unnamed bank in Ashburton has put a receiver on notice over financially vulnerable farmers will send a chill through rural New Zealand, says Labour’s Finance Spokesperson Grant Robertson. “The Government needs to work with  New Zealand’s banks… ...
    2 days ago
  • Key is trading away New Zealand land and homes
    John Key yesterday admitted what National dishonestly refused to confirm in Parliament last week – he is trading away New Zealand’s right to control who buys our homes and land, says Opposition leader Andrew Little. “The Prime Minister must now… ...
    2 days ago
  • Razor gang takes scalpel to health
    Plans by the Government to take a scalpel to democratically elected health boards are deceitful and underhand, coming just months after an election during which they were never signalled, Labour’s Health spokesperson Annette King says “Leaked documents reveals a radical… ...
    2 days ago
  • Spin lines show a department in chaos
    Corrections Spin Doctors sending their place holder lines to journalists instead of responding to serious allegations shows the scale of chaos at the department over the Serco scandal, says Labour’s Corrections Spokesperson Kelvin Davis. “As more and more serious allegations… ...
    4 days ago
  • Court ruling shows law should never have been passed
    A High Court ruling that a law banning prisoners from voting is inconsistent with a properly functioning democracy should be a wake-up call for the Government, Labour’s Justice spokesperson Jacinda Ardern says. In an unprecedented ruling Justice Paul Heath has… ...
    5 days ago
  • Judicial Review Gamble Pays Off for Problem Gambling Foundation
    Congratulations are due to the Problem Gambling Foundation (PGFNZ) who have won their legal case around how the Ministry of Health decided to award their contracts for problem gambling services to another service provider. Congratulations are due not just for… ...
    GreensBy Denise Roche MP
    5 days ago
  • Environmental Protection Agency appoints GE advocate as new CEO
    This week, the Environmental Protection Authority Amendment Bill passed its first reading in Parliament. The Bill puts protection of the environment into the core purpose of the Environmental Protection Authority. This month, Dr Allan Freeth, the former Chief Executive of… ...
    GreensBy Steffan Browning MP
    5 days ago
  • Charanpreet Dhaliwal death demands genuine health and safety reform
    The killing of a security guard on his first night on the job is exactly the kind of incident that National’s watered-down health and safety bill won’t prevent, says Te Atatu MP Phil Twyford. The coronial inquest into 22-year-old Charanpreet… ...
    5 days ago
  • Arbitrary sanctions hit children hardest
    Increasing numbers of single parents are being penalised under a regime that is overly focussed on sanctions rather than getting more people into work, Labour’s Social Development spokesperson Carmel Sepuloni says. “Figures, obtained through Parliamentary questions show 3000 more sanctions,… ...
    5 days ago
  • Hekia just won’t face the facts
    Hekia Parata’s decision to keep troubled Whangaruru Charter school open despite being presented with a catalogue of failure defies belief, goes against official advice and breaks a Government promise to close these schools if they were failing, says Labour’s Education… ...
    5 days ago
  • No more silent witnesses
    Yesterday I attended the launch of a new initiative developed by and for Asian, Middle eastern and African youth to support young people to name and get support if there is domestic violence at home. The impact on children of… ...
    GreensBy Jan Logie MP
    5 days ago
  • Single Use Plastic Bags campaign – Some wins and some green-washing
    As we near the end of Plastic Free July I’m nearing the conclusion of my Say No To Plastic Bag tour when I will have completed all 30 of my public meetings. The campaign was designed to work with community… ...
    GreensBy Denise Roche MP
    5 days ago
  • Single Use Plastic Bags campaign – Some wins and some green-washing
    As we near the end of Plastic Free July I’m nearing the conclusion of my Say No To Plastic Bag tour when I will have completed all 30 of my public meetings. The campaign was designed to work with community… ...
    GreensBy Denise Roche MP
    5 days ago
  • Minister must take responsibility for problem gambling debacle
    The Government’s handling of the Problem Gambling Foundation’s axing in a cost-cutting exercise has been ham-fisted and harmful to some of the most vulnerable people in society, Associate Health Labour spokesperson David Clark says.“Today’s court ruling overturning the axing of… ...
    5 days ago
  • Labour will not support TPP if it undermines NZ sovereignty
    The Labour Party will not support the Trans Pacific Partnership Agreement unless key protections for New Zealanders are met, Opposition leader Andrew Little says.“Labour supports free trade. However, we will not support a TPP agreement that undermines New Zealand’s sovereignty. ...
    5 days ago
  • Coleman can’t ignore latest warnings
    Resident doctors have advised that a severe staffing shortage at North Shore Hospital is putting patients’ lives at risk, Labour’s Health spokesperson Annette King says. “They say a mismatch between staffing levels and patient workloads at North Shore has… ...
    5 days ago
  • ACC must remove barriers to appeals
    The Government must prioritise removing barriers to justice for ACC claimants following a damning report by Acclaim Otago, Labour’s ACC spokesperson Sue Moroney says. “ACC Minister Nikki Kaye must urgently scrap her flawed plan to remove claimant’s right to redress… ...
    6 days ago
  • Six months’ paid parental leave back on the agenda
    Six months’ paid parental leave is back on the agenda and a step closer to reality for Kiwi parents after Labour’s new Member’s Bill was pulled from today’s ballot, the Bill’s sponsor and Labour MP Sue Moroney says. “My Bill… ...
    6 days ago
  • Sole parents at risk of having no income
    New requirements for sole parents to undertake a reapplication process after a year is likely to mean a large number will face benefit cancellations, but not because they have obtained work, Labour’s Social Development spokesperson Carmel Sepuloni says. “Increasing numbers… ...
    6 days ago
  • Juking the Welfare Stats Again
    Last week the government’s major initiative to combat child poverty (a paltry $25 increase) was exposed for what it is, a lie. The Government, through the Budget this year, claims to be engaging in the child poverty debate, but instead,… ...
    GreensBy Jan Logie MP
    6 days ago
  • OCR rate cut a result of flagging economy
    The Reserve Bank's decision to cut the Official Cash Rate to 3 per cent shows there is no encore for the so-called 'rock star' economy, says Labour's Finance Spokesperson Grant Robertson.   "Today's interest rate cut comes off the back… ...
    6 days ago
  • Reboot to an innovation economy, an Internet economy and a clean economy
    In my short 33 years on this planet we’ve seen phenomenal technological, economic and social change, and it’s realistic to expect the next 33 will see even more, even faster change. You can see it in the non-descript warehouse near… ...
    GreensBy Gareth Hughes MP
    6 days ago
  • Bill that puts the environment into the EPA passes first hurdle
    A Bill that puts the environment squarely into legislation governing the Environmental Protection Authority passed its first reading today, says Meka Whaitiri.  “I introduced this member’s bill as the current law doesn’t actually make protecting the environment a goal of… ...
    7 days ago
  • Key’s KiwiSaver deception exposed
    KiwiSaver statistics released today expose John Key's claim that the cutting of the kickstart payment "will not make a blind bit of difference to the number of people who join KiwiSaver” to be duplicitous, says Labour Finance Spokesperson Grant Robertson.  “Official… ...
    7 days ago
  • Minimum Wage Amendment Bill to protect contractors
    All New Zealanders should be treated fairly at work. Currently, the law allows non-employment relationships to be used to get around the minimum wage. This is unfair, says Labour MP David Parker. “The Minimum Wage (Contractor Remuneration) Amendment Bill, a… ...
    7 days ago
  • Bill raises bar to protect Kiwi farmland
    The Government’s rubber-stamping of every one of the nearly 400 applications from overseas investors to buy New Zealand farm land over the last three years proves tougher laws are needed, Labour MP Phil Goff says. “In the last term of… ...
    7 days ago
  • Costly flag referendum should be dumped
    John Key must ditch the flag referendum before any more taxpayer money is wasted, Opposition Leader Andrew Little says. “Millions of dollars could be saved if the Prime Minister called a halt to this hugely expensive, and highly unpopular, vanity… ...
    7 days ago
  • Nats letting Serco off scot free
    Government members have prevented Parliament’s Law and Order select committee from getting answers out of a senior Serco director about the fight clubs being run at Mt Eden prisons, says Labour’s Corrections Spokesperson Kelvin Davis. “At today’s Law and Order… ...
    7 days ago
  • Charter school experiment turns into shambles
    The National Government’s charter school experiment has descended into chaos and it’s time for Hekia Parata to stop trying to cover up the full extent of the problems, Labour’s Education spokesperson Chris Hipkins says. “The Education Minister must release all… ...
    7 days ago
  • Disconnect between rates and income must be fixed
    Local Government New Zealand’s 10 Point Plan is a chance to stop the widening chasm between the rates some households are charged and their ability to pay, Labour’s Local Government spokesperson Su’a William Sio says. “There is a huge disconnect… ...
    1 week ago
  • Parole and ‘surviving the first year’
    “Intensive psychological treatment and early release to parole is far more effective at reducing reoffending among high risk prisoners than serving out the full prison sentence.” That’s reportedly the finding of Surviving the First Year, a recently-released study into Corrections’… ...
    GreensBy David Clendon MP
    1 week ago
  • Parole and ‘surviving the first year’
    “Intensive psychological treatment and early release to parole is far more effective at reducing reoffending among high risk prisoners than serving out the full prison sentence.” That’s reportedly the finding of Surviving the First Year, a recently-released study into Corrections’… ...
    GreensBy David Clendon MP
    1 week ago
  • If it’s good enough for Lake Taupō…
    Nick Smith supports helping farmers transition away from dairying and agrees we must set nitrogen caps that limit the number of animals on farms. He says this strategy is “world leading”. However we need action and pressure from him, on to… ...
    GreensBy Catherine Delahunty MP
    1 week ago
  • The importance of swamp kauri for climate research
    As early as 2010, international climate scientists were expressing concern at the rate of ancient swamp kauri extraction in Northland. Swamp kauri provides one of the best sources in the world for measuring climate fluctuations over the last 30,000 years.… ...
    GreensBy Eugenie Sage MP
    1 week ago
  • Govt needs to heed warnings on med students
    The Government is being urged to act on advice it has received about the negative impact its seven year study cap will have on hundreds of medical students, Labour’s Health spokesperson Annette King says. “The 7EFTS lifetime limit unfairly disadvantages… ...
    1 week ago
  • Ministers at sea over overseas buyers register
    The Prime Minister and three of his ministers are at odds over the collection of information about offshore speculators buying our houses and seem to be making things up as they go, Labour’s Housing spokesperson Phil Twyford says. “John Key… ...
    1 week ago
  • Time for Key to ditch the King Canute routine
    With the economic mood in New Zealand souring, it is time for John Key to admit reality and drop the King Canute approach, says Labour’s Finance spokesperson Grant Robertson.  “John Key is claiming that 95 per cent of the economy… ...
    1 week ago
  • Botched contract leads to charter school rort
    A botched Government contract has allowed an Auckland charter school to double dip by getting funding for students it has accommodated for free, Labour’s Education spokesperson Chris Hipkins says. “Information received by Labour through written Parliamentary questions show the Ministry… ...
    1 week ago
  • Flawed system costs $3 million and counting
    New figures obtained* by Labour show the Government’s shambolic ACC car registration levy system has cost more than $3 million to implement and the costs are set to escalate, Labour's ACC spokesperson Sue Moroney says. “That’s $3 million that could… ...
    1 week ago
  • Radio NZ facing death by 1000 cuts
    The National Government’s seven year funding freeze on Radio New Zealand has put its vital public broadcasting services in serious jeopardy, Labour’s Broadcasting spokesperson Clare Curran says. "The axing of 20 jobs at our only publicly funded broadcaster shows the… ...
    1 week ago
  • Trades funding cut short-sighted
      Short-sighted funding cuts could lead to fewer school students learning trades, Labour’s Education spokesperson Chris Hipkins says. "Schools are now being financially penalised for enrolling students in trades academies. They could lose teachers and school management positions as a… ...
    1 week ago
  • The rock star economy is well out of tune
    The bad news is mounting for the economy with job ads falling in June, suggesting employment is taking a hit, says Labour’s Finance spokesperson Grant Robertson. “ANZs Job Ads data shows job advertising fell 0.6 per cent in June and is… ...
    2 weeks ago
  • Treasury latest to withhold Saudi sheep scandal information
    The Labour Party will today lodge a complaint with the Ombudsman after the Treasury became the latest government department to withhold information on the Saudi sheep scandal. Labour’s Trade and Export Growth spokesperson David Parker says the Government has been… ...
    2 weeks ago
  • Calls to extend life-saving training
    The Government must ensure all health sector workers are not only be trained to routinely check for medical identification bracelets but have access to critical online patient information, Labour’s Health spokesperson Annette King says. “The tragic death of an 80-year-old… ...
    2 weeks ago
  • Making business tax more flexible
    Labour is launching a new proposal to give businesses more flexibility and control over when they pay their tax, Opposition Leader Andrew Little announced today. “Today I am launching a discussion document to give businesses the option of paying their… ...
    2 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere