web analytics

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

  • Rebuilding Christchurch – a lost opportunity?
    In rebuilding Christchurch, the city has a rare chance to build in a sustainable, creative and people-centred way. We can create a city that is so much more than a simple re-construction of buildings and transport links. Christchurch could be… ...
    GreensBy Eugenie Sage
    5 hours ago
  • Rebuilding Christchurch – a lost opportunity?
    In rebuilding Christchurch, the city has a rare chance to build in a sustainable, creative and people-centred way. We can create a city that is so much more than a simple re-construction of buildings and transport links. Christchurch could be… ...
    GreensBy Eugenie Sage
    5 hours ago
  • Minister must ensure 111 issue is fixed
    The Police Minister must ensure the 111 fault is fixed as an urgent priority as a 40 minute wait can be the difference between life and death, says Labour’s Police spokesperson Stuart Nash. “The Police have said the fault lies… ...
    9 hours ago
  • New Zealand a world leader – in unaffordable housing
    The National Government has made New Zealand a world leader – in unaffordable housing, Labour’s Housing spokesperson Phil Twyford says. “The latest International Monetary Fund report shows New Zealand had the world’s second fastest growth in house prices at the… ...
    10 hours ago
  • New Zealand a world leader – in unaffordable housing
    The National Government has made New Zealand a world leader – in unaffordable housing, Labour’s Housing spokesperson Phil Twyford says. “The latest International Monetary Fund report shows New Zealand had the world’s second fastest growth in house prices at the… ...
    10 hours ago
  • Hospital meals making you sick
    I don’t know about you but I felt a bit sick watching Health Minister Jonathon Coleman eat supposed Dunedin hospital food last week.  Dunedin people have tolerated a crumbling hospital, lower access to services, longer waiting times and gross food… ...
    GreensBy Metiria Turei
    11 hours ago
  • Hospital meals making you sick
    I don’t know about you but I felt a bit sick watching Health Minister Jonathon Coleman eat supposed Dunedin hospital food last week.  Dunedin people have tolerated a crumbling hospital, lower access to services, longer waiting times and gross food… ...
    GreensBy Metiria Turei
    11 hours ago
  • Key needs to stop shifting and come clean
    John Key’s position on his lawyer’s offshore trusts lobbying has changed yet again with the Prime Minister admitting he told Todd McClay that Ken Whitney had approached him, says Labour’s Finance spokesperson Grant Robertson. “Yet again information has to be… ...
    13 hours ago
  • Key needs to stop shifting and come clean
    John Key’s position on his lawyer’s offshore trusts lobbying has changed yet again with the Prime Minister admitting he told Todd McClay that Ken Whitney had approached him, says Labour’s Finance spokesperson Grant Robertson. “Yet again information has to be… ...
    13 hours ago
  • Revolutionary art in Palmerston North
    Last night I was a judge at the May Day Cup, an annual theatrical event which celebrates International Workers Day. The event was organised by stalwart unionist Dion Martin and included a range of performers competing for the Cup. This year… ...
    GreensBy Catherine Delahunty
    1 day ago
  • Revolutionary art in Palmerston North
    Last night I was a judge at the May Day Cup, an annual theatrical event which celebrates International Workers Day. The event was organised by stalwart unionist Dion Martin and included a range of performers competing for the Cup. This year… ...
    GreensBy Catherine Delahunty
    1 day ago
  • Andrew Little visits Zaatari refugee camp
    Leader of the Opposition, Andrew Little, has visited the largest Syrian refugee camp in the world, Zaatari in Jordan, a day after seeing New Zealand troops at Camp Taji in Iraq. Mr Little spent several hours in the camp, meeting… ...
    2 days ago
  • Com Com’s Z Energy decision anti-competitive
    The Commerce Commission’s decision to allow Z Energy to buy Caltex can only undermine the competition in the fuel industry that is needed to ensure New Zealanders pay the lowest price for petrol, Labour’s Consumer Affairs spokesperson David Shearer says.… ...
    3 days ago
  • Com Com’s Z Energy decision anti-competitive
    The Commerce Commission’s decision to allow Z Energy to buy Caltex can only undermine the competition in the fuel industry that is needed to ensure New Zealanders pay the lowest price for petrol, Labour’s Consumer Affairs spokesperson David Shearer says.… ...
    3 days ago
  • OAG raps Govt over the knuckles on HNZ contracts
    The Government has been rapped over the knuckles by the Auditor General over its failure to properly manage $2.3m of contracts and conflicts of interest in relation to a merchant banker advising them on the state house sell-off, says Labour’s… ...
    3 days ago
  • OAG raps Govt over the knuckles on HNZ contracts
    The Government has been rapped over the knuckles by the Auditor General over its failure to properly manage $2.3m of contracts and conflicts of interest in relation to a merchant banker advising them on the state house sell-off, says Labour’s… ...
    3 days ago
  • Brownlee must step in as EQC spin exposed
    Gerry Brownlee needs to step in after EQC’s desperate spin in the wake of yesterday’s landmark settlement has been exposed by its own documents, says Labour’s Canterbury spokesperson Megan Woods. “Yesterday’s settlement showed that thousands of homes may not have… ...
    3 days ago
  • Brownlee must step in as EQC spin exposed
    Gerry Brownlee needs to step in after EQC’s desperate spin in the wake of yesterday’s landmark settlement has been exposed by its own documents, says Labour’s Canterbury spokesperson Megan Woods. “Yesterday’s settlement showed that thousands of homes may not have… ...
    3 days ago
  • OIO must explain Argentine pollution prosecutions
    The Overseas Investment Office (OIO)has questions to answer about how it safeguarded our sensitive land by allowing foreign investors with criminal prosecutions to purchase Onetai Station in Taranaki, says Labour’s Land Information spokesperson David Cunliffe.   “Rafael and Federico Grozovsky… ...
    4 days ago
  • Aussie banks in NZ should ban lending to offshore buyers
    ASB, Westpac and ANZ must confirm whether or not they will continue to fund the over-heated property market by lending to non-resident offshore home buyers, Labour’s Housing spokesperson Phil Twyford says. “This issue has arisen because their parent banks have… ...
    4 days ago
  • Aussie banks in NZ should ban lending to offshore buyers
    ASB, Westpac and ANZ must confirm whether or not they will continue to fund the over-heated property market by lending to non-resident offshore home buyers, Labour’s Housing spokesperson Phil Twyford says. “This issue has arisen because their parent banks have… ...
    4 days ago
  • Murray McCully needs to come clean over Tokelau ferry debacle
    Foreign Minister Murray McCully needs to come clean on why a New Zealand aid-funded vessel intended to service the Tokelau Islands is delayed, over budget and failed its sea trials, Labour’s Foreign Affairs spokesperson David Shearer says. “The new ship… ...
    4 days ago
  • Full independent inquiry needed to save New Zealand’s reputation
    Revelations that John Key's personal lawyer and trust advisor led a lobbying campaign to shut down a review of New Zealand's foreign trust regime makes the case for a full scale independent inquiry a matter of urgency, Labour's Finance spokesperson… ...
    4 days ago
  • Full independent inquiry needed to save New Zealand’s reputation
    Revelations that John Key's personal lawyer and trust advisor led a lobbying campaign to shut down a review of New Zealand's foreign trust regime makes the case for a full scale independent inquiry a matter of urgency, Labour's Finance spokesperson… ...
    4 days ago
  • Andrew Little visits NZ troops in Iraq and refugees in Jordan
    Opposition Leader Andrew Little has visited New Zealand troops at Camp Taji, Iraq. Mr Little also met with Iraqi Defence Minister Khaled Al-Obedih and senior military officials from the Coalition forces in Iraq. He now heads to Jordan to see… ...
    4 days ago
  • Workplace death toll still too high
    It’s a damning indictment on the Government that as workers gather to remember their lost workmates on Worker’s Memorial Day, New Zealand’s workplace death toll is still far too high, Labour’s Workplace Relations and Safety spokesperson Iain Lees-Galloway says. “At… ...
    4 days ago
  • Workplace death toll still too high
    It’s a damning indictment on the Government that as workers gather to remember their lost workmates on Worker’s Memorial Day, New Zealand’s workplace death toll is still far too high, Labour’s Workplace Relations and Safety spokesperson Iain Lees-Galloway says. “At… ...
    4 days ago
  • Minister must come clean on implications of landmark settlement
    Gerry Brownlee has urgent and serious questions to answer in the wake of today’s landmark EQC settlement, which potentially has major implications for thousands of Cantabrians, says Labour’s Canterbury spokesperson Megan Woods. ...
    4 days ago
  • Mossack Fonseca links to OIO approvals must be investigated
    The Minister for Land Information must investigate and disclose how many applications to the Overseas Investment Office (OIO) have links to Mossack Fonseca, says Labour’s Land Information spokesperson David Cunliffe. “Labour can now reveal the OIO approved an application from… ...
    5 days ago
  • Mossack Fonseca links to OIO approvals must be investigated
    The Minister for Land Information must investigate and disclose how many applications to the Overseas Investment Office (OIO) have links to Mossack Fonseca, says Labour’s Land Information spokesperson David Cunliffe. “Labour can now reveal the OIO approved an application from… ...
    5 days ago
  • Govt complacency leaves RB no room to cut
    The Government has put the economy in a holding pattern, leaving the Reserve Bank Governor with little room to manoeuvre as he tries to balance a rampant housing market with non-existent inflation, says Labour’s Finance spokesperson Grant Robertson. “Graeme Wheeler… ...
    5 days ago
  • Govt complacency leaves RB no room to cut
    The Government has put the economy in a holding pattern, leaving the Reserve Bank Governor with little room to manoeuvre as he tries to balance a rampant housing market with non-existent inflation, says Labour’s Finance spokesperson Grant Robertson. “Graeme Wheeler… ...
    5 days ago
  • Dam not out of doldrums yet
    Ruataniwha Dam promoters Hawke’s Bay Regional Investment Company (HBRIC) still has hurdles to clear and a lot of work to do before ratepayers and taxpayers will have confidence in the scheme, says Labour’s MP for Ikaroa-Rāwhiti Meka Whaitiri.“We need sustainable… ...
    5 days ago
  • New study shows Smith’s insulation fails Kiwi kids
    A new Otago University study shows Nick Smith’s inadequate insulation standards will see hundreds of children unnecessarily hospitalised for housing-related illnesses every year, Labour’s Housing spokesperson Phil Twyford says. ...
    5 days ago
  • Government out of touch on foreign trusts
    John Key’s poor handling of the foreign trusts issue is starkly revealed in a poll today which shows the majority of Kiwis are worried about the country being a tax haven and almost half think the issue has been badly… ...
    5 days ago
  • Government out of touch on foreign trusts
    John Key’s poor handling of the foreign trusts issue is starkly revealed in a poll today which shows the majority of Kiwis are worried about the country being a tax haven and almost half think the issue has been badly… ...
    5 days ago
  • Biggest trade deficit for 7 years a warning for Govt
    The biggest trade deficit for seven years shows the Government can’t be so complacent about the economy and must take action to diversify and encourage exports, says Labour’s Finance spokesperson Grant Robertson. “The biggest driver has been the fall in… ...
    5 days ago
  • Biggest trade deficit for 7 years a warning for Govt
    The biggest trade deficit for seven years shows the Government can’t be so complacent about the economy and must take action to diversify and encourage exports, says Labour’s Finance spokesperson Grant Robertson. “The biggest driver has been the fall in… ...
    5 days ago
  • Government’s record on climate change under fire
      The Royal Society’s latest report on climate change has made it clear that it believes the Government’s current approach to climate change is inadequate, says Labour’s spokesperson on Climate Change Megan Woods.  “The report, ‘Transition to a low-carbon economy… ...
    5 days ago
  • Government’s record on climate change under fire
      The Royal Society’s latest report on climate change has made it clear that it believes the Government’s current approach to climate change is inadequate, says Labour’s spokesperson on Climate Change Megan Woods.  “The report, ‘Transition to a low-carbon economy… ...
    5 days ago
  • Mainfreight director agrees with Labour on rail funding
    Richard Prebble – in the past accused of ruining rail and now a director of Mainfreight – agrees with Labour that secure funding for KiwiRail is the best way to minimise congestion in our major cities, says Labour’s SOEs spokesperson… ...
    6 days ago
  • Mainfreight director agrees with Labour on rail funding
    Richard Prebble – in the past accused of ruining rail and now a director of Mainfreight – agrees with Labour that secure funding for KiwiRail is the best way to minimise congestion in our major cities, says Labour’s SOEs spokesperson… ...
    6 days ago
  • Government to Reserve Bank – Rock or Hard Place?
    The Government’s complacency on the housing crisis and the economy has put the Reserve Bank Governor in a no-win position as he contemplates the OCR tomorrow, says Labour’s Finance spokesperson Grant Robertson. “Graeme Wheeler is stuck between a rock and… ...
    6 days ago
  • Government to Reserve Bank – Rock or Hard Place?
    The Government’s complacency on the housing crisis and the economy has put the Reserve Bank Governor in a no-win position as he contemplates the OCR tomorrow, says Labour’s Finance spokesperson Grant Robertson. “Graeme Wheeler is stuck between a rock and… ...
    6 days ago
  • John Key’s land tax could push up rents
    A land tax proposed by John Key as the answer to the housing crisis could push up rents and risks having no effect on skyrocketing prices, Labour’s Housing spokesperson Phil Twyford says. “The Government needs to explain why the thousands… ...
    6 days ago
  • Government should ban foreign speculators
    The Prime Minister’s musings about a land tax on non-resident buyers is just more tinkering, and the Government should just ban foreign speculators as the Australian Government has done, says Labour’s Housing spokesperson Phil Twyford. “This is classic John Key.… ...
    7 days ago
  • Government must protect Pharmac as promised
    John Key must tell New Zealanders that he will not bow to pressure from wealthy drug companies or their US negotiators and put Kiwi lives at risk, Labour’s Health spokesperson Annette King says.   “News reports today have the drug… ...
    7 days ago
  • Action not words, needed on housing speculation
    John Key should be taking action to crack down on speculation in our overheated housing market, instead of random musings on land tax, Labour Housing spokesperson Phil Twyford said.  "John Key suggested today on TVNZ's Q and A programme that… ...
    1 week ago
  • Tertiary education cost rising 7x faster than inflation
    New figures show the cost of tertiary education is rising seven times faster than inflation, putting post-school education out of the reach of many, Opposition Leader Andrew Little says.  “Figures release this week show how much more students or their… ...
    1 week ago
  • Buying Lotto is not an arts funding strategy
    The Government must rethink the way the arts are funded after falling Lotto sales has left the sector with declining resources and increasingly vulnerable, Labour’s Arts, Culture and Heritage spokesperson Jacinda Ardern says.  “Our arts sector is in a sorry… ...
    1 week ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere