These changes resulted in adjustments to the price of the tunnel, and affected projections of traffic patronage and of CCM's revenue. The total net value of resolving these post-Supplementary EIS issues was about $75 million. The RTA faced the prospect of a reduced upfront payment.
To keep the project on a 'no net cost to government' basis, the RTA negotiated a financial package with CCM. CCM carried out the $75 million worth of additional work in return for the application of a new toll escalation regime. This regime entitles CCM to minimum defined annual increases in tolls for a fixed portion of the term of the contract. See Exhibit 2.6.
Exhibit 2.6: Change to the toll escalation formula | |
Pre SEIS process | Post SEIS process |
Toll to increase by CPI | Toll to increase by: ■ 4 percent up to 2012 or CPI, whichever is the greater ■ 3 percent from 2012 to 2018 or CPI, whichever is the greater ■ CPI thereafter |
Source: Audit Office research | |
This action distorts inter-generational equity between tunnel users. If it was appropriate for tunnel users to fund these costs, this should have been done by changing the base tolls. Escalation factors should do no more than reflect underlying cost movements or inflation.