Thursday 8 December 2016

Funds for bad roads used to repay motorway costs

Published 11/05/2015 | 02:30

National Roads Authority Chief Executive Fred Barry
National Roads Authority Chief Executive Fred Barry

Roads bosses have been forced to divert money intended for upgrading and improving dangerous roads to repay the costs of the motorway network.

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The National Roads Authority (NRA) has slashed funding earmarked for new schemes after the Government changed the rules on repaying the cost of infrastructure projects.

Some €35m has been taken from this year's budget alone, NRA chief executive Fred Barry told the Irish Independent.

In 2013 and 2014 the agency was forced to reduce spending on new projects by an additional €64m so it could meet repayments for public private partnership (PPP) road schemes.

The cut comes despite a new Department of Transport report warning that there is a €300m shortfall in funding to maintain the road and public transport network at current standards.

"Investment in transport is currently facing a significant shortfall to the identified minimum investment level to maintain the network as it is," the 'Transport Trends: An Overview of Ireland's Transport Sector' report warns.

It added that expenditure had dropped from a peak of €3.6bn in 2008, to just €1bn this year. This represents a "€300m gap to the identified minimum level to maintain the current system as it is".

There is almost 100,000kms of road across the country, of which around 5,500km is heavily-trafficked national routes.

Of this, around 900km is motorway, much of which was funded through PPP financing where the private sector funded the cost of the road, which is repaid by the NRA on behalf of the State over time.

Until 2010, these costs were funded from current expenditure.

However, that year the Department of Public Expenditure and Reform changed the rules and decided that all new projects would have to be repaid from capital budgets.

"We're diverting some money to pay for PPP roads," Mr Barry said. "The PPP budget doesn't always match the funding. We sign the contracts and commit to making operational payments which kick in at the end of construction.

"We used to have a budget line from the Department of Transport through the Department of Public Expenditure and Reform, but that hasn't been keeping up with commitments.

"It's a growing amount, around €100m. We could use more money. We're doing less than we should do, but not so much less than we're going to get into trouble in the near future.

"What we would like to be doing, apart from big schemes, is smaller project work like removing bad bends," he added.

Older PPPs such as the M4 Kilcock-Kinnegad, Limerick Tunnel and M50 motorway remain funded from current spending.

However, four new roads PPPs - Arklow-Rathnew, N17/N18 Gort-Tuam, New Ross bypass and Gorey-Enniscorthy which are expected to cost some €1.2bn - will be funded from capital.

This impacts on the amount of money available to carry out smaller projects.

Transport Minister Paschal Donohoe has warned about a lack of funding to maintain the roads network and has said he would seek additional funding in the Budget.

The department said that spending in relation to the four PPPs was being drawn from the NRA's capital budget.

"In this context discussions are continuing with the Department of Public Expenditure and Reform in relation to overall capital budget allocated to this Department for the period 2016-2020," it said.

The Department of Public Expenditure and Reform added that all PPPs signed post-July 6, 2010 would be paid from capital budgets.

This was designed as an "expenditure management tool" which would provide "greater transparency".

What is a PPP?

Used to finance large-scale infrastructure projects, public private partnerships (PPPs) allow roads, schools, water treatment and buildings to be funded using private sector finance.

Instead of the State borrowing the money upfront, which would impact on general government borrowings, it instead partners with one or a number of private companies.

Around €6.5bn worth of projects are funded under the model, including the National Conference Centre, which will have cost almost €770m by the time it's paid off in 2035; the Criminal Courts Complex in Dublin (€623m to be repaid by 2035) and a number of education projects including schools costing €1.7bn.

Much of the national road network was funded under the model, with financial commitments of €4bn in place. They will all be repaid by 2052.

New projects are also being developed including primary healthcare centres Garda divisional headquarters and roads. By 2020, the State will face annual PPP charges of some €440m.

PPPs can take a number of forms ranging from design and build to design, build, operate and maintain.

Irish Independent

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