NRA defends deal to pay toll firms for car shortfall
THE NATIONAL Roads Authority (NRA) has defended a controversial deal to pay compensation to private toll companies because of falling traffic levels on newly opened motorways.
As much as €100m in exchequer cash may be needed to compensate two toll-road firms under the 30-year deal, it has been claimed.
The NRA admitted yesterday that it had agreed the deals involving cash penalties being paid to companies that built and operate the M3 Dublin to Cavan motorway and Limerick tunnel toll roads, if traffic volumes fall below certain levels.
Traffic on the M3 is currently 22pc below the agreed threshold and by 26pc on the Limerick tunnel. About 21,500 vehicles a day are using the M3, 5,000 below the 26,250 needed to avoid penalty payments.
The Limerick tunnel is handling about 3,500 vehicles below the penalty fee level. To avoid penalty payments, 17,000 vehicles need to pass through each day. The actual traffic level is around 13,500.
However, the NRA said any penalty payments were calculated on an annual basis and over a 30-year life span. Since both stretches of road had only just opened, it was not yet possible to calculate if any payments would be made.
The NRA has emphatically rejected claims that any secret deal had been done with the companies and insisted that no claim for compensation had yet been received.
A spokesman said: "We need to take account of the fact that we are living in unique times and that the agreement is based for the next 30 years of traffic volumes.
"A case in point is the M50 motorway, where traffic turned out to be far greater than the design capacity, necessitating a €1bn upgrade which has just been completed."
The penalty clause was highlighted by PlanBetter, a joint initiative of four environmental organisations -- An Taisce, Friends of the Earth, Friends of the Irish Environment and Feasta.
It claimed that the bill to the taxpayer would be at least €100m over the lifetime of the contracts, but could be even higher if traffic levels remain static or continue to fall.
In a statement yesterday, the NRA said revenue-guarantee arrangements were a common feature of public private partnership (PPP) contracts in many countries.
They were used mostly on large and complex schemes to provide a competitive funding environment.
Two of the nine PPP schemes contain a revenue-guarantee arrangement based on traffic -- the M3 motorway and the Limerick Tunnel.
"If traffic levels are below the levels set out in the contract, the NRA pays the difference in revenue between the two levels," the authority said.
The purpose of traffic revenue-guarantee schemes was to "enhance the fundability of these projects and attract more competitive funding terms.
"In the case of the M3, the reason the traffic guarantee was necessary was due to the size of the project and the amount of funding banks required to participate in the funding," the statement added.
The Limerick tunnel involved risky work and uncertainty about future city-centre traffic management schemes.
Fine Gael's transport spokesman Simon Coveney said it had been estimated that taxpayers could face a €100m bill over the lifetime of the two contracts.
"Not only is this a false economy, it also shows that the Government's assumptions about traffic volumes were far too optimistic," he said.
"It appears that the Government failed to put in place a provision where the State would not be penalised if traffic numbers fell."
The issue was also raised by Labour leader Eamon Gilmore in the Dail yesterday. Tanaiste Mary Coughlan said it was a matter for the Transport Minister Noel Dempsey to address.