Transportation Planning Casebook/Road User Charging in Australia

Road user charging has occurred for many years in Australia. These charges include tolls, fuel excise, parking, registration and taxes on luxury and imported cars. However, the most controversial of these in Australia is Tolls. Australia's history of tolls dates back to 1811 when the first toll road was built from Sydney to Parramatta. As it stands there are 17 toll roads in Australia and they are located in New South Wales, Queensland and Victoria. There are two different characteristics of road tolls in Australia; type and the charging system of the road.

Maps of Locations
The current location of toll roads can be found here: http://www.eastcoastcarrentals.com.au/media/1269/toll-road-australia.pdf

The table below is a tabulated summary of information regarding the current toll roads in Australia.

Budget and method of financing
Roads are built with funding either from extension of the concessions on existing roads, such as the NorthConnex project which raised 2.1 billion dollars from tolls on the M2 and M7. The other way is financing through the private sector. The percentage of private funding varies from 0 to 68%. For example, the new M5 project successfully secured 32% of the $4.7 billion funding from the private sector. Many features of the toll roads in Australian cities are at least partly due to the involvement of the public and private sector working together, this type of contract is none as a public-private partnership or PPP.

By the nature of the PPP, the toll road project will be own and run by the private section until the debt from acquiring the road is paid off. From the information sheet publish by the department of infrastructure and regional development, 13 of the 17 toll roads in Australia are majority own and operate by Transurban.

Collecting tolls from existing roadway is one method to fund future roadway project. However, in many cases toll rates are determined in advance, with an agreed maximum rate of increase. Further, the difference in tolls between roads within a city does not directly reflect on it funding structure. It may simply reflect differences in the deals negotiated between the private and public. One example is the current M5 East roadway, the sections from Kingsgrove to inner city is not subjected to tolls. However, the remaining sections of M5 are subject to tolls.

Selection of projects
Tollways are major pieces of urban infrastructure that link other pieces of infrastructure. There are many consideration which need to be taken into account, and aren't necessarily easy to solve. Generally, the need for a transport link will be identified years in advance in government planning processes. The government will make decision based on key factors such as which roads should be prioritized, if the public transport infrastructure is more effective then a road, and if the project has viability and should go ahead.

Other than proposal from the governments planning processes, companies can propose new roads and therefore tolls. An example of these market-led proposals are the NorthConnex link in Sydney from Transurban, although they can potentially be unsolicited. Private involvement through these unsolicited proposal process has allowed the acceleration of roadway project. However, this type of proposal still needs to align to Infrastructure Australia's guidelines and the state government's strategic priorities. Also, it is crucial to explore alternative ways of achieving the same or similar outcome. For example, the NorthConnex project is aiming to link M2 and M1, this will provide a better traveling route for drivers. However, there hasn't been sufficient work to determine if there is an alternative route, enough public demand or if a rail line would be a better investment.

Tolls impact on living standard
Tolls among road user charging can potentially have a greater impact on the living standards of road users. People living in some location pay a significant amount of tolls or are required to go out of their way. However, some people who live away from these areas don't incur these costs. There is cases where this has significantly affected road user as some toll roads are located near less affluent areas. Therefore, these tolls can potentially be seen as a regressive tax.

These tolls can have a significant effect on households, particularly regular users of toll roads. Data from Transurban indicates that 3.97% of its NSW customers pay between $200 and $499.99 a month. Some of these tolls are subject to government rebate that allow the local user to claim the cost back exclusive of GST. The Sydney M5 southwest has this feature due to the M5 cashback scheme. The NSW government has initiated a rebate system whereby those who spend on average more than $25 dollars a week will be eligible for free car registration.

An additional cost for the consumer if tolls are left unpaid are fines for these unpaid tolls. There is an escalation in pricing for the longer it takes for you to address the issue.

Narrative of the Case
The various charges imposed on road users in Australia are generally implemented to produce revenue for government, private corporations and/or to manage travel demand. These charges include tolls, vehicle registration, fuel excise, parking expenses, heavy vehicle charges, and other related taxes such as luxury car tax and tariffs on imported vehicles.

Tolls
Tolling stands out among these charges as being the main technique of managing travel demand, with the other charges generally being implemented to raise revenue. This is because of the observed behaviour of motorists to alter their travel plans and habits if a toll substantial enough to is applied along their route.

The tollways in Australia can currently be classified into three categories:


 * Harbour/river crossing: Bridges or tunnels that are in demand due to a physical barrier
 * Tunnels or roads with tunnels (short-distance routes, 2–7 km, for avoiding congestion within major urban areas)
 * Intra-city links (long-distance routes connecting major traffic areas)

Within these categories toll roads can be further defined as being fixed or varying with distance or time of day/week. Most of the toll roads in Australia employ fixed pricing. The majority (73% in terms of revenue) of toll roads are owned and operated by Transurban. This large market-share has been attained through an increased concentration in the ownership and operation of Australian toll roads over the last 5 years; a level of concentration which is expected to remain for the foreseeable future. Transurban's acquisitions were approved after being scrutinized by the Australian Competition and Consumers Commission. They were put before the commission to ensure that there was still enough competition in this market and to guarantee that the state governments would maintain power to regulate toll road operation. Regardless of this measure to maintain a level of competition in the market there are concerns that this concentration may not be desirable for road users and for the future efficiency of the toll industry.

This private ownership and operation of toll roads has resulted from the state governments choosing to sell to private companies for a lump sum payment, rather than having to pay operating expenses and accruing revenue over a long-term. This lump sum payment is preferred by government as it does not rely on the accuracy of traffic demand forecasts, which have proven to be inaccurate with overestimates of toll road users for past toll road projects. Revenue from the sale of toll roads is largely reinvested into road projects and maintenance with very little profit being made for government to spend elsewhere. This reinvestment allows for improvements to the road network, which can give alternative routes that don't incur a toll more utility, leading to less traffic using the toll road, reducing revenue.

As previously stated, toll roads are primarily used as a method of managing travel demand over specific routes, thus alleviating congestion. This reduction in congestion and as a result travel time, has a significant economic benefit. In addition to this benefit toll roads are able to 'fast-track' the construction of other road projects, which in turn has improved the efficiency of the road network and has indirectly led to more economic benefit. The 2014 total annual economic benefit of toll roads in Australia has been estimated by KPMG to be $51.6 billion (composed of $38.8 billion of road user benefits and $13.3 billion of wider economic benefits).

Fuel Excise
Fuel excise refers to the taxation of fuels as imposed by the federal government. The revenue from excises represents the largest component of road user charging revenues. Generally conventional road vehicle fuels are taxed $0.409 per litre. This is not a fixed cost, as it rises with inflation and availability of fuels, nor is it constant with all fuel types. As there is a transition away from petroleum based energy sources, there will be a decrease in profit for the government.

Parking
The regulation of parking pricing is another method through which travel demand can be managed. For instance, in the city centre the parking costs are significantly higher. This is to stop people from driving to work, and therefore reducing congestion in the CBD.

Luxury Car Tax
The Luxury Car Tax only applies to vehicles over the threshold, this is dependent on the year and fuel efficiency of the car. If over this threshold value there is a tax of 33% on the amount above the threshold. There are suggestions of removing this tax to increase the safety of cars.

Heavy Vehicle Charges
Heavy vehicle charges are distinct from the other charges identified as they are revenue raising charges implemented specifically to compensate for the wear and tear imparted upon the roads as a result of vehicle use. They are charged in two parts to users of heavy vehicle; annual heavy vehicle registration and charges based on fuel consumption. The fuel consumption-based charge is applied as this value is indicative of the damage dealt to road surfaces and is charged in terms of $/litre. The rate is set by the Transport and Infrastructure Council and is currently $0.258 per litre, an amount which will remain frozen until the end of the 2020 financial year. This charge is collected by the federal government, whereas the registration charge is collected by the state governments and in both instances are reinvested to maintain roads at the discretion of the respective governments.

Proposed Reform
It has been suggested that the current road user charging arrangement is inadequate and that a large reform is required. As congestion is the main issue to be resolved by road user charging, these claims have in part been made due to what is seen to be a weak link between the congestion caused by individual road users and the charges they incur. To resolve this, it has been suggested that a variable toll amount be used on more toll roads in Australia so that travel during off-peak times becomes more preferable and congestion is decreased, with any additional revenue being invested in transport projects. There are similar complaints applied to vehicle registration and fuel excise charges, as neither of these are scaled in relation to congestion. Further improvements to road user charging could be produced by increasing the responsiveness of the fuel excise taxation amount, as it has historically been slow to react to market externalities. Beyond this, it is argued that large reductions in fuel excise amounts would not be recommended as it would eliminate too much of the revenue raising ability of government. Given that the increased popularity of alternatively fuelled vehicles is causing a reduction in annual fuel excise revenue, this suggestion is often disregarded. Other recommendations suggest that the luxury car tax be abolished, and that the price of parking should be increased, particularly in Melbourne and Brisbane where the CBD parking space levy is much lower. This increase in parking prices would discourage road users from using private vehicles to commute to work.

It is accepted that changes to urban road user charging are difficult to implement but could result in significant improvements to a road network's efficiency.

Discussion Question

 * 1) What type of tolls should we use (fixed, distance or time of day)?
 * 2) Are tolls effective at mitigating congestion?
 * 3) Do we need tolls for anything other than mitigation of congestion or profit?
 * 4) Should Transurban be allowed to monopolize the toll industry?
 * 5) As the revenue from fuel excise decreases, how should the government increase their revenue?
 * 6) Should all roads be tolled?

Additional Readings

 * 1) https://www.theage.com.au/national/victoria/optimism-bias-on-toll-road-plan-20121205-2avpq.html
 * 2) https://bitre.gov.au/publications/2016/files/is_081.pdf
 * 3) https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027
 * 4) http://www.afr.com/news/transition-to-road-user-charge-inevitable-20161123-gsw8i0
 * 5) https://www.sciencedirect.com/science/article/pii/S0386111214600789
 * 6) http://www.abc.net.au/news/2018-01-15/electric-cars-breaking-australia-roads-reform-road-user-charging/9235564