# 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.

## Annotated List of Actors

| Stakeholders Group | Members | Issue/Interest |
| Commuters | Motorists | Price of road user charging (e.g. tolls, parking) Congestion of roads |
| Local Community | Members of the public | Price of road user charging (e.g. tolls, parking) Congestion of roads |
| Toll Road Owners | RMS Kumagai Gumi Transubran Horizon Roads Pty Ltd | Profit from tolls |
| Toll Road Operators | RMS Tunnel Holding Pty Ltd Transurban Horizon Roads Pty Ltd | Profit from tolls |
| Government Organizations | Federal Government State Government | Profit from selling the road Ensure that Budget |

## Timeline of Events

| Open Date of Road/Bridge | Event |
| 1811 | Sydney to Parramatta |
| 19 March 1932 | Sydney Harbour Bridge opened. It is a steel through arch bridge which links the Sydney CBD to the North Shore of Sydney. |
| 1935 to 1979 | Hornibrook Bridge is a 2.6 km wooden bridge that was built from 1932-1935. It was replaced with a toll free Houghton highway in 1979. |
| 1936 to 1960s | Walter Taylor Bridge is a 300m heritage-listed suspension bridge crossing the Brisbane River between Indooroopilly and Chelmer in Brisbane. |
| 1940 to 1947 | Story Bridge was opened in 1940 and is now a heritage-listed steel cantilever bridge spanning the Brisbane River that carries vehicular, bicycle and pedestrian traffic between the northern and the southern suburbs of Brisbane, Queensland, Australia. |
| 1963–1993 | The M4 Western Motorway is a 46 km motorway which was tolled between 1963 and 1993. |
| 1965–1990 | The M1 Pacific Motorway is a 127 km motorway which runs from Sydney to Newcastle. |
| 1975–1995 | Southern Freeway, now known as the Princes motorway is a 55 km dual carriage motorway which was tolled between 1975 and 1995. |
| 1978 to 1985 | The West Gate Bridge is a 336m bridge which spans the Yarra river in Melbourne. It was tolled between 1978 and 1985. |
| December 1986 | The Gateway Motorway opened. It originally opened as a two-lane motorway on 13 December 1988, and was upgraded to four lanes in two stages. The first stage of the duplication (Ipswich Motorway to Wembley Road) was completed in December 1996, followed by the second (Wembley Road to Pacific Motorway) on 23 May 2000. The motorway was constructed to connect the then-recently opened Gateway Bridge to the Bruce Highway in the north and the Pacific Motorway in the south. |
| 1990 to 1996 | Sunshine Motorway is a single lane road in each direction which extends for 33 km along the Sunshine coast of Queensland. It was tolled between 1990 to 1996. |
| August 1992 (M5 South-West) December 2001 (M5 East) | The M5 route comprises of two separate parts, separately owned and operated. The M5 South-West which connects Liverpool to Sydney CBD opened in August 1992 and M5 East which connects opened in December in 2001. |
| August 1992 | Sydney Harbour Tunnel opened. It is a twin-tube road tunnel which provides an alternate route to relieve congestion on the Sydney Harbour Bridge. |
| 1993 | M2 Motorway opened. A 21 km motorway which connects Seven Hills to North Ryde. |
| October 1999 | CityLink opened |
| December 1999 | Eastern Distributor opened, it links the Central Business District to Southern Cross Drive which runs to the Sydney International airport. |
| July 2003 | Westlink M7 opened. The M7 connects three motorways around Sydney. They are the M5 South Western Motorway at Prestons, M4 Western Motorway at Eastern Creek and the M2 Hills Motorway at Baulkham Hills. |
| August 2005 | Cross City Tunnel opened. A tunnel which links Darling Harbour to the Rushcutters Bay in the Eastern Suburbs. |
| March 2007 | Lane Cove Tunnel opened. A twin-tunnel which connects North Ryde with the Gore Hill Freeway at Artarmon in Sydney, Australia. |
| June 2008 | Eastlink in Melbourne opened. It is a tolled section of the M3 freeway connecting the eastern and south-eastern suburbs of Melbourne. |
| March 2010 | M7 Clem Jones Tunnel opened. A tunnel which runs under the Brisbane river and connects the north to the south of Brisbane. During the time of its construction is was the largest tunnel in Australia. |
| July 2010 | Go Between Bridge opened. It crosses the Brisbane river in inner-city Brisbane, Queensland. |
| 2012 | Brisbane airport link opened. A motorway which connects the Brisbane CBD and the Clem Jones Tunnel to the East-West Arterial Road which leads to the Brisbane Airport. |
| 25 June 2015 | The M5 Legacy Way opened. A tunnel linking Inner City bypass to the Western Freeway in Brisbane. |

## 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.
Current Toll Roads in Australia :
| Location | Name | Road Type | Charge Type | Length (km) |
| NSW | Sydney Harbour Bridge | Harbour/river crossing | Time of Day and Week | 1.1 |
| NSW | Sydney Harbour Tunnel | Harbour/river crossing | Time of Day and Week | 2.7 |
| NSW | Cross City Tunnel | Tunnels or roads with tunnels | Fixed | 2.1 |
| NSW | Lane Cove Tunnel | Tunnels or roads with tunnels | Fixed | 3.8 |
| NSW | M1 (Eastern Distributor) | Intra-city link (short) | Fixed | 6.0 |
| NSW | M2 (Hills) | Intra-city link | Fixed | 21.0 |
| NSW | M7 (Westlink) | Intra-city link | Distance Based | 40.0 |
| NSW | M5 (South-West) | Intra-city link | Fixed | 22.0 |
| NSW | WestConnex New M4 | Intra-city link | Distance Based | 7.5 |
| QLD | Go Between Bridge/Hale St Link | Harbour/river crossing | Fixed | 0.3 |
| QLD | Clem7 | Tunnels or roads with tunnels | Fixed | 6.8 |
| QLD | Airport Link | Tunnels or roads with tunnels | Fixed | 6.7 |
| QLD | Legacy Way/Northern Link | Tunnels or roads with tunnels | Fixed | 5.7 |
| QLD | Gateway Motorway | Intra-city link | Fixed | 23.1 |
| QLD | Logan Motorway | Intra-city link | Fixed | 38.7 |
| VIC | CityLink | Intra-city link | Fixed | 22.0 |
| VIC | EastLink | Intra-city link | Fixed | 39.0 |

## Policy Issues
### 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

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

## Additional Readings

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

## References

* 1 2 3 4 5 6 Bureau of Infrastructure, Transport and Regional Economics (BITRE) 2016, Toll Roads in Australia, Information Sheet 81, BITRE, Canberra.
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* ↑ Audit Office, 2017. 01 North Connex Full Report. [Online] Available at: https://www.parliament.nsw.gov.au/la/papers/DBAssets/tabledpaper/webAttachments/71165/01%20North%20Connex%20Full%20Report.pdf [Accessed 2018].
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* ↑ Transurban, 2017. Inquiry into toll roads in Australia. [Online] Available at: https://www.transurban.com/content/dam/transurban-pdfs/02/news/transurban-submission-inquiry-into-toll-roads.pdf [Accessed 2018].
* ↑ Transport for NSW, 2017. Toll Relief: Free refo for drivers | Transport for NSW. [Online] Available at: https://www.transport.nsw.gov.au/news-and-events/media-releases/toll-relief-free-rego-for-drivers-0 [Accessed 2018].
* ↑ Clarke, H., 2010. Parliament of Victoria. [Online] Available at: https://www.parliament.vic.gov.au/images/stories/committees/rsc/road_funding/hearings/La_Trobe_University_School_of_Economics_and_Finance_presentation.pdf [Accessed 2018].
* ↑ KPMG 2015, Economic Contribution of Australia’s Toll Roads, report prepared for Transurban Limited, 11 August.
* ↑ Gothe-Snape, J., 2018. Electric cars are breaking our roads, here's how - ABC News (Australian Broadcasting Corporation). [Online] Available at: http://www.abc.net.au/news/2018-01-15/electric-cars-breaking-australia-roads-reform-road-user-charging/9235564 [Accessed 2018].
* ↑ ATO, 2018. Excise rates for fuel | Australian Taxation Office. [Online] Available at: https://www.ato.gov.au/business/excise-and-excise-equivalent-goods/fuel-excise/excise-rates-for-fuel/ [Accessed 2018].
* ↑ Litman, T., 2018. Parking Pricing Implementation Guide, Melbourne: Victoria Transport Policy Institue.
* ↑ ATO, n.d. Luxury Car Tax | ATO. [Online] Available at: https://www.ato.gov.au/Business/Luxury-car-tax/ [Accessed 2018].
* ↑ Thompson, C., 2018. Industry calls to scrap new car import tariff. [Online] Available at: https://www.whichcar.com.au/news/industry-calls-to-scrap-new-car-import-tariff [Accessed 2018].
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* ↑ Anon., n.d. Part 1: Overview - Executive summary - Australia's Future Tax System: Final Report. [Online] Available at: http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/executive_summary.htm [Accessed 2018].
* ↑ Terrill, M., 2017. Stuck in traffic? Road congestion in Sydney and Melbourne. [Online] Available at: https://grattan.edu.au/wp-content/uploads/2017/10/892-Road-congestion.pdf [Accessed 2018].
* ↑ May, A. D., Koh, A., Blackledge, D. & Fioretto, M., 2010. Overcoming the barriers to implementing user charging schemes.