Monday, March 28, 2011

"Either way, residents and businesses lose while a foreign company profits."

Australians accused of 'highway robbery'

Macquarie loo

Simon Mann, Washington
The Sydney Morning Herald
Copyright 2011

AUSTRALIAN investors are being accused of highway robbery by motorists in Virginia, who blame the Macquarie Group for what they say are exorbitant road tolls.

The complaints have been taken up by a member of Congress and Virginia's transport authorities, which have agreed to set up a local committee to look at ways of making the 22 kilometre Dulles Greenway "more user-friendly".

But the prospect for lower tolls is poor.

The road, one of the most expensive in the US, charges up to $US5.25 for car journeys, but has not paid a dividend to its owner, Australia's Macquarie Group, for the past three years.

Some residents and local companies have boycotted the road - choosing gridlock on alternative routes - with week-day traffic volumes falling by 3 per cent in 2010. Despite this, toll increases helped lift income by 1.8 per cent.

"Either way, residents and businesses lose while a foreign company profits," charges Congressman Frank Wolf. "It is my hope that this advisory committee will introduce TRIP II [the Macquarie-owned local operator] to the concept of being accountable to the people it claims to serve."

The road rage is being reflected in online postings, too. "The only way to affect the way the Aussies conduct business is to NOT USE THE GREENWAY," urged one motorist.

But the man who runs the road responds: "We are a toll road and, sure, people don't like to pay tolls and there's probably very little we can do to put lipstick on that pig, so to speak."

Built in the mid-1990s, the Dulles Greenway stretches west from Washington's international airport (named after 1950s secretary of state John Foster Dulles) to Leesburg, coursing through Virginia's fast-growing Loudon County. It connects with the state-owned Dulles Toll Road that runs east to the US capital, which levies tolls at much lower rates.

Revenue from that road is being used to subsidise the cost of constructing a rail link from Washington to the airport, with tolls expected to rise over time. Together, the two roads form State Route 267.

Macquarie acquired the Greenway in 2005, subsequently spending big amounts on improvements in return for tolling proceeds until 2056. Its interest in the road is divided 50-50 between two of its managed funds, Macquarie Atlas Roads and Macquarie Infrastructure Partners. Other Macquarie assets include toll roads in Chicago and Indiana, as well as private roads in Britain and Europe. The locals' anti-Australian sentiment has not been confined to Macquarie.

Australia's Transurban group, part of a consortium building so-called HOT lanes (high occupancy toll lanes) on Washington's "beltway" and on interstate highways 95 and 395, has also been caught up in local politics, with councils and residents wary of government dealings over the projects.

So incensed were Arlington County officials that at one point they filed a lawsuit claiming the I95 and I395 legs of the Transurban project were "racist" because they stood to benefit "more affluent, largely Caucasian citizens".

Bemoaning a lack of transparency and suspected government subsidies for the road builders, one local editorial observed sharply: "Under current market conditions, the private sector would never finance such a risky, uneconomic concept. That means Virginia taxpayers likely will pay a $US250 million subsidy for the privilege of being tolled by Australians."

The sniping comes as cash-strapped states battle to balance budgets that have been crippled by America's economic slump.

The downturn, along with petrol prices pushed beyond $US1 a litre by Middle East tensions, is also hurting toll road operators nationwide.

But a prime criticism of the Dulles Greenway is that it does not incorporate distance pricing that would allow it to charge less for short trips. In some cases, travelling barely two kilometres invites the maximum toll. The road has few electronic tag readers and relies heavily on cash collection points.

Tom Sines, chief executive of TRIP II (Toll Road Investors Partnership II), argues that adding more electronic toll points would cost an estimated $US6.5 million, while distance tolling could ultimately hurt revenue. He says the company might be interested if local authorities pitched in up-front and were willing also to "backstop against any lost revenue".

But Congressman Wolf says this attitude reveals a loyalty to the operator's foreign masters and that TRIP II is not interested in "protecting current users or attracting new users" of the road. The community advisory committee would aim to "make the road more user friendly and potentially provide [toll] relief".

However, tolls on the road are set, ultimately, by Virginia's State Corporation Commission, which must approve any increase. They were last raised at the beginning of 2010.

Mr Sines is frustrated by the attacks on the six-lane divided roadway, which pays state property tax, leasing charges and is a big donor to community projects. It also pays $US700,000 a year for police patrols.

"We're a business, and Congressman Wolf has to realise we're a business," he says. "We're not a public entity."

Last year, the Greenway reported average week-day traffic of 55,698 vehicles (down from 57,492 previously), but daily revenue rose to $US177,949 (from $US174,747). The maximum peak hour toll is $US5.25.

After meeting interest payments on its bonds, TRIP II has been unable to pay a dividend to the Macquarie funds since the US was plunged into recession in 2008 by the Global Financial Crisis.

"We are currently in financial lock-up because we have not met our coverage ratios for our bonds,'' says Mr Sines.

''But we have paid our bonds and we have paid our bills and whatever access money that's left over goes into reserve for future bond payments''.

He cannot say how long Macquarie might tolerate the current situation, but adds: "I'm sure they understand that this road has great value, it has great potential. Loudon County is still one of the fastest-growing counties in the nation''.

© 2011 The Sydney Morning Herald:

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