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Victorians will have to pay up to $5.2 billion, or almost $1 million a day, for the Napthine government's Pakenham/Cranbourne rail upgrade, the first long-term major privatisation of a key part of Melbourne's rail network.
Leaked cabinet documents reveal the government has fast-tracked the multibillion-dollar project – Australia's biggest-ever rail public-private partnership – to ensure contracts are signed ahead of the November state election.
Critics, including academics and Labor, have slammed the private-sector proposed upgrade – dubbed ''Project Flinders'' in the documents – as a corporate hijacking of transport planning in Victoria.
In a surprise announcement in March, the government spruiked the project as costing $2 billion to $2.5 billion. The developer, a consortium led by Hong Kong-based rail operator Metro Trains Melbourne (MTM), says the scheme will deliver a 30 per cent boost to capacity along the congested Dandenong corridor, enabling 2 million extra passenger journeys a year.
But the cabinet-in-confidence documents reveal taxpayers will be left to pay up to $360 million a year as ''annual service payments'' to the consortium until 2034 in ''nominal'' dollars – the actual amount spent, including inflation. The total payments in nominal terms will be as much as $5.2 billion.
The $2.5 billion figure released by the government is a ''net present'' figure. In government, politicians tend to cite the net present, or today's money, figure, pointing out that home-buyers think of the cost of their house as the sale price, not the additional cost of loan repayments and interest over decades.
Opposition parties often focus on the larger long-term nominal payments for major projects. In opposition, the Coalition was scathing of the Brumby government after similar revelations about the nominal payments for the controversial desalination plant.
The Auditor-General also relies on nominal payments over time to report on major public-private-partnership projects.
The Pakenham/Cranbourne upgrade includes buying 25 ''next generation'' high-capacity trains, removing four level crossings, rebuilding three railway stations, high-speed signalling and a new train-maintenance depot on green wedge land in Pakenham East.
It is Victoria's first ''unsolicited proposal'', pitched to government just weeks earlier in February by a private consortium of MTM, construction giant John Holland, and UGL Rail Services.
The leaked documents detail an in-principle deal between the government and the consortium, and reveal a key ''milestone'' to be a ''contractual close'' by September 29, two months before November's state election.
A timeline for the project lists elections in both 2014 and 2018 as milestones.
The government's new 'unsolicited proposals' legislation, announced by Treasurer Michael O'Brien in February, allows the private sector to propose new infrastructure, even if the projects identified are not government priorities.
Mr O'Brien released the guidelines for unsolicited proposals on February 13, 10 days after Project Flinders was proposed. He executed a commitment deed with the rail consortium on March 3, four days before the government announced the Pakenham-Cranbourne upgrade.
On April 28, the government also announced an $850 million deal to widen parts of CityLink and the Tullamarine Freeway as an unsolicited proposal from CityLink operator Transurban.
Government and opposition insiders are in no doubt that the flurry of transport announcements is aimed at leaping ahead of Labor on the pivotal issue of transport infrastructure in the race to November's poll.
But the embrace of unplanned private sector schemes, and the haste with which these new deals are being made, raises thorny questions about whether transport investment in Victoria is now being driven by private profits and votes, rather than good transport planning.
John Stone, lecturer in urban planning at the University of Melbourne, said the Napthine government was taking big risks with public money in its rush to launch its first big public transport project.
"The government has belatedly recognised that voters expect action on public transport. And so, on this project, it seems willing to throw away 'due diligence' and sign up on the assurances of the private-sector proponents," Dr Stone said.
Shadow treasurer Tim Pallas accused the Napthine government of ditching proper planning process in a desperate bid for votes.'''They are planning to spend billions of taxpayer dollars under a veil of secrecy and with no regard for the integrity of the process,'' Mr Pallas said.
And, with the private sector effectively allowed to replace government as procurer of works, the unsolicited proposals policy faces questions over probity issues. Project Flinders has been split into six separate works packages in an 'invitation-only' tendering process being run by the consortium.
Consortium parties including builder John Holland, will be entitled to bid for work.
Tendering for Project Flinders will be monitored by Public Transport Victoria, although the bidders have not been revealed. Public Transport Victoria chief executive Mark Wild confirmed that consortium members John Holland and UGL would be allowed to bid ''under the usual very strict probity rules that will apply''.
University of Melbourne infrastructure investment specialist associate professor Colin Duffield said Project Flinders was the first long-term contract to the private sector of a section of the Victorian metropolitan rail network. ''Jeff Kennett's use of the private sector was just a franchising of the operation of the system on a short to medium term basis. But this deal hands over a key part of the system, until 2034.''
The government had not responded to written questions at press time.
This article first appeared on www.theage.com.au
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