Another State subsidy for tunnel operators

THE operators of the €660 million Shannon Tunnel will require another multi-million euro State subsidy this year, judging by the latest traffic figures and projections for the rest of 2012.

 

Figures released by the National Roads Authority (NRA) this week showed that an average of 15,500 vehicles per day used the Shannon Tunnel last month, well below the projected figure of 19,400 before it opened in July 2010.

The NRA has also revealed that the annual average daily traffic figure will be 15,500 at the end of 2012, which means another subsidy of a few million euro will be required.

Sean O’Neill of the NRA explained that traffic volumes generally fall following a reduction in economic activity and expects that levels should improve when there is economic growth.

He acknowledged the NRA would prefer if the average daily traffic levels were over 20,000, which would eliminate the need for a large subsidy provided by the taxpayer.

The Government’s spending watchdog has predicted the tunnel will continue to rely on State subvention for the duration of the 30-year contract until 2041.

The Comptroller and Auditor General’s 2012 report revealed that under a revenue guarantee clause, €5.2m was paid by the NRA in 2011 to Direct Route, the operators of the Shannon Tunnel and a second tolled public private partnership road – the M3 Kells to Clonee scheme. That figure is likely to rise to €6.7m for the two roads in 2012.

Around €180m of the €660m costs of the Limerick Tunnel scheme were met by the State, with the remainder met by the Direct Route consortium, which will continue to collect toll revenue until 2041.

The NRA has previously explained that built into the PPP contract was a revenue guarantee clause, where the State would compensate Direct Route if traffic fell short of projections. This reflected the risk the private consortium was taking on in financing the scheme.

“The shortfalls in traffic volumes relative to guarantee thresholds in 2010 and 2011 were significant. The Limerick Tunnel contract provides for a 6% increase in the 2012 level of traffic over 2011. Subsequent increases are smaller but continue until 2035, after which the traffic guarantee will remain unchanged,” the C&AG report states.

The chief executive of the NRA stated in the report that traffic risks in the context of the underwritten traffic volumes applicable on certain PPP schemes have, to date, been more than offset by the revenue-sharing arrangements in place on other projects.

Opponents of the proposed €40m Shannon Crossing and Killaloe Bypass have claimed this new bridge and bypass will result in even lower use of the Shannon Tunnel, which will result in higher subsidies. The current levy ranges from €1.80 for cars to €5.70 for heavy goods vehicles.

Objectors to the proposed €100m Limerick Northern Distributor Road have called for the scheme to be reassessed in the context of reduced traffic levels, impact on communities and environmental considerations.

The Lisnagry-Annacotty Action Group commissioned Limerick-based Punch Consulting Engineers to inform its submission to Clare County Council, arguing much of the objective of the road plan has been met by the Shannon Tunnel.

It said no consideration has been given to the cost to the Exchequer in compensation payments to Direct Route – operators of the Shannon Tunnel – arising from its under-use, which, it said “will be exacerbated by the provision of a toll-free alternative road”.