Martin Cullen (Waterford, Fianna Fail)

I thank Senators for their contributions. I thank Senator Ross for tabling the motion and Senator O'Toole for seconding it. They have given me the opportunity to come before the House to debate the important issue of the upgrade of the M50, including a move to barrier-free tolling.

The growth of traffic on the M50 mirrors the growth of Ireland's population, its economy, employment and vehicle fleet during the past ten years. The scale of this growth has imposed major strains on our physical infrastructure, particularly that which relates to transport. The Government has responded to this challenge by a sustained commitment to high levels of capital investment. In the case of national roads, for example, Exchequer investment in 2005 alone will amount to over €1.4 billion. The beneficial impact of this high level of investment is evident throughout the country in the completion of major projects and the elimination of major bottlenecks such as those at Monasterevin, Kildare, Ballincollig, Cashel, etc. Good progress is being made in implementing the national roads improvement programme and we are beginning to see the benefits in reduced inter-urban journey times on key routes.

A major project in this programme is the upgrade of the M50, including the West Link toll facility, which is being prioritised by the National Roads Authority. Before outlining the main elements of this project, it would be useful to set out the background to the West Link toll facility and the position regarding toll revenues, the impact of the toll plaza on congestion and the application of West Link experience in recent PPP contracts. I shall also address the issue of a buy-out of the toll rights.

The original West Link toll agreement was approved in principle by the Government in October 1984 on foot of proposals by the then Minister for the Environment, Mr. Liam Kavanagh, and concluded in October 1987 between Dublin County Council and NTR. The agreement provided for the construction, maintenance and operation of 3.2 km of motorway on the M50 between the N3, Navan Road, and the N4, Galway Road, interchanges as well as the West Link bridge spanning 385 m over the Liffey valley. The project, which was one of the first sections of the M50 Dublin C-ring to be completed, opened to traffic in 1990.

The 1984 agreement provides that the toll company, NTR plc., has, until the expiry of the agreement in 2020, the exclusive right to toll traffic travelling on the M50 between the N4, Galway Road interchange, and the N3, Navan Road interchange. It also provides that the tolls can be increased in line with inflation. The maximum toll that can be charged at West Link is updated each year by reference to the consumer price index.

The bridge was opened to traffic in 1990. Prior to the conclusion of the agreement in 1987, average annual daily traffic for 1990 was projected at 18,400 vehicles. Average daily traffic levels grew from 11,500 vehicles in 1991, to more than 15,000 in 1993, to 45,500 in 1997, 67,000 in 2000 and to more than 78,000 in 2003. It should be noted that the level of traffic projected for 1990 was not reached until 1995. I was in the House at the time and remember the debate on the cost involved, particularly in light of the fact that the traffic projections were nowhere near to being achieved. That is set against the background of a big change today.

In November 1999 the National Roads Authority reached agreement with NTR relating to the construction of the second West Link bridge. The agreement provided for the construction of the second bridge and a car toll increase of approximately 20 cent. The draft agreement was concluded on the then legal basis that VAT was not applicable to tolls. In July 2000, however, the European Court of Justice ruled that VAT must be applied to tolls. The effect of the application of VAT on the draft agreement would have been for the private car toll charge to rise from approximately €1 — 80p in old money — as was the toll charge for the period 1 January 2001 to end of August 2001, to a car toll charge of €1.60 on 1 January 2002.

The National Roads Authority was concerned at a rise in the toll charge of effectively 60% in the space of four months, September 2001 to January 2002, particularly as there would be no improvement in the level of service at West Link until September 2003, when the second bridge was due to be opened.

The National Roads Authority, therefore, with the approval of the then Department of the Environment and Local Government, agreed with NTR in June 2001, as part of the supplemental agreement relating to the second West Link bridge, a revised toll structure for the period September 2001 to 31 December 2004, to take account of the imposition of VAT and the construction of the second bridge. This agreement provided for a car toll charge of €1.27 between September and December 2001, €1.30 in 2002, €1.30 in 2003 and €1.50 in 2004. The maximum allowable toll permissible under the agreement for each of the years 2002, 2003 and 2004 would have been €1.60, €1.70 and €1.70, respectively.

This lower car toll structure was made possible by the then Minister for the Environment and Local Government agreeing to moderating the increase in the car toll by means of a reduction in the State's share of the gross toll revenue in 2002 and 2003. This reduction amounted to €2.9 million and €3.5 million for 2002 and 2003, respectively.

The West Link car toll was maintained below the maximum allowable toll charge for a number of years through the Government foregoing part of the revenue share payable under the West Link toll agreement, that is, the actual car toll was not allowed to increase in accordance with the applicable by-laws. The rises in 2004, 20 cent, and 2005, 30 cent, represent, in effect, a catch up of the indexation provisions and the car toll increase required by NTR to provide for the construction of the second bridge.

The position in regard to total toll revenues since 1990 is that gross toll revenue from 1990 to end 2004 amounted to €308.987 million, exclusive of VAT. Of this, a total of €64.397 million in licence fees, also referred to as the State's share of the gross toll revenue, has been paid to the State. During the period 1998-2004, commercial rates of €10.4 million, a not insignificant amount, were paid to Fingal County Council, while South Dublin County Council received €2.5 million during the same period. In addition, gross VAT receipts since 1 September 2001 amount to approximately €28 million.

It is clear that the concession has worked out well for NTR but it should be acknowledged that from the toll revenue it receives, it has to meet liabilities arising in respect of the repayment of capital and interest and the operation and maintenance of the toll facility and 3.2 km of motorway, corporation tax rates payable to Fingal and South Dublin county councils, the Exchequer share of toll receipts payable to the Department of Transport and investment in the toll road to ensure a high-quality road pavement. Some have proposed that the State buy out NTR on the basis that the toll plaza is causing congestion and that NTR is earning super profits. Where tolls are abolished altogether the agreement provides that the NRA must make a monthly payment to NTR, calculated on the basis of the preceding 12 months average, to the value of the lost revenues with such amount indexed each year by reference to CPl, in respect of the remaining years of the toll concession agreement, which, as already indicated, will run until 2020. The House can imagine the scale and cost to the taxpayer and the money that will be lost instead of being invested in other road infrastructure which is badly needed.

It should also be noted that the €650 million estimated cost of phase two of the M50 upgrade works is proposed to be funded through the annual Exchequer share of the West Link toll revenue as well as toll revenues from West Link for a period post the expiry of the current concession in 2020.

It is important that this is understood. The massive expansion phase of the M50 has been possible because of those revenues. If this were not available, other inter-urban routes, other roads and investment in public transport would not be possible. It is a question of trade-offs with the Exchequer trying to maximise its investment and resolving some of the issues pertaining to the M50.

Any consideration of the buy-out of NTR's rights would have to take account of the cost involved and the implications for the national roads programme if the cost had to be funded from the funding provision available for the national roads programme and the implications for the funding of the M50 upgrade.

It is acknowledged that the toll plaza is sub-optimal, having regard to the current daily traffic throughput and that the approaches and departure sections are inadequate for the high traffic levels.