The consortium behind Melbourne's East West Link will
receive $420 million under a deal reached with the Victorian Government
after the project was scrapped.
The consortium had been contracted to build an 18-kilometre road connecting major arterials — the Eastern Freeway at Hoddle Street to CityLink, the Port of Melbourne and on to the Western Ring Road — by the previous government.
Premier Daniel Andrews made an election promise to scrap the project and ordered all preliminary works on the road to be suspended after Labor won office in November.
Treasurer Tim Pallas said the Government had also negotiated a $3.1 billion bond agreement with the consortium's bankers which would be available for the Melbourne Metro Rail project.
"The funding source available for Melbourne Metro through these Metro Rail bonds will effectively be almost half of the identified costs of Melbourne Metro," he said.
"So if people want to know whether or not this is a project that is real, that is happening, we put our money where our mouth is.
"This is not a day for celebration, but it is a day to be very clear that this matter is now behind the state of Victoria.
"We can proceed, we can go forward delivering the infrastructure that Victorians voted for."
We're seeing a $3 billion credit card that Victorian taxpayers are taking on and Victorians are still stuck in traffic with no relief in sight.Michael O'Brien, shadow treasurer
In the May budget, the Government allocated $1.5 billion to begin work on the rail project, which is expected to cost up to $11 billion to complete.
Shadow treasurer Michael O'Brien, who was part of the Coalition government that signed off on the East West project, said Labor's decision was a waste of taxpayers' money.
"We're seeing hundreds of millions of dollars paid out in compensation despite a clear promise not to. We're seeing hundreds of millions of dollars lost in terms of costs already incurred," Mr O'Brien said.
"We're seeing a $3 billion credit card that Victorian taxpayers are taking on and Victorians are still stuck in traffic with no relief in sight."
Business case exposed flaws: Pallas
In December, Mr Pallas released the previous Napthine government's business case for the East West project, which showed it would increase traffic congestion on existing freeways and had a $2 billion funding black hole.Mr Pallas said the original business case, dated April 2013, showed only 13 per cent of Eastern Freeway morning traffic travelled to the western suburbs and the airport.
"'Almost nine in every 10 vehicles on the Eastern Freeway in AM peak are not using the East West Link', the summary of the business case stated," Mr Pallas said.
"The project is expected to benefit a number of users, however, at the same time, it will increase traffic at already-congested locations [on the Eastern and Tullamarine freeways in particular] which erodes the overall project benefits cost reduction."
A side letter signed by the Napthine government and released in February purported to guarantee compensation for the consortium if the project was scrapped, even if a court subsequently found the contract was "void or otherwise unenforceable".
The letter acknowledged there was a "significant opportunity cost" for the consortium members if they committed to the toll road.
It also said that "Victoria's leading reputation as a place to do business ... would be compromised" if the project was dumped.
"All the letter of guarantee does is simply state that the State Government will stand behind the contract," Mr O'Brien said in December last year.
"That is normal commercial business practice, and in fact you would have to go to a banana republic before you'd find any government that looked at ripping up contracts."
abc.net.au 15 Jun 2015
More corrupt deals by the Victorian 'government' which in reality is a corporation conglomerate, defrauding the masses billions of dollars annually.
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