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News & Updates

4/8/2016

Committee for Geelong's Weekly Addy Opinion Piece - Infrastructure Initiatives

As infrastructure project proposals become more frequent, and demands for funding increase, all levels of Australian government should consider innovative funding methods to keep up with the momentum of change.  During the Committee for Geelong's USA trade mission we visited Virginia and learned how the Chesapeake Bay Bridge-Tunnel, a 37km fixed link crossing at the mouth of Chesapeake Bay, was funded.  This remarkable piece of infrastructure remains one of only ten bridge-tunnel systems in the world, three of which are located in Hampton Roads, Virginia.

Although the original vision for a facility consisting of tunnels and bridges was widely criticised as 'extravagant and dangerous', the project went ahead. The Chesapeake Bay Bridge-Tunnel has since been described as one of the engineering wonders of the modern world.  It was financed, not by the use of state or local government public funds, but by the issue of 'revenue bonds'.  In 1960 investors bought $US200 million in bonds which were to be repaid from toll revenue.

Over time, all debtors were repaid and the project began to make a profit. Money was re-invested for future maintenance and expansion. The Chesapeake Bay Bridge and Tunnel District (CBBTD) became the governing body of the facility. By 1991, it realised that, in order to cope with future traffic growth, to provide safer travel and to allow for maintenance and major repairs, expansion of the facility would be needed.  Again, toll revenue bonds were sold to finance the project. 

In 2003, a state government review found that the construction and operation of the Chesapeake Bay Bridge-Tunnel had been a successful endeavour with the facility providing 'an essential link between the Eastern Shore and the mainland, supporting the agricultural economy on the Shore, and tourism on both sides of the bay.'  In financial terms, the toll structure was assessed as providing 'adequate revenue for operation, maintenance, and existing debt service.'

Subsequent expansion of the bridge-tunnel in 2015 has been financed primarily from three funding sources: the issuing of bonds supported by bridge toll revenues, funds the CBBDT has on hand and an anticipated federal loan. While this project is not receiving any state or local subsidies, CBBDT has applied for a state government loan through the Virginia Transportation Infrastructure Bank.

Building the Chesapeake Bay bridge-tunnel using infrastructure revenue bonds was an excellent achievement by the Commonwealth of Virginia.  It was driven by visionary leadership, boldness and financial insight.  The use of bonds in Australia has been uncommon in the past, and they do not seem to be used currently to raise finance for major projects. This is an option which, if administered by a specially constituted and independent authority, could provide better accountability and financial returns than using debt, tax revenue or asset sales.  

As Geelong transforms, innovative funding methods for future infrastructure projects should be considered for Victoria's second largest city.  Perhaps such funding methods could be used for a new convention centre, the final stage of Simonds Stadium or even a revolutionary bridge-tunnel system between Geelong and Melbourne. 

Rebecca Casson is the Committee for Geelong Chief Executive Officer. Follow the Committee for Geelong on Twitter @Comm4Geelong.

 

 

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