Tue | Aug 9, 2022

Editorial | Get behind toll road numbers

Published:Friday | July 1, 2022 | 12:06 AM
There are suggestions that the cost of using the highways  might be causing many truckers to stay away from the routes – a fact that could be worsened by the proposed toll hikes of between nine and 26 per cent.
There are suggestions that the cost of using the highways might be causing many truckers to stay away from the routes – a fact that could be worsened by the proposed toll hikes of between nine and 26 per cent.

Even as we adhere to the principle of the sanctity of contracts, this newspaper believes Jamaica would benefit from a robust analysis of whether Jamaica’s existing, and expanding, network of tolled highways has delivered on its economic promise and if the model used to determine what commuters pay to use these roads is the best, or as transparent enough.

These questions are significant given that the annual increases in the toll rates are due this weekend – by law they come into force on the first Saturday of July in the year following the previous hike – and the declaration by the regulator, the Toll Authority of Jamaica, that the operating companies are disinclined to forgo the increases. Nor does it seem that the Government, despite its wish to contain Jamaica’s spiralling inflation, is willing to make up the difference between what will be legally due to the companies and any rebate it might offer commuters.

Currently, Jamaica has two discrete elements to its toll road system – the North-South highway, linking Kingston, the island’s capital and industrial centre on the south coast, with the tourism and major bauxite-producing centre in the north. The other heads generally west from Kingston to the central parish of Clarendon, and will soon reach Manchester, when a 28-kilometre segment is completed. At present it is 56.5 kilometres.

This segment is ‘owned’, via a 35-year concession agreement, by Trans-Jamaica Highway (TJH), a publicly listed entity that is ultimately controlled by the Jamaican Government, through a 20 per cent holding and a golden share. Until TJH’s public listing in 2020 it was controlled by two French construction, energy and toll road companies, Bouygues Travaux and Vinci. Bouygues was the original concessionaire under a build, operate, finance and return arrangement.

The 66-kilometre north-south leg is owned by the Chinese construction firm China Harbour Engineering Company under a 50-year concession. Despite traversing a substantial portion of mountainous terrain, the highway has more than halved the old two-hour drive between Kingston and the north-shore town of Ocho Rios, a journey that, for a long stretch, was through a winding gorge, with a choke point at a centuries-old, lower stone bridge that crosses a sometimes dangerous river.

SPUR TRAVEL

It was expected that the north-coast highway, which was opened in 2016, would spur travel between Kingston and the island’s north coast, where it joins a decent two-lane highway that spans the entirety of the island’s north shore. The east-west highway was expected to do the same for traffic between Kingston and central and western parishes.

The anecdotal evidence is that some of that has happened. Indeed, the managers of Trans-Jamaica have recently talked of building additional ramps to connect nearby communities and new housing schemes to the east-west route. However, there is no immediately available analysis and supporting data to indicate the extent to which this has taken place or its value to the national economy.

There are suggestions, however, that the cost of using the highways might be causing many truckers to stay away from the routes – a fact that could be worsened by the proposed toll hikes of between nine and 26 per cent, depending on the distance to be travelled and the category of vehicles involved.

“The majority of companies in the food distribution business in Jamaica operate with private contractors,” explained William Mahfood, the chairman of Wisynco, a large manufacturing and distribution company. “The truth is that most of those private contractors who do delivery of food items and groceries and so forth don’t go on the toll road. It’s already too expensive. They feel it’s not worth their while using it.”

Mr Mahfood said that toll road operators have in the past rejected proposals for discounted fees for truckers, especially for late night and early morning travel – although such arrangements, depending on their structure, might as well be impermissible under the concession agreements. They, in principle, rule out differential pricing.

BASED ON FORMULA

The annual adjustment of the tolls is based on a formula that takes into account, among other things, Jamaica’s inflation for the preceding year, expected return on capital under the agreement, and exchange rate movements. The system, therefore, is straightforward.

If the regulator declines to award based on the formula, the Government’s National Road Operating and Constructing Company (NROCC), as the grantor of the concessions, is obligated under the agreements to pay the difference between the approved rates and what the formula says should be the real toll. Last year, at the height of the COVID-19 pandemic, the companies agreed to delay the implementation of new rates.

Obviously, the concessionaires have to justify their rate applications with real operating and other costs. However, there appears to be little, if any, room for the regulator to require the operators to be creative to drive traffic to increase revenue, rather than placing the entire burden on existing highway travellers.

Take the north-south highway. Based on NROCC data for the fiscal year 2019/2020 (April to March) when its traffic was up by 12 per cent. The highway averaged fewer than 400,000 vehicles per month. The highest figure was for December 2020, when 433,376 vehicles, or 13,980 a day, travelled the 66-kilometre highway, whose speed limit is 80 kilometres per hour (km/h) – that is 582 vehicles, on average, per hour. Many of those vehicles, though, didn’t travel the entire highway. The bottom line, even on its busiest day there would have been a lot of empty roadway for vehicles travelling at 80 km/h.

Many private motorists, especially SUV drivers, complain about the cost of using the toll roads, which causes them to make fewer trips. Some argue that lowering pricing and widening the bands would drive volume on the roads. Maybe the analysis of the concessionaires and the regulators has proved otherwise.

The toll regulator and the toll authority, unlike the regulators of other utilities, are, however, not in the habit of holding public hearings ahead of its terminations. That should change. The authority should also be more proactive in providing data on the use of the toll roads and their impact on the national economy.