Sources of revenue for Transurban's contribution to funding the widening of CityLink (source: Figure 3L, VAGO)

No doubt like many others, I was startled last week when The Age revealed the extraordinarily high profits it says Transurban will make from its (unsolicited) offer to the Government to pay for widening of CityLink.

Transurban will spend $850 million widening the toll road between Bulla Road and the tunnels, including Bolte Bridge… It is expected the company will ultimately reap $3.2 billion in extra toll revenue from the deal.

Greens State MP Ellen Sandell wasn’t impressed. “Here’s The Age’s analysis” she tweeted on Friday, “we’re giving billions to private companies for transport projects with dubious benefits”.

The Age drew the numbers from no less an authority than the Victorian Auditor-General, who published a report earlier in the week critical of the Governments handling of the CityLink Tulla Widening project. The executive summary of the report says:

The private sector proponent will contribute $850 million (in September 2014 dollars) to CityLink Tulla and is expected to recover an equivalent toll revenue stream worth approximately $3.2 billion up to 2035.

I expect that’s what The Age relied on, but the wording is surprisingly clumsy coming from an accountant. The $850 million is in present value terms while the revenue is stated in nominal terms i.e. it’s not discounted.

Had The Age looked beyond the executive summary it would’ve seen Figure 3L (see exhibit) which states the additional revenue stream accruing to CityLink as a result of the widening is $851.2 million in present value terms. That’s around a quarter of what it looks like without discounting!

$0.85 billion vs $3.2 billion is hardly a trifling difference. This is the same problem that tainted public debate over the cost of the desalination plant and the East West Link; figures were tossed around – in ignorance or for political advantage – without indicating whether they were real or nominal or, in some cases, whether they included the cost of financing.

But playing fast and loose with the numbers ultimately poisons the quality of public debate (e.g. see Three misconceptions about the East West Link).

None of this means the estimate of Transurban’s revenue quoted by the Auditor-General will prove to be correct. It’s hardly unthinkable the company might hope to earn more; but there’s nothing to indicate it could be in the order of $3 billion in present value terms.

I’d hate to think The Age knowingly presented the figures in the most sensational way it could in order to pander to the prejudices of a section of its readers. I prefer the more charitable view that the paper was misled by the Auditor-General’s clumsy wording.

I would’ve hoped though that on an issue like this the paper might’ve looked beyond the executive summary. It doesn’t help the standard of public debate when the information presented by the mainstream media isn’t properly researched.

This isn’t the fault of Fairfax’s reporters or even sub-editors, though; it’s a management problem. The paper’s financial model is shaky and management is desperately trying to cut costs and arrest falling circulation.

The resulting policies define the expectations placed on staff and limit the time and resources they’ve got for research and checking. It reminds us once again that we can’t rely solely on the media or the Auditor-General to defend the public interest; and that better access to information on infrastructure projects is imperative.