For an example of the hazards of private funding of large infrastructure projects, and a good example of plain stupidity, look no further than the Sydney Airport Rail link.
The Sydney Airport Rail Link was commissioned in 1995 by a state Liberal government, you know, the ones that are so good at economic management. In the deal, the government would stump up the cash to build the lines and rolling stock, while a private consortium was contracted to build the stations.
To cover the cost of the stations, the consortium would receive a surcharge on the passenger ticket price. It was obvious even before the railway was completed that the surcharge, about $9 per passenger, would deter commuters from using the service.
To get the consortium to sign before the upcoming election (which they lost), the government guaranteed the commuter patronage, and wrote into the contact that if lack of passenger numbers caused the consortium to default on their loans, then the government would buy the stations!
Sydney Airport is only seven kilometers from the city centre and well served by road transport. Why would air passengers use rail to access the airport, when, for a similar price and less hassle, they could get a cab?
Passenger numbers were way down, and, only months after the railway opened, the consortium went into receivership. Now the government must either buy out the contract for $300 million, or renegotiate.
The public is often told that private organisations run things better than government. As a principal, private involvement of infrastructure projects is sound, but it's irresponsible not to make them take some of the risk.
As far as the airport railway is concerned, if the new arrangements don't result in the reduction of the surcharge, then it's doomed to be a permanent white elephant.
