FUNDING OF THE MERSEY GATEWAY PROJECT
The funding arrangements between the UK Government and Halton Borough Council have been agreed on the basis that users of the Mersey Gateway and the Silver Jubilee Bridges will contribute the majority of funding through the payment of tolls.
The project uses toll revenue to fund the total investment required to construct the new crossing and for its maintenance and operation over the next thirty years.
Funding the project will cost £1.86bn over this time period (up to 2044). This figure is based on the figures agreed by all parties in the contracts awarded to the Merseylink consortium in March 2014 and reflects the £250m saved by Halton Borough Council and Merseylink through the innovative procurement process.
When the contracts were signed, Halton Borough Council entered into a Public Private Partnership with the Merseylink consortium.
The Project Company (Merseylink)
Merseylink has the formal responsibility for the design, build, finance, operation and maintenance of the new bridge and associated road infrastructure over a thirty year period. It is also responsible for the provision of tolling equipment on both the new bridge and the existing Silver Jubilee Bridge and a journey time measurement system on the new bridge and road infrastructure.
To be able to meet these costs, Merseylink has put in place a financial arrangement which consists of bank loans, a Council loan and funding through a bond investment supported by the HM Treasury’s UK Guarantees Scheme. To deliver this finance, it has been necessary for Merseylink to secure equity investment.
The Council does not pay Merseylink for any of the costs explained above (such as construction cost) but instead it is required to pay Merseylink an annual fee based on the new crossings being available to users.
The fee, called the unitary charge, is linked to Merseylink’s performance against the service requirements as set out in the contract. For example, Merseylink is required to operate the new crossing so that the average speed of users does not drop below an agreed level. If the average speed does drop below this minimum then the unitary charge could be reduced.
The unitary charge only becomes due when the new crossing opens and Merseylink has demonstrated that tolling systems are operating satisfactorily. The Council will pay this charge up until 2044, when the project is handed back (to the Council) in a good condition and with all the private finance repaid.
The Demand Management Participation Agreement Company (emovis)
In addition to the Project Agreement with Merseylink, the Council entered into a Demand Management Participation Agreement (DMPA) with emovis, who are responsible for the delivery of the end to end tolling collection and enforcement of unpaid tolls. To undertake this task, emovis have developed the relevant software and systems that are required for a road that will handle circa 20m vehicles per annum, they have a call centre, walk-in Centre and project management facilities all based in Manor Park, Runcorn.
The Council pays an annual fee, the service subsidy, to emovis for the delivery of the DMPA, again a large element of this fee is performance related, so if emovis customer service and other related Key Performance Indicators do not meet the required standards then this money can be withheld by the Council.
If use of the crossings is higher than anticipated, emovis also receives an additional share of the revenue above a set breakeven point
emovis are responsible for the toll collection of toll monies, they have to pay over to the Council the theoretical revenue that should have been collected.
Merseyflow is the brand name under which emovis collects the monies in relation to the Mersey Gateway Project.
Question 1: what happens to the money?
All revenue collected by emovis through both tolls and PCNs goes to the Council, this money can only be used as follows:
- to pay Merseylink for the design, build, finance and operation of Mersey Gateway Bridge and associated project roads until 2044
- to pay emovis for the collection and enforcement of the tolls until 2024
- To meet the interest cost of the Council’s capital contribution to the project
- To insure the Project Assets and other associated project costs.
Question 2: What happens to the money from Penalty Charge Notices?
The penalty charge notice revenue, which varies between £20 and £60 depending on how quickly the fine is paid, all goes to the Council.
Question 3: What happens to the income generated from the cost of collecting unpaid Penalty Charge Notices?
This only relates to PCNs which are not paid within 42 days, where bailiffs will be instructed to recover the costs.
Any bailiffs costs incurred in the recovery of PCN’s is retained by the bailiffs to cover the cost of their service. This revenue does not go to either the Council or emovis.
The bailiffs will charge fees in line with an agreed charging structure to recover the debt. Any income from bailiffs’ charges stays with the bailiff, it does not go to the Council or emovis.
When the bailiff is paid the outstanding Penalty Charge Notice and original toll fee that money is then forwarded to emovis and is put through the usual toll revenue protocol agreement.
- From the start of the project until the award of contracts, there have been various published estimated figures regarding the construction and operating cost of the project. The cost estimate of £600 million that was widely used before contracts were awarded related purely to the cost of land and construction. The figure did not include the cost of operation, maintenance and finance of the Project over its 30 year period.
- The contract to build and operate the bridge is a complex commercial document. As such, there is information including the costs assumed by Merseylink, which is commercially sensitive and cannot be disclosed.
- The risks associated with the cost of construction, maintenance and operation and the delivery programme are placed with Merseylink and the Council is contracted to pay for the project through agreed unitary charge payments