D-Day looms for Route K

The $61 million debt on Tauranga's Route K toll road is likely to remain a huge and growing financial burden on the council even if the road was declared a state highway.

Proposals to get the road, but not the debt, off the city council's books will be decided at a meeting of the council today.

Current predictions were that Route K would not become cash flow positive until around 2026 when both The Lakes and the Tauriko business area would be fully developed.

Debt on Route K will reach $61.1 million by the end of this month - about $200,000 more than a month earlier.

The way forward for the financially embattled road, which was built on the wrong financial forecasts, has followed years of talks with the Government's highways agency.

Today's meeting will consider the basis of future discussions with the New Zealand Transport Agency. The three major points of any future agreement were proposed to be that Route K would become a state highway, that all maintenance costs would be met by the agency and that the debt would remain with the council to be funded from tolls.

The agreement also called on the agency to pay for the construction of an electronic tolls gantry and to meet the financial risks if the predicted increase in tolls did not eventuate from the future construction of a new link down to Route K from 15th Ave and the construction of the SH29 Tauriko Bypass.

The agency would also take on the financial risks of toll collection cost increases from installing the electronic toll collection system. A risk share arrangement would be modelled between the council and the agency. The council and the agency would manage Route K jointly to ensure that the debt was repaid in the "earliest possible time". However, the council reserved the right to lobby future Governments on debt repayment or future funding.

The report said that "as a separate matter" the Turret Rd and 15th Ave corridor would cease being a state highway and transfer back to council's ownership. This meant that the cost of the four-laning would be met by the council although it would still attract a 50 per cent subsidy from the agency.

Route K's debt has grown steadily since it opened in 2003, to the point where it had become a significant part of the council's overall debt of over $400 million. About $2 million was added every year because the revenue from tolls fell well short of the amount needed to service the debt on the road.

Revenue currently paid all the operating costs and about half the debt of servicing costs. The latest council financial report said the council intended to collect nearly $3 million in tolls for the next financial year.