Toll company not entitled to ‘special ratings benefits’ on Kinnegad bypass payments

Case concerned payments to be remitted to Transport Infrastructure Ireland

The judge upheld the commissioner’s argument Eurolink was in error in seeking to treat the “revenue share” as a limitation on profit earning capacity inherent in the tolls. Photograph: iStock

The judge upheld the commissioner’s argument Eurolink was in error in seeking to treat the “revenue share” as a limitation on profit earning capacity inherent in the tolls. Photograph: iStock

 

A motorway toll concessionaire is not entitled to “special ratings benefits” in relation to payments to Transport Infrastructure Ireland concerning tolls paid by drivers using the Kinnegad bypass on the N4/N6 motorway, a High Court judge has said.

The Commissioner of Valuation asked the High Court to decide legal issues concerning payments Eurolink Motorway Operation Ltd (Eurolink) is obliged to remit to TFI under a public private partnership agreement (PPP) made under the Roads Act 1993.

In his judgment this week, Mr Justice Alexander Owens noted the motorway was built by Eurolink and the PPP obliges Eurolink to maintain it. Eurolink does not occupy the tolled section of motorway but it has the exclusive toll rights.

Upholding key findings of the Valuation Tribunal concerning Eurolink’s payment obligations under the PPA, the judge said it was not the Oireachtas’s intention, when enacting provisions of the Roads Act allowing road authorities to grant concessions of their tolls, to give “special ratings benefits” to toll concessionaires.

He agreed with the tribunal that, when conducting a valuation under the Valuation Act 2001, the estimated annual value of a “revenue share” [payments Eurolink is obliged to remit to TFI under the PPP], should be disregarded in determining the net annual value (NAV) of the toll rights of the Kinnegad bypass.

The effect of the tribunal’s decision was that the estimated annual receipts were not reduced by a sum equivalent to the annual estimated amount of the “revenue share” in calculating Eurolink’s liability to TFI.

The judge noted the “revenue share” formula designates a percentage of the toll revenue for each class of tolled vehicle as for the benefit of the TFI. It varies over the life of the PPA and when average daily traffic per month for any class of vehicle exceeds the base number of vehicles in a series of bands for traffic frequency.

Issue to decide

The judge said the primary issue he had to decide was whether, because the rights of Eurolink to the tolls are derived from the PPP made under the Roads Act, the “revenue share” must be treated as a statutory “working expense” of the receipts and expenditure (R&E) method of valuation.

The tribunal, he ruled, had not erred in law in concluding that an annual estimate of the “revenue share” is not deductible in calculating the NAV of the tolls using the R&E valuation method. The “revenue share” is not such an intrinsic feature of the tolls that it requires to be deducted, he held.

He upheld the commissioner’s argument Eurolink was in error in seeking to treat the “revenue share” as a limitation on profit earning capacity inherent in the tolls.

He also agreed with the tribunal that the property to be rated is the whole toll franchise and not some notional part of it after deducting an annual amount equivalent to the “revenue share”.

He rejected Eurolink’s additional argument that the revenue share is deductible as “an expense … necessary to maintain the property … in its actual state” as part of the valuation assumption required by the relevant provision of the 2001 Act.