ACT taxpayers will carry the financial risk of the Capital Metro failing to attract enough passengers, under a public-private partnership model used to deliver stage one of the territory's light rail network.
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But private-sector partners in the project might face financial penalties if there are construction delays or trams fail to run on time.
Last week's ACT budget included $18.7 million to help plan the development of the Capital Metro, which would initially run between Gungahlin and Civic.
In a territory first, the ACT government wants to use public-private partnerships to develop the light rail system, a sub-acute hospital at the University of Canberra and the City to the Lake development.
Treasurer Andrew Barr said it was unlikely that a private partner would be willing to accept the financial risk of payments based on light rail passenger numbers.
''In the context say of light rail, the PPP there won't be someone taking the patronage risk on the delivery of the project,'' Mr Barr said.
''They'll demand an availability payment. What we will do is be required to make a payment and what they will be required to do is run a service. And they get penalised if the service doesn't run on time and those sorts of things.
''But we would take the risk on the patronage. We do that now with ACTION buses - we take all the patronage risk because it's funded off the budget.''
Like ACTION buses, the Capital Metro would not make a profit. But Mr Barr said the fixed costs would be spread over more people if the network attracted large numbers.
''It would need a level of subsidy,'' he said.
Mr Barr said private companies had been scarred by the experience of operators that had failed to make a profit from toll roads that were shunned by motorists.
''What is clear about PPPs is that the private sector won't take demand-side risk. We've seen some spectacular failures there with toll roads, for example,'' he said.
Mr Barr said the ACT's AAA credit rating would make it cheaper for the government than a private partner to borrow money for major infrastructure. But he said there were still advantages in forming partnerships to develop infrastructure, such as the Capital Metro.
''Having the private sector involved with managing - and where we've both got skin in the game in terms of delivery on time and on budget - I think there's some good tensions to have in your capital works delivery,'' he said.
Under the agreement with Greens MLA Shane Rattenbury, construction of the Capital Metro must begin by 2016. Alistair Coe, opposition spokesman on planning, infrastructure and transport, said he was sceptical that light rail would attract the commuters to make it viable.
''At this stage, we don't see the financial case for it and it seems the ACT taxpayer is going to take on the lion's share of the risk and, therefore, the lion's share of the cost,'' he said.
He is also concerned that a large number of commuters would need to be promised to attract private-sector investment.
with Fleta Page
