Background to the price hikes on bridges

Background to the price hikes on bridges

The government increased the costs of bridge tolls over Istanbul’s Bosphorus Strait by 48 percent, while the costs of crossing the Osmangazi Bridge over the İzmit Bay were decreased by 26 percent.

The first thing that came to my mind when I first heard the news was that a new type of participation to the financing of the bridge and highway constructions were undertaken as a public-private cooperation through the built-operate –transfer (BOT) model.

The cost of projects like Osmangazi Bridge are paid by everybody, whether they use the bridge or not, due to the requirements made by the state. Now, with the additional hikes to the already-existing bridges, even those who use other bridges will pay an additional fee.

As is known, the government sets a certain revenue to be paid from their budget to private sector companies for the construction and management of these infrastructures for long years.

This way, a payment is done from the state budget to private companies if they do not reach the expected revenue. One of the prime examples of this is the Osmangazi Bridge that was opened last summer. The toll fee based on U.S. dollars was so high that it was obvious from the beginning that the number of vehicles using the bridge would remain low. This meant that everybody, whether they used the bridge or not would have to pay for it. The state had guaranteed and anticipated on the contract that the daily crossing would be 40 thousand. The difference between the current toll fee, which was kept low, and the one determined in the contract, as well as the gap between the guaranteed 40 thousand crossings and the actual number of vehicles that crossed the bridge was to be paid. 

After the Osmangazi Bridge, other BOT projects like the Yavuz Sultan Selim Bridge, which guaranteed 135 thousand daily crossings, and the Eurasia tunnel, which guaranteed 68,500 daily crossings, were put into force.

Pricing adjustments

The pricing adjustments done on New Year’s Eve are very interesting. At the start of 2016, the tolls were increased by 16 percent, while the 20 percent discount for those who prepaid for automatic crossing systems like the “Fast Transit System,” called HGS in Turkish, were cancelled. That meant a 39 percent hike for tolls on bridges and highways.

The second big hike came on New Year’s Eve, it brought a 15 percent hike for highways and 48 percent hike for bridges. The price increase over the course of the last two years for the two bridges with an annual of 150 million crossings reached 105 percent.

The number of crossings over the two bridges had decreased by 5.5 million between 2015 and 2016. Therefore it looks likely that there will not be a hike in revenues for 2016. It is possible that the 48 percent hike was done in order to increase the 2017 revenues.   

The actual 39 percent increase, which was done last year, reflected on the highway revenues of the General Directorate of Highways (KGM). It looks like the KGM’s highway revenues will increase by 39 percent. 
While the revenue for December is not yet revealed, based on a calculation, the KGM finished 2016 with a 1.2 billion lira revenue.
What is most probably expected by the recent 48 percent hike on bridges and 15 percent hike on highways, both much higher than the inflation must be that the number of vehicles crossing the bridge will not increase, based on estimation, KGM’s revenue will be around 1.5 billion liras. That means an increase by 23 percent. Subtract the inflation, which means 180 million liras of additional resource. Those crossing the two bridges and driving through the paid highways will be indirectly financing the three BOT projects with the taxes they pay, as well as the toll fees they pay. Interestingly, the 2017 additional revenue via price hikes can only compensate for one month of the costs of the Osmangazi Bridge.