THE state Treasury has been forced back to the drawing board over the $7 billion M4 East inner-city motorway after the proposed toll for the new road was deemed too high.
Last year the Premier, Morris Iemma, was told by Treasury officials that NSW could afford both the $12 billion North West Metro and the motorway.
But in the past few months officials have ordered a review of the numbers because the modelling relied upon such a high level of private sector finance that the toll had been pushed to an intolerable level.
The Herald understands Treasury had been working on an assumption that tolls would have been charged at well over $4 for the trip into the city. The M4 from Penrith into North Strathfield costs $2.20.
The Government has not formally announced the motorway, after pledging to do so by the end of last year. The Treasurer, Michael Costa, is now linking the project to the success of the $15 billion electricity sale.
The motorway would be the biggest ever built in Sydney. One arm would link the M4 at Strathfield to the City West Link, and another would link Port Botany with Victoria Road, via an intersection between Concord and Lilyfield.
This north-south extension is crucial in catering for the increasing traffic out of Port Botany, with freight to and from the port set to double within 16 years.
But under the revised figures, the Government contribution to the road project is rapidly climbing and cabinet has been told in recent months the funding share in a modelled public-private partnership needed to be revised.
Heather Gilmore, a spokeswoman for Mr Costa, said only: "We don't discuss the internal workings of government."
The Government has been hoping for a substantial federal contribution. But the Herald understands the federal Transport Minister, Anthony Albanese, does not support the project.
The underground tollway would travel through his electorate of Grayndler and potentially through his wife Carmel Tebbutt's state seat of Marrickville. The electorates cover inner-city areas where residents have previously raised objections to the possibility of ventilation stacks.
Mr Albanese's office has vigorously denied this is the case. Jeff Singleton, his spokesman, said the suggestion was "absurd".
"The Rudd Labor Government has established Infrastructure Australia to objectively assess projects based on national interest not political interest," he said.
The State Government had appealed for the funding required to get the M4 East off the ground. But in the May budget, $5 million had been allocated, not for the M4 East, but for a feasibility study into the duplication of the M5.
Many say the project will not proceed in this Government term.
It is understood the Roads and Traffic Authority has suggested a per-kilometre tolling regime across the M4 road - both the existing corridor as well as the proposed extension. The scheme would be similar to the M7, which charges a distance-based price in both directions.
The distance-based toll would provide a financial boon for the M4 East, because the Government could borrow billions of dollars against the concession. But cabinet has rejected the plan because it would have to reverse its promise to lift the toll from the M4 when the present concession expires in 2010.