Article: Queensland infrastructure's funding crossroads

[ozbob]

From the Brisbanetimes click here!

Queensland infrastructure's funding crossroads

Queensland infrastructure's funding crossroads
TONY MOORE
April 16, 2010 - 5:49AM

Queensland is at funding crossroads and must adopt US and European-based models to fund big infrastructure projects, or it will quickly struggle to cope with its growing population.

The Queensland Property Council will this morning table its six-step approach to shake off Queensland's reliance on government funding and infrastructure charges and look at six alternatives to fund infrastructure.

One of the six alternatives is giving local or state governments the ability to issue "growth area bonds" to the stock market with a guaranteed rate of return.

These bonds attract investors to infrastructure projects in specified geographical areas and the higher land taxes and rates on the improved property near the new infrastructure pays back the original bond.

Property Council president Steve Greenwood said their research - which will be presented to the Queensland Government today - shows Queensland needs to step back and chart a new funding model.

"It is quite obvious to everyone that in Queensland we are struggling to provide the infrastructure that we need for a growing community," he said.

"And if we keep on relying, in the same way, on the same sort infrastructure financing mechanisms we are just going to end up in the same place, which is just not good enough."

More than $124 billion worth of roads, bridges, schools, hospitals, busways and hospitals are identified under the Queensland Government's South East Queensland Infrastructure Plan and Program.

However, the QPC believes funding problems in Queensland are close to the surface, with the government feeling the impact of the lower revenues from slower economy and market nerves about its proposed $15 billion asset sale.

Last year the QPC approached consultants, the AEC Group, to examine funding alternatives.

AEC Group CEO Simon Smith will present the funding alternatives to a Property Council of Australia breakfast this morning at the Sofitel Hotel.

Mr Greenwood said the Property Council would provide the alternatives to the Queensland Treasury.

Public Private Partnerships - which recently built the Clem7 tunnel and the Southbank TAFE - developer's infrastructure contributions, and government debt funding are the schemes most used today.

One dramatic proposal is for infrastructure charges - now paid by developers to local governments as a contribution towards roads, stormwater and parks - be phased out over three years.

"The bottom line is they don't work," Mr Greenwood argued.

"In other states they are moving to reduce them. In New South Wales they are already moving to reduce them.

"They are inaccurately called developer charges because in the long run the charge is levied on the home owner."

He said the charges end up being passed on to homeowners, who effectively pay for infrastructure that lasts for 50 years.

Mr Greenwood said he would be providing the AEC Group report to Infrastructure Minister Stirling Hinchliffe and Treasurer Andrew Fraser.

"I will be writing to both the Minister for Infrastructure and Planning and to the Treasurer suggesting to them that this is something to consider," he said.

Brisbane City Council's deputy mayor Graham Quirk, Brisbane's Infrastructure Committee chair, is one of three panellists at the breakfast.

[Jon Bryant]

All well and good but when are we going to have the debate about whether the 124 billion dollars of infrastructure planned is the most efficient investment of anyone's money.  SEQ is struggling to provide frastructure because our Govts have spent 40 years investing in the wrong infrastructure and encouraging inefficient urban development.  A new source of funding will not fix the problem but potentially only accelerate the creation of worse infrastructure problems.  

A change in infrastructure and urban growth direction is needed first.  

[curator49]

I see that rail does not receive a mention in the article, just roads and busways. No wonder we are so far behind in the infrastructure stakes.

The US military is quoted today as saying thery estimate there will be  a world wide shortage of oil as early as 2012. What happens then to the almighty car? Petrol rationing might be a possibility but one thing is certain the price of petrol will escalate significantly.

[#Metro]

How come we never hear about "Translink Bonds" for super funds?

These bonds attract investors to specified geographical areas, and the higher land taxes and rates on the improved property near the new infrastructure pays back the original bond.

A lot of these things could work. If you wanted to speed up the construction of the (for example only) Springfield railway, offer the plan, have a local referendum (they seem to do this in America all the time) and put the stations in a seperate zone with a slightly higher fare. Or slightly higher rate. If it is put to vote, then it will be more legitimate than without one.

The second thing is although higher land taxes and rates on improved property might generate money to pay for infrastructure, the mere fact that more people are living there (and more people = more ratepayers) will itself increase the total amount of revenue collected even if rates stay the same.

"The bottom line is they don't work," Mr Greenwood argued.
"In other states they are moving to reduce them. In New South Wales they are already moving to reduce them.
"They are inaccurately called developer charges because ... the charge is levied on the home owner."

Does this sound like rent-seeking? A levy or tax will also be levied eventually on the home owner too. And not all of that cost of developer charges will filter to the homeowner because some of it will come from forgone profits and distributions to shareholders...
So it is difficult to say either way with the information given.