Malcolm Turnbull's infrastructure pitch to turn developers into rail builders

[ozbob]

AFR --> Malcolm Turnbull's infrastructure pitch to turn developers into rail builders

The Turnbull government is set to establish a high-stakes infrastructure investment body to drive more private sector funds into the building of new roads and railways.

Scheduled to be announced next week in the leadup to the budget, it's understood the new institution's primary purpose will be to spur companies such as property and retail developers into directly funding new projects using a well-tested model that is already well entrenched overseas.

With Malcolm Turnbull and his Treasurer Scott Morrison under pressure and scrutiny from ratings agencies to bring down the deficit and avoid budget-blowing election promises, government proponents believe the new infrastructure body is the key to unlocking private sector savings such as those held in superannuation funds without threatening Australia's AAA credit rating.

Based on what has become known as a so-called "entrepreneurial rail model," the pre-election launch comes as global bodies such as the International Monetary Fund and Reserve Bank of Australia governor Glenn Stevens intensify their push for more infrastructure investment to shake off more than seven years of sluggish economic growth since the global financial crisis.

"There's a little bit of Keynesianism in all of us," said one senior Coalition figure. "But the best fiscal stimulus is for infrastructure because it also has a productivity enhancement."

Senior sources indicated the government will announce the new infrastructure delivery agency in Melbourne on Friday, making it a cornerstone of the broader budget strategy of boosting growth and innovation.

It also comes as municipal mayors around the country have started pitching projects in need of funding as anticipation builds for a major commitment on cities by Mr Turnbull.

"Every element of our budget is focused on enterprise, investment and jobs," Mr Turnbull said on Friday.

Coalition strategists believe the infrastructure body will also act as an election-campaign foil against Labor's promised plan for a $10 billion infrastructure bank, which was described by one as "overkill".

While there are considerable execution risks given the model is untested in Australia, experts point to places such as Hong Kong and Japan where developers effectively fund new rail lines from the gains generated by the lift in economic value that is delivered to regions near new stations.

One consequence of this model is that it upends the traditional top-down approach of governments whereby federal and state bureaucrats determine the nature, layout and priorities for new infrastructure projects.

Under the system being encouraged by the Turnbull government, the private sector would be encourage to take the lead, using its expertise to advise on the viability of proposed routes that factor in current land prices and zoning issues.

An illustrative example of how the model would work is the classic North America ski-resort, where owners use the profits from the sales of condominiums, restaurants and shops to fund ski lifts and gondolas.

Supporters also point to Japan Rail, which is as much a property developer of land adjacent to stations as it is an operator and builder of the nation's railway lines.

Major projects minister Paul Fletcher told a forum last month organised by the Australian Property Council in Brisbane that the government was eager to reach out to developers to find ways of designing so-called "value capture" mechanisms that go beyond merely raising more tax.

He pointed to the examples of the Sydney Orbital Network and Melbourne freeway system, which are estimated to add $2 billion a year to the economy, and Melbourne's CityLink freeway, which has boosted land values by nearly $30 billion, as well as the new Badgery's Creek airport.

"If you own land in Western Sydney, the value of that land will be greatly enhanced if there is a railway station close to your land," Mr Fletcher said. "It will be enhanced even more if the land around the railway is zoned to permit, for example, multi-storey apartment blocks, commercial shopping areas and the like.

"A mechanism under which land owners can contribute to the cost of a railway line and station, in this situation, could be a win-win outcome."

One of the issues confronting the federal government is the need to find the right people to run the new body, given it would require not just infrastructure knowhow, but broader insight into property development.

"It requires a commercial skill-set in government which we haven't had, even if we're asking developers to get involved," said one Coalition source.

Read more: http://www.afr.com/news/policy/budget/malcolm-turnbulls-infrastructure-pitch-to-turn-developers-into-rail-builders-20160422-gocvfd

[ozbob]

Twitter

Anthony Albanese ‏@AlboMP 10 minutes ago

Here's an idea for the Govt - why don't they call their body to promote infrastructure development "Infrastructure Australia" #justathought

[ozbob]

Twitter

Anthony Albanese ‏@AlboMP 3 minutes ago

Value capture isn't new. If PM is serious on cities he must fund public transport, not just take selfies on it.

[#Metro]

Value capture will be a minute amount because they don't want land tax (or any tax) to fall on residential homes/land. Votes from the property class are highly valued in Australia.

An observation: look at the last paragraph of Albo's statement.

"... actually invest in cities to confront worsening traffic congestion, which IA has predicted will cost $53 billion by 2031, unless action is taken now."

There are a number of problems with this statement.

1. It positions public transport as an anti-congestion device. It is not. Cities with the best PT also have horrendous traffic congestion regardless. PT simply allows more people into the city to work than otherwise would be possible with only congested roads.

2. The statement talks about congestion within cities, but HSR is not designed to make transport within cities better. Most cities would have just one or two HSR stops at best. A national HSR is designed to transport people between cities and towns. It will thus have absolutely no impact on the traffic or congestion levels within a city, just like passengers on flights between Melbourne and Sydney do not affect the overall levels of congestion within Melbourne or Sydney.

If one wants to provide an alternative to traffic congestion within cities, then investing in current networks or upgrading them, for example, to Regional Rapid Rail would actually address the problem.

This logic doesn't follow: Bad traffic in city ---> National HSR.

The ordinary worker has around 30 minutes or so budgeted to get to work in the morning and afternoon. This places an approximately 200 km circle around a city where RRR would be feasible.

[newbris]

..This logic doesn't follow: Bad traffic in city ---> National HSR.
..

Was that inference made ? The release that quote comes from seems to be discussing urban rail projects.

[#Metro]

Was that inference made ? The release that quote comes from seems to be discussing urban rail projects.

You are correct that it has not been explicitly made in this release. However it has been generally made in other pieces put forward by both Malcolm Turnbull and others.

e.g.

The idea of a rapid link between Melbourne, Canberra, Sydney and Brisbane – as well as regional centres along the 1750km route – is back on the agenda, with the Turnbull Government flagging new "value capture" funding methods to help pay for it.

http://www.couriermail.com.au/goqld/queensland-section-of-national-highspeed-rail-network-should-be-fasttracked/news-story/5a2376a9fe1f194a39fecc4a9d85367a

Is value capture the silver bullet for funding infrastructure?
http://blogs.crikey.com.au/theurbanist/2016/02/22/is-value-capture-the-silver-bullet-for-funding-infrastructure/

Centurion says the line could be funded by "value capturing" –that is developing in areas around new stations

The issue with HSR is that there are so few stops on it, that land development opportunities around stations would be highly restricted.

[Stillwater]

^^ Not if the stopping places were at the new regional cities as opposed to existing regional cities.