TAXPAYERS LOSE BILLIONS TO OUTDATED THINKING
Written on the 3 September 2015
SPENDING on transport infrastructure in Australia could be earning taxpayers more bang for their buck, but billions are being lost to outdated thinking, says a new report.
The report commissioned by Consult Australia and AECOM says the 'value capture' approach used for years in the UK, US and Canada is the innovation that needs to be adopted by Australian governments, both federal and state, if infrastructure spending is to keep pace with population growth.
The proposal comes in the wake of Queensland voters rejecting asset sales by voting in the Palaszczuk Government earlier this year and comes despite the Baird Government being given the green light for 'asset recycling' which the report describes as a 'once in a century opportunity' to upgrade infrastructure.
The Value Capture Road Map report says government agencies in Victoria, Western Australia, NSW and Queensland have all investigated the value capture model to fund transport and urban renewal projects, with some applying elements of it.
The federal government has even looked at the model to fund a high-speed rail network between Sydney and Melbourne.
"However, none of the examples reviewed for this paper have resulted in the adoption of these methods," says the report.
The report notes that indirect beneficiaries of key projects, such as property owners located close to new infrastructure, receive untaxed financial windfalls that are effectively subsidised by the public. It proposes that these funds could be captured to help finance the projects.
Report author and AECOM technical director Joe Langley says Australian taxpayers could save billions by using proven value capture methods.
"It is reasonable to assume that a well-conceived and managed value capture program here could contribute between 10 per cent and 30 per cent directly related infrastructure costs within a defined improvement area," he says.
"For example, new stations along Brisbane's rail network or the Gold Coast's light rail network will deliver significant financial windfalls to local property owners and businesses, but under current legislation they do not have to pay a cent towards them.
"That just doesn't make sense when there's a tried and tested way of leveraging this value to reduce the overall cost to the tax payer."
The report highlights that legislation in Queensland refers to some forms of additional property taxes used to fund infrastructure as value capture, but notes these are simply additional taxes that have no correlation to created value.
Consult Australia CEO Megan Motto says Australian governments needs to adopt value capture approaches similar to those models that have worked successfully overseas.
"We need Australian governments at all levels to embrace value capture as part of a range of innovative financing mechanisms if we are going to deliver the roads, trains and ports that will make living, working and doing business easier," she says.
"In London, the $29.6 billion Crossrail project utilised value capture from a range of indirect beneficiaries, such as local employers and commercial property owners to finance $7.6 billion or 26 percent of the overall project cost.
"Why can't Australian beneficiaries contribute in the same way?"
Langley says the lack of innovation around the funding of key transport infrastructure projects is preventing a better return to Australians.
"With so much new infrastructure being planned and in demand over the coming decade, state and federal governments have a once-in-a-generation opportunity to look beyond the blunt funding tools they currently use, such as levies, tax increases or rate hikes," he says.