Infrastructure deficit demands smart financing
While the Prime Minister likes the “30-minute city” concept and politicians agree that our cities urgently need investment, how we finance the infrastructure backlog remains up for debate.
Cities were in the spotlight last week, with Malcolm Turnbull arguing that the nation’s city dwellers should be able to get from home to work or school in less than half an hour.
Shadow Minister for Cities Anthony Albanese, also a vocal proponent of the 30-minute city, concurred. “Most of people's day to day work, education, shopping or recreational activities should be located within 30 minutes of walking, cycling or public commuting from their home,” he said.
But is the 30-minute commute a pipe dream? The Grattan Institute says the average weekly commuting time in Australia’s largest cities has lengthened by 20 per cent over the last decade. Only 14 per cent of the jobs available in Sydney can be accessed within a 45-minute car trip, for instance.
While the property industry has welcomed the political enthusiasm for city policy, the question remains: how will the backlog of infrastructure be funded?
Speaking at a Property Council luncheon in Brisbane last week, Federal Minister for Major Projects Paul Fletcher (pictured) argued that value capture financing could create a “win-win proposition” – one which saw “landowners contribute towards the cost of new infrastructure in exchange for an increase in value which greatly exceeds the amount of the contribution.”.
Late last year, Fletcher asked the Standing Committee on Infrastructure, Transport and Cities to inquire into how transport connectivity can stimulate development and economic activity. Committee chairman John Alexander has said “mechanisms such as value capture can help to make major projects focused on increasing transport connectivity more feasible.”
‘Value capture’ seeks to recoup part of the cost of infrastructure by turning the increased value – whether that’s property, rent, parking or retail turnover – into money by way of a levy.
The Minister for the Environment, Greg Hunt, said earlier this month that one of the fairest ways to fund new infrastructure was for “the beneficiaries of that infrastructure to contribute to the cost”.
Value capture, though, typically contributes only a portion of the total capital costs – around 32 per cent in the case of London’s CrossRail project, for example.
The Federal Opposition is looking at other funding mechanisms. In a speech to the Sydney Institute in early March, Anthony Albanese said that reducing the “infrastructure deficit” demands “smarter financing models” and that “value capture is one solution”.
Other smart financing options, according to Albanese, would include Labor’s promised $10 billion infrastructure financing facility, to be administered by Infrastructure Australia.
Property Council chief executive Ken Morrison has previously warned that property owners already pay their fair share of taxes, including stamp duty, land tax, and capital gains tax.
“We are wary of government adding a value capture tax on top of them. The danger for the government is that it might end up with its own version of a VCT – very cross taxpayers,” Morrison told the Australian Financial Review in late January.
Paul Fletcher told the audience at the Property Council’s luncheon that he understood the industry’s concerns.
“If value capture simply ends up as the justification for more up front charges being levied on a lot – when there is no discernible benefit derived in exchange – then we will not have achieved very much when it comes to stimulating the provision of the infrastructure our country needs.”