Lack of Infrastructure Innovation Costing Taxpayers Billions

Monday, September 7th, 2015
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Gold Coast’s light rail network
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The failure of both federal and state governments to pursue more innovative value-capture financing methods for key infrastructure projects could be costing taxpayers billions of dollars in unreaped funding.

A new report produced by AECOM in collaboration with Consult Australia found that the Queensland state government is still failing to tap into potential windfall sources of funding for public infrastructure that are generated by the projects indirectly.

These include the untaxed financial benefits enjoyed by property owners located within close proximity of new infrastructure projects, such as the light rail networks in Brisbane and Gold Coast.

The end result is that the owners of properties located adjacent to new infrastructure projects reap gains that are wholly subsidised by taxpayers.

The report, entitled Value Capture Road Map, advocates capturing some of this additional value in order to help finance the development of major infrastructure projects.

According to Joe Langley, report author and AECOM technical director, these innovative financing methods have the potential to save Australian taxpayers billions of dollars in infrastructure costs, and could account for nearly a third of funding for projects.

“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,” Langley said.

“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 toward 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.”

According to Consult Australia CEO Megan Motto, the adoption of value capture funding models will play a critical role in ensuring that Australia’s future infrastructure needs are adequately met.

“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 said.

“In London, the $29.6 billion Crossrail project utilised capture from a range of indirect beneficiaries, such as local employers and commercial property owners, to finance $7.6 billion or 26 per cent of the overall project cost.

“Why can’t Australia beneficiaries contribute in the same way?”

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