New South Wales is missing out on billions of dollars’ worth of funding opportunities for major infrastructure projects through failing to take advantage of innovative funding mechanisms such as value capture, the state’s deputy opposition leader says.
At a recent built environment conference at Parliament House in Sydney, deputy opposition leader and shadow minister for planning Michael Daley said the state has seen a big run up in spending on infrastructure projects. He added, however, that the state had spent tens of billions of dollars’ worth of taxpayer money but failed to implement effective mechanisms to capture some of the uplift in property values associated with that investment back through value capture mechanisms.
Daley said the government had been largely reliant upon asset sales in order to fund investment in new public infrastructure but said the usefulness of this strategy was finite as public assets were limited in number.
In this light, he said the state should be looking at alternative funding mechanisms such as value capture, and says it is disappointing that the state had not made far greater progress in this area.
“Now is the time to discover and implement brave strategies to stretch the taxpayer dollar further and to make the most of the available capital,” he said. “Value capture should be a vital part of that strategy…but it is not happening.”
Daley listed a number of projects on which he says taxpayers have spent billions without unlocking value capture opportunities.
“Thirty-three kilometres of the North West Rail Link that costed more than $8 billion to the taxpayer – no value capture,” he said.
“Seventeen billion dollars and rising on the WestConnex – admittedly, a lot of the tale, you can’t do value capture, but no (no value capture attempted) on the rest of it. The Eastern Suburbs Light Rail, over $2 billion: wrong project, wrong place, wrong time, no value capture. With the Sydney Metro, the cost of $12 billion from Chatswood out to Bankstown, we haven’t heard anything about value capture and in fact we haven’t heard much at much about that project really but for the sales pitch. We hope value capture is part of that mix.”
Around Australia, awareness of the need to look at new innovative new financing and funding mechanisms in order to generate unlock new streams of funding has been growing as fiscal constraints limit the amount of taxpayer funding which can be used for public sector projects.
In a report released last year, built environment consultancy group AECOM and engineering professional association Consult Australia argued that Australia was missing billions of dollars through failing to take advantage of value capture opportunities – a concept whereby a portion of the uplift in property values which occurs through new infrastructure investment is captured by the taxpayer though one or more of a variety of means.
By not having done this, Daley says the government is forcing taxpayers and motorists to bear an undue portion of the burden of new infrastructure investment through taxpayer funding and road tolls.
“The motorist, the commuter and the taxpayer will be groaning under the weight of these financing models for decades and the developers who have already largely on-sold much of the land around these projects will skate away with the profits,” he said.
In a separate address, state planning minister Rob Stokes said the state told the conference that the state and particularly Sydney faced a massive challenge in providing sufficient volumes of affordable housing to meet the needs of a growing population.
In order to meet this challenge, Stokes says the state needs to look at a more diverse range of housing types, and needed to look beyond the traditional divide between detached housing and high rise apartments.