Smart Cities Plan: A Blueprint for the Future? 1

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Wednesday, May 18th, 2016
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Our cities — the CBDs, the suburbs and our regional centres — are where most of us live and work, and this is the opening subtext of the Smart Cities Plan released by the Turnbull Government late April 2016.

Australia’s growth as a knowledge-based economy, and the prosperity this offers, goes hand in hand with the growth of our cities and the regions surrounding them. Knowledge-based industries rely on the successful concentration of industries and organisations in particular locations. To succeed in the 21st century economy,our cities need to be productive and accessible, but they also need to be liveable with a clear focus on serving their citizens.

The foreword of the Smart Cities Plan goes further to say, in essence, the scarcest resource in cities today is not money, but coordination, where better cities policy starts with a commitment from all levels of government to work together to deliver common goals, including reforms that make our cities easier to invest in and do business.

The Smart Cities Plan is built around three appropriate pillars: smart investment, smart policy and smart technology. Moving away from the grant funding model between federal and state/local governments into long-term investment, co-investment and value-capture frameworks for financing or infrastructure, the federal government seeks to use its balance sheet (no commentary on the debt  and deficit matters affecting government capacity to borrow and fund for infrastructure) to deliver essential infrastructure in the near to medium term. The Smart Cities Plan prioritises:

  • projects that meet broader economic and city objectives such as accessibility, jobs, affordable housing and healthy environments
  • the need to collaborate across all levels of government to develop opportunities called “City Deals” with the aim to unlock public and private infrastructure investment in key economic centres, supported by the collection of data about the performance of cities, policy success and plan for future needs
  • the need to embrace new technologies that can have the effect of revolutionising how cities are planned, function and grow the economy
  • projects must meet vigorous planning and business case measures, applying instruments such as cost-benefit analysis within the context of broader national economic objectives such as long term growth and job creation, improving accessibility, promoting agglomeration economies, and  enhancing amenity, housing affordability and sustainability.

The Smart Cities Plan recognises the potential affects of disruptive technologies, yet there does not appear to be a coherent policy framework in the country on how the Commonwealth and state governments treat these disruptive technologies. For example, the Commonwealth Government is actively pushing the Fintech agenda through the National Innovation and Science Agenda, and yet the states have taken diverse policy positions on the two biggest disruptive enterprises in the western world (Uber and AirBnB).

The Smart Cities Plan correctly recognises major challenges and opportunities in Australia:

  • economic transition from resources to the services sector due to our proximity to Asia and the Pacific nations, a mature well-regulated financial sector, a highly educated workforce supported by leading research institutions that are increasingly focusing on the research, commercialization, and return on investment framework in their activities. High quality infrastructure in our cities (of all scales) is needed to support these initiatives
  • employment clustering around a few specialised industries, networks of people and organisations, supported by and supportive of the previously noted research institutions and  adaptable/mobile/ageing workforce
  • the need to deliver a growing supply of affordable, connected housing in close proximity to high value employment opportunities (the 30-minute city – plan for cities where residents can access employment, schools, shopping, services and recreational facilities within 30 minutes of home)
  • development of multi-modal transport opportunities that meet the need of the individual cities and connectivity between cities
  • the need to develop smart green cities with increased tree coverage and green spaces, energy efficient buildings, improving the quality of air and water, reduce the heat island effect,  protect biological diversity and threatened species, and enhance general amenity
  • the ability to capture the added value to the city that infrastructure development can bring, most commonly considered through developer charges, stamp duty, land taxes, local rates.

If the Commonwealth Government is serious about infrastructure and innovation, the federation white paper will need to consider how the federation as a whole can build and manage policy that caters for how these new transnational, cross-border technology driven, disruptive technologies will operate. The Smart Cities Plan is certainly making the right statements. Translating to real policy and legislative reform needs to occur to provide certainty to ensure the success of both homegrown and international disruptors.

The Commonwealth Government has committed $50 million to accelerate planning and development works on major transformational infrastructure projects. The commitment of the Commonwealth Government in the 2016 budget to not privatise the $4 billion Australia Rail Track Corporation (one of the parties pursuing the $10 billion inland rail project) is a clear indication of the Commonwealth Government’s commitment to the sector. An addition $594 million in equity funding to the ARTC will be used to acquire land for the 1700-kilometre project and pay for the pre-construction works and due diligence activities, supported by $3.8 million in funding in the 2016-2017 budget to examine opportunities to “optimise provide sector involvement in the delivery and financing Inland Rail.”

Strangely, the Commonwealth Government will establish an “infrastructure financing” unit to collaborate with the private sector to develop and finance solutions to deliver key government projects. Currently, there are multiple entities involved in the sector (internal and external to the Commonwealth Government) that could take a lead role in this process without establishing a new entity.

In addition, bodies such as the Clean Energy Finance Corporation have delivered truly innovative financial models that could be used as the templates for the necessary innovations in financing the broader infrastructure sector. The Energy Efficiency Financial Institutions Group (European Institution), the Sustainable Cities Collective, the Global Commission on the Economy and Climate, and the Smart Cities for Shared Prosperity conference participants can all provide guidance as “external to Australia entities” on innovation in financing and policy in the planning and delivery of infrastructure. Why re-invent the wheel?

History shows that here in Australia, as elsewhere in the world, it is “the city” that is frequently the driver of new infrastructure to support the needs of the economy and the residents, with examples including Gold Coast Light Rail, Canberra Light Rail, the Clem Seven tunnel, and Metro Rail in Melbourne and Sydney. Cities are frequently the dominant financier/investor in major infrastructure.

Cities frequently apply return on investment measures such as infrastructure charges, user-pays tolls and rates regimes that reflect (at a minimum) the objective of cost recovery (including interest charged for the borrowing to build infrastructure), such as the City Transport Improvement Charge levied by local government on ratepayers by the City of Gold Coast to develop stage one of the Light Rail service.

Land value based local government rates systems do not accurately reflect the true cost of service delivery to residents. Infrastructure charging regimes are a blunt instrument applied by local and state governments that can result in new development being over-charged for connectivity to existing infrastructure that does not accurately reflect the true load that such development places in the infrastructure class.

Increasing fares for public transport service delivery to essentially cover increasing fixed operating costs without a commensurate improvement in service delivery will keep people out of the public transport system and increase the usage of the road networks. Subsequently, the “City Deals” activities that focus on transport infrastructure funding or financing to improve connectivity and increase access to jobs will need to look at the complete transport and road network opportunities with the subject city – bus, rail, light rail, taxis, ride sharing/sharing economy service providers, private vehicle usage and so forth to ensure there is true value for money. Perhaps a de-congestion credit can even be applied to residents who change their transport methodologies from private vehicle usage to other transport modes.

The Smart Cities Plan identifies other “City Deals” activities which could include:

  • targeted initiatives to strengthen existing or emerging economic hubs
  • housing supply and planning changes
  • changes to regulatory and zoning arrangements
  • investments that improve environmental outcomes
  • maximising benefits from under-utilised state and Commonwealth land, perhaps by shifting large tracts of underutilized, yet critical defence force facilities to outside urban footprints to help deliver affordable housing opportunities, and community focused economic developed opportunities within regional centres, such as Maryborough (Queensland), Townsville, and elsewhere around the country
  • integrating environmental criteria into decision making

The Smart Cities Plan continues to present commentary on issues as broad as:

  • building on the arguments presented by successive Productivity Commission reviews and the Australian Infrastructure Plan of the need for reform in our cities to drive strategic planning to make it easier to invest and do business
  • housing affordability and supply
  • improving city governance, competition and business conditions
  • improving the environmental planning regimes of all government jurisdictions
  • transport
  • the need to define and measure success
  • the Internet of Everything – data, energy efficient technologies how these can be leveraged to meet the higher order goals.

Missing is any discussion on soft infrastructure sector such as schools, hospitals, community health centres and community centres, energy, weather and climate change, specific conversation on the role of local government, the third sector, financial institutions (national, local and international) and the interface between cities and rural participants in driving the  economy.

Remember that for many rural communities and industries, their products will be exported through the infrastructure that is located within cities, which means they are key stakeholders in how any changes to infrastructure improvement and related charging regimes may affect rural primary and value-adding producers, resource enterprises and tourism operators.

There is a need to fully understand and quantify the scale of the economic value and savings made when implementing the models espoused in the Smart Cities Plan. Ultimately, connecting these methodologies may be able to create better linkages across infrastructures and landscapes – both urban and rural – and potentially better outcomes for the operations of infrastructure, local, regional and national ecosystems, and the communities that depend on cities to functions more effectively – i.e.  everyone.

Urban planners, asset managers and other stakeholders need to consider the true costs and opportunities of implementing truly innovative policy positions on infrastructure delivery and charging regimes. Governments at all levels need to deliver the policy settings that allow  development  of new  business models that take advantage of opportunities to be found through improving the planning, funding, delivery, operation of new/improved infrastructure and decommissioning of obsolete infrastructure.

Overall, the Smart Cities Plan is a good starting point for considering the future needs of our nation, especially when considered in parallel with other documents and investigations including but not limited to the Productivity Commission reviews and the Australian Infrastructure Plan. Multi-(political)-party partisanship needs to occur in how we, as a nation, discuss, plan and progress through the 21st century and take full advantage of new technologies, our intellect and our physical, human, financial and environmental resources.

Many have written extensively on issues related to the how, when, where, why, and importantly “the who” in the sustainable development of our cities and communities. I encourage everyone, whether you agree with my stance or not, to actively participate in the public submission phase of the Smart Cities Plan development. Public submissions are open until June 24, 2016 at  www.dpmc.gov.au/cities.

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  1. Barry B

    A shrewd and timely move by the Turnbull government, and a coordinate national-level plan which Australia's major cities sorely need.