JOHN AUSTEN and LUKE FRASER. Urbane transport policy. Part 2 of 3.

Urbane transport policy

This article is the second in a series about transport infrastructure. Part 1 dealt with the Prime Minister’s focus on mass transit and 30-minute cities. This deals with other matters raised by the Prime Minister: value capture, city deals. A final article will deal with the Commonwealth’s role.[i]

Value capture

Value capture – levying taxes on properties improved by infrastructure projects – is not novel in Australia; contributions to local infrastructure are made for some developments. But it is relatively new for major transport projects.

There are plenty of arguments about value capture; how much, which properties to tax etc. Beyond these, three observations:

  • use of value capture would lessen the fetish of suspect ’travel time savings’ and de-congestion as the rationale for transport projects; it would also reduce the bias to road building for cars. Value capture is not, but should be, reflected in appraisals conducted by bureaucracies;[ii]
  • Value captured is likely to be affected by the property market. Revenue risks may be lower outside central areas of capital cities where there is less suspicion of a ‘bubble’;
  • As the Prime Minister noted, the mechanism is not available to the Commonwealth. To draw on it, the Commonwealth would need to do deals with the states.

Deals

The Prime Minister seems to envisage deals involving governments, property developers and infrastructure builders. There are references to the UK, where a locality can get support from the national government if it demonstrates contributions to the national economy or coffers.[iii]

Such deals could be tricky for the Commonwealth. The Prime Minister is wise to allow a considerable sum, $50 million, to establish a framework etc. Again, three observations;

  • The public sector should advance the interests of the public, rather than focus on commercial deals – attractive though that may be. Checks and balances are important.   One of the most important is publication of content prior to any deals being done. This has little tradition in transport and is not emphasised in guidelines;
  • The Commonwealth appears ill-placed to engage in infrastructure deals:
  • states have the whip hand via control of infrastructure and value capture.
  • land transport policies, which are needed to underpin deal objectives, appear a mess. Official maps, omitting Wollongong and Newcastle from the national road network, say as much. Does the latest national infrastructure plan mention truly national considerations like defence requirements, or standardising network infrastructure? Like the United States does[iv]? The current ‘plan’ does not. It is more properly just the backdrop to a wish list of state projects. This is evidence of an advisory deficit.[v] This is a problem for any Prime Minister who wants a solid transport and cities legacy, rather than more dedicatory plaques celebrating new motorway openings;
  • It is too early to assess the UK deals.[vi] In any event, translation of the concept to Australia is not straightforward, as acknowledged by the Prime Minister. Canberra does not have the powers of the UK government. The UK deals are about devolution: more independence of cities and regions from higher government. How might this translate into new, undefined, Commonwealth activity in cities? Unless urbane, Canberra’s approach could reduce democratic responsibility of the states without increasing the political accountability of the Commonwealth.  It is all too easy to imagine this arising from an election fuelled federal cash-splash.

Some challenges

Cities will continue to be the major economic force in Australia. They will have big transport proposals, with proponents claiming ‘national productivity’. But at present these are not sufficient reason for Commonwealth involvement in projects or deals. Without sufficient reason, substantial risks arise.

Invest in haste

Offers from both Government and Opposition to fund major urban projects are often premature; made before any (economic or other) assessment. This creates a moral hazard for Commonwealth agencies: who dares raise their voice against the master? This can also be a temptation for proponents.

On matters outside Commonwealth responsibilities, Canberra runs the risk of not being fully informed and/or being misled by proponents. This will be embarrassing and it will sap community confidence in government when the truth outs. Such was the case of the East-West link in Victoria: the then-state government reportedly did not provide relevant information about the project, lest it not be supported by Commonwealth agencies.[vii]

Joining the bandwagon

The Commonwealth likes to proclaim a ‘role’ in major projects but may do little until a state government publicises a pet project as its ‘strategy centrepiece’. Then Commonwealth support implies sanction for decisions already made – and any reasons behind them, even if these matters are not widely known, or come with ‘a history’, or at odds with usual national aims. This casts the Prime Minister of the day in a poor role.

This could be the case for Sydney’s multi-billion dollar metro rail. Aspects of this project reportedly involve permanent break of gauge: for example, tunnels for the new trains too small to be used by the current fleet. Despite some terse commentary, and the Commonwealth trying to remove state-inspired gauge breaks since federation (albeit in different contexts), Canberra is offering its support.[viii]

Is this further evidence of an advisory deficit? There appears little understanding that the Sydney metro decisions may be the most consequent for transport in post-war Australia. The impression of non-comprehension is reinforced by Canberra’s mentions of Sydney metro and Melbourne Metro in one breath, as if they were comparable. Melbourne’s Metro project simply expands that city’s existing railway. Sydney’s is an entirely new and distinct rail system which, by ‘converting’ some lines, reduces the scope of the existing railway.[ix]

Making things up

Perhaps the Commonwealth would be best served by an agency which comes up with its own project ideas? To do so such an agency would need to know a lot, consult widely and gain support for its ideas. Too often, Canberra falls short on these counts.

A Senate Committee recently highlighted this via the example of WA Freight Link, a $2 billion highway expansion in Perth, supposedly to improve trucking to Fremantle port. Despite the project coming from the blue, Canberra weighed in with well over $1 billion, apparently on the basis that trucks would be charged a toll. [x]

The Committee’s report is notable for being unanimous and scathing, recommending withdrawal of Commonwealth funding from Freight Link. Among the reasons: Perth may need another seaport, hence another road etc (the port has indicated its current location may reach operational capacity in perhaps less than a decade; there are long-term plans to relocate the port[xi]); Fremantle’s local government and community oppose the project; proposed road improvements stop short of the port. Moreover, the trucking industry has not been told what the toll price will be, despite repeated requests and the likelihood that these costs will be recouped by fuel and registration charges in any event, meaning the trucks will pay twice.

The Committee was lenient in not observing the Commonwealth recently signed up to national strategies for ports and freight which, if followed, would have avoided the debacle before them.[xii]

So…

Many wish for the might of the Commonwealth to swing behind a pet project. And afterwards, like St Augustine, it can be pure.

Despite the most fervent and urgent wishes, on current configuration the Commonwealth faces real problems with involvement in urban transport projects.

Lest anybody think this is all small beer – a price to pay for securing progress and legacies– understand the real costs: Melbourne’s farcical East-West Link – a project far more modest than Sydney’s Westconnex or metro, for example – was calculated to cost taxpayers almost $23 billion over its lifespan[xiii]. Such numbers place urban transport projects up with even the biggest Defence projects, such as the submarine acquisition, the subject of recent posts here. They deserve far more care. As Michael Keating has observed previously on roads:

‘it is scandalous that such investment escapes proper scrutiny while at the same time the proponents are calling for cuts in other government programs, including education and training programs that would actually increase productivity and participation’.[xiv]

Our next article will be more positive and suggest a better path for the Commonwealth to tread in order to help all Australians rather than just federal politicians or bureaucracies. For now: shameless showboating about Canberra’s urban project spending is not on that better path.

John Austen is a happily retired former official. He was Director of Economic Policy for Infrastructure Australia from its inception in 2008 to his retirement in 2014. Further background is at: thejadebeagle.com.

Luke Fraser is the founder and principal of a transport policy and investment advisory. In 2012 he was appointed to the board of the Prime Minister and Premiers Road Reform Project. Prior to this he was a national freight industry chief executive and provided advisory services to Infrastructure Australia. He recently authored a tax-rebate-based road pricing reform model for the SA government. The views expressed here are his own.

[i] Urbane transport part 1, at http://johnmenadue.com/blog/?cat=3084

[ii] Strategex submission to Senate Committee inquiry into transport connectivity at http://www.aph.gov.au/Parliamentary_Business/Committees/House/ITC/Transport_connectivity/Submissions.

[iii] Department of the Prime Minister and Cabinet, Smart Cities Plan, 2016, at https://cities.dpmc.gov.au/smart-cities-plan.

[iv] The best example is the United States’ Strategic Highway, Ports and Rail Network; infrastructure critical to Defence and as such subject to Defence oversight on planning, maintenance and investment matters. Defence requirements for these assets must be incorporated in national transport planning.

[v]An initial indication of an advisory deficit see: Grattan Institute on transport projects, at http://johnmenadue.com/blog/?p=6223.

[vi] (UK) Cabinet Office, City Deals and Growth Deals, Policy Paper 2010-15 government policy

[vii]The documents released today also revealed the original business case was not submitted to Infrastructure Australia. The East West Link Business Case Cabinet Submission stated “the risk associated with this action is that the lower end range of benefit-cost ratios presented in the business case may be used as a justification for not supporting the project”.’ http://www.abc.net.au/news/2014-12-15/east-west-link-victorian-goverment-business-case/5966938

[viii] For example: http://blogs.crikey.com.au/planetalking/2015/05/11/govt-lunacy-and-vandalism-comes-to-sydneys-railways/. Sandy Thomas, Fixing the trains in Sydney, 1855 revisited at http://catalyst.com.au/.

[ix] For example: http://www.abc.net.au/news/2016-05-02/$5b-plan-in-budget-to-fund-public-transport-projects/7374772

[x] Infrastructure Australia claimed it had not been mentioned in any major transport policy for Western Australia, http://infrastructureaustralia.gov.au/projects/files/WA-Perth-Freight-Link.pdf.

[xi] Fremantle Port Authority, Annual Report 2014, p. 28. Both the Senate Inquiry and Infrastructure Australia note the existence of advanced planning for a new deeper water seaport at Kwinana, outside the city.

[xii] Senate Rural and Regional Affairs and Transport References Committee, Decision to commit funding to the Perth Freightlink project, May 2016.

[xiii] Victorian Auditor-General Report into the East West Link project 2015 Total cost in nominal terms.

[xiv] http://johnmenadue.com/blog/?p=3834

 

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