JOHN AUSTEN. Urban rail projects: property developers should be servants not masters

There is plenty of advice on how to plug the supposed infrastructure gap in Australia’s big cities. One popular idea is for passenger rail projects to be led and funded by property development. [1]

The idea has intuitive appeal. The origins of some railways many years ago was land development. Land use has been put as the sine qua non for major rail projects, recently via agglomeration theory. The idea would be a step towards the holy-grail of integrating the yin of land use and the yang of transport planning.

Yet caution is needed. There were reasons why privately led railways fell out of favour.

In modern western countries settlement patterns and passenger rail networks need a conversation in which many voices, not just those with land or money, are heard and respected.

When it comes to development the community might speak but money will yell, often insisting that decisions be made behind closed doors because of ‘commercial in confidence’ matters.

The problem is that in-camera decisions about railways can be ill-informed yet have enormous consequences. The potential for misjudgement is high due to complications like hard wired interaction between vehicles and infrastructure, extensive radial networks with limited core capacity, directional peak flows, customers having virtually no power and prevalence of hidden subsidies for roads.

That major urban railway projects are not as easy as politicians or proponents think is shown by experience with the Moreton Bay rail line in Brisbane, the Seaford extension in Adelaide and belated recognition that another harbour crossing is needed for Sydney’s north-west rail line.

Inviting developers to lead railway growth would create chaos and inefficiency no matter how much money is put on the table. Giving a single party railway and property development rights would raise a whole raft of additional issues, even if there are examples in cities like Hong Kong.

A balanced framework is needed for proper private sector involvement in Australia’s urban railways. Existing bureaucratic guidelines for ‘unsolicited bids’ or for ‘public private partnerships’ are clearly inadequate..

The costs of ploughing ahead without an adequate framework may soon become evident. There are suspicions that enthusiasm for land development has led to dubious ideas such as the light rail routes in Canberra and Newcastle, lifting rail lines rather than roads to eliminate level crossings in Melbourne and Sydney’s oddly located metro whose tunnels are too small for commuter trains. The penchant of governments to establish special purpose authorities for such projects accentuates these risks.

The influence of unguided development hopes can also be seen in high speed rail proposals which embody perverse ideas such as tunnelling to the very centre of the big city CBDs at enormous cost while bypassing cities like Newcastle to save a little money and time.

A useful framework is the Strategic-Tactical-Operational paradigm which proposes a decision making hierarchy. Governments make top tier decisions such as about objectives, and businesses make lower level operational decisions. Matters that strongly influence urban form and transport systems, such as major urban rail projects, belong near the top of this hierarchy and should be determined by government after careful public consideration. [2]

This points to a better approach to railways which has also been recommended by experts; a plan for railways in each city that is universally known, stable and legislated. The plan would have a supporting menu of project options.

Such a plan requires guidance from land use, railway and transport experts. It demands proper public consultation and debate in parliament. Of course the private sector should be free to provide ideas which can be examined by this open process.

Sir Rod Eddington’s Melbourne plan was the nearest example in Australia. Ron Christie, AM, and a team of renowned experts developed a draft for Sydney but, as is the way in NSW, those ideas were ignored – a matter which may haunt the city for generations.

Any proposal to start a project identified in the plan should be assessed by an independent organisation against tests of merit and deliverability with advice given to parliament. Given urban growth the real question is when, not if, a well-conceived project should come on line.

After the city’s rail plan is legislated, the private sector could contribute by working on projects or by providing services under contract.

Proposals for railways should not be discouraged, but they must be treated as per the city’s rail plan; expert review, public inquiry, community consultation, legislation.

Three other points need considering before swallowing private sector funding / developer-as-saviour story.

First, only the gullible would believe the private sector will front up with large sums for railways unless something else is on offer. It would be naïve to wait for a white knight. Meanwhile politicians and treasuries would indulge their biases towards wastage of public money on roads.

Second, as Operation Spicer in NSW revealed, signs of willingness by politicians to accept / solicit / expect even small side payments from developers can lead to real probity problems and frustrate worthwhile investment.

Third, when Australia’s property markets ‘soften’ it is doubtful that developers will be lining up to shower governments with money.

Hence if land values are to underpin urban passenger railways, governments should set the agenda and openly control the flow of money.

The states, have adequate powers to capture land value created from railways. The best way is land taxes rather than deals with developers. Property developers can make their money by skilfully serving the community, rather than the community and its railway serving up sure profits to speculators. The Commonwealth should not meddle here.

John Austen is a former state and Commonwealth transport official, now happily retired in western Sydney.

[1] https://theconversation.com/want-to-build-better-cities-get-the-private-sector-involved-in-rail-projects-52204

[2] http://ws.econ.usyd.edu.au/itls/wp-archive/ITLS-WP-02-14.pdf

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