Mernda Infrastructure: The Public Right to a Return on Investment

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With ALP leader Daniel Andrews’ announcement today of plans to extend the rail line to Mernda, the question arises of how to finance it.

“The $600m cost will probably be sourced from general revenue. But we ask, why don’t the public receive a better return on investment for major infrastructure expenditures?” stated Prosper Australia Project Director Karl Fitzgerald.

Value Capture is the system the public must understand if we are to overcome the traffic rage so many feel each day.”

“Value Capture paid for 25 percent of the Melbourne City Loop and about 30 percent of the Sydney Harbour Bridge. This innovative funding mechanism could easily cover a third of the $600m Mernda rail extension. This estimate is based on landowners paying just $4 per week towards the cost of the extension. Over 20 years the revenue would amount to some $10.4m per year and be used to pay off bond holders.”

“Those in the best locations would pay more than those who live further away, ensuring that the public gets some return on investment. Why should public funds deliver private windfalls in an age of infrastructure shortfalls?”

“Surely the public could see the common sense of it – those that benefit the most, pay for it proportionately. A small weekly charge is fair in return for a top notch rail system with grade separation. This type of thinking is needed to overcome the traffic rage facing cities all over the planet.

“The ALP has grasped at the Value Capture system in its Project 10,000 transport document. They should now take it further.”

“Public infrastructure will one day be recognised as a sneaky way to hand cash to favoured voters and donors. Land values surrounding train stations typically increase 10- 20 percent on the announcement of a new station.“

“Once people realise they can hop on a train for a stress free ride into town, competition for the best locations intensifies, gifting millions in windfall gains to the lucky landowners. Those closer to the city also benefit with less congestion pressure.”

“Vic Track has done its job maintaining the rail corridor. But surrounding landowners are set for an election year windfall. With the recent electoral re-drawings deeming this a marginal seat, will this development ensure a Labor victory?”

“A fairer system would see some of that $600m funded upfront by infrastructure bonds. This would raise the revenue at an interest discount of at least 2 percent compared to a PPP arrangement. World’s best practice would see this repaid via a system Value Capture.“

“This cost could be reduced even further if the load was shared amongst all property owners. An even fairer system would see Victoria mimic the Western Australian government’s Metropolitan Regional Improvement Tax. Set at a rate of just 0.14%, this small amount is paid by all metropolitan ratepayers. Over 50 years this system has enabled Perth to claim Australia’s best public transport system.”

“Lastly, we hope the ALP will be a little more prudent in their station design after the $110m Williams Landing station – the Taj Mahal of train stations“ finished Fitzgerald.

Workings:
140,000 expected residents at 2.7 people per household = 51,582 properties.
$200m/ 51582/ 20 years = $194 p.a = $4 per week.

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https://prosper.org.au/2014/09/25/mernda-infrastructure-the-public-right-to-a-return-on-investment/