• Download the discussion paper by Chris Hale

A well planned public transport network brings a city closer to itself. It creates value for its citizens by reducing the distance between neighbourhoods. Businesses gain access to broader markets, and land value grows through quicker access to CBDs and major centres. People are brought closer to their friends and loved ones, are exposed to greater possibilities of work, and are able to reach their workplaces without the drama of traffic standstills or sardine-can train rides.

Visions for this modern, connected city where people are able to move easily over distance, and through densely populated areas are not far-fetched dreams, they are realities for many of our Asian neighbours and ‘competitor’ economies, and among many European cities.

However, it’s not simply the shortage of rail and other transport that has set us back from achieving modern cities for Australia. Our imagination and handling of the value created by transit is faulty.

Our policy toolbelt for funding the bold new projects we need to drag our cities and our daily lives into the twenty-first century is itself long overdue for an upgrade.

For too long, instead of looking to our global neighbours for policy and practice leadership, we have shrugged our shoulders and pined for easy answers. This easy road has involved public-private partnerships and programs based around runaway borrowing, regardless of the long-term sustainability and workability of those approaches.

The current infrastructure funding paradigm in Australia obsesses over an artificially narrow list of ‘old-fashioned’ transport project benefits; decreased travel time for users and less congestion on the roads is about as far as the imagination stretches. We fall radically short of measuring the true depth of value created via a well-planned strategic transport project. The delivery of greater economic productivity and increases in land value are viewed as second-order externalities instead of core components or even primary purposes for transport projects.

A smarter and fairer approach to upgrading our transport networks would acknowledge, foster, and intelligently tap this value creation stream – working with mass transit’s proven global ability to at least partly pay its own way. Leveraging the increase in wealth resulting from land value and productivity gains has been a reliable funding pathway for the twenty-first century’s most renowned transport systems.

This paper outlines and promotes five of the key funding mechanisms used to do this:

  1. Capturing value through the mainstream tax system; borrowing from future revenue increases that result from economic expansion delivered by major projects (Tax Increment Financing)
  2. Special fees or levies to capture land value increases delivered by transit system development, or by changes to development rights
  3. Auction or sale of development rights for transit-associated property
  4. An urban renewal authority working to direct value creation and capture through land use mechanisms in harmony with major transit projects
  5. ‘Direct property’ activities as an income generator for transit agencies.

We don’t need to wait until 2050 to create transport systems that we need for our cities. We can build what we need within a tightly-managed 10-15 year horizon – if we work diligently and collaboratively across the urban planning, transport and policy spheres to deliver this necessary paradigm shift.

A significant program of work is required to educate planners and policy makers on the nature, evidence, techniques, and usage of important emerging funding mechanisms that will unlock the future cities we all want to live in.