Australian prime minister Malcolm Turnbull is set to introduce a new “value capture” funding approach for federal infrastructure projects ahead of the May 3 budget.
The Australian reports that this new way of funding lets the company responsible for the development leverage a potential uplift in land value resulting from the new infrastructure.
A major project that has been flagged as part of this building plan is a high-speed rail network on Australia’s east coast.
The rail line development will start with Badgerys Creek in western Sydney, then will add links to regional centres such as Goulburn, and eventually extend from Melbourne to Brisbane.
The construction of the network has been estimated to cost between $60 billion and $114 billion.
Building the rail line in stages using a private consortium would minimise the amount of taxpayer dollars used on the project, and would end cash handouts from the federal government to the states for major infrastructure projects.
A similar funding measure called the “betterment tax” was used to pay for one-third of the construction of the Sydney Harbour Bridge. The principle was that the company that built it was able to benefit in some way from the increase in land values along the route.
However, it’s unlikely the Turnbull government will go ahead with the betterment tax, as it is unfavorable among voters.
Coalition ministers have described the “value capture” funding approach as an “innovative” way to raise the investment needed to get the project, and others, off the ground.
“There’s many projects that could fit this model, whether it is rail to Badgerys Creek, whether it’s the Melbourne Metro, or whether indeed it is high speed rail between regional cities and the capitals — they are all projects where we are interested in looking at innovative approaches to financing,” assistant minister to the prime minister for cities Angus Taylor told The Australian.
“Each project needs to be assessed on its own merits but I certainly see great opportunity to invest more and fund innovatively, and in the process address historical underinvestment in our cities.”
The Australian has more.