Tony Abbott has created a new phrase that wonderfully describes a political tradition or paradigm: “not in our knitting”.
“We have no history of funding urban rail and I think it’s important that we stick to our knitting,” the Federal Opposition Leader declared. “And the Commonwealth’s knitting when it comes to funding infrastructure is roads.”
But is urban rail so easily dismissed as a national responsibility?
The Commonwealth of Australia was born out of a rail issue: Western Australia was brought into the Federation on the proviso that the Trans Continental Railway was built to Perth. The Australian Constitution mentions rail but not roads.
Post-war the Commonwealth set up a national highway program - as did the US - in response to a perceived security need. This is where the “knitting” became roads-based, and it was all outside cities. In recent years this has become blurred as first urban roads and then urban rail became part of the Federal knitting.
Infrastructure Australia was set up in 2008 with a remit to examine all transport infrastructure (and other areas of infrastructure) without political preference for particular modes but on their economic significance. Fifty-five percent of the first Nation Building funding went to urban rail because of its economic value.
Urban rail has been funded in Australia because it can provide higher benefits than costs. One of the new ways to see the benefit of urban rail, other than its higher speed over traffic, is its agglomeration economies.
Rail projects enable centres to form that are important for the knowledge economy, where most new jobs are created (these are known as agglomeration economies). The Cross Rail project in London had a benefit-cost ratio of 1.5 but it went to 3.0 when agglomeration benefits were included.
All cities are now seeing the benefits of urban rail.
Big cities Traffic congestion means that most big cities are focusing on rail projects to by-pass traffic. A good rail line can take 12 to 20 lanes of traffic equivalent in a fraction of the space. Over 100 US cities are building urban rail as the value of major highways through cities has reached financial and political exhaustion. Every big city in Australia is planning to roughly double their urban rail capacity.
Emerging cities More than 80 Chinese cities are building metro rail systems after Shanghai built the world’s biggest metro in a decade (carrying 8 million people a day). Sixteen Indian cities are building metros. Even the Middle Eastern cities like Dubai have urban rail and Saudi Arabia is spending a trillion dollars on rail.
Small cities It used to be that rail only belonged in big cities but there are now 118 cities under 150,000 population with light rail. The small cities of Australia like Canberra, Hobart, Newcastle, Bendigo, Darwin, Cairns even outer Western Sydney, want light rail.
So, where can the money be found?
The most important development in recent years has been the use of “land value capture” as a means of funding urban rail. If a rail line is built then property values increase – in Perth we are finding residential values go up between 18% on traditional rail lines and 40% on the new fast rail lines; commercial values go up over 40%. This value passes into various local, state and Federal taxes; if hypothecated it can be used to finance the infrastructure.
It may even be possible to build rail using private sector funding of the capital and on-going operational fund using value capture. This takes such projects “off the books”, thus freeing up state treasury funding limits.
It’s hard to imagine the Federal Government not wanting to be part of this action. Every state has priority rail projects where some Federal assistance would seed the project into a partnership of significance. This kind of public-private project with all levels of government, together with the land value capture-based approach, is the kind of knitting needed to help transform our cities for the future.