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It’s not in the knitting? Urban rail’s growing significance

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…

Rail has been a part of Federal “knitting” since, well, Federation. Annie Mole

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.

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8 Comments sorted by

  1. George Michaelson

    Person

    I think the hypothicated tax idea is interesting. For many people, this is a hard concept. Usually, its a penalty to have to pay a specific purpose tax, and people see it as a disincentive. Making it explicit that by acquiring land rights on un-improved property and then securing a windfall from the increase in property value, you share the windfall with the state. Cute.

    It also sets limits on the kinds of closed-market land aquisitions which historically accompanied infrastructure development. I believe S.E. Qld has notorious spots where 'the word went out' and people got that magic 5m strip between you and the public road..

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  2. Wil B

    B.Sc, GDipAppSci, MEnvSc, Environmental Planner

    More than 100 years ago Melbourne funded its rail expansions through property developments capitalising on the land value increase. This is not a novel idea!

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  3. Greg North

    Retired Engineer

    There is no doubting the benefits for many of urban rail just as there is no doubt that the Trans Australia line connection for WA to enter the Commonwealth is not Urban.

    Certainly, federal funding is to the fore in distribution of taxes for our national highways and if the Infrastructure mob have now inserted themselves in to other than national works, one does wonder on the complications for obviously there will be state Vs State vying for priority, that aside from just more building of expectations for which funding is not expected other than more borrowings.

    It is pretty obvious that whilst national transport can be used by many users from various states and abroad, the use of urban transport is going to be much more weighted towards local residents and as such that is where the responsibility for infrastructure should be.
    Such an approach might also contribute to the federal gap between revenue and expenditure.

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  4. greg fullmoon

    being and doing

    The ideas for funding of public infrastructure of obvious benefit need reappraisal. If the idea is agreed as filling a genuine need, then it makes sense to do it. It is presumed the public consent to the improvement. The funding then must be found.
    Traditionally through debt, either the debt of the direct borrowings from some bank, or from the debt incurred by the people who work, (time for income = increased productivity) or borrow to pay their taxes which fund public capital spending.
    Two forms…

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  5. Barry White

    Retired

    There is no doubt that future transport is going to be rail and roadways will over years fade to minor roles. Every main road built now should be built
    to specification that will allow one or both sides to be converted to rail lines.
    There has already been reports of moves for that requirement in the USA.
    Fuel costs will continue to rise, the period from 2000 to today has seen a five times escalation of prices and as the proportion of expensive oil, such as shale, deep sea, and tar sands etc increase in the mix that rise will accelerate. There is no choice, crude oil production has stopped increasing so the price must increase, as long as world population keeps increasing anyway.

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  6. eric keys

    logged in via LinkedIn

    The article points out that the original aims of commonwealth investment was "connection" not only to WA but also to the NT. It then move to security ( an interesting side note is that freeways were originally developed in Germany per-WW2 and that didn't end well).

    More recently the focus has been on economic development and the improved productivity from better connections. This is the essence of the agglomeration benefits.

    What the article doesn't highlight but is worth stating is the significant role cities play in generating economic output. Forget outback mining towns the real value adding occurs in our cities. Everyone knows this. That why we are becoming more urbanised. And that why we need improved urban transit systems.

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    1. Peter Newman

      Professor of Sustainability at Curtin University

      In reply to eric keys

      Well said Eric. Its hard to get this message across as we are so used to seeing primary products as our wealth. They are of course part of our wealth, especially as exports, but our cities are also creating wealth and hence opportunities for people, and at a much faster rate than our regions. Urban rail is especially important for knowledge economy jobs. So it must be in the knitting...

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  7. wilma western

    logged in via email @bigpond.com

    Some interesting funding suggestions and comments about the importance of urban rail . But the immediate political point didn't get a mention - that is , that Infrastructure Australia rated Melbourne's metro rail project number one , with business case and planning in hand. Abbott's off-hand cliche about sticking to our knitting is a favourite of the small government, free-marketeer mob , and was inaccurate as well , as the article points out. But minimal fuss from the MSM who go on for weeks about any perceived "error"of the PM.

    Furthermore, the huge road EastLInk connection that Abbott advocated does not yet have a business case or any advanced planning - in fact the Vic govt hasn't yet decided which bit of it - the inner urban bit or the outer eastern bit they would want to do first.

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