Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 1 Contents 36 futurebuilding Volume 3 Number 1
Capturing value: an option for funding the future
development rights from the Hong Kong Government
at a 'before rail' price and sells them at an 'after rail'
price. The difference between these two stages is
substantial, often enabling MTRC to cover the costs
of their initial investment in the station around which
the development is built.
The MTR case study is an extraordinary example,
driven by the very high land value in Hong Kong.
While it is not likely that a similar model applied in
Australia would deliver returns to the same degree, it
nonetheless serves as a useful example for Australian
governments of how the development of land around
transport infrastructure could be used as a funding
The Washington Metropolitan Area Transportation
Authority (WMATA) offers another case study for the
use of value capture mechanisms. The WMATA is
unusual among United States and Australian transport
agencies, because it does not have a reliable funding
stream beyond its farebox. In 2007, government
funding comprised just 37 per cent of the agency's
revenues, in effect forcing WMATA to look to
innovative funding streams to operate, maintain and
expand its network.
Recently, the WMATA has utilised BADs to
help fund the Dulles Corridor Metrorail Project.
This 37-kilometre project will service two of
Virginia's largest employment centres, and provide
a direct connection from Dulles Airport to central
The project, which is being completed in two
phases, has been budgeted to cost US$5.2 billion --
and roughly 16 per cent of the project's funding is
coming from the creation of a BAD in Fairfax County.
The BAD, known as the Transportation Improvement
District, has been levied on commercial and industrial
properties in close proximity to the proposed metro
extension; all owners of commercial or industrial
property are charged 22 cents out of every $100 of
assessed value increases in their properties annually
until the 16 per cent of project cost target is achieved.
Global learning, domestic opportunity
To date, value capture mechanisms have
remained largely unused in Australia, presenting
policy-makers with an unexploited funding resource
for transport infrastructure projects. A 2012 report by
Infrastructure Partnerships Australia, regarding the use
of value capture strategies in the land surrounding
New South Wales's rail corridors, outlined the
signi cant opportunity for the implementation of
joint development models at New South Wales's train
The IPA report found that Sydney's high passenger
traf c train stations (those on the City Circle loop)
present a clear opportunity for joint development
within the CBD.
Redfern, Central, Town Hall, Martin Place and
Circular Quay stations are all key interchange nodes
that experience high customer throughput every day.
Many of these stations are in poor condition, with a
sub-optimal legacy design, and have not experienced
wholesale renovation for many decades.
The high level of patronage means the station
concourse, airspace and adjacent land -- if planned
for, designed and delivered in a suitable way -- is
potentially a very valuable commercial real estate
holding for the government, and would enable the
redevelopment of Sydney's legacy CBD rail stations
at a measurably lower cost to the taxpayer.
Value capture opportunities exist in Australia's
major cities -- the challenge is to articulate the case
for these kinds of reforms, and develop workable,
local models to allow their application.
With substantial funding constraints frustrating
governments and commuters alike, the time is right
for a much more informed public debate about
how Australia can fund its forward infrastructure
task. Models like value capture are only part of the
solution, but they are a relevant development and
need to take their place alongside the suite of reform
and revenue measures that policymakers explore.
Value capture represents a signi cant opportunity
for governments to increase the funding for critical
updates to Australia's transport infrastructure.
Mark Birrell is the Chairman of Infrastructure
Partnerships Australia and a member of the Infrastructure
continued from page 34
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