Value capture a priority for funding new infrastructure projects

We want to make more extensive use of the markets and the private sector in funding transport infrastructure, Federal Urban Infrastructure Minister, the Hon. Paul Fletcher has told a CEDA audience.

Speaking in Melbourne at the Cities and infrastructure event, Mr Fletcher said “there is a clear limit to what can be directly funded by governments, Commonwealth or state, given all the other claims on the budget.”

Mr Fletcher said value capture is a priority in funding for new infrastructure projects.

“Value capture can provide an additional funding source to support at least part of the cost of a project, that could mean the difference between the project proceeding or not proceeding.

“We also see it as a means for the Commonwealth Government to be a more sophisticated investment partner. 

“This year we will provide transport infrastructure funding of nearly $9 billion around Australia.  That is a very significant amount – and we want to make sure it has the maximum possible impact.

“We are interested in leveraging this spend to attract funding from other sources – such as other levels of government, the private sector, and project beneficiaries – and we see value capture as one very important tool to do this.

“Already we have issued a set of funding and financing principles that will guide the Commonwealth Government’s approach to supporting projects; the guidelines refer specifically to the need to test for value capture opportunities.”

Mr Fletcher said there is also significant potential for greater use of market based approaches in the operation of Australian roads.
“We signalled two important directions here late last year, in responding to the Infrastructure Australia 15 Year Plan,” he said.

“The first was a commitment to reform the present system of heavy vehicle user charging.

“We are working on establishing more of a market-based system that links heavy vehicle user needs with the level of service they receive.

“We will be working with states and territories to develop a forward looking cost base and consulting with industry to appoint an independent price regulator.

“We also promised to establish a study, led by an eminent Australian, into the potential benefits and impacts of road user charging for light vehicles.

“Many Australians erroneously think that roads are free.  In fact, as a nation we spend some $25 billion a year on them, and motorists pay a range of taxes and charges to use the roads, although these are not currently directly linked to investment in the network.

“Our present system has some serious challenges, not least because the amount of money collected from fuel excise is likely to drop steadily as vehicles become more fuel efficient and as electric vehicles make up a growing proportion of the fleet.

“As the Prime Minister and I have said on many occasions, it would be a 10 to 15 year journey if we were to decide to move to a road user charging system, and before any such decision was made, governments – state and federal – would need to be satisfied that we were moving to a fairer system which gave us better roads. 

“But we have stated a willingness to have a thorough look at the issue, and in coming months we will announce more details about this study.”

In regards to infrastructure planning and delivery, Mr Fletcher said the problem was not in planning, but in “the capacity of governments to stay the course and deliver on the plan”.

“Take the East West Link here in Victoria.  It took an extensive planning process to get this project to the point of construction commencing, beginning with a review conducted for the Bracks Labor Government in 2006 by businessman and transport expert Sir Rod Eddington.

“Unfortunately for political reasons – centred on inner city seats in Melbourne – the Andrews Government decided to scrap this project, at the cost of $1.2 billion to the Victorian taxpayer.

“A similar scenario has just played out in Perth.  The Perth Freight Link project was developed and planned over several years, and it was rated a ‘High Priority Project’ by Infrastructure Australia.  But the incoming McGowan Labor Government chose to cancel the project – and is now wrestling with how to extricate itself from a contract.

“This project would have generated 2400 jobs – but sadly that has now been lost.  No doubt new projects will be developed over time – but infrastructure projects have long lead times and with the best will in the world it will be impossible to recover the lost time.”