Naming the price to reduce transport congestion
January 2013
Without doubt one of the best things about working in Melbourne in January is the significant decrease in congestion on the roads and crowding on trains and trams as you make the daily commute to work.
To say Melbourne has a transport infrastructure problem is an understatement. For years we have discussed and dissected our infrastructure problems and have unanimously concluded that our current rate of build in no way meets current demands. What we haven’t done is pushed the discussion to the next level and asked the hard question – just how much do we really value more efficient transport options?
As our infrastructure backlog grows, the construction costs of meeting the needs of Melbourne’s population today far outweigh available funding pools. We are now at a point where the infrastructure challenge facing us is beyond the capacity of any State Government budget alone, or State and Federal Government budget combined for that matter.
Given that the options for Government to increase spend on infrastructure are to either divert existing funds away from current spend on essential services like health, education, fire, police or ambulance, or to raise taxes, the bottom line is if we want to continue to rely on Government funds alone, we will pay, either through decreased services in other areas, or increased taxes.
To make substantive inroads into our infrastructure demands, we need to change our mindset away from relying primarily on government only funded construction, and seriously start considering alternative user pays options to generate essential funding.
When we talk about dollars it is essential to understand the very clear distinction between funding and financing.
Financing is money raised to help pay for construction. We often hear comments about super funds and overseas investors needing to be more active financiers. A good supply of willing financiers is not the limiting factor in meeting the high costs of major infrastructure construction – repaying that finance through a secure funding source is.
Any money ‘borrowed’ via financing is in effect a ‘loan’ that will have to be repaid, and if Government funding alone cannot meet the cost demands, then alternative funding sources must be found – and that means user pays.
This is the decision Melbournians must make. If we are to accelerate our infrastructure build, we must look for innovative and creative means of generating funds via appropriate direct and indirect funding mechanisms.
We are already familiar with direct funding charges like road tolls and parking levies, such as the parking levy that was introduced in the CBD, Southbank, Docklands and St Kilda in 2006. A congestion charge similar to the cordon-based charge introduced in London has also been mooted as an option for Melbourne’s CBD, although strictly speaking, the real aim of this type of initiative is to limit traffic volume rather than to raise infrastructure funds.
What we are not so familiar with are a range of indirect mechanisms that can also be applied to include other beneficiaries of infrastructure value uplift, such as businesses, land owners and developers.
Because indirect mechanisms are arguably harder to clarify or implement, they are often overlooked as options in exchange for easier to implement direct charges. Ignoring these options, however, not only limits the possible funding opportunities available, it is also unfair as both direct and indirect beneficiaries alike should be making a reasonable contribution to the funding pool.
Numerous successful projects prove that indirect mechanisms can be very effective in helping to generate funds.
The Melbourne Underground Rail Link or ‘City Loop’ as we know it, included a Benefitted Area Levy mechanism whereby CBD businesses who benefitted from the improved city loop infrastructure paid a levy to help contribute to the cost of construction. On Queensland’s Gold Coast, benefitting rate-payers will be charged a $111 annual transport improvement levy to help fund Stage 1 of the Gold Coast Rapid Transit light rail project.
Surrey, in Canada’s British Columbia province, after identifying a significant funding gap in its 10-year transport servicing plan, introduced a range of redevelopment related property taxes and development charges to help fund public transport initiatives.
In Los Angeles, the LA 30/10 initiative has applied a specific one-half cent sales tax across the entire county to generate funds to fast-track the delivery of 12 new transport projects over a 10-year period. Interestingly, this funding proposal was voted in by more than two-thirds of LA County voters who realised that the only way forward was to start making a funding contribution.
In the case of all the initiatives mentioned above, there was a clear and demonstrable link between the charge, tax or levy the beneficiary pays, and the infrastructure improvements received in return, and this is an absolute must for success. Evidence shows that people are much more open to contributing if they can actually see their dollars at work.
Solving our infrastructure funding issue won’t be easy, and there is no simple one-size-fits-all solution. The only certainty is that as Melburnians we need to stop thinking of this as a ‘government only’ issue, and start taking some responsibility for our own future by embracing more innovative and creative ways to accelerate our infrastructure build.
Kate Roffey is Chief Executive Officer, Committee for Melbourne
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