RE: SUBMISSION TO INFRASTRUCTURE VICTORIA S LAYING THE FOUNDATIONS PAPER

Transcription

1 16 March 2016 Michel Massn Chief Executive Infrastructure Victria Level 34, 121 Exhibitin Street Melburne, VIC 3000 Dear Mr Massn, RE: SUBMISSION TO INFRASTRUCTURE VICTORIA S LAYING THE FOUNDATIONS PAPER Infrastructure Partnerships Australia (IPA) is pleased t prvide input t the develpment f Infrastructure Victria s infrastructure strategy, and specifically the discussin paper Laying the Fundatins: Setting bjectives fr Victria s 30-year infrastructure strategy. Frm the utset, IPA strngly supprts Infrastructure Victria s establishment, which we hpe will assist t ensure mre independent, evidence-based decisin-making n the State s infrastructure pririties. The ver-pliticisatin f infrastructure has been an unwelcme feature f Australia s apprach t infrastructure in recent times, which damaged Victria s and indeed Australia s reputatin as an investment destinatin. In respect t the Laying the Fundatins discussin paper, IPA welcmes the recgnitin f the funding challenge inherent t infrastructure, and the awareness that all infrastructure funding must ultimately cme frm the cmmunity. We thus welcme Infrastructure Victria s willingness t explre different funding mdels fr infrastructure, like direct and indirect user payments fr rad and public transprt; beneficiary charges such as land value uplift, develper cntributins and betterment levies; as well as privatisatin f existing assets. Overarching remarks We nte that the bjectives and needs identified in Laying the Fundatins, nce final, will frm the fundatins f Infrastructure Victria s 30-year strategy and that Infrastructure Victria will identify slutins and prvide ptins fr addressing these bjectives in due curse. As such, we lk frward t cnsulting further with Infrastructure Victria regarding the slutins and ptins fr meeting infrastructure needs when the third and furth papers in this series are released later in Fr nw, we cmmend Infrastructure Victria s interest in engaging with stakehlders and the public in prducing a cmprehensive, nn-partisan strategy that lks t the future, taking int accunt the changing ecnmic, envirnmental and scietal cntext fr Victria ver the next three decades.

2 IPA supprts the draft bjectives and needs in general, and is particularly interested in prviding supprt and assistance fr the achievement f draft bjectives three (reduce disadvantage), fur (enable wrkfrce participatin) and five (lift Victria s prductivity). We are particularly interested in wrking with Infrastructure Victria n the develpment f slutins fr the fllwing draft needs, identified in the discussin paper: Addressing husing affrdability challenges with better scial husing; Supprting changing appraches t scial service and justice delivery thrugh infrastructure; Prviding access t the diversity f emplyment pprtunities ffered by the central city; Prviding better links t nn-central city emplyment centres; Imprving the efficiency f freight supply chains thrugh infrastructure; and Mving peple t and frm airprts mre efficiently. IPA s plicy prgramme is aligned with the bjectives in general but particularly t thse listed abve and, as such, we are well psitined t prvide plicy supprt and input. Funding Challenges Belw are ur recmmendatins f sme f the necessary appraches and refrms that will allw Victria t surmunt the funding challenges it faces, and t ensure that Victria gets the infrastructure it requires. In particular, we urge Infrastructure Victria, as part f this discussin, t cnsider: - Rad pricing - Value capture - Asset recycling Each f these issues will be briefly utlined belw. Rad pricing The case fr refrming Australia s system f rad user charging has nw been well established by a series f cntemprary studies and wrks. We wish t draw yur attentin t ur research paper, Rad Pricing and Transprt Infrastructure Funding: Refrm Pathways fr Australia, which can be accessed here: In that paper, IPA and Australia s peak mtring rganisatins the AAA, NRMA, RACQ and RACV tgether develped a range f fundamental principles, allwing us t undertake an ptins analysis fr ptential refrm pathways. Our paper finds that the current apprach is demnstrably unable t efficiently sustain the capital and recurrent funding requirements acrss the transprt netwrk; t efficiently allcate capacity; r t equitably apprtin the csts acrss users. Our analysis ultimately identifies a whle-f-netwrk, all f light vehicle fleet pricing mdel, that we term the Universal Rad User Charge (URUC). 2

3 The reprt mdels the price impacts f a transitin t a hypthetical whle-f-netwrk rad pricing system acrss three different user types. The mdelling indicates that the greatest benefits f a mve t direct user charges fr light vehicles wuld accrue t lw-impact urban rad users and drivers in nncapital cities and regins; while high impact users, wh drive during peak perids in urban centres, culd expect t incur charges that better reflect their impact n the netwrk. These findings are imprtant because they demystify the cncept f rad user charging and shw that under a cnsidered scheme, lw impact users wuld pay less, high impact users wuld pay mre, and all users and the ecnmy mre bradly wuld benefit frm a mre efficient rad netwrk. Value capture The renewal f interest in value capture mdels presents a timely pprtunity fr Infrastructure Victria t examine where there may be an enlarged rle fr additinal prperty develpment charges and/r additinal prperty taxatin, t assist with the verall shrtage f funding capacity fr infrastructure; and t increase the incentives fr gd prjects and gd planning. IPA supprts the cncept f value capture. Hwever, value capture shuld nly ever be seen as a partial funding mechanism it shuld nt replace traditinal funding surces. Well applied, value capture can prvide a functinal linkage between land and infrastructure develpment; culd serve t increase verall infrastructure funding; and can help the already-stretched taxpayer t share in the additinal private value that is created thrugh public infrastructure investment. In the case f land use plicies, upfrnt cntributins are sught frm develpers t help fund the develpment, and gvernment prfits n value uplift f land can be reinvested int new infrastructure prjects. In the case f taxatin mechanisms, an additinal levy is charged t prperties in the surrunding area this can either be used t partially fund r supprt financing fr the develpment. Hwever, this submissin urges Infrastructure Victria t be realistic abut the practical limitatins n value capture as a funding surce; t ensure value capture des nt pllute prject priritisatin, design r selectin incentives. Asset recycling & assciated market refrm Fr cmmercially viable infrastructure markets, the earliest and least cstly transitin t an efficient, cmpetitive market shuld be a key bjective fr gvernment. Efficient, cmpetitive markets fr utility and transprt infrastructure are critical t Australia s ecnmic grwth and prductivity as these sectrs underpin all frms f scial and ecnmic activity. In shrt, the better these markets functin, the greater the scial and ecnmic dividend. The impact f cntinued gvernment participatin in cmmercially viable infrastructure markets extends beynd capital pprtunity csts; it als lcks-in ecnmic inefficiencies. Addressing these ecnmic inefficiencies acrss utility and transprt infrastructure markets, thrugh asset divestments and assciated regulatry refrm, wuld deliver clear ecnmic and prductivity benefits. Imprvements in the cst and efficiency f these sectrs wuld have a cnsiderable flw thrugh impact n natinal prductivity and ecnmic grwth. Fr instance, this wuld mean getting exprts t the 3

4 natin s prts mre quickly and cst effectively; reducing the persnal csts and freight csts f traffic cngestin; and maximising dwnward pressure n utility bills. Infrastructure Victria shuld identify infrastructure assets t be sld r leased, n a rlling basis ver time, as assets and markets mature. In this regard we encurage Infrastructure Victria t cnsider asset and assciated regulatry refrm in urban water. Our 2015 reprt, Refrming the Urban Water Sectr, can be accessed here Cncluding remarks We lk frward t reading the next tw instalments f Infrastructure Victria s 30-year infrastructure strategy, especially the draft strategy utlining prpsed recmmendatins in the third quarter f We cmmend Infrastructure Victria s effrts t date in preparing the 30-year strategy, and are excited t cntribute further t the prcess in due curse. Shuld we be able t prvide additinal infrmatin please cntact ur Plicy Officer, Alice Byd, n (02) r at alice.byd@infrastructure.rg.au. Yurs sincerely, BRENDAN LYON CHIEF EXECUTIVE OFFICER 4

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