Thursday, June 5, 2014

Liberal Speaker of the Assembly supports light rail in Canberra, even borrowing money to do it.

Extract from "The Potential and Limitations of Sustainability Policy: Modest Proposals from the Garden City" by Vicki Dunne, Liberal MLA for Ginninderra   

Full paper can be found here

Canberra Liberals - MLA Alistair Coe shaking Opposition Leader Jeremy Hansons hand, MLA Vicki Dunne at far right


The ACT is a small polity, where representatives are in close personal contact with their constituents. When an electorate can plainly see its government is constrained, there is less likelihood high-flown rhetoric will be taken seriously. As with the Canberra Plan, this does not prevent politicians' making the attempt. Accountability, however, involves a more direct acquittal of their responsibilities.

The other side of the coin is that effective government would turn these limitations to good account. In the case of sustainable development, however it is postulated, an ACT Government can undertake two kinds of initiative. In the first place, it can lead by example to reduce the city’s use of natural resources and production of wastes, rather than simply mandating rules to be complied with.

There are several examples. In Canberra, senior public servants are provided with cars as part of their remuneration package, partly because of the hours they work, but largely for artificial reasons to do with the government depriving itself of tax. And middle- ranking public servants are encouraged to buy cars through equally artificial Fringe Benefits Tax arrangements. So cars are associated with status, while traveling by bus, as noted, is regarded as a sign of inferiority, almost ignoble — not because of the operation of a free market, but the exact reverse.6

Governments are also major building owners and tenants, and can be exemplary in the environmental standards they require in their own buildings; for instance, through retrofitting of offices and schools as well as new construction. Other instances might include a scheme of low-interest loans for the private retrofitting energy- and water- saving measures, funded from savings on utility bills.

The second kind of initiative is for government to act as a catalyst for broader collaboration with the private sector. Infrastructure development and maintenance is the most obvious example; and within that, transport the most obviously expensive and far- reaching component. It is also the policy field in which the impact of an expensive energy economy will be most immediately and permanently felt.

Like the city, the suburbs will not wither away. Nor will car-dependence for cross- suburban movement and family activities. What can be changed is reliance on the car for ordinary commuting. The obvious answer is a light rail system, or adaptation of Transit Oriented Development (Gilbert & Ginn 2001).

The political and economic challenge is to make public transport more attractive than private cars for more journeys, especially between home and work. Since it is reasonable to suppose the continuing high price of petrol will constitute enough of a stick, the emphasis has to be on the carrot. Several general possibilities come to mind. One is to make the commuters’ public transport free, or to involve only nominal cost, at least during peak commuting periods.

Canberra’s public transport use has been an embarrassment for successive governments; and the development of an efficient system is a bipartisan objective.7 The current target of increasing bus use from seven to 16 per cent by 2026 (ACT Planning & Land Authority 2004: ii) is, to say the least, minimalist — and in any case unlikely to be met. The only actual growth in public transport usage can be explained by population growth and the construction of new routes. 

Initiatives such as improved bus interchanges, real- time bus information and a busway between two of the city’s towns do not address the underlying problem of over-reliance on private cars. Unlike improvements in South- East Brisbane (Donato 2003), on which current ACT policy is largely based, this proposal would not greatly reduce commuter travel times.

The current Sustainability Plan divides into ‘soft’ initiatives such as better information systems and ‘hard’ initiatives like bus priority measures and cycling paths (ACT Planning & Land Authority 2004: iv) The truly hard initiative would be the development of a light-rail system to link the territory’s constituent towns.

Canberra was originally designed for light rail. The idea has been resuscitated a number of times over the past 20 years, only to be discarded. Recent attempts to pursue the ‘Griffin Legacy’ are notable for ignoring it altogether. The claims in favour are strong. Rail friction is seven to eight times less than that of rubber-tyred vehicles. While a road lane can carry about 2500 an hour and a busway about 5000, light rail can carry between 7000 and 10,000 (Newman 2005).

Sydney has reintroduced a tram service of sorts and Brisbane is considering trams. Despite a ‘car culture’ more entrenched than even ours, many North American cities centre on tramways (including San Francisco, Salt Lake City and Minneapolis). Perhaps more pertinent are those medium-sized cities with a comparable population to that projected for Canberra in 2030, such as Eskisehir in Turkey (with a population of 500,000); Wroclaw in Poland (700,000), Las Vegas (500,000) and Edmonton (665,000). European cities of similar population size to Canberra with light rail systems have many more journeys a year on public transport than do cities with bus-only systems.

Financing Options

It has been apparent for years that sensible public transport could pay for itself, especially in a city where the land-acquisition needs are few, and facilitated by the leasehold system. But, clearly, a light rail project would require a significant capital outlay.

All governments these days — but especially, and ironically, Labor governments — are now reluctant to borrow in order to fund what any sane person would regard as necessary, long-term investment. Labor governments have burned their fingers very badly in the none too distant past — especially in Victoria. The result, though, has been not a more careful approach to public borrowing, but an aversion to any public borrowing at all. The current ACT Government policy of limiting capital expenditure to what can be paid for from the annual budget would clearly rule out any such project as a light rail system. In this Labor differs from, among others, the Property Council, the Australian Industry Group, the ANZ Bank and even Standard & Poor's (Fels 2004).

Yet there is a fundamental difference between borrowing for short-term consumption and borrowing to pay for essential infrastructure (McAuley 2003): borrowing can be done for good as well as bad purposes. It is time those in charge of public finances rethought their own cultural cringe. Just as the average family can only finance home ownership through borrowing, so the average polity must finance at least some of its wealth-building infrastructure from borrowings.

But the role of the private sector can extend beyond being the source of loan capital: it can have a more active role, including sharing some of the risks. In principle there are three options: total government financing through borrowing, government ownership and management; total private financing, ownership and management; or some form of public-private partnership or PPP.

None of these is perfect. But because of the prevailing ideological climate, the advantages of risk-sharing, what I have said about the limitations of government, and the need to maximize community involvement, some sort of public-private partnership appears the most desirable.

But we need to be cautious and avoid the trap of thinking that PPPs are an unalloyed good. Despite their ostensible attractions, public-private partnerships have the potential to combine the worst habits of both partners, as exemplified by the debacle of the cross- Sydney tunnel. At its simplest and worst: profits can be privatised, and losses socialised (Hodge 2005).

Salvaging PPPs

Given these downsides, it is understandable many governments are tempted to abandon PPPs altogether — as the NSW Government seems to have done, at least in the short term. Yet this presents them with the stark choice of abandoning infrastructure projects — or assuming all the risks themselves.

To counter this, it is first important to remember there is no single model for public- private collaboration. Any particular venture has to reflect the particular needs to be served. And safeguards clearly must be built in.

We should also remember there is nothing at all new about what we now call PPPs. In one way or other they go back to the ancient world. In relatively modern times, the best example is the PPP that helped make up the fleet with which Francis Drake conquered the Spanish Armada. Some 82 per cent of the 197 vessels were private contractors to the Admiralty.

The Admiralty in 1588 was part of a monarchical system of government, not subject to the electoral temptations and gambles of a present-day liberal democracy. The government’s interests were not only long-term, but grounded in an executive power that today’s cabinets can only dream of. They did not have problems with accountability — only accounts.

By contrast, modern governments’ main interest is in getting a new piece of infrastructure as quickly as possible and at the least possible cost — preferably no immediate cost at all, ignorant of — or ignoring — the longer-term or hidden costs and risks.

Value Capture

One type of partnership which may avoid the need for direct borrowing is based on value capture. As a leasehold city, Canberra is particularly well placed to utilise such a model to help pay for expensive infrastructure through the increasing value of land along any light rail route. Businesses would have numerous reasons to relocate along the transit route: reduced general transportation costs, and access to larger pool of potential services, jobs, customers and employees. Investors gain from increased land value along the route – a permanent route, unlike most bus routes. This would encourage medium to long-term investment and permanent business relocation.

There are numerous historical and contemporary precedents. Value capture was, for example, used to develop rail networks in the United States and was initially proposed by the South Australian Government to fund the Adelaide to Darwin railway (Fischer 2004: 14).

Today, Hong Kong’s rail transit system receives no subsidy. All costs (including interest) are met from land rents from development in station areas. Surplus values have also been generated from Washington DC’s Metro and the London tube extension. Brisbane has experienced a significant increase in land values along its busway.

But these are high density cities with little direct bearing on Canberra’s situation. Much closer in scale is the Dublin Area Regional Transport (DART) system: which development added US$62 million (in 1991 dollars) to surrounding property values (Barry 1991: 208).

Whichever course is adopted, government would play a leading role, going beyond gestures and grand designs to the sort of practical intervention only governments can make. It would certainly be expensive and probably involve public debt, but such occasionally is the responsible course for those in charge of public service.

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