Value Capture Viable Solution for Transport Infrastructure Funding

As the Victorian state looks at innovative alternative strategies for infrastructure funding, the 9^th Annual Victorian Transport Infrastructure Conference 2017 will provide a vital opportunity for stakeholders in the infrastructure sector to discuss value capture mechanisms.

Paul Kenny, leader of Allens' government advisory practice, will present at the Conference on funding transport Infrastructure through value capture. Paul brings his extensive experience in advising government and private sector clients on commercial transactions, financing arrangements and major infrastructure projects to the Conference.

Recently, value capture has emerged as an innovative strategy to fund major infrastructure works with numerous projects in the pipeline across Victoria. Value capture mechanisms provide innovative opportunities and new challenges for the Australian infrastructure sector as governments explore more efficient ways of funding critical transport works.

A type of public financing that recovers some or all of the value generated by public infrastructure, value capture has sharply risen in popularity with multiple projects utilising this style of funding for major works across Australia.

The recent release of the Federal Government's discussion paper, 'Using Value Capture to Help Deliver Major Land Transport Infrastructure', highlights the increased interest of the funding mechanism in both the public and private sector. The paper explores how governments can make sure that value capture is not an additional tax, but a more efficient and fair allocation of benefits and costs.

A new piece of infrastructure such as a freeway or railway line creates economic value under a value capture mechanism. For example, the value of land near a new station will typically increase. Tapping into part of this value increase offers a source of funds to contribute towards the total cost of the project.

Not isolated to transport or major works infrastructure, health and education infrastructure can also benefit from value capture approaches. Governments can better leverage value increase as a means of funding the cost of infrastructure while sharing the costs with those that benefit the most, through value capture. Value capture also places a greater emphasis on the outcomes, benefits and public objectives which lead to better infrastructure and services planning. Finally, value creation is aligned to project funding as those who benefit most contribute to the infrastructure cost.

Proposals such as the Consolidated Land and Rail Australia (CLARA) plan, discuss the idea to fund major works such as a high-speed rail link through value capture. CLARA’s high-speed rail would connect Sydney to Melbourne, passing through Canberra, funded by value capture.

The high-speed rail would give rise to more affordable housing in Australia by relieving the country’s capital cities of the burden of growth, decentralising the population through faster transport into urban areas. Increasingly developed regional centres would also be a beneficial outcome of the high-speed rail. 

In funding the high-speed rail system, state and territory governments could collect funding through taxing or levying increases in values along the rail route, a funding source that would ease the public's cost burden for the project.

The 9^th Annual Victorian Transport Infrastructure Conference 2017 convenes on the 21^st and 22^nd of March 2017 at the Melbourne Convention and Exhibition Centre.

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