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Civil Construction Industry and “Value Capture”

September 11, 2013 0 Comments

Value Add for Civil ConstructionThe Civil Construction Industry and the Contractors who depend upon it require constant and consistent growth in infrastructure in order to survive. But it cannot be growth for the sake of it. A new report was recently produced by Consult Australia and SKM titled “Capturing Value: Realising New Funding for Infrastructure and Urban Renewal”. The report looks at the future challenges we face as a nation and how we might increase our national return on investment from the highways, rail and urban transport infrastructure of the future.

A shortened version of the report can be found at:
Consult Australia Cities Urban Development

Some of the key points made in the report are:

  • With Federal and State Governments now in debt across the nation there appears to be a serious funding gap that needs to acknowledged in relation to infrastructure spending. The difference between what we need to spend and what we have available to spend is wide and continues to widen.
  • “Value Capture” are mechanisms that will contribute efficient, effective and economical inputs into the infrastructure projects to extract as much return as we can from our limited funds. An understanding of these potential mechanisms needs to be on the table as quickly as possible.
  • Institutional Resistance is the biggest obstacle to developing value capture policies in Australia.

So what is Value Capture as described by the Civil Construction and Infrastructure Industry? According to the report produced by Consult Australia:

“Value capture (also referred to as Tax Increment Financing [TIF]) refers to infrastructure and urban renewal funding mechanisms closely tied to increases in public tax revenues from private property. Value capture establishes a revenue benchmark that can be monitored against planned investments. Revenues above the benchmark are used to repay bonds or loans which fund projects, while revenues below the benchmark continue to flow to taxing authorities as usual. Typically implemented with a long pay-back period (e.g. 20-25 years) revenue streams tapped through value capture include:

  • Property values increased via infrastructure investment, land rezoning and density controls.
  • Increases in property transfer taxes, local government rates, business rates, land taxes and related local government charges.
  • Sale of additional development rights over and above those permitted under existing zoning, also called sale of ‘bonus floor space’.
  • Sale of under-utilised government land beside public transport corridors and stations.
  • Sale of air rights over public land and transport corridors and stations.”

“Value capture programs provide an equitable means of reinvesting a portion of the benefits created by urban renewal and transport infrastructure programs.”

Now we are neither for or against it because in essence this is a political matter that will need Commonwealth and State Government input. Please note these types of policies are being introduced in other parts of the world, so no doubt there will be more about this in the future. The tough questions are always around who pays and which projects. Resources are not unlimited so anything that can be assessed to allow us to build more roads and infrastructure where and when it is most needed should at least be given some assessment.

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