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Glenorchy to Hobart Public Transit Corridor Value Capture Funding Analysis October 2016

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Glenorchy to Hobart Public Transit Corridor Value Capture Funding Analysis October 2016 Hobart & Glenorchy City Councils Glenorchy to Hobart Public Transit Corridor Value Capture Funding Analysis October 2016 Executive summary While the project has been shown to present a range of economic and Introduction to the issue social benefits to the local community, proponents of the project have Hobart has a relatively high dispersed population base with growth sought to analyse how alternative beneficiaries, including local predominantly realised on fringes of the city. This fact, coupled with low residents, businesses and all levels of government can contribute to the quantity, quality and price of public transport services has meant that upfront capital costs. car ownership and use within Hobart is among the highest in Australia. Scope of the Project Steady growth in population following these trends will likely have a major impact on the social welfare, living standards and the economic GHD was engaged by the Hobart and Glenorchy City Councils to performance of businesses within the region. investigate the appropriate alternative funding methods that could be implemented to support the development of the Hobart to Glenorchy The Hobart and Glenorchy City Councils are undertaking a range of Transit Corridor to ease the funding burden off government. studies to look at supply of land, market factors and supporting policy settings that could support further infill development within the city The evaluation undertaken presents the findings of a desk-top corridor. investigation on a range of land based value capturing mechanisms that have been investigated and/or implemented internationally and aims to Introduction to the Project define and assess its potential implementation within the context of this project. The Glenorchy to Hobart public transit corridor stretches along the former heavy rail freight link from Central Hobart at Franklin Square to This report presents a range of alternative, in some cases mutually Austins Ferry. exclusive mechanisms that either the Local and/or State Government could implement to meet the funding requirement of the project. The Glenorchy to Hobart public transit corridor has been earmarked as a project to facilitate greater public transport use within Hobart to This report also provides a strategic assessment of the advantages and alleviate the ever expanding environmental footprint and related disadvantages of each mechanism and the alternative rates/tax values increasing cost of congestion facing the local community. that would have to be applied to support government to meet the overall funding requirement of the project. Furthermore, the project, if developed in conjunction with appropriate local government planning measures, has the opportunity to act as a catalyst to support urban renewal within the local area surrounding the corridor. GHD | Report for Hobart City Council-Glenorchy to Hobart Public Transit Corridor - Value Capture, 3218083 | i Incremental increase in Local Government conjunction with the project, capitalisation of access benefits and revenues improved desirability of the area As part of this investigation, GHD undertook a strategic assessment of This international literature has highlighted that fixed infrastructure the potential general council rates that could result from economic and investment, such as light rail, is valued higher in the market as it development activity within the proposed rapid transit catchment areas. creates a perceived level of certainty of future supply (i.e. given the large upfront sunk cost) relative to other forms of transport services (i.e. Based on an estimate of the potential development activity that could buses). Previous estimates of price increases as a result of transport be realised in the area, current council rates and average assessable infrastructure (SGS Economics and Planning) have estimated that property value, and an assumed rate of diversion from elsewhere within property within a close and easily accessible distance to a station/stop the respective local government areas. Based on these assumptions it could increase by between 5% to 10% for dedicated bus rapid transit is projected that the Hobart City Council and Glenorchy City Council and between 10% and 15% for light rail. could realise up to an additional $4.5 m and $18 m respectively in present value terms over a 20-year evaluation period. Based on this level of property price increase on all properties within 800 metres from all stations across the corridor would result in an Funding investment from perceived incremental activity can be a risk to increase in Glenorchy City Council rates by $12m to $24m with the government operations, and thus not seen favourably by ratings introduction of BRT or between $24m to $36m with the introduction of agencies, as there is an inherent level of uncertainty with regards to the LRT. Furthermore, HCC could realise an increase in their rates based timing and quantum of private investment, how much is actually from between $16m to $32m with the introduction of BRT or between diverted from what would have occurred elsewhere and the other costs $32m to $48m with the introduction of LRT.1 to government in supporting this development (i.e. provision of other local government services). It should be noted that there are a mirrored of risks associated with any level of government banking potential increases in property prices to Potential increases in Local Government revenues support ongoing investment costs which could have significant adverse effects on its viability. due to property price increases There is a body of international literature that highlights the potential for transport infrastructure, such as that which is being proposed for Tasmania, to increase property prices of surrounding residences. Property prices typically increase as a result of improved access to public transport services through general improvements to the area in 1 Present value calculations based over a 20 year analysis period, government borrowing discount and assuming that the increase in value occurred from day one of operations and was consistently maintained over the evaluation period. GHD | Report for Hobart City Council-Glenorchy to Hobart Public Transit Corridor - Value Capture, 3218083 | ii Value Capture Mechanisms zoning rights are sold to developers. This generally would result in an increase in upfront payment by developers through development The following value capture mechanisms to supporting the funding contributions but also through ongoing rates payable. requirement of this project were shortlisted for the analysis: Sale or Lease of surplus development sites – Local government’s Business Rates Supplement (BRS) – A business rate supplement associated with the project may be able to sell, lease or undertake joint (BRS) is an increase in the general rates payable on businesses of a venture arrangements with developers over land owned by government certain size and scale within a specified area/zone. Such a mechanism within the project corridor to effectively reduce the funding requirement would allow Local Government to target the funding requirement on for the project. businesses that have a direct and tangible benefit as a result of the project over an extended period of time. Results of the evaluation Special Local Government Rates (Households) – Currently, across a The quantum of funds returned by any one value capture mechanism, number of States in Australia the Local Government Act 1993 allows with the exception of the visitor tax, will not be enough by itself to fund local councils to apply special rates on top of council rates in special this infrastructure without imposing the tax on the community at what is circumstances (across its entire rates base and/or within a defined likely to be seen as an unacceptable rate. It should also be noted that area). the implementation of any two of these policies together may not be Stamp Duty supplement – Stamp duty is a tax imposed by State mutually exclusive. Government on numerous acquisitions, including selling real estate, The implementation of any value capture mechanism as well as who cars and assets belonging to a business. Property values that would will ultimately be targeted (i.e. rate and applicable safety nets) is a increase in the general proximity to the project, as a result of improved matter of public policy and therefore the decision of the government. access to employment and services, would result in additional Stamp duty receipts to the State Government when properties were sold. Further analysis may be required by local government to support the implementation of any proposed mechanism, which may include: Special interest groups (visitor/hotel tax) – One such mechanism Detailed analysis of the links between beneficiaries and those may be to impose a special tax upon visitors to the local area. Such a that will pay tax could include a rate imposed upon hotels/accommodation providers. Detailed analysis of the potential returns and uptake of Voluntary Planning Agreements – Voluntary planning agreements development opportunities along the corridor would be seeking additional funds, over and above that which are currently charged by Local Government on developers to support the Socio – economic analysis of people’s ability to pay and the funding of this public infrastructure. impact on living standards Sale of bonus Gross Floor Area (GFA) – Local Government’s Detailed analysis of the most effective implementation of a associated with this project may need to vary
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