Developers Vs Planning

There have been real estate imperatives behind aspects of Sydney’s development since the First Fleet arrived at La Perouse and then moved to Sydney Cove.

This is a chronology of more recent interventions, as a reference:

There has been mention in the literature of betterment or value capture being designed to be a brake on speculation.  Indeed, that is a natural consequence as experienced between 1970 and 1973 and subsequently or so it seems.  This would suggest a suppression of landowners’ profits.

On the contrary, there was a series of fast train proposals in the 1980s and ‘90s including the Fahey Government’s Minister Baird’s unsuccessful tilt train experiment which saw the shaving of country platforms which remain a hazard for travellers due to the gap between platforms and mainline trains.  A review of that series by the national Parliament in 1998 produced the following comment (“Canberra expresses a capital idea”, 16 October 1993):  “Other reasons for failure may have been the suspicion that the project was motivated by real estate development ”.

There is no presumption of wrongdoing in the following but the chain of events could be scanned for evolutionary causation, remembering the only inquiries into the strategic matters recommended against the outcomes reached through the chronology:

  • MTR is included as a pre-qualified contractor (with others) for the CBD Metro “fiasco” in 2009
  • February 16 2010 Brendan Lyon, the executive director of Infrastructure Partnerships Australia, which represents the construction industry, said the government should build the metro to Rozelle. ”Metro rail offers a genuine game-changer for the city. We don’t want the CBD Metro delayed, because it starts to put the step-change into place.”
  • Feb 22 2010 Premier Keneally abandoned the CBD Metro. The shadow minister Gladys Berejiklian said the metros were doomed if the Coalition won. ”We want to reassure the community – if we do win the next election, our absolute priorities will be to construct the north-west and south-west rail links.”  Brendan Lyon of Infrastructure Partnerships Australia said he was “profoundly disappointed” at the demise of the Metro.  “This decision shreds the credibility of the government in delivering projects,” he said. “NSW bureaucrats have worked tirelessly to get this project to tender — it is very disappointing to see that this work and considerable taxpayer dollars have been squandered.”
  • Apr 7 2011
    • Ms Berejiklian said Rodd Staples, the former chief executive of the Sydney Metro Authority, would lead the NW project, and said he should not be judged by his previous role. “We will not blame very, very talented people for the mistakes of the previous Labor government”.  Despite the CBD Metro debacle, which has cost NSW taxpayers more than $400 million since it was cancelled by the Keneally government, Mr Staples won a reputation with private sector infrastructure groups.  Since the demise of the CBD Metro, Mr Staples is known to have been examining ways of converting part of the CityRail grid to a single-deck, high-frequency metro-style system.  Ms Berejiklian, however, confirmed that standard double-decked trains would run on the new rail line. ”This is a heavy rail link,” she said.
    • Ms Berejiklian has appointed Owen Johnstone-Donnet, an experienced Liberal adviser and former executive with the infrastructure lobby Tourism and Transport Taskforce, as chief of staff. Larry McGrath, from the TTF’s sister organisation, Infrastructure Partnerships Australia, is her policy director. The executive director of Infrastructure Partnerships Australia, Brendan Lyon, said Mr Staples’s appointment was particularly welcome. Mr Lyon said the government should consider a public-private partnership to deliver the north-west line. [NB  TTF and IPA were steadfast supporters of the CBD Metro.]
  • iNSW SIS in 2012 reported a very high capacity of metro trains and low capacity of double-deckers (vs Christie’s and other’s reports), the information having been provided by MTR, the Hong Kong operator which has majority ownership by the Chinese Government. It recommends against proceeding with the second Harbour crossing.
  • June 2012 Government decides to convert the NW heavy rail line to metro standards
  • MTR showcases its straight-line trains in The Hills media in January 2014 (in other media earlier and later). (The straight-line has been pilloried due to the unforeseen costs of adjusting existing station platforms.)
  • MTR is the operating contractor to Metro Trains, announced in June 2014.
  • May 23 2015 High-rise apartments could soon spring up around stations along the rail lines from Sydenham to Bankstown, and from Glenfield to Macarthur, as part of state government plans to increase the city’s supply of housing. In what’s being seen as a trade-off between improvements in infrastructure and dramatic increases in the amount of high-density development to be allowed ….
  • June 9 2015 Daily Telegraph – back to the future:
    • Back then Iemma wanted to build a “North West Metro” and another metro line eventually out to the west with, guess what, the proceeds from electricity privatisation. Of course the difference is Baird got his privatisation through parliament whereas Iemma got rolled.  But why is the government doing essentially what Iemma promised — a North West Metro to the city?  The staple — if you’ll forgive the pun — could be a certain bureaucrat. The man at the centre of both projects — and possibly the link between them — is Rodd Staples …
    • in December 2012 … Staples was already talking as if a second Harbour rail tunnel was inevitable. Staples must have been pretty happy to see Baird and Constance last week out on a barge where exploratory holes are being drilled under the Harbour…
    • The original idea for a Western Metro out to Parramatta should be explored as should the Infrastructure NSW idea to expand the Bondi Junction subway out through the southeast. Indeed, the most frustrating thing about the Metro plan is that work could have started way back in 2008 or 2009. If only all the MPs in Macquarie Street had been better at digging dirt for projects rather than flinging it at each other.
  • June 16 2015 Minister Constance says new residential and commercial buildings are likely to be constructed as part of Sydney’s latest rail project, a mammoth underground train link carving under the lower north shore and inner city Sydney. “This massive city shaping project will be the new spine of our city’s public transport system and will serve us for generations to come with room to grow,” Mr Constance said.  “We are going to see a massive influx of people into Sydney as we grow, we are going to see the population grow to six million people by 2031, that means a combination of transport projects facilitating both urban developments in terms of brownfield sites and obviously greenfield sites as well,” he said.  “You only need to look at the development that’s happening in the north-west, and what we will see in terms of the uplift associated with Sydney Metro North West, to know that this type of infrastructure is a game changer in terms of urban design, urban planning,” he said.  “We want to maximise the development opportunities off the investments we are making on behalf of the taxpayer because it makes economic and social sense.”  He said he had instructed Staples to go super-fast.
  • July 30 2015 Premier met Metro Trains Melbourne which includes MTR, John Holland and UGL Rail (all contractors to TfNSW’s Metro)
  • Aug 10 2015 Minister Constance met Boston Consulting re transport, on 17 Sept China Rail, and on 30 Sept Metro Trains Melbourne (as above)
  • Oct 14 2015 Planning Minister Rob Stokes revealed a new vision for the town centres around the 11 stations on the Sydenham to Bankstown rail line. The vision looks at opportunities to revitalise areas around these stations with new homes, community facilities, shops and businesses and capitalise on the future Sydney Metro Southwest rail line project. “The enhanced public transport network is the catalyst for new growth and development along the corridor,” Mr Stokes said.
  • Oct 14 2015
    • Chris Johnson, chief executive of the developer group Urban Taskforce, said he thought the plan was good but could have been clearer about some of the development heights proposed for suburbs such as Bankstown and Campsie. “You would need to get up about 20 stories to be economic,” Mr Johnson said. “Communities should be getting used to heights of that order around railway stations.”
    • The Sydenham to Bankstown rail corridor will include an extra 36,000 dwellings over the next 20 years. The plan also says there is potential for light rail between Bankstown and Parramatta via Granville and Chester Hill. Under the plan, residential and mixed use developments would be permitted within 400 m of the stations from Sydenham to Bankstown [NB this is an “overlay plan” which featured in Kennett’s administration in Victoria].
  • Nov 17 2015 Minister Constance – “You have a need for urban uplift in the Waterloo area and then of course we have got 70,000-odd students who travel to the University of Sydney every day,” he said. “In many ways it’s a difficult decision … and we hope to have it done by the end of the year.”  The university has proposed a $1.5 billion “knowledge hub” … However, it faces competition from UrbanGrowth, the state government’s property arm, which is pushing for a new station at Waterloo. UrbanGrowth has argued that the construction of a train station at Waterloo would allow more than 2,000 public housing units in the inner city to be replaced with new ones.  Work on stage two of the metro line from Chatswood to Sydenham will begin before the end of 2018.
  • Nov 25 2015 Property Council – Sydney Metro will help boost capacity of the rail network by 100,000 people every hour and move more people across the Harbour in the busiest hour of the peak than the Sydney Harbour Bridge and Sydney Harbour Tunnel combined. [NB impossible number of trains per hour.]
  • Nov 27 2015 Central Barangaroo buildings increase again thanks to new station, the Barangaroo Delivery Authority had already said it would invite developers to submit projects using up to 120,000 square metres of floor space, but on Thursday increased this to 150,000 square metres. “It is the addition of the station,” said the chief executive of the Barangaroo Delivery Authority, Craig van der Laan.  “Obviously the government’s decision to give Barangaroo an underground station is a very significant game changer – it is going to make Barangaroo so much more accessible….  Apart from the increase in development size, which Mr van der Laan said could mean higher buildings, the Premier said other elements of the area’s design would not change.
  • Nov 28 2015 Minister Stokes “earlier this month” laid out a vision of a suburb of cheap and resilient Surry Hills-style terraces, in Sydney’s newest suburb: Leppington, some 50 kilometres south-west of the CBD and future home to 30,000 new residents.
  • MTR is headlined in the SMH on 17 December 2015 as being “The operator of Hong Kong’s metro system (who) wants to strengthen its grip on Australia’s rail network, eyeing opportunities to build and run new lines in Sydney and Melbourne. MTR Corporation, which runs Melbourne’s Metro and will run Sydney’s first private commuter railway the Sydney Metro Northwest, is also looking to export its business model, where property development near and above train stations funds the construction of new lines.
    • Chief executive Lincoln Leong said Australia was a critical market for the company, which is 76 per cent owned by the Hong Kong government, and it sought “end to end” work where it built, operated and maintained rail lines. MTR’s interest is not unrequited. Premier Mike Baird and Transport Minister Andrew Constance have, according to their diaries, met with MTR representatives in Australia and federal Cities Minister Jamie Briggs visited the company’s Hong Kong headquarters in recent weeks.  The rail-plus-property model is a form of “value capture” – a broad term for a finance model that works to capture the windfall gain in land value that property owners experience when public infrastructure is built nearby.
    • But MTR’s approach in Hong Kong has been criticised by some, including AECOM’s Asia Pacific executive director of buildings and places, Guy Perry, who labelled their residential developments “fortresses” that were geared towards profit. The company has only exported the rail plus property model to mainland China, but Mr Leong is quick to say it would be used differently in Sydney and would not mean 60-storey apartment blocks sprouting in the suburbs. “The rail-and-property model need not just be massive buildings above stations or depots. There are many different ways of skinning the cat,” Mr Leong said.
    • It makes financial sense for MTR to look to expand in Australia. The company’s projects in Australia contributed more revenue – about $770 million – than any of their other international ventures in the half year to June 30.
  • Dec 19 2015 MTR does not have property development rights for the Sydney Metro Northwest, the high speed rail line between Rouse Hill and Chatswood, but it is bidding for new contracts for the extension of the line under Sydney Harbour, through the CBD and to Bankstown. The federal government is also considering how value capture could be used to fund a rail link to the proposed Badgerys Creek airport, including the option of contracting developers to build stations and the communities around them.
  • Feb 21 2016 Baird issues tender for development of high-rise towers above six stations – Martin Place, Pitt St and Barangaroo, plus Chatswood, Victoria Cross and Waterloo.
    • “MTR is part of the consortium that will operate Sydney’s first private railway, the Metro Northwest, but that contract doesn’t include air rights. The company has lobbied the Baird government to adopt its “value capture” model for future projects, which potentially lowers construction costs in exchange for the property development.  The design tender will allow Transport for NSW to determine how the stations can be built so that commuter access to the underground Metro City and Southwest platforms are not impeded by high-rise footings.  “Transport for NSW is investigating the feasibility of over-site development opportunities at some of the proposed new Sydney Metro railway stations,” a spokesman said.  “This tender will help Transport for NSW put in place an appropriate delivery strategy to maximise any over site development opportunities as part of delivering Sydney Metro.”  The Baird government hasn’t announced whether property development rights above stations will be awarded in a separate contract to the station construction.  An industry briefing in December found “significant interest” in property development opportunities above the stations, particularly in the CBD.

There are points of change (inconsistency) in the chronology.  Whether the Hong Kong operator was influential at any such point/s would need to be established by the Auditor-General or ICAC, if at all;  but the influence of IPA is evident and the interests are coincidental.

Finally, a case study can be reported from PWC’s Crossrail-2 Funding & Financing Study

In the early 1990s, an impending fiscal crisis at the City of Copenhagen and an unwillingness to fund large infrastructure projects on balance sheet at the national level forced the City to consider alternative funding models for the Ørestad project . Because of the potential for capturing value uplift through the development of Ørestad New Town, the ODC adopted a ‘development corporation’ model similar to that used in the context of the Hong Kong MTR .

The metro farebox provided an additional source of revenue. Due to a lack of revenues from land sales during the 2000s, tax revenues have also been used to service the debt.

The “metro farebox” in Sydney is all but irrelevant because of the incredible costs of metro and tram projects – which are beyond commercial viability.  The NW/Bankstown Metro at 1/20th recovery and CBD & ES tram at some 1/10th, given operating costs are hidden, mean a permanent reliance of borrowings and debt – which is unsustainable.