- New Funding Options for Urban Regeneration   click here to open paper content450 kb
by    Langley, Joe | jlangley@globalskm.com   click here to send an email to the auther(s) of this paper
Short Outline
The traditional means of funding urban regeneration are proving to be
inadequate as cities struggle to rebuild obsolete infrastructure while
responding to changing demographic,housing and employment trends. New
funding options are needed which share the value created by the public's
investment in urban infrastructure.
Local and State Government urban renewal and transport agencies are
struggling to revitalise Australian cities using traditional public funding
sources. In order to support sustainable urban growth, these agencies must
often rebuild existing obsolete transport infrastructure, amalgamate highly
fragmented land ownership patterns, and rejig metropolitan plans to support
new, higher density housing and employment developments to respond to
shifting demographic, economic and social trends. Not only are these
problems difficult and expensive to fix, urban renewal agencies do not have
the legislative powers needed to create more equitable revenue generating
schemes to supplement traditional funding sources. New funding options are
required if Australia’s cities are going to address these problems and
compete successfully in tomorrow’s global market place for talented

Value capture funding methods have been used to supplement urban renewal
projects in North American for over 40 years, and were introduced to the UK
urban regeneration program in 2011. Value capture is simply a means of
redirecting a portion of the increase in private property value caused by a
public infrastructure investment to help fund redevelopment activities and
projects. Under these schemes, dedicated revenue streams are hypothecated
into a separate fund to underwrite bonds or notes which are then used to
pay for the improvements for fixed future periods, paying back the initial
borrowings and in many cases generating added revenues for other public

There have been numerous research efforts, pilot projects and technical
studies over the past few years which have investigated the application of
value capture methods in Australia, but a value capture funding method has
yet to be adopted in any jurisdiction. A report by PricewaterhouseCoopers
(PwC) for the Property Council of Australia in 2008 recommended that
Australian Commonwealth and State Governments develop a Tax Increment
Financing (TIF) model[i] “to meet Australian infrastructure funding
needs”[ii]. Research into the use of value capture to help fund the City of
Perth’s ambitious light rail network demonstrated that many of the
legislative tools are in place for this model. However, the report
concluded that these mechanisms “have not yet been applied in a co-
ordinated and strategic way to achieve the large scale upgrading of Perth’s
transit system and the building of its urban activity centre”[iii]. In
Melbourne, the Victorian Department of Treasury and Finance recently asked
infrastructure and finance specialists to propose value capture and
alternative financing options for several major transport and urban renewal
projects “using international and national experiences” [iv] , but provided
no guidance on how those options might be structured or implemented by

This paper examines the opportunities and challenges of implementing value
capture funding methods to support urban regeneration in Australia. Efforts
to establish value capture programs in Perth, Gold Coast, Brisbane and
Melbourne are used to highlight some of the hurdles facing proponents and
policy-makers. Drawing from successful projects in the US, the paper sets
out a framework for an Australian value capture model. Recommendations for
Commonwealth and State Government policy makers are advanced for creating
and implementing an Australian value capture model.

[i] Tax Increment Financing (TIF) is a value capture funding method used
throughout the United States.

[ii] Tax Increment Financing to fund infrastructure in Australia,
PricewaterhouseCoopers for the Property Council of Australia. November 2008

[iii] Discussion Paper – Alternative Funding Mechanisms for Public
Transport in Perth: The Potential Role of Value Capture, James McIntosh,
Curtin University Sustainability Policy Institute, Corview Group, and
Committed for Perth. December 2011 (p. 105).

[iv] Request for Proposal (Technical Advisor) Infrastructure (Value
Capture). Victorian Department of Treasury and Finance. March 2013
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