How do we switch on Sydney's 'Virtuous Cycle'?

When Malcolm Turnbull recently launched an Australia Infrastructure Plan he said ‘we need to capture more sources of funding’ in order to be able to keep investing in our cities as they keep growing.

Sydney skyline

Increasingly, as we use public and private sector partnerships, the need to find smarter, more collaborative approaches to investment is urgent.

The Prime Minister was referring to the whole idea of Virtual Capture, a buzzword for how we harness the uplift in property values due to public investment in projects like transport hubs, light rail or new roads so that it can be reinvested.

The NSW Government says it will spend $20 billion on Sydney infrastructure by 2020, but as we increasingly use public and private sector partnerships to make it happen it means the need to find smarter, more collaborative approaches to investment is urgent.

So far the debate about how we should go about doing it has been fairly one-dimensional.

For a start, government investment is a lot more than infrastructure. We need to widen the value net to include everything we’re doing to strengthen our communities like hospitals, schools, or sporting venues so that we capture the benefits of public investment much more broadly.

A current example of non-infrastructure investment creating value, is the Northern Beaches Hospital where existing homes near the site saw property values jump sharply while new residential development and investment also rose rapidly.

The debate on Value Capture has also focused far too much on short-term financial imposts like new taxes for developers, homeowners, councils or even hotels. While tax can-and must-play a role it is just one part of the process. Good investment can also cause environmental uplift, social benefits, as well as the betterment arising from its intended purpose. We need to understand these with a benefit model that identifies and can measure benefits with time.

We should start looking at public and private sector investment in our cities as an interrelated process where costs and returns interact over the short, medium and long term. We need to see public investment as a broader benefit creation process that includes everything from wealth to employment to new business to retail growth, green space or housing and so forth. I like to think of this as a ‘virtuous cycle’ so that every phase of the process adds value to what went before to reinforce and multiply added value and grow over time.

Baltimore’s Harbour Regeneration is a great example of this type of approach.

Baltimore’s Harbor Regeneration is a great example of this type of approach. When the home grown sporting wear company Under Armour wanted to set up their global HQ the Baltimore Development Agency actively worked to help facilitate the move and ongoing operation.  Those short term upfront costs are now paying back as Under Armour’s tenancy has attracted related and unrelated businesses, creating jobs, further investment in the area, and potential new development like rail, improved housing. The crime rate has dropped!

 This virtuous cycle is therefore like a snail’s shell starting at an origin and growing in many dimensions and increasing its size with time. Do we need to fully understand the wider benefits when making public investment decisions or encouraging private investment? Do we need to be able to measure it and make decisions on whole of life outcomes?

 Let’s talk about it Sydney. 

Stephen Taylor

Australian Cities Director +61 2 8907 9084 Ask me a question
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