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Don’t be incremental, be bold, planners tell government

Some of the world’s biggest brains in urban planning had a strong message for our local and state authorities, reports Michael Koziol.

Without new investment and infrastructure, Sydney is in danger of behing left behind. Credit: Jimmy Harris, licensed under CC BY 2.0 Without new investment and infrastructure, Sydney is in danger of behing left behind. Credit: Jimmy Harris, licensed under CC BY 2.0
Without new investment and infrastructure, Sydney is in danger of behing left behind. Credit: Jimmy Harris, licensed under CC BY 2.0

An overhaul of the way development is financed in NSW was one of the major ideas to emerge from a panel discussion on urban planning at the University of Sydney on Thursday.

Tax increment financing is used by local governments in the United States to finance major projects by issuing bonds generated from expected future property tax income.

In the United States, property tax is the major source of revenue for most local governments. The property value is based chiefly on the value of the production taking place on the land, such that a vacant lot generates very little tax but a shopping centre would generate a substantial amount.

“We are permitted to use that like a mortgage, to make payments from that increased tax revenue to support a bond issue from which we can get money immediately to drive the development, to put in the infrastructure,” explained Tom Murphy, the former Mayor of Pittsburgh and now senior fellow at the Urban Land Institute in Washington.

Under Mr Murphy’s leadership, Pittsburgh engaged in a major revitalization project that transformed the city’s neglected waterfront, created a vibrant arts and cultural precinct, required pension funds to invest in venture capital, and matched that investment with significant co-contributions from government.

The panel was held at the Seymour Centre as part of the 10th International Urban Planning and Environment Association symposium, co-hosted by the Faculty of Architecture and the United States Studies Centre last week. It was moderated by Edward Blakely, one of the world’s leading urban policy scholars and the “recovery tzar” of New Orleans in the aftermath of hurricane Katrina.

Mr Murphy said the major threats to the continued success of a city such as Sydney are a dearth of leadership, strategy, and institutional capacity. By the latter he meant the lethargy of bureaucracy.

“You don’t ever have to make a decision when you’re in a process,” Mr Murphy said. “You either paralyze yourself trying to get everybody for it, or you make a decision.”

He said leaders and planners had to be willing to take risks for the future of their city and plan strategically, “not on an incremental basis but on a bold basis”.

Local panelists felt those elements are lacking in Sydney. Julie Bindon, of the Warren Centre for Advanced Engineering’s Urban Reform Project, said: “governance and leadership is what we really need to develop more of.”

Partly that means finding new ways for governments and developers to finance projects, such as tax increment financing (TIF).

In 2008, PriceWaterhouseCoopers prepared a report on the need for such a funding model in Australia. The report was critical of the limitations of existing mechanisms such as development levies and state government debt.

It noted that public infrastructure funding has fallen significantly as a share of GDP since the 1970s, and that consequently, “Australia’s infrastructure is not keeping pace with the demands placed on it by a growing population and economy.”

TIF, on the other hand, provides a strong market test for infrastructure selection because “TIF administrators have a strong incentive and accountability to invest in infrastructure that generates ‘value’ to the community”.
It is deemed more equitable because the funds come from the owners of newly created wealth within the designated TIF district.

The model has been used to finance major projects in Chicago, is currently being used to fund the extension of the “7” subway line in New York City, and financed enormous high speed rail rollouts in Japan, as well as the Hong Kong subway.

But thus far the PwC report has largely fallen on deaf ears in Australia.

Unsurprisingly, the panelists who spoke last Thursday night were also critical of a governance structure which they believe hampers development prospects.

“The 43 or 44 local councils [in Sydney] is not conducive to a much bigger picture if we’re talking globally, but [even] if we’re talking metropolitan, it’s not working particularly well,” Ms Bindon said.

Patricia Forsythe, Executive Director of the Sydney Business Chamber, has long supported an amalgamation of Sydney’s councils down to just ten. She was critical of those who are uncomfortable with growth and change.

“I know there are some people who would rather that [overseas] investment wasn’t there,” she told the panel.

Mr Murphy said residents and business-owners could grow tired of development if it was badly designed or infinitely delayed, something NSW has experienced far too often.

“People will respond if they believe it’s going to happen,” he said. “The central role of an elected official is to create hope.”

Additional reporting by Fabian Di Lizia