1.1. New Investment in Urban Transit
1.2. Land Value Uplift and the Entrepreneur Rail Model
1.3. Theory, Purpose, and Structure of the Paper
- Section 2 provides a series of global historical case studies of entrepreneurial rail building. Rather than being a comprehensive history this is intended to demonstrate the breadth of this model of railway building—commercially-motivated and linked to land development.
- Section 3 examines the Western Australian case studies, being Perth Electric Tramways Ltd. and the earlier land grant railways.
- Section 4 draws conclusions on the potential for this model of railway building to be revived in contemporary western cities, potentially incorporating the more recent governance innovation of the city deal.
- Section 5 contains concluding remarks.
2. Global Entrepreneurial Rail History
2.2. North America
3. Historical Case Studies from Western Australia
- The Perth Electric Tramways Limited, a British company that laid down the core of the extensive tramway network in the capital city, Perth, which was later subject to state takeover.
- The land grant railways—two railways were developed in Western Australia with grants of undeveloped land that the government was unable to bring under development on its own. This model was essentially the same as the American railways and the Canadian Pacific.
3.1. Perth Electric Tramways Limited
3.1.1. Tramway Regulatory Framework
3.1.2. Nedlands Park Tramway Estate
- The two authorities would receive 3% of the gross profits of the tramway operation between them, in lieu of rates payments and in return for the right to use the roadway.
- The developers were to build a public jetty on the river foreshore at the end of the tramway, as well as public baths. The jetty was to be handed over to the one of these municipalities, who would also have the option to purchase the baths at any time. The baths were to be ceded to the municipality at the end of three years regardless.
- A substantial area of river foreshore land was ceded to the two authorities, to be maintained in perpetuity as a reserve for the local community (this foreshore reserve was used as a selling point in marketing the estate).
- The two authorities had responsibility for building and maintaining various roads, and maintaining the foreshore.
- Construction on the tramway was to commence within nine months of the bill being passed, and to be completed within nine months.
- There was to be a minimum service level of nine cars per direction per day.
- Maximum fare levels were set.
- There were certain construction standards, including the materials used and gauge of the tracks—which were the same as on the existing tramway network, 3′ 6′′.
- The promoter was required to pay a deposit of £1000 into the Colonial Treasury, a substantial sum at the time. If the promoter did not meet minimum service levels over the course of the following 10 years, or failed to complete the tramway on time, then this deposit would be forfeited .
3.1.3. The Osborne Park Development
3.2. Great Southern and Midland Land Grant Railways
4. Reinventing Entrepreneurial Infrastructure
4.1. Lessons from Western Australian History
- The requirement for government approval, first through the responsible minister, and then by the legislature.
- Control of building standards and track gauges, to ensure standardisation and integration between the lines of different proponents.
- Prescribed construction timelines and a cash bond, to ensure the promoter delivers the promised infrastructure, and in a timely manner.
- Protections of the rights of adjacent property owners.
- Powers for government agencies to modify or otherwise interfere with the rail infrastructure, if required for some public purpose.
- A strong local government involvement, early on in the process.
- The increment in improved accessibility offered by the new transit.
- The rate of growth, with new transit infrastructure is more likely to affect land development in rapidly growing cities than in those where growth is slower.
- The ease or difficulty in assembling land parcels within close proximity to stations.
- The severity of zoning, or similar political or legal barriers to development.
- Transit-land use integration.
4.2. Can City Deals Mimic Historical Rail Governance?
- Demonstration of government commitment: explicit government support can give investors confidence about political and regulatory risk. This is often given as one of the explanations for rail projects’ increasing land values.
- Regulatory and compliance burden: one potential role of government is to simplify or otherwise manage its own regulatory approvals processes for a project, including land use planning approvals. In some jurisdictions, approvals can be time-consuming and can create uncertainty. This is a concern raised by the Australian property industry .
- Risk: A joint railway and large-scale real estate development is a large project, representing a substantial risk for a private company. In particular, this model requires a large upfront capital for development costs and to build the infrastructure. The returns come later, as the developments go to market, and final sales are uncertain. Government can provide financing guarantees to lower the cost of finance for potentially high-risk undertakings.
- Several roles suggest themselves for different tiers of government in Australian cities:
- Land assembly for redevelopment: this role could be filled by state and local government. In Western Australia, a state government mechanism already exists for acquiring land for long-term strategy infrastructure planning. This is the Metropolitan Region Improvement Fund, which uses revenues from an increment on the state’s land tax to fund land voluntary acquisition for public purposes .
- Concessional finance or underwriting: for large projects, this role might be filled by the national government, whose larger financial resources allow it to better absorb this risk. Concessional finance was provided to the Tsukuba Express project in Japan .
- Community and stakeholder engagement: this role can be undertaken by the relevant local governments, and the project proponent, as has been done by the CLARA consortium in Australia.
- Regulatory co-ordination: all tiers of government have regulatory functions. Simplifying this process can result from a partnership between different levels of government. City deals are particularly suited to this function.
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