After decades of strong government control of urban public transport infrastructure, transit planning is going through a transition to greater private investment in many parts of the world [1
]. This is based on demand for a rapid transit system that can overcome traffic problems [2
]. The process for doing this through private investment is obviously one that requires a partnership between all levels of government and the private sector and these are increasingly being labelled ‘city deals’ [3
]. The focus on bringing private investment into transit funding is now on the agenda in Australia as it is required by city deals from the federal government [5
This paper sets out to show how this global process is happening, how it could indeed follow the historical process that first set up transit systems using private investment, and how historical case studies from Western Australia suggest two means to enable the new transition. Examination of these new case studies adds to the global body of evidence of the entrepreneur rail model [1
] and provides some insight into how such models might be reintroduced. It concludes by suggesting that the city deal governance process may be able to mimic the historic integration of transit, land development, and private finance so eagerly sought after by cities.
1.1. New Investment in Urban Transit
Rail transport is going through a renaissance globally, in what [6
] calls “the Second Rail Age”, with a concomitant peak and then decline in car use per capita [7
]. This rail revival has involved new rail investment in the dense cities of Europe, the Middle East, and Asia, but also in the more car-dependent cities of the United States, Canada, and Australia [2
]. The reason for this renaissance is the demand for better accessibility in cities where traffic speeds are no longer competitive with fast transit that can go under, over, or around the traffic [2
]. Cities are now having to respond to this increasing demand by trying to find alternative funding sources and private participation, with a number of new models emerging.
In southern Florida, the Brightline, a privately funded and financed regional railway, recently began operation. This project has drawn substantial funding from transit-oriented developments around its stations (see Figure 1
]. This privately delivered model is favoured by the state administration, as a means to deliver infrastructure without a financial burden or financial risk to the public sector. In announcing a Brightline extension between Tampa and Orlando, the Governor of Florida stated that “through private investment, we ensure that this major project has zero financial risk to Florida taxpayers”, comparing this model with the California High-Speed Rail project, which was federally funded. The Florida Department of Transportation is to run an open procurement process for the right to lease government-owned land along the corridor, rather than offering any funding support [9
In Montreal, the provincial pension fund—the Caisse de dépôt et placement du Québec—is developing an elevated light rail line, with substantial funding from its depositors. The Caisse sees this as an opportunity for a long-term investment in “tangible assets that generate stable, predictable returns”, in addition to delivering a public good outcome [10
In Australia, the Consolidated Land and Rail Australia (CLARA) group is planning a high-speed rail line between Sydney and Melbourne, building new cities along the route. This new development will be used to service the project’s finance. This project was a private initiative, but was undertaken in response to a long-running policy objective, which conventional public funding models had not been able to deliver [11
In London, the £14.8 billion Crossrail project has sourced funding from a variety of sources, including the Greater London Authority, Department for Transport, and the private sector [12
]. The UK Government’s contribution had been capped at one-third of the total cost, so alternative sources of funding were required for the project to proceed [13
Private funding is not that unusual in transport as toll roads are a common form of alternative funding; Regan et al. identify eight toll road projects implemented since 2003 in Australia alone [14
]. Several of these have failed financially—the Cross City Tunnel, Lane Cove Tunnel, Clem 7 Tunnel, and the Brisbane Airport Road Tunnel failing to live up to their forecast traffic volumes [15
]. However, railway capital funding has not been easily able to achieve sufficient return just from tolls (fares). The new approach has been a rediscovery of the insight that funding for rail is more likely to be raised from the increase in land values. The mechanisms for doing this have been found to vary across the globe either through various forms of additional levies or taxes [16
], business improvement districts or special improvement districts [20
] or transit-oriented development by the rail provider. The latter can involve joint development, in which a public transit agency’s land assets are leased to a private partner [23
] or more privately-led initiatives, such as the Japanese railway conglomerates, or London’s Metropolitan Railway [26
This paper considers how private funding of rail projects has happened in history and could be reintroduced into contemporary cities. Australia is somewhat lagging in developing more entrepreneurial rail building models compared with other parts of the world, but this paper shows there are historical models of railway development which were previously not well documented and which could help inform a future model of entrepreneurial rail-building in Australian cities. These case studies add to the literature on privately developed railways, integrated with land development, and provide further evidence of the effectiveness of this model.
Infrastructure planning and delivery in Western Australia is not averse to private investment, except in urban transport, both in roads and public transport. Perth Airport is run by a private company financed mostly by superannuation funds, including being 30% owned by a subsidiary of the Australian Government’s Future Fund [27
]. The mining community are structured to provide their own rail and road systems without government investment, including railways and roads. The government instead performs a regulatory function, through regulating third party access to railways and rail safety. There also is increasing involvement of private investment in health and education. However, in urban areas, including the capital city, there is no private investment in transport, just private involvement in the construction of the road and rail systems under government supervision. This is being challenged by the federal government’s new involvement in Australian cities through city deals.
1.2. Land Value Uplift and the Entrepreneur Rail Model
Railway operations have often been difficult to make profitable through fare revenue alone [28
], and there have been many attempts to address this deficit by taking advantage of the effect of railways on the value of surrounding land.
The land value effects of railways have been estimated by numerous prior studies. The common method of undertaking these estimates is hedonic price modelling, which estimates the willingness to pay for certain features of a property [31
], such as its proximity to schools, parks, or in this case railways. The body of empirical evidence for the effects of the presence of railways on land values is substantial, with useful summaries of this research published [30
Many forms of value capture have been documented. These include compulsory land-based levies, such as the “impact fee” in the United States [18
], increments on property rates paid by business [15
], special area levies [18
]; tax increment financing [20
], special improvement districts [20
], and various forms of joint development programs [25
The mechanisms listed above involve additional revenue being raised from land to fund infrastructure delivery by government agencies. In addition to these public funding models, there is a substantial amount of rail building by private companies and commercially-motivated government-owned businesses that we have called the entrepreneur rail model [1
]. These invariably make use of land assets to increase their profitability. The Hong Kong MTR Corporation is well documented [24
] and the Japanese railway companies have been particularly adept at finding alternative sources of revenue, with real estate development and management being particularly significant [34
As will be shown below, this entrepreneur rail model was practiced in many parts of the world in earlier times and it is the purpose of this paper to see what can be learned from this as cities across the world look to build a lot more urban rail.
1.3. Theory, Purpose, and Structure of the Paper
This paper is part of two urban science theories: the theory of sustainable cities and urban fabric theory. The first, developed by [35
], suggests that cities become more sustainable when they reduce their metabolism (resource consumption and waste production) whilst simultaneously improving their livability (economic and social factors like jobs, health and community). The theory shows how this cannot be done without restructuring the city and this primarily is determined by transport priorities. The second theory [36
] pursues this concept in more detail by showing that every city has a combination of three cities, based on their history of development: walking city, transit city, and automobile city. The three eras are based on transport priorities and create three different fabrics: walking fabric, transit fabric, and automobile fabric. The relevance to this paper is that global priorities have shifted to seeing the significant economic, social, and environmental benefits of having more walking and transit fabric; this cannot happen unless cities find new ways of restoring the transport priorities and investment in these modes whilst at the same time building in their associated urban fabrics. Thus, the urban science of transport and land use planning needs to understand the history of transport and how to learn from it in delivering more sustainable cities.
The paper brings new case studies to the global body of evidence on the entrepreneur rail model, in the form of urban tramways (as streetcars are referred to in Australia) and land grant railways in late-19th and early-20th Century Western Australia. It examines the regulatory regimes prevailing at the time of these projects, offering potential guidance to future policy makers.
These case studies are notable for the small and isolated settlements involved. The paper also discusses the urban contexts in which these projects took place, noting the rapid population growth during the time of the streetcars. There is extensive literature on the viability of transit in terms of urban density, but the rate of population growth will also be a relevant variable for entrepreneur rail model projects (see discussion below).
The remainder of this paper is set out as follows:
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.
examines the Western Australian case studies, being Perth Electric Tramways Ltd. and the earlier land grant railways.
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.