Living Cities Workshop

Speech

PFS001/2016

09 February 2016

Parliament House Canberra

I am very pleased to join this Living Cities Workshop here at Parliament House.

I congratulate the Australian Institute of Landscape Architects for organizing this event—it is an important opportunity to exchange ideas about the future of our cities.

This is a subject where the Turnbull Government aims to foster vigorous discussion.

We will release a position paper early this year setting out the issues and trends that affect Australia's cities, and the opportunities and challenges ahead.

This is a chance for the Australian community to engage in a collaborative discussion about what we want our cities to look like in twenty, fifty, and a hundred years' time.

The Government will host a National Cities Policy Forum, bringing together leaders, experts and industry to shape a shared vision for the future of our cities.

To make an impact we need many different portfolios within the Commonwealth Government involved. We also need close engagement with state and local government.

For my part, as Minister for Major Projects, Territories and Local Government, much of my work deals with urban infrastructure and its influence on the effective functioning and physical shape of our cities.

I will be working with Minister Greg Hunt—who is leading the cities and built environment portfolio—the Prime Minister, and other Ministers to articulate and implement the Government's cities agenda.

This morning, I want to cover some themes that will be a significant part of the cities agenda.

First, I want to explain why the Turnbull Government has given such strong emphasis to its cities agenda, and outline the fundamental directions of that agenda.

Next, I will speak about the importance of the natural environment, and the Government's approach to greening our cities.

Lastly, I want to discuss the linkage between transport infrastructure and the effective planning and functioning of cities.

The Turnbull Government's Cites' Agenda

Let me turn first, then, to the thinking behind the Turnbull Government's ambitions for Australia's cities.

Announcing his Ministry last year, the Prime Minister had this to say:

Liveable, vibrant cities are absolutely critical to our prosperity. Historically the Federal Government has had a limited engagement with cities and yet that is where most Australians live, it is where the bulk of our economic growth can be found… We have to ensure for our prosperity, for our future, for our competitiveness, that every level of Government works together, constructively and creatively to ensure that our cities progress.[1]

The cities agenda recognises that Australia's cities are vital economic assets.

Just as importantly, well-planned cities are critical to our collective quality of life.

It is well recognised that our cities are among the most liveable in the world. With their idyllic beaches and rivers, their clean air and water, our cities are located in some of the world's most beautiful natural settings.

Each year, our cities appear near the very top of international rankings—with Melbourne topping the Economist's livability ranking as the world's most liveable city for a fifth consecutive year.[2]

As for Sydney, I like the almost grudging judgment by British travel writer Jan Morris in her book about the city. She called it one of the great cities of the world:

…not the best of the cities the British Empire created—but the most hyperbolic, the youngest at heart, the shiniest.[3]

If our cities are pretty good by world standards, then, why is there a need for federal government involvement in cities policy? After all, previous attempts at such involvement—the grand schemes of the Whitlam years, for example, or the ‘cities unit’ Anthony Albanese created as Minister for Infrastructure—have not made much difference.

One reason is that policies which affect our cities are policies which affect the vast majority of Australians. The proportion of our populations living in cities is now 89 per cent—one of the highest such rates of any country in the world[4].

Another reason is the economic importance of our cities. Recent work by the Grattan Institute found that 80 per cent of the dollar value of all goods and services in Australia is produced on just 0.2 per cent of our land mass—and nearly all this share is produced in our cities.[5]

The combined CBDs of Sydney and Melbourne—just 7.1 square kilometers in area—create almost 10 per cent of the total value of Australia's goods and services[6].

According to the Infrastructure Australia audit released earlier this year, Australia's capital cities contributed $854 billion to the economy in 2011—a very substantial proportion of our GDP.[7]

So it is vitally important that our cities remain liveable, accessible and productive.

That will require us to overcome some challenges.

First, effective long-term planning will be critical to shaping our cities so that they deliver the economic growth needed to maintain our quality of life.

Secondly, we need cities that support the needs of those who live, work and visit them. Smart and successful cities are underpinned by world class digital and physical infrastructure.

Thirdly, we need sustainable, green cities with improved amenity for a more liveable environment.

Greening our Cities

Let me turn, then, to say a bit more about greening our cities.

Cities with high levels of trees, foliage and green spaces provide enormous benefits to their residents.

Air quality

One key factor here is air quality. The Government has already made significant progress on improving the livability of cities from an environmental perspective, including through the recent National Clean Air Agreement which was endorsed by State Environment Ministers in December 2015—over six months ahead of schedule.[8]

The Agreement will deliver actions to reduce air pollution—ensuring Australians continue to enjoy clean air into the future.

Minister Hunt also recently announced plans to expand the National Carbon Offset Standard to include the certification of carbon neutral cities and precincts under the Carbon Neutral Program.[9]

Greater urban canopies

Another factor is the quality of the urban canopy. As a politician representing a fair part of Sydney's ‘Leafy North Shore’, I am very conscious that a healthy treescape is not just an environmental asset but also a social asset—and when you look at the impact on property values, a significant economic asset as well.

Increasing urban canopy coverage decreases heat, which improves health and quality of life. People living in large cities can be especially susceptible to the effects of extreme heat.

Air temperature in cities are a number of degrees higher than in surrounding areas due to heat-absorbing properties of dark-coloured roads and other surfaces, as well as the effect of urban canyons trapping hot air.

An effective way to reduce the severity of the heat island effect is to increase the greenery in our cities. Greener cities tend to be healthier cities.

Minister Hunt will be working to set decade by decade goals out to 2050 for increased overall tree coverage. He will also look at building rooftops with green cover which improve both amenity and, as Singapore has shown, can improve value and quality of life as well as operational efficiency.[10]

We have an opportunity to make Australia's cities strong and resilient and able to withstand economic changes, as well as changes in our climate, lifestyles, technologies and social fabric over time.

Reducing carbon emissions

Urban canopies also help to reduce carbon emissions. Of course, trees act as carbon sinks. Additionally, as urban canopies reduce the heat island effect, the energy required to cool our cities to comfortable temperatures also decreases and emissions decline.

While Australia accounts for less than 1.3 per cent of global emissions, we are committed to playing our part in global efforts to combat climate change.

We should not underestimate the challenges in moving to lower emissions energy and meet ambitious climate change targets. The transformations required are significant and financing the energy infrastructure of the future is a major opportunity for investors.

The Australian Government's renewable and emissions reduction polices and our focus on innovation support this transformation. We are reducing emissions through our Direct Action policies, centered on the Emissions Reduction Fund, which has seen the largest purchase of abatement in Australia's history.

Australia also excels in the development and deployment of renewable energy technologies under the Renewable Energy Target and investments through the Australian Renewable Energy Agency and Clean Energy Finance Corporation.

The Emissions Reduction Fund, Australian Renewable Energy Agency and Clean Energy Finance Corporation provide $15 billion in direct support for renewable and energy efficiency.

An example of the practical approach being taken by the Australian Government can be seen in a recent announcement Minister Hunt made with the Lord Mayor of Melbourne Robert Doyle.[11]

The Clean Energy Finance Corporation will provide up to $30 million in finance to help the City of Melbourne introduce more energy efficient street lighting, retrofit commercial properties to improve their energy efficiency and install solar panels. This has enormous environmental benefits and will also slash the City of Melbourne's power bills.

Transport Infrastructure and Cities

Now, given my particular responsibilities, let me turn next to the linkage between transport infrastructure and the effective planning of cities.

I want to argue firstly that globally cities are competing—and transport infrastructure is a key part of the competitive offering. Secondly I want to touch on the question of how we fund and finance transport infrastructure. Third, I will describe some of the current priorities of the Turnbull Government.

Global Competition

Let me start with the observation that if we want to attract and retain people with global skills—so important to our competitiveness in a knowledge economy—we need cities which are attractive, liveable and vibrant.

The North American academic Richard Florida has written extensively about the way that cities foster economic activity, particularly by bringing knowledge workers together in a way that demonstrably stimulates creativity and productivity. In the economic jargon, greater density fosters knowledge sharing between firms and knowledge ‘spillovers’ between sectors.

In a newspaper opinion piece following the recent Canadian election, Florida called for a Ministry of Cities, arguing that cities are key to innovation, productivity and economic growth:

Each of those things revolves around one central pivot—the health and well-being of our cities. Along with talent and technological innovation, it is urbanization— dense, diverse cities—that powers innovation and economic growth today.[12]

In a recent discussion with the CEO of Urbangrowth in NSW, I was struck by the list of major world cities which are engaged in significant urban regeneration projects, such as the Hudson Yards project in New York, the Waterfront project in Toronto and here in Australia, the Bays Precinct and Barangaroo. The role of transport infrastructure is striking in all of these projects.

A few weeks ago I had the chance to visit San Francisco and Silicon Valley—one of the pre-eminent urban areas in the world when it comes to the ability to attract global talent. But civic leaders in the San Francisco Bay Area are not resting on their laurels—on the contrary, they are hard at work regenerating large parts of this 7.5 million people conurbation, with new transport infrastructure projects playing a key role.

For example, the Transbay Redevelopment Plan and Transit Centre is transforming downtown San Francisco by creating a landmark multi-modal transportation station and new parks as a new neighbourhood in the heart of the financial district.

The $4.5 billion project brings together 11 local, regional and state-wide transit systems in a central hub. But it is much more than just a new terminal building for rail, light rail and bus. It is also the centrepiece of significant urban regeneration.

Many vacant lots are now building sites—indeed across several blocks the downtown area of San Francisco is being regenerated.

A key part of the project economics is the use of value capture, with private developers contributing to the cost of the new Transit Centre, in the knowledge that their building will be much more valuable because the area where it is located is becoming much more vibrant—and will have first class transport connections to virtually every part of the Bay Area.

I also met with the leadership team of Bay Area Rapid Transit or BART, the rail system which links much of the Bay Area and which is soon to extend south to the largest city in the area, San Jose. Again I was struck by the close relationship between transport and urban development.

BART uses a model for transit oriented development which involves the strategic construction or redevelopment of mixed-use properties in the immediate vicinity of transportation infrastructure projects. The aim is to encourage intensive development oriented towards transit on and around station properties; enhance the value of BART land; and enhance the performance of the BART system as a whole.

Some of the US style thinking about urban regeneration is increasingly being adopted in Australia. For example in NSW we are seeing major urban renewal projects delivered through dedicated delivery agencies in projects which combine redevelopment of publicly owned land with opening up new urban renewal opportunities on private land to deliver housing and jobs.

The Bays Precinct Transformation Plan is one example; the regeneration of Waterloo, linked to a new metro station, is another.

We have also seen the announcement of the Greater Sydney Commission and a move towards more integrated transport planning and delivery in Western Sydney between the Australian and NSW Governments.

By involving the community, industry and government in a comprehensive engagement process, the Baird Government is building support for asset recycling and major urban transformation projects to help fund projects and outline broader benefits to the community.

How we Fund and Finance Transport Infrastructure

In my US discussions I was particularly interested to learn about how public transport projects are funded and financed. One thing which stood out: BART derives around 70 per cent of its operating revenue from the fare box, much higher than the 20–30 per cent which is typical in Australia. Indeed it is able to fund some of its capital requirements for network upgrades from fare revenue, although much of its capital funding comes from taxes and grants.

All three local government districts serviced by BART have a voter endorsed 0.5 per cent sales tax that is hypothecated to transport projects, including BART projects. These taxes are periodically reviewed and put forward to the public for re-adoption by these authorities.

A feature of the US approach to infrastructure funding is the way that governments of all levels, as well as specific government created entities, have the capacity to raise funds for example through issuing bonds. Often this is linked to a resolution which is put to voters—meaning that the new infrastructure project, and the means of funding it, have been approved through the democratic process.

We have recently seen local councils in Victoria begin to issue bonds, after the Municipal Association of Victoria partnered with NAB, CBA and Ernst and Young in 2014 to create the Local Government Funding Vehicle (‘LGFV’)[13].

The LGFV has been used for one bond issue to date, in November 2014. This raised $240 million for 32 councils over two tranches—a five year and a seven year fixed rate, interest-only bond. Bonds are not intended to replace council general revenue, but provide an alternative to traditional finance.

MAV estimates that the first bond issue will save Victorian councils $100 million in financing costs compared with traditional bank finance. Anecdotal reports from councils suggest that the bond rate (4.24%) is up to 45 basis points less than comparable bank borrowings.

I was interested to read a recent report of a study tour by a group of Australian officials to the US, the 2015 US-Australian City Exchange report. The Australian delegates were able to observe innovative funding and financing approaches in the US used to help build and revitalise communities.[14]

A typical approach in the US is the Business Improvement District (BID). Under this model business leaders and local government agencies within an area set local fees for provision of services and improvements within a defined precinct. The Australian delegates, in their report, noted the potential to make wider use of formal and informal voting referenda to garner community support.

Certainly we have seen recent examples in Australia of local councils financing new transport infrastructure through a specific rate increase, with the Gold Coast City Council contributing $120 million to stage 1 of the Gold Coast Light Rail using this mechanism.[15] But it is interesting to ask whether such an approach could be taken further through linking it to a local voting process. Of course this might well require change to state legislation governing the powers of local councils.

Current Priorities of the Turnbull Government

The question of how to fund and finance infrastructure is of central importance to the Turnbull Government. Major infrastructure projects in Australia typically require a Commonwealth contribution to be viable.

A key factor underpinning the involvement of the Commonwealth is the sheer cost of major infrastructure projects. The updated business case for WestConnex in Sydney puts that project's total cost at $16.8 billion. The Melbourne Metro rail project in Melbourne is estimated to cost between nine and eleven billion dollars.

As a consequence, projects of this scale typically require at least some federal government funding if they are to proceed.

The Turnbull Government has a very extensive program of infrastructure investment, the majority of which will go to projects in our major capital cities. Our spending commitment on transport infrastructure is $50 billion, with the expectation that this will leverage total spending of around $125 billion.

However there are limits to the Commonwealth's funding capacity, and we are therefore interested in prompting a discussion about innovative approaches to funding and financing.

One of the fairest ways to fund new infrastructure investment is for the beneficiaries of that infrastructure to contribute to the cost.

Another direction we are interested to explore is the sharing of the value that can be generated through increased property values when new roads or rail links are built.

Value capture is increasingly used internationally to ensure that projects go ahead, residents receive the benefits, but some of the cost is offset though the uplift in value to beneficiaries.

Our investment in transport infrastructure is a critical policy lever in influencing the development of cities.

We want to see a more rigorous and systematic approach to assessing infrastructure projects. And we are very keen to encourage better coordination between land use and transport decisions. This is an important part of the work of Infrastructure Australia. Its job is to provide high quality, evidence-based and independent advice to governments on nationally significant infrastructure—and its planning.

Infrastructure Australia will shortly provide the Australian Government with its 15-year Australian Infrastructure Plan. A 15-year plan for Australian infrastructure is a key part of the Commonwealth government's planning agenda for cities and infrastructure investment.

Another aspect of the plan will be an emphasis on key principles of good infrastructure planning.

If the 15-year plan is one tool the Turnbull Government will use to encourage better coordination of transport infrastructure planning and urban planning, the way governments conduct themselves in relation to major infrastructure projects is another tool. The Western Sydney Airport is a good case study as a starting point.

There has been much good work done over many decades to get to where we are today including protecting the site from incompatible development.

Last year, the Commonwealth and NSW governments announced further cooperative work in relation to the airport and the future of Western Sydney. We will jointly conduct a scoping study into the rail needs of Western Sydney and the airport: what is the right route, when should it be built and how should it be funded.[16]

This is a useful opportunity to consider, in an integrated fashion, transport infrastructure including the airport, the rail network and of course the new roads we are building under the $3.6 billion Western Sydney Infrastructure Plan; and the future urban development of Western Sydney, where an extra one million people are expected to live in twenty years' time.

Conclusion

Today I have sought to explain why the Turnbull Government attaches so much importance to Australia's cities—and why we are setting out some clear policy ambitions to make our cities even better than they are today.

Through the cities agenda, the Government will work with industry and experts in seeking to deliver the best outcome for all Australians.

Transforming our cities will require strong collaboration across the Commonwealth, with all levels of government and with business.

I look forward to hearing the outcomes of this afternoon's workshop, and this group's ongoing engagement in the national cities agenda.

[1] https://www.pm.gov.au/media/2015–09–20/changes-ministry

[2] http://www.eiu.com/public/topical_report.aspx?campaignid=Liveability2015

[3] J Morris, Sydney, 1992

[4] http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS

[5] J-F Kelly and P Donergan, ‘Mapping Australia's economy—Cities as engines of prosperity', Grattan Institute, 2014, p. 1.

[6] Ibid.

[7] Australian Infrastructure Audit, Executive Summary, p 2, http://infrastructureaustralia.gov.au/policy-publications/publications/files/Australian-Infrastructure-Audit-Executive-Summary.pdf

[8] http://www.environment.gov.au/protection/air-quality/national-clean-air-agreement

[9] http://www.environment.gov.au/climate-change/carbon-neutral/ncos/review

[10] http://www.greghunt.com.au/Media/MediaReleases/tabid/86/ArticleType/ArticleView/ArticleID/3623/Default.aspx

[11] http://www.greghunt.com.au/Media/Transcripts/tabid/89/ID/3527/Doorstop-Melbourne.aspx

[12] R Florida, ‘It's time for a Ministry of Cities', Toronto Globe and Mail, http://www.theglobeandmail.com/globe-debate/its-time-for-a-ministry-of-cities/article27163937/

[13] http://www.mav.asn.au/policy-services/procurement/projects/pages/local-government-funding-vehicle.aspx

[14] http://www.futurecities.org.au/sites/fcc/media/387.pdf

[15] http://www.goldcoast.qld.gov.au/rapid-transit-6004.html

[16] http://minister.infrastructure.gov.au/wt/releases/2015/November/wt364_2015.aspx