Fed funding key for major projects

05/02/2018 - 15:56

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SPECIAL REPORT: A move to secure federal cash for road upgrades ahead of a new outer harbour port development is one possible funding fix for a state government battling budget issues.

Fed funding key for major projects
Chris Oughton says upgrades to Rowley Road are a priority. Photo: Attila Csaszar

Advocates of the proposed Westport outer harbour development in Cockburn Sound are planning to press Canberra for road upgrades related to the project as the state government continues to consider how it will proceed.

The calls come as the private sector has expressed interest in the new port as a potential investment opportunity.

The state government has been keen to find alternative sources of funds for its multi-billion-dollar infrastructure program as it grapples with a large debt.

The program is headlined by $3 billion for urban rail and up to $5 billion for a Westport package, with the Metronet rail build to be partly funded by a variety of mechanisms, including cash from the federal government.

Another is value capture, a levy on landowners who earn a capital gain from proximity to infrastructure investments.

It’s still early days for Westport, with the state government appointing Freight and Logistic Council WA chair Nicole Lockwood to head a taskforce analysing the project.

One funding solution put forward by supporters has been for the federal government to reallocate money earmarked for the Perth Freight Link (Roe 8 and 9), currently a contingent liability in the federal budget.

The federal government’s position has been that it will allocate the money to a Roe Highway expansion or to a similar project that achieves the same aims, and advocates of the outer harbour are pitching roadways into a new port as fitting the bill.

Infranomics director Cameron Edwards made the funding reallocation the first recommendation in a recent report funded by the Kwinana Industries Council and presented last week to the Westport taskforce.

Speaking to Business News, Mr Edwards said the money would be needed to upgrade Rowley and Anketell roads, which run east-west into Kwinana’s industrial zone.

Both roads would be grade separated, so trucks would travel down Tonkin Highway to Armadale and turn west as the last leg to the port.

The report says upgrading Rowley and Anketell roads should be a top priority for the state government.

Kwinana Industries Council director Chris Oughton said the roads should also be prioritised.

“The critical transport infrastructure that signs the deal for a new port at Kwinana is the (upgrade) of Rowley Road,” Mr Oughton said.

“For me, that’s the new Perth Freight Link.”

Freight access to the Kwinana industrial area was currently severely constrained, he said, with rail in particular basically at capacity.

“We’re hoping the Westport project process (will) advance resolution of these constraints for industry.”

Western Harbour Alliance founder Kim Dravnieks said she hoped to make the funding of the port and associated infrastructure an issue ahead of the next federal election, due in 2019.

Ms Dravnieks was campaign manager of the Rethink the Link campaign against the Perth Freight Link.

She said there had been 20 years of delays to the building of a new port.

“We really think there’s an urgency, there’s a federal election coming up,” Ms Dravnieks told Business News.

“We could be utilising this to really talk to the feds to say get on board and get behind this.

“We need to make sure by the next state election we’ve got some runs on the board.

“This is a really key project for Western Australia.”

Improved rail connections into Kwinana, potentially with the ability to double stack containers, was a further transport link needed for the port, she said.

Infranomics’s Mr Edwards has other fundraising mechanisms in mind, too.

“It’s all about the land,” Mr Edwards said.

At Kwinana, the state government could use value capture, which has already been flagged for use in Metronet, to recoup revenue, he said.

Mr Edwards said the existing Fremantle port would also provide opportunities.

“If you go to South Quay at the moment you’ll see perhaps the world’s most expensive car park (at the car import facility);  you won’t find a car park anywhere in the world with such a high opportunity cost,” he said.

“That land, if it was rezoned ... have a look at Elizabeth Quay for example; that land could be worth anything from $4,000 to $10,000 per square metre.”

Business News understands numerous developers have expressed interest in the land at South Quay.

Other major priorities flagged in the Infranomics report include: federal government funding for common-user facilities such as rail and shipping channels; establishing a customs-free special economic zone over the Western Trade Coast; and prioritisation of upgrades to Kwinana Bulk Jetty and Bulk Terminal.

One knock-on effect of the state government’s ongoing investigation into Westport will be on capital expenditure at Fremantle Ports’ existing inner harbour.

Fremantle Ports’ annual report showed that some investment was needed in order to allow bigger vessels into the existing inner harbour, including a deepening of the harbour and bigger cranes.

The return on investment depends in good part on the timeframe for the outer harbour.

Business News understands numerous private businesses are keen to invest in the building of the new port.

They include Arc Infrastructure, the superannuation funds invested in Perth Airport (Utilities Trust of Australia, The Future Fund, Australian Super, The Infrastructure Fund, Sunsuper), and numerous overseas entities.

Arc, which manages the state’s south-western rail network, will also have representation on the Westport taskforce.

Arc Infrastructure chief executive Paul Larsen said it would potentially make sense for the business, or parent company Brookfield, to be involved in a port consortium as it would mean vertical integration of the supply chain.

“The capacity of the railway and the investment in the railway needs to match up with the capacity of the infrastructure of the port,” Mr Larsen told Business News.

“If you have a mismatch in that capacity, your supply chain may fail.

“We’re a logical investor alongside others in the port infrastructure.

“Those other parties know if we’re an investor alongside them that we’ll (also) invest in the railway to make it happen.”

Other potential Arc investments would be into multi-user freight terminals, so cargo could leave the port via train to a terminal from which it could be distributed by truck.

Three potential terminals are under investigation, including in Mundijong, Kenwick, and Bullsbrook, with Sirona Capital taking the lead on the latter.

Mr Larsen said there was spare capacity for rail freight into the existing Fremantle Port, but major complications because tracks were through a residential area and shared space with passenger trains.

He said the state government’s increased container rail subsidy would help get more freight off trucks.

“We have got the best percentage of freight containers on rail of any capital city… (and) we’re hoping to do more,” Mr Larsen said.

Urban rail

Work for two smaller stages of the Metronet rail program is well under way, with the Public Transport Authority at the project definition stage of the Butler to Yanchep extension and Cockburn to Thornlie link.

The two projects will cost about $1 billion combined, most of which is already budgeted, with both to be completed in the 2022 financial year.

The Public Transport Authority has planned for about $5 billion of capital works going forward.

Work on the Morley-Ellenbrook rail line is at a much earlier stage, however.

Business News understands the state government is yet to decide the alignment of the line, with potential for use of a tunnel from the city north to Morley creating a new spoke in Perth’s rail network.

Such a move would potentially be more costly than the alternative – a spur to Morley off the Midland line, which Labor projected would cost about $860 million during last year’s election campaign.

Either way, the state government has not yet budgeted for the construction of the line.

The winner of a tender for engineering and planning of the line should be announced in coming weeks, Business News understands.

The use of value capture for Metronet was one funding proposal mooted during last year’s election campaign.

Consultancy Urbis regional director Ray Haeren told Business News that value capture in its purest form would be politically and administratively difficult, with an infrastructure contribution charge more likely.

Rather than taxing existing residents for capital gains, it meant only developers of future projects would pay a levy.

“Value capture is something that all the major Australian cities are struggling with and no-one has actually got it sorted out yet,” Mr Haeren said.

“The difficulty is who is the benefactor … is it the person who develops, or is it the person who owned the site when the opportunity arose, when the infrastructure was announced?

“You need to get those systems in place before you announce a new line, that ship has sailed.”

A practice known as value uplift, using public landholdings near infrastructure projects, was another option, he said.

In Victoria, contractors removing level crossings were given nearby land to develop, reducing the cash cost of work for the government.

Mr Haeren said there were opportunities in Metronet to develop areas around stations into precincts, something the state government seemed to be getting right so far.

“A station is a station, it serves a particular function,” he said.

“The biggest potential is the development you can get to happen around that station … (which can) revitalise an entire area.”

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