So what was discussed at the finance component of the Bays Precinct International Summit last week? Here’s a bird’s eye view from one audience member.
The Bays Precinct Summit was an international symposium of the brightest and best institutional and academic minds from Australia and internationally, brought together by UrbanGrowth NSW to deliberate and consider the opportunities for the future of the urban regeneration area two kilometres to the south west of the CBD.
The Bays Precinct is 80 hectares of redevelopment land, which includes 5.5 kilometres of waterfront in White Bay, Johnstons Bay, Rozelle Bay and Blackwattle Bay, and 94 ha of water.
The phrase coined for the preparation of the renewal/regeneration/reimagining strategy for this area was “Make New, Think New, Fund New, Build New, Live New”.
The entry into this world created by UrbanGrowth initially appeared over the top for an urban renewal conference, but after opening statements from the Planning Minister Pru Goward, Treasurer Andrew Constance, UrbanGrowth board chairman John Brogden and chief executive David Pitchford, it became clear that this NSW government was sincerely looking for a new way forward for redevelopment of underutilised parts of the state with no preconceptions of the outcomes of the discussions that were going to take place.
The Finance and Investment International Summit preceded the main Bays Precinct summit. It included Australian and International presenters from the fields of public institutional redevelopment and infrastructure; private investment and financing; large scale property development; consulting economists; and international academia.
The focus of the first session was on developing sustainable infrastructure funding sources that were outside of the budgetary and electoral cycles. This was emphasised as critical to providing the private sector with the confidence to invest in the infrastructure and redevelopment market. The use of project specific bond issues and the use of value capture methods had been applied with success internationally, and had potential for redevelopment projects in NSW, the speakers said.
The second session focused on the use of tax increment financing in the United States, with positive examples from Denver Union Station in Colorado, and ones that were less successful from the redevelopment of Hudson Yards in New York City. Both examples discussed the use of long term TIF-based bond issue, and the potential for the redevelopment costs to be partially funded off the government’s balance sheet.
The morning session was rounded out with an open forum. The issue of redevelopment site risks, such as contamination, heritage and infrastructure, was elevated as a critical issue. Government de-risking the site was seen as a priority for the private sector, as it is really only capable of taking commercial development and real estate market risk, and the inclusion of other risks significantly increases the costs of project financing.
Another priority raised by the private finance sector was for the project finance team to be brought in as early as possible to ensure that all the relevant finance risks be addressed as early as possible to avoid delay, or finance risk based conflicts at the procurement phase of the project.
The afternoon session focused on the limitations of the government funding available for redevelopment, and the overarching view that the redevelopment of government-owned land should effectively come at no net financial cost to government. This was reinforced by the view that redevelopment must focus on financial and economic value creation. This enables alternative funding mechanisms to capture this value by matching the project costs to their beneficiaries.
The value creation based model was reinforced by the view that redevelopment should be an economically efficient investment in the city, rather than simply the consumption of a public asset. This redevelopment investment based focus is achieved by optimising the site’s employment opportunities, and this in turn would enable the investment in provision of transit to the site, for instance. To facilitate the capture of this value created, NSW Treasury will need to take a lead role in developing these funding sources.
The Finance and Investment International Summit concluded with a visit to the Bays Precinct and a broad discussion of the opportunities available to the sites. This formed a strong and realistic basis to what is achievable from the redevelopment and a fantastic platform for the rest of the summit.
James McIntosh is a transport & land use planner and economist. He has 16 years of professional experience in multidisciplinary engineering and environmental consultancies in Australia and internationally with SKM and pitt&sherry, and with his own firm, McIntosh Consulting.