During the November election in the US many people voted for local initiatives to pay for the infrastructure their town or city needed. In some cases, they voted to increase sales tax in order fund a 20-year transport improvement plan
Look out the window at all the houses, roads, railways and buildings we’ve built over the past 230 years. Think of our schools and universities, the hospitals, the Sydney Harbour Bridge, our magnificent Opera House. Now imagine having to build all of that again – but in only 40 years. That’s the task before us as a city as our population grows.
How we pay for it all is what keeps our treasury officials awake at night. How are we going to build a city our kids can afford to live in? And how will we keep them connected to services and jobs?
For some types of infrastructure, this won’t be much of a problem because we have a good funding model: the user pays. Utilities like electricity and water, for example, have been able to grow in lockstep with population and demand. The more houses we connect to power and water, the more people we can charge. Growth matches funding.
Sometimes having a secure funding stream can even lead to over-investment. Most major cities in Australia have built recently new desalination plants to augment their water supplies. We built them, whether needed or not, because we could pay for them with a levy in every household water bill.
But this is not true for all infrastructure.
Public transport expansion, for example, has not matched growth. We now struggle with overcrowded trains and buses. While we do have a user charge, the price of a ticket is nowhere near enough to cover the cost of running the service. So the shortfall is subsidised by taxpayers.
This leads to a dilemma: the more we spend on expanding our transport network, the greater the subsidy taxpayers pay to keep it running. And, unlike utilities, transport services are not a universal. Because they are primarily used in urban areas, people outside metropolitan Sydney understandably don’t like paying for a service they don’t use.
So we have long-term investment decline in some types of infrastructure, and over-investment in others. The state government recognises this, and has been working to reverse the trend with new trains and light rail. But Sydney’s growth requires new ways of funding the future. The question is: how?
One answer may have been provided by our friends in America at their recent election. While attention was understandably focused on the historic rise of Donald Trump, a story just as relevant was playing out in cities and towns across the US.
American cities tend to have even worse public transport than Australia. Perhaps because their funding problem is even more acute, they have been motived to come up with innovative ways to change things.
During their November election, many voted for local initiatives to pay for the infrastructure their town or city needed. In some cases, they voted to increase sales tax (their GST equivalent) in order fund a 20-year transport improvement plan.
In other cases, they voted in favour of increasing land tax to pay for the expansion of light rail and rapid bus transport. Alameda County in California voted for a 30-year funding measure to improve public transport. Seattle voted to expand buses. San Francisco approved multiple measures funding public transport, cycling infrastructure, and affordable housing.
In short, they are reaching into their own pockets to pay for the things they want. In plebiscites and binding referenda, local citizens imposed taxes upon themselves to fund transport. Importantly they accepted that it is cities themselves that have to pay for the things that cities need.
Sydney should draw inspiration. One idea is a metropolitan-wide land tax, the proceeds of which could be locked to expanding our train network. As Sydney grows, the tax would naturally increase, providing more money to expand the network further. The beneficiaries of the transport, Sydneysiders, would be the only ones to pay.
Of course, no one relishes paying taxes, and our politicians know it. Yet if ‘Big Government’-wary Americans can see the sense, surely there is hope?
The key is moving to a system under which Sydneysiders get a vote on the future of their city. We should be able to impose upon ourselves the responsibility of paying for the things we need.
Dr Tim Williams is chief executive officer, Committee for Sydney