source: business news

Infrastructure spend under fire

A rail tunnel under the Swan River is a key element of the Forrestfield Airport Link

The state government's infrastructure spending priorities have been called into question, with a new report showing its new big ticket transport items – the $1.6 billion Perth Freight Link and the $2 billion Forrestfield Airport Link – do not stack up economically when compared to other potential projects.

The findings are part of an Urbis-produced report commissioned by the Property Council of Australia, which evaluated the economic impact and potential private sector spend which would be produced by a range of new infrastructure projects needed in Western Australia.

Consultation with industry groups identified a list of ten projects which would provide the most benefit to the state, a list which did not include the rail line to the airport or the Perth Freight Link.
Criteria under which the projects were assessed included the development of new markets, new businesses or industries, improving the supply chain, productivity enhancement and improvements in economies of scale.

The ten projects identified to provide the most benefit were the MAX Light Rail network, the Western Trade Coast, the Peel Economic and Environmental Initiative, the Breton Bay Deep Water Port, the Bunbury Very Fast Train, the Perth to Darwin Highway, the extension of the Mitchell Freeway, the Ellenbrook Rail Project and the Mundaring Infill Sewer Project.

Property Council of Australia WA executive director Joe Lenzo said the omission of the Perth Freight Link in particular was an illustration that the project simply did not stack up in the eyes of industry.
Mr Lenzo said the report's findings clearly showed the need for an independent infrastructure body to be established in WA, in order for the state government to get the most bang for its buck and remove politics from the decision making process.

"If you have that sort of body, these are the sorts of criteria that they would take into consideration to build a pipeline of infrastructure projects that would actually bring some private sector investment," Mr Lenzo told Business News.

"That's what we haven't got and this actually demonstrates that if you put it through an expert, independent lens you are going to do a lot better for the Western Australian community than the current process that we go through."

Mr Lenzo said there also needed to be a new evaluation of how infrastructure projects were funded in Western Australia, urging the state government to embrace private sector involvement instead of shouldering all the responsibility itself.

"In my opinion, it's inevitable that we move into that area where there is going to be private sector investment in infrastructure development," Mr Lenzo said.

"The private sector will invest as long as they see there is some returns for them and they see some economic benefit coming out for them."

Mr Lenzo said alternative funding methodologies should be considered, such as toll roads to fund major transport links.

"There seems to be a mindset that we're not allowed to talk about things like that, that infrastructure needs to be funded by a very old-fashioned and unsustainable way of increasing taxes, getting some money and doing it, and if we haven't got the money, we won't do it," he said.

"That is a pretty old fashioned and blinkered view of how infrastructure is funded and developed."
Urbis director of economics and market research, David Cresp, said the aim of the report, which he described as a high-level evaluation based on publicly available information, was to provide some clarity to the public around why governments should commit to certain infrastructure projects over others.

"What we're really advocating is there should be a process that these types of projects are put through," Mr Cresp said.

"There should be some availability to public scrutiny, and if you're coming out and announcing that you're building a train to the airport for example, tell us what benefits is it providing, how does it compare to other projects that you looked at to decide it was the project that you are going to spend in excess of $2 billion on and why is it the project that it's being spent on?"

Of the ten projects identified in the report, it was the highly-debated and delayed MAX Light Rail that was touted as potentially producing the most benefit for the state.

The report showed for the $2.1 billion estimate capital cost of a light rail network, $960 million in property development would be unlocked, and $5.5 billion in economic activity would be enabled over the next 20 years.

Productivity gains would also be provided from reduced congestion, with traffic issues expected to cost Perth industry $16 billion in 2031 if there is no additional transport capacity added to the network, while land values would be uplifted at an average rate of 9.5 per cent.

Mr Cresp said it was important that the project was not assessed and discussed in the public arena as simply a means of transporting commuters from the suburbs to the city.

"It's an enabling infrastructure, and if you get it right, you can have transport oriented development around the stops," he said.

"We need to think less about what's going to be the cheapest and have a look at what is going to be the solution that is going to enable that private sector expenditure and best enable the infrastructure to be built around the stops.

"If you look at the totality of the picture, the question of what is the cheapest way to do it becomes less important.

"We're also not saying a really well thought out bus rapid transit system couldn't deliver those benefits

"It certainly could, but you have to think about he totality of the picture, which is not just moving people from A to B, it's about being an enabler of development around stops and its about assisting with the city providing density and achieving our targets for Perth and Peel @ 3.5 million."

Urbis director of economics Nicki Hutley said the second phase of the light rail network, the 'Knowledge Arc' to connect the city's universities and hospitals, would also provide significant benefits outside of more efficient transport.

Ms Hutley said one of the strongest growth areas in the Australian and WA economies was what she described as the knowledge economy – education and health.

"That is where we still have a comparative advantage, and if we get the capital funding right for that, it would be a huge growth area for the state," Ms Hutley told Business News.

"Being able to connect and promote the connectivity of Curtin University, UWA and the hospitals makes a huge amount of sense.

"We're seeing this unfolding economic activity in health and education, where we should have significant export potential.

"It provides a nice balance to the economy and supports that knowledge and health economy, which is two areas that are growing quite significantly."

See the original article in all its glory HERE at Business News

Freo port deal pivotal for freight planning

source: business news

  Freo port deal pivotal for freight planning

SPECIAL REPORT: The privatisation of Fremantle Ports will have a major bearing on the future shape of freight movements across Perth.
In 2007, when in opposition in Western Australia, the Liberal Party came up with a radical policy to phase out commercial shipping activity at Fremantle in favour of a new outer harbour at Cockburn Sound.

The policy was the brainchild of Simon O’Brien, who had a relatively short stint in the ministry after the change of government, before losing favour with Premier Coin Barnett.
As the Liberals settled in to the government parliamentary benches, they reverted to the orthodox policy that favoured development of an outer harbour as an overflow port after Fremantle reached its capacity – at some indeterminate time in the future.

That is still the accepted policy; yet last week Transport Minster Dean Nalder was musing on the possibility of Fremantle being closed to commercial shipping.

His comments were made in the midst of a Committee for Economic Development of Australia transport forum, where Mr Nalder was defending the $1.6 billion Perth Freight Link project.
Critics believe the freight link heads in the wrong direction, because it services the inner harbour at Fremantle rather than looking to the future at Cockburn Sound.

Mr Nalder believes it makes sense, irrespective of future port developments.

“If we started yesterday, it would take a minimum of 10 years to develop the outer harbour,” Mr Nalder told the CEDA forum.

“On top of that, if a future government decided to transfer completely to the outer harbour, and decided there was another use, and a better use for the community, for the inner harbour, that would take a number of years as well.

“So we’re talking 15, 20 years before you could transition fully to an outer harbour project.
“In the meantime, we’re going to see the number of trucks coming out of Fremantle port in the next 10 to 15 years more than double, we’ll start seeing 6,000 trucks a day.”
He then expanded on this theme.

“If you were to remove the inner harbour out of Fremantle, you will not be replacing it with lawn.
“It will be high-density residential and commercial, and the number I’ve heard is that there will be up to 20,000 additional people, and I think that will be quite dynamic for Fremantle.”
Either way, the minister believes improved road links to Fremantle will be needed.
Mr Nalder said he was seeking more advice on how long it would take to fully transition to an outer harbour.

Privatisation
And clearly he won’t be the only one.

Banking group Rothschild and accounting firm Deloitte have been engaged by the state government to advise on the privatisation of Fremantle Ports – for likely proceeds of $2 billion.

The government is looking to link the sale of the existing port facilities with development of the outer harbour, at a cost of several billion dollars.

Treasurer Mike Nahan told a budget briefing in May the government would look to package-up land at Cockburn Sound, including some held by LandCorp and Synergy, to facilitate the outer harbour development.

This would draw upon extensive planning undertaken a decade ago, when then planning and infrastructure minister, Alannah MacTiernan, saw the outer harbour project as a priority.
Ms MacTiernan actually announced a preferred development option in 2006, with the outer harbour to be built north of the BP oil refinery at James Point.

Dr Nahan believes the outer harbour development opportunity will enhance the privatisation deal.
“The right to build, own and operate an overflow port is an extremely valuable asset, it will enhance the value, not detract from it,” Dr Nahan told the budget briefing.

Labor ports spokesperson Bill Johnston believes the sale process must specify the development obligations on the purchaser, to ensure the outer harbour proceeds.

“It would be in the interests of the purchaser to keep the inner harbour as a monopoly,” Mr Johnston said.

How long?
Mr Nalder’s view is that it will be 15 years before the inner harbour reaches capacity.
The port handled 703,000 twenty-foot equivalent units last year, with TEUs the industry measure for container freight.

The port’s capacity is generally seen to be about 1.3 million TEUs, a year though Mr Nalder said the stevedores – DP World and Patrick – had been telling him they could handle up to 1.8 million TEUs.
The state government is aiming to get more of this freight on to rail, with the aspirational target of 30 per cent about double the current level.

That still leaves most containers leaving the port on trucks, which is where the Perth Freight Link is meant to help.

Perth Freight Link is one of three major road projects, along with Gateway and Northlink, designed to create a freight corridor from Fremantle to north of Perth (see map).

Mr Nalder believes trucking companies using these roads will be willing to pay a freight levy, or toll, because the improved road network will deliver substantial efficiency gains.

However, the freight link has upset environmental groups, which are concerned the Roe 8 extension will damage the Beeliar wetlands.

It has also upset residents near Leach Highway, whose houses might be resumed.

That is why the government has asked the private consortia bidding to build the project to evaluate alternative routes for stage 2, including a tunnel.

Even if the government addresses all of these challenges, it still faces a major hurdle – how to manage the extra truck movements across Stirling Bridge and through North Fremantle.

Mr Nalder said last week the government had evaluated extending a tunnel under the Swan River, but concluded that was not viable.

That has led to speculation the government will need to build a new bridge across the Swan River, lifting the project’s total cost closer to $2 billion.

Labor’s transport spokesperson, Rita Saffioti, believes the problems facing Perth Freight Link reflect the genesis of the project.

“It wasn’t on the agenda at the 2013 state election,” Ms Saffioti said.

“It wasn’t a priority, it wasn’t funded.”

She said it was pulled together with the Abbott government, which was opposed to funding metro rail projects but wanted to find an alternative infrastructure development for Perth.

“Now it’s a massive priority,” Ms Saffioti said.

“It’s another example of chaotic and dysfunctional planning.”

Ms MacTiernan, who has been endeavouring to obtain documents used in the planning and evaluation of the Freight Link, suspects planning did not get underway until March 2014, just two months before the project was announced.

That is based on one of the few pieces of information thast has been released. A schedule of correspondence shows the first correspondence on Freight Link was in March 2014.

The original story can be viewed at Business News HERE

Backing for freight project

source: business news

Backing for freight project

 


Infrastructure Australia has released its preliminary assessment of the Perth Freight Link, which concludes the project will deliver net economic benefits but also raises questions about its cost. 

The release of the five-page ‘assessment brief’ has followed mounting political controversy over the project, which is budgeted by the state government to cost $1.575 billion.

The IA report says the capital cost will be $1.742 billion.

A state government spokespeson said it is normal practice to prepare two estimates for Infrastructure Australia - is $1.575 billion considered the most probable cost, while $1.742 billion is a more conservative estimate.

IA said Main Roads WA, as the project proponent, had provided “good evidence that access to port gateways in Perth is a nationally significant problem”.

“In addition, IA has a high level of confidence that the proposed solution will deliver net economic benefits.”

The IA assessment, dated May 2015, was based on the Barnett government’s original plan - an extension of Roe Highway, followed by upgrades to Stock Road and Leach Highway.
The state government is currently evaluating whether the stage 2 development should include a tunnel under residential areas south-east of Fremantle.

Critics of the project believe the government will also need to build a larger bridge over the Swan River to avoid a major logjam at Stirling Bridge.


Federal Labor MP Alannah MacTiernan said the IA assessment raised more questions than it answered.

“The IA assessment already shows a $167 million cost blowout on the project – before a shovel has even hit the ground or a single contract has been let,” she said.

“The assessment did not include the $700 million-plus needed to tunnel through Hamilton Hill and build a new bridge over the Swan River, nor the cost of tolling infrastructure.”

The IA report said the multi-criteria assessment used for the project has significant weaknesses, including a bias against low-cost options.

The federal government agency noted that its assessment was based on preliminary risk assessments and construction timelines.

Despite this, IA was satisfied the proposed solution was preferable to one lower-cost option - a $100 million upgrade of Leach Highway.

It was also satisfied the freight link would continue to have economic merit if an ‘outer harbour’ was developed at Cockburn Sound.

This supports Transport Minister Dean Nalder’s argument the project makes sense, irrespective of future port developments.

Critics believe spending should be focused on freight transport links to Cockburn Sound, which is expected to become the site for Perth’s major commercial shipping terminal over the next 10-20 years.

IA said Main Roads could investigate broadening the planned freight levy so that it applied to more than heavy freight trucks.

It also commented on the state government’s plan to hold or sell the future revenue stream from the freight levy.

“Analysis shows that this maximises the expected value of the revenue stream, although this approach results in the state government taking on considerable greenfields traffic risk,” the IA report states.

“The proponent should provide further detail, or present a sensitivity analysis so this risk can be evaluated.”

the original story is available from Business News HERE