Congestion Inquiry

Introduction.

The Victorian Competition and Efficiency Commission is conducting an inquiry into transport congestion. While this is an urban problem, the impact of possible actions that may come from this inquiry are likely to have a devastating effect on non-metropolitan people.

Although the terms of reference include congestion in regional cities, there is no doubt that congestion in the Melbourne and metropolitan area will dominate the evidence. It is most probable that the solutions proposed will call on the State government (probably also the Commonwealth government) to spend large sums of money to rectify the problems.

There is already the example of the Commonwealth Coalition government denying funds for roads to the Victorian government on the lame excuse that it had promised to construct a particular road from taxpayer funds. If the State government is to be disciplined for any such failure, that is a decision for Victorians, not the Coalition in Canberra.

It needs to be pointed out that, as a wartime measure during World War 2, uniform taxation was introduced replacing a system under which each State levied its own income tax separately from the Commonwealth. Although the Victorian and New South Wales governments have complained about the formula under which the States have been reimbursed ever since, in the past they have declined offers by the Commonwealth to return income taxing powers to the States.

The relevance of this situation to this inquiry needs explanation. The Commonwealth and State governments have over recent years implemented "a fairer tax system". On that basis, it is assumed that taxes are raised fairly across all sections of the community. It is also assumed that in determining the disbursement formula, the allocation to each State and Territory is also fair. Governments of all persuasions have recognised that the larger States need a bigger share of the cake.

That being so, any additional money that may be allocated to tackle Melbourne's traffic congestion will be at the expense of country Victorians in the case of State funds and all the rest of Australia in the case of Commonwealth funds. It appears that neither of these groups of people have registered any concern at the potential impact on the funds that they need to maintain services, such as roads, schools, hospitals etc. should State and/or Commonwealth funds be so allocated.

The problem for country people is that the terms of reference were drawn up by city people, the Commissioners and staff are almost certainly city people, the bulk of the evidence will be given by city people, many submissions coming from very wealthy municipal councils. The real beneficiaries have no need to plead their cause because the odds are well stacked in their favour. Those who will be most disadvantaged are trying to deal with other issues, such as bushfires and drought. For them, congestion is not a daily problem. There is no doubt that it will cost a great deal of money to solve problems of congestion in any big city but, in the case of metropolitan Melbourne, there is a very large source of untapped revenue available that would comply with all principles of justice and fairness. This is explained below.

The most likely argument is that Melbourne's congestion can be solved or alleviated by improving its public transport network. It has been stated in the past that the purpose of the public transport subsidy is to relieve the pressure for more money to be spent on roads. The fact that Melbourne's train and tram network already costs Victorians $2,146,000,000 per annum to run(see Auditor General's Report, Sept. 2005) is unlikely to be mentioned.(N.B. This figure was revealed in the Victorian Auditor General's Report on Franchising Melbourne's train and tram system presented to Parliament in Sept 2005. A search of media outlets a month later returned 0 hits on this fact.) This is more than the Commonwealth, State and Local Governments spend on all roads throughout the State.

To have this enormous amount allocated year after year and then demand more funds for freeways is double dipping into taxpayers' funds. There is strong evidence that Melbourne is not only getting a far larger share of the cake than it deserves, it is grabbing all the cream as well.

Residents of the metropolitan area and country alike have been brain washed into believing the public transport system and freeways are for their benefit. Such expenditure is equally if not more valuable to property owners the full length of every specific route. A quick look at a map of rail or road systems shows that all the routes lead to Melbourne's CBD. Melbourne and its contiguous municipalities most likely reap 50% or more of the benefit of expenditure on each route.

A system of rating applying a uniform rate in the dollar over all municipalities served by the regional transport system and regional arterial roads would raise sufficient revenue. This could be done without the overall rate burden exceeding that already paid by some rural ratepayers. This should cover the full cost, less government contribution for concession holders, of running the system, not just measures to deal with congestion. To ensure that the burden falls where the benefit is greatest, a system of rating already used in Australia would ensure that those who cause the congestion are made to pay.

This uses unimproved value (or site value) which does not take improvements on each property into account. The Australian Capital Territory government uses this system in conjunction with three categories of properties: - commercial, residential and farm. Commercial rate in the dollar is three times the residential and six times the farm rate. Like the Australian Capital Territory, the rate in the dollar should be uniform across the whole State. The caregories of commercial, residential and farm could be extended to include prpoperties that contribute disproportionatly to the demand for roads and public transport as well as other services such as water and electricity. A property used for a supermarket, for example, that depends on publicly provided facilities to suck in customers from miles around would, most likely, need to be in a special category. Businesses in its catchment area are, in fact, subsidising their competitors opperating within the supermarket. As National Competition Policy claims subsidies distort the economy and cause a misallocation of resources.

Governments on both sides of the political fence can see this assertion in evidence in the country but are blind to the most evident illustration of all. The construction of roads and subsidisation of public transport do not relieve congestion - it causes it - and misallocates resouces from country to city. It is an estabished fact that any road space freed up by attracting commuters to cheap public transport is taken up very quickly by people attrcted to the area by  better access to the CBD.

Rural councillors will protest that this will destroy their autonomy but rural ratepayers are paying dearly for a largely illusory benefit. The valuation of land should be the only variable across the whole State. Another objection is that country councils would have to depend on a government body to ensure they get their fair share. The facts show that the present system does not meet that criteria. Revenue raised from local government rates represents only 5% of the total tax take. Just how fairly the other 95% is spent across the whole nation is very apparent.

It may take a calamity in local government funding to alert country people what is really going on. At present, there is a government-induced creeping paralysis slowly destroying rural industries and country towns. There is a constant inference that it is all the fault of country people - a classic case of blaming the victim.

The ACT model reflects the difference of the various classes of property in the use of publicly provided facilities, and probably coincidently, reflects the contribution of each sector to congestion. There is no doubt that big business interests in the CBD have a very powerful vested interest in maintaining cheap fares into the city to lure customers away from their suburban competitors. A high proportion of small businesses in the CBD are likely to be paying rent based on property values inflated by the fact that the CBD does not pay its fair share of the costs of operating the city.

Ordinary citizens of country and metropolitan areas alike should also be made aware that all the major political parties receive substantial donations from "the city". Some make sure they back both sides of politics to ensure their interests are not forgotten during government deliberations.

An extract from a comprehensive submission by SGS Economics and Planning, which is available on the Competition and Efficiency Commissions' website, states: -

Betterment capture refers to the use of land value increments associated with the provision of infrastructure to fund the infrastructure in question or at least re-coup some of its costs. The discussion here is limited to the increase in land values associated with the provision of transport infrastructure.

The Bay Area Rapid Transit (BART) system is a predominately underground heavy rail network that services San Francisco, Oakland, Richmond and various other locations in the region. Originally, BART was to be financed by a tax imposed on all properties in the San Francisco Bay Area Rapid Transit District, which comprised the five metropolitan counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo.

In 1957, the District was granted a taxing power of five cents per $100 of assessed valuation. It also had authority to levy property taxes to support a general obligation bond issue, if approved by District voters.

Unfortunately, this funding approach was abandoned shortly afterwards when two of the municipalities making up the District withdrew their support for the rail system. Notwithstanding this, a recent study led by Cambridge Systematics Inc. traces how betterment taxes would have generated significant funding streams if they were implemented. These are summarised in the tables overleaf.

These figures document that BART has generated some US$225 million in land value increases in station precincts between 1973 and 1993. The key beneficiaries of these increases in property values appear to be central city offices - representing approximately 40% of the total. Single-family suburban homes were also a significant grouping as was suburban retail and urban single family housing. Other examples of betterment capture, whether it be through taxation measures or through direct project participation by public agencies, include the experiences in Portland (Trimet 1999), Japan (Tsukada and Kuranami 1990), London, Manchester and Los Angeles (Schuerer et al. 2000), Copenhagen and Spain (Farrell 1999). The premise behind each of the examples is the same - land value increments can be efficiently captured to fund transport infrastructure investments.

This suggests that, far from being a hare-brained scheme dreamed up by an elderly ex-politician, this method of financing big city infrastructure is common practise. It may well be 'world's best practise', which the Commission is supposed to take into consideration. That term is frequently used by governments but who decides what it is?

There is no doubt that, if the State government was operating in the interests of all Victorians, it could establish a Metropolitan Transit Authority, financed by a precept on local government rates modelled on the system of rating as enacted in the Australian Capital Territory to apportion the charge according to the degree each category of property contributes to the congestion.

This would ensure the burden fell on the large commercial properties that cause the problem but have little impact on residential properties. A likely consequence of giving the metropolitan area ownership of its own transport network would be pride of ownership, less fare evasion and vandalism.

The big advantage to all Victorians would be $2 billion extra for the State to spend on hospitals, the disadvantaged and on all Victorians.

Bridges and tunnels.

The Melbourne Underground Rail Loop Authority (MURLA) was established to construct the City Loop. It was to be financed on the basis of 25% by the Melbourne City Council, 25% by the Melbourne and Metropolitan Board of Works which was financed, at least in part, by rates and 50% by the State government. The scheme was not even completed before the rumblings started. A few short years and the shares of the respective metropolitan authorities were reduced to 10% and the State carried 80%.

Metropolitan authorities do not have a very good record of sticking with a deal even if it is entrenched in law. The following extract explains it all.

Melbourne's overwhelming dominance of the state of Victoria's population and economy means the Victorian state government is also effectively the city government of greater Melbourne. Most city-wide government activities are controlled by the state government. These include public transport, main roads, traffic control, policing, education above preschool level, and planning of major infrastructure projects. Because three quarters of Victoria's population lives in Melbourne, state governments have traditionally been reluctant to allow the development of city-wide governmental bodies, which would tend to create a rival to the state government. For this reason the Melbourne and Metropolitan Board of Works, which had become a powerful semi-autonomous authority, was abolished in 1992.

This extract confirms that the State government is carrying the cost of many services that in other cities around the world are carried by local government. This distorts the economy by artificially increasing the international competitiveness of Melbourne and disadvantages that of country based industries, including farmers. Most big cities in other countries carry their own costs of development, not just public transport and regional roads, but also traffic control, police and jails in the United States.

In Britain there are 43 police forces with Scotland Yard providing an overall backup in the case of major crime. This model may not be appropriate in Victoria but the fact is that the cost of traffic control, crowd control and the like is carried by local communities in many parts of the world. The Victorian system is a huge bonus for metropolitan Melbourne.

National Competition Policy is escalating the problems for country people even further. It states specifically that subsidies distort the economy and causes the misallocation of resources. In 1966, the Victorian State Electricity Commission introduced uniform electricity tariffs across the State. This meant that all consumers shared the costs of generation, transmission and distribution of electric power.

This was regarded as "cross subsidization". A coalition government 'privatised' the industry and broke it up into several distributors. Governments close their eyes to the fact that this means that country people inevitably cross subsidise other country people but city people are allowed to benefit from living closely together. However, when this crowding causes congestion, governments use tax payers' money to solve the problem. This policy is being reflected in Telecom charges and there is probably more to come.

Despite freedom of the press, the news media is also controlled by city interests. Correspondence on these issues does not see the light of day. The mass media also has a vested interest in concentrating population in the smallest possible area. It reduces their costs of distribution also.

There was never a greater need for independent Members of Parliament who are prepared to put the interest of country people first. The party system has failed us.