Urban Infrastructure E-Book

K. Wellman

• Herausgeber: John Wiley & Sons
• Kategorie: Wissenschaft und neue Technologien
• Sprache: Englisch

Seitenzahl: 614

Veröffentlichungsjahr: 2012

Beschreibung

The magnitude of investment, the long time-frames involved and the influence of pre-existing infrastructure on urban infrastructure provision make a co-ordinated approach to forward-planning, policy development and implementation essential.

There are major challenges in making decisions on urban infrastructure and getting management structures and processes in place. Getting it right generates long-term dividends; getting it wrong involves major costs, often borne by taxpayers.

Urban Infrastructure: finance and management is posited on a strong belief that the physical structure of cities and the efficiency of infrastructure services delivered are driven by efficiencies within individual infrastructure sectors, lessons learnt across these sectors and the ability to co-ordinate and integrate sectors to generate economies of scale.  This necessitates an interdisciplinary approach, integrating knowledge from finance, governance, planning and management as well as the characteristics of the individual urban infrastructure sectors involved. Here it is not only about getting the initial decisions and policy settings right, but also ensuring effective implementation. A major theme running through the book is the nature of institutions and the governance structures responsible for delivery and management of urban infrastructure and the decision making processes involved.

The editors have taken a deliberately pragmatic approach to the finance and management of urban infrastructure; chapters are cross-sectorial and present both theory and practice. This book is for students and practitioners in policy, planning, urban management, infrastructure finance and management.

Leseprobe

Contents

About the Contributors

Preface

Acknowledgments

Abbreviations

1 Introduction

Introduction

Global Challenges of Urban Growth, Climate Change, and Finance

Technological Change

Microeconomic Reform and Productivity

Australia as Case Study

2 Urban Management Principles and Instruments

Introduction

Urban Policy

Policy Implementation

Conclusions

3 Urban Infrastructure: Productivity, Project Evaluation, and Finance

Introduction

Which Investments Should Be Undertaken?

Infrastructure: On Efficiency, Effectiveness and Equity, Markets, and Further Economic Concerns

Criteria for Choice in Action: Nation Building for the Future

Assessing the Benefits and Costs: Project Evaluation

Financial Evaluation

Cost-Benefit Analysis

Limitations of Cost-Benefit Analysis

A Case in Point: Questions about Project Evaluation in Practice

Further Methodological Challenges: Multicriteria Analysis

How Should the Investment Be Financed?

Forms of Financing?

Capital Markets and Infrastructure Financing in Australia since the 1990s

Conclusions

4 Private–Public Partnerships: Transaction Analysis and the Case of Urban Motorways

Introduction

A Private–Public Sector Participation Continuum

A General Framework for Analyzing Private–Public Partnerships in Infrastructure

The Melbourne CityLink: A First-Generation Modern Era Build-Own-Operate-Transfer PPP

Conclusions

5 Land Management and Planning Legislation

Introduction

The Land Development Process

Planning Systems and Land Use Regulation

Overview of Good Practice Principles

6 Financing and Managing Urban Water

Introduction

The Urban Hydrological Cycle

Climate Change and Its Impact on Urban Water Management

Water Security: Balancing Demand and Supply

The Urban Water Industry

Financing Urban Water Utilities

The Financial Structure of Water Utilities

Conclusions

7 Financing and Managing Urban Energy Systems

Introduction

Outline of the Chapter

Energy Systems, Energy Policy, and Governance

Energy Markets, Resources, and Supply Systems

Australia: Primary Energy Resources and Supply

Australia: Secondary Energy Supply and Retailing

Future Energy Systems

Conclusions

8 Financing and Managing Urban Transport

Introduction

Urban Transport in Theory

Australian Transport Shed

Australian Transport Infrastructure

Australian Transport Modes

Australian Transport Policy Structures and Mechanisms

Australian Urban Transport in Detail

Conclusions

9 Principles and Systems for Coordination of Infrastructure Investment across Portfolios

Introduction

City Shaping and Follower Infrastructure

‘Predict and Provide’ versus ‘Creating the Future’

Identifying Infrastructure Projects with ‘City Shaping’ Power

Designing Coordination Systems

Coordinating City Shaping Infrastructure

Coordinating Follower Infrastructure

Challenges

Planning and Governance at a Metropolitan Scale

Mission

Urban Metropolitan Governance

Role of the Australian Government

Conclusions

Glossary

Index

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Library of Congress Cataloging-in-Publication Data

Urban infrastructure : finance and management / edited by Kath Wellman and Marcus Spiller. p. cm. Includes bibliographical references and index.

ISBN 978-0-470-67218-1 (hbk. : alk. paper)1. Infrastructure (Economics)–Finance. 2. Infrastructure (Economics)–Australia–Finance–Case studies. 3. Public works. 4. Urban economics. 5. Urban policy. I. Wellman, Kath. II. Spiller, Marcus. HC79.C3U723 2012 363.6068′1–dc23

2012009755

A catalogue record for this book is available from the British Library.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.

Cover design by Meaden CreativeCover image courtesy of iStockphoto.

About the Contributors

John Daley is an energy economist with a 40-year background in industry, government, and consulting. He specialized in resources and energy sector policy and strategy, commercial project evaluation and risk mitigation, advising clients in the coal, petroleum, electricity, and natural gas industries. He has worked on climate change policy pertinent to the energy sector since the early 1990s. He is currently a Director of Businesscertainty.com Pty Ltd, a consultancy firm that provides advice to government and private enterprise on energy policy.Cameron Gordon is an Associate Professor of Economics at the University of Canberra’s Faculty of Business and Government and currently a Visiting Professor at the Imperial College of London Centre for Transport Studies. Professor Gordon has previously been a Visiting Professor at the University of Sydney Institute for Transport and Logistics Studies (ITLS) and a Visiting Fellow in Public Policy at the City University of New York (CUNY) Research Foundation. He has had prior academic appointments in Finance with CUNY and in Public Policy and Administration with the University of Southern California.Andrew McDougall holds qualifications in economics, finance, and planning. He has an extensive record of achievement in consulting, including formal evaluations of government programs; preparation of business cases for government funding; development of strategies and business plans for tourism facilities, cultural institutions, and community organizations; regional economic analysis and strategy development; and public policy research surrounding urban and economic competitiveness and strategies to maximize development potential within this context. He is a Principal and Partner of SGS Economics & Planning Pty Ltd.Lyndsay Robert Neilson has had a long career in government, academia, and the private sector in Australia and internationally, developing public policy and strategic plans for major cities (Canberra, Melbourne, Riyadh), including significant work on infrastructure planning. He was Chairman of the Group on Urban Affairs in the OECD and in Australia created the national Better Cities Program that helped transform the inner urban areas of Australia’s major cities. He established the Centre for Developing Cities at the University of Canberra. He has been Secretary of both the Department of Infrastructure and the Department of Sustainability and Environment in the Government of Victoria, Australia. He is currently Managing Director of Neilson Associates Pty Limited which provides services internationally, notably in the Middle East and Australia, in metropolitan strategic planning, housing programs, urban management, and public policy development.Frederik Pretorius is an Associate Professor at The University of Hong Kong (HKU) and has been active in urban development for more than 30 years. He has experience in Asia, Australia, New Zealand, and Southern Africa as academic, in the corporate sector, and as a consultant and professional in various activities, including regional economic development and real estate and infrastructure finance. At HKU, he teaches Finance in various Land Economics-related subjects in the Faculty of Architecture and is Adjunct Professor, Urban Finance, Urban and Regional Economics at The University of Canberra. He previously served at the University of Canberra in Australia and the University of the Witwatersrand in Johannesburg.Marcus Spiller is a Principal and Partner of SGS Economics & Planning Pty Ltd. His consulting experience spans land economics, regional development, housing policy, infrastructure funding, and policy coordination systems. He has taken up secondments as lecturer in urban economics at Melbourne University, adviser to the Minister for Planning and Housing in Victoria, and senior executive in the Queensland Department of Housing, Local Government and Planning. He is an Adjunct Professor in Urban Management at the University of Canberra, a former member of the (Australian) National Housing Supply Council, and a former National President of the Planning Institute of Australia.Sophie Sturup completed her PhD “Managing Mentalities of Mega Projects” in 2011. She completed a Masters of Science in Geography at the University of Oxford and has a graduate certificate in public sector management from Flinders University. She was director of Antur Projects Pty Ltd, her own consulting company, for 6 years and worked with the Victorian government on the privatization of the electricity industry during the late 1990s. She is currently Principal of Sturup Consulting and undertakes research in the Australasian Centre of Governance and Management of Urban Transport at the University of Melbourne.Praveen Thakur is one of Australasia’s leading experts in spatial economics and has authored several refereed journal articles on the topic. He has extensive experience in combining macroeconomic and urban planning theory to provide new insights into the location choices of firms and households, the economics of infrastructure, productivity, and how cities and regions function. He is an Associate Director of SGS Economics & Planning Pty Ltd.Kath Wellman has a broad base of qualifications in environmental science, landscape architecture, urban design, and business management. She has been placed in international urban design competitions in Europe, North America, and Australia and has authored papers and book chapters on environmental science and design. More recently, her focus has been urban management, particularly the finance and management of urban infrastructure in developed and developing nations. She has worked for government, private enterprise, and nongovernmental organizations and has been an Associate Professor at the University of Canberra from 1995 to 2010, first as Head of Landscape Architecture and later as Deputy Director and then Director of the Centre for Developing Cities. She continues her association with the University through the ANZSOG Institute of Governance.

Preface

The magnitude of urban infrastructure investment and the long time frames involved in management and maintenance require a coordinated approach to forward planning, policy development, and implementation. There are major challenges in making long-term decisions on urban infrastructure and getting management structures and processes in place in the present environment where politics, economies, social and technological systems, and our understanding of the physical environment are changing rapidly. Getting it right generates long-term dividends. Getting it wrong involves major costs, often borne by taxpayers.

This book focuses on the finance and management of urban infrastructure. It is posited on a strong belief that the physical structure of cities and the efficiency of infrastructure services delivered are driven by efficiencies within individual infrastructure sectors, lessons learned across these sectors, and the ability to coordinate and integrate sectors to best leverage off ­economies of scale and scope and minimize negative externalities. This necessitates an interdisciplinary approach, integrating knowledge from finance, governance, planning, and management as well as the characteristics of the individual urban infrastructure sectors involved. Here it is not only about getting the initial decisions and policy settings right, but also ensuring effective implementation. A major theme running through the book is the nature of institutions and the governance structures responsible for delivery and management of urban infrastructure and the decision-­making processes involved.

The book takes a deliberately pragmatic approach to the finance and management of urban infrastructure and is written by academics and practitioners presenting both theory and practice. It is written for both students and practitioners in policy, planning, urban management, infrastructure finance, and management. There has been strong use of Australian case studies throughout this book, and these case studies have been placed within an international context where appropriate. Many of the lessons learned in Australia have direct applicability to both developed and developing nations.

Below is a brief description of each of the chapters.

Chapter 1 provides an introduction to the book. It examines the nature of infrastructure investment and productivity and global factors impacting on this, in particular exploring potential impacts from urban growth, climate change, and finance. It touches on innovation in technologies in design and development of not only the physical infrastructure but also the financial and management systems that support this infrastructure. It provides an introduction to microeconomic reform, the productivity benefits of this, and the challenges of coordination of urban infrastructure at a metropolitan scale which remain. Australian case studies are introduced.

Chapter 2 outlines urban management principles and instruments that are used to complement markets or are utilized where markets fail, recognizing that efficiencies driven by markets are not themselves sufficient to ensure effective, integrated urban outcomes, given the abundance of externalities (both positive and negative) that characterize urban growth and change. Policy development, legislation and regulation, fiscal and financial measures, institutional arrangements, advocacy, and knowledge management are discussed and illustrated utilizing case studies.

Chapter 3 examines the productivity of infrastructure and the decision-making processes behind determining whether, when, and how best to invest in infrastructure. Here infrastructure investment decisions are measured against the efficiency with which the project produces service outputs, the effectiveness with which all relevant outcomes are achieved, and the distributional consequences of the investment. Three project evaluation methodologies used to determine whether to invest in infrastructure are critically reviewed: Financial Evaluation, Cost-Benefit Analysis, and Multicriteria Analysis. Once a decision to invest has been made, the form of financing needs to be determined. The chapter concludes with an overview of the forms of project finance and the benefits arising from efficient financing, taking into account the characteristics of the project, fiscal circumstances, and the broader policy context.

Chapter 4 examines in further detail private participation in the provision of infrastructure and in particular public–private partnerships (PPPs) that are characterized by complex, nonstandard, capital-intensive projects with public good characteristics. It is noted in Chapter 3 that in PPPs there is considerable scope to align incentives to manage project risks with the capacity to do so but that poor negotiation and contracting practice by ­government agencies could result in government retaining unnecessarily high contingent liabilities. This chapter presents a conceptual framework to dissect and integrate systematically the institutional mechanisms put in place to ensure the clear division and allocation of rights and risks and the management of incentive conflicts between the public and private partners in PPPs. This conceptual framework is then utilized to analyze the performance of the process and institutional mechanisms that were used to finance, deliver, and operate the Melbourne CityLink project.

Chapter 5 addresses land management and planning legislation utilized to optimize land use and investment in urban infrastructure and services. The underlying premise is that the form, density, and timing of land development and redevelopment have major impacts on the efficiencies of urban services provision. These efficiencies are shaped by market forces through the land development process and by regulation through land use planning ­systems and controls. Both market forces and land management and regulatory systems are analyzed to show how each can drive efficiencies and accountability in the funding and provision of urban services and the shaping of cities.

Chapters 6, 7, and 8 are sector specific, analyzing the network structures, finance, and management of urban economic infrastructure in water, energy, and transport. These urban infrastructure sectors provide essential services, and lessons learned on finance and management in these sectors have broad applicability internationally.

Chapter 6 takes an integrated approach to water management, describing spatial characteristics of the urban hydrological cycle and the interconnections between water supply, stormwater, and sanitation. An analysis is made of predicted impacts from climate change on the hydrological cycle and water management. Here a major challenge for urban water management is to balance supply and demand within defined tolerance limits. Water ­security, demand management, access, water pricing, and water supply are addressed. The final sections of the chapter describe the structure and finance of water utilities. An analysis is made of water infrastructure investment, whether and where competition could be utilized in the water value chain to increase efficiency, and how the investment and economic performance of Australian government-owned water utilities can be improved.

Chapter 7 addresses the finance and management of urban energy ­systems (excluding transport, which is discussed in Chapter 8). It commences with a description of the dynamic and interactive relationship between energy, technology, and the shaping and retrofitting of cities. Energy systems are introduced, including concepts of energy services and value chains. An ­analysis is made of the objectives and impacts of energy policy and energy regulation on energy systems, including the impact of a carbon tax or emissions trading. Finance and governance of energy investment are investigated with a focus on economic efficiency and risk management. The central ­sections of the chapter describe the nature of demand and supply of primary and secondary energy in Australia, including a description of the National Electricity Market. Finally, the potential for future energy systems is examined, including the prospect of more decentralized energy supply systems operating within city precincts and households.

Chapter 8 is set within a framework of transport theory founded on urban economics, planning, and place theory. Australia’s unique geography of widely separated capital cities and diffuse but congested urban agglomerations have a profound effect on the nature and cost of providing ­transport infrastructure to both integrate cities and provide transport within cities. The urban transport network (transport shed) and the characteristics of transport infrastructure including the scale of investment are described. An analysis is then made of modal choice as a function of geography and ­infrastructure. Transport policy is described, with a focus on intergovernmental considerations in finance and management of the Australian ­transport network. The final section focuses particularly on Australian intra-urban transport.

Chapter 9 shifts the focus from specific infrastructure sectors to the ­coordination of infrastructure (both social and economic) across metropolitan regions. Differentiation is made between infrastructure that shapes cities (e.g., major transport corridors) and infrastructure that follows based on the understanding that city-shaping infrastructure should be coordinated and supported by follower infrastructure and the orderly release of land. The chapter explores the challenges arising in metropolitan planning and urban governance to coordinate land release at a local government level with urban infrastructure provision, given the tensions arising from local government autonomy and the intra-sectoral focus of specific State urban infrastructure utilities given their obligation to deliver high-quality, consistent output in an increasingly competitive market. Past involvement of the Australian Government in the development of Australian cities is described. The chapter concludes that strategic infrastructure investments at a metropolitan scale are unlikely to be made without strong political alignment of key decision makers and the financial capacity and political will to implement decisions on infrastructure investment. Achieving urban governance structures and processes which support this remains an important political and professional challenge, particularly in a liberal democracy where power is shared.

Acknowledgments

This book originated from collaboration between the Centre for Developing Cities, now under ANZSOG Institute of Governance at the University of Canberra, and SGS Economics & Planning Pty Ltd. Thanks go to all authors of chapters whose work made this book possible. Special thanks to Lyndsay Neilson, who founded the Centre, and whose commitment to a cross-­disciplinary and cross-sectoral approach to urban management inspired much of its work. I am indebted to Mike Woods, Geoff Campbell, Bruce Dockrill, Peter Rimmer, and Trevor Kanaley for their continued guidance and support and to Chris Harris for his wit and his perceptive responses to the early manuscript. In particular I would like to thank Rick Wellman for his continued patience and for giving up his dining room table for the year it took to edit this book and to the editorial staff at John Wiley & Sons who made the final stages in this process a pleasure. Finally thanks to Mark Evans for his support for the Centre for Developing Cities under the ANZSOG Institute of Governance.

Abbreviations

ABARE

Australian Bureau of Agricultural and Resource Economics

ABS

Australian Bureau of Statistics

ACT

Australian Capital Territory

ACTEW

Australian Capital Territory Electricity and Water

AEMC

Australian Energy Market Commission

AEMO

Australian Energy Market Operator

AER

Australian Energy Regulator

ANAO

Australian National Audit Office

ATRC

Australian Rail Track Corporation

AURDR

Australian Urban and Regional Development Review

BCP

Better Cities Program

BITRE

Bureau of Infrastructure, Transport and Regional Economics

BOO

Build Own Operate

BOOT

Build Own Operate and Transfer

BOT

Build Operate Transfer

BRT

Bus Rapid Transit

CBA

Cost-Benefit Analysis

CBD

Central Business District

CCGT

Combined Cycle Gas Turbine

CCS

Carbon Capture and Storage

CEDA

Committee for Economic Development

CKI

Cheung Kong Infrastructure

COAG

Council of Australian Governments

CPI

Consumer Price Index

CPRS

Carbon Pollution Reduction Scheme

CSG

Coal Seam Gas

CSIRO

Commonwealth Scientific and Industrial Research Organisation

CSO

Community Service Obligation

DAF

Development Assessment Forum

DCP

Developers Contributions Plan

DFAT

Department of Foreign Affairs and Trade

ENA

Energy Networks Association

ERA

Economic Regulation Authority (Western Australia)

ESAA

Energy Supply Association of Australia

ETS

Emissions Trading Scheme

EU

European Union

EWLNA

East West Link Needs Assessment (Victoria)

G20

Group of Twenty

GDP

Gross Domestic Product

GFC

Global Financial Crisis

GHG

Green House Gas Emissions

GNE

Gross National Expenditure

GST

Goods and Services Tax

GTE

Government Trading Enterprise

HRT

Heavy Rail Transit

IA

Infrastructure Australia

ICT

Information Communications Technology

ICWE

International Conference on Water and the Environment

IEA

International Energy Agency

IPA

Infrastructure Partnerships Australia

IPCC

Intergovernmental Panel on Climate Change

LGA

Local Government Authorities

LPG

Liquefied Petroleum Gas

LRT

Light Rail Transit

MAE

Material Adverse Effect

MCA

Multicriteria Analysis

MIG

Macquarie Infrastructure Group

MWST

Ministerial Water and Sewerage Taskforce (Tasmania)

NBN

National Broadband Network

NCP

National Competition Policy (Australia)

NEM

National Electricity Market

NGER

National Greenhouse and Energy Reporting Systems

NGL

Natural Gas Liquids

NRLV

Net Residual Land Value

NWI

National Water Initiative

OECD

Organisation for Economic Co-operation and Development

PC

Productivity Commission

PCA

Property Council of Australia

PFI

Private Finance Initiative

PPP

Public–Private Partnerships

PV

Photovoltaic

RD&D

Research Development and Demonstration

RET

Renewable Energy Target

R2R

Australian Government’s Roads to Recovery Program

SCNPMGTE

Steering Committee on National Performance Monitoring of Government Trading Enterprises

SCRGSP

Steering Committee for the Review of Government Service Provision

SEQ

South East Queensland

TOD

Transit-Oriented Development

TOJV

Transfield Obayashi Joint Venture

TPE

Total Primary Energy

UNFCC

United Nations Framework Convention on Climate Change

UPT

Urban Public Transit

VCAT

Victorian Civil and Administrative Tribunal

VCEC

Victorian Competition and Efficiency Commission

VKT

Vehicle Kilometres Travelled

Voll

Value of lost load

WEC

World Energy Council

1

Introduction

Kath Wellman and Marcus Spiller

Introduction

The motivation to write this book comes from a fascination with the ­complex, dynamic, interactive nature of cities and recognition of the ­critical role that urban infrastructure plays in this. Why is infrastructure so ­important in cities? Cities, simply defined, are concentrations of ­people, resources, information, and activities. Clever and skilled people in close proximity with each other generate many benefits due to the diversity of interactions of people and ideas and the potential for economies of scale and scope from agglomeration. Where interaction is fluid, dense, and diverse, there emerges potential for innovation and creativity. Although we realize that people and ideas are fundamental to successful cities, these people and the processes they put in motion need support from urban infrastructure to ensure that cities remain healthy, safe, and accessible and to support ­cultural, economic, and social systems. Efficient, effective urban infrastructure does not lead in itself to competitive, innovative cities, but the lack of it would strongly impede their development or sustainability. Through ­infrastructure’s enabling function, complex, dynamic cities come alive.

Understanding the economic nature of urban infrastructure is critically important to any analyses of the contributions infrastructure may make to the efficiency of human interaction in the urban economy. In contrast to the fluid, dynamic nature of human transactions in healthy cities, urban ­infrastructure is characterized by high capital investment costs in assets which are inflexible, often location and function specific, exhibit network characteristics, and typically require low but steady maintenance and ­reinvestment. Once committed, the capital is essentially sunk, difficult, or impossible to retrieve. Additionally each city has a legacy of infrastructure from past investment which can either support or inhibit the efficiency of future infrastructure investment. The longevity and essentially path-­determining nature of urban infrastructure investment influences urban development patterns and cost structures for decades, as urban ­infrastructure services are usually inputs to further production or to end consumers. These are important reasons why such inputs have to be efficient—­positive or negative efficiency effects are cumulative. Thus a ­flexible but conservative approach needs to be taken to major investment decisions due to the locational, sunk nature of costs and the long-term impacts of such investment.