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Does Infrastructure Australia ‘get’ community infrastructure?

Collaboration is key to community infrastructure investment
Failing to understand the economic and social opportunities that can come from investing in community infrastructure denies the creation of social cohesiveness and the enhancement of community health.

Infrastructure Australia’s recently released Future Cities report raises the question whether they, and other policy makers, understand the importance of community infrastructure.

The report states that “Australian governments should routinely review the capacity of economic and social infrastructure within our cities and develop strategies to ‘sweat’ existing assets to extract greater value for communities”.

According to Infrastructure Australia “new infrastructure will be needed to support growth, but governments should also maximise the return on investment from existing assets. ‘Sweating’ assets can be more financially effective and less disruptive to the community than building new infrastructure. This could include ensuring appropriate maintenance, renewal, technology upgrades and demand management strategies are in place”.

Infrastructure Australia’s thinking is flawed in a couple of areas. Firstly they fail to recognise the existing inadequacy of community infrastructure assets. According to the Australian Local Government Association, there is currently $47 billion worth of community infrastructure that is in poor condition. The State of NSW has identified a total infrastructure backlog for all NSW councils estimated to be $7.4 billion, or over $1,000 per head of the NSW population, at 30 June 2012.  

One example in Australia of assets in poor conditions are aquatic centres. According to a review by the Victorian Auditor General, there are 153 aquatic centres in Victoria that are over 26 years old, with 41 that are over 51 years of age. More than half of Victoria’s aquatic centres are likely to be in need of repair or upgrading and responses to the Auditor General’s survey indicate that over a quarter of councils will conduct significant upgrades at a cost of more than $1 million over the next four years. 

But the real issue is that Infrastructure Australia is failing to understand the economic and social opportunities that can come from investing in community infrastructure. Community infrastructure, should not be seen as assets to be 'sweated', but assets which create social cohesiveness, enhance community health and economic opportunity.

What Infrastructure Australia needs to understand is what the impediments facing community infrastructure are, and how can they be resolved.

Community infrastructure such as community sporting facilities are generally owned by local and municipal governments. The disconnection between clubs and facilities is one of the principal reasons that the funding and financing model is broken. The problem that we have today is that the informal partnership that previously existed between municipal authorities and communities is not so readily apparent today.

There were many examples of how this partnership operated in the past. One example is the growth of the Scouts movement which boasted a world-wide membership of around 25 million at its peak. Many scout halls were built on land that was, and is still, owned by municipal authorities.

As the Scout movement has declined, leaving many old Scout halls under-utilised, there is a need for governments to understand how community demand is shifting. An example is the rapid rise of AFLW and women’s cricket teams. Cricket Australia recently estimated that the deficit of changing room facilities across the nation is $10 billion.

The loss of partnership between municipal authorities and community clubs, which was never formalised, is problematic. Municipal authorities need community clubs - and community clubs need municipal authorities. For municipal authorities, clubs bring the energy of volunteers that is necessary to activate spaces. An oval without a football or cricket club is simply open green space. But with a club, that open space is transformed into an active community.

For clubs that operate on land owned by municipal authorities, the lack of ownership results in an inability to finance development.

Australia’s Productivity Commission examined the issues that Australia’s 600,000 not-for-profits faced accessing capital, finding that whilst the sector contributed around $43 billion to the Australian economy, 8 per cent of national employment, and 4.6 million volunteers, the major impediments to accessing capital included the lack of collateral to guarantee loans and the lack of a suitable organisational structure which would allow organisations to raise equity capital.

Given the structural divide between ownership and operation, the model to unlock investment in community infrastructure has to be based on partnership and collaboration. If we can recognise that the benefits of community infrastructure are widespread, including sporting codes such as AFL and Cricket Australia that generate significant revenues off the back of the players that come through local competitions, then we can unlock new investment models.

In particular community bonds are a mechanism by which we can reinvest in community infrastructure.

As a nation we need to consider the infrastructure investments that we are currently considering. An example is InLand Rail which will require $8-9 billion tax payer investment (the likelihood that this is the final bill is doubtful).

I may have spent a little too much time at university playing football and engaging in student politics, but the one thing I understood from my economics degree was the concept of opportunity cost. In simple terms if we have InLand Rail there is a lot of other infrastructure investments we won’t have.

Just think what $1 billion of Commonwealth investment into community infrastructure could unlock around the nation?

Such an investment could underwrite community bonds that could combine to bring in capital from other sources. A $1 billion investment from the Commonwealth could therefore  unlock billions more investment.

We don’t need to sweat community infrastructure assets, but we do need to use them in a smarter way that addresses the latency of assets during many periods of the week. If we build community assets with an understanding of their multiple uses there is the potential for community infrastructure to be the mechanism to deliver significant economic and social impacts for our communities.

Meet the John Grill Centre team.

This article was first published on LinkedIn on Saturday 24 February 2018.