Developers and business face Suburban Rail Loop levy to fund project

Developers and businesses along the route of the first stage of the Suburban Rail Loop will be asked for as much as $11 billion to help pay for it as the state government refused to guarantee the rail project won’t face further blowouts.

Suburban Rail Loop Minister Danny Pearson said despite last week’s budget confirming a 22 per cent increase in the cost of infrastructure projects, the government remains on track to deliver the first stage of the loop for the $30 billion to $34.5 billion price tag estimated in 2021.

Construction at the Box Hill site for the Suburban Rail Loop.Credit: Darrian Traynor

“All I can go on is the fact we have the budget estimates to be $30 billion to $34.5 billion,” he said.

Suburban Rail Loop Authority chief executive Frankie Carroll confirmed the government had been given options for new taxes on businesses to raise the $11 billion required in the business case.

“In relation to the value capture mechanisms that were recommended in the business investment case in 2021, there was three recommended to government. One was a land tax surcharge. The second was a developer surcharge and the third was a car parking surcharge,” he said.

“Those recommendations have gone to government. Government need to make a recommendation on what they want to use going forward.”

Pearson also refused to promise that the budgeted figure for the Cheltenham to Box Hill section of the orbital rail loop would not blow out by its completion date in 2035.

“If you’re asking me to guarantee that in 2035 it will be $34.5 billion dollars, within that range, fine. But I just recognise the fact that it’s 2024 now and what can happen,” Pearson said.

His comments come after Treasurer Tim Pallas on Thursday rejected suggestions that the cost of SRL stage one could blow out to more than $42 billion. He said he remained confident that the project could be delivered in the predicted range.

Last week’s state budget confirmed more than 100 projects would face delays due to a 22 per cent increase in construction costs since 2021, triggered by an increase in the cost of materials, labour and transportation.

On Friday, Pearson said the government would not consider conducting a new cost-benefit analysis of the project despite the changes to infrastructure costs.

The government also confirmed it would push ahead with plans to finance one-third of the project – up to $11 billion – with levies and taxes on land in the area that will increase in value, with the cost picked up by businesses and developers, but not local residents.

Asked whether taxes or levies may apply to universities such as Monash and Deakin that could benefit from the rail loop, Pearson said “that work remains ongoing”.

The Victorian Chamber of Commerce and Industry late on Friday slammed the proposal.

Chief executive Paul Guerra told The Age the industry group would oppose any new tax or levy on businesses – for the rail loop or any other project.

“Business growth must be at the forefront and the recent budget confirms that position,” he said.

The Victorian Auditor-General has previously challenged the government’s ability to raise $11.5 billion through value capture, saying it “may not be achieved” and that the Department of Treasury and Finance had advised about “options for mitigating the forecast shortfall”.

Pearson said the government was “working on the basis” that the state government would contribute one-third of the cost, with one-third raised through value capture and the remaining third picked up by the Commonwealth.

The Allan government, which has only committed a third of the funding, remains confident the federal government will pay the same amount, despite only pledging $2.2 billion for the eastern section of the Victorian government’s Suburban Rail Loop before the last election.

In the federal budget on Tuesday, the Albanese government did not allocate any cash to the project, with Treasurer Jim Chalmers waiting on advice from Infrastructure Australia.

“There are many more budgets to come,” Pearson said on Friday.

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