The Baird government calls it ‘value capture’ – but is the price of a ticket to ride on the profits of surging values for land near new rail and tram lines in Sydney’s west simply just too high, even for developers?

Peak development group Urban Taskforce on Thursday firmly put the New South Wales Government on notice that a proposed ‘Special Infrastructure Contribution (SIC)’ of $200 per square metre for floorspace in new residential developments along the Parramatta light rail corridor is way too steep.

The developer group, which represents apartment builders, estimates the new tax will force up a typical two bedroom unit price by $20,000 – just as prices are come off the boil and auction clearance rates are falling.

That’s hardly the kind of welcome NSW transport and planning authorities would have been hoping for after they finally unveiled the new 22km light rail corridor which will link Parramatta’s rapidly ascending CBD to the struggling precinct of Sydney Olympic Park and the badly underserviced hubs of Westmead Hospital and Western Sydney University, with the new run finally emerging at Strathfield.

The project has already taken far too long for some big blue chips that went West punting the promise of rejuvenation (and cheap rents for new builds).

The Parramatta light rail’s long awaited confirmation this week comes after more than a decade of pressure from the community and business groups, with the Commonwealth Bank recently revealing it will relocate several thousand jobs out of Sydney’s West –a commercial decision that says plenty about the challenges anchor tenants face in sterile precincts like Olympic Park.

The Baird government has so far committed around $1 billion to the new light route, saying it will also convert Sydney’s last single track heavy rail branch line from Clyde the Carlingford to trams – almost certainly taking advantage of the skinnier tram cars to duplicating the track to boost service frequency to viable levels.

Baird is also clearly hoping for some fresh money from Canberra now that renowned rail sceptic and former PM Tony Abbott has been replaced by public transport enthusiast Macolm Turnbull. .

But to make the project a reality, the Baird government is banking on being able to exploit the windfall gain made by property owners and developers who will be allowed to throw up tens of thousands of new dwellings, mostly apartments, after adjoining land is either compulsorily acquired, rezoned or both.

A billion dollars goes some of the way, but not as far as long suffering commuters out West want, especially when new freeway tolls hit for projects like WestConnex.

“The light rail corridor will activate a priority growth area and there is an opportunity for the government to share in the value uplift that will occur along the corridor,” the official announcement for the project says.

“A Special Infrastructure Contribution will be implemented, with the levy expected to be set at around $200 per square metre of gross floor area of new residential developments subject to consultation.”

But Urban Taskforce is actively talking down the price of the proposed levy, which in effect is a betterment tax, strongly arguing it will act to hike prices just as previously soaring values and auction clearance rates are coming off the boil.

Urban Taskforce chief executive Chris Johnson told Government News that “the government needs to be aware it [the SIC] will increase the price of housing. It is going to be inflationary.”

The lobby group is not against the concept of ‘value capture’ per se – after all developers can profit handsomely – but it is worried the floor space linked level could inhibit investment by medium sized players.

“There seems to be a threshold reached in terms of [selling] prices [in Sydney]” Mr Johnson said.

“The danger of adding a high contribution amount is that development may not be economically viable and so funds will not flow to the infrastructure. Further discussions with industry are needed to ensure that the SIC is workable.”

There are also decidedly mixed views on how to best apply value capture within the urban planning community.

Guy Perry, Executive Director of Asia Pacific at construction company AECOM, which is working with the NSW government, recently labelled some Asian examples of the value capture model “suburban cellulite” because high rise developments over rail stations there essentially funnelled shoppers into them.

There’s also confusion about what ‘value capture’ actually is.

The Baird government is facing escalating community hostility and demands to better explain what its wider plans for ‘value capture’ are, especially as its redevelopment juggernaut, Urban Growth, attempts to sell an agenda of urban densification and infill to communities deeply worried that established residential communities in older inner suburbs will be bulldozed to make way for big, fast profit, apartment blocks.

While developers can negotiate directly with the government on price for land that is compulsorily acquired from existing owners – whom the government pays out – many sections of inner Sydney communities remain confused as to whether betterment taxes could or will apply to rezoning for areas where there is no additional transport infrastructure or renewal.

Urban Growth hasn’t been doing itself many favours in terms of fostering trust or clarity.

At a community meeting in November over proposed developments in Lewisham, in Sydney’s Inner West, government officials were left red faced after they put up diagrams showing potential new areas for additional green space that already had unit developments build on them.

Angry residents in turn accused Urban Growth of relying on outdated Google Earth imagery to make their plans rather than assessing what was actually on the ground, an allegation that officials had clear difficulty refuting.

Urban Growth has produced some other eye-opening visual curiosities when it comes to illustrating the new Parramatta light rail line.

One of Urban Growth’s recent indicative illustrations (cue AC/DC’s Jailbreak) has the tramline cutting through the middle of one of Australia’s most densely populated precincts, the Silverwater Correctional Complex.

While that route is highly unlikely to eventuate, it would not be the first time the NSW Government had run a tramline into a working jail.  For many years there was a modified tram used to run prisoners between Darlinghurst Courthouse and Long Bay jail in La Perouse, the infamous ‘948’ car – from which notorious criminal escape artist Darcy Dugan managed to get out of – and is now an exhibit at the Sydney Tramway Museum.

That’s light rail value capture of a different kind.