A Labor Party-affiliated union is expected to raise controversy within the ALP at the weekend when it calls for the development of high-rise apartments in the inner city to fund public transport in the Western suburbs.
The proposal goes further than a Baird government plan to charge developers a levy to help fund the proposed new Parramatta light rail line and is likely to offend some Labor MPs.
The Rail, Tram and Bus Union, affiliated with the ALP's right wing, will put a motion in support of the new funding model to the party conference in Sydney on Saturday.
RTBU national secretary Bob Nanva said his union supported the development of high-rises above and around inner-city rail lines and train stations. He said businesses and property owners near new train stations should be charged a levy which would be invested in new rail projects.
"Both sides of politics have been hostage to the argument that the only way to fund public transport projects is to sell other government assets."
"By utilising our rail corridors more effectively, and by placing levies on business and property owners who benefit from new projects, we can make public transport infrastructure almost pay for itself.
"At the same time, we can address the housing shortage and provide affordable housing options for people without creating more urban sprawl."
NSW Labor leader Luke Foley has been critical of the NSW government's plan to charge developers a special levy for projects around the pathway of the proposed Parramatta light rail line because a similar charge was not being imposed to fund light rail to the eastern suburbs.
Mr Foley, who is the member for Auburn and from the party's left wing, has questioned the inconsistency of "slugging" the people of western Sydney with a tax to have light rail, saying it would add an extra $20,000 to the cost of apartments.
The proposal to introduce a levy on developers to fund the light rail line is known as "value capture", which can involve putting a levy on businesses or property developers along new rail lines or selling land or rights to the airspace above and around them.
Shadow Treasurer Michael Daley said Labor realises there is a revenue challenge for governments in Australia and "we are always open to a sensible discussion about new revenue sources including value capture".
"But as with any new tax, the devil is in the detail. And at the moment Mike Baird has released very little detail about his proposed value capture tax," he said.
Summer Hill Labor MP Jo Haylen has also raised concerns about "residential towers" and one-size-fits-all development that fails to meet community standards in heritage streets.
Mr Nanva said alternative funding models, such as the use of "value capture", have been successfully used around the world in cities including London for the city's Crossrail project and in Hong Kong, where profits from property developments have helped fund rail.
The Baird government has said it is exploring new ways of "sharing the value" of new infrastructure projects by charging a new levy on surrounding developments that benefit.