TOOWOOMBA REGIONAL COUNCIL DRAFT SUBMISSION: INFRASTRUCTURE PLANNING & CHARGING FRAMEWORK REVIEW

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1 TOOWOOMBA REGIONAL COUNCIL DRAFT SUBMISSION: INFRASTRUCTURE PLANNING & CHARGING FRAMEWORK REVIEW Introduction Toowoomba Regional Council (TRC) is pleased to provide a submission to the Department of State Development, Infrastructure and Planning s discussion paper Infrastructure planning and charging framework review. TRC is in broad agreement with the stated purpose of the infrastructure planning and charging framework review. In this regard, the planning, funding and delivery of development infrastructure must be undertaken in a manner which supports the long term financial sustainability of a local authority whilst facilitating a prosperous development industry in Queensland. This purpose is supported because it recognises that the provision of trunk (PIP) infrastructure is costly and that these costs have a significant impact on the financial sustainability of infrastructure providers like TRC. In the 2012/13 financial year, TRC spent $39.2 million on trunk (PIP) infrastructure. This represented 19% of Council s entire budget for that period. Over the next 10 years, TRC is proposing to spend many hundreds of millions of dollars on PIP infrastructure in order to service the needs of planned development. These are substantial financial commitments with significant implications for the ratepayers of Toowoomba. For TRC to provide this program of PIP infrastructure, it needs to be certain of an adequate level of infrastructure charges revenue, and to have control over its capital works program. Much is heard of the development industry s need for certainty; however certainty is equally important to an infrastructure provider like TRC. In this regard, the establishment of a multi million dollar capital works budget cannot be undertaken unless there is adequate confidence around the local authority s future revenue and expenditure. By having certainty around its forward capital expenditure, Council can plan for and manage the debt necessary to fund the program. This information is reported to Queensland Treasury Corporation (QTC) as part of its budget preparation. Forward planning gives the infrastructure provider the ability to prepare budgets with confidence and is an outcome that is facilitated by the current infrastructure planning and charging framework under SPA. In particular, the trunk infrastructure conditioning powers afforded under the SPA provide financial certainty for Council by allowing it to manage the costs of infrastructure associated with inconsistent development in a way which does not jeopardise the roll out of its planned trunk infrastructure. TRC is deeply concerned that many of the proposed reforms will serve to diminish the capacity of the local authorities to plan and fund trunk infrastructure capital works with any degree of certainty. In particular, the proposed concept of deemed trunk infrastructure is a radical departure from the existing provisions of SPA and will expose local authorities like TRC to significant financial risk from unplanned, additional trunk infrastructure costs. Should this concept be implemented, there is a very real risk that development may have to be refused in order to minimise the financial risk arising from having to provide offsets and refunds for infrastructure additional to that already planned for.

2 TRC is also concerned that the reintroduction of planned charges will also result in a replay of the same arguments that plagued planned charges under the framework that existed until Experience would suggest that the introduction of more process and more reports is unlikely to resolve the underlying issue associated with planned charges. Instead, it is likely to result in more cost and delay and further uncertainty for TRC and the local development industry. TRC is also concerned at the scope of infrastructure defined in the essential list. Much trunk infrastructure which has a nexus with development is proposed to be excluded from the essential infrastructure list simply to minimise the resultant planned charges. Removing this infrastructure from the planning framework is a retrograde outcome for TRC and the local development industry. TRC believes that the capped charges framework offers a more simple means of resolving the question of what should be the quantum of infrastructure charges. In this regard, the State has the ability to undertake a State wide analysis to determine the level at which a charge is adequate for a local authority s needs whilst not adversely impacting the viability of the development industry. Where this is done with fairness, transparency and consultation, local authorities and the development industry are likely to accept the outcome. TRC recognises that there is a need to refine some of the provisions of SPA regarding infrastructure planning and charging and supports reforms which minimise costs for all parties, rather than the inequitable shifting of costs from one party to another. The latter approach may provide short term political fixes but will not provide long term financial sustainability for local authorities nor the development industry. Particular reforms which TRC supports include: A standard approach to the giving of credits A standard approach for valuing land A lower cost dispute resolution process A refinement of development categories to which charges apply A streamlined and consistent approach to developing and updating of Priority Infrastructure Plans to keep pace with new planning A third party certification process for approving infrastructure plans Transparency in the receipt and spending of charges revenue Annual indexation of the charges cap to recognise the rising cost of infrastructure This submission deals with issues arising from the discussion paper in two parts. Part 1 summarises TRC s comments concerning what it considers to be the core issues arising from the discussion paper. Part 2 of this submission provides detailed responses to the questions posed by the discussion paper.

3 PART 1 Comments on Core Reform Issues TRC believes that the core reform issues presented in the discussion paper are: 1. Scope of infrastructure essential infrastructure list 2. Deemed trunk infrastructure, conditions, offsets and refunds 3. Planned charges 4. Credits 5. Appeals and dispute resolution Given the significance of these proposed reforms, TRC has provided detailed comment on these issues within Part 1 of this submission. Comments on other issues arising from the discussion paper are addressed in Part Scope of Infrastructure essential infrastructure list 1.1 Issue Section 5.1 of the discussion paper suggests that some local authorities charge (and therefore plan) for infrastructure which does not directly benefit development and that this infrastructure is therefore not essential. It also states that the scope of trunk infrastructure established under Statutory Guideline 01/09 and the definition of development infrastructure under SPA has resulted in infrastructure that could be considered as desirable (barbecues and shade structures in parks) but not essential being included in PIPs. Consequently, the scope of trunk infrastructure under the SPA is proposed to be replaced with a new list of essential infrastructure which narrows the scope (type and standard) of infrastructure which may be included in a PIP and funded by infrastructure charges. The list of essential infrastructure is shown in Appendix 4 of the discussion paper. The discussion paper states that the essential infrastructure list was developed on the principal that a direct nexus must exist between the infrastructure scope and a development site. TRC submits that this principal alone is an insufficient basis for determining what constitutes essential infrastructure. Instead, it is recommended that a more comprehensive test is required in order to improve objectivity when determining the list of essential infrastructure. In this regard, TRC has used the following criteria to review the existing infrastructure within its PIP and to compare against the essential infrastructure list provided in Appendix 4 of the discussion paper: 1. Is the infrastructure essential to ensure safe and healthy communities? 2. Is there a nexus between the need for the infrastructure and development? 3. Is the infrastructure most efficiently planned by the local authority and therefore identified and provided through its capital works program? 4. Is the proposed level of service commensurate with the intent of criteria 1? (e.g. will it provide suitably safe and healthy communities?) 5. Does the infrastructure provide a higher order, trunk function?

4 These criteria address a broader range of concepts relevant to essential infrastructure than just nexus to development. Applying the five criteria to existing infrastructure within its PIP, TRC has drawn the following conclusions concerning the list of essential infrastructure shown in Appendix 4 of the discussion paper. Water Network Using the five essential infrastructure criteria proposed by TRC, all existing trunk infrastructure identified within TRC s PIP is considered to be essential infrastructure with the exception of the safety upgrades to Cooby Dam and Cressbrook Dam. There is no direct nexus between these safety upgrades and development and TRC does not object to the exclusion of this infrastructure from the essential infrastructure list. However, the exclusion of raw water sources such as dams and bores and raw water transport mains from the proposed list of essential water supply infrastructure in Appendix 4 of the discussion paper is not supported. This infrastructure meets all of the proposed criteria, including that it has a nexus with development. In this regard, the need for new water sources arises in large part as a consequence of new development. There is little point requiring the planning of a trunk water network without planning for how raw water is to be obtained and transported to the treatment plant for treatment. TRC also questions the qualification that water treatment facilities are essential only if they are not funded from other sources such as rates or utility charges. It is unclear why this qualification is specified as it has no relationship to the question of nexus with development. TRC recommends that raw water sources such as dams and bores and raw water transport mains be included in the list of essential infrastructure and that the qualification concerning funding sources for water treatment facilities be removed from the list. It is also noted that the essential infrastructure list provided in the original DSDIP specification to consultants (Appendix 5) excluded water mains less than 200mm in diameter. Should this proposal be reconsidered by DSDIP, it would have a significant impact on TRC s ability to service growth in regional communities and consequently the feasibility of development in these areas. Regional or smaller communities are typically serviced by long lengths of smaller diameter mains. Their exclusion from the essential infrastructure list would mean that TRC could not include these mains in the PIP, nor their cost in the calculation of any future TRC planned charge. As it is unlikely that an individual developer would be able to fund their provision, the expectation would be that TRC would continue to do so. An example from the TRC PIP is the Yarraman trunk water main WSFWM1036 shown in Figure 1. This 150mm main is 3.7km in length and has an estimated cost of $800,000 ($2010). Notwithstanding its small diameter, it performs a shared function by providing water supply to the township of Yarraman and is an essential component of the trunk infrastructure network planned to be provided by TRC.

5 Figure 1 Yarraman Trunk Water Wain Setting an arbitrary size limit on essential water and sewerage infrastructure is unnecessary and could result in infrastructure of this type not being planned or provided by either local authorities or developers. This would represent an effective road block to development in regional areas. Sewerage Network Using the five essential infrastructure criteria proposed by TRC, all existing sewerage trunk infrastructure identified within the PIP is considered to be essential. This is consistent with the proposed list of essential sewerage infrastructure in Appendix 4 of the discussion paper. However, TRC questions the qualification that sewage treatment plants are essential only if they are not funded from other sources such as rates or utility charges. It is unclear why this qualification is specified as it has no relationship to the question of nexus with development. On this basis, the DSDIP list of essential sewerage infrastructure is considered to be acceptable subject to the removal of the qualification concerning funding sources for sewerage treatment plants. It should be noted that concerns about the potential exclusion of sewerage mains less than 200mm in diameter apply equally to the wastewater network. This could also result in oddities in the plan of trunk infrastructure such as pump stations not connected to the essential trunk network if they happen to be serviced by mains less than 200mm diameter. Transport Network Using the five essential infrastructure criteria proposed by TRC, higher order local government roads are considered to be essential infrastructure, whilst lower order roads (access roads and streets) are not. This is the direct opposite to what DSDIP proposes in the list of essential transport infrastructure in Appendix 4. This list includes local government roads but excludes higher order local government roads such as arterial roads.

6 Higher order roads meet each of the proposed criteria, including the requirement that they are most efficiently planned for by local government and provided through its capital works program. This is the same logic which is applied to water and sewerage transport mains. There is also a recognised nexus between development and the need to upgrade arterial roads, even if these roads are located a significant distance from the development site. This was accepted by the Queensland Planning and Environment Court in Hickey Lawyers (a firm) & Ors v Gold Coast City Council [2005] QPEC The exclusion of higher order local government roads from the list of essential infrastructure will have a number of adverse impacts on TRC. In the first instance, their exclusion will mean that the existing legislative requirement and framework for undertaking the planning of higher order local government roads such as arterial road will be removed. This is contrary to good planning, and defeats the original intent of the infrastructure planning provisions of SPA. By not identifying higher order local government roads in the infrastructure plan, the local government will not be able to impose conditions to require land for necessary road reserve widening, and will also hamper its ability to condition development with respect to the restriction of access, setbacks and intersection spacing in order to protect the future, higher order function of a road. TRC will also be impacted by not being able to include the cost of higher order road augmentations in the calculation of any future TRC planned charges. An indication of the extent of this impact can be gleaned from the fact that higher order road augmentations currently included in the TRC PIP have an estimated value of $49,728,917 ($2010). Notwithstanding their proposed exclusion from the list of essential infrastructure, these higher order road augmentations will still need to be provided to facilitate new development. The inability to apportion part of this cost to development will mean that the entire cost will need to be funded through rates revenue. The proposed exclusion of higher order roads from the list of essential infrastructure will result in unacceptable impacts on TRC and its community, and it is recommended that the list of essential infrastructure be amended to include local government sub arterial and regional arterial roads. Conversely, by not excluding lower order roads such as access streets and access roads from the essential infrastructure list, it appears that TRC will be required to plan to provide these assets. TRC is not best placed to perform this role as it is difficult to determine the most efficient layout of the lower order road network without onerous consultation with the subdivider of the land. Lower order roads are most efficiently planned and provided by the subdivider, in the same way that the local water and sewerage connections forming the reticulation network are provided. The inclusion of these lower order roads in the essential infrastructure list (if that is what DSDIP intends) would also mean that TRC will have to fund their provision (likely to be through offsets and refunds). The financial impact of this proposal on TRC cannot be quantified, as TRC has not planned, designed and funded lower order roads in the past. However, due to the significant quantity of lower order roads within the roads network, their inclusion in the list of essential infrastructure would greatly impact on TRC s financial sustainability. It should be noted that lower order access roads were excluded 1 Hickey Lawyers (a firm) & Ors v Gold Coast City Council [2005] QPEC 22. If every miniscule or insignificant or sub 5% (or some other percentage) impact is disregarded, costs that in principle should be chargeable against developments will be foregone, but the aggregation of the impacts of developments, all of which escape a charge, will undoubtedly require expenditures from public resources to provide the necessary new infrastructure (quite apart from giving free access to existing infrastructure).

7 from the previous list of essential infrastructure (Appendix 5) and the infrastructure cost analysis undertaken by DSDIP. For the above reasons, it is recommended that lower order roads such as access roads and streets be excluded from the essential infrastructure list and instead provided by the developer. Land for Parks and Community Facilities Network The list of essential serviced land for parks and community purposes infrastructure significantly alters the type and standard of infrastructure which may be included in this network. The list excludes all embellishments for parks and community facilities land but may require that land contributions include works to make the site suitable for its intended use such as earthworks, clearing, turf and connections to services. The list also limits the maximum rate of land provision to 2 hectares per 1,000 people. TRC currently plans its parks network using a rate of 4 hectares per 1,000 people and also plans for appropriate embellishments to all park types. Applying the proposed five essential infrastructure criteria to its PIP, TRC accepts that its current rate of provision could be considered to be more than what is reasonably required to deliver safe and healthy communities. For this reason, TRC has recently conducted a review of its rate of provision standard for PIP parks and a reduced rate of provision of 3.6 ha/1000 persons has been recommended in urban areas to fulfil recreation and sporting needs. This recommended standard is considered to be the minimum needed to provide effective, efficient and affordable parkland for recreation and sport and on this basis TRC does not support the proposed reduction to 2ha per 1,000 persons. TRC also has significant concerns with how the proposed 2ha per 1,000 persons standard is to be implemented. It is understood that the 2ha per 1000 persons standard is calculated city wide and includes consideration of existing parks. If this is the intention, it fails to consider the existing unequal distribution of parks throughout Toowoomba. Toowoomba Regional Council undertakes planning for parks on a suburban catchment level against which both provision and accessibility standards are applied. Some catchments may currently have a higher level of provision than the standard but many catchments are significantly undersupplied and fail to meet accessibility standards in relation to existing parks. For example, the actual rate of provision of parks in the older suburbs of Toowoomba is relatively high over 3ha per 1000 persons. This means that in order to keep below the proposed 2ha per 1000 persons city wide rate, new areas of development such as Highfields will be required to have a rate less than 2ha / 1,000 persons. This is considered to be an unacceptable outcome for TRC and the communities in those areas. To avoid this situation, the essential infrastructure list for parks must specify suitable catchment sizes for various park types, within which the rate of provision applies. Applying the five essential infrastructure criteria to the question of parkland embellishments, it is TRC s view that these are essential, as they have a nexus with development, and are most efficiently planned by the local authority. It is accepted however that the standard of embellishments required to ensure safe and healthy communities is open to argument.

8 TRC believe that it is reasonable that a small number of typical embellishment items should be included in the essential land for parks and community facilities infrastructure list, in order to make the land useable and safe. Items could be specified for each park type e.g. paths, lights and play equipment in a local recreation park. Alternatively, the essential infrastructure list could specify a maximum monetary amount for embellishments for local recreation, district recreation and district sport parks which equates to the provision of basic embellishments. In this way, local governments will have flexibility to design individual parks to best service the local community. Stormwater Network Applying the five essential infrastructure criteria to its current PIP, TRC is of the view that regional stormwater detention basins and stormwater bio retention facilities meet the essential infrastructure test and should be included on the list of essential infrastructure. This is because regional detention basins and bio retention facilities provide a better and more cost effective solution for dealing with increased stormwater quantity and water quality issues in greenfield locations than a multitude of smaller developer provided infrastructure solutions. Developer provided detention basins and water quality devices are typically located on small land parcels, requiring the design of basins in particular to be much deeper than desirable, posing ongoing maintenance and public safety issues for TRC. In areas where regional detention basin sites can be identified, planned and provided by TRC, this option should continue to be provided under the infrastructure planning and charging framework. Anything less would be a step backwards for TRC s planning and provision of stormwater infrastructure. This would also allow an infrastructure charge for regional detention or bio retention basins to be calculated for only those catchments that benefit from the basins. In areas of Toowoomba where the provision of regional stormwater retention and detention basins are no longer viable, the power to condition development to provide on site solutions which result in no worsening of stormwater quality and quantity as non trunk infrastructure is considered to be an acceptable outcome. To achieve this outcome, the wording of the essential infrastructure list for stormwater must make clear that where an on site solution is to be conditioned, this will be considered non trunk infrastructure. Stormwater infrastructure currently proposed in these catchments by TRC would no longer be planned or provided by TRC. For the above reasons, it is recommended that the list of essential stormwater infrastructure include both regional stormwater quantity (e.g. detention basins) and quality (e.g. bio retention facilities and wetlands) infrastructure. 1.2 Financial Impact of the DSDIP essential infrastructure list on TRC As the preceding analysis has shown, there is much infrastructure within TRC s PIP which TRC considers to be essential infrastructure, notwithstanding that it is proposed to be excluded from the essential infrastructure list provided by DSDIP. Essential infrastructure which is currently not included on the DSDIP list but is identified in TRC s PIP and must continue to be provided by TRC includes:

9 Bores Higher order local government roads such as arterial roads A reasonable level of embellishment to local recreation parks, district parks or sporting parks or an equivalent monetary amount. Parks provided at an appropriate catchment level, with an overall rate of provision of 3.6 ha / 1000 persons Regional detention and bio retention basins The difference between the cost of essential infrastructure which TRC must continue to deliver (as defined by the five criteria proposed by TRC) and the cost of essential infrastructure as defined by the current DSDIP list is shown in Table 1. This table demonstrates that TRC would continue to plan to deliver $678.6 million (NPV $2010) of essential infrastructure over the 16 year planning horizon of the PIP, whilst only $462.7 million (NPV $2010) of that cost will be recognised as essential infrastructure using the DSDIP essential infrastructure list. This means that $216 million (NPV $2010) of future essential trunk infrastructure cannot be included in the calculation of infrastructure charges and therefore cannot be recovered in part from development which benefits from its provision. Table 1 Infrastructure costs TRC PIP and TRC Essential Infrastructure Water Supply Wastewater Parks Transport Stormwater TOTAL Future TRC PIP trunk infrastructure cost (NPV $2010) Future TRC essential infrastructure cost (NPV $2010) Future DSDIP essential infrastructure cost (NPV $2010) $129,196,977 $68,489,644 $68,489,644 $200,938,795 $200,938,795 $200,938,795 $119,028,551 $119,028,551 $12,239,114 $237,767,488 $230,756,840 $181,027,924 $145,418,658 $59,401,592 $0 $832,350,469 $678,615,422 $462,695,477 The overall impact of the DSDIP essential infrastructure list on TRC s trunk infrastructure charges revenue is shown in Figure 2.

10 Figure 2: TRC s trunk infrastructure charges revenue This figure shows that if average cost planned charges are calculated using the value of trunk infrastructure included on DSDIPs essential infrastructure list, revenue of approximately $300 million (NPV $2010) will be achieved over the sixteen year planning horizon (this is shown in the third column titled Planned Charge DSDIP Essential). The cost of essential trunk infrastructure that will still have to be provided by TRC is approximately $678.6 million (this is represented by the middle dotted line), giving an overall cost recovery of approximately 44% if planned charges calculated using the DSDIP definition of essential infrastructure are used. Of particular concern is the fact that the gap between the forecast infrastructure charges revenue and the cost of the trunk infrastructure to be provided by TRC is $378.5 million (NPV $2010) under the proposed planned charges framework. This funding gap is $191 million more than the gap which exists under the current capped charges framework. This means that although the cost of TRC s trunk infrastructure program has reduced as a result of applying the five essential infrastructure criteria, the actual amount which will need to be funded from rates has increased from $187 million to $378.5 million a 50% increase. 1.3 Summary of TRC recommendations 1) The list of essential infrastructure should be determined based on the following test: 1. Is the infrastructure essential to ensure safe and healthy communities? 2. Is there a direct nexus between the need for the infrastructure and development? 3. Is the infrastructure most efficiently planned by the local authority and therefore identified and provided through its capital works program? 4. Is the proposed level of service commensurate with the intent of criteria 1? (e.g. will it provide suitably safe and healthy communities?) 5. Does the infrastructure provide a higher order, trunk function? 2) Having applied the above test to TRC current trunk infrastructure, the following infrastructure should be included on the list of essential infrastructure: Dams, bores and raw water transport mains

11 Water treatment facilities Sewage treatments plants Local government arterial roads Land for parks and community facilities to a standard of 3.6 Ha/1000 persons in urban areas. Basic embellishments to land for parks and community facilities. A monetary figure representing the cost of basic embellishments for the various park types is suggested Regional stormwater detention and bio retention basins 3) Having applied the above test to TRC current trunk infrastructure, the following infrastructure should be excluded from the list of essential infrastructure Access streets and access roads 2. Deemed trunk infrastructure, conditions, offsets and refunds 2.1 Issue SPA currently defines trunk infrastructure as development infrastructure (now essential infrastructure) identified in the PIP or an adopted infrastructure charges resolution. The discussion paper suggests that some local authorities are failing to identify trunk infrastructure within their PIP, thereby requiring the developer to provide the infrastructure as non trunk. This has meant that developers in these areas do not receive the benefits offsets and refunds which would otherwise have been available if the infrastructure was identified as trunk infrastructure in the planning instrument. To overcome this problem, the discussion paper proposes the introduction of deemed trunk principles. The stated objective of these deemed trunk principles is to provide a clear and consistent basis to determine whether infrastructure that is not identified in the PIP/LGIP or Netsev Plan is trunk infrastructure. The deemed trunk principles comprise the following criteria: 1. Is the infrastructure identified in a PIP/LGIP or Netserv Plan? 2. Does the infrastructure meet the minimum standard specification for trunk infrastructure provided by the State? 3. Where the minimum specification is not met, does it provide a trunk function? 2.2 Impact on TRC The proposed deeming of trunk infrastructure that has not been identified in a PIP/LGIP or Netserv Plan is a major departure from the existing planning framework of SPA and has potentially massive financial implications for TRC. These financial implications will arise as a consequence of having to provide offsets and refunds for all infrastructure which is deemed trunk infrastructure. As the identification of deemed trunk infrastructure and the requirement for offsets and refunds for trunk infrastructure are intrinsically linked, this part of the TRC submission discusses these two issues together. Unfortunately the discussion paper appears to ignore this connection, stating that

12 the current conditioning powers under s649 s652 would not change. This is despite the discussion paper proposing fundamental changes as to when infrastructure constructed by developers would be entitled to offsets and refunds. It is simply not possible to do one without changing the other. TRC is fundamentally opposed to the proposed concept of deeming trunk infrastructure. The reason that SPA defines trunk infrastructure with reference to the infrastructure identified in the PIP, is because an infrastructure provider must determine the most efficient approach for providing a trunk network to service its Priority Infrastructure Area. An infinite variety of potential trunk servicing options are available, however by undertaking planning, the infrastructure provider is able to select the most efficient option for inclusion in the plan. It is recognised that the location and timing of TRC s identified trunk network will not always be consistent with the needs of all developers. Developers will invariably want trunk infrastructure to be provided quicker, of a different type or in a different location to that which has been planned by the infrastructure provider. However, this does not mean that the trunk infrastructure solution desired by that developer is the most efficient option for providing a trunk service. Efficiency in this context is defined as being the most cost effective option for servicing the priority infrastructure area, which includes consideration of the capital and operational costs as well as the optimal timing of the infrastructure having regard to the agreed growth assumptions. In many instances, the trunk infrastructure solution proposed by a developer will be inefficient to all parties except for that particular developer. A trunk network which is provided in this manner will not deliver the optimal trunk network at the lowest possible cost to the community. These concerns are demonstrated in a recent example from TRC shown in Figure 1. This figure shows a plan of trunk infrastructure from the TRC PIP, with the planned water trunk mains shown in red. In this example, a landowner proposed to construct the trunk water main along an alternative alignment (shown dotted). The proposed trunk main would continue to be shared, would meet minimum specifications for trunk infrastructure and in all other respects provide a trunk function. However, it is not the most efficient option for servicing the priority infrastructure area. The alternative alignment was proposed because it brought the trunk main closer to other land owned by that developer.

13 Figure 1 Example from TRC water plans for trunk infrastructure As the above discussion and example demonstrates, the proposed trunk infrastructure test process is flawed. The test does not consider whether the developer s proposed infrastructure is more efficient than that planned by the local authority, has no consideration of the logical sequence or timing of infrastructure provision, and does not have regard to the consequential impacts on a local authority s financial sustainability. The proposal that offsets and refunds be provided for all infrastructure deemed to be trunk exposes the local authority to potentially unlimited costs. The proposed reform would have the effect of removing TRC s financial control over its annual spend on infrastructure (by having to provide offsets and refunds for all deemed trunk infrastructure), making the budgeting for its capital works program extremely difficult. By having to provide offsets and refunds in this fashion, TRC could have its capital works program for trunk infrastructure entirely dictated by the whims of private individuals. TRC is not aware of any other infrastructure provider in Australia that is subject to such an unreasonable imposition on its financial sustainability. There is certainly no precedent at the State level. Rather than promoting the planning of infrastructure to efficiently service development, the proposed reforms would encourage a much more conservative and reactionary approach by local authorities. TRC questions the need for such a radical and ill conceived concept to be included in the SPA. The SPA currently provides a framework for determining when a developer can be conditioned to provide trunk infrastructure (land or works) and whether offsets and refunds are to be provided for that infrastructure. These conditioning powers are provided under s649, s650, s651 and s652 of the Act. Where trunk infrastructure has been conditioned to be provided and the development is consistent with the local authorities planning, offsets and refunds are mandated under s649. This

14 section of the Act also allows other infrastructure to be accepted by the local authority where it delivers the same level of service and function as the planned solution. It is only in instances where a development is inconsistent with the planning undertaken by the local authority that offsets and refunds may not be available. Sections of the SPA clearly articulate these rules. If the development is inside the PIA, a refund from the LG is mandated but is based on the proportion of the establishment cost of the infrastructure collected or to be collected, and which can reasonably be apportioned to the other users of the infrastructure. Offsets and refunds are not available for additional trunk infrastructure required by development outside the priority infrastructure area. In these instances, the cost of this additional infrastructure is borne by the developer. This is considered to be entirely reasonable and allows development to proceed outside the planned servicing sequence if the developer is prepared to pay this additional cost. In this way TRC can plan to provide infrastructure in an orderly and financially sustainable manner whilst not unduly constraining development. It is acknowledged that these conditioning powers of SPA (which include the rules for offsets and refunds) are poorly understood and could benefit from some simplification. Some additional certainty concerning the timeframe that developers receive offsets and refunds could also be provided. It is also recommended that training in using whichever process is finalised is undertaken throughout the state. TRC supports the development of a guideline which provides a plain English explanation of the existing trunk infrastructure conditioning powers in the SPA, and specifically the circumstances under which an alternative infrastructure solution may be considered by the local authority. 2.3 Offsets Cross Crediting Reform option 3 in Table 13 of the discussion paper states that cross crediting across networks will be mandatory. Cross crediting of offsets would occur where an infrastructure item in a network is conditioned to be constructed to service a new development but the charge levied for that network is less than the value of the infrastructure. Cross crediting of offsets would require the value of the offset for the supplied infrastructure being offset against the charge for other networks. The practical implication of cross crediting is that refunds are effectively required to be provided upfront, rather than over time as is currently the case. As a consequence, immediate infrastructure charges revenue that was anticipated by the other networks is foregone. This revenue would not be returned to the other networks until the network for which the infrastructure was supplied has the capacity to refund these amounts. This would usually be dependent on the receipt of infrastructure charges revenue from other developers. The likely end result will be that infrastructure networks comprising higher cost infrastructure items such as the road network will receive a greater proportion of funding to the detriment of networks comprising lower cost items. The cross crediting of offsets means that TRC s costs are higher as it would need to borrow more money in the interim to fund planned trunk infrastructure. It would also incur additional

15 administrative costs associated with the tracking of offsets between network funds. TRC recommends that cross crediting between networks remain optional for local authorities. 2.4 Offsets Value of Infrastructure The discussion paper also proposes that the value of infrastructure to be offset or refunded can be based on its actual value or the planned value as stated in the PIP (LGIP). It is stated that the applicant can decide which option is preferred as long as the infrastructure is procured in accordance with the approved local authority procurement process. The obvious problem with the proposed approach is that an applicant will always select the option which provides the highest return. If the actual cost is less than the planned cost, then the planned cost will be selected. If the actual cost is higher than the planned cost, the actual cost will be selected. This would ensure that there would never be a combination of overs and unders. All costs to be offset would be equal to or greater than the planned cost, resulting in greater infrastructure cost to the community. For this reason, it is recommended that the value of infrastructure supplied by an applicant to be offset or refunded, be based on an estimate of the construction obtained by the developer. The estimate would be provided by the developer to the local authority prior to commencement of the works. A procurement process for obtaining this estimate could be specified by the State government and might require for example the need to obtain three quotes for the work. If the local authority agrees with the estimate, the works could be undertaken and offsets and refunds would be payable based on the estimated cost. This would provide an incentive to the developer to ensure that the works are undertaken efficiently and within the estimated budget. Where the infrastructure being supplied is land, it is recommended that an independent land valuation is used as the value of the infrastructure contribution. 2.5 Recommendations As the preceding discussion demonstrates, the proposal to deem trunk infrastructure will have significant implications for the cost effective provision of infrastructure and the finances of TRC. Given the significant implications which will arise from the proposed changes to SPA, TRC recommends that: DSDIP s proposed test for deeming trunk infrastructure be discarded; DSDIP undertake further consultation concerning the development of an appropriate test for deeming trunk infrastructure that has not been identified in the infrastructure plan; The current legislative framework for the conditioning of trunk infrastructure under s649 to 652 of the SPA be maintained but streamlined; Further guidance be provided to both local government and the development industry on the proper application of these conditioning powers under s649 s652 of SPA. E.g. include in a guideline, prepare development assessment checklist for infrastructure providers; Third party review of PIP planning be required to ensure that adequate trunk infrastructure planning has been conducted by a local authority to service the priority infrastructure area. Cross crediting of offsets be optional

16 The value of infrastructure supplied by an applicant, and which is to be offset or refunded, be determined using a methodology which requires an estimate of the construction cost to be obtained by the developer. The estimate is to be agreed to by the local authority. 3. Planned charges The major reform to infrastructure charging will be ability to calculate planned charges. As part of this reform, it is also proposed that: a standardised processes for calculating planned charges be introduced planned charges be subject to an independent assessment of both local authority financial sustainability and development feasibility before a ministerial determination being made. Comments on planned charges are provided as follows. 3.1 Discussion Up until 2011, planned charges were used by most local governments as a means of obtaining contributions from developers. During this entire period, the development industry was critical of the quantum of infrastructure charges, claiming that development feasibility was being adversely affected. It was further stated that a greater proportion of the cost of new infrastructure should be paid by existing ratepayers who also receive benefits from new infrastructure. Numerous studies and reports were prepared on the topic by both sides, but resulted in little agreement being reached. To put an end to this debate, a maximum charges framework was introduced in The maximum charges were to be set at a level which provided a fair contribution to the cost of new infrastructure to support the financial sustainability of Councils, whilst not being so high as to make development uneconomic. Although some components of the maximum charges framework were insufficiently developed prior to implementation, the current capped charges framework has had a number of benefits. The primary benefit is that capped charges offer an effective means of resolving the question of what should be the quantum of infrastructure charges. In this regard, the State is able to use its resources to determine the level at which a charge is considered adequate for a local authority whilst not adversely impacting the viability of the development industry. Where this is done with fairness, transparency and consultation, local authorities and the development industry are likely to accept the outcome, even if neither party has received exactly what it would have preferred. TRC also recognises that the capped charges framework has provided incentive for it to deliver infrastructure more efficiently and therefore allow costs to be reduced. A recent review of TRC s PIP recommended a number of actions that would result in infrastructure being provided more efficiently, with a corresponding reduction in cost. TRC is currently implementing these recommendations. TRC is concerned that the proposed re introduction of planned charges will result in a replay of the same arguments that plagued planned charges previously. Experience would suggest that the

17 introduction of more process and more reports is unlikely to resolve the underlying issue associated with planned charges. Instead, it is likely to result in more cost and more delay with potentially only a limited prospect of it being successful for a local authority. 3.2 Recommendations The planned charge process is supported if optional for implementation. Should DSDIP proceed with the re introduction of planned charges, the following recommendations are made: Local authorities should have the flexibility to determine their charge areas and the number of such areas The essential infrastructure list should not exclude essential infrastructure which will still be delivered by TRC, simply to minimise the planned charge Standard demand generation rates should be provided as guidance only and not be mandated. Local authorities should be allowed the option of determining demand generation rates based on local factors as well as relevant historical data such as occupancy rates, water consumption data and traffic counts for different types of development in their local government area. The suitability of demand generation rates used by local authorities could be reviewed as part of the third party review of infrastructure plans and/or resolutions. The time and cost implications associated with the process for testing the local authority financial sustainability and development feasibility could be considerable. Prior to the introduction of capped charges, significant time was spent obtaining approval of infrastructure charges schedules. Planned charges will be calculated by network and for different parts of the local government area and will be levied according to development type. If development feasibility is considered to be adversely impacted for one type of development or in one particular charge area, will all the planned charges be refused? If not all planned charges are refused, what charge would replace the refused charge/s? There are a number of practical issues that will need to be resolved. 4.0 Credits Section 7.3 of the discussion paper proposes that: Credits be provided for existing lawful use rights. Charges can only be levied for infrastructure demand that is additional to that provided for under existing lawful use rights. Local authorities maintain a more detailed record of charges, credits and offsets received for each lot to inform the determination of credits. Details of the LGs crediting policy must be included in their LGIP, resolution or board decision. Whilst TRC agrees with the giving of credits for existing lawful uses, it is essential that appropriate qualifications be included as follows: Credits should be calculated for each trunk infrastructure network separately as the greater of the following amounts:

18 o o o If there is an existing lawful use on the premises that is serviced by the trunk infrastructure network, the amount of the adopted charge for the network for the use. The value of any previous trunk infrastructure contribution (land, works or money) for that network be escalated to the base date using the Producer Price Index Roads and Bridge Construction. The applicant should be required to make application for such a credit and provide proof of the previous trunk infrastructure contribution or payment. If the premisesis a vacant residential lot that is serviced by the trunk infrastructure network, the credit should be equal to the amount of the adopted charge for the network for a 3 or more bedroom dwelling. 5.0 Appeals and dispute resolution The discussion paper comments that existing appeal and dispute resolution processes are time and resource intensive. The objective of the reform options is to expedite the resolution of infrastructure planning and charging disputes and to reduce cost of doing so. TRC supports this reform objective as it is advantageous to both itself and the development industry. The reform options range from the introduction of a requirement for parties to mediate prior to the formal lodgement of an appeal, to an expanded set of appeal rights to include the methodology used to calculate charges (planned and capped), conditions for both trunk and non trunk infrastructure as well as the calculation of credits, offsets and refunds. It is noted that the discussion paper dismisses without reason, the use of the Building and Development Dispute Resolution Committee as a forum for resolving these matters. This committee was established for the explicit purpose of providing an accessible, affordable and timely mechanism for resolving disputes concerning technical building and development matters. The BDDRC also has a number of committee members who are technical experts in the field of infrastructure planning and charging. Expanding the jurisdiction of the BDDRC to hear and mediate a wider range of infrastructure planning and charging disputes will provide quick and cost effective results and is considered to be a better long term solution than establishing a mediation process as part of the Planning and Environment Court.