Introduction

On 28 June 2013, the Newman Government released its Discussion Paper: Infrastructure planning and charging framework review(Discussion Paper) outlining reform options for the current infrastructure planning and charges framework. This Discussion Paper drew on a review that was undertaken by a stakeholder working group that included both local government and development industry representatives.

The Discussion Paper is part of the Queensland Government’s broader planning reform agenda that has included the introduction of both a single State Planning Policy and State Assessment and Referral Agency.

The Discussion Paper attempts to identify reform that strikes a balance between local authority financial sustainability and development feasibility. Infrastructure charges frameworks have struggled in the past to balance these two competing interests successfully. It is hoped that the preferred set of reform options developed from this Discussion Paper will not suffer a similar fate.

What are infrastructure charges?

Infrastructure charges are charges that are imposed by local authorities to support the delivery of trunk infrastructure that is necessary to accommodate new development and growth in local communities.

Trunk infrastructure is defined as higher-level infrastructure that is shared between several different developments. Non-trunk infrastructure is not shared with other developments and is usually essential to a development site.

The current system

The maximum infrastructure charges framework was implemented through the State Planning Regulatory Provision (adopted charges) in July 2011.

The maximum infrastructure charges framework set a cap on the amount that local authorities could charge on development for trunk infrastructure. Local authorities were free to charge the amount they wanted up to the maximum charge.

Discussion paper

The purpose of the Discussion Paper is to obtain stakeholder views on possible reform options. The maximum infrastructure charges framework was only ever intended to be an interim measure.

The reform options are categorised into three areas:

  1. Framework fundamentals: infrastructure scope, identification of trunk and non-trunk infrastructure and infrastructure planning
  2. Charges mechanisms
  3. Framework elements: conditions, offsets, refunds, credits, infrastructure agreements, dispute resolution and deferred payment of charges

Framework fundamentals

Framework fundamentals underpin the infrastructure charges framework and ultimately provide the basis for deciding who pays the infrastructure costs.

  1. Infrastructure scope
    1. This identifies the type of infrastructure that the framework should apply to.
    2. The current system identifies trunk infrastructure (which the framework applies to) in a Priority Infrastructure Plan (PIP) or Netserv Plan.
    3. A possible reform option would be to introduce an essential infrastructure list with reduced infrastructure scope. Local infrastructure charges and conditions would be limited to this essential infrastructure list.
    4. An example essential infrastructure list is included in Appendix 4 of the Discussion Paper.
  2. Identification of trunk and non-trunk infrastructure
    1. This has implications on the ability to levy an infrastructure charge and the rules for conditioning, credits and offsets.
    2. For trunk infrastructure, a charge may be levied and/or a condition may be applied as part of the development approval for the developer to provide the trunk infrastructure. For non-trunk infrastructure, a charge cannot be levied and developers are usually conditioned to provide this. Infrastructure that is neither trunk nor non-trunk cannot be conditioned nor can a charge be levied.
    3. Currently, trunk infrastructure is infrastructure that is identified by the local authority in a Local Government Infrastructure Plan (LGIP) or Netserv Plan. All other infrastructure is non-trunk.
    4. A possible reform option would be to introduce a “test-based” approach to determine whether unidentified infrastructure is trunk infrastructure. The test would involve determining:
      1. Whether the infrastructure meets a minimum specification for trunk infrastructure; and
      2. If it doesn’t, whether the infrastructure provides a “trunk function”.
  3. Infrastructure planning
    1. Infrastructure planning provides useful information that informs local authority decisions about development patterns in an area. Currently, local governments are required to include at least a basic level of infrastructure planning in a planning scheme.
    2. A possible reform option would be to require local authorities to include a standardised infrastructure plan in their planning schemes. Infrastructure plans will also undergo a third party review process and there will also be a streamlined process for amending infrastructure plans.
    3. The planning process could be standardised by:
      1. Standardising the methodology for apportioning costs;
      2. Having a standard Schedule of Works model; or
      3. Having standard demand generation rates.
    4. The two methodologies for apportioning costs are average cost methodology (total cost of infrastructure divided by the total estimated demand) or incremental cost methodology (estimated cost of remaining infrastructure capacity and any future infrastructure that is necessary to service future demand divided by the future demand).
    5. Schedule of Works models calculate cost per demand unit. The Government has developed draft schedule of works templates and user manuals that are available on the Department of State Development, Infrastructure and Planning (DSDIP) website.

Charges mechanisms

The Discussion Paper accepts that meaningful evaluation of the maximum infrastructure charges framework can only occur once reforms to the broader framework have been considered.

A proposed option is to have the maximum infrastructure charges framework as a default requirement for all local authorities. Planned charges would then be available when a local authority could demonstrate that having a cap for infrastructure charges would create long-term financial sustainability issues.

A more detailed analysis of the maximum infrastructure charges framework will be completed by 31 January 2014.

Framework elements

  1. Conditions
    1. Local authorities have the power to impose conditions on a development approval requiring certain infrastructure. This raises justified concerns as developers were often forced to pay an infrastructure charge which they had also been conditioned to provide.
    2. The Discussion Paper proposes that where unidentified infrastructure is found to be trunk, an offset or refund will be available to offset the cost of the infrastructure.
  2. Offsets and refunds
    1. Local authorities may condition a development approval to supply trunk infrastructure. A refund may be available for the value of infrastructure works that exceed the infrastructure charge.
    2. Currently, local authorities are only required to provide offsets and refunds for infrastructure that is deemed trunk in an infrastructure plan. These offsets and refunds also only need to be equivalent to the “establishment cost” (the estimated cost at the time an infrastructure plan is drafted).
    3. A proposed option is for the offset to be equivalent to the “actual cost” of providing the infrastructure. Another proposed option is to have offsets and refunds for unidentified infrastructure that is deemed trunk.
  3. Credits
    1. Infrastructure charges for a development may be discounted to account for existing lawful use rights through credits.
    2. Currently, there is no standard methodology for credit calculation or even the mandatory provision of credits.
    3. The Discussion Paper proposes to establish a formalised crediting arrangement and consistent crediting methodology. This arrangement would introduce mandated crediting arrangements for existing lawful uses and require local authorities to maintain a register for the collation of credits.
  4. Appeals and dispute resolution
    1. Proposed options include to require all parties to a potential infrastructure charges appeal to mediate before they formally lodge an appeal with the Court and to widen the existing appeal rights.
  5. Infrastructure agreements
    1. Infrastructure agreements allow local authorities and developers to negotiate and agree on specific arrangements.
    2. The Discussion Paper proposes a review of the infrastructure agreement provisions in the Sustainable Planning Act 2009. It also proposes that advisory guidelines be prepared to support infrastructure agreement negotiation and that there be a time limit for negotiation.
    3. A further option is to eliminate conditions requiring an infrastructure agreement,
  6. Deferred payments
    1. Currently, infrastructure charges can be levied if the development approval involves a reconfiguration of a lot, material change of use or building works.
    2. A proposed option would be to move payment of infrastructure charges from plan sealing to settlement.
    3. Alternatively, payment could be mandated to occur at the plan sealing stage and no earlier (unless agreed upon by the local authority and developer).

Submissions

Submissions in relation to the Discussion Paper are open to the public until 9 August 2013 at 5 pm. The Discussion Paper helpfully sets out a set of questions that stakeholders should address in their submissions.

Submissions should focus on:

  1. The impacts (financial, administrative and time) of the proposed reform options;
  2. Alternative reform options or solutions; and
  3. Evidence to support the existence of identified problems.

All submissions must include a point of contact with the full name and a residential or business address.

Submissions need to be forwarded to DSDIP at:

Post: Infrastructure Charges Framework Review

PO Box 15009

City East QLD 4002

Email: infrastructure.planning@dsdip.qld.gov.au

For more information about local infrastructure charges in Queensland, you can visit http://www.dsdip.qld.gov.au/ or email infrastructure.planning@dsdip.qld.gov.au

Adoption of reform

Following public consultation, DSDIP will develop a preferred set of reform options to be presented for government approval in late 2013.

DSDIP will also provide detailed information about the options through things such as draft legislative provisions and guideline information. It is hoped that a new infrastructure charges framework will commence from 1 July 2014.

As previously discussed, the review of the maximum infrastructure charges framework will occur once reforms to the broader framework are considered. It is anticipated that the analysis of the maximum infrastructure charges framework will be completed by 31 January 2014.

Conclusion

Many of the options tabled by the Discussion Paper are in direct response to criticisms that the increasing costs of infrastructure charges have made development unfeasible in Queensland. This is a legitimate concern to the State as the development and construction industry in 2011 represented the fourth largest contributor to Gross State Product and jobs in Queensland.

The proposed options that are the most beneficial to developers include:

  1. Introducing an essential infrastructure list with reduced infrastructure scope;
  2. Making offsets the equivalent of the “actual cost” (as opposed to the “establishment cost”) of providing the infrastructure;
  3. Mandated crediting arrangements for existing lawful uses;
  4. Moving payment of infrastructure charges from plan sealing to settlement or alternatively, mandating that payment is to occur at the plan sealing stage and no earlier.

It is recommended that developers make submissions in response to the Discussion Paper. In particular, the submissions should address the proposed options outlined above as being the most beneficial to developers.