Insights

29 FEB 2012

Infrastructure planning and charging in Queensland: evolution or revolution?

Ian Wright

Planning, infrastructure and environment Government


This article discusses the Queensland Government's reforms to the infrastructure planning and charging frameworks.

Introduction

How we forget

"A nation that forgets its past is doomed to repeat it."

Winston Churchill's words are very pertinent to the current state of infrastructure planning in Queensland particularly in light of the Queensland Government's recent reforms to the infrastructure planning and charging frameworks.

Background to reform

The Queensland Government's reforms to the infrastructure planning and charging frameworks were made in response to the recommendations of the Infrastructure Charges Taskforce which itself was a response to the Queensland Growth Management Summit (p.3).

The reforms were implemented through three legislative instruments:

Significance of reforms

The reform of the infrastructure planning framework implemented by these instruments is considered to be evolutionary whilst the reform of the infrastructure charging framework is truly revolutionary perhaps dangerously so. The paper analyses reforms to the infrastructure planning and charging frameworks in the context of the infrastructure reform agenda of the Australian Government and Queensland Government more generally and concludes as follows:

  • First, that the evolutionary reforms of the infrastructure planning framework will not avoid the mistakes of the past.
  • Second, that the revolutionary reforms of the infrastructure charging framework are repeating the mistakes of the past.

Themes of the paper

This paper therefore has four themes.

  • First, the paper summarises the infrastructure planning reform agenda of the Australian Government and the Queensland Government, to provide the policy context for the recent reforms of the infrastructure planning and charging frameworks in Queensland.
  • Second, the paper assesses the leading practice characteristics and shortcomings of Queensland's infrastructure planning framework.
  • Third, the paper considers the public policy implications of the inconsistent planning horizons which currently exist under Queensland's infrastructure planning framework.
  • Fourth, the paper considers the public policy benefits of adopting a broader cross sectoral focus to the preparation of planning schemes based on spatial planning rather than the current sectoral focus of land use planning and development management.

Finally, the paper identifies the adverse public policy implications of the infrastructure charges reforms.

Infrastructure reform agenda

Australian Government reform agenda

The Australian Government has initiated a reform agenda in relation to the planning, assessment, funding and regulation of infrastructure projects of national significance. This is reflected in the following policy documents recently released by the Australian Government:

  • Sustainable Australia – Sustainable Communities: A Sustainable Population Strategy for Australia – This document identifies planning and infrastructure investment as crucial to the objective of ensuring that Australia's population is compatible with economic prosperity, liveable communities and environmental sustainability (pp.26, 27).
  • Our Cities, Our Future: A national urban policy for a productive, sustainable and liveable future – This document identifies the objective of integrated land use and infrastructure as crucial to the policy goal of planning for and delivering an urban Australia that is more productive, sustainable and liveable (pp.6, 7, 19, 29-33).
  • Regional policy agenda (Regional Development Australia) – This agenda identifies that infrastructure investment and access to services is crucial to the sustainability of Australia's regions.
  • National transport infrastructure policies (National Ports Strategy, National Land Freight Network Strategy, National Aviation Policy and High Speed Rail Study) – These documents identify improved planning and project assessment frameworks as crucial to future investment in Australia's transport infrastructure.
  • National Broadband Network Overview, May 2010 – This document identifies that high speed broadband is essential for Australia's economy, future growth and international competitiveness.
  • Australia's Future Tax System, 2009 – Report to the Treasurer (Henry Tax Review) – This document recommends that the Council of Australian Governments (COAG) review State and local government institutional arrangements to ensure that zoning and planning do not unreasonably inhibit housing supply and housing affordability and also review infrastructure charges to ensure that they appropriately reflect the avoidable costs of infrastructure provided in housing developments(pp.93, 422 and 428).
  • COAG Reform Council's Review of Capital City Strategic Planning Systems – This document identifies the integration and coordination of infrastructure planning with land use planning as an assessment criteria for the COAG review of capital city strategic planning systems which is to report in December 2011.
  • Performance Benchmarking of Australian Business Regulation: Planning, Zoning and Development Assessments – This document recognises the following leading practice characteristics of the Queensland infrastructure planning framework (see pp.185, 223):
    • First, there are detailed infrastructure plans with a level of committed funding from the State budget and committed delivery timeframes.
    • Second, detailed land use planning is supplemented by infrastructure specific planning.
    • Third, priority infrastructure plans which provide a transparent basis for local government decisions about infrastructure funding including the derivation and application of infrastructure charges.

Queensland Government reform agenda

The Queensland Government has also recognised that infrastructure planning and delivery is crucial to the continued development of Queensland and its regions. This is reflected in the following policy documents recently released by the Queensland Government:

Key implications of the public reform agenda

The key implications of the public reform agenda of the Australian and Queensland Governments are as follows:

  • First, change is considerable and constant.
  • Second, there is an increasing focus on decentralised or localised solutions based on local governments or regions (such as the Commonwealth's regional development areas or Queensland's regional plan areas). This is being reflected in the following:
    • a common understanding of local and regional distinctiveness
    • increasing community and stakeholder management
    • devolved responsibilities
    • managing more locally to achieve sustainable outcomes.
  • Third, the public sector agencies are being joined up from the perspective of the user to reduce the public's frustration with having to deal with a variety of public sector entities and to reduce back office costs. This is being reflected in the following:
    • common and standard evidence bases
    • common outcomes
    • common delivery programs and delivery channels and outlets
    • aligned budgets moving to pooled budgets.

Land use planning and development management, infrastructure planning and delivery and local government financial planning have critical roles to play in the implementation of these public sector reforms.

Table 1 summarises Queensland's infrastructure planning framework in terms of land use planning and development management, infrastructure planning and delivery and local government financial planning.

Table 1: Queensland infrastructure planning framework
 

Planning document

Planning agency

Object

Spatial boundary

Temporal boundary

Land use planning and development management

Queensland Regionalisation Strategy

State government

Overarching strategic framework for regional policy and planning outlining a vision, strategic directions and proposed actions for Queensland's regions.1

State

20 years

Regional plan

State government

A planning instrument that provides an integrated planning policy to manage growth and change for a Queensland region.2

Region

20 years

Strategic framework

Local government

The part of a planning scheme that sets the policy position and future development intent for a planning scheme area.3

Local government area

20 years

Infrastructure planning and delivery

Queensland Infrastructure Plan

State government

Long term infrastructure planning document for the State that links infrastructure delivery with population growth and economic development priorities.4

State

20 years

Regional infrastructure plan

State government

Long term infrastructure planning document which outlines State government infrastructure priorities to support a regional plan.5

Region

20 years

Priority infrastructure plan

Local government

That part of a planning scheme that identifies local government trunk infrastructure to service urban growth for 10–15 years.6

Local government area

10 – 15 years

Financial planning of local governments

Long term financial forecast

Local government

Forecast of income, expenditure and value of assets, liabilities and equities.7

Local government area

10 years

Long term community plan

Local government

Plan which provides a strategic direction for the local government's planning processes.8

Local government area

10 years

Long term asset management plan

Local government

Document which states the strategies and capital expenditure for the management of assets.9

Local government area

10 years

 

 

 

 1 Queensland Government (2011) Queensland Infrastructure Plan – Building Tomorrow’s Queensland, p.7.

2 Section 23 of Sustainable Planning Act.

3 Queensland Government (2010) Queensland Planning Provisions - Version 2.0: Module B Drafting Instructions, p.10.

4 Queensland Government (2010) Shaping Tomorrow’s Queensland: A Response to the Queensland Growth Management Summit, p.3; Queensland Government (2011) Queensland Infrastructure Plan – Building Tomorrow’s Queensland, p.7.

5 Queensland Government (2010) South East Queensland Infrastructure Plan and Program 2010–2031, p.3.

6 Queensland Government (2011) Draft Statutory Guideline: Priority Infrastructure Plans, July 2011, p.6.

7 Section 104(2) of the Local Government (Finance, Plans and Reporting) Regulation 2010.

8 Section 124, ibid.

9 Section 136, ibid.

 

Assessment of Queensland's infrastructure planning framework

Leading practice characteristics

The Queensland Government states that Queensland leads the nation in linking land use planning and infrastructure delivery. (See Queensland Government (2011) Queensland Infrastructure Plan: Building Tomorrow’s Queensland, p.14) This claim is supported by the Productivity Commission which has stated that Queensland has a number of leading practice characteristics in particular the following:

  • First, regional infrastructure plans such as SEQIP and FNQIP (and more recently the Queensland Infrastructure Plan) provide detailed infrastructure plans which have a level of committed funding from the State budget and committed delivery timeframes.
  • Second, planning schemes through their strategic frameworks and structure plans for master planned areas, provide detailed land use planning which is supplemented by infrastructure specific planning through priority infrastructure plans.
  • Third, priority infrastructure plans which provide a transparent basis for local government decisions about infrastructure funding including the derivation and application of infrastructure charges.

(See Performance Benchmarking of Australian Business Regulation: Planning Zoning and Development Assessments, pp.185, 190 193.)

Leading practice undermined

However it is important to note that the Productivity Commission's findings predate the Queensland Government's recent reforms to the infrastructure planning and charging frameworks which appear to significantly undermine some of these leading practice characteristics:

  • First, the local government trunk infrastructure plans in a priority infrastructure plan are not aligned with the land use planning reflected in a strategic framework of a planning scheme. Under the Queensland Planning Provisions version 2.0, the strategic framework is to state strategic outcomes which are consistent with the timeframe of a regional plan (generally 20 years) and where there is no regional plan, a minimum of 25 years (see Module B: Drafting Instructions, p.13). This is not aligned with the planning horizon for local government trunk infrastructure plans in a priority infrastructure plan which are only required to show trunk infrastructure to service urban growth over a 10–15 year period.(See Queensland Government (2011) Statutory Guideline: Priority Infrastructure Plan, November 2011, p.10) This is also inconsistent with the 10 year horizon for a long term financial forecast, long term community plan and long term asset management plan which is required to be prepared by a local government. (See sections 104(4), 124 and 135(2) of the Local Government (Finance, Plans and Reporting) Regulation 2010)
  • Second, a priority infrastructure plan no longer provides a transparent basis for local government decisions about infrastructure funding – including the derivation and application of infrastructure charges. (See Performance Benchmarking of Australian Business Regulation: Planning Zoning and Development Assessment, p.191) As a result of the infrastructure charges reforms, a priority infrastructure plan is no longer to contain an infrastructure charges schedule which states infrastructure charges that are derived from a cost apportionment methodology for the provision of the trunk infrastructure identified in the priority infrastructure plan. Rather the infrastructure charges are stated in an adopted infrastructure charges resolution which has no relationship to the cost of provision of the trunk infrastructure identified in the priority infrastructure plan.
  • Finally, under the Queensland Planning Provisions version 2.0, a planning scheme and in particular its strategic framework is focused on the setting and implementation of policies affecting land use planning and development management (see p.4).This sectoral focus on land use planning and development management excludes the opportunities provided by a broader cross sectoral focus based on spatial planning which would allow a greater linkage between urban development and the cost and sequencing of infrastructure.

Suggested reforms to Queensland's infrastructure planning framework

Given these shortcomings, the following improvements to Queensland's infrastructure planning framework are suggested:

  • First, the claimed linkage between State government regional plans and regional infrastructure plans should be made more explicit and transparent to show the linkage between the timing of State infrastructure and the sequencing of urban development.
  • Second, the different planning horizons of, 20 – 25 years for a strategic framework, 10 – 15 years for a priority infrastructure plan and 10 years for a local government financing plan should be made consistent.
  • Third, the current sectoral focus of a planning scheme and its strategic framework on land use planning and development management should be changed to a broader cross sectoral focus based on spatial planning.
  • Finally, the infrastructure charges reforms should be revisited given that they are inconsistent with the leading practice characteristics for infrastructure planning and charging identified by the Productivity Commission, and will also give rise to significant adverse public policy outcomes as identified in previous Productivity Commission reports (See Industry Commission (1993) Taxation and Financial Policy Impacts on Urban Settlement, Australian Government, pp. 8 and 9; Productivity Commission (2004) First Home Ownership Report, Australian Government, pp. 165 and 167) and the Henry Tax Review (see pp.93, 422 and 428).

The remainder of this paper focuses on three of these suggested reforms, namely:

  • achieving consistent planning horizons
  • broadening the focus of planning schemes, and
  • reviewing the infrastructure charges reforms.

Consistent planning horizons

Problems in the making

The inconsistency between the 20 – 25 year planning horizon of a strategic framework and the 10 – 15 year planning horizon of a priority infrastructure plan will exacerbate the current disconnection between land use planning and development management and infrastructure planning and delivery.

Since the strategic framework will be focused on the year 2031, the planning scheme will have to provide for amended designations (up planning) and zones (up zoning), in order to facilitate development up to 2031.

Unlike the present, development extending beyond the normal 10 year review period of a planning scheme would no longer require discretionary actions such as planning scheme amendments by a local government and approval by the State government to provide for development beyond the 10 year planning horizon. (See section 91 of the Sustainable Planning Act)

Public policy implications

Whilst the rationale for these more permissive planning scheme designations (up planning) and zones (up zoning) is the need to accommodate new housing for the anticipated population growth up to the 2031 planning horizon of the regional plans, it is important to understand the consequences of this approach.

The significant beneficiaries of this approach will be private interests in particular existing land owners, real estate investors and speculators whose net worth will be inflated by the increased designations (up planning) and zones (up zoning).

The significant losers of this approach will be the public interest as local governments become increasingly responsible for the provision of infrastructure and services to accommodate the additional development. This will further exacerbate the funding difficulties and other adverse public policy consequences that will arise from the infrastructure charges reforms which are discussed later in this paper.

In the end it will be current local government's residents who need both improved public services and infrastructure to accommodate their day to day needs, as well as better housing, who will be providing financial support for new residents. Those residents will have to either pay for increased local government rates and user charges to provide for the required infrastructure or accept reduced levels of service for infrastructure as a result of the increased development.

It has been estimated that the State government's infrastructure capping reforms will result in a total additional unfunded infrastructure liability of $625 million over 5 years equating to in excess of $60.00 per ratepayer per annum. (See Local Government Association of Queensland, Impact of Maximum Infrastructure Charges on Queensland High Growth Councils, April 2011.)

Water distributor retailers will also face similar policy implications to local governments. The distributor retailers have only two primary revenue streams being:

• user charges for water consumption and network access from all users of their networks, and

• infrastructure charges from developers to service new development.

The distributor retailers have also been established to operate on business lines to achieve full cost recovery. Like local governments, the under recovery of infrastructure charges increases the user charges for consumption and access which have to be paid by all network users.

Suggested reforms

These problems can be avoided by resolving the disconnection between the 20 – 25 year planning horizon of a strategic framework and the 10 – 15 year planning horizon of a priority infrastructure plan.

A possible option would be to ensure that the planning horizon of a priority infrastructure plan is increased to 20 – 25 years consistent with that of a strategic framework. However, this option would merely exacerbate the financial risks already faced by local governments as a result of the expected adverse public policy implications of the infrastructure charges reforms that break the connection between the cost of infrastructure and the infrastructure charge.

An alternative option would be to clarify within the Queensland Planning Provisions that whilst a strategic framework has a planning horizon of 20 – 25 years, the development entitlements in terms of increased designations (up planning) and zones (up zoning) are limited to a planning horizon of only 10 – 15 years consistent with a priority infrastructure plan.

This would ensure that permissive changes to designations (up planning) and zones (up zoning) beyond the 10 – 15 year planning horizon of the priority infrastructure plan, remain at the discretion of a local government and the State government which can, as part of the 10 year review of the planning scheme, evaluate the necessary infrastructure planning and delivery requirements and resulting funding consequences of providing additional development entitlements in a new or amended planning scheme.

(Source: Communities and Local Government (2006) The Role and Scope of Spatial Planning: Literature Review, HMSO, London; New Zealand Government, Building Competitive Cities: Reform of the Urban and Infrastructure Planning System - A Technical Working Paper, 2010, pp.59-60.)
 

Spatial planning

Problems of a sectoral focus

In addition to achieving consistency between the planning horizons for land use planning and development management, infrastructure planning and delivery and local government financial planning, it is also critical to review the planning methodology that is underpinning the preparation of planning instruments in particular local government planning schemes.

Planning schemes are generally focussed on land use planning and development management consistent with the traditional sectoral focus of planners. However, the sectoral focus of planners on land use planning and development management whist indispensable has significant limitations.

  • First, sectoral managers have a tendency to focus on cost reduction (that is work process efficiency in the development approvals process) rather than focussing on maximising the difference between costs and benefits as is the tendency of cross sectoral managers. This tendency to focus on cost minimisation is reflected in the desire of planners to:
    • minimise regulation by reducing development approvals and standardising planning schemes;
    • minimise development timeframes as evidenced by RiskSMART, Smart eDA (ePlanning, eAssessment) and privatising development approvals through certification and accreditation;
    • minimise development application fees and infrastructure charges.
  • Second, a sectoral focus has the tendency to result in a lack of co-ordination in the planning and delivery of the necessary infrastructure to support land use planning and development management. Common weaknesses include:
    • A failure to provide sufficient detail on the infrastructure requirements of the plan.
    • A lack of identification of the agencies responsible to deliver specific projects on proposals or who the key partners might be.
    • Insufficient consideration or evidence that the key partners are willing or able to take responsibility for delivering relevant infrastructure requirements.
    • Insufficient consideration of the existing plans, strategies and expenditure commitments of the key partners.
    • The inclusion of overly aspirational and unrealistic policies.
    • A narrow conceptualisation of infrastructure to development infrastructure which excludes other social, environmental and economic infrastructure.(See Baker, M. and Hincks, S., Infrastructure Delivery and Spatial Planning, May 2009, pp.181, 188 and 189.)
  • Third, a sectoral focus has the tendency to result in a lack of integration between policies and programs for land use planning and development management and other Government policies and programs which influence the nature of places and how they function.
  • Fourth, a sectoral focus has the tendency to result in a lack of understanding of the funding and financing of development by the private sector and the funding and financing of infrastructure by the public sector and increasingly the private sector. The tendency of planners to require infrastructure now but pay for it later is not realistic.

Cross sectoral spatial planning

These problems can be minimised by adopting a broader cross sectoral focus based on spatial planning.

Spatial planning is the practice of place making and delivery at all spatial scales which aims to achieve the following:

  • Enable a vision for the future of requirements and places that is based on evidence, local distinctiveness and community derived objectives.
  • Translate this vision into a set of policies, priorities, programs and land allocations together with the public sector resources to deliver them.
  • Create a framework for private investment and regeneration that promotes economic, environmental and social wellbeing for the area.
  • Co-ordinate and deliver the public sector components of this vision with other agencies and processes.

(See Royal Town Planning Institute, Shaping and Delivering Tomorrow’s Places: Effective Practice in Spatial Planning, April 2007, p.11.)

A comparison between the sectoral approach of land use planning and development management and the cross sectoral approach of spatial planning is provided in Table 2.

Table 2: Comparison of land use planning and development management and spatial planning
 
 

Attribute

Land-use planning and development management

Spatial planning

Purpose

Regulating land use and development through the designation of areas of development and protection, and application of performance criteria.

Shaping spatial development through the coordination of the spatial impacts of sector policies and decisions.

Considers economic, social and environmental effects of development.

Form

Schedule of policies and decision rules to regulate land use for the administrative area.

Mapping of the designation of areas and sites for development purposes.

Strategy identifying critical spatial development issues and defining clear desired outcomes across functional areas.

Visualisation of spatial goals and key areas of change including place making of areas where there are synergies between the public realm and private land.

Process

Discrete process leading to adoption of final blueprint plan.

Confrontational process, instigated through consultation on draft plans and political negotiation.

Stakeholders use the process to protect and promote their interests.

Continuous process of plan review and adjustment.

Mutual learning and information sharing, driven by debate on alternative development models as part of a collaborative political process.

Stakeholders use the process to achieve their own and mutual goals.

Ownership and policy community

A document of the planning authority providing guidance to other professional planners promoting and regulating development.

A corporate document of the local government in shared ownership with communities and other stakeholders, partnerships and NGOs.

Procedural safeguards

Final plan determined through adversarial inquiry or parts of the plan are subject to objections.

Final plan determined by inquisitorial examination of the soundness and coherence of the whole plan.

Methods

Mapping of constraints and collection of sectoral policy demands.

Bargaining and negotiation with objectors and other stakeholders, informed by broad planning principles.

Checking of proposals through sustainability appraisal/strategic environment assessment.

Building understanding of critical spatial development trends and drivers, market demands and needs, and the social, economic and environmental impacts of development.

Analysis of options through visioning and strategic choice approaches.

Generation of alternatives and options assisted by sustainability appraisal/strategic environmental assessment.

Delivery and implementation

Seeks to direct change and control investment activity in land use through prescriptive regulation, whilst mitigating local externalities through conditions and infrastructure agreements.

Seeks to influence decisions in other sectors by building joint ownership of the strategy and a range of incentives and other mechanisms, including land-use regulation and infrastructure agreements.

Monitoring and review

Measures conformance of the plan's policies and proposals with planning control outcomes.

Data provides portrait of plan area as general context for implementation of proposals.

Periodic but infrequent review of whole plan.

Measures performance of the plan in influencing sector policy and decision-making.

Data informs understanding of spatial development and the application of the strategy.

Regular adjustment of components of the plan around a consistent vision.

 

(Source: Communities and Local Government (2006) The Role and Scope of Spatial Planning: Literature Review, HMSO, London; New Zealand Government, Building Competitive Cities: Reform of the Urban and Infrastructure Planning System - A Technical Working Paper, 2010, pp.59-60.)

 

Return of physical planning

Spatial planning goes beyond traditional land use planning and development management to bring together and integrate policies and programs for land use planning and development management with other policies and programs which influence the nature of places and how they function.

As such spatial planning provides a renewed emphasis on physical planning involving as it does, core competencies related to place making, infrastructure and the physical environment, both built and natural.

It is time for planners to reject the jack of all trades, master of none tag that they have acquired since the traditional focus of physical planning was lost in the aftermath of Jane Jacobs' blistering attack on urban planners in her 1961 seminal work The Death and Life of Great American Cities: The Failure of Town Planning.

The fate of today's urban planner has been summarised thus:

Too busy planning. Too busy slogging through the bureaucratic maze, issuing permits and enforcing zoning codes, hosting community get togethers, making sure developers get their submittals in on time and pay their fees. This is what passes for planning today. We have become a caretaker profession - reactive rather than proactive, corrective instead of pre-emptive, rule bound and hamstrung and anything but visionary. If we live in Nirvana, this could be fine. But we don't. We are entering the unchartered waters of global urbanisation on a scale never seen. And we are not in the wheelhouse, let alone steering the ship. We may not even be on board.

(Source Thomas Campanella, Jane Jacobs and the Death and Life of American Planning, April 2011.)

Suggested reforms

Spatial planning based as it is on physical planning should therefore become the centre around which the other planning specialties orbit such as transport planning, heritage planning, environmental planning and urban design to name but a few.

As a result, planning instruments and, in particular, local government planning schemes should be focused on spatial planning rather than simply land use planning and development management.

Infrastructure charges reforms

Capped infrastructure charges

The Queensland Governments infrastructure charges reform has resulted in the adoption of maximum charges for different classes of development that are to apply uniformly throughout different local government areas.

The maximum adopted charges appear to have been derived from a consideration of infrastructure charges under previous planning scheme policies and priority infrastructure plans of selected local government areas in Queensland. (See Final Report Infrastructure Charges Taskforce, March 2011, pp.62-65.)

At best, it could be argued that the maximum adopted charges are a reflection of the generalised average cost across all local government areas for the supply of trunk infrastructure to service the relevant classes of development. As such the maximum adopted charges have no relationship to the marginal cost of supplying trunk infrastructure to service development in different parts of different local government areas.

The rejection of the marginal cost pricing methodology for financial contributions for trunk infrastructure is contrary to the overwhelming weight of public policy analysis over the last 20 years that is set out in the following landmark reports:

  • Industry Commission Report on Taxation and Financial Policy Impacts on Urban Settlement, 1993.
  • Productivity Commission Report on First Home Ownership, 2004.
  • Australian Future Tax System, 2009, : Report to the Treasurer (Henry Tax Review).
  • Productivity Commission Report on Performance Benchmarking of Australian Business Regulation: Planning, Zoning and Development Assessments, 2011.

The application of maximum adopted charges changed the whole decision making framework that local governments applied to infrastructure charges. As a result, local governments are now required to juggle the issues of financial affordability, the willingness of ratepayers to subsidise urban development and the job creation of the development industry in determining their adopted infrastructure charges.

The adoption of maximum adopted charges which have no relationship to the marginal cost of funding trunk infrastructure to service new development will have the following significant public policy implications:

  • First, the price signal which would encourage economic efficiency and effectiveness has been emasculated such that the cost of funding infrastructure to service development in an outer suburban greenfield area is the same as an infill area.
  • Second, it can result in significant cross subsidies from local government ratepayers and SEQ distributor-retailer customers to landowners and developers.
  • Finally, but not least, the funding of cross subsidies can result in increased rates and user charges to landowners and customers thereby worsening the cost of living pressures especially on those least capable of affording it. As such, this reform will have a regressive impact on taxpayers.

Housing affordability

The infrastructure charges reforms were implemented by amendments to the Sustainable Planning Act made by the Sustainable Planning (Housing Affordability and Infrastructure Charges Reform) Amendment Act. The title of this amendment Act would tend to indicate that infrastructure charges are adversely affecting housing affordability in Queensland and that housing affordability will be improved by the amendments.

The Final Report of the Infrastructure Charges Taskforce supports this when it states that where infrastructure charges are "set too low, local government will under recover money to pay for infrastructure. Set too high, projects will not proceed and housing affordability will be further eroded." (See pp.62-65)

Whilst this statement is literally correct, the Final Report does not acknowledge the findings and recommendations of the Productivity Commission and the Henry Tax Review which:

  • first, endorse the appropriateness of infrastructure charges that relate to the cost of the provision of infrastructure to service development; and
  • second, indicate that infrastructure charges that are not related to the cost of provision of infrastructure to service development such as capped infrastructure charges are inappropriate from a public interest perspective.

In relation to the impact of infrastructure charges on housing affordability, these landmark reports relevantly provide as follows:

• Industry Commission Report on Taxation and Financial Policy Impacts on Urban Settlement –

An apparent dilemma facing governments is the need to promote efficiency (and relieve fiscal stress) through user pays policies for publicly provided infrastructure, while keeping accommodation ‘affordable’ and ‘accessible’ to those on lower incomes. There is apprehension that the reforms of charges and taxation may lead to unacceptable escalation in housing prices … For the reforms advocated in this report, there do not appear to be grounds for these concerns.(See pp.8-9)

• Productivity Commission Report on First Home Ownership –

In summary, greater use of upfront development charging is unlikely to have any substantial effect on housing affordability, irrespective of whether infrastructure was previously subsidised … (See p.165)

The claimed cost savings and improvements in affordability from reducing reliance on developer charges for infrastructure appear overstated. (See p.167)

• Australian Future Tax System (Henry Tax Review) –

Findings:

Infrastructure charges can be an effective way of encouraging the efficient provision of infrastructure to areas where it is of greatest value and of improving housing supply. Charging for infrastructure may be a more effective means of allocation resources than regulating land release.

Where land supply is constrained, well-designed infrastructure charges are more likely to be factored in to the price that developers pay for raw land, than to increase the price of housing in the development where the charge is levied. However, where infrastructure charges are poorly administered - particularly where they are complex, non-transparent or set too high - they can discourage investment in housing, which can lower the overall supply of housing and raise its price.

Recommendation 70:

COAG should review infrastructure charges (sometimes called developer charges) to ensure they appropriately price infrastructure provided in housing developments. In particular, the review should establish practical means to ensure that these charges are set appropriately to reflect the avoidable costs of development, necessary steps to improve the transparency of charging and consequential reductions in regulations. (p.167)

In short, there is a case for the review of the previous infrastructure contributions regime to improve its transparency and thereby provide certainty for stakeholders.

However, there is no persuasive evidence that supports the conclusion that existing or proposed infrastructure charges calculated and imposed in accordance with the methodology applicable to priority infrastructure plans (or earlier infrastructure charges plans) do not relate to the cost of provision of necessary trunk infrastructure and as such would operate as a tax.

Indeed, the balance of evidence (in particular the reviews carried out by the Queensland Competition Authority on local government priority infrastructure plans prepared under the previous infrastructure contributions regime) would indicate that the draft priority infrastructure plans appropriately priced trunk infrastructure, and if anything, under-priced that infrastructure.

Furthermore, the implication that the new infrastructure charges regime involving as it does capped infrastructure charges will improve housing affordability is not supported by the reports of the Productivity Commission and the Henry Tax Review.

Rather, it is apparent that capped infrastructure charges will adversely affect housing affordability in those areas (generally inner city suburban areas) with previously lower infrastructure charges which will be increased by local governments in order to offset the capping of higher infrastructure charges applicable to other areas (generally outer fringe or remote greenfield areas).

Therefore, perversely, it is likely that a portion of increased infrastructure charges in some areas will operate as a tax and adversely impact on housing affordability in those areas.

Suggested reforms

It is therefore essential that the infrastructure charges reforms are reviewed to address the adverse public policy impacts on public sector funding and housing affordability. In this regard, a return to the economically efficient and equitable marginal cost pricing methodology previously adopted is strongly recommended.

It is also recommended that the process for making priority infrastructure plans be reviewed to ensure that these documents are prepared and approved in a timely and cost efficient manner.

Conclusions – Back to the future

In summary it is clear that we have forgotten the mistakes of the past and, if not corrected quickly, we are doomed to repeat them.

  • First, there must be a clear linkage between land use planning and development management, infrastructure planning and public sector funding and financing. Land use and infrastructure plans which are based on consistent planning horizons, a common and standard evidence base and committed funding and delivery timeframes by State and local governments is critical.
  • Second, there must be a return to physical planning involving as it does core competencies related to place making, infrastructure and the physical environment. Spatial planning can be used as a tool to enable this shift from traditional land use planning and development management.
  • Third, infrastructure charges to service new development must once again be based on the marginal cost pricing methodology which provides the most economically efficient and equitable mechanism for funding a developer's financial contribution to the public's cost of providing trunk infrastructure to service new development. It is also consistent with over 20 years of established evidence-based public policy.

The mistakes are clear; as are the solutions. The commitment to implement the solutions is the issue. As a profession, urban planners must articulate and champion these matters in the public interest. If not we run the risk as noted earlier that:

We are entering the unchartered waters of global urbanisation on a scale never seen. And we are not in the wheelhouse, let alone steering the ship. We may not even be on board.

 

(Source: Thomas Campanella, Jane Jacobs and the Death and Life of American Planning, April 2011.)

If this is the case then Churchill was right that "a nation that forgets its past is doomed to repeat it."

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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