Significant Reductions In State Infrastructure And Local Government Levies And Water Utilities Charges
On 17 December 2008 the Premier of New South Wales, Nathan Rees, announced a package of reforms to infrastructure levies as follows:
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Charges to the way that State infrastructure contributions are calculated by removing rail infrastructure and bus subsidies.
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Deferral of payment of State infrastructure contribution to the point of sale of a new residential lot.
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Establishing a $20,000 threshold for local Government contributions applying to residential dwellings. Councils will only be able to charge above the threshold if they have the approval of the Minister for Planning.
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Requiring Councils with existing contribution plans that would allow contributions above the $20,000 threshold to seek approval from the Minister for Planning.
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The immediate cessation of water infrastructure charges imposed by Sydney Water and Hunter Water.
The objective of the review is to ensure that the contribution framework is supporting the State’s housing and employment targets.
The above changes come into effect as follows:
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The changes to water levies have already commenced with a direction by the New South Wales Treasury to Hunter and Sydney Water.
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The changes to State infrastructure contributions apply immediately in relation to the calculation of renewed levies and review of existing levies.
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State infrastructure contributions for the growth centres Wyong employment zone, Warner Vale town centre and interim transport levies will be revised during January 2009 with an expected commencement date of 1 February 2009.
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The limitation of levies under the new local government contributions plan of a $20,000 threshold will apply from when the Minister for Planning issues a direction to Council (this was anticipated for mid/late January 2009). As regards existing local government contribution plans the Limitation to the threshold of $20,000 (unless the Council has obtained the approval of the Minister) will apply from 30 April 2009 onwards.
State infrastructure contribution
At present a State infrastructure contribution system is in place for the north west and south west growth centres and this will result in contributions being reduced from, at present $23,000 per lot to $11,000 per lot between February 2009 and June 2011 and reduced to $17,000 per lot from July 2011 onwards. This has been achieved by (as previously mentioned) removing the rail infrastructure and bus subsidy from the component and increasing the Government contribution to 25% until June 2011.
The interim transport levy introduced in 2002 which applies to the releases at Elderslie, Spring Farm, Balmoral Road and Second Ponds Creek will be amended and will result in a decrease at the same time as the State contributions in the growth centres.
The underlying principle of the precinct accreditation protocol remain unchanged and a developer is still required to construct all necessary infrastructure needed to service the precinct at their own cost. Instead of receiving a refund from the Government for infrastructure that benefits other development areas the developer will receive an infrastructure contribution credit for the State levy as financial compensation for the works it has provided.
The payment of the contribution to this levy which has had a negative impact on developers cash flows in the past has now moved to the point of sale and should have a positive impact on cash flows. A restrictive covenant will be placed on the title to the developer’s property which will prevent transfer of the lot until the levy is paid.
The changes to the State infrastructure contributions will only apply to all payments made after the revised State levies direction comes into effect on 1 February 2009.
Where a developer has a voluntary planning agreement with the New South Wales Government they will be able to renegotiate the terms of that agreement to reflect the reforms.
Operation of the $20,000 threshold for local infrastructure
In January 2009 a direction was to be given to the local council which effectively requires contribution plans to only authorise contributions for individual residential dwellings to a maximum of $20,000. A contribution of more than $20,000 will require evaluation by a panel and the approval of the Minister for Planning. This applies to existing local contribution plans.
Introduction of a new Part 5B of the Environmental Planning & Assessment Act (EPA Act)
In the first quarter of 2009 under section 116D of the new Part 5B of the EPA Act (which will come into effect on the commencement of the relevant provisions of the amending act) the evaluation of Council plans will have regard to a focus on the infrastructure needs of new development, how the infrastructure fits within an overall asset management strategy of the Council, the cost estimates for the infrastructure and the implications of affordability for development. The Department will be preparing new contribution manuals as part of its implementation work for the new Part 5B. Further advice on the new Part 5B of the EPA Act will be provided in the first quarter of 2009.
Water infrastructure levies for Sydney Water and Hunter Water customers
These reforms which will see a reduction in developer charges will now result in charges being recouped from existing users.
Will these proposals have any impact on the decision in Broker Pty Limited v Shoalhaven City Council first heard in the Land & Environment Court of New South Wales in late 2007 and then in the Supreme Court of New South Wales Court of Appeal in the later half of 2008
The case of Broker Pty Limited v Shoalhaven City Council involved the Shoalhaven City Council imposing additional contributions under section 94 of the Environmental Planning & Assessment Act 1979 on the owners of lots in a subdivision (following subdivision approval by the developer) when those owners applied for complying development certificates to construct their dwellings. The Council had determined that the original subdivision approval had not at the time of approval contemplated additional works covered by the Council’s new contributions plan and so levied the contributions when the individual owners applied for these complying development certificates.
In the first instance the Land & Environment Court, found that the Council did have power to levy the additional contributions and that such decision was not irrational and therefore not unreasonable and was not double dipping by the Council.
The Land & Environment Court’s decision was upheld by the Court of Appeal and confirmed that the granting of subdivision consent in the first instance to a residential subdivision did not imply grant of consent to the lots in a subdivision being put to residential use and the Council was therefore entitled to levy additional 94 contribution as such approvals would increase demand on infrastructure over that contemplated when the subdivision approval was originally give to the subdivider..
In view of the abovementioned case it is uncertain as to how the application of these changed infrastructure contributions will apply if a similar situation arises as in the Broker Pty Limited case. Therefore a developer needs to be cautious when having a subdivision approval granted to make sure that development applications for the use of the land by the prospective purchaser does not invoke further section 94 contributions, otherwise there could be an impact on sales of the Lots.
