Insights
VAGO report into development contributions unveils the need for a root and branch review
Posted April 03, 2020
Two keystone reforms
Improve DCP/ICP system
The DCP / ICP system can be improved by supporting Councils to adopt whole of municipality contribution plans rather than a patchwork of precinct or site specific plans which characterises the system at present.
This would see off the duplication of strategic planning effort that goes into preparing multiple plans, saving literally millions of dollars across the system. It would also deal with the obvious equity problem of charging developers in some parts of a municipality an infrastructure fee while others get away scot-free.
The effort and know-how required to prepare a whole of municipality DCP is comparable to those employed in creating a Council’s annual budget. It can be readily mastered by local government officials, especially given the range of custom software now available to support the process*.
A large part of the ‘unreasonable cost’ of putting together a DCP, to use VAGO’s language, relates to the torturous process of amending a planning scheme, including a potentially litigious panel hearing.
DCPs are essentially technical documents. While rigorous scrutiny is undoubtedly required, the matters likely to be in dispute are amenable to resolution against objective standards; they typically do not require policy judgements as such. The same distinction exists in assessing compliance in building permit applications versus appraisal of policy alignment in planning permit applications.
A dedicated team in the Essential Service Commission could scrutinise proposed DCP charges for compliance with the fairness and efficiency principles in the Act and recommend (or otherwise) approval via a fast track amendment process. This already occurs in other jurisdictions, notably in NSW and Queensland.
Recast the GAIC as universal licence fee
A second strategic reform would see GAIC abolished and replaced with a universal development licence fee. Again this would resolve a glaring equity issue – the State insists on value sharing in greenfield development under current arrangements, but land owners in brownfield, infill and regional areas capture 100% of the uplift in land value associated with rezonings and discretionary development approvals.
A universal development licence fee can operate on a pre-scheduled or ‘codified’ basis rather than relying on before and after valuations of sites subject to planning related uplift. Such a system operates in the ACT.
Provided enough of the uplift is ‘left on the table’ to motivate land owners to release their sites to bona fide developers, the licence fee would be non-distortive and would generate new revenue quite likely calculated in the hundreds of millions per year. If, in turn, this revenue were shared with local governments, not only would there be a significant boost for infrastructure investment, Councils may even become more welcoming of densification, thereby providing more opportunities for the development sector.
*SGS has developed a cloud based tool, ShapeVIC, for both the formulation of DCPs and the ongoing monitoring of transactions once these Plans are in force. Find out more about ShapeVIC here.