The Minister’s announcement regarding a phasing out of the Section 94 development contributions cap is welcomed, as the current regime limited Council’s form obtaining adequate funding to provide social and road infrastructure to growing communities. It means that councils will be able to develop Section 94 Plans that shows the direct nexus and charge developers a proportion of the cost to providing needed infrastructure.
"PIA welcomes initial reforms that will provide appropriate funding to support the way Councils fund infrastructure" states PIA State President, Jenny Rudolph.
The Local Infrastructure Growth Scheme (LIGS) is the main way councils fund the infrastructure funding gap created by the current artificial upper limit on development contributions, but funding for the scheme relies on a discretionary annual allocation from the State budget. Having a phase-out period of at least 3 years is essential so that developers have time to adjust to the increased charges in their feasibilities, and councils have time to plan for future growth, ascertain community needs and derive and cost the infrastructure requirements.
With the phasing out of the cap, the focus will rightly return to justifying the nexus between the demands created by development and the necessary infrastructure costs that are included in contributions plans.
PIA is concerned that many council plans and the DPE contributions practice notes haven’t been updated for many years. Councils will also require resourcing assistance to update their contribution plans. PIA would welcome the opportunity to work with the Government to come up with ways to upskill councils and update the contributions planning guidelines.
The phase-out and consequent higher developer contributions raises the expectation that councils should speed up the delivery of infrastructure to support growth. PIA therefore welcomes the Minister’s announcement of a scheme to allow councils to borrow money at reduced interest rates in order to speed up delivery of growth infrastructure.
This appears to be similar to the Local Infrastructure Renewal Scheme that the Government ran from 2012-14 which allowed many councils to borrow money at lower interest rates so that they could provide backlog infrastructure. Hundreds of millions of dollars in infrastructure investment was unlocked under this program which helped unlock housing supply.
The Government also announced that the Special Infrastructure Contribution (SIC) will be expanded to additional areas across Sydney, in order to fund new schools and other State infrastructure in urban renewal and greenfield growth areas. Providing clarity on the type of infrastructure required and how the cost of provision of this infrastructure will be shared is critical to provide certainty to councils and ensure no double dipping for the payment of levies for developments.
Speeding-up of infrastructure delivery can also be supported by:
- A focus on implementing, rather than just preparing, section 94 plans
- Councils spending the money they already have in section 94 accounts on essential infrastructure
- The State Government providing clarity on where the new SICs will apply and how much the contribution will be.
"PIA continues to urge the government to announce a holistic suite of infrastructure funding and value capture arrangements to deliver the objectives of the Draft District Plans in Sydney and Regional Plans across NSW" said Jenny.