Development contributions as user charges
These are payments required of developers to help fund planned infrastructure which will be used by the development in question. The main principle is that developers should contribute according to their expected share of the benefits that come from using the items in question.
In Queensland, NSW and Victoria, approval authorities are required to prepare a Contributions Plan which must identify the area subject to the charges, the works that will be charged for and the amount that will be charged per dwelling or equivalent demand unit. ln all these jurisdictions there has been some slippage from this direct user pays rigour with the recent ‘capping’ of charges.
Development contributions as impact fees
Whereas user charges for infrastructure apply to planned infrastructure, impact fees may apply when a development creates unanticipated or unplanned demands on local infrastructure as a result of its particular design or timing.
The ruling principle for splitting costs is the ‘polluter or exacerbator pays’ principle, that is, those who cause the cost impact are 100 percent responsible for paying that cost. This would apply even if the unplanned additional investments in local infrastructure subsequently provide opportunities/ benefits for other developments. Unlike user charges, impact fees cannot, by definition, be predetermined. They must be worked out on a case by case basis.
Development contributions as inclusionary requirements
Inclusionary requirements are about ensuring that successive developments meet community expectations in relation to liveability, efficiency and sustainability. Parking and open space requirements, or their cash-in-lieu equivalents for off-site provisions are examples.
Development contributions as value sharing or value capture arrangements
‘Value sharing’ or value capture contributions capture part of the uplift in the unimproved land value that follows from infrastructure investment, site rezoning or development approval which allows for a higher value or more intensive land use.
The idea of levying part of this so-called ‘betterment’ is a well-established planning concept, though is not explicitly provided for in Australian jurisdictions, apart from the ACT where the leasehold land system includes a ‘lease variation charge’ for 75% of the value uplift following the granting of additional development rights. Growth Area Infrastructure Contributions in Victoria and Special Infrastructure Charges in NSW are both quasi-value capture or betterment regimes, though neither is explicitly linked to land value. In NSW, in the absence of formal mechanisms available to local government, Voluntary Planning Agreements (VPAs) with development proponents are increasingly used to make provision for development contributions based on value capture.
Calculating value uplift for voluntary planning agreements
When a particular parcel of land is rezoned or has its development potential increased, the landowner is effectively granted additional development rights which are not available to all landowners. This represents a ‘rationing’ of development rights which the community allows or understands because it is part of appropriate planning, rather than a ‘free for all’ which would result if there were no restrictions on development rights.
However, the rationing of rights also creates special development opportunities for particular landowners. The value of these special opportunities - so-called ‘monopoly rents' - is reflected in increased land value. For example, other things equal, land approved for a multi-storey apartment building will be worth more than otherwise equivalent land designated for a low rise industrial building.
Figure 2 highlights some of these concepts. It shows the pre and post zoning ‘development values’.
