The Sustainable Planning (Housing Affordability and Infrastructure Charges Reform) Amendment Act 2011 (the Act) affects the existing regime for infrastructure charging under the Sustainable Planning Act 2009 (SPA).  Broadly, it provides for a new "maximum adopted infrastructure charge" to be set by a Queensland State Planning Regulatory Provision (SPRP) and "switches off" existing charging arrangements in favour of the new adopted infrastructure charge.

Our review of the Act identifies 6 significant issues:

1. Proportionality

The requirement that a charge not be more than the proportion of the establishment cost of the network that can reasonably be apportioned to the premises (which applies under the existing regime for infrastructure charges under section 632 of SPA) appears not to apply to adopted infrastructure charges.

The only limit in the Act is that charges not exceed the cap established by the SPRP.  It therefore permits a level of charge to be set absent any consideration of whether the charge represents a reasonable apportionment for the premises in the context of the actual establishment costs for the trunk infrastructure network. 

Despite the stated aims of infrastructure charges reform, some developments may attract infrastructure charges that are higher than their proportion of the infrastructure establishment costs, but nonetheless compliant with the cap established by the SPRP.  Conversely, some local governments may not be able to recover the actual costs of infrastructure as a result of the SPRP and be forced to obtain funding from other sources (e.g. rates).

2. Uncertainty around Transitional Arrangements

The Infrastructure Charges Taskforce recommended that the standard charges framework apply to planning appeals resolved after the SPRP took effect.  This position was endorsed by the State Government. 

Due to the drafting of section 880 of SPA, the key transitional provision, there is uncertainty around the infrastructure regime to be applied in planning appeals.  Section 880(d) effectively provides that rights, liabilities and actions in relation to a charge or contribution already levied or imposed at the time the SPRP takes effect are not affected by the Act.  The question is whether, in an appeal involving a decision by Council to approve development subject to conditions requiring infrastructure contributions, those conditions can be said to be "lawfully levied or imposed"? 

An appeal is a hearing anew.  If the Court resolves an appeal by granting a development approval, and that development approval takes effect after the SPRP takes effect, it is unclear whether the Court's final judgment can include conditions under a planning scheme policy about infrastructure, or whether it is precluded from imposing such conditions, with the consequence that, once the approval is granted, the local government then issues an adopted infrastructure charges notice. 

3. Retrospectivity

The Act contains no provisions with direct retrospective effect.  The Queensland State Government had to, in balancing the interests of the development industry and Local Governments, draw a line in the sand.  

From the development industry's perspective, the failure to legislate to apply the charges retrospectively (to approved but un-commenced projects) defeats the purpose of the reforms because it creates a micro, two speed economy.  A development application approved on 1 July 2011 gains the benefit of standard charges.  Development approved on 30 June 2011 is subject to the old regime. 

The approach to retrospectivity leads to some peculiar outcomes.  Some local governments are saying they will apply the new regime if a request is made to change a development approval.  Other local governments have indicated, informally, they will reduce fees for, and "fast track", new applications for development already approved. 

Much will turn on the policy positions adopted by individual local governments, defeating the purpose of a state wide, standard infrastructure charging regime.    

4. Appeal Rights

The appeal rights under Section 478 of the SPA, which has been amended to refer to adopted infrastructure charges notices, will continue to be of limited utility to applicants in challenging charges due to the restriction imposed on challenging the methodology used to establish the charge.  Grounds of appeal are limited to manifest unreasonableness and calculation errors. 

Despite the Notes to the Bill indicating that "The Bill provides for extensive rights of review and appeal against the calculation and application of the charge", there seems little scope for challenging a standard charge even if the local government has resolved to increase the charge up to the maximum without necessarily providing any justification.  Any such attack is likely to be characterised as impermissible as it goes to the "methodology used to establish an adopted infrastructure charge".  It could not qualify as manifestly unreasonable as it is expressly permitted by the amendments. 

The limited appeal rights may successfully be used when there has been an obvious failure to follow the rules contained in an adopted infrastructure charges resolution or a manifest legal error in applying the terms of the resolution.

5. Residual Conditioning Powers

For code and impact assessable development applications, an assessment manager must now assess the applications against either an adopted infrastructure charges resolution or the priority infrastructure plan.  This provides a basis for the imposition of conditions dealing with "necessary trunk infrastructure" or additional costs for development outside a priority infrastructure area. 

The new regime may lead to local governments in Queensland increasingly seeking to utilise the residual conditioning powers under the SPA in relation to "necessary trunk infrastructure" and "additional trunk infrastructure" to make up for any shortfall in income arising out of the capping of charges. 

6. Long Term Reform

What is most evident from the Infrastructure Charges Taskforce Report, and the Queensland Government response, is that a long term sustainable solution to the funding of infrastructure requires consideration of alternative sources of revenue for local governments.  This should be approached on a national basis with a view to eliminating the disparity that now exists between the levels of infrastructure charges applied to development approvals across the various States and Territories. 

The Australian Government Productivity Commission released a research report in May of this year, which found that it was:

"difficult to discern the basis of jurisdictions'  policies for determining what infrastructure developments should contribute to their developments, what level of charges should be borne by the private sector and what infrastructure government should provide".

Notably, that report when on to state that:

"Recovering the cost of infrastructure from developers is most appropriate where that infrastructure is used to service a specific development (rather than a situation where hat infrastructure will be shared among the broader community."

Clearly, the current funding mechanisms are not sustainable in the long term. The problem with the charging system in Queensland is that the whole burden of the new charges, if development is able to absorb them, will be passed on to the end purchaser.  In the case of Greenfield development, the deposit gap is affected, or the money is added to buyers' mortgage.  Whilst that might be considered fair in relation to the component of the charges relating to infrastructure serving specific developments, it cannot be considered fair for infrastructure that is used by the wider community.  This "moral" argument is in line with the policy position articulated by the Productivity Commission. 

Alternative funding options could include applying a portion of Federal tax revenue (e.g. from the proposed mineral resource tax) to State and Territory infrastructure funds that must be distributed amongst local governments according to amounts budgeted for planned and approved infrastructure.  There is also the option of returning to the previous system, where funds for infrastructure were borrowed and the interest on the borrowing paid through rates. 

For further information on these issues or the Reform, please contact HopgoodGanim's Planning and Environment team.

David Nicholls, Partner
Tel: +61 7 3024 0368
d.nicholls@hopgoodganim.com.au

Gemma Ayriss, Associate
Tel: +61 7 3024 0377
g.ayriss@hopgoodganim.com.au