Sharing the Costs of Infrastructure

Planning for the provision/funding of infrastructure associated with the release of new urban land is a complex process. The complexity exists, in part, because there is no legislative or endorsed ‘whole of government’ procedure in South Australia to guide landowners, local councils and State Government agencies.

At the same time, URPS’ involvement with Intro Design facilitating the rezoning of land at Angle Vale and negotiating infrastructure agreements with the Department of Planning, Transport and Infrastructure and the City of Playford provides some important lessons. For example, designated teams at Renewal SA and within the City of Playford to coordinate negotiations were extremely valuable. Similarly, the identification of several ‘local champions’ to coordinate information to and from the broader landowner’s group helped to ensure ongoing commitment – these processes can take several months.

Determining the physical and social infrastructure required, and at what cost, is complex and often requires government agencies and councils to complete a number of studies in a robust and timely manner. Councils also need to fulfill all necessary prudential requirements, including balancing increased service costs with uplift of capital values/rates.

In March 2014, the Productivity Commission released its draft report into “Public Infrastructure”. While the role of the development industry in the provision of infrastructure is important, it is also worth noting that the Productivity Commission’s draft report states:

“In principle, developer contributions should only be made to the extent that infrastructure is attributable to the properties being developed. This is straightforward for infrastructure that is clearly related to a developed property, such as that linking a property to a local network. It is less straightforward for networked infrastructure shared with other developments, such as water mains. Ideally, the incremental cost attributable to each property would be reflected in developer charges. For social infrastructure that provides broad-based benefits to the community, such as a library, government funding from a broad-based revenue source can be more appropriate than developer contributions.”

Significantly, the Productivity Commission’s draft report also states that:

“Governments will have to continue to at least partly fund some infrastructure:

  • This can be warranted when it is impractical to exclude users who do not pay direct charges, the wider beneficiaries are difficult to identify or very diffused, and/or infrastructure is provided to meet equity goals…
  • A mix of government funding and direct charging appears likely to remain appropriate for some roads, public transport and social infrastructure.

Government funding should generally be sourced from broad-based taxes on income, consumption or land because such taxes have lower efficiency costs. The Australian Government levies the greater part of these more efficient taxes, requiring it to play a major role in funding infrastructure spending by the States and Territories.”

We eagerly await the finalisation of the Productivity Commission’s report.