Item 8.8 - Attachment 1 |
Detailed Report |
Attachment 1 – Detailed report
BACKGROUND
1. On 25
February 2008 Council resolved to adopt the Parramatta City Council Section 94A
Development Contributions Plan. The Plan took effect on 9
April 2008 and applied to all lands within the Parramatta local government area outside
the Parramatta City Centre.
2. With
the exception of single dwelling houses and ancillary structures the s94A
Contributions Plan applied a fixed rate percentage development contribution
levy to all new development based on the estimated cost of development. The
rates and thresholds applied were in accordance with Section 25K of the
Environmental Planning & Assessment Regulation 2000 as follows:
§ 0% for development proposals with an estimated cost up to and including
$100,000
§ 0.5% for development proposals with an estimated cost between $100,001
and $200,000
§ 1.0% for development proposals with an estimated cost in excess of
$200,000
3. With
respect to single dwelling houses and ancillary structures the adopted Plan
increased the relevant threshold to $300,000 (subject to indexation and is
currently $331,725). The justification for this variation as outlined in the
Council report of 25 February 2008 was to minimise the financial burden on “Mum
and Dad” developments.
4. On 23
May 2011 Council resolved to adopt an amended contribution plan titled Parramatta
City Council Section 94A Development Contributions Plan. Amendment 1 of the
Plan commenced on 8 June 2011. No changes were made to the contribution
thresholds as part of that amendment.
PROPOSED
AMENDMENT TO S94A PLAN
5. This
report presents the outcomes of an analysis conducted into the suitability and
effectiveness of the dwelling house and ancillary structures threshold. Based
on the outcomes of this analysis this report seeks to amend the dwelling house
and ancillary structures threshold to align to the thresholds applied to other
forms of development, being:
§ 0% for development proposals with an estimated cost up to and including
$100,000
§ 0.5% for development proposals with an estimated cost between $100,001
and $200,000
§ 1.0% for development proposals with an estimated cost in excess of
$200,000
6. Amending
the dwelling house and ancillary structures threshold and applying the standard
levies for all developments would improve the current development contributions
system by making the system equitable, more streamlined and simplified.
ISSUES
Inequitable
threshold
7. A
review of Council’s current development contributions system arrangement
indicates that the dwelling house and ancillary structures threshold is
inequitable. A minor difference in the estimated cost of development could
result in a development proposal for a single dwelling house fall just above or
just below the dwelling threshold. An estimated cost just over the threshold
requires payment of a development contribution whilst an estimated cost just
below the threshold would require no payment even where difference between the
cost of the two dwellings is negligible (say one dollar).
8. For
example, a dwelling proposal with an estimated cost of $329,000 would currently
not be levied at all by the S94A Plan (as it is below the current indexed
threshold of $331,725). However a dwelling with a cost estimate of $332,000
would pay a 1% contribution. The proposal to remove the indexed dwelling house
threshold would ensure an equitable approach to the application of S94A
development contributions.
9. The
added complexity of the threshold being indexed each quarter (in line with
movement in the consumer price index) results in difficulties determining the
relevant threshold at the time the consent is being issued, as a different
threshold may have applied at the time the application was lodged.
10. Development
contributions are used to provide for new capital infrastructure to service
local communities on things such as local road and civil infrastructure
upgrades, improvements to open spaces such as parks and playgrounds,
improvements to libraries and community centres and the like. As these
facilities are available to, and often used by the entire community, it is
inequitable if only some new developments are contributing toward their cost.
Any new dwelling house is likely to have an average life expectancy of 50 years
or more and therefore redevelopment of the same site in the short term is
unlikely. Therefore the opportunity to collect further development
contributions would not be possible in the short term.
11. Section
25K of the Environmental Planning and Assessment Regulation sets thresholds
which allow for minor development costing less than $100,000 to be exempt from
the levy, for development costing between $100,001 and $200,000 to attract a
lesser levy of 0.5%, and for development costing in excess of $200,000 to
attract a levy of 1%. The legislation therefore recognises that minor
development of less than $100,000 should not attract a levy, but that anything
greater than $100,000 should contribute towards the costs of infrastructure.
12. If the
single dwelling house and ancillary structure threshold was aligned to the
threshold applied to other development types, then most new dwelling houses
would be levied and would therefore contribute towards the provision of
infrastructure in the local community.
Cost estimates
13. The
s94A development contribution levy is based upon the cost of development.
Applicants are required to provide the cost information to Council at the
development application lodgement stage.
14. While Council staff review the cost
information provided, experience indicates that in some cases applicants reduce
their estimated cost of development to be less than the dwelling house
threshold to ensure their application does not attract a development
contribution levy.
15. Council
has also in some cases received Section 96 applications to modify development
consents seeking that the s94A contribution be deleted with the applicant
purporting that the cost of works is less than the threshold, though the estimate
provided at lodgement was greater than the threshold.
16. There
is also an increasing trend towards having single dwelling houses approved as complying
development certificates (CDC’s). CDC’s can be issued by private certifiers,
avoiding the need to obtain Council approval. As Council does not play a role
in the approval of CDC’s approved by private certifiers, there is greater
potential for dwelling house applications to include unreliable cost estimates.
These cost estimates can be lowered so as to avoid the development being levied
by the S94A Plan. However, by amending the dwelling house threshold to align
with thresholds for other developments would simplify the processes and reduce
the opportunity for development cost estimates to be less than the applicable
threshold.
17. Council
policy requires that a quantity surveyors report is to be submitted only with
applications with an estimated cost over $750,000. As most dwellings are likely
to have an estimated cost below $750,000, there is a greater flexibility for
applicants to be subjective in the formulation of cost estimates. Section 25J
of the Environmental Planning and Assessment Regulation 2000 outlines how to
calculate the estimated cost of development; however this is somewhat ambiguous
and subject to interpretation. Therefore cost estimates could be lowered so as
to avoid the development contributions levy.
S94A
DEVELOPMENT CONTRIBUTION INCOME
18. Based
on available data, a review has been conducted of all development consents issued
by Council for dwelling developments and ancillary structures lodged since the
commencement of the Section 94A Development Contributions Plan on
9 April 2008. The purpose of the review was to estimate the total development
contributions required by these development consents, based on the cost of the
development and the applicable S94A contribution rate.
19. In
the period from the commencement of the S94A plan on 9 April 2008 through to 31
May 2012, the development contributions required as part of development
consents for dwellings and ancillary structures totalled approximately $1,132,800.
20. If
the same development approvals were issued under the scenario where the dwelling
threshold was removed, a number of additional development approvals would be levied
by the S94A plan. As a result, Council would likely have received an additional
$579,000 over the four year period since the commencement of the Plan.
21. It
is noted that Complying Development Certificates (CDCs) issued by private
certifiers and Council also make up a large number of approvals for dwelling houses
and ancillary structures. These developments would therefore contribute a
substantial amount of developer contributions if the threshold was removed.
COMPARISON
WITH OTHER COUNCILS
22. A
review has been undertaken of S94A development contributions plans implemented
by a selection of Sydney councils in order to gain a clearer indication of the
industry standard. As a result of this review it is concluded that other councils
generally apply the standard rates to development as specified under the
Environmental Planning and Assessment Regulation 2000, and that special
exemptions or thresholds are not made for dwelling house developments and
ancillary structures.
23. For
example, The Hills Shire Council’s Section 94A Plan (2011) applies the standard
percentage rates and thresholds for all developments, as derived from the
Environmental Planning and Assessment Regulation 2000, and does not provide
special thresholds for dwelling house and ancillary developments. Fairfield
City Council’s S94A Plan (2011) also does not provide special thresholds for
dwelling and ancillary developments.
24. It is
noted that a number of Councils, such as Blacktown, Holroyd, Ryde and Hornsby
do not currently have a S94A Plan in force, but instead are governed by various
Section 94 development contribution plans which are not levied based on the
estimated cost of works.
NEXT
STEPS
25. Should Council adopt the preparation of an
amended Parramatta S94A Development Contributions Plan, it will be placed on
public exhibition for a period of 28 days as prescribed by the Environmental
Planning and Assessment Act 1979.
26. Any
submission received in relation to the amendments would be reported to Council
for consideration before the Plan is made.
27. Should
the amendment to the Plan proceed, then the change to the dwelling house and
ancillary structures threshold would be applied to development consents issued
following the day the amendment comes into effect and would not be
retrospective.
CONCLUSION
28. A
review of Council’s current development contributions system arrangement
indicates that the dwelling house and ancillary structures threshold is
inequitable. A minor difference in the estimated cost of development could
result in a development proposal for a single dwelling house fall just above or
just below the dwelling threshold.
29. There
is a clear need for dwelling house developments and ancillary structures to be
levied so as to contribute to the provision of infrastructure. If the dwelling
house and ancillary structures threshold was aligned to the threshold applied
for other development types, then most new dwelling houses would be levied and
would therefore contribute towards the provision of infrastructure in the local
community.