Item 7.11 - Attachment 2 |
Detailed
Report |
Background
In
January 2011 Council’s Economic Development Team circulated to Councillors a
draft options paper regarding business investment and attraction in the Parramatta
CBD over the next 3 years.
One
issue explored in the discussion paper is the impact of development
contributions on the supply of new commercial buildings. The paper recommends
that Council consider accepting staged development contribution payments, in an
attempt to reduce the upfront imposition on developers as a means for
attracting new commercial development.
Recent DA activity last 5
years
Over
the last 5 years, development approvals for multi storey commercial buildings
in the city centre have been low. Of the applications that were approved, many
were purpose built buildings for public authority tenants including the
Of
the remaining approvals, only four (4) were in the form of new buildings, being
four (4) or more storeys in height, and dedicated to non residential uses. Of
these, two (2) have proceeded to construction certificate stage, being a 20
storey building at 60 Station Street (known as the Eclipse Building) and a four
(4) storey building at Parkes Street. One factor that was instrumental in seeing
Parramatta
Civic Improvement Plan (CIP) came into effect in December 2007 in conjunction
with Parramatta City Centre LEP and DCP. This development contribution plan
attracts a 3% levy payable on all new developments in the city centre that
increase gross floor area and that have a value greater than $250,000.
The
development contribution is payable in full prior to the issue of a
construction certificate unless the applicant can demonstrate financial
hardship. Demonstration of financial hardship is difficult for Council to
assess.
The
Parramatta City Centre LEP 2007 covers the Parramatta CBD and extends along
The
B3 Commercial Core zone comprises the area directly north and south of the
railway station. This area has traditionally housed commercial development as
opposed to retail or residential development as it is well suited for
commercial redevelopment. Objectives of the B3 zone include:
· To provide a wide range of
retail, business, office, entertainment, community and other suitable land uses
which serve the needs of the local and wider community.
· To encourage appropriate
employment opportunities in accessible locations.
· To strengthen the role of
the Parramatta city centre as the regional business, retail and cultural
centre, and as a primary retail centre in the Greater Metropolitan Region.
The
land uses permitted within the B3 zone seek to ensure the above objectives are
achieved and specifically preclude residential development, ensuring the
continued commercial use of the area.
The
B4 Mixed Use Zone extends beyond the B4 zone (with the exception of
· To support the higher order
Commercial Core Zone while providing for the daily commercial needs of the
locality, including:
o commercial and retail development.
While
residential development is permitted in the zone, staged contributions would
only apply to development that did not include any residential component.
Amendments to the Civic
Improvement Plan
In
line with the Council’s Economic Development Team discussion paper, it is
recommended that Council consider amending its development contribution plan
for the Parramatta CBD (the Civic Improvement Plan) to enable Council to
consider staging development contribution payments for development that meets all
of the criteria below:
· Development within B3 Commercial Core Zone or B4
Mixed Use Zone (see Attachment 2); and
· Predominantly commercial development (i.e. other
than ground floor retail); and
· No residential component; and
· Has undergone an architectural design competition
(in accordance with Council’s LEP) ; and
· Achieves a ‘5 star’ energy rating (NABERS or Green
Buildings Council of Australia or similar); and
· Achieves an ‘A grade’ property rating (Property Council
Criteria or similar).
The
staged payments would be in the form of 50% of the total payment prior to the
issue of a construction certificate (in-line with existing practices) and the
remaining 50% to be paid prior to the issue of an occupation certificate. The
outstanding 50% balance would be required to be secured by bank guarantee and
would continue to be indexed in line with consumer price index (CPI) increases
over time. The CPI increase would be added to the final balance at time of
payment.
The
applicant would request that Council consider staging the contribution payments
at DA stage to enable compliance with the criteria to be assessed.
It is recommended that this criterion be trialled
for a three (3) year period and reviewed at the end of that period to determine
whether the change has provided any real benefits in driving new development.
This could be measured by the number of new commercial developments that proceed
to construction stage as a result of the staged payment methodology, as well as
potential survey and consultation with the local property industry.
Potential disadvantages of
staging contribution payments
The
potential disadvantages to Council in staging development contribution payments
include:
· potential foregone interest income;
· potential delay in delivering works projects
identified in the contribution plan (i.e. while awaiting final payments);
· potential requirement for additional staff time and
resources to administer the staged payments and registration of bank guarantee
security etc.
In order to offset any lost interest income, Council
would simply charge interest on the staged/final payment.. The interest charged
would be based on indicative returns that Council would otherwise have been
likely to receive over the expected construction period. This could be based on
an average over the construction period of the Reserve Bank of Australia’s
(RBA) cash rate or an industry accepted investment benchmark such as the UBS Australia bank bill index (or
similar). This would be detailed in the condition of development consent.
While there could be a delay in the delivery of
some contribution plan projects, it must be noted that if residential and mixed
use development continues in and around the CBD, development contributions will
flow from these developments, and this will give Council room to negotiate on
the commercial side while still ensuring development contribution projects can
continue. It is considered that the potential long term benefits of attracting
new commercial development (and hence more contributions) would outweigh the
short term impacts of the timing of payments.
Administration of staged payments and associated
security may impact upon staff resources and time. This may need to be
accommodated appropriately through additional resources.
Justification for staging
contribution payments
Development
contributions are one development supply side lever that Council has control
over. Therefore, a flexible development contribution scheme could have some
real impact with regard to making Parramatta CBD more attractive to investors
and boosting new commercial development.
New
commercial floor space is equivalent to job growth at a rate of approximately 1
new employee per 20sqm of additional floor space. With a target of 27,000 new
jobs by 2036, there is a requirement for the equivalent of one large (25,000sqm)
office tower and approximately 1000 new
jobs to be created every year.
Applying
the staged payment criteria only to ‘5 star’, ‘A-grade’ and well designed buildings
will provide an additional incentive to developers to provide high quality
building stock in
Why not apply staged
contributions to mixed use or residential developments?
The
global financial crisis has impacted
With
regard to commercial development, securing pre-commitments from prospective
tenants is significantly more difficult than that of residential development. Demand
for commercial space is more tentative and the market more competitive with
space on offer nearby at Ryde, Homebush and Norwest.
While
residential and mixed use developments are also facing similar finance and
lending difficulties, the nature of the residential market makes it easier to
sell or pre-commit the units individually. Recent activity in B4 mixed use zone
has seen a predominance of residential development take up which, if continued,
would suppress commercial development over the long-run. While a mix of
residential and commercial development in the B4 zone is desired, it is the
commercial development that will generate the bulk employment growth for the
Parramatta CBD, and therefore this type of development should be encouraged
Housekeeping amendments to
Council’s Development Contribution Plans
Council
has two development contribution plans being the Parramatta Civic improvement Plan
(applies to the CBD) and the
· Insert relevant clause explaining the obligation of
accredited certifiers in issuing construction certificates and complying
development certificates (both plans).
· Insert relevant clauses relating to 94E Ministerial
Directions, Pooling of Funds, and requirement for detailed cost information
(CIP only).
· Provide a land application map and correct any map
boundary errors (CIP only).
· Specify that the CIP applies to development
applications and complying development.
· Correct typographical errors and misdescriptions
· Number the works item list within the S94A Plan
· Update Bike Routes map within the S94A Plan.
CONSULTATION & TIMING
Should
Council adopt the draft amendments, these will be publicly exhibited for a
minimum of twenty-eight (28) days. Any submission received in relation to the
amendments would be reported back to Council for consideration before the
amendments come into effect.