Financing infrastructure through user-pays development contributions: an assessment of Australian practice

ABSTRACT

New development often necessitates upgrading existing – or constructing entirely new – infrastructure. It is generally acknowledged that developers should bear a portion of these costs. However, exactly what constitutes a fair and efficient mechanism for the levying of development contributions is disputed and poorly understood, reflected by significant variation between user-pays contribution systems in Australia. After briefly detailing the current framework in each state, this paper evaluates each with respect to a set of good practice principles, and on this basis, outlines several pathways towards improvement. Key issues identified include the prohibitive complexity of current cost apportionment methods, inadequate measures to prevent councils from levying for non-essential projects, and a lack of developer certainty with respect to levy particulars. It is argued that measures to counter these system imbalances should include the reservation of full cost apportionment to significant development only, the pursuit of more transparent and robust apportionment methods using modern modelling capabilities, greater emphasis on leviable item lists, and the restriction of items contained therein to those objectively essential for development. Ultimately, this paper highlights both points of failure and avenues for improvement within the patchwork of Australian contribution systems, helping to inform the debate surrounding developer levies.

KEYWORDS:

• Infrastructure
• development contribution
• property developer
• urban development
• user-pays

Disclosure statement

No potential conflict of interest was reported by the authors.