Think Contributions don't need to be reformed? Think again.

During May 2022 we distributed a survey to 44 local councils in NSW asking them a range of questions related to infrastructure contributions in NSW. The intention of the survey was to obtain direct responses from those responsible for the management of infrastructure contributions within council on how they are dealing with issues under the following broad categories:

1. NSW Government's reforms to infrastructure contributions (Part 1 article)
2. Challenges in forward funding enabling infrastructure (Part 2 article)
3. Council's administration of infrastructure contributions (this article)

The survey covered Councils in a range of growth settings and locations; we heard from metropolitan high growth Councils in both infill and greenfield settings, high growth regional Councils, as well as regional Councils that face a different set of challenges due to low population growth.

This article is part 3 in our series and will cover responses about general changes in contributions planning including the contributions cap and staffing. 

NSW’s local contributions system is not working for Councils

We asked Councils to rate the severity of challenges they face in relation to infrastructure contributions from 0 to 10 (10 being the highest severity). Here is what they said:

The response came back at a very high weighted average score of 7.32. The response could also be construed like this: NSW Councils are, on average, not achieving 73.2% of what they expect from their contributions program. This should be sobering reading for any infrastructure planning practitioners out there.
Those in the community not across the details of the proposed contributions reforms may think the reforms being dropped is a good thing. While some controversial elements of the reforms like the RIC and the Land Value Contribution needed more work (a lot more in case of the RIC), there were a lot of quick wins in what the NSW government planned to deliver. The results above should validate the need for changes in NSW’s contributions system.
How can this be fixed?
The elected NSW Government of 2023 needs to make action on infrastructure contributions a priority. The recent and extensive consultation conducted by DPE should provide an excelling starting point for the government.
We then asked Councils to identify their biggest challenges. Here is what they said:

We were told the two biggest challenges are the contributions cap and contributions staffing. Land costs also rated highly but we have discussed possible solutions for Councils in depth in previous articles.
It is difficult to be too strong when describing how much of an abject policy failure the contributions cap has proven to be. The decision to place an arbitrary cap on local contributions to prevent overcharging was always a shortcut to doing a comprehensive review of the contributions planning framework. After all, if contributions plans were to be prepared within the confines of a well working, fair and rigorous legislation, why would a cap be needed?
Notwithstanding the existence of the cap, the decision to not allow it to be indexed with inflation is almost indefensible. Consider this fact – since the cap was put in place in 2009:

• CPI has increased by 32%
• ABS Road and bridges index has increased by close to 43%
• VG’s land value index has increased by 128%

In other words, while the cap has remained fixed, the cost of building roads and basins has gone up by around 43% (likely more), and the cost of purchasing land has easily more than doubled.
Councils have the option to submit an application to IPART for a review of their contributions plan if they want to levy above the contributions cap. Unfortunately, this is far from a quick process. 
The table below lists the IPART review timeframes for contributions plans within the North West Growth Centre. 

The median duration for review is 19 months, keeping in mind this figure does not include the time required to prepare a plan for IPART review. In the context of a new release precinct with high demand for housing, the time required to complete an IPART review can prove very expensive for Councils.
Developers win by somehow only paying $20,000 or $30,000 per lot in contributions during 2022, however, the community loses by not getting the infrastructure they need on time, or ever.
How can this be fixed?
An urgent review of the contributions cap should be undertaken by the state government. The review should consider the following options:

1. Investigate circumstances where the contributions cap can be removed altogether.
2. If a cap is still retained in some areas, a new cap amount should be adopted, along with a provision to index the cap in line with a suitable index.

Shortage of skilled staff

Councils have long known how difficult it can be to find contributions planner. Now we have the numbers to back it up.

73% of the Councils we surveyed said they face a shortage of contributions planning staff. Feedback from the 18% ‘other’ responses indicated that even though they have finally built contributions capability at their Council, they would be in a difficult position if any staff were to leave.
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On a weighted average basis, Councils rated the staffing shortage at a 7.45 out of 10. 

As mentioned earlier, staffing challenges in contributions planning is not new information. People in the planning industry have known about the shortage for years. Admittedly, better processes would alleviate some of the need for more staff, but the unanimity of Councils responses to questions about skilled staffing shortages shows there are structural issues behind the staff shortages.
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We asked Councils to self-reflect on things they were falling behind with. This is what they said:

Perhaps it is a lack of skilled staff that is preventing Councils from preparing a plan to fully fund, stage and sequence the delivery of infrastructure prior to a rezoning? Perhaps if Councils had more staff, they could actively explore the benefits and consequences of NSW government’s low-cost loans to forward fund infrastructure?
How can this be fixed?
A review of skilled staffing shortages in the field of infrastructure planning should be conducted. It should consider the reasons for the shortage and possible solutions such as:

1. Training courses to upskill planning staff
2. Increased focus on infrastructure funding in tertiary courses
3. Incentives to attract more staff to infrastructure planning

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If you have any further questions about the discussion in this report, or would like to use data from the survey, please contact me at the details below.

Suyash Pareek
Director, NXS Planning
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0452030400
[email protected]