Australia: Planning Update: Developers Win, Councils Lose On Infrastructure Charges

A recent test case on the way that councils calculate infrastructure charges has saved one developer $200,000 and could cost councils a lot more in refunds of incorrectly levied charges.

On 31 October 2005, the Planning and Environment Court handed down the decision of Clift v Gold Coast City Council [2005] QPEC 106, which found that the council’s approach in imposing conditions regarding infrastructure contributions was unlawful. Phillips Fox acted on behalf of the developer in this case.

This decision was the ‘test case’ which both developers and councils had been looking for, to resolve the debate about the level and method of infrastructure charges. The result is a major victory for the development industry and in turn, may leave some councils having to pay.

The development industry has been troubled for many years about the level of infrastructure charging that councils impose. Many councils have sought to extract the maximum possible financial contributions from developers based on expected planning scheme densities rather than the actual demand the development will place on the infrastructure system.

The developers, Lawrence and Raimonda Clift, lodged a development application with Gold Coast City Council for a material change of use for a nine-storey apartment building on the corner of Garfield Terrace and Enderley Avenue, Surfers Paradise. Four multi-levelled, three-bedroom units were proposed. The site, after dedication for road widening purposes, would be 747m2.

The land is included in the Surfers Paradise Local Area Plan under the council’s planning scheme. According to this, a 30-storey building was possible on the land and a planning scheme density of one bedroom per 13m2 of net site area was achievable.

The council approved the application subject to conditions, including infrastructure charges based on the site’s theoretical maximum density as outlined above. The developer appealed against these conditions on the basis that the conditions were neither relevant nor reasonably required by the proposal as applied for.

The developer argued that the site was constrained by its size, proximity to the beach and being on the southern side of the adjacent roadway. Having regard to the provisions of the planning scheme, the development had to satisfy performance criteria with respect to car parking, landscaping, southern shadow, beach shadow, communal open space, site coverage, plot ratio requirements and building setbacks.

The effect of these site constraints meant that the maximum theoretical development could not be achieved on the site. On behalf of the developer, Phillips Fox successfully argued that the infrastructure contributions should be calculated on either the actual demand the development would place on the system or the maximum actual development that could be achieved on the site.

It was the council’s position that the proposed development was an underdevelopment of the site. The council stated that as it was the developer’s choice to not achieve the maximum theoretical development, the council should not exercise its discretion in the application of its planning scheme policies and that the maximum contribution was therefore payable.

The court held that the density, as shown in the Local Area Plan, could not be achieved due to the other planning scheme constraints placed on the land. As the designated planning scheme density could not be achieved on the site, the maximum ‘yield factor’ under each planning scheme policy could also not be achieved.

The court found that the council must be flexible and exercise discretion when determining contributions under each planning scheme policy. In scenarios where the council’s nominated planning scheme density cannot be achieved, the contributions imposed by the council must be reasonable and relevant and have regard to each site’s constraints.

The court agreed that the maximum development achievable on the site was nine three-bedroom units. This decision resulted in the developer saving approximately $200,000 in infrastructure charges.

The future implications of this case are that developers’ contributions under a planning scheme will be calculated according to a density that is realistically achievable for a particular site.

It is conceivable that some developers may recover infrastructure contributions already paid to councils where mistakes have been made. However, the potential for refunds or reductions needs to be determined on a case by case basis.

Developers who believe they may have been incorrectly charged for infrastructure as a result of this case will need to review their contributions in light of the actual demand placed on the system.

Long-term infrastructure planning is going to be a difficult exercise for councils. Under-provision of infrastructure will be costly to remedy and overprovision will waste resources. Councils must aim to use their best judgment about what infrastructure should physically be constructed when the time for actual construction arrives. If developer contributions are insufficient, councils must fund the shortfall from other resources.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.