By Kerin Shekel, 11th October 2012
In an effort to boost struggling local economies, Queensland councils are prepared to forego millions in revenue collected from developers.
Earlier this year, Cairns Regional Council led the way by offering developers a fee waiver on infrastructure costs. The Gold Coast City Council is following closely behind, with substantial discounts for developers now on offer.
Both councils believe removing the up-front costs to developers will generate future projects. Any losses in revenue are expected to be offset by an increase in construction and local employment.
Cairns Regional Council has so far waived developer infrastructure charges of more than $11 million under its Infrastructure Contributions Incentive Program which began in July.
“Projects eligible for part and full discounts are required to have 80% local workers and suppliers and complete the projects by November 2014,” said Lea Guy, media coordinator for the council.
A similar initiative by the Gold Coast City Council is now starting and will run for six months. The Construction Kick-Start Program offers a two-phase discount on infrastructure costs to the construction industry for major works to be completed by 2015.
Gold Coast developers will be eligible for discounts of 50% to 100% on infrastructure charges. Some exceptions are shop developments and larger projects. Developers are set to save a maximum of $500,000 in costs under the scheme.
According to a statement from Robyn Holland, the Gold Coast Council’s communication strategist, the council’s losses will be recouped through the boost to the local economy from any new developments the discounts generate.
“We anticipate the cost of the Kick-Start Program will be offset by an increase in development activity, resulting in infrastructure charge receipts continuing at close to the current levels,” she says. “Receipts are a function of both the charge and the amount of development activity. The Gold Coast will also benefit from job creation for the construction industry, which will help boost local employment figures in the short term.”
The discounts apply to the up-front stormwater, transport and recreation facility infrastructure charges which developers usually pay. In 2009, the Property Council of Australia’s “Infrastructure charges and New House Affordability” estimated that Gold Coast developers were paying around 30% per house site in infrastructure charges to the Gold Coast City Council. The council estimates the loss of revenue from discounting these charges will amount to $16 million during the period.
Despite calculating similar losses in revenue, the Cairns Regional Council maintains it is opting “to keep general rates low to reduce the economic burden on household”.
Guy said that although no council will guarantee rates won’t rise, the council had no “specific plans” to do so.
“The waived revenue has been factored into the forward estimates and allowed for in the council’s budget,” she said. “There are no costs to Council in offering the discounts to developers. Council is simply waiving the fees for headworks that developers would usually pay.”
The initiative seems to be working for the Cairns region. Since the scheme was publicly announced in July, 31 new development applications have been received. Of these, 22 projects have so far been approved.
“The list of recipients remains confidential, though there is a variety of development types, including shopping centres, offices, tourist accommodation, aged care and medical facilities,” said Guy.
The council estimates the 22 approved projects will inject $400 million into the local economy.
As a hint that other councils may follow the Cairns lead, the Sunshine Coast Regional Council announced in August that it will give developers a 25% discount on application fees.
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