Melbourne Planning Scheme Amendment C208 Development

Contributions Plan

Panel Hearing 7th October 2014

Expert Evidence by Roger Gibbins

Engaged by GL Investments

Site - 38 Freshwater Place Southbank

17 September 2014

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1 Introduction ...................................................................................................................................... 1

2 Background ...................................................................................................................................... 2

3 Legislative Basis.............................................................................................................................. 4

3.1 Planning & Environment Act 1987 ..................................................................................................... 4

3.2 The Ministers Direction ...................................................................................................................... 4

3.3 Development Contributions Guidelines ............................................................................................. 4

3.4 Development Contributions Plan Overlay ......................................................................................... 5

3.5 Implications of the Legislative Basis .................................................................................................. 5

4 Review of Documentation ............................................................................................................... 7

4.1 The Southbank Structure Plan 2010 ................................................................................................. 7

4.2 Utilities Capacity Review ................................................................................................................... 7

4.3 Proposed Incorporated Document..................................................................................................... 7

4.4 AECOM Detailed Cost Opinion Report (June 2012) ....................................................................... 10

4.5 Development Forecasts and Implications for the Levy Calculation ................................................. 10

5 Strategic Justification ................................................................................................................... 12

6 Application of Tests ...................................................................................................................... 13

6.1 Need ................................................................................................................................................ 13

6.2 Nexus ............................................................................................................................................... 14

6.3 Fair Apportionment .......................................................................................................................... 15

6.4 Accountability ................................................................................................................................... 16

6.5 Later Developments ........................................................................................................................ 16

6.6 Consistency with Standard Development Contributions Framework .............................................. 17

6.7 Consistency with Normal Practice ................................................................................................... 18

6.8 Works In Kind .................................................................................................................................. 18

7 Conclusions ................................................................................................................................... 20

8 Particulars Appendix ..................................................................................................................... 22

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1 Introduction

1. This report analyses the exhibited and related material for Amendment C208 with an emphasis on the implications for the Southbank Northern Sub-area in accordance with instructions documented in the Particulars Appendix at the rear of this report.

2. Based on my review of the exhibited documents, related reports and information subsequently provided, I have reached the following conclusions:

My site inspection of the area reveals that the amenity of the area and the standard and condition of existing streetscape measures is generally good. There is no demonstrable need for the works upon which the DCP is based, save for some modest improvements to pedestrian and cyclist amenity and the introduction of a comprehensive tree planting scheme.

The projects upon which the DCP is based are impractical and cannot be justified on a cost benefit basis. They are not endorsed by the relevant authorities.

The projects have not been documented to the level of specificity required by the relevant legislation and guidelines, including the mandatory provisions of the DCPO. The notion that the Council will spend a given amount of money on projects to be decided in the future is unacceptable.

To the extent that modest amenity improvements would be beneficial to the area, the need for these relates to the existing situation and not to the impacts associated with new development.

The development forecasts upon which the DCP is based are grossly underestimated to the extent that, if the DCP is approved, new development will fund close to the full cost of the works, rather than the 18.46% claimed in the DCP.

New development will also generate sufficient rates in the future to fund close to the full cost of the works, resulting in substantial ‘double dipping’.

There is likely to be significant cross subsidies between the sub-areas as defined in the DCP, given differences in the extent of existing and committed development.

The DCP has not factored in substantial use of facilities in the area by visitors from outside the DCP area, with the result that costs are unfairly imposed on new development.

The DCP does not demonstrate that the planning authority is accountable for funding its proportion of the costs. In the absence of specific projects an appropriate level of accountability cannot be achieved.

A properly prepared DCP would be substantially different to what has be proposed, therefore this DCP should be rejected.

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2 Background

3. Amendment C208 proposes to apply the Development Contributions Plan Overlay (DCPO) and associated new Schedules to land commonly known as Southbank (DCPO2) and City North (DCPO3). It is proposed to amend the Municipal Strategic Statement by inserting an objective and strategy regarding the funding of infrastructure.

4. It is also proposed to insert a new Incorporated Document titled “City North and Southbank DCPs, SGS Economics and Planning, September, 2013” into the Schedule to Clause 81.01 of the Planning Scheme.

5. According to the explanatory statement, the amendment implements actions from the Southbank Structure Plan 2010 and the City North Structure Plan 2012, which identify key capital works projects, including public realm, drainage and community infrastructure projects.

6. The Development Contributions Plan is intended to be set over a 15-year timeframe, and the following types of infrastructure are intended to be partly funded:

Streetscape upgrades – including footpath widening, new cycling infrastructure and street tree planting;

Key public realm projects – new local centres, improvements to areas underneath the freeway in Southbank and new pedestrian/cycling bridge crossings over Moonee Ponds Creek;

Upgrades to drainage infrastructure and Water Sensitive Urban Design interventions - pump stations and pipe networks;

Delivery of new multi-purpose community centres – including land acquisition and building construction.

The DCP will not fund the delivery of open space; this is the subject of Melbourne Planning Scheme Amendment C209 – Public Open Space Contributions.

7. In this report I focus on the Southbank precinct as described in Exhibit 1. The development contributions for the Southbank precinct are restricted to the ‘public realm’ as follows:

Total Cost $56,089,317

Time of provision 2015/16 – 2029/30

Cost attributable to development $10,354,672

Proportion attributable to development 18.46%

8. It should be noted that these figures are expressed as ‘present values’ using a 6% discount rate (Exhibit 1 – Replica of Appendix 4 in DCP). If nominal totals are used the proportion attributable to development becomes 22%. The patterns of inflows and outflows are not explained. Inflows are suddenly halved in 2022 and outflows are greatest in the first three years and then fall away dramatically.

9. The proposed development contributions for residential and non-residential uses relate to various sub-areas (Exhibit 1).

10. The proposed development contribution rates are set out in the DCP (Exhibit 2).

11. The basis of the calculation for the levies in each of the sub-areas is not provided in the DCP.

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12. It is noted that in Southbank only ‘public realm’ projects are included in the DCP. However, these include drainage works that are identical to those included in City North where they are treated separately. It is not clear why this is the case, although it is noted that the technical studies (reviewed below) make it clear that drainage works are not required in Southbank for drainage purposes.

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3 Legislative Basis

3.1 PLANNING & ENVIRONMENT ACT 1987

13. The power to require a development contribution rests in the Planning and Environment Act 1987. The act empowers a planning authority to make a Development Contribution Plan (DCP) for the purpose of levying contributions for the provision of works, services and facilities (Sec 46I).

14. The act also specifies the mandatory contents of such a plan (Sec 46K). The plan must specify the area to be charged and set out the works, services and facilities (including staging) to be funded from the levy.

15. Importantly, the plan must (paraphrased):

(c) relate the need for the works, services and facilities to the proposed development of land in the area…..

(e) ….. specify the proportion of the total estimated cost of the works, services and facilities which is to be funded by a development infrastructure levy or community infrastructure levy or both …..

(f) ….. specify the land in the area and the types of development in respect of which a levy is payable and the method for determining the amount of levy payable in respect of any development of land …..

16. The act also empowers the minister to issue written directions on a range of matters (Sec 46M). This is dealt with below.

3.2 THE MINISTERS DIRECTION

17. The Minister’s Direction sets out what may be funded by DCP’s (Exhibit 3).

18. It is noted that streetscape measures are not separately identified as an includable item.

3.3 DEVELOPMENT CONTRIBUTIONS GUIDELINES

19. These guidelines were issued by the Department of Infrastructure in 2003 and update by the Department of Sustainability and Environment in 2007.

20. Statements of note in the guidelines include:

DCPS must have a strategic basis – links to SPPF and LPPF (p12).

New development can only be charged in accordance with its projected share of usage. That is all that is required to demonstrate need. (p12)

Must demonstrate that new development will use the infrastructure (can be collectively) – this demonstrates nexus (p13).

DCP’s must have a reasonable time horizon – maximum 25 years (p13).

Apportion cost according to usage (p13).

A commitment to provide the infrastructure. A DCP imposes a binding obligation on the infrastructure provider to provide the infrastructure by the date or criteria specified in the DCP (p13 and p24).

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Accountability – Council must keep publicly available accounts of collections and expenditure (p13).

Transparency – Council must document all assumptions used in calculations in non-technical language (p13).

Items that may be included in a DCP include infrastructure that has reached the end of its economic life (p16).

To be included in a DCP an item must be basic to or consistent with community expectations with regard to the health, safety or well being (pp16 and 17).

Justification will be required to demonstrate that the type or standard of infrastructure is supported by the community – including consultation (p17).

The DCP must provide clear documentation of the costs (p17).

DCP must be based on reasonable growth assumptions (p20),

Unspent funds to be returned (p21).

Council should evaluate options for funding infrastructure (p23).

Demand Units should be area based or ‘per dwelling’. For drainage infrastructure only ‘hectare of developable land (greenfield) or per sqm of site coverage (p44).

3.4 DEVELOPMENT CONTRIBUTIONS PLAN OVERLAY

21. It is clear that the requirements imposed by this overlay (Exhibit 4) accurately reflects the powers created in the Act and the procedures set out in the subsequent Ministerial Direction and the Guidelines. It is therefore appropriate to apply these criteria to test the efficacy of any proposed development contributions plan. It is noted that the Overlay sets out the criteria as mandatory provisions.

3.5 IMPLICATIONS OF THE LEGISLATIVE BASIS

22. The Act, the Minister’s Direction, the Guidelines and the DCPO, taken together, confirm that a high level of justification is required to impose development contributions. There is an onus of proof on the planning authority to identify the need for the works, services and facilities and to establish a nexus with the development it is intended to charge. There must be direct cause and effect.

23. The responsible authority, if it proves cause and effect, must then clearly document the costs and apportion them fairly and must be accountable for expenditure on the specified works, services and facilities. If this cannot be achieved for whatever reason, development contributions cannot be justified. Unjustified development contributions would constitute a tax for which no power exists in the Planning and Environment Act 1987.

24. The legislative basis for development contributions implies some flexibility for the planning authority in preparing a DCP. It is understood that projects may be developed to the ‘concept plan’ stage and the accuracy of cost estimates may be commensurate with this. There is some leeway in defining areas of development where there is reciprocity of usage of works, services and facilities. Estimates of future development and use of the works, services and facilities by outsiders are obviously subject to forecasting assumptions.

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25. However, this leeway given to responsible authorities must not be misapplied to propose ill-conceived and inaccurate DCP’s. The principles that I consider should be applied to strike the right balance between the onus of proof on the planning authority and the flexibility that should be allowed are as follows:

The works, services and facilities must respond to clearly identifiable needs. Reference should be made to community standards. Evidence of need includes a documented commitment by the relevant authority to provide the items in the form proposed, in a stated achievable timeframe and with demonstrable support from all relevant agencies.

A test I would apply is that the works, services and facilities have at least high probability of being implemented in the form proposed within the stated timeframe.

The question should be asked – are the works, services and facilities required whether the development proceeds or not? If they will be provided in any event, there is questionable nexus with the development and a financial contribution is difficult to justify.

The proportion of usage by the development being levied must be high. If existing development that has escaped the net makes up a large proportion of usage, there arises an issue with ‘double dipping’. This is to say that new development will be charged once, and then again when it must pay rates and taxes to fund the balance of the cost. If a large proportion of the usage is generated by outsiders this indicates that the nexus test is not met.

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4 Review of Documentation

4.1 THE SOUTHBANK STRUCTURE PLAN 2010

26. This document provides a ‘strategic framework’ for planning the future development of the Southbank area. It deals with issues of built form, access, open space, community infrastructure and ‘sustainable services infrastructure’.

27. The plan contains estimates of future development (Exhibit 5).

28. The structure plan proposes an ambitious ‘integrated sustainable services infrastructure systems model’ (p73) which includes a tri-generation plant, photo voltaics, wind turbines, gas power generation, sewage recycling, rainwater collection and storm water treatment and re-use.

29. With regard to implementation of the structure plan, development contributions are mentioned as a possibility (p77). A review of the flooding situation is mentioned (p80), however, this is given ‘priority 2’. A recommendation is made ‘to investigate a developer contribution overlay for the delivery of sustainable infrastructure’.

30. A recommendation is made to develop a street improvement program to be delivered through the City of Melbourne capital works program. There is no mention of development contributions for these works.

4.2 UTILITIES CAPACITY REVIEW

31. This technical review (AECOM, 2012) carried out for the Structure Plan assesses the capacity of all utility services.

32. Of significance is the statement quoted below (p 143).

The wider catchment of the Melbourne drainage network is highly developed (mostly covered by roof and paved surfaces with minimal parkland). Any increase in development is expected to have minimal impact on the percentage of rainfall runoff. Consequently, the peak flow rate or total volume of rainfall runoff will not be increase and it will not add any extra flow into the pipe network.

4.3 PROPOSED INCORPORATED DOCUMENT

33. The amendment proposes to incorporate the document ‘City North and Southbank DCPs’ (SGS Economics and Planning, 2013).

34. Statements of significance in this document are as follows:

The majority of Southbank located beyond the river interface is recognised as lacking a defined ‘heart’ that could serve as a focal point for community facilities and commercial activity. Furthermore, some existing local streets have low amenity and cater more for through traffic than the circulation of people throughout the suburb. The Southbank Structure Plan (2010) aims to improve the quality of the Southbank public realm and create a high quality living environment able to support considerable residential and commercial growth into the future (p 1).

Comment – This summarises the rationale for the proposed works. My inspection of the area confirms that traffic volumes in the streets do indeed compromise the amenity of the public domain. However, there has been considerable investment in the ‘back of kerb’ spaces with new paving and tree planting. This infrastructure is generally in good to very good condition. The Southbank Structure Plan assumes that all except local traffic can be excluded from the area and the streets can be narrowed to two lanes only, with generous widened footpaths, planting areas, bike paths and tree planting. All existing infrastructure whether new or old is to be destroyed and replaced – as per the AECOM report. The new footpath, bike path and road paving is intended to

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be loose flags set in gravel to provide a permeable surface. All drains are to be ‘upsized’ and provided on both sides of the streets.

The ‘vision’ set out in the Masterplan is clearly speculative to the point of being totally impractical for the following reasons:

Destroying the existing relatively new infrastructure cannot be justified on a cost-benefit basis.

The arterial functions of many of the roads cannot be ignored, particularly when these roads provide an important interchange function with CityLink. The CityLink contract is drafted such that compromising the traffic function of these roads is infeasible.

There is a possibility that up-sizing the drains may in fact exacerbate flooding problems as flow rates into inundated areas are increased.

Flagged surfaces are likely to suffer ‘washouts’ in flood events, are unlikely to bare the loads imposed and may be susceptible to tree root disruptions.

The task of documenting this DCP was shared between staff of the City of Melbourne and SGS as per the following (p2):

Infrastructure funding policy and procedural matters – City of Melbourne

Strategic base for the DCP – City of Melbourne

Development stock take and projections – City of Melbourne and SGS

Infrastructure project information and justification – City of Melbourne

Cost apportionment method and calculations – SGS.

Comment – It is clear that SGS has not been involved nor does it provide any information on the critical issues of establishing the need for the infrastructure, nor the nexus with development. SGS’s report deals only with the cost apportionment method, with some input into development projections. This is a serious issue as the necessary work to establish need and nexus does not appear in any documentation.

Hence costs must be shared in accordance with projected share of usage, using best estimates. Existing development is not charged and an allowance is made for ‘external usage’ (p 4).

Comment – As it transpires the development forecasts upon which the cost apportionments are made are questionable and no allowance has been made for external usage – difficult to fathom in an area hosting a range of destinations of metropolitan if not State significance.

The balance of the capital cost of the works will be funded from alternative sources, including council rates and, where applicable, Federal and State government funding (p4).

Comment – There is no evidence of a Council commitment to fund the balance, as is required to meet the test of accountability. Given the low ratio of new to existing development, the prospect of ‘double dipping’ is a real consideration.

According to the Southbank Structure Plan 2010, the precinct had a population of 10,500 persons in 2010. This could potentially grow to 40,500 by 2040 (p6)

Comment – The Structure Plan is based on a population of 74,000 30 years, hence. It appears there is a serious discrepancy between the structure plan forecast and that adopted by SGS. By underestimating the future number of people and dwellings the calculation of the development contribution on a ‘per demand unit’ basis is over estimated.

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The primary infrastructure reference document for the DCP is a report prepared by AECOM in collaboration with City of Melbourne staff. It is entitled (sic) Detailed Cost Opinion Report (AECOM, 2012). The AECOM (2012) report identifies design standards and costings for the suite of infrastructure projects nominated by the City of Melbourne for the successful development of the two growth areas in question (p6).

Comment – Notwithstanding the occasional mention of ‘nexus’ the SGS report accepts the AECOM report uncritically. As a consequence the utility of the SGS report as a justification for the DCP is severely diminished.

The AECOM report provides cost estimates for projects totaling $290 million (Apx G) (plus 33 traffic management measures – Apx H).

The DCP has adopted ‘charge areas’ (see following figure) which are designed to avoid ‘cross subsidy’. External demand will be factored in, as will demand beyond the time horizon (p7).

Comment – In the actual calculations in Appendix 3 there appears to be no allowance for external demand. Given there is no information in the report on the specific projects being charged for, it is impossible to check whether cross subsidy occurs and to what extent. By arbitrarily adopting a relatively short timeframe the development forecast becomes a key variable and potential source of inaccuracy. If more development occurs than is forecast, the Council will collect more funds than is justified, and vice versa. A more rigorous approach is to assign the justified costs to all development up to total build out, irrespective of when this occurs.

The SGS report states (p 16) – ‘The City of Melbourne has determined that 8 individual or grouped infrastructure projects will be included in the Southbank DCP. Note that other infrastructure projects may be warranted in the area but at the time of the DCP preparation these were omitted from the DCP for varying reasons. More detail on infrastructure projects included in this DCP and their justification is provided in Appendix 3.

Comment – It is clear SGS has no input into the selection of projects and there is no documentation of the Council’s rationale for selecting the nominated projects. Appendix 3 states that a list of projects is provided with ‘detail on project justification’. In fact Appendix 3 states that project justification is in the AECOM report which provides no justification at all. It merely provides cost estimates for projects nominated by the Council.

The list in Appendix 3 refers to aggregate sums for 5 ‘quadrants’ plus City Road and Sturt Street, plus 23 intersection upgrades. The actual projects within the quadrants are not identified. This is a serious flaw in any DCP.

On the issue of timing and delivery (p18) the SGS report refers to Appendices 3 and 4 as providing the nominal delivery dates for the (unspecified) projects. Appendix 3 states that Sturt Street and City Road will be delivered by 2018 and the other projects between 2015/16 and 2029/30

It is stated – ‘In terms of statutory responsibilities for deployment of funds collected through development contributions under this Plan, Council is committing to deliver all projects within the horizon of the plan. This is encouraging, but no evidence of a budget allocation is provided.

The SGS report states (p19) – ‘Appendix 4 of this DCP provides the infrastructure charge calculation sheet for each project included in the DCP. The calculation sheet shows all of the information inputs used to determine the infrastructure charge attached to each project’.

Comment – The web version of the SGS report has Appendix 4 blank. I have obtained a printout of a spreadsheet that purports to give ‘cash flow by project type’. These appear to be aggregate cash flows for the whole area. It is not possible to relate this to the recommended development contribution rates for the five sub-areas.

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4.4 AECOM DETAILED COST OPINION REPORT (JUNE 2012)

35. This report states – The projects costed have been designed to meet the requirements and targets set in the structure plans for each project. The detailed costing has been produced to provide the City of Melbourne with an understanding of the cost required to upgrade the infrastructure in the three precincts. The information contained within this report will be used to directly inform the DCP.(p1).

36. Hence these are the projects intended to be funded by the DCP.

37. There are eight pages of clarifications and qualifications (pp 2 to 10) in the report. Items of note include:

The costs are based on concept plans and cross sections provided by the City of Melbourne – no detailed design work has been undertaken (p3).

Permeable pavement is more difficult to construct and comes at a higher price (p3).

All kerbs are bluestone with granite detail to ramps (p4).

A recycled water system is included (p5).

Upsized pipes are included with no guarantee that a 1 in 20 year ARI can be achieved (p5).

The project has limited information, based on the ‘conceptual nature of a Development Contribution Plan’ (P6).

38. An example of the material AECOM was required to use in its costings is included in Exhibit 6. This cross section of City Road shows the following:

Noted as ‘provisional concept only for DCP costing only’.

All paving is bluestone flags or sets.

City Road is is one lane in each direction.

Flush kerbs with V profile.

39. An example of an AECOM costing is included in Exhibit 7. It can be seen that complete demolition and excavation of all existing infrastructure is proposed from property line to property line (cost exceeds $3.5 million with contingencies).

40. A summary of the AECOM costings is included in Exhibit 8. The total cost is $290 million - plus traffic signal upgrades (costed separately).

41. The DCP is based on a total cost of $56 million. It is unclear from the DCP which of the projects from the AECOM costings have been included in this figure.

42. The pencil sketches that have informed the AECOM costings appear to have been prepared in total isolation. The qualifications in the AECOM report suggest the costings are unsuitable as a basis for a DCP.

4.5 DEVELOPMENT FORECASTS AND IMPLICATIONS FOR THE LEVY CALCULATION

43. I have examined the dwelling and worker forecasts and have no issues with the latter, however the dwelling forecasts are questionable.

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44. The dwelling forecasts, upon which the DCP is based, are shown in Exhibit 9. It is forecast there will be 13,750 dwellings in 2029. This is contradicted by the Councils own Development Activity Monitor which estimates there will be 17,836 dwellings by 2018 (Exhibit 10).

45. The Southbank Structure Plan contains three forecasts also as shown in Exhibit 9:

Scenario A – Development within current planning scheme.

Scenario B – Development within recommended controls.

Scenario C – Development proceeding according to current trend.

46. If one adopts Scenario B, on the basis that this is what the Structure Plan intends, the number of dwellings forecast in 2029 is 40,000.

47. The implication of this is that the development contribution is significantly over estimated. Exhibit 11 replicates the DCP calculations. It inputs the DCP forecasts, and works backwards to calculate the development costs from the proposed levies. On this basis the total cost of infrastructure being charged for is $58.5 million.

48. However there is some inconsistency here as the DCP estimates the total cost to be $66.0 million (Exhibit 15). It appears the Levies may have been calculated on the 2034 demand units rather than the 2029 demand units.

49. Exhibit 12 shows the likely outcome if the levies as proposed are adopted. Rather than collecting $16 million, $50 million, or 86% of the total cost will be collected. In two sub-areas well over 100% of the allocated cost will be collected. This illustrates the major impact that the growth estimates can have on the outcome.

50. Exhibit 13 shows the effect of adopting the 40,000 dwelling forecast and re-calculating the levy. In this scenario the levies are significantly reduced and at the same time the Council collects more than it would have in the DCP scheme.

51. However, it is not recommended that this scenario be adopted as there are other issues to be dealt with.

52. I have replicated the DCP spreadsheet contained in Appendix 4 (Exhibit 12). This spreadsheet suggests that the Council will spend $73.5 million in nominal terms and will collect $16.0 million from development contributions.

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5 Strategic Justification

53. Strategic justification is advanced by the Council in the Explanatory Statement where there is plethora of policy statements from the planning scheme. However, there is insufficient analysis relating the policies to the proposal.

54. While it is claimed that an extensive consultation process was undertaken on the Southbank Structure Plan 2010 the works that are proposed to be funded by the development contributions in Southbank involve major changes to the arterial road system – reducing high volume arterials to two lane ‘residential streets’. VicRoads do not endorse the proposals in their current form.

55. The roads in question function as an important interchange system on CityLink. It must be noted that the CityLink contract contains objectives relating to improved access from the link to Southbank. In section 2.4 of the contract the State must support the link including principal traffic routes - Kingsway and Power Street.

56. Power Street and linking roads in Southbank provide the principal interchange with the CBD, Southbank and StKilda Road. Any reduction in the capacity of the feeder roads in Southbank will reduce toll collections exposing the State to a compensation claim. Any reduction in the capacity of these roads to draw traffic off City Link will potentially create congestion on the link.

57. The proposed amendment states in relation to compliance with the Transport Act - “there are no applicable policy principles”. The Act states (Sec 15): “The principle of integrated decision making means seeking to achieve Government policy objectives through coordination between all levels of government and government agencies and with the private sector”. On the face of it, given the major implications for the transport networks in the area, this principle is not complied with.

58. There are potentially major implications for the drainage system. The proposals to expand the capacity of pipes may have implications for the rate of flow into areas already subject to inundation. Low lying areas will be increasingly difficult to drain with a rising sea level.

59. Therefore, there are important strategic planning issues that remain unresolved and these have significant implications for the nature of any streetscape measures that might be entertained,

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6 Application of Tests

6.1 NEED

60. The amendment as exhibited clearly states that it intends to implement the Southbank Structure Plan, specifically the road cross sections contained in the AECOM report. It is suggested that this is the solution to satisfying a need to ‘to improve the quality of the Southbank public realm and create a high quality living environment able to support considerable residential and commercial growth into the future’.

61. The difficulty is of course that this plan cannot be implemented. It has not been subjected to due process and cannot therefore be considered to be ‘orderly and proper planning’ for the area. Key stakeholders have not been consulted. There may well be a suite of measures that can improve the amenity of the area and improve levels of safety for pedestrians and cyclists. But the DCP contains no projects that are remotely practical in this regard. I note that this position is consistent with that of the Melbourne AM C171 Panel who stated (p66):

‘…the Council aspirations for City Road …… while admirable, seem unattainable and unrealistic’.

‘…the Panel notes the VicRoads submission … directly identifies City Road as both an arterial road and a key transport route, and it does not support the reduction in lanes without comprehensive transport analysis’.

62. I have direct experience related to the question of the need for major expenditure on streetscape improvements in Southbank. In the late 1990’s I undertook post occupancy surveys and conducted focus groups for all Central Equity apartment developments in the area. Occupants were 90% tenants who chose to live in Southbank for a host of reasons. Foremost amongst these were the benefits of the location – the opportunity to be close to the CBD, StKilda Road and the Arts Precinct. Easy access to open space and beaches was also mentioned. The issues relating to the area’s busy roads (and indeed a shortage of parking) were acknowledged but it was clear residents consciously made a tradeoff decision to choose to live in Southbank. I note that this position is consistent with that of the Melbourne AM C171 Panel who stated (p15):

‘…the Panel does not regard the precinct (Southbank) as nearly as a comprehensively or unworkable an area as was suggested by Council’.

63. An argument that the relatively new infrastructure in the area needs to be totally destroyed cannot be sustained. The community does not need projects that waste valuable capital and are so poorly conceived.

64. The specification of the proposed infrastructure cannot be justified on a ‘value for money’ basis. It exceeds community expectations of the standards that should be applied.

65. Evidence of need includes a documented commitment by the relevant authority to provide the items in the form proposed, in a stated achievable timeframe and with demonstrable support from all relevant agencies. This evidence is absent.

66. Evidence of need, at a minimum, requires that the projects be specified. The only hint as to what the projects are is the list in Table 23 in the DCP document. Here the projects are described as being ‘local streetscape and drainage upgrade projects’ and streetscape improvements’ and ‘intersection upgrades’. As to what projects apply in each of the sub-areas, the DCP is silent.

67. As for the test that the works, services and facilities have at least an high probability of being implemented in the form proposed within the stated timeframe, I would rate the DCP projects as described, as having a very low probability.

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6.2 NEXUS

68. There is a distinction to be made between the primary test of nexus that derives from a strict interpretation of the legislation and the guidelines and the secondary test which takes a less rigorous view.

69. The primary test of nexus is that the development gives rise directly to the need for the works, services and facilities. In greenfield development areas where there is a ‘clean slate’ the nexus between development and the need for infrastructure is clear. In existing built up areas it becomes quite problematic.

70. The Southbank Structure Plan estimates (2010) that there were over 8,000 dwellings and a worker population of over 38,000. Of course, there are many visitors every day to the arts precinct and to the many business and hospitality facilities located in the area.

71. The Council’s document ‘Daily Population Estimates and Forecasts’ (December 2013) states: ‘In a snapshot of an average weekday in 2012, we estimate approximately 844,000 people (residents, commuters and visitors combined) travelled to or were present in our municipality’. The area in question is the CBD, Docklands, South Wharf and Southbank. If approximately 40,000 residents in the area are subtracted the number of daily visitors from outside is around 800,000.

72. In order to estimate the proportion of this visitation that might be attracted to the Southbank area reference is made to the distribution of employment. The ‘jobs density’ in any given area is an indicator of the level of economic and social activity and hence the ability of the area to attract visitors.

73. If visits are apportioned relative to the number of jobs in each area there will be over 100,000 visitors to Southbank each day (a conservative estimate given the presence of arts facilities that have a low ‘jobs to visitor’ ratio).

74. The Southbank Structure Plan also identifies a range of existing ‘key issues’ (pp 17-20):

Lack of a local urban ‘heart’ – paucity of local convenience shopping, services and facilities.

Disconnection from the River and the Central City – walking and cycling is difficult.

Lack of accessible parks and green open space.

Inactive and unfriendly streetscapes – 83% inactive frontages.

Poor walking and cycling environment – City Road, Kings Way and the CityLink tunnel act as barriers.

Unsustainable buildings.

CityLink void.

75. The DCP projects are intended to address these issues. However, it is quite clear that these projects are intended to address existing problems experienced by the existing residents, workers and visitors to the area. The problems are also created by exogenous factors such as the traffic functions of the major arterial roads. The proposed new development is not the cause of these problems, nor does it directly create the need to address them.

76. On the primary test of nexus the development proposed in Southbank fails the test.

77. There is a secondary test of nexus that is alluded to in the Development Contribution Guidelines, and that relates to ‘beneficial use’ of the works, services and infrastructure it is intended to provide.

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78. The proposed new development will certainly use and streetscape improvements that occur and will benefit from them. In fact, residents and workers will have no choice but to use the improved street environment, if it is indeed delivered. But the question remains – how strong is the nexus when the majority of the benefits flow to existing development and to outsiders who will not be charged. This is addressed in the next section on ‘fair apportionment’.

6.3 FAIR APPORTIONMENT

79. The proportion of usage by the development being levied must be high. If existing development that has escaped the net makes up a large proportion of usage there arises an issue with ‘double dipping’. This is to say that new development will be charged once, and then again when it must pay rates and taxes to fund the balance of the cost. If a large proportion of the usage is generated by outsiders this indicates that the nexus test is not met.

80. Remarkably, the DCP, despite recognizing the need to do so (p7), assumes that there will be no use whatsoever by outsiders of the works, services and facilities (as yet unidentified) it is proposed to fund. This belies the fact that there is likely to be over 100,000 visitors from outside daily. This figure will grow, but even it stays the same it is ten times the existing population and it is double the potential future population.

81. The test I would apply is that a high proportion of the need for the works, services and facilities must be generated by the development it is intended to charge.

82. The likelihood is that new demand units (Exhibit 13) will make up around 50% of all internal demand units in 2029, and less than 25% of total demand units if visitor use of the works, services and facilities is considered. Therefore the appropriate test is not met. The apportionment is clearly unfair.

83. A further consideration is that of ‘cross subsidy’ which, as stated in the DCP (p7), is to be kept as low as possible. The DCP does not expose its assumptions about the individual projects in each sub area. An attempt has been made to reveal this by applying the DCP estimates of ‘new demand’ to the development contributions amounts (Exhibit 15).

84. It can be seen that the total cost of projects that the DCP appears to be based on varies wildly from one sub-area to another. The biggest difference is between the North ($21.4 million) and North-east ($1.9 million) sub-areas. It is not immediately apparent why there should be such a difference.

85. Equally perplexing is the notion that the North sub-area will receive the greatest amount of new development. This contradicts the analysis in the Structure plan that identifies this area as being the area with least development potential (Exhibit 16).

86. There are other dimensions to the ‘fair apportionment’ issue, as reflected in the Development Contribution Guidelines, that require examination of alternative funding mechanisms.

87. It is questionable whether population and worker numbers are the appropriate demand units for streetscape measures. The need for such works is generally viewed as an ‘absolute’ or a ‘threshold’ issue. In fact the Southbank Structure Plan argues that the threshold has already been crossed.

88. The obvious alternative source of funding is rate revenue. An additional 30,000 dwellings in the area paying $1,000 annually in rates would generate around $4 million pa available for funding urban improvement projects (based on the current proportion of 13% of rate revenue spent on such projects). To this can be added additional rate revenue from non-residential properties. Of course, this annual revenue stream will ramp up over time but it does provided a certain revenue stream that can service loans. The present value (50 years @ 6%) of the additional income stream available for capital expenditure is $62 million. This means that the Council’s ‘commitment’ to fund the proportion of the costs not covered by development contributions will effectively be funded by the very same development.

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89. The situation that will occur if a development contribution is introduced as proposed is that new residents will pay a contribution up-front and then up to 13% of their rates will be applied to the unfunded costs. This is the double dipping effect.

90. Consideration must also be given to the impact of a development contribution on the housing market. Exhibit 14 contains an extract from a report that argues development contributions cause a contraction of housing supply and a price increase. Both of these outcomes are highly undesirable, particularly given the push to impose a minimum size on apartments and widespread concerns about housing affordability.

6.4 ACCOUNTABILITY

91. Based on the legislation and related guidelines it follows that:

The projects to be funded must be clearly identified and costed to a reasonable level of accuracy.

The authority must demonstrate and document its commitment to implement the projects in the timeframe proposed and to fund to unfunded proportion of the costs.

The authority must commit to refunding the contributions in the event the projects do not proceed or are inordinately delayed.

The authority must keep up-to-date publicly available records of all revenue and expenditures under the scheme.

92. It is not apparent form the DCP documentation that any of these requirements are met.

6.5 LATER DEVELOPMENTS

93. I am aware on the basis of information received on 15th August 2014 that the Council is re-

thinking its approach to the DCP. I note that VicRoads in commenting on the proposal for City Road (September 2013) stated: ‘The activity profile and function of this section of City Road must continue to accommodate placarded loads (largely trucks carrying dangerous goods such as chemicals, petrol, explosives, medical waste etc.) and the arterial road traffic capacity of City Road as an access to City Link via Power Street and an important alternative to the Burnley Tunnels in the event of a closure (accident or planned maintenance event).’

94. Further: ‘The base assumption for any suggested improvements to City Road is to not compromise the function and capacity of the existing arterial road network. This assumption has been successfully applied to the Footscray Road ‘edge treatments’ for Major Projects Victoria’s E-Gate development (refer to the separate E-Gate Masterplan, Architectural Report, dated 13 September 2013). These amenity upgrades create public spaces along the Footscray Road edge without compromising the existing function and capacity of the existing arterial road network’.

95. It would seem that a proper and more rational approach to planning streetscape improvements has commenced. However, even if a suite of feasible projects is finally arrived at, there will remain the issue of cost apportionment, given the extent of existing and outside demand.

96. I received a report on 5th September 2014 by Leanne Hodyl from the Council and I have

undertaken a review. This report suggests that the Council’s intention is as follows:

The projects are as described in the ‘Design Intent’ document which is essentially the same cross sections of roads as contained in the AECOM report.

The AECOM costings are adopted.

The projects have been constrained to ‘back of kerb’.

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In Southbank the total expenditure will be as outlined in the DCP at Table 24 (replicated in Exhibit 15).

$30.0 million is apportioned for local streetscape and drainage upgrades to the sub-areas pro-rata to the overall project costs.

On this basis, when major projects are added, the Council intends to spend $56.08 million (present value) and will collect $10.35 million (present value) (18% of overall cost) as stated in footnote 5 on page 7.

97. My comment on this information is that the projects remain ill-defined and are not implementable in the form upon which the costings are based. It may well be possible to plan and design some practical streetscape measures, but this has not been done. Hence the DCP as it is currently framed does not meet the statutory requirement to ‘set out the works, services and facilities to be funded through the plan, including the staging of provision of those works, services and facilities (Clause 46.06 Melbourne Planning Scheme).

98. It remains to be explained which projects will be implemented in each quadrant (Exhibit 17). For example, in the ‘North Quadrant’ Council states it will commit $7.1 million to local projects, out of $42.9 million to fully implement six projects. Potentially, if only one of these proceeds the majority of properties will derive no benefit at all. As for the major projects, these benefit only a very limited number of properties in this quadrant.

99. The Hodyl report dismisses the option of requiring developers to improve the streetscape in the immediate vicinity of their development on the grounds that this is a ‘patchwork approach’ and a more coordinated approach (especially where footpath widening is proposed) is preferred. In my view this can be managed, where the problems that arise with the DCP approach are intractable. I am aware that the Council is pursuing design solutions for extensive streetscape measures with individual developments relating to permits issued by the Minister for high rise buildings in Southbank.

6.6 CONSISTENCY WITH STANDARD DEVELOPMENT CONTRIBUTIONS FRAMEWORK

100. I have been asked to make comment on the relevance of the new standard development contributions framework. My review and comments are as follows:

101. On 1 May 2014 the Minister for Planning, Matthew Guy1, announced the introduction of Standard

Levies for development contributions in priority growth locations, the implementation of a new Infrastructure Contribution Plan and a streamlined approval process (Standard Development Contributions Advisory Committee, Report 2 ‘Setting the Levies’, 31 May 2013). The Standard Levies are intended to be available for use from 1 July 2015 and will be able to be applied in identified metropolitan and non-metropolitan growth locations.

102. The Infrastructure Contribution Plan (ICP) is a new tool with which development contributions will be levied in priority growth locations. The ICP will be prepared by a Planning Authority in consultation with relevant stakeholders. It will provide the strategic justification for the application and allocation of the development contributions levy to a specific precinct or site. It will align with the Precinct Structure Plan, structure plan or similar planning framework that applies to a Strategic Development Area.

103. It is expected that consultation on infrastructure projects, priorities and delivery will occur as part of setting the strategic framework for locations of growth and change and that this will inform the ICP.

104. The ICP will:

1 http://www.dpcd.vic.gov.au/planning/theplanningsystem/improving-the-system/development-contributions-reform

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Specify the area to which the plan applies

Set out the infrastructure to be funded through the plan

Identify the strategic basis for the infrastructure

Identify any infrastructure items that are proposed to be funded by a Supplementary Levy

Provide for collection of a levy in respect to any development for which a permit is not required.

Be prepared in accordance with a new Ministerial Direction on the form and content of ICPs

105. The level of justification in the Development Levy Plan for the Standard Levy in an Urban Area is intended to be clear and to an appropriate level of detail to demonstrate broad nexus. By ‘broad nexus’ the Committee intends that it is not necessary to show that new households are each likely to be users of each item of the proposed infrastructure. Rather, it will be necessary to demonstrate that the population growth and/or growth in retail, commercial, industrial and tourism activities is likely to justify the type and quantum of infrastructure proposed (Setting the Levies, p25).

106. However, it is stated (p iii) “The new system will continue to operate as a contribution towards infrastructure, and not full cost recovery, and will continue to ensure the principles of need, nexus, equity and accountability are front and centre in the new Development Levy System”.

107. The following observations are made:

Fifteen of the 36 recommendations are the subject of further work to be completed by July 2015, including guidelines and policy issues.

The system will be applied only to Growth Areas and Strategic Development Areas – not ‘urban areas’ as defined in Plan Melbourne.

External apportionment is to be avoided (Recommendation 15).

Works in Kind are recognized as a ‘valuable delivery mechanism’ (Recommendation 18).

There is a need to avoid ‘double dipping’.

108. The upshot of this is that the new system is in its infancy and it is far from fully resolved. Given the requirement to avoid external apportionment and double dipping, and for other reasons, it is far from certain that it will ever be applied to Southbank.

6.7 CONSISTENCY WITH NORMAL PRACTICE

109. In my experience panels have been quite consistent in requiring specific projects to be identified, costed to a reasonable degree of accuracy and programmed within a reasonable timeframe. DCP’s with which I am familiar accord with these principles.

110. I am aware that a number of DCP’s in built up areas have been approved with the proportion of new development lower than the level that I would say avoids ‘double dipping’. These schemes do not comply with the spirit or the legislative intent of development contribution schemes.

111. I note that Fishermans Bend has a Schedule to the DCP Overlay requiring site specific DCP’s. This is not relevant to Southbank.

6.8 WORKS IN KIND

112. As has been acknowledged by the State Government Response to the Recommendations of the Development Contributions Advisory Committee (May 2014) works in kind (WIK) are a valuable

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delivery mechanism. This is supported by the recent introduction of WIK options for expenditure of GAIC funds.

113. The reason WIK options must be included in a DCP is that this provides a highly efficient and cost effective means to achieve the adopted planning objectives for an area. Works can proceed in a timely fashion without waiting for Council to make allocations of scarce budget resources. They can also be associated with the development where the nexus is strongest. Private developers are on site and can cost effectively extend works contracts to the immediate public domain. If developers can deliver projects to the required specification at a cheaper cost this is a win-win situation, as the community is able to enjoy the benefits and the impact on housing affordability is reduced.

114. A significant issue will arise if the solution put forward in the Hodyl Report is adopted. The danger is that a development will take place and the footpath and kerbs will need to be reinstated as part of a permit condition. The Council may then elect to fully reconstruct the streetscape at a future date resulting in destruction of valuable capital. It would be far superior to have the reinstatement done as part of a properly designed scheme for the whole street.

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7 Conclusions

115. Having reviewed the exhibited and subsequent material I have drawn a number of conclusions.

116. The ‘grand vision’ in the Southbank Structure Plan is the way of the future but it is extremely difficult to implement in a substantially built out area. Practical public realm improvements that can move towards implementing the ‘urban forests’ model and improve the pedestrian and cyclists environment are highly desirable. However, the need exists independently of the forecast development proceeding.

117. The projects outlined in the DCP are certainly not needed in their present form due to their impracticality. A DCP should not proceed on the basis of a stated sum of money and a promise to spend it on projects that have not been developed as broad feasible concepts. There is a basic statutory and policy requirement to identify the projects with a reasonable level of specificity.

118. The forecast development in the Structure Plan does not create the need for the (ill-defined) works, services and facilities. This need exists now, as evidenced by the narrative in the Structure Plan and the conclusions drawn by the Melbourne AM C171 Panel. Even if the less strict interpretation of nexus is adopted and future beneficial use becomes the test, the DCP suffers from adverse cost apportionment issues.

119. The extent of existing development that has escaped the net makes profound double dipping inevitable. New residents and business operators will be asked to pay an up-front levy, with adverse implications for housing affordability and supply, and will then be required to fund the balance of the costs via their rates.

120. The additional rates generated from the new development that will be available for capital works of the kind proposed will in fact fully fund the Council’s ‘contribution’. This means that new development will potentially fund the total cost of the works. Existing development and outsiders will get a ‘free ride’. This is clearly an inequitable outcome and one that is not intended by the legislation and the related guidelines.

121. The DCP, as proposed, will have an adverse impact on housing affordability and supply - and will result in an economically inefficient allocation of community capital.

122. Major flaws in the current proposal include:

The projects have not been adequately identified in terms of scale, scope, timing or location, therefore whether they are constructed or not cannot be checked. Projects may be selected that do not benefit the sites from which levies are exacted with the sub-areas.

The Council has not committed to funding the unfunded proportion of the costs, either in Council resolutions or in the DCP itself.

123. Therefore, mandatory requirements or Clause 45.06-2 and therefore the requirement of the Act are not met by the exhibited DCP or the material subsequently issued. The projects are simply not defined to any reasonable level of specificity.

124. The danger is, if this amendment is adopted, the Council will collect nearly four times the development contributions estimated in the DCP and will collect as much again from rates (capital expenditure proportion) on new development. The effect of this will be that new development will fund all of the facilities enjoyed by existing development and by outsiders.

125. In my view a DCP is inappropriate in Southbank due to the extent of double dipping that would occur if it were to be adopted. It is very difficult to configure a broad-based DCP to meet the required tests. The enhanced rate base can more than adequately fund the share of costs that new development should bare.

126. The most appropriate response is for this DCP to be rejected and for the Council to start again. In the event that the DCP is to be introduced in Southbank the following requirements should apply:

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A suite of feasible and practical streetscape projects should be designed to introduce ‘high impact’ canopy tree planting and improvements to the pedestrian and cycling environment. The projects should be technically competent and respectful of the current community investment in streetscape works. All relevant agencies should be demonstrably in support of the projects. This will result in significantly lower costs than those adopted in the proposed DCP.

Cost apportionment should recognize the real development potential of the area and the likely extent of new development – as dealt with in the Structure Plan. This will spread the cost of the works over a large number of demand units. The extent of external demand will need to be estimated and factored in. Taken together, this will result in significantly lower levies than those proposed in the DCP.

The Council should put proper accountability measures in place – by resolution and by inclusion in the DCP. This should include separate ‘funds’ for the Council’s contributions on behalf of existing development and outsiders.

Works in Kind should be a key element of any DCP that may be adopted.

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8 Particulars Appendix

127. Name and address of the expert

Roger Gibbins, Urbis, 120 Collins Street, Melbourne, 3000

128. Qualifications and experience

Graduate Diploma Economics (Latrobe University)

Master of Urban Planning (University of Melbourne)

Diploma of Applied Science (Town Planning) (R.M.I.T.) Certificate IV in Building and Construction (Holmesglen)

Certificate of Technology (Surveying and Cartography) (R.M.I.T.)

Roger has over 30 years’ experience in the project evaluation and policy economics field.

129. Area of expertise to make the report

Policy development in the infrastructure funding filed including development contribution plans.

Extensive experience formulating, evaluating and project managing urban renewal and design projects.

Extensive technical experience in civil design, traffic engineering and streetscape design.

130. Statement identifying any other significant contributors to the report and where necessary outlining their expertise

Nil

131. Instructions that define the scope of the report (original and supplementary and whether in writing or oral)

Oral instructions from Travis Conway of Urbis to prepare a report on Amendment C208 as exhibited with an emphasis on the Southbank North Sub-area. I have been asked to make comment on the relevance of the proposed ‘New Development Contribution System’.

132. Identity of the person who carried out any tests or experiments upon which the expert has relied on and the qualifications of that person.

Self

133. Facts, matters and all assumptions upon which the report proceeds

Documented in the report

134. Documents and other materials the expert has been instructed to consider or take into account in preparing his or her report, and the literature or other material used in making the report

Documented in the report

135. Opinions that are not fully researched for any reason (identifying the reason why such opinions have not been or cannot be fully researched)

Nil

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136. Questions falling outside the expert's expertise

Nil – within the terms of the brief.

137. Whether the report is incomplete or inaccurate in any respect

138. The report is complete to the best of the author’s knowledge.

Declaration

I have made all the inquiries that I believe are desirable and appropriate and no matters of significance which I regard as relevant have to my knowledge been withheld from the Panel.

Roger Gibbins

Sydney Tower 2, Level 23, Darling Park 201 Sussex Street Sydney, NSW 2000 t +02 8233 9900 f +02 8233 9966

Brisbane Level 7, 123 Albert Street Brisbane, QLD 4000 t +07 3007 3800 f +07 3007 3811

Melbourne Level 12, 120 Collins Street Melbourne, VIC 3000 t +03 8663 4888 f +03 8663 4999

Perth Level 1, 55 St Georges Terrace Perth, WA 6000 t +08 9346 0500 f +08 9221 1779

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