Posted on August 6, 2012 by Lindsay Taylor
Development Contributions & The Carbon Tax
In simple terms, the mechanisms established by the Clean Energy Act 2011 (Cth) to deal with climate change include establishing thresholds for greenhouse gas emissions and imposing unit shortfall charges measured in carbon units for emissions that exceed the threshold. This is what is commonly referred to as the carbon tax.
Although only a limited number of businesses will pay the carbon tax, it is reasonable to expect that the cost of a range of manufactured goods and materials will be affected, including the cost of building and construction materials used by councils to provide public infrastructure to meet the demands generated by new development in their areas.
Sections 94 and 94A of the Environmental Planning and Assessment Act 1979 (‘EPA Act’) allow councils to levy monetary development contributions from developers as a condition of approving development for the purpose of funding the cost of the provision of such infrastructure. Councils may also negotiate with developers to obtain monetary contributions or material public benefits in-lieu through planning agreements, works-in-kind (‘WIK’) agreements and the like.
Councils are required to have contributions plans in place in order to require monetary contributions under s94 and s94A, and the contributions must accord with the contributions plan. Contributions plans contain predictions of future development and the infrastructure required to be provided and infrastructure costs. They also set out the monetary contribution rates payable by developers based on those predictions.
Contributions plans frequently contain mechanisms to adjust contribution rates and sometimes the cost of works. These are commonly based on quarterly or annually published indices measuring changes in prices and costs of specified goods and materials in the general economy or specific sectors of the economy. The most commonly used mechanism is the consumer price index published by the Australian Bureau of Statistics.
In order for contributions plans to achieve the funding outcomes on which they are based, the impact of the carbon tax will need to be identified by councils and addressed through appropriate strategies.
One strategy might be for councils to attempt to identify any actual one-off cost impacts of the introduction of the carbon tax and amend the costs of infrastructure and contribution rates in contributions plans in response.
Another strategy might be to identify the index or indices that best capture the impacts of the carbon tax, including its on-going effects, and amend contributions plans to include the index or indices for the future.
A combination of the two strategies may sometimes be appropriate.
A different kind of strategy, and one designed to insulate councils from the cost impact of the introduction of the carbon tax in the intial period, may be for councils to negotiate arrangements with developers through planning agreements or WIK agreements or the like for the developers to provide the works at their cost. This would be useful if the cost impacts of the carbon tax have not been accurately identified or until contributions plans are amended.
What is clear, however, is that councils will need to review their contributions plans and adopt appropriate strategies whether by way of amendments or otherwise to ensure that the carbon tax does not undermine the efficacy of their plans.