Transcript HR Skills Audit - Councillor Rick Crouch

Development Charges
June 2011
BACKGROUND
•Presently new external infrastructure costs for new and upgraded capacity for developments are
in the main subsidised by all ratepayers and not on a user pays principle.
•Durban has applied a simplistic “Development Charge” across the Metro from 1 July 2010
(applied in the Outer West from 2003).
• The other Metro Municipalities in the country, i.e. Joburg, Ekurhuleni, Tshwane and Cape
Town, are currently levying development charges of one form or another, hence some recovery
of costs.
• National Treasury Policy is to introduce Development Charges on a rational basis, across the
entire country.
•The Municipal Fiscal Powers and Functions Act of 2007 is to be amended to better provide for
a Development Charge.
• Spatial Planning and Land-use Management Bill, 2011 (SPLUMB) makes specific provision
for a Development Charge. This is set to be enacted in 2012.
KEY POLICY OBJECTIVES
 Equity and Fairness - DC must be reasonable, balanced &
practical so as to be equitable to all stakeholders.
 Predictability – DC must be predictable, legally certain &
reliable.
 Spatial & Economic Neutrality – DC primary role is to ensure
timely, sustainable financing of required urban infrastructure.
 Administrative Ease & Uniformity – The determination,
calculation and operation of the DC should be administratively
simple and transparent.
 Specific Use of Development Charge – Can only be used for
effecting changes to infrastructure and for no other purpose.
WHAT ARE DEVELOPMENT CHARGES?
It is a tariff or levy in respect of either new
external and upgraded infrastructure
and/or the taking up of existing surplus
infrastructure capacity in the system
The charge is levied against all new
residential, commercial & industrial
development within Ethekwini, be they in
established areas or in undeveloped areas
All funds collected are to be
retained in a dedicated
infrastructural fund for the
area concerned.
The component costs making up the charge
are in respect of municipal roads, water,
waste-water and electricity services as may
be required for a proposed development
The payment of a development charge is
not a guarantee of approval unless the
development also conforms to the
planning guidelines of the city, i.e. Spatial
Development Plans, Service Infrastructure
Plans, Scheme, etc.
THE NEED FOR DC POLICY – NATIONAL CONTEXT
Huge urban
infrastructure
investment
need
• Cities should invest R257 bn (est.) over next 10 years
• 90% of this for infra expansion or rehabilitation, which is
critical to growth and job creation, esp given existing
bottlenecks
DCs important
component of
infra finance but:
• Inadequate regulatory overarching framework.
• Different approaches by cities offers opportunities for
arbitrage.
• Shortfall of between R482m and R18,6bn per year!
The “missing
contribution” has
significant
impacts
• Under-investment by municipalities, compounded each
year, that delays development & constrains growth and
job creation
• Unfair, opaque rationing of access to infrastructure
• Windfall benefit to new developments, paid for by
existing ratepayers
PRIMARY ROLE
Is to apportion the installation costs of infrastructure
User pays for
consumption of
infrastructure
“asset”
capacity
Relation to other
rates and user fees
• Fairly apportion “asset” cost relative to benefits between
end users now and in the future
• For consumption of infrastructure not the service
• Does not attempt to be redistributory but can provide
spatial (dis)incentives if development is beyond Urban Dev
Line.
• These recover operating & replacement / replenishment
costs (not initial asset installation)
• e.g: Depreciation included in tariff
• Supports ongoing equity: user pays
STRUCTURE & CALCULATION OF DC
Structure of the Development Charge
Fee is levied for provision of Municipal infrastructure required for essential services to a
development
CALCULATION OF DC
Water
Sewage Disposal
Roads
Electricity
Estimated additional water
demand for development in
Kilolitres/day X current
replacement cost of existing
water infrastructure
Estimated additional sewage
effluent generated by
development in Kilolitres/day
X current replacement cost of
existing sewage disposal
infrastructure
Costs consists of 2
components:
1. Capacity component –
‘number of lanes on the
road network’
2. Strength component –
pavement layers of road
network
Estimated Development
Charge is the Asset
Replacement Cost less
Outstanding Loans divided by
the Average Network Capacity
in Rands per kilowatt
STRUCTURE & CALCULATION OF DC
Water
Sewage Disposal
Roads
Electricity
Development Charge for Water:
Development Charge for
Sewage Disposal:
DC = ARC – OL
ANC
Development Charge for
Roads
CC = SD X TGR X HTL X
CR
Development Charge for
Electricity:
DC = ARC – OL
ANC
DC = ARC – OL
ANC
SC = SD X DHTR X AF X
CR
DC = CS + SC
DC = Development Charge / ARC = Asset Replacement Costs / OL = Outstanding Loans / ANC = Average Network Capacity
CC = Capacity Contribution / SD = Size of Development / TGR = Trip Generation Rate / CR = Cost Rate
SC = Strength Contribution / DHTR = Daily Heavy Trip Rate / AF = Axle Factor / HTL = Half Trip Length
DEVELOPMENT CHARGES
Who is liable for the Charge?
The landowner is responsible for payment of the development charge, although in most
cases the developer (who may also be landowner) will attend to payment thereof
Which developments are affected?
Development Charges will be applicable to all developments for which the approval of the
Municipality is required in terms of any law, by-law or scheme
These relate to land use applications for township development, subdivision applications,
change in zoning, change of use of an existing building
WHEN IS DC EFFECTIVE?
•Development Charge will become effective from 1st July
2012
•It will be implemented on a phased basis over a number of
years to lessen impact of new cost to developers
• Policy & By Law will be subject to National Treasury
directive / National Legislation when promulgated.
WHEN IS DC ASSESSED & PAYABLE?
 The Development Charge is to be assessed upfront
during the planning application approval stage.
 The Development Charge is payable on approval of
the development (and only after all appeal
processes , if applicable, are exhausted).
Thank You
Questions ??