Accounting for local councils outside the scope of the report’s research, the total trunk infrastructure funding gap over the next four years is $2.2 billion. Photo: iStock/Dora Dalton.
The Local Government Association of Queensland (LGAQ) has revealed an infrastructure funding black hole that’s expected to cripple council budgets.
According to a recent report LGAQ commissioned, Queensland councils will face a $2.2 billion bill over the next four years – if the state does not increase the cap on how much councils can charge property developers for the infrastructure they said was vital for liveable communities.
LGAQ president Mark Jamieson said the state-set infrastructure charges cap had not been appropriately indexed since introduced in 2011 and was placing enormous pressure on councils battling to protect ratepayers during a cost-of-living crisis.
“Queensland communities rely on councils to provide critical infrastructure like roads, parks and water and wastewater to keep pace with growth,” the recent Sunshine Coast Council Mayor said.
These critical items of infrastructure servicing multiple users are captured under the term ”trunk infrastructure”. For example, a large road may be trunk infrastructure, while an access road to a particular development will usually be non-trunk.
As construction costs have sharply risen over recent years, there has been a significant impact on the cost of delivering trunk infrastructure.
Historically, infrastructure charges paid by property developers have only covered 50 per cent of the cost to deliver trunk infrastructure in South-East Queensland (SEQ), and 39 per cent outside of the region.
The rest of the charges are paid by local governments, which are expected to face a large bill over the next four years.
SEQ local governments are forecasting a trunk infrastructure funding gap of more than $1.54 billion, but that could be much higher if accounting for unforeseeable expenses such as the COVID-19 pandemic. If this were passed on to SEQ ratepayers, they would be expected to pay an additional $269 a year.
Regional Queensland councils included within the report’s research scope are forecast to have a gap exceeding $650 million – which, if passed on to ratepayers, will mean they will be hit with an additional $437 a year.
LGAQ chief executive officer Alison Smith said the system needed modernising because communities and their councils were ”getting the wrong end of the stick”.
“When developers create new subdivisions and housing, each home needs access to power, water and sewerage, drainage and roads,” Ms Smith said.
“This is funded through an ‘infrastructure charge’ on the developer that is set by the State Government, then collected and delivered by the council.
“Because the state’s infrastructure charging regime has been capped since 2011, it has not kept pace with the true cost to councils to provide this critical infrastructure.
“This is why Queensland councils want the cap increased and appropriately indexed – so that it is fit for purpose, so that it enables a user-pays system, so that developers are charged a fair price for infrastructure, and so that it does not keep gouging Queensland ratepayers.”
According to the CEO, even the State Government charges more for infrastructure in state-run Priority Development Areas (PDAs) – where it bills developers on average 50 per cent more for infrastructure than councils can charge outside of PDA boundaries.
“If it were true that higher infrastructure charges lead to higher home prices, you’d expect home prices in PDAs – where charges are higher – to be more expensive than home prices outside PDAs – where charges are capped,” Ms Smith said.
“But evidence shows this isn’t the case. The price people pay for housing is the price the market is willing to pay – not simply the sum of its parts.
“A modest increase in infrastructure charging won’t necessarily increase home prices – but it will help fund the critical infrastructure our growing state needs.”
This recent infrastructure data follows a Cost Shifting Report that the LGAQ released in January, which showed councils are having to fill a $360 million funding gap every year to cover services that other levels of government are supposed to be providing.
When the Federal Government launched an inquiry into local government financial sustainability last month, Ms Smith welcomed the announcement.
“Councils receive just three cents in every dollar of tax nationally, compared to 80 cents for the Federal Government, with the rest going to the State Government,” she said.
“We need a proper level of funding that is fair and can be relied on by councils and their communities.”
