Calculating contributions rates

Section 7.11 plans use formulas to turn the cost of the infrastructure into contribution rates, which are used to calculate the total contribution paid by development.

This module provides guidance on how these formulas are used to determine contribution rates.

Legislative requirements

Section 7.11 plans must show the contribution rates and the formulas used to determine those rates.

Contribution rates formula and requirements
Legislative requirements	Reference
Contributions plans must contain the formulas used to determine the contributions required	212(1)(d) EP&A Regulation
Contributions plans must show the contribution rates for different types of development	212(1)(e) EP&A Regulation

Policy positions

Contribution rates and formulas should be clearly shown in the plan

Contributions plans uses formulas to convert the cost of a works schedule into a cost per unit of charge, such as a per person or per lot rate. These rates per unit of charge are then used to calculate the actual contribution due for a specific development.

Contribution rates and the formulas used to calculate them should be clearly shown in the plan:

each infrastructure category in the plan should have a detailed contribution rate schedule showing the calculations and assumptions used to arrive at that rate
the plan should have a summary contribution rate schedule showing the overall indicative contribution rates for each type of development.

Common units used in contributions are:

per person
per lot
per worker
per visitor or tourist
per square metre of floor space.

Simple formula for calculating contribution rates

In simple terms, the contribution rate is a function of the total cost of the infrastructure in the schedule of works multiplied by an apportionment factor, divided by the demand for the infrastructure. A simple formula demonstrating this is shown below.

Contribution rate = (infrastructure cost × apportionment factor) / demand

Infrastructure in the schedule of works may have different apportionment factors and demand, so contribution rates may be calculated separately for different infrastructure categories or for different items of infrastructure.

Councils may use different formulas specific to their circumstances. This is why it is important to include the formulas used to determine the contribution in the plan.

Infrastructure cost

The infrastructure cost represents the total cost of infrastructure for that contributions catchment or the total cost for that infrastructure category, as shown in the works schedule. This should be the cost that will be borne by the council to provide the infrastructure.

Apportionment factor

The apportionment factor represents the proportion of the cost that has been apportioned to new development. The apportionment factor can be calculated by dividing the incoming population by the total population that is creating demand for the infrastructure.

For example, if all the demand for a piece of infrastructure is being created by new development, the apportionment factor would be 1. If 60% of the demand for infrastructure is apportioned to new development and 40% is apportioned to existing residents or other demand, this would be represented in the formula as an apportionment factor of 0.6.

Demand

The demand represents the demand for the infrastructure created by new development over the life of the plan. This may be based on, for example, the number of new lots in a catchment, the total incoming population the infrastructure will serve or the floorspace that will be created by new development.

Demand for different types of infrastructure may be determined using different demand units. Contributions for open space may be calculated on a per person rate, while contributions for drainage and stormwater infrastructure might be calculated on a per lot basis.

Plans should clearly show indicative contribution rates

Plans should include contribution rate schedules that clearly show the indicative rates that apply to the expected types of development. This allows applicants to use the plan to estimate a contribution amount for their development. It also provides a signal to the market of the cost of developing in that particular location.

Council will need to convert the contribution rates for each infrastructure category into indicative contribution rates using a common unit of charge. This is usually based on a per lot and per dwelling rate for residential development and per square metre for commercial and industrial development.

Councils can do this using the standard occupancy rates appropriate for their local government area. The occupancy rates can be based on historical occupancy rates for that area, as published by the Australian Bureau of Statistics, or studies and other data used to produce a forecast future occupancy rate. The occupancy rates must be set out in the contributions plan.

For example, open space or traffic and transport contributions may be calculated on a per person basis and then converted into a per dwelling basis using the standard occupancy rates for that area.

Plans will require a review by IPART if the proposed contribution rates are above the threshold

The Independent Pricing and Regulatory Tribunal (IPART) review section 7.11 plans for reasonableness that propose contributions for residential development that exceed the threshold of $20,000 per lot or dwelling, or in some cases $30,000.

If a contributions plan requires contribution rates over the thresholds, the council will need to submit the plan to IPART for review before being able to levy above threshold rates.

Examples

Apportioning between existing and new development

There are various methods to identify demand by population. However, the most common method is for councils to use either a population projection or establish the population or development yield from a release or redevelopment area. This will give the total number of ‘persons’ for the formula.

For example, for a works program of $100 million serving an end population of 10,000 (4,000 existing residents and 6,000 incoming residents), with both incoming and existing residents contributing to the demand, the apportionment factor would be:

Apportionment factor = 6000 / 10,000 = 0.6
(If there was no existing demand, the apportionment factor would be 1).

The new population is therefore responsible for $60 million of the works program ($100 million x 0.6), while council commits to funding $40 million to cover demand by the existing population.

Using the contribution rate formula:

Contribution rate = $100,000,000 x 0.6 / 6,000 new residents
The contribution rate will be: $10,000 per person.

Converting contributions into a set of standard indicative contributions rates

Where a contribution is set at a ‘per person’ rate, it might be necessary to convert this into a contribution for a dwelling.

As an example, hypothetical projected occupancy rates for a local government area might be:

1.3 persons per one bedroom dwelling
1.8 persons per two bedroom dwelling
2.5 persons per three bedroom dwelling.

The conversion of the ‘per person’ rate is simply a multiplication of the contribution per person by the occupancy rate for different types of dwellings or lots within the catchment area.

If a contribution for community facilities is $1,000 per person, using these occupancy rates would result in:

$1,300 ($1,000 x 1.3) for a one bedroom dwelling
$1,800 ($1,000 x 1.8) for a two bedroom dwelling
$2,500 ($1,000 x 2.5) for a three bedroom dwelling.

This can be repeated for any dwelling or allotment type as long as the occupancy rate is adopted in the contributions plan.

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