PUBLIC ACCOUNTS COMMITTEE INQUIRY INTO DEVELOPER CONTRIBUTIONS FOR INFRASTRUCTURE COSTS ASSOCIATED WITH LAND DEVELOPMENT TRANSCRIPT OF EVIDENCE TAKEN AT ALBANY ON MONDAY, 22 MARCH 2004 SESSION 1 Members Mr J.B. D’Orazio (Chairman) Mr M.G. House (Deputy Chairman) Mr J.L. Bradshaw Mr A.J. Dean Ms J.A. Radisich Public Accounts Session 1 - Monday, 22 March 2004 Page 1 Committee commenced at 9.37 am DRAGE, MR PETER Deputy President, Shire of Cranbrook, PO Box 38, Cranbrook, examined: BURGES, MR NICK Shire President, Shire of Cranbrook, RMB 456, Cranbrook, examined: STANLEY, MR GRAHAM PHILLIP Chief Executive Officer, Shire of Cranbrook, PO Box 21 Cranbrook, examined: STEWART, MR ROBERT JOHN Chief Executive Officer, Shire of Plantagenet, PO Box 48, Mt Barker, examined: LONG, MR DARREN JOHN Chief Executive Officer, Shire of Jerramungup, 4 Derrick St, Jerramungup, examined: GARNETT, MS GLENYSE DAWN Shire President, Shire of Jerramungup, Barbara Street, Bremer Bay, examined: DUNCAN, MR PETER ALEXANDER Manager, Planning and Development, Shire of Denmark, PO Box 183, Denmark, examined: FORBES, MR KEVIN Shire President, Shire of Plantagenet, PO Box 48, Mt Barker, examined: DURTANOVICH, MR PASCOE Chief Executive Officer, Shire of Denmark, PO Box 183, Denmark, examined: BARROW, MR JAMES KIMBERLEY Shire President, Shire of Denmark, 95 Scotsdale Road, Denmark, examined: Public Accounts Session 1 - Monday, 22 March 2004 Page 2 The CHAIRMAN: Welcome to the Public Accounts Committee hearings. The committee hearing is a proceeding of the Parliament and warrants the same respect that proceedings in the House itself demand. Even though you are not required to give evidence on oath, any deliberate misleading of the committee may be regarded as contempt of Parliament. Have you completed the “Details of Witness” form? The Witnesses: Yes. The CHAIRMAN: Do you understand the notes attached to it? The Witnesses: Yes. The CHAIRMAN: Did you receive and read an “Information for Witnesses” briefing sheet regarding giving evidence before the parliamentary committees? The Witnesses: Yes. The CHAIRMAN: Everything is being recorded and will be part of the transcript of these hearings, which will go into the Parliament in due course. The committee will obviously go through the whole process through the submission. Two of the councils have made written submissions, which we have received. Do those people wish to propose any amendment to the submission? The Witnesses: No. The CHAIRMAN: Is it your wish that the submission be incorporated as part of the transcript of evidence? Mr Long: Yes. The CHAIRMAN: Do you wish to make any additional statement to your submission? Mr Duncan: Not at this stage. The CHAIRMAN: As I said, we are looking at developer contributions for metropolitan and regional areas. Who would like to lead off first and tell us their position? It is good to see so many familiar faces. Local government has not changed too much! Mr Duncan: Not too much. I will talk briefly to my submission. It is fairly self-explanatory. I might read through some of the key areas of it. In most instances with new residential, special residential, or special subdivisions, the developer is required to construct all new infrastructure on the property as part of the condition of approval by the WA Planning Commission. Generally from council’s perspective that infrastructure consists of roads, drainage network, footpaths and so on. Obviously, government agencies require other infrastructure, such as power, water, sewerage system and telephone. In terms of council’s requirements as per my submission, I have detailed an extract of our schedule of fees and charges, which covers things like inspection fees, defects liabilities, headworks - The CHAIRMAN: Can we interrupt you on that? We were looking at that and were intrigued by how these things are paid - Mr A.J. DEAN: How can you afford to build in the Shire of Denmark, in other words? Mr Duncan: I think most developers are quite happy with paying those amounts. We have never had - Mr J.L. BRADSHAW: Is there an upper limit on the 3.5 per cent for inspection fees? Mr Duncan: No, that is the schedule fee. Public Accounts Session 1 - Monday, 22 March 2004 Page 3 The CHAIRMAN: If you had a million-dollar development, you are saying you want $35 000 to go and inspect it? Mr Duncan: That is correct. The CHAIRMAN: How come you need as much money to do one inspection as you do for 10, 20, 30 or 40? Mr Duncan: I think you will find that on the larger developments our engineers do a lot more work on-site doing inspections compared with a much smaller subdivision, which has a much lower fee. We have one going on at the moment where they have paid an inspection fee of around $30 000, and our engineer - and his deputy engineer - spend a lot of time on-site inspecting the roadworks. Because the site is on the side of the hill there is a potential for water problems and so forth. The CHAIRMAN: Surely, part of your engineer’s job, who is already paid by the ratepayers to do a job, is to do exactly that. To say you are going to hit them with a $35 000 fee on a million-dollar project seems astronomically high for just going and doing what he is supposed to be doing anyway. Mr Duncan: I guess so. It is based on a user-pays system. The engineer is paid a salary from the ratepayers for doing his job, which does not involve just inspecting this particular subdivision. Subdivisions create a large number of blocks. The developer factors into his costing the fees the council will charge. As I said, we have them set in our schedule of fees and charges so that he knows what they are before he starts. The developer who is doing this current development has done other large developments in Denmark and he has never had a problem with that. Mr Durtanovich: Peter has mentioned the contributions - the 3.5 per cent. Firstly, that is on roadworks only. Secondly, at the end of the day - this is recorded so I have to be careful what I say - some cowboys do some of the roadworks in these subdivisions, and after about 12 months - that is all we can get a defects liability period for - that road is then the responsibility of the Shire of Denmark. If it is not constructed properly, we have to pick up the tab after 12 months. The CHAIRMAN: That changes everything. Three and a half per cent of the road cost is different from 3.5 per cent of the development. That makes a helluva difference. Mr Durtanovich: There is no way we would permit a road to be built in our shire by somebody else without our engineer and supervisors etc making sure it is built correctly. To do that, they have to be there every day. If they are not there every day, I can show you examples of what has happened. The CHAIRMAN: We do not have an argument but we were trying to establish the basis of the 3.5 per cent. If it is not an inspection fee for a subdivision, it makes a helluva difference. Mr Durtanovich: It is for the road. The CHAIRMAN: If the lot costs $100 000, it costs $3 500 to inspect it. Mr M.G. HOUSE: Is that figure applicable to other shires? What is Plantagenet doing in that regard? Is that similar? Mr Stewart: That is one of the areas we are looking into at the moment; that is, how much should a council charge on a user-pays basis. A lot of our costs at the moment are zero. That is one of the areas we have to look at. Mr M.G. HOUSE: What about Jerramungup where you are doing Bremer Bay subdivisions? Mr Long: We levy a two per cent fee on roadworks costs. The CHAIRMAN: Is that like an inspection fee? Mr Long: That is correct, yes. Public Accounts Session 1 - Monday, 22 March 2004 Page 4 The CHAIRMAN: When you just said that the costs are zero, does that mean that you are not doing the work or that you are not charging? Mr Stewart: Meaning we are doing the work but we are not charging. Mr M.G. HOUSE: So you are absorbing it into your ratepayer costs? Mr Stewart: Yes. The CHAIRMAN: Is the defects liability guarantee a guarantee that they get back or is it something they still pay as well? Mr Durtanovich: It is something they get back after 12 months provided the road is satisfactory. As you would obviously be aware, depending on when the roads are built, you really need a winter, summer and possibly another winter - especially down around Denmark - before any road defects show up. In some instances we have, by negotiation with the developer, increased it to a two-year defects liability. Again, I think that is a percentage that they pay or they bond - they do not necessarily have to pay it. When the final inspection is done, if it is all satisfactory, they get a refund in full. The CHAIRMAN: Has the council done an actual costing of what the council/developer contribution is per lot on a subdivision? Have you done that exercise? Mr Duncan: No, we have not gone down to that detail. The CHAIRMAN: Are there things that you are providing for subdivisions that are not included as part of that cost? For example, with other submissions we received, in metropolitan cases things such as libraries and recreation facilities are factored into the direct developer contribution.