Prebudget Submission 11-12 by Property Council of Australia

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Pre-Budget Submission: 2011-2012 SA State Budget Property Council of Australia April 2011

Alliance Partner

The Voice of Leadership 142 GAWLER PLACE, ADELAIDE SA 5000 PH 08 8236-0900 - FAX 08 8223-6451 www.propertyoz.com.au

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Table of Contents Executive Summary.....................................................................iii The Property Council in Brief.........................................................iv 2010 in Review ..........................................................................v Recommendations .......................................................................vi A Guide to Reading this Submission ...............................................x 1.

Building SA for Growth .......................................................1 1.1

Metropolitan Authority ..............................................2

1.2

Local Action Plans ....................................................4

1.3

Resolving Policy Misalignments ..................................6

1.4

Infrastructure Program on Steroids.............................7

Climate Change and the Environment ...................................9 2.1

A Climate Change Policy for the Built Environment ........10

2.2

Delivering Water Use Reductions ................................13

Community Dividends ........................................................14 3.1

Community Consultation and Engagement ...................15

Governing Smarter ............................................................16 4.1

Modernising Metropolitan Governance .........................17

4.2

Modernising Local Governance ...................................20

A Fairer and more Competitive South Australia ......................21 5.1

Root and Branch Review ...........................................22

5.2

Land tax .................................................................23

5.3

Stamp Duty on Multi Level Residential.........................25

5.4

Unit Trust Hamonisation Program ...............................26

Contact......................................................................................27 Attachment 1: Metropolitan Authority Public Policy Paper Attachment 2: Submission on Strategic Infrastructure Plan Attachment 3: Growth Area Bonds Public Policy Paper Attachment 4: Recycled Water Pipeline Position Paper Attachment 5: Financial Review article on property taxes Attachment 6: Barriers to Vertical Communities Public Policy Paper Attachment 7: Unit Trust Rationalisation Model Attachment 8: Unit Trust CRE Rationalisation Model

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Executive Summary This submission focuses on the contribution of the property investment and development sectors to the broader community. The Property Council supports a budget that delivers: 

a return to strong, ongoing economic growth of three to four per cent;

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a public policy reform framework for long-term sustainable growth; and



programs that build community capacity and better balance the social, environmental and economic targets of South Australia’s Strategic Plan.

In addition, the Property Council remains of the view that the State needs a new approach to setting fiscal policy – based on the following concepts – which should inform the design of the 2011/2012 budget: 

Key performance indicators – greater clarity about the measurable goals of all budget programs;



Community capacity building – lifting the ability of individuals, families and firms to make the most of their relative talents and opportunities;



Sustainability – optimising governance, economic, social and environmental assets for the long-term benefit of the community;



Maintaining the war on red and green tape – more efficient regulation, less duplication and minimal conflict of policy settings;



Tax reform – lower taxes achieved through more efficient tax design that also delivers lower compliance costs and promotes a competitive economy;

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Modern policy assessment instruments – adoption of methodologies that better allocate scarce resources (such as capital spending on infrastructure) on a triple bottom line basis, and allow for more effective assessment of regulatory impacts;



Accounting for spatial implications – an understanding of the spatial consequences of all policy programs; and,



Incentives – the use of incentives to transform market behaviour to meet community goals as an alternative to regulation.

These concepts are not all directly addressed in this submission however the Property Council (SA Division) is available to discuss each of the areas outlined above.

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The Property Council in Brief The Property Council represents the property investment sector in Australia. Its members include every major property investor in the State. Members are engaged in the entire property investment universe, which includes all: 

dimensions of property activity (financing, funds management, development, ownership, asset management, transaction and leasing);



major property types (offices, shopping centres, residential development, industrial, tourism, leisure, aged care, retirement and infrastructure);



major regions of Australia and international markets; and,



the four quadrants of investment – public, private, equity and debt.

Some key statistics:



the estimated value of investment grade stock under management in South Australia is about $35 billion;



more than half a million South Australians collectively own major segments of the state’s most valuable commercial property assets;

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the market value of foreign assets owned by Australians is $50 billion;

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Total construction spending across South Australia in 2011 is forecast to be $22.6 billion; comprising $10.4 billion in residential construction, $3.9 billion in commercial construction and $8.3 billion in infrastructure1;

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$61 million flows in to the property sector from super funds in an average week; and,

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$2.5 billion in property specific taxes are paid annually to State and Local Governments.

Construction Forecasting Council [http://www.cfc.acif.com.au/] November 2010

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2010 in Review Globally, 2010 was a tough year. While the year started well, the continuing economic difficulties in the United States and the EuroZone Debt Crisis ensured that global economic performance remained marginal. The flow-on effects of these economic conditions are expected to be felt throughout 2011 and into 2012; particularly exacerbated by the Queensland floods and the Japan disaster. While these economic crises’ have had an effect on Australia, the overall impact on South Australia to date has been comparatively limited; in large part as a result of the Federal Government’s stimulus package, continued population growth and the new State Government capital works program. In 2010, the Government released the 30-Year Plan for Greater Adelaide and the Housing and Employment Land Supply Program Report that built upon the previous years’ planning and development assessment reforms. These actions and policies have provided clarity for the community and the industry on how the State will grow into the future, and will assist the State in meeting the needs of a growing population. In 2011 / 2012, with additional commercial grade stock being added to the market, it is expected that vacancy rates in the commercial sector will rise. In addition, with lower retail turnover, it is expected that the retail sector will have a difficult 12 to 24 months. While indications are that the availability of finance is improving, the constraints and requirements necessary to access finance are clearly continuing to impact the market. It is not expected that this situation will improve for at least a further 12 months. While the State Budget is under continued pressure from reduced GST revenues and the political fall-out from the 2010 / 2011 State Budget, the medium to long term outlook for the state economy remains positive with growth in the resources and defence sectors. During these tough times, the impost of the State’s property tax regime has assisted in dampening the property market. While we congratulate the Government on its action to address this issue at the ‘mum and dad’ end of the scale, those that invest in South Australia’s economic future are continuing to suffer under an unfair and inequitable property tax regime. The impact of this has already been seen in a reduction in forward development and falling private investment levels. The key issue is the uncompetitively low top threshold and high top rate of land tax in South Australia compared to every other jurisdiction in Australia. It is imperative that the Government use this time to prepare the State for prosperity. The State must be moving onto a ‘war footing’ so that the potential prosperity does not pass us by and all Government policies, including the tax regime, must be reviewed to ensure they align with the outcomes set out in South Australia’s Strategic Plan and the 30-Year Plan for Greater Adelaide.

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Recommendations Building SA for Growth

Metropolitan Authority – Recommendations: 1.1.1

Establish a Metropolitan Authority to oversee the delivery of the urban infill elements of the 30-Year Plan for Greater Adelaide.

1.1.2

Develop community capacity building KPIs, to be used to guide State Government funding support. Such KPIs could underpin a sustainability and growth charter along the lines recommended by the House of Representatives reports on Sustainable Cities (2005) and Sustainability for Survival (2007).

1.1.3

Identify and fund five catalyst urban renewal projects (confirm five years of State Government financial support).

Local Action Plans – Recommendations: 1.2.1

Establish a working group to develop and deliver Local Action Plans.

1.2.2

Deliver better governance by making financial support contingent on the achievement of community capacity building KPIs.

1.2.3

Use PPPs and other innovative funding mechanisms to accelerate the delivery of infrastructure projects.

Resolving Policy Misalignments – Recommendations: 1.3.1

Establish a cross Government working group under the auspices of the GPCC to review all legislation and regulation to remove any policy misalignments that will inhibit the delivery of the 30-Year Plan for Greater Adelaide.

1.3.2

Require all new proposed legislation and regulation to be reviewed against the 30-Year Plan for Greater Adelaide and an impact statement prepared before being considered by Cabinet.

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.. .. .. .. . Infrastructure Program on Steroids – Recommendations: 1.4.1

Introduce Growth Area Bonds to enable the long-term, fair funding of critical infrastructure to meet the growth outlined in the 30-Year Plan for Greater Adelaide.

1.4.2

Commit to a CBD Light Rail Loop.

1.4.3

Create a $1 billion over 10 year fund for the Adelaide CBD to be operated by the Capital City Committee.

Climate Change and Environment A Strategy for Transforming Market Behaviour – Recommendations: 2.1.1

Develop voluntary interim performance targets across all eco efficiency categories – energy/greenhouse abatement, water, waste and indoor environmental quality – to enable the achievement of targets in South Australia’s Strategic Plan.

2.1.2

Extend the Government’s Building Innovation Fund by an additional $2 million over four years.

2.1.3

Provide $300,000 over two years to the Property Council to enhance the Government/Property Council Green Buildings Tune-Ups Program, specifically to develop and disseminate information such as a tune-up and retro-greening toolkit and help to build industry capacity.

2.1.4

Cut environmental red tape.

2.1.5

Establish a state demonstration program that makes the business case for green development/buildings and promotes innovative practices.

2.1.6

Develop a One Stop Shop for all water, waste and energy reduction strategies, directing building owners to sources of financial and non-financial incentives.

Delivering Water Use Reductions – Recommendations: The Property Council proposes the following package of measures: 2.2.1

Cut water connection charges by 50 per cent for commercial properties that deliver significant reductions in potable water use.

2.2.2

Finance the extension of the recycled water pipeline through the CBD.

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.. .. .. .. . Community Dividends Community Consultation and Engagement – Recommendation: 3.1

Support the Property Council’s work to create a Community Consultation and Engagement model to assist in generating community support for change.

Governing Smarter Modernising Metropolitan Governance – Recommendation: 4.1

Adopt the Property Council’s proposed Metropolitan Governance Principles and work with local government to deliver.

Modernising Local Governance - Recommendations: 4.2

Help to reform and improve the performance of local government with the following programs: - institute an inquiry into the optimal size of local councils that balances democratic representation, efficient delivery of services, environmental catchments, funding powers and ability to attract (and retain) professional staff; - support a constitutional commission to develop a model for establishing councils as local parliaments. A key feature of the model would be the application of the separation of powers doctrine to local government activities; - require all councils to develop local action plans based on key performance indicators (KPIs), similar to South Australia’s Strategic Plan. All councils should develop 25year infrastructure plans; and - require councillors who sit on planning committees to undertake professional development provided by a registered training provider.

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.. .. .. .. . Fairer Taxes 5.1

Commit to a Root and Branch review of State Taxation with a target of reducing the percentage of property taxes from 43% to 35%.

5.2

Increase the Land Tax maximum threshold to $2.5 million at a rate of 2.5c per dollar.

5.3

Introduce a new Stamp Duty incentive for all “off-theplan” apartment sales to promote this product for consumers and to stimulate the residential construction market.

5.4

Immediately adopt and implement the Property Council’s Unit Trust harmoinsation models.

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A Guide to Reading this Submission This submission provides recommendations on 9 policy topics grouped by five broad themes:

Building SA for growth

Climate change and the environment

Community dividends

Governing smarter

Fairer taxes

This submission focuses on policy issues with implications for the 2011 2012 State budget. In general, one to two pages of commentary and recommendations are provided for each topic. Each section has been written to assist the State to meet targets in South Australiaâ&#x20AC;&#x2122;s Strategic Plan and the 30-Year Plan for Greater Adelaide. The Property Council of Australia can provide considerably more detail for each subject area, including extensive research reports prepared by Australiaâ&#x20AC;&#x2122;s leading independent consultants and academics. We are keen to share these resources with the South Australian Government.

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Building SA for Growth

This chapter addresses: 

the creation of a Metropolitan Authority;

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the establishment of local action plans;

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the need to resolve policy misalignments between existing policies and the goals and targets established in the 30-Year Plan for Greater Adelaide; and

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the delivery of more infrastructure.

South Australia’s Strategic Plan Targets: T1.1, T1.2, T1.5, T1.6, T1.7, T1.8, T1.10, T1.11, T1.14, T1.15, T1.16, T1.21, T1.22, T1.23, T1.24, T2.2, T2.3, T2.4, T2.9, T2.10, T2.11, T2.12, T3.5, T3.6, T3.7, T3.8, T3.9, T3.12, T3.14, T6.7, T6.8

T h e V o i c e o f - 1L- e a d e r s h i p 142 GAWLER PLACE, ADELAIDE SA 5000 PH 08 8236-0900 - FAX 08 8223-6451 www.propertyoz.com.au

.. .. .. .. . 1.1 Metropolitan Authority The Property Council welcomes the announcement of the State Governmentâ&#x20AC;&#x2122;s commitment to urban renewal and investment in the rail network. We believe this is a good first step, but to achieve the targets established by South Australiaâ&#x20AC;&#x2122;s Strategic Plan and the rollout of the 30-Year Plan for Greater Adelaide a Metropolitan Authority needs to be created to be responsible for developing and implementing the infill component of the 30-Year Plan. It is clear that the Government is driving South Australia towards innovation in the built environment, and it is also clear from around the country and around the world the only clear way that activity centres and broader urban renewal can be delivered is through a statutory authority charged with doing so. In early 2011, the Property Council released a position paper that outlines a framework for delivering such an authority, including the necessary powers and a recommendation on the most efficient method for delivering it. The Property Council recommends this approach to Government as the critical link in delivering the targets in the 30-Year Plan In addition, it is important that the Metropolitan Authority and the State Government as a whole engage with local communities to develop aligned community capacity building KPIs as a basis for determining continued access to State funding. The Metropolitan Authority should identify and seed fund major projects that demonstrate governance reform. Five catalyst urban renewal projects should be identified and provided with five years of State support. These should be selected on merit (projects which would deliver the greatest community capacity building dividends). Detailed renewal plans should be agreed and implemented for selected precincts, including land use and infrastructure plans.

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.. .. .. .. . Specifically, the Property Council asks the South Australian Government to:

Metropolitan Authority â&#x20AC;&#x201C; Recommendations: 1.1.1

Establish a Metropolitan Authority to oversee the delivery of the urban infill elements of the 30-Year Plan for Greater Adelaide.

1.1.2

1.1.3

Identify and fund five catalyst urban renewal projects (confirm five years of State Government financial support).

Attachments: Metropolitan Authority, Property Council of Australia (2011)

Sources: Tax Increment Financing to Fund Infrastructure in Australia, PricewaterhouseCoopers (2010) Sustainability for Survival, House of Representatives Standing Committee on Environment and Heritage (2007) Sustainable Communities: a national plan of action, Centre for International Economics (2006) Sustainable Cities, House of Representatives Standing Committee on Environment and Heritage (2005) Funding Urban Public Infrastructure, Allen Consulting Group (2003) Recapitalising Australiaâ&#x20AC;&#x2122;s Cities, Allen Consulting Group (2002)

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Local Action Plans

South Australia's next leap in competitiveness and living standards will occur in its cities and towns. While ongoing reform programs focus on key sectoral drivers, such as transport, health, education and infrastructure, we need to hardwire these programs into an overarching strategy that addresses the urban communities that generate 80 per cent of the state’s GSP. In doing so, we should aim to forge far-sighted reform strategies that are sustainable. This action plan for urban South Australia outlines a model for achieving these goals. The concept of a local action plan is based on these basic propositions: 

there should be a plan for every locale in South Australia that sets targets for building community capacity – aligned to South Australia’s Strategic Plan;

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these targets should address all factors that drive prosperity health services, education, transport, information connectivity, the natural environment (to name a few) - as they relate to local communities;

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each local plan should be backed by an infrastructure delivery program that would help achieve these targets;

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each plan should be financed by modern public and private funding practices;

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each plan should provide an assessment of the dividends it is expected to deliver versus its total cost of implementation;

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each plan should strive to reduce red tape, improve governance and ensure the optimal democratic involvement of local communities

The State Government should tie financial assistance (or project funding) to Local Governments achieving agreed common objectives (or KPIs). More use should be made of PPPs and innovative funding mechanisms such as Growth Area Bonds, a model referred to as Tax Increment Financing (TIF) in the United States, to accelerate the delivery of key infrastructure projects. The Property Council commissioned research by PricewaterhouseCoopers into TIF techniques employed successfully in the United States and Europe. TIFs involve appropriating increases in tax revenue arising from an investment in infrastructure to amortise the cost of providing infrastructure.

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.. .. .. .. . TIFs draw on the financial dividend that infrastructure delivers over time to help fund up front costs. There are no additional taxes. The recommendation is based on a National Report titled, Sustainable Communities: a national plan of action, developed by the Centre for International Economics, following extensive stakeholder consultation over the past four years.

Specifically, the Property Council asks the South Australian Government to:

Local Action Plans â&#x20AC;&#x201C; Recommendations: 1.2.1

Establish a working group to develop and deliver Local Action Plans.

1.2.2

Deliver better governance by making financial support contingent on the achievement of community capacity building KPIs.

1.2.3

Use PPPs and other innovative funding mechanisms to accelerate the delivery of infrastructure projects.

Sources: Growth Area Bonds, Property Council of Australia (2010) Tax Increment Financing to Fund Infrastructure in Australia, PricewaterhouseCoopers (2010) Funding Urban Public Infrastructure, Allen Consulting Group (2003) Recapitalising Australiaâ&#x20AC;&#x2122;s Cities, Allen Consulting Group (2002)

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Resolving policy misalignments

The South Australian Government is to be commended for its drive to plan for a sustainable future through the 30-Year Plan for Greater Adelaide, the Housing and Employment Land Supply Program Report and the soon-tobe-released Strategic Infrastructure Plan. This is a level of planning for the future not seen before in South Australia and very rarely seen in a national context. However, while there is much activity and work at the top level of policy development, there is a need to undertake a full review of the stateâ&#x20AC;&#x2122;s legislation and regulation to ensure all barriers to delivering the outcomes envisaged by the 30-Year Plan are removed. Considering the work of the cross-government Government Planning Coordinating Committee (GPCC) to oversee the rollout of the 30-Year Plan, it would appear that this body would be best placed to undertake this review. The reality is that if this does not occur, the ability of the State to deliver the 30-Year Plan will be significantly hampered. In addition, as new legislation and regulation is proposed, it is critical that it all aligns with the headline policies of the state; South Australiaâ&#x20AC;&#x2122;s Strategic Plan and the 30-Year Plan for Greater Adelaide. The Property Council recommends that an impact statement be prepared for all proposed legislation and regulation before it is presented to Cabinet to ensure that it does not inhibit the delivery of the Plan.

Specifically, the Property Council asks the South Australian Government to: Resolving Policy Misalignments â&#x20AC;&#x201C; Recommendations: 1.3.1

1.3.2

Require all new proposed legislation and regulation to be reviewed against the 30-Year Plan for Greater Adelaide and an impact statement prepared before being considered by Cabinet.

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Infrastructure Program on Steroids

The State Government is to be congratulated for its focus on modernising the stateâ&#x20AC;&#x2122;s infrastructure and for working to deliver a Strategic Infrastructure Plan for South Australia. The forward planning and funding of critical infrastructure is one of the most important mechanisms to enable the goals and targets of the 30-Year Plan for Greater Adelaide and South Australiaâ&#x20AC;&#x2122;s Strategic Plan to be delivered. While we await the final version of the Strategic Infrastructure Plan and while the industry is working with Government to roll out the already committed major infrastructure works, the State must consider the next phase of infrastructure investment to ensure economic growth is not inhibited by reduced investment in critical infrastructure. While the Property Council believes that consideration should be given to creating a State Infrastructure Fund, funded from increased debt levels, the Property Council also believes that the Government must immediately move to introduce Growth Area Bonds as a mechanism to fund necessary infrastructure to development areas upfront, recognising that the Government will receive the increased taxation revenues in the future. This is a model that has been utilised in the United States for over 50 years and it is time for it to be introduced here in South Australia. In addition, the central city area is often overlooked for Government capital investment. There is currently a plan to extend the light rail line through the Northwestern corner of the city such that it forms a loop back to Victoria Square. The Property Council supports the delivery of a city light rail loop but urges the Government to consider a broader plan that would link the four outside squares thereby maximising return for the investment. In addition, for too long the burden of maintening and investing in the City has been left to the 22,000-odd ratepayer. Little extra funding is provided by the majority of South Australians who utilise the city on a daily or weekly basis. The Property Council believes that the State Government should establish a $1 billion over 10 year fund focussed on revitalising the CBD, controlled by the Capital City Committee. There is a clear economic benefit that would be returned to the State by encouraging greater development in the City.

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.. .. .. .. . Specifically, the Property Council asks the South Australian Government to: Infrastructure on Steroids â&#x20AC;&#x201C; Recommendations: 1.4.1

Introduce Growth Area Bonds to enable the long-term, fair funding of critical infrastructure to meet the growth outlined in the 30-Year Plan for Greater Adelaide.

1.4.2

Commit to a CBD Light Rail Loop.

1.4.3

Create a $1 billion over 10 year fund for the Adelaide CBD to be operated by the Capital City Committee.

Attachments: Submission on Strategic Infrastructure Plan, Property Council of Australia (2011) Growth Area Bonds, Property Council of Australia (2010)

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2. Climate Change and the Environment This chapter recommends an overarching strategy for dealing with climate change and the built environment, including 

the extension of the Green Buildings Tune-Ups Program; and



reforms to deliver increased waste water re-use.

The Property Council commends the State Government on its forwardthinking legislation to establish targets aimed at reducing greenhouse gas emissions and its budgetary support for the Green Building Tune-Ups Program. The Property Council has concluded a Sector Agreement with the State Government as provided by Legislation. The Property Council sees programs that focus on broad-scale improvements in the energy efficiency of the built environment (and building users) as a crucial pathway to achieving deep cuts in greenhouse gas emissions and water use.

South Australia’s Strategic Plan Targets: T1.1, T1.2, T1.5, T1.6, T1.14, T2.11, T3.5, T3.6, T3.7, T3.8, T3.9, T3.10, T3.11, T3.12, T3.13, T3.14, T4.6, T4.7, T4.11

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A Climate Change Policy for the Built Environment

The Property Council and the State Government are working together to deliver a greener built environment; a partnership based on a Sector Agreement. The recommendations in this section are designed to build on the existing strong relationship. Buildings and their occupants account for 23% of Australia’s greenhouse gas emissions (GHG).2 The Built Environment Offers a ready source of GHG Savings Research conducted by the Australian Sustainable Built Environment Council (ASBEC)3 showed that significant abatement can be achieved with properly targeted incentives. Relying on the Carbon Pollution Reduction Scheme (CPRS) alone the building sector is expected to reduce emissions by around 8 Mt a year. The ASBEC research demonstrates that with complementary measures and incentives, abatement of around 60 Mt per annum is achievable by 2030. The Opportunities A strategic approach to building energy efficiency could: 

halve electricity use in commercial building stock by 2030 and reduce it by 70% by 2050;



reduce GHG emissions by 30% within two decades;



cut the cost of carbon abatement by 14% or $30 per tonne by 2050;



return $38 billion each year to GDP compared to conventional GHG abatement programs by 2050;



provide breathing space for the development of clean energy alternatives; and,



help the country reduce its carbon footprint faster and with less fuss.

Capitalising on the Building Sector’s Potential to Lessen the Cost of a Broad Based GHG Emissions Cut, Centre for International Economics (September, 2007) 3 The Second Plank – Building A Low Carbon Economy With Energy Efficient Buildings, Centre for International Economics for ASBEC (August, 2008)

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.. .. .. .. . Eco-efficiency in the Built Environment Energy efficiency does not provide the only opportunity for the built environment. A focus on eco-efficiency could deliver other significant sustainability dividends: 

new commercial buildings and their occupants could: o

consume 60%-70% less water;

generate 40% less waste; and,

deliver higher indoor environmental quality;



new dwellings and their occupants could halve their eco footprint compared to business as usual performance; and



retrofitted existing commercial buildings could achieve at least half the efficiencies of new buildings over the next decade.

The Second Plank The ASBEC/CIE paper proposed three specific policy measures that would allow energy efficiency in the building sector to deliver greater abatement opportunities: 

a national white certificate scheme; and



public funding for building retrofits – aimed at both the retail (residential and commercial buildings) and wholesale (energy retailer) sectors.

The recommendations outlined below will enable South Australia to achieve significant social and economic benefits while also ensuring we meet our national and international obligations. The requested funding of an additional $300,000 over two years will enable the Property Council to deliver education programs and materials that encourage the property sector to refurbish existing buildings. This expenditure will enhance the Government/Property Council Building Innovation Fund announced in the 2008/09 State Budget.

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.. .. .. .. . Specifically, the Property Council asks the South Australian Government to:

Strategy for Transforming Market Behaviour – Recommendations: 2.1.1

2.1.2

Extend the Government’s Building Innovation Fund by an additional $2 million over four years.

2.1.3

2.1.4

Commit to reducing environmental red tape.

2.1.5

Establish a state demonstration program that makes the business case for green development/buildings and promotes innovative practices.

2.1.6

Develop a One Stop Shop for all water, waste and energy reduction strategies, directing building owners to sources of financial and non-financial incentives.

Sources: The Second Plank – Building A Low Carbon Economy With Energy Efficient Buildings, Centre for International Economics for ASBEC (August, 2008) Capitalising on the Building Sector’s Potential to Lessen the Cost of a Broad Based GHG Emissions Cut, Centre for International Economics (September, 2007)

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.. .. .. .. . 2.2 Delivering Water Use Reductions As the community and the Government both recognise, one of the Stateâ&#x20AC;&#x2122;s biggest challenges is the future supply of potable water. The Property Council supports the Governmentâ&#x20AC;&#x2122;s efforts to reduce potable water use through desalination, stormwater harvesting, and the recycled water pipeline to the Adelaide Parklands. However, more must be done to reduce usage of potable water for nonessential purposes. The greatest economic barrier to improved water efficiency in nonresidential buildings is the annual supply charge for connection to mains water. The low cost of water mean there is little or no incentive to cut usage levels as the significant cost for non-residential users is the annual supply charge. Case Study on World Park One World Park One is a new campus-style development just outside of the Adelaide CBD. The development is designed to be water neutral, delivering outcomes for the community as a whole. However, despite this, the owners and tenants will continue to pay about $120,000 per annum in connection charges (based on a property value of $150 million). The State and Federal Governments are making a major investment in the Glenelg to Adelaide Parklands Recycled Water Pipeline to provide water for the parklands. For a minimal additional investment, a spur of this pipeline could be run through the CBD to allow commercial buildings to plumb in cooling towers and other non-potable uses to this water source. This adds an economic benefit to the project and clearly has the potential to deliver significant water savings. Specifically, the Property Council asks the South Australian Government to: Delivering reduced Water Use â&#x20AC;&#x201C; Recommendations: 2.2.1

Commit to introducing a true user-pays system for water pricing that focuses on water use not value of connected property.

2.2.2

Finance the extension of the recycled water pipeline through the CBD.

Attachment: Recycled Water Pipeline Position Paper (April 2008)

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3. Community Dividends This chapter provides a recommendation on: ď&#x201A;ˇ

Community Consultation and Engagement.

South Australiaâ&#x20AC;&#x2122;s Strategic Plan Targets: T1.1, T1.5, T1.6, T1.10, T1.11, T1.12, T1.26, T2.1, T2.2, T2.3, T.24, T2.7, T2.11, T2.12, T3.1, T.32, T.3.3, T3.4, T3.5, T3.6, T3.7, T3.8, T3.9, T3.12, T3.13, T3.14, T5.6, T5.8, T6.5, T6.6, T6.7, T6.8, T6.9, T6.10, T6.11, T6.22

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.. .. .. .. . 3.1 Community Consultation and Engagement There is no question that the State has been moving forward at a rapid pace in terms of economic and physical growth. With the roll-out of the 30-Year Plan for Greater Adelaide and the resulting negative community feedback about developments such as Buckland Park, Mount Barker and Cheltenham, there is a clear need to further engage with the community about the changes that are happening and what it will mean for our state in the future. For too long neither the State or Local Governments nor the industry have done an appropriate job of consulting with the community about what they want. The push back that we have seen is related more to the lack of consultation and engagement in the process than the developments themselves. It is time for all three parties to stand up together and work to engage the community in the direction and the future of the State. The Property Council is in the process of developing a model to assist the development industry to play their part in engaging the community in broader consultation, both virtual and physical. This engagement will significantly reduce the negative media and vitriolic commentary from sectors of the community. This is a project that should be jointly partnered by the State Government, Local Government and the Property Council to ensure the best outcome for the State.

Specifically, the Property Council asks the South Australian Government to: Community Consultation and Engagement â&#x20AC;&#x201C; Recommendation: 3.1

Support the Property Councilâ&#x20AC;&#x2122;s work to create a Community Consultation and Engagement model to assist in generating community support for change.

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4. Governing Smarter Two issues are addressed in this chapter: ď&#x201A;ˇ

a methodological approach to modernising metropolitan governance; and

ď&#x201A;ˇ

delivering improved local governance.

South Australiaâ&#x20AC;&#x2122;s Strategic Plan Targets: T1.1, T1.2, T1.5, T1.6, T1.7, T1.8, T.19, T1.10, T1.11, T1.12, T1.14, T1.16, T2.21, T 5.4, T5.5

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.. .. .. .. . 4.1 Modernising Metropolitan Governance Toward an Australian set of leading practice urban governance principles “…cities will face growing social exclusion and increasing financial pressure in a more complex, fragmented institutional environment. “Cities will need to be more creative, more institutionally innovative…the challenge of devising effective models of governance will become increasingly urgent.” Michael Parkinson “Developing Competitive and Cohesive European Cities”, European Institute for Public Affairs, 2002 The early 1990s witnessed a revival of programs that aimed to improve competitiveness and social opportunity in cities. A decade later, many policy makers concluded that urban strategies often failed in the face of outmoded governance arrangements. Causes of Urban Governance Failure The 2001 OECD report Cities for Citizens: Improving Governance in Metropolitan Areas, identified three main failures of urban governance: 

the fragmentation of administrative jurisdictions within metro areas;



the financial/fiscal strain faced by local authorities at a time when major investment in infrastructure is required; and



the absence of transparent, accountable decision-making frameworks at the local level.

The OECD encouraged its members to develop governance models that addressed these shortcomings. Modern Governance Principles More recently, the United Nations4 identified seven principles of leading practice urban governance:



sustainability in all dimensions of urban development;



subsidiarity of authority and resources to the appropriate level;

Global Campaign on Urban Governance (Concept Paper), UN-HABITAT (2002)

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.. .. .. .. . 

equity of access to decision-making processes and the basic necessities of urban life;



efficiency in the delivery of public services and in promoting local economic development;



transparency and accountability of decision makers and all stakeholders;



civic engagement and citizenship; and,



security of individuals and their living environment

These principles were employed to develop a performance measure called the “urban governance index”. There are many other menus of urban governance principles, all of which cover similar territory. Metropolitan Governance Principles for Australia To kick-start the debate, the following metropolitan governance principles are proposed: 1.

Commit to strategic sustainability that aims to maximise multiple economic, social, ecological and governance dividends.

Increased competitiveness based on long-term investments in social development and economic infrastructure.

Place-shaping that increases local choice, diversity and opportunity within broader regional/national contexts.

Greater transparency, accountability and probity that enhances trust in metropolitan government.

Greater fiscal capacity to capitalise city services and investment programs adequately, whilst minimising deadweight taxes/charges.

Improved equity and access to opportunity across the community.

Greater subsidiarity, participation and civic engagement that refreshes civic mandates.

Greater efficiency, coordination and integration of public service delivery.

A commitment to innovation and inspiring leadership that continuously improves city governments’ capacity to meet evolving community needs.

10.

Rational and coherent spatial boundaries that establish a logical nexus between the responsibilities of city government and the communities they serve.

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.. .. .. .. . Specifically, the Property Council asks the South Australian Government to:

Modernising Metropolitan Governance â&#x20AC;&#x201C; Recommendation: 4.1

Adopt the Property Councilâ&#x20AC;&#x2122;s proposed Metropolitan Governance Principles and work with local government to deliver.

Sources: Modernising Metropolitan Governance: Toward an Australian set of leading practice urban governance principles, Version 2.0, Property Council of Australia (December, 2008) Cities Strategy, Version 3.0 Property Council of Australia (October, 2008) Developing Competitive and Cohesive European Cities, Michael Parkinson European Institute for Public Affairs (2002) Global Campaign on Urban Governance (Concept Paper), UN-HABITAT (2002) Cities for Citizens: Improving Governance in Metropolitan Areas, Organisation for Economic Co-operation and Development (2001)

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.. .. .. .. . 4.2 Modernising Local Governance In addition to Federal-State reforms that are currently being negotiated through COAG, local government also needs to be modernised. The recommendations outlined below provide a clear pathway to improved local governance that will benefit all levels of government, and more importantly, the community.

Specifically, the Property Council asks the South Australian Government to:

Modernising Local Governance - Recommendation: 4.2

Help to reform and improve the performance of local government with the following programs: - institute an inquiry into the optimal size of local councils that balances democratic representation, efficient delivery of services, environmental catchments, funding powers and ability to attract (and retain) professional staff; - support a constitutional commission to develop a model for establishing councils as local parliaments. A key feature of the model would be the application of the separation of powers doctrine to local government activities; - require all councils to develop local action plans based on key performance indicators (KPIs), similar to South Australiaâ&#x20AC;&#x2122;s Strategic Plan. All councils should develop 25year infrastructure plans; and - require councillors who sit on planning committees to undertake professional development provided by a registered training provider.

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.. .. .. .. .

5. A Fairer and More Competitive South Australia This chapter addresses the need for tax reform in the areas of: 

South Australia’s taxation regime



Land Tax;



Stamp Duty on Multi-Level Residential; and



Unit Trust rules.

Over the last several budgets, the State Government has provided payroll tax relief as well as land tax relief to mum and dad investors. While the Property Council recognises that times are tough, we cannot wait any longer for property tax reform; reforms that will deliver the greatest economic benefit for every South Australia. The Federal Government has undertaken its ‘root and branch’ review of the nation’s taxation system and it is time for South Australia to undertake one of its own, focussed on providing fairness and equity in the system while also protecting the South Australian budget from future shocks.

South Australia’s Strategic Plan Targets: T1.1, T1.2, T1.5, T1.7, T1.8, T1.9, T1.10, T1.11, T1.13, T1.14, T1.15, T1.16, T1.17, T1.18, T1.19, T1.20, T1.22, T1.23, T1.24, T1.25, T3.5, T3.12, T4.7, T4.11, T5.9, T6.7, T6.8

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.. .. .. .. . 5.1

‘Root and Branch’ Review of State Taxes

The Global Financial Crisis has shone a light onto the inherent weakness of the state’s revenue raising capacity. These weaknesses are not necessarily a direct consequence of any specific action of the State Government but rather reflect the vulnerability of the State’s finances due to the structure of our economy. What has been seen is that the State Government is too heavily reliant on property taxes and GST revenues, and when times get tough, the budget is severely impacted. In South Australia, property taxes as a percentage of own-state revenue comprises about 43 per cent. This is the highest level of all the mainland states and 8 percentage points higher than the average. In dollar terms, since 2000/01 the property tax income of the state government has increased from $687m to $1,649m in 2010/11; this is an increase of just under $1 billion in 10 years. The first step towards removing these weaknesses and strengthening the future economic position of the State is to undertake a ‘root and branch’ review of State Taxes. Over the last two decades, all mainland states have undertaken reviews of their tax bases, South Australia is the only one left out in the cold. Now is the time to undertake a review of this nature, a review focussed on regenerating the State’s taxation base, one that creates fairness and equity across all sectors. In particular, the Property Council believes that one of the terms of reference for such a review should include a target of reducing the percentage of property taxes from 43 per cent to 35 per cent.

Specifically, the Property Council asks the South Australian Government to:

‘Root and Branch’ Review– Recommendation: 5.1

Commit to a ‘root and branch’ review of State Taxation with a target of reducing the percentage of property taxes from 43% to 35%.

Attachment: ‘States grab $20bn in property tax’, The Australian Financial Review (25 January 2011)

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.. .. .. .. . 5.2

Land Tax

Land tax in South Australia is the most uncompetitive State tax, impacting on South Australian businesses and private land investors. Almost every other state has reformed their land tax regimes over the last decade, including most recently Tasmania who delivered massive land tax cuts. This places South Australia in a precarious competitive situation. As can be seen from the graph below, on every scale between $2.5m and $25m, land tax bills in South Australia are higher than anywhere else in the nation. 

A $2.5m investment in South Australia will pay $27,400 more in land tax per year than then next highest jurisdiction (ACT);



A $5m investment in South Australia will pay $73,731 more in land tax per year than the next highest jursidction (NSW);



A $10m investment in South Australia will pay a whopping $158,731 more in land tax per year than the next highest jursidction (NSW);



A $25m investment in South Australia will pay a staggering $378,200 more in land tax per year than the next highest jursidction (Victoria); Land tax paid by State (commercial)

$900,000 $800,000 $700,000

tax paid

$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $2,500,000

$5,000,000

$10,000,000

$25,000,000

unimproved land value Vic

NSW

QLD

TAS

ACT

This is clearly uncompetitive and urgent action is required. While the Property Council congratulates the Government on the land tax reforms delivered for mum-and-dad investors in 2010, there has been no real relief for those who invest in South Australia’s productive capacity, those who invest in property worth more than $1 million. As can be seen from the graph below, land tax receipts have risen dramatically over the last 10 years but at the same time the rental return from those investments has not kept pace. This gap is one of the key reasons why South Australia continues to lose investment to cheaper jurisdictions.

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.. .. .. .. . Land Tax Receipts v Premium + A Grade Commerical Rents $500

700

$450 600 $400

$350

$300 400 $250 300 $200

$150

200

$100 Land Tax ($'m) Premium + A Grade Gross Face Rent ($/mÂ˛) Linear (Land Tax ($'m))

100

$50

$0 2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

Sources: Land Tax data has been derived from State Budget Papers and data on rental incomes has been obtained from Colliers International.

The Property Council believes that in order to alleviate the severe uncompetitiveness of the system, the State Government must reform land tax by increasing the maximum threshold to $2.5 million at a maximum rate of 2.5c per dollar.

Specifically, the Property Council asks the South Australian Government to:

Land Tax â&#x20AC;&#x201C; Recommendation: 5.2

Increasing the Land Tax maximum threshold to $2.5 million at a rate of 2.5c per dollar.

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Gross Face Rents

Land Tax Recipets ($'millions)

500

.. .. .. .. . 5.3

Stamp Duty on Multi-Level Residential

In the 30-Year Plan for Greater Adelaide, the State Government has set strong targets for growth in apartment developments in South Australia. However, amongst a range of other disincentives, the state’s stamp duty regime has a disproportionate affect on purchasers of apartment dwellings as compared to purchasers of house and land packages. The industry supports the State Government’s aim of increasing urban infill and urges the State Government to introduce a similar stamp duty incentive to those that exist in Victoria and New South Wales. Specifically, the Property Council believes that the removal of the financial disincentive for purchasing “off-the-plan” will not only assist in delivering on the Government’s infill target but will also generate activity in a market that is almost a standstill following the GFC.

Specifically, the Property Council asks the South Australian Government to: Stamp Duty on Multi-Level Residential – Recommendation: 5.3

Introduce a new Stamp Duty incentive for all “off-theplan” apartment sales to promote this product for consumers and to stimulate the residential construction market.

Attachment: Barriers to Vertical Communities, Property Council of Australia (April 2011)

- 25 -

.. .. .. .. . 5.4

Unit Trust Harmonisation Program

As the State Government is already aware, the Property Council has been undertaking a program to rationalise land rich stamp duty definitions and provisions across Australia. Our recommendations have been adopted in Western Australia and are being favourably considered in other jurisdictions. Stamp duty on property is collected by all states however the definitions and provisions applying to stamp duty are different in each jurisdiction. The delivery of this program will encourage domestic property investment and improve international competitiveness. The lack of consistency between jurisdictions creates unnecessary complexity for property owners who want to invest across multiple jurisdictions or from overseas. These investors incur additional legal and administrative costs to comply with different state taxes and the movement of capital into and across Australia is made more difficult by the complex variation in state stamp duty regimes. It makes investment in some jurisdictions unattractive and uncompetitive. This inhibits capital investment in Australian property. Copies of the Harmonisation Models are attached for detailed consideration.

Specifically, the Property Council asks the South Australian Government to:

Rationalisation Program â&#x20AC;&#x201C; Recommendation: First:

Immediately adopt and implement the Property Councilâ&#x20AC;&#x2122;s Unit trust harmonisation models.

Attachments: Unit Trust Rationalisation Model Unit Trust CRE Rationalisation Model

- 26 -

.. .. .. .. .

Contact Please contact the following about any aspect of this submission: Nathan Paine Executive Director â&#x20AC;&#x201C; South Australia Property Council of Australia 142 Gawler Place Adelaide SA 5000 t. 08 8236 0900 m. 0448 445 177 e. npaine@propertyoz.com.au

- 27 -

.. .. .. .. .

Attachment 1: Metropolitan Authority Public Policy Paper

- 28 -

ACCOMMODATING GROWTH DELIVERING INFRASTRUCTURE BUILDING BETTER COMMUNITIES

METROPOLITAN AUTHORITY A NEW GOVERNANCE MODEL FOR FUTURE COMMUNITIES

SUBIACO, WESTERN AUSTRALIA

PROPERTY COUNCIL OF AUSTRALIA – METROPOLITAN AUTHORITY: A NEW GOVERNANCE MODEL FOR FUTURE COMMUNITIES

A NEW REGIME TO DELIVER URBAN RENEWAL South Australia has embarked on a bold new path toward urban redevelopments that will support our growing economy and population. The Government has identified a range of infill sites along the northwest growth corridor and around the metropolitan area, from Noarlunga in the south to Elizabeth in the north. In addition, the Government is also upzoning large sections of transit corridors to enable urban infill. The scheduling, planning and delivery of these sites to market is a mammoth task. Building on lessons from the 2009 international tour of Transit Oriented Development sites, the 2010 Urban Development Tour and examples from around Australia, momentum is gathering for a South Australian Metropolitan Authority to deliver our new city communities.

MEETING THE CHALLENGES OF THE 30-YEAR PLAN Population growth is inevitable

The cost of inaction

Coordinating delivery

Contrary to common misconceptions, international migration is not the sole cause of Australiaâ&#x20AC;&#x2122;s population growth. A recent report by the Centre for Independent Studies shows that even if Australia halved its migration levels, at current fertility levels the population would still grow to 30 million people by 2050.

Without a new approach to the delivery of urban renewal - one that is better coordinated, faster and strategically driven, we will experience ill-timed and poorly scheduled developments that fail to meet the needs of the community and heap additional costs onto government.

A Metropolitan Authority should have responsibility for amalgamating and coordinating the delivery of sites to the market to stimulate the creation of new, active, vibrant and sustainable communities that leverage upon and support the State Governmentâ&#x20AC;&#x2122;s investment in our public transport system.

We can either ignore the reality of population growth and suffer the consequences of unplanned urban expansion, or we can begin to plan strategically for a growing population and economy.

Metropolitan Authorities charged with infill projects in other Australian jurisdictions and around the world have proved their capacity to quickly develop the new communities South Australia will inevitably need as the state prospers and grows.

South Australiaâ&#x20AC;&#x2122;s current model for delivering urban renewal sees a range of Government agencies working to different objectives with divergent priorities. A clear lesson from successful redevelopment projects overseas and interstate is that the most effective means of coordinating urban renewal is through a Metropolitan Authority governance model.

The South Australian Government has chosen the latter and planning for growth is underway. But given the emphasis placed on urban infill as a strategy for accommodating metropolitan growth, a new governace structure is needed to deliver the 30-Year Plan for Greater Adelaide.

VAUBAN, FREIBURG, GERMANY

The rationale and structure Urban regeneration projects are more complex than greenfield developments. They involve more than the preparation of planning ordinance, master plans, structure plans, precinct plans and policies and regulation for private sector response and reaction. A revitalised committment to urban renewal will require strong leadership and a unified and consistent approach to decisions and actions with respect to: • future development and the highest and best use of land (including potential private-public partnerships); • the establishment of effective governance bodies and institutional arrangements;

• •

• • • • • • •

a commitment to fiscal and financial (both capital and recurrent) policies and tools; a commitment to legible, transparent and effective policies and guidelines that balance certainty and flexibility; effective community engagement and consultation; land tenure and acquisition; land assembly; land use and activity distribution; investment in infrastructure to support development and unlock sites; a commitment to place making and place capital; and strong and consistent advocacy for agreed directions and outcomes.

Policy misalignments working counter to infill projects + stamp duty disincentive to multi-level residential developments + delivery of good public spaces constrained by tax and planning settings + many government agencies with different responsibilities and priorities + mandatory affordable housing requirements constrain innovative approaches + energy, sewerage and other infrastructure augmentation costs + fractured site ownership and complex titling hampers delivery of sites to market + inequitable energy efficiency requirements

PROPERTY COUNCIL OF AUSTRALIA – METROPOLITAN AUTHORITY: A NEW GOVERNANCE MODEL FOR FUTURE COMMUNITIES

WHAT ARE THE OPPORTUNITIES? A Metropolitan Authority will increase South Australia’s ability to deliver the housing, employment and growth it needs to achieve the targets set out in the 30-Year Plan for Greater Adelaide.

RESOLVING POLICY INCONSISTENCIES A statutory body tasked with the delivery of Zones of State Significance and major corridor developments would have greater ability to resolve the policy inconsistencies that currently exist and that act as a barrier to the delivery of good outcomes for all South Australians.

LINKING HOUSING AND EMPLOYMENT LANDS It is critical that we provide jobs for people where they live. A Metropolitan Authority would be positioned to ensure that appropriate employment opportunities are provided in the new communities where people will live.

AFFORDABLE HOUSING Rather than the traditional approach of ‘taxing thy neighbour’, a Metropolitan Authority would be able to take a holistic view of the delivery of affordable housing, and more importantly, housing in general, to the market.

A COORDINATED RESPONSE There are currently a dozen Government agencies with an interest in the delivery of Zones of State Significance and corridor developments. This can prompt competition over cooperation and lead tp duplication of effort. A Metropolitan Authority offers ensure the smooth, efficient and productive delivery of these sites to market,

CENTRE REVITALISATION The importance of these Zones and corridor developments as activity centres cannot be underestimated. However, the ability to deliver these outcomes depends on the capacity of the Government or the Authority to reinvest dividends from the sale of land into appealing public spaces.

INVESTOR CERTAINTY The greatest advantage of a Metropolitan Authority, as illustrated in Australia and overseas, is the ability to provide investor certainty, for those that purchase homes, for those that start businesses in the new communities and for those developing the sites.

In October 2010, the South Australian Government released the first audit of land in the Greater Adelaide area. This audit, the Housing and Employment Land Supply Program report clearly identifies areas for targeted housing and employment. Critically, this report highlights that we do not have enough greenfields land in the Greater Adelaide area to support our projected population growth. The only option, as identified by Government, is to increase the density of housing and other development around our transport corridors. This is the only solution that will deliver affordable housing, in close proximity to where people work and in a way that reduces our impact on the environment.

THE ANSWER FOR SOUTH AUSTRALIA To ensure the successful implementation and delivery of the urban renewal required to meet the targets and policies set out in the 30-Year Plan for Greater Adelaide, a Metropolitan Authority should be established as soon as possible.

VAUBAN, FREIBURG, GERMANY

Almost all successful urban renewal programs have succeeded as consequence of being guided by a Metropolitan Authority. The Authority must be established with a legislative framework that designates control over all Zones of State Significance, corridor developments and surplus government lands within the Greater metropolitan area. The Authority should also work in partnership with other government agencies such as Housing SA, whose sites will be integral in delivering future urban renewal outcomes. Given the scale and complexity of this work and its importance in the realisation of regional and state-wide strategic objectives, the Authority should have: • strong leadership and direction; • legislative and statutory authority; • initial financial establishment support with access to recurrent funding streams; • power to initiate and act to achieve agreed outcomes; • a focus that transcends political contexts and cycles; • an approach that is unified, coordinated and structured with appropriate supporting institutional arrangements; • capacity to deliver and achieve short (up to five years), medium (five to 10 years) and longer term (10 to 20 years) results; • an agreed, transparent implementation plan that is adequately funded, programmed and action-oriented and; • power of acquisition to assist with land assembly and the development of key land parcels (to achieve coordinated development and delivery of key sites and areas). It is suggested that a Metropolitan Authority of this nature would assist in addressing potential delivery impediments that may arise including competing overnment interests (state / local), competing agency interests or the potential conflicting interests of local stakeholders.

PROPERTY COUNCIL OF AUSTRALIA – METROPOLITAN AUTHORITY: A NEW GOVERNANCE MODEL FOR FUTURE COMMUNITIES

NEW SOLUTIONS THAT WORK A Metropolitan Authority will ensure infrastructure and land use planning is coordinated and delivered to the market in a strategic manner with a view to delivering economic prosperity. The Government already has a statutory entity to deal with surplus government lands, called the Land Management Corporation. This is an organisation that, with some amendments to its structure and charter, is ideally placed to become South Australia’s Metropolitan Authority. The South Australian model for a Metropolitan Authority should have five fundamental elements: 1. 2. 3. 4. 5.

responsibility for site consolidation in Zones of State Significance; and corridor developments; responsibility for precinct planning and development authorisation with final approval undertaken by the Development Assessment Commission; responsibility for coordinating the infrastructure delivery and public realm; responsibility for delivering the site to market; and required to reinvest dividends from the sale of land into the site.

Where Authorities have worked: •

Dandenong Development Board, VIC

•

Honeysuckle Development Corporation, NSW

•

Redfern-Waterloo Authority, NSW

•

East Perth Redevelopment Authority, WA

•

Midland Redevelopment Authority, WA

•

Subiaco Redevelopment Authority, WA

•

Urban Land Development Authority, QLD

•

South Bank Corporation, QLD

•

22@Barcelona, Spain

•

Urban Centre Metroplitano, Torino

•

Portland Development Authority, USA

•

City of Philadelphia Redevelopment Authority, USA

THE ACTION PLAN 1

Government commitment

Government must commit to establishing a Metropolitan Authority to oversee the deliver of Zones of State Significance and corridor developments in South Australia. This should include powers to: • amalgamate sites; • undertake appropriate planning processes (structure and precinct planning); and • retain and reinvest dividends into public infrastructure.

Reform the Land Management Corporation

The most efficient pathway to delivering a Metropolitan Authority is to convert the Land Management Corporation. The process of converting the Land Management Corporation must include: • a full review and revision of the Corporation’s Charter; • a full review of skills and requirements of the new body; and • a commitment from Government that the new body will not be a developer.

ORENCO STATION, PORTLAND, USA

PROPERTY COUNCIL OF AUSTRALIA – METROPOLITAN AUTHORITY: A NEW GOVERNANCE MODEL FOR FUTURE COMMUNITIES

Property Council of Australia Limited ABN 13008 474 422 142 Gawler Place Adelaide SA 5000 Telephone: 08 8236 0900 Facsimile: 08 8223 6451 Email: sa@propertyoz.com.au Web: www.propertyoz.com.au

TURIN, ITALY

.. .. .. .. .

Attachment 2: Submission on Strategic Infrastructure Plan

- 29 -

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Agree on the following, with the recommendation that they form part of governance structures within the new plan: Strategic Priority

Comment

Implement the new approach to land use and infrastructure planning, consistent with the 30-Year Plan for Greater Adelaide;

Agree, but further recommend that the Infrastructure Plan should be further separated into regional plans aligned with the regions in the 30-Year Plan and South Australiaâ&#x20AC;&#x2122;s Strategic Plan.

Position South Australia as a best practice leader in urban design;

A formalised process for engagement with the Integrated Design Commission on best practice principles for urban design should be created. However, the Property Council holds the policy position that new home buyers should not be expected to fund public facilities that benefit the wider community.

Continue to reform public procurement processes to enable more innovate approaches to delivery and funding of infrastructure investment while maintaining high standards of probity;

This process should be consistently applied to all projects and all stages of projects to improve probity.

Ensure that government procurement processes maximize opportunities for competitive local industry to participate in infrastructure projects;

Supported as a governance principle for ongoing infrastructure investment and management.

Identify further opportunities to streamline assessment and approval processes to support the delivery of innovative, fit-forpurpose infrastructure solutions.

The Coordinator-General model worked exceptionally well for the Stimulus Package rollout and should be considered for broader application.

.. .. .. .. . Continue to harmonise procurement policies and processes and reduce transactions costs incurred by both governments and the private sector.

This should be a pursuit within all government functions and should form a governance principle for infrastructure and management.

Ensure that government procurement processes include opportunities for people that currently experience barriers to employment to be involved in infrastructure construction projects.

Agree in principle, however these policies are already in operation and a further expansion would need to be assessed in detail to understand the cost / benefit of any changes.

Work with other jurisdictions to develop a national best practice framework and to improve the evidence base for strategic city and national infrastructure planning.

Supported as a governance principle for ongoing infrastructure investment and management.

Develop strategies to adapt public infrastructure to respond to the inevitable pressures from climate change;

Agree in principle. The Property Council is keen to work with the Government to develop these policies and plans.

Continue to foster collaboration between infrastructure owners and operators throughout the state on risk management and business continuity planning and redundancy arrangements for all critical infrastructure. Continue the planning, standard setting, training and consultation necessary to continue to protect critical infrastructure.

Supported as a governance principle for ongoing infrastructure investment and management.

.. .. .. .. . Agree on the following as background context to the Strategic Infrastructure Plan rather than as new detail: Emerging Industry Requirements • Identify, protect and facilitate the development of a rolling 25 year supply of land including a 15 year supply of industry zoned land to meet demand. • Ensure infrastructure is provided in an integrated and timely manner to support existing and proposed industrial land developments. • Ensure suitable sites are available for industries that are strategic to the state’s economy and have site-specific requirements. • Identify land suitable for industrial sites in southern Adelaide. Residential Land • Provide for planned, sequenced and evidence-based land release and an appropriate balance of infill and greenfields development. • Identify, protect and facilitate the development of a rolling 25 year supply of land including a 15 year supply of residentially zoned land to meet demand. • Give greater consideration to population data and changing demographics in residential and employment land supply planning. • Ensure that planning for residential developments is more closely integrated with infrastructure and transport planning. • Monitor activity in regional housing markets and facilitate planning and development to meet demand. • Review processes for disposal of surplus government land.

Strongly agree, however this already forms part of the 30-Year Plan and the HELSP Report. Strongly agree.

Agree, but this should align through all major strategic planning documents.

Agree but this is already underway through the 30-Year Plan and the HELSP

Agree. However, infrastructure investment is critical to opening up infill opportunities.

Agree.

Agree, but this should be recorded as a governance principle for ongoing infrastructure investment and management. Strongly agree.

Strongly agree. The Property Council has released a new Governance model to assist this discussion. Agree; this review should require consideration of the state’s strategic land needs.

.. .. .. .. . Strongly support the following as they meet the requirements of hard infrastructure that supports growth: Manage urban congestion through targeted investment in: • Strategic public transport • Transit-oriented developments supported by an integrated mass transit public transport system • Key road corridors and intersections • Use of intelligent transport and traffic management systems • Travel behaviour change programs. Improve road freight • Improve the state’s competitiveness through well maintained, efficient road freight transport networks including Adelaide’s north-south corridor and international links. • Minimise the impact of road freight vehicle movement on the community and environment by appropriately locating and protecting freight routes. • Continue to improve route network access for heavy vehicles.

Strongly agree to all points.

Improve maritime infrastructure • Facilitate the redevelopment of the state’s export and import harbours to ensure the most efficient access to international markets. • Ensure any changes in land use on or adjacent to ports and harbours are consistent with current or future transport and harbour activities. • Develop and maintain appropriately located wharves and associated facilities to support tourism, fishing and aquaculture industries. • Establish a deep water bulk commodity port on Eyre Peninsula for minerals exports.

Agree

The Property Council has called on the Government to develop a Tourism Investment Plan to promote increased private investment in tourism infrastructure. No comment

Improve rail freight • Develop a connected metropolitan, regional and interstate rail network to support the efficient movement of export freight. • Encourage the shift to rail transport for passenger and freight movements where justified by environmental, economic or social imperatives.

Strongly agree to all points.

Agree to all

.. .. .. .. . Improve aviation infrastructure â&#x20AC;˘ Ensure aviation infrastructure at Adelaide Airport, and land transport links to the airport, are sufficient to support the economic growth of South Australia and meet visitor expectations. â&#x20AC;˘ Aim to ensure any change in land use on or adjacent to airports is consistent with future transport development. â&#x20AC;˘ Provide for the orderly expansion of facilities at regional airports to meet growing passenger and freight activities. â&#x20AC;˘ Facilitate timely access to health and emergency services for remote communities through the provision of safe aerodromes. â&#x20AC;˘ Provide for the mining and resource sectorâ&#x20AC;&#x2122;s requirement for aerodrome infrastructure to meet exploration, development and workforce needs. Improve people movement â&#x20AC;˘ Continue to transform Adelaideâ&#x20AC;&#x2122;s urban passenger transport system into a costeffective, environmentally friendly and modern metropolitan network. â&#x20AC;˘ Reduce injuries and fatalities from transport related crashes. â&#x20AC;˘ Coordinate public transport networks and facilities to maximise access to social services. â&#x20AC;˘ Deliver a more accessible public transport system in line with Disability Discrimination Act (DDA) requirements. â&#x20AC;˘ Continue to implement necessary counter terrorism measures. â&#x20AC;˘ Reduce the impact of passenger transport on the environment by supporting the utilisation of environmentally friendly fuels and transport modes. â&#x20AC;˘ Provide connected networks for pedestrian use and cycling.

Strongly agree to all points

National transport reforms â&#x20AC;˘ Implement national transport reforms to increase the productivity and competitiveness of the national transport system. â&#x20AC;˘ Consider the networks between capital cities and major regional centres, and other important domestic and international connections.

Agree to all.

Agreed to all points.

.. .. .. .. . Public Realm • Revitalise the special places and spaces of Adelaide and regional South Australia to create a vibrant, surprising and inspiring experience. • Encourage exemplary urban design that creates places and experiences for people, connects with contemporary issues and challenges the norm. • Achieve more collaborative and integrated urban design decision-making across all agencies and tiers of government through the Integrated Design Commission. • Develop a public art policy to ensure that public art is a feature of new public realm improvements and significant new developments. Integration of Services • Improve community access and amenity by better linking housing to transport infrastructure and services. • Develop innovative and integrated accommodation and support services for those people requiring assistance to maintain successful independent living in the community.

Agree however the cost burden must not be applied to the development industry or consumers and should be shared by all South Australians.

Agree in principle, however this appears to be more a planning and social justice matter than an infrastructure issue.

Agree, however consideration should be given to reviewing the various Codes to promote use of co- and tri-generation generation systems.

Electricity Generation and the Supply/Demand Balance • Maintain a reliable, secure and competitively priced supply of electricity in a carbon constrained economy.

It may be necessary to review the charters of relevant government statutory bodies and utilities to ensure that new generation and delivery technologies can be implemented (see recommendation below). Electricity Transmission and Distribution Networks • Facilitate greater interconnectivity of electricity transmission networks to increase system security and reliability and increase exports of South Australian renewable energy. Gas Transmission and Distribution Networks • Facilitate greater inter-connectivity of state gas transmission pipelines and expanded gas field connectivity to ensure that South Australia has access to multiple gas supplies at competitive prices.

Agree, however consideration should be given to reviewing the various Codes to enable and promote ‘Smart Grids’ or local distribution networks.

Agree.

.. .. .. .. . Water

User pays model for water charging should be introduced to support greater demand side response. In addition, the State Government should support and adopt the Property Council’s model for recycled water reuse in the CBD.

ICT • Coordinate deployment and use of ICT infrastructure, including broadband, with the state’s physical infrastructure priorities, including transport, new housing and industrial developments and other built infrastructure. • Make maximum use of the opportunities presented by the State Government’s purchasing of broadband services to stimulate investment in broadband infrastructure and take-up rates across the broader community. • Maximise benefits to the South Australian community and economy from the rollout of the National Broadband Network. • Continue to implement the Ask Just Once strategy. • Continue to work with other jurisdictions to develop consistent national ICT standards and processes.

Agree to points on hard infrastructure; however the points unrelated to hard infrastructure should be removed from the SIP.

.. .. .. .. . The following recommendations do not refer to specific infrastructure investments nor contribute adequately to critical infrastructure governance requirements. Therefore they should be removed from the Strategic Infrastructure Plan: Strategic Priority

Comment

Liquid Fuels • Facilitate commercially viable private sector proposals to construct marine fuel discharge and/or fuel storage facilities. • Support research and development into biofuel development. Climate Change • Foster research and development and fast take-up of technological advances in renewable energy supply and use. • Promote the development of market and regulatory arrangements that encourage energy industry developments that minimise growth in greenhouse gas emissions.

Managing Demand • Promote the adoption of demand-side measures that contribute to more efficient energy use and improve use of existing infrastructure. Energy Market Development and Reform • Promote the development of national policy and regulatory arrangements for energy markets that ensure that South Australia secures access to reliable, sustainable and affordable supplies of energy. • Contribute to national energy reforms that will support the timely development of transmission infrastructure and equitable cost allocations.

This proposal does not refer to specific infrastructure investment and should not be included in the Strategic Infrastructure Plan.

.. .. .. .. . Reducing Greenhouse Gas Emissions and Adapting to Climate Change • Achieve South Australia’s greenhouse emission and climate change targets, as set out in the Climate Change and Greenhouse Emissions Reduction Act 2007, through implementation of actions identified in Tackling Climate Change: South Australia’s Greenhouse Strategy and the directions for urban and regional form set out in the planning strategy (including the 30-Year Plan for Greater Adelaide). • Develop a climate change adaptation framework for South Australia that will inform NRM plans. Housing and Homelessness • Increase housing options available for high need or homeless people, including the development of long-term and transitional accommodation. • Continue to develop the capacity for new joint ventures between the government, not-for-profit organisations, the private sector and local government for new, affordable and high-need housing and support community aspirations for home ownership. • Incorporate affordability objectives within local development plans so that the development approval process supports an appropriate supply of affordable and high-need housing. • Continue urban regeneration in areas of disadvantage to improve amenity for tenants and expand housing choice. • Support ageing at home and communitybased accommodation options as an alternative to institutional care. • Promote the development of accessible and adaptable housing that is suitable for seniors and people with disabilities. • Promote energy efficiency and environmental sustainability in new residential developments. • Stimulate market responses to housing supply linked to regional industry expansion and seasonal worker accommodation needs.

This proposal does not refer to specific infrastructure investment and should not be included in the Strategic Infrastructure Plan.

.. .. .. .. . Managing and Making the Best Use of Heritage Assets • Maximise economic and social benefits through improved conservation and management strategies for the state’s heritage assets. • Target potential high profile heritage experiences for revitalisation through commercial opportunities that will lift the profile of South Australia’s heritage and culture and subsequently induce further conservation and management opportunities. • Develop a 10-year management plan for maintenance of the state’s heritage and cultural assets under the control of Arts SA. • Develop a strategy to bring heritage buildings to an acceptable standard for disability access. •

This should be removed from the SIP. Furthermore, there is concern about the competing issues raised in terms of upgrading our heritage assets and providing disabled access whilst the Council’s heritage policies restrict the ability to achieve sensible outcomes.

This proposal does not refer to specific infrastructure investment and should not be included in the Strategic Infrastructure Plan.

Encourage the use of sustainable industrial practices through planning of industrial estates.

Public Realm • Promote the development of quality public spaces and require excellent design in the public realm through the Integrated Design Commission. • Encourage world-class urban design and architecture.

Agree. However, this is not a topic that should be included in an infrastructure plan. Further, a formalised process for involving the Integrated Design Commission should be created and on the basis that the community as a whole should bear the cost of these outcomes, not new home buyers.

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Attachment 3: Growth Area Bonds Public Policy Paper

- 30 -

ACCOMMODATING GROWTH DELIVERING INFRASTRUCTURE BUILDING BETTER COMMUNITIES

GROWTH AREA BONDS NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

PROPERTY COUNCIL OF AUSTRALIA – GROWTH AREA BONDS: NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

MATCHING INFRASTRUCTURE AND GROWTH Infrastructure is the lifeblood of our cities. It facilitates economic growth, ensures our cities function smoothly, and helps realise the full promise of our communities. There is an enormous task involved in providing the infrastructure that will support the inevitable growth of cities like Adelaide. We need to look to new financing solutions that help governments meet the future demand for infrastructure. Growth Area Bonds meet that challenge. They bridge the divide between infrastructure and land use â&#x20AC;&#x201C; and in doing so, will gift us economic growth and sustainable communities.

MEETING THE INFRASTRUCTURE CHALLENGE Growth is inevitable

The cost of congestion

Population projections in the 30-Year Plan for Greater Adelaide indicate that Adelaide is expected to grow by about 560,000 people over the next 30 Years.1

Congestion is a growing threat to the smooth functioning of our city. While Adelaide still enjoys less congestion than other capitals, time spent in traffic inhibits the time families spend together and carries an economic cost estimated to be $2.1 million each day for Adelaidians.3

This projected growth would result in demand for at least 258,000 new dwellings, as well as the development of new employment lands, industrial precincts and office accommodation. Adelaide needs to find room for 282,000 new jobs.2 The 30-Year Plan for Adelaide provides the planning framework for this projected growth, but effective forward planning and funding of infrastrucutre will be critical, given the challenge of delivering new housing, transport and social infrastructure.

At current projections the annual cost of congestion is set to rise from approximately $767 million in 2010 to more than $1 billion by 2020.4 We need better ways of financing infrastructure that are explicitly tied to land use decisions if we are going to reverse the current drift towards Adelaide becoming a choked city.

Current models cannot deliver While the State Government has substantially increased investment in infrastructure, with the support of additional funding from Infrastructure Australia, much greater levels of investment will be needed to meet the demands of growth projected in the 30-Year Plan for Greater Adelaide. This investment cannot simply be expected to come solely from Government coffers. Nor should new homebuyers be lumbered with the cost of critical infrastructure that benefits the entire commuity. Since improved infrastructure benefits every South Australian we must find new ways of delivering this community benefit equitably and efficiently.

Taxing times for expanding communities + stamp duty disincentive to multi-level residential developments + open space contributions + energy augmentation costs + affordable housing requirements + inequitable energy efficiency requirements + hidden council imposed costs

PROPERTY COUNCIL OF AUSTRALIA â&#x20AC;&#x201C; GROWTH AREA BONDS: NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

A stagnant climate for finance The Global Financial Crisis and EuroZone debt crisis has exposed the limited options available to governments for funding essential infrastructure. While the State Governmentâ&#x20AC;&#x2122;s commitment to its Triple A credit rating is fiscally responsible, new methods of funding critical infrastructure must be found. If governments cannot or will not borrow up front to fund catalysing infrastructure, Growth Area Bonds provide a new off-balance-sheet means of funding these investments.

FOOTNOTES 1 SA Government, 30-Year Plan for Greater Adelaide, 2010, p3. 2 SA Government, 30-Year Plan for Greater Adelaide, 2010, p3. 3 BTRE Report 2007, Estimating urban traffic and congestion trends for Australian cities, 2007, p108. 4 BTRE Report 2007, Estimating urban traffic and congestion trends for Australian cities, 2007, p108.

WHAT ARE THE OPPORTUNITIES? Alternate funding mechanisms can help facilitate infrastruture critical to the state’s inevitable housing and employment growth. >

POLICY INCONSISTENCY

IDLE EMPLOYMENT LANDS The supply of new employment land has stalled. The Housing and Employment Land Supply Program Report has been released and highlights opportunities that could be created by increased infrastructure investment, if finance is made available through alternative measures.

Urban growth objectives are being undercut by the inability for the state to fund infrastructure delivery. To ensure the efficient rollout of proposed residential developments and jobs precincts required to support our growing economy and population, policy misalignments must be resolved. >

FALLING AFFORDABILITY The State Government has maintained its commitment to opposing Homebuyer Levies, and this must be maintained through the introduction of Growth Area Bonds. The Government must also force Councils and other authorities to stop imposing hidden costs on developments.

UNRELIABLE INCOME STREAMS Current investment mechansisms rely on increasing state taxation income, and this sets up competition with other key priorities such as health and policing. As illustrated by the GFC, state taxation income can be a volatile. Alternative financing mechanisms allow the Government to invest for the long term with minimal risk to the Budget bottom line.

STIFLING CITY CENTRE REVITALISATION Current budget constraints restrict the Government capacity to invest sufficiently in revitalising our city centre. New financial mechanisms must be adopted to free up finance for investments that help make Adelaide the best place in the nation to live, work and invest.

INVESTOR UNCERTAINTY While the Government has identified a range of infrastructure projects that it intends to deliver through partnership finance models, the risk of state tax revenues falling suddenly and unexpectedly weighs heavily in private investment decisions. Alternative financing mechanisms create a guaranteed funding stream for infrastructure investment, providing greater investor certainty.

In October 2010, the SA Government released the first audit of land in the Greater Adelaide area. This report, the Housing and Employment Land Supply Program report, clearly identified areas for future housing and employment. In order to deliver all of this land to the market to cater for our growing economy and population, more infrastructure will be needed. Unless the Government considers increasing the state’s debt to Gross State Product ratio - imputing the likely loss of the coveted AAA Credit Rating - new infrastructure funding mechanisms must be adopted to ensure adequate infrastructure provision.

PROPERTY COUNCIL OF AUSTRALIA – GROWTH AREA BONDS: NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

NEW SOLUTIONS THAT WORK A new model called Growth Area Bonds will ensure fiscal certainty while also coorinating infrastructure and land use planning.

Growth Area Bonds discipline governments to guarantee the timely and rigorous provision of infrastructure.

A South Australian model for Grown Area Bonds would have five fundamental elements:

The model has been used in the United States for more than 50 years and is now widely activated to help cities and communities accelerate growth.

1 Enabling legislation to set up Growth Area Bond schemes passed by Parliament.

Growth Area Bonds can be tailored to suit development needs and governance arrangements here. It is time to apply them in South Australia.

2 Schemes must be initiated by a state government agency rather than local governments, which might not have the necessary expertise. 3 Bonds would be issued through the SA Financing Authority. 4 Tax revenues involved would be land tax and stamp duty but not council rates. 5 Schemes would be used to fund infrastructure in both greenfield areas and urban infill areas.

The advantages of Growth Area Bonds: + A transparent approach to infrastructure selection and provision + A sustained commitment to infrastructure provision which is not subject to the vagaries of the electoral cycle + The provision of infrastructure is appropriately timed + Market testing and added rigour around infrastructure selection to improve efficiency + Not a tax or levy â&#x20AC;&#x201C; debt repaid through asset revaluation

HOW DO GROWTH AREA BONDS WORK How Growth Area Bonds work: + Identify a suitable area (or GAB district) and establish a GAB authority + Prepare a growth plan for the area outlining its infrastructure needs and estimating the cost + Calculate the property tax revenues currently derived from the area

+ Repay the bonds from the incremental increase in property taxes (above the revenue previously collected) generated by the new infrastructure and development in the area + Once the bonds are repaid, all property tax revenue for the area returns to the Government.

+ Issue bonds to fund the infrastructure works for the area (bonds can be government-backed or not)

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PROPERTY COUNCIL OF AUSTRALIA â&#x20AC;&#x201C; GROWTH AREA BONDS: NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

A CASE STUDY BETTER INFRASTRUCTURE, BETTER COMMUNITIES The North West Growth Corridor is one of the first locations to be targeted for new growth in Adelaide in coming years. Spread across 4,650ha and two local government areas, the North West Growth Corridor faces huge infrastructure demands with 33,060 new dwellings and 40,500 net additional jobs to come over the next 30 years.5

This conservative model sees a Growth Area Bond financing 75% of the $2 billion invested in infrastructure in the growth corridor, with the State Government directly funding the remaining 25%. Modelling suggests that this could result in all bonded debt being repaid in approximately 30 years.

To support this corridor redevelopment, the Government has committed to extending the cityâ&#x20AC;&#x2122;s light rail system to the Port Adelaide area. Combined with the cost of delivering associated physical and social infrastructure, this project is expected to cost in the order of $2 billion.

It represents a solution that sees the North West Growth Corridor realised as a functional and connected community with its infrastructure provided in full.

Growth Area Bonds represent a better way to fund the schools, hospitals, public transport and open space that we all want when we seek to create stronger, revitalised communities.

FOOTNOTES 5 SA Government, 30-Year Plan for Greater Adelaide, 2010, p158. 6. PriceWaterhouseCoopers, Tax Increment Financing to Fund Infrastructure in Australia, http://www.infrastructureaustralia.gov.au/public_submissions/published/files/486_ propertycouncilofaustralia_SUB2.pdf

Using a Growth Area Bond modelled by PricewaterhouseCoopers6 we would see: + The North West Growth Corridor defined as a Growth Area Bonds district + The Bond used to help deliver approximately $2 billion in state infrastructure + Development and revenue would be slower at first, pick up after the initial phase, and then slow again in the final years of the development term + Infrastructure costs will be higher at first before tapering away Under the model, it is assumed that: + The tax subject to the Bond is stamp duty due to the comparative reliability of forward estimates + Inflation is assumed to be 3%, the interest rate for debt at 8% and the rate of income at 6% + Debt would be staged given the scope of the infrastructure investment

THE ACTION PLAN FOR FUNDING INFRASTRUCTURE 1

State action

Integrate infrastructure delivery into the 30-Year Plan

Better infrastructure selection

4 Better governance \6

Delivering the level of infrastructure investment South Australiaâ&#x20AC;&#x2122;s growth will necessitate better institutional arrangements. The creation of a Metropolitan Authority (see Action Plan item 4) to drive urban renewal projects will give stronger focus to the integration of land use planning. Similarly, the 30-Year Plan for Greater Adelaide and the State Strategic Infrastructure Plan must be integrated into one document.

Once the 30-Year Plan for Greater Adelaide and the State Strategic Infrastructure Plan are folded into one document, policy makers will be better positioned to clearly identify priority areas for growth. Priority growth areas can represent a mix of greenfields development tied to new infrastructure links, using expanded transport capacity to drive urban renewal, or activating employment lands.

Restoring rigour and discipline to the selection of infrastructure priorities will improve its delivery. Clear criteria which benchmark projects for cost-benefit analysis and reflect the priorities of the Council of Australian Governments will gift us a legacy of timely infrastructure provision. Importantly, the criteria should be transparent and the results of project assessments and rankings should be published to better inform the public on why particular projects are being advanced ahead of others.

Recognising the specialised nature of urban renewal projects, a dedicated implementation body is required to drive and oversee masterplanning, statutory documentation, site amalgamation, infrastructure planning and delivery and community amenity. A state-level Metropolitan Authority should be established to this end.

5 8

PROPERTY COUNCIL OF AUSTRALIA â&#x20AC;&#x201C; GROWTH AREA BONDS: NEW SOLUTIONS FOR FUNDING INFRASTRUCTURE

A legislative framework

Enabling legislation would be passed by South Australian Parliament to allow for the formation of Growth Area Bond districts, and to define the State rather than local councils as the relevant tier of government to initiate the Metropolitan Authority for each district. This legislation could also define the assumptions which would underpin the Bonds, such as the criteria for assessing baseline revenue in a Growth Area Bond district and the taxes which could be used to collect the revenue generated from increased property values.

6 7

Pilot schemes

Reforming taxes

Based on areas identified by the South Australian Government or Metropolitan Authority as priority targets for growth, a pilot scheme should be commenced as soon as possible. As discussed in the case study, an ideal pilot scheme would be the urban renewal project along the North West Corridor.

The Henry Review of Australiaâ&#x20AC;&#x2122;s future tax system offers a unique opportunity to transform the tax system by removing complexity and inefficiency, rewarding productivity and delivering a fair and competitive tax system. The use of Growth Area Bonds must be matched by a commitment from all tiers of government to act swiftly on recommendations arising from the Henry Review that give life to a fairer tax system for investors, commercial property owners and homeowners alike.

A pathway to growth

The State Government must maintain its opposition to the introduction of homebuyer levies to ensure the efficient and economic rollout of the 30-Year Plan, Transit Oriented Developments and Corridor Renewal projects.

Property Council of Australia Limited ABN 13008 474 422 142 Gawler Place Adelaide SA 5000 Telephone: 08 8236 0900 Facsimile: 08 8223 6451 Email: sa@propertyoz.com.au Web: www.propertyoz.com.au

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Attachment 4: Recycled Water Pipeline Position Paper

- 31 -

Recycled water re-use for CBD cooling towers: A strategy to minimise potable water use in city buildings

Recommendations 1. Immediately support the proposed extension of the Glenelg-City Pipeline. 2. Provide funding for the extension of the pipeline. 3. Establish a Working Group to clarify the route of the pipeline and resolve any technical issues. 4. Deliver a publicity campaign highlighting the benefits of the project. 5. Charge a water learning hub with raising awareness levels around issues of recycled water. Support for these recommendations will assist the State Government in achieving the following targets in South Australiaâ&#x20AC;&#x2122;s Strategic Plan: T1.1, T1.10, T1.22, T3.7, T3.9, T3.10 and T3.11.

About the Property Council of Australia The Property Council of Australia is the nationâ&#x20AC;&#x2122;s chief advocate for the property investment, development and property services sector. It champions members' interests by engaging governments on key public policy issues, as well as creating a more informed and connected marketplace. Our members help shape, build and finance our cities. These organisations have a long-term interest in the future of Australiaâ&#x20AC;&#x2122;s urban areas. They include the bulk of the State's investors in office towers, shopping centres, industrial parks, tourism accommodation and residential developments. The South Australian Division represents members with interest in more than $33 billion of property investment, of which, nearly $5 billion is invested by superannuation funds in South Australian property. More than 500,000 South Australians now have a stake in these investments through their superannuation, life insurance, managed fund property trusts, syndicates and direct ownership investments.

Our proposal The Property Council of Australia (SA Division) recognises that the property industry is in a unique position to improve the Stateâ&#x20AC;&#x2122;s environmental performance. The Property Council has been examining opportunities arising from the proposed recycled water pipeline from the Glenelg treatment works to the Adelaide parklands for irrigation purposes. The Property Council believes there is potential to extend this water supply into the CBD for use in cooling towers of commercial buildings. There is some urgency attached to this proposal as supplying additional buildings could necessitate a larger diameter pipe than currently proposed. Changing the pipe size would have minor fiscal and logistical impact on the project as it stands, especially when compared with the potential benefits. It should be noted that this proposal holds national significance. The proposed use of highly treated waste water in cooling towers has not been investigated interstate, positioning South Australia as a pioneer in this field.

Background The State and Federal Governments have committed to building a new recycled water supply pipeline from Glenelg to the Adelaide parklands to provide non-potable water for the irrigation purposes. The Property Council supports this initiative as amenable public space is crucial to the health of our community and the parklands are a key natural attribute of the city. The current proposal is to install a pipeline along ANZAC Highway and complete a ring around the city. In an effort to reduce pressures on Adelaideâ&#x20AC;&#x2122;s potable water supply it is intended to use highly treated waste water as the source water for this irrigation project. The owners of the new SA Water Building in Victoria Square (VS1), in their endeavours to develop a water-efficient building, have already reached an agreement with SA Water to run an extension of the pipeline from the parklands to VS1.

The Property Council believes that this program can be easily and cheaply extended to include all commercial buildings. Conversations with SA Water and the South Australian Department of Health have indicated that this proposal is achievable. As noted earlier, a larger pipe size may be required to transfer the larger volumes of water needed. In addition, as ANZAC highway is a potential development corridor, the pipeline design should allow for other developments along the route to â&#x20AC;&#x2DC;bolt onâ&#x20AC;&#x2122; to the recycled water supply. In any event it is less costly to over-engineer the pipe before it is installed than to replace it to meet increased demand in years to come.

Discussion The Property Council has held extensive discussions with SA Water and the South Australian Department of Health and has determined that significant savings of potable water can be made by extending the proposed pipeline into the CBD and running supplies into the cooling towers of major buildings. Initial preliminary calculations have revealed that running recycled water into commercial building cooling towers could save in the realm of one billion litres of potable water annually, enough water to fill 4,000 Olympic sized swimming pools or alternatively supply the needs of all the flats, units and apartments in the City of Holdfast Bay council area (based on usage of 250 kilolitres per home; Australian Bureau of Statistics, Census Data, 2006 Community Profiles). Cooling towers are a typical air conditioning component of buildings world-wide. And while the property industry in South Australia is extremely proactive in making new buildings as environmentally friendly as possible, there are limitations to greening the existing built environment. For example, while new buildings can be plumbed to run recycled water to toilets and cooling towers, this is more complex to implement in existing buildings. Running a dedicated feed to an existing roof-mounted cooling tower is one immediately feasible means of using recycled water in existing buildings. As cooling towers are one of the biggest users of water in a commercial building, they present an effective use of this new water supply in a way that also contributes to economic development.

As mentioned earlier, this opportunity has already been identified by the owners of Adelaide’s first – and Australia’s highest design rated Six Star Green Star Building, the VS1 building scheduled for completion in the final quarter of 2008. Recycled water from this supply will be used for the building’s cooling towers and toilet flushing systems. The Property Council, through its membership base, is aware of many new developments which could promptly connect into the proposed scheme if the opportunity existed. It is therefore imperative that the pipeline be extended throughout the core of the CBD.

Financial issues The current proposed pipeline from Glenelg to Adelaide is expected to cost $30 million and the additional treatment plant to be developed as part of the project another $30 million. This is a significant outlay and it makes sense to maximise the State’s environmental return for this investment. The Property Council estimates the government’s additional contribution for the extension of the project through the CBD to be in the order of $5 million. This is based on a generous costing of $500 per metre cost for additional in-ground pipe work - an insignificant outlay when considering the benefit to the State and the River Murray in saving one billion litres of potable water a year. Costs that might be associated with this project are: x building alteration and maintenance costs; x the cost of increasing the size of the pipe work already under consideration; and x any requirements to expand the capacity of water treatment facilities. Compared with these relatively low costs the benefits are significant: x savings of up to one billion litres of potable water per year; x substantially increased use of recycled water; x bolstering South Australia’s water security credentials; x positive messaging to the public around water reuse and recycling; and x asserting South Australia’s leadership in innovative water security policy.

Implementation The Property Council has discussed a possible route for the pipeline extension with the SA Water’s Project Manager for the current scheme. This proposal runs the extension past a concentration of major commercial buildings to maximise usage of this recycled water. A draft map is attached but the Property Council would welcome the opportunity to discuss the practicalities of implementation with the Project team.

Timing Although the Glenelg Pipeline scheme has not yet entered construction phase, it is imperative the issues of main pipe size and treatment plant capacity are reviewed urgently in the light of the proposition to extend the pipeline. The pipe size might need to be doubled or even tripled to account for significantly increased volumes of water. To do this at the planning stage is relatively inexpensive.

Enhancing public awareness of recycled water use The successful achievement of this project would be a milestone in the South Australian Government’s Waterproofing Adelaide strategy to secure a reliable potable water supply. The Property Council is also an Alliance Partner in South Australia’s Strategic Plan and, as such, the South Australian Government and the Property Council should cooperate in developing and implementing a communications strategy that shows South Australia as an exemplar in major water-saving projects and simultaneously promotes the use of recycled water to the public. Ongoing public education on these matters is vital. Practical initiatives such as these can contribute significantly to the increased usage of recycled water but public awareness of recycled water is very limited. In these times of extended drought it is imperative that these awareness levels are raised substantially to facilitate ever-greater uptake of recycled water. The Property Council would therefore also advocate that the South Australian Government charge the “water learning hub” – currently in development – with increasing public understanding of the issues of recycled water and the importance of its use. 5

The hub should act as a single clearing house for policy ideas and messages around recycled water to ensure that the public receives clear and reliable messages that encourage the uptake of recycled water and water reuse technology.

Proposed Pipeline Extension

.. .. .. .. .

Attachment 5: Australian Financial Review on property tax

- 32 -

.. .. .. .. .

Attachment 6: Barriers to Vertical Communities Public Policy Paper

- 33 -

ACCOMMODATING GROWTH BUILDING BETTER COMMUNITIES DELIVERING AFFORDABLE HOUSING

Multi-Level Residential REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

PROPERTY COUNCIL OF AUSTRALIA – MULTI-LEVEL RESIDENTIAL: REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

REMOVING BARRIERS TO VERTICAL COMMUNITIES In February 2010, the State Government launched the 30-Year Plan for Greater Adelaide. This Plan, one of the first of its kind in the nation, clearly outlined the future challenges of population, a growing economy, climate changes and how Adelaide will grow to meet these challenges. In particular, this Plan drives a shift away from sole reliance on traditional greenfield living by creating greater urban infill through urban walkable villages and increased densities along transport corridors. The challenges have been welcomed by industry and the broader community, and this paper seeks to create a partnership to enable the Government’s and the Sate’s targets to be met. The first urban village has been announced with the release of Bowden Village. This will be the perfect opportunity to make sure we get this new urban form right. To do that we need to reflect the targets and goals of the 30 -Year-Plan and South Australia’s Strategic Plan back through legislation to ensure everything is pulling in the right direction. This paper will outline some key areas that for reform to ensure in the goals and targets are achieved.

HOME BUYER DISINCENTIVES Stamp Duty

Open Space Levy

Environmental Impact

Stamp duty is one of the major financial obstacles to apartment living. People wanting to buy an apartment pay more in stamp duty for buying a dwelling type that the government is promoting.

Section 50 of the Development Act 1993 requires that where a division of land involves more than 20 allotments, and one or more allotments is less than one hectare in area, that up to 12.5 per cent of the land area being divided must be vested in the relevant Council or the Crown to be held as open space. In cases where this is not practicable, the applicant must make a direct financial contribution to the establishment or redevelopment of open space. This money is put into a general open space fund rather than directed to the area in which the levy is collected.

Last year, the State Government introduced a minimum energy efficiency regime for residential dwellings as agreed by COAG. This regime increased the required energy efficiency of dwellings from 5-Star to 6-Star as measured by energy use. However, multi-level residential buildings tend to use more energy as a consquence of ancillary equipment such as lifts and lighting of common areas. In addition, the costs of achieving this higher standard is dramatically higher for apartments than detached dwellings. In some cases, this can add an additional cost estimated to be around $13,000.

In a traditional purchase of a house and land package, stamp duty is generally only calculated on the cost of the land as opposed to the purchase of an apartment where the homebuyer pays stamp duty on the value of the completed product. On a $400,000 apartment a buyer can expect to pay around $11,500 more in stamp duty than when purchasing a house and land package1. In both Victoria and New South Wales, the governments have introduced incentive schemes that promote apartment living, such as stamp duty concessions for “off-the-plan” sales and stamp duty concessions for over 65’s wishing to downsize. These reforms make inroads into making apartments a competitive product to house and land packages as well as driving increased market activity during the current tought times. They must be considered for South Australia.

The fee currently amounts to an additional $5,430 per apartment In contrast to high density developments in inner-city areas, low density developments often have little difficulty allocating the mandated open space into the development package. In most cases the availability of open public space is a marketing advantage to such developments. High density and high rise developments generally do not have the luxury of allocating the mandated space as they are often constructed in built-up and constrained areas. As the Act stands, any alternative provisions by which a developer could offer purchasers open space - such as streetscape treatments, rooftop gardens or common areas - are not recognised as open space. Inner city developments are particularly disadvantaged in this respect as open space already exists in abundance in the Adelaide Park Lands surrounding the city. Further, funds collected in one area are not necessarily spent in that area, meaning the developer has lost funds with which they could otherwise improve the amenity of the immediate and surrounding area through the existing community.

Tough times to grow up + stamp duty disincentives + open space levy contributions + higher construction, financing and marketing costs + minimum car park requirements + minimum space requirements + height restrictions + inequitable sustainablity requirements

This current model for measuring the environmental impact of dwellings does not reflect the Government’s own assumptions of environmental benefits of apartment living in urban villages and on transit corridors. There is a clear need to move to a system that appropriately reflects the benefits of apartment living without the financial penalty for doing so .

FOOTNOTES 1 Modelling based on apartment cost of $400,000 versus house and land package where the land component is $150,000.

A RED TAPE BARRICADE AGAINST INVESTMENT Height Restrictions

Minimum Space

Car Park Requirements

Adelaide’s excessive and overly conservative height restrictions form a critical barrier to multi-level communities. They constrain the development potential of underutilised parcels of land and in turn they constrain innovation in design.

The issue of minimum space requirement has been a source of great and ongoing conflict between the development industry and councils over the last few years. On one side of the argument, smaller apartments are more affordable and sought by segments of the market; on the other are antiquated notions of minimum space standards. In order to remove minimum space requirements as a barrier to multi-level higher density living, a balance between the two must be struck.

Most councils demand a minimum of one to two car spaces per apartment (dependant on size). High car parking requirements in new residential developments where they may not be necessary - the CBD being a case in point - lead to reduced affordability. It is estimated that the cost for providing a single car park can be up to $40,000.

Height restrictions have one of the greatest impacts on city developments, where the Adelaide City Council has imposed excessive restrictions in areas that have a high demand for residential living. These areas have been identified as; • • • •

•

along West/South/East Terraces; around Hurtle and Whitmore Squares; along Morphett and Pulteney Streets (south); across the northwest corner of the City (to capitalise on the new hospital and medical research institute precinct); along Greenhill Road, Fullarton Road and Dequetteville Terrace (to create opportunities for Park Lands-facing apartment living); and within the expanded Mixed Use Zone (to the southwest and southeast of the existing zone boundary).

Particularly in the case of student and serviced apartments, the lifestyle requirements of occupants is vastly different to that of those accustomed to a suburban lifestyle. Planning requirements should recognise this disparity and provide a variety of options to meet the diverse needs of home buyers in South Australia.

At the same time, the minimum car parking requirement is a direct contradiction to the State Government’s commitment to increasing public transport usage and reducing traffic in the CBD. There must be a compromise between providing consumers with the choice of buying an apartment with a car park at a higher price or a cheaper apartment without a carpark. Student and serviced apartments should be exempt from the car park requirements, to ensure the continual supply of affordable student and short stay serviced accommodation.

Brewery Apartments, Adelaide Photo provided by: Woodhead

THE COSTS OF DOING BUSINESS

Stamp Duty $11,500 Open Space Spa $5,627 Inconsis onsistentt Energy Ene gy Regul egulations tions $13,000

Car ar Parking ing $40,000

Project Finance

Construction Costs

Due to the nature of project financing and banking regulations, developers of high-density residential properties face significantly higher financing cost than their low-density counterparts. Low-density developers benefit from the ability to draw on purchaser finance to fund the project with “off-the-plan sales”. Banks funding the purchase of higher density developments will not forward on lending to developers until completion of the project, requiring developers to fund the entire project until completion.

Construction of higher density developments can be as much as three times the cost of low density developments due to the nature of construction (see below).

In addition, with the current financing environment some institutions are requiring up to 120 per cent pre-sales to obtain finance in recognition of the risk of some purchasers reneging on their contracts. This all leads to significant holding costs, meaning only those developers with significant financial liquidity will make such investments. In a market where multi-level residential living is seen as the poor cousin to broadacre developments, the number of players in this field is severely reduced. Resolutions such as ‘progressive payments’ systems could allow a developer to request payments at staged points along a development, as occurs with greenfield developments.

The major cost disparity reflects the relative strength of Adelaide’s traditional low-density construction sector. Adelaide has the lowest cost of construction for low-to-mid density developments in the country and the highest in the country for high-density development. However, more must be done by the industry to integrate new and cheaper forms of construction such as unitised and pre-fabricated construction techniques to reduce these costs.

Project House- Medium standard. 120/140sqm. Brick Veneer

$1075-1250sqm

Town House- two storey full brick with tiled roof Medium standard

$1350-1480sqm

Walk-up apartments Medium standard

$1780-1990sqm

Multi-unit, high density apartments. Medium standard with balcony Source: Davis Langdon

$2550-2850sqm

DIRE T COS DIRECT OSTS ALING TOTALING up to

$70,127

PROPERTY COUNCIL OF AUSTRALIA – MULTI-LEVEL RESIDENTIAL: REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

GETTING THE BALANCE RIGHT Consumer Preferences

Lifestyle

Community Acceptance

Historically, the vast majority of the Adelaide’s residents have expressed a lifestyle preference for detached housing in suburban areas. Therefore it can not be assumed that the lack of existing multi-level stock will provide sufficient demand for developers to deliver the high density dwellings that will be required to achieve the targets set in the 30-Year Plan for Greater Adelaide.

The 30-Year Plan for Greater Adelaide aims to significantly increase the percentage of high -density dwellings in the CBD and other activity centres over the next 30 years. This will considerably improve the lifestyle choices available to residents into the future. However, for higher density living to be an attractive and affordable lifestyle choice for consumers, the government must resolve the disparities between low- and- high-density living.

There is a predominance in Adelaide of anti-development or “not-in-my-backyard -and- not-over-there-either”views in areas earmarked for change. This has the potential to significantly slow planning and approval process, and ultimately challenge the capacity of the region to achieve the infill targets.

While it will be possible to deliver a significant increase in the supply of attached dwellings by 2040, the public perception of insufficient social benefits in this lifestyle preference presents a significant risk to achieving the targets. The Government cannot afford to ignore this risk and adopt a “build it and they will come” approach to future development.

Within the CBD, identified as a major growth area, the Government and the Adelaide City Council must make city living more attractive by activating the Park Lands, improving shopping and entertainment precincts and providing fast and reliable public transport in and around the city.

Within the CBD the major contributor to these views are councilors who represent a small number of local residents; their views do not represent the desires of many South Australians. The Property Council has previously suggested the CBD be declared a zone of state significance in recognition of its importance to the state and in achieving many of the State’s planning and population goals. Doing so would balance the broader interests of the State in the CBD.

The Government must support a programme that showcases the social, educational, cultural and recreational benefits of this type of lifestyle and helps diminish the negative public view of high density development. The Bowden Urban Village provides an excellent opportunity to showcase the benefits of this lifestyle to the public, similar to the program run by the Land Management Corporation at Lochiel Park.

5 PROPERTY COUNCIL OF AUSTRALIA – MULTI-LEVEL RESIDENTIAL: REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

SOLUTIONS THAT WORK Stamp duty concessions The Victorian Government has achieved significant homebuyer support for apartments through its Stamp Duty Concession Scheme for “off-the-plan” sales, while the New South Wales Government offers similar incentives as well as further incentives for over 65’s to downsize to smaller dwellings freeing up bigger detached dwellings in well serviced neighbourhoods for young families. Revenue reductions are offset by the increase in the volume of transactions. South Australia should investigate and introduce a similar scheme in order to create demand for this product to assist in achieving the Government’s targets.

Reducing costs State, Local Government and industry will need to work in partnership to reduce the cost of producing higher density infill dwellings to make these developments more affordable for homebuyers. In particular, issues such as open space, whole-of-life energy efficiency and car parking should be targeted for reform.

Streamline Development Assessments Councils must remove some of the roadblocks that slow the development assessment process for infill development. This could be achieved by making this type of development code assessable in nominated redevelopment areas and through the establishment of priority teams focused on ensuring infill development applications are progressed in a timely manner.

Promote the benefits of higher density living To achieve any meaningful increase in the uptake of high density living, State and Local Governments will need to actively promote this lifestyle choice. Currently the market will struggle to deliver the quantity of units required to deliver the 30-Year Plan targets for infill at the prices at which they are likely to be in demand. State and Local Governments will need to play a leadership role in promoting greater demand for this type of dwelling. This should be similar to the work of the Land Management Corporation at the Lochiel Park Development.

PROPERTY COUNCIL OF AUSTRALIA – MULTI-LEVEL RESIDENTIAL: REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

RECOMMENDATIONS 1

Undertake a review of all Government legislation and regulation to resolve policy misalignments with the 30-Year Plan for Greater Adelaide. Suggested Responsibility: GPCC (Government Planning and Coordination Committee) Target Completion Date: 30 June 2012

Introduce new Stamp Duty incentives for all “off-the-plan” apartment sales to remove the disincentive to purchase this product. Suggested Responsibility: Department of Treasury and Finance Target Completion Date: State Budget 2011/2012

Conduct a review of the Open Space Levy (Section 50 of the Development Act 1993) with the aim of maximising community outcomes . Suggested Responsibility: Department of Planning and Local Government Target Completion Date: 30 June 2011

Investigate new environmental rating schemes that recognise the whole of life emissions of all dwelling types. Suggested Responsibility: Development Industry Target Completion Date: 31 December 2011

Ensure barriers inhibiting building conversions are removed from the Adelaide City Council Development Plan. Suggested Responsibility: Adelaide City Council with support from the Property Council. Target Completion Date: 30 September 2011

Invest in research into alternative housing measures such as drop-top housing, shop-topping and flat pack housing. Suggested Responsibility: Development Industry (Property Council + MBA + HIA), UniSA, Land Management Corporation and Adelaide City Council Target Completion Date: 31 December 2012

Develop and deliver a marketing program to promote the 30 Year Plan and the new paradigm Suggested Responsibility: Department of Planning and Local Government, Housing SA, Land Management Corporation Target Completion Date: 30 June 2011

PROPERTY COUNCIL OF AUSTRALIA – MULTI- LEVEL RESIDENTIAL: REMOVING THE BARRIERS TO VERTICAL COMMUNITIES

Property Council of Australia Limited ABN 13008 474 422 142 Gawler Place Adelaide SA 5000 Telephone: 08 8236 0900 Facsimile: 08 8223 6451 Email: sa@propertyoz.com.au Web: www.propertyoz.com.au

.. .. .. .. .

Attachment 7: Unit Trust Rationalisation Model

- 34 -

.. .. .. .. .. Issue Landholder

Proposed Model ď&#x201A;ˇ unlisted company or unit trust. Unit trusts are treated as entities (similar to the treatment under the GST Act).

Listed companies or unit trusts are entities in which any of its securities are quoted on a World Federation Exchange or in which any of its securities are stapled to securities of another entity or entities, which stapled securities are quoted on a World Federation Exchange.

"Quoted" includes suspended from quotation but only if the entity or entities whose securities are involved, are still included in the official list of a World Federation Exchange.

Rationale Companies and unit trusts should be treated the same, as there is no policy justification for differentiating â&#x20AC;&#x201C; the choice of investment vehicle will often be influenced by commercial and income tax issues, rather than stamp duty. Also, having the same regime for companies and trusts significantly reduces complexity, and provides more certainty to the tax, whilst also removing the need for various classes of 'wholesale' or widely held trusts.

The treatment of unit trusts as entities removes the existing tension in most land rich legislation between taxing the trust and taxing the trustee or acquisitions by a trustee or a beneficiary, again simplifying the rules and adding robustness to the revenue base.

Listed entities should be excluded on the basis of the provisions of the Intergovernmental Agreement and on the basis that an investment in a quoted security is a significantly different investment than an investment in land (for example, the liquidity that is provided by acquiring interests in a listed entity).

The Voice of Leadership 142 GAWLER PLACE, ADELAIDE SA 5000 PH 08 8236-0900 - FAX 08 8223-6451 www.propertyoz.com.au

.. .. .. .. . Issue

Proposed Model

Rationale

ď&#x201A;ˇ landholdings of more than $2 million unimproved value, subject to indexing at CPI.

This has the effect of removing nuisance transactions from the base (and effectively keeps the threshold consistent with the current NSW provisions).

ď&#x201A;ˇ land must comprise 60% (80% for primary production land) or more of the unencumbered value of all of its property.

The policy justification for land rich duty is to tax acquisitions of marketable securities which are in economic substance an acquisition of an interest in land. However, whilst many companies have significant land holdings, (such as hospitals and other infrastructure assets), the land is simply one of the capital items which allows the business to generate revenue from other means. An investment in marketable securities of this type of business is not, in economic substance, and investment in land. Accordingly, it is appropriate that a land rich threshold be set at 60%. It is also appropriate to set a higher threshold for primary producers. Despite some jurisdictions moving to a landholder model, keeping a land-rich threshold of 60% remains best practice and is based in sound policy.

-2-

.. .. .. .. . Thresholds

ď&#x201A;ˇ relevant acquisition â&#x20AC;&#x201C; 50% or greater interest (legal entitlement) of a landholder.

An investment in marketable securities can either be a passive investment, or if control of the entity is acquired, can involve active management. The risk and investment profile of these two types of investment are very different. Accordingly, it is appropriate that duty only be payable where the investment is in the nature of an active investment, and so where there is a 50% or more acquisition.

In this regard, there is no policy justification for any difference between a company and a unit trust. This is supported by the High Court decision in CPT Custodian Pty Ltd v Commissioner of State Revenue; Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd [2005] HCA 53. Also, by the removal of any distinction between types of unit trusts, the model is significantly more simple.

-3-

.. .. .. .. . Associated Persons

Tracing

 companies if they are related bodies corporate

This maintains the status quo.

 trusts if they have more than 50% direct beneficiaries (including their associated persons) in common

Recognises trusts as entities, and effectively mirrors the position for companies.

 companies acting in a trustee capacity are ignored – the trust entity is tested, and not the trustee

Companies acting as trustees do not invest for their own benefit, and are bound by fiduciary and legal obligations to act on behalf of their beneficiaries. Accordingly, it is necessary to make it clear that trustees should not be aggregated simply because they are related bodies corporate. Also, it would be inconsistent with the treatment of trusts as entities for land rich purposes if they were treated as associated persons simply because of the ownership of the trustee.

 other tests are as per current rules in NSW, save for the fact that any relationship must be of 50% or more (eg a trust and a company are associated if the company (and its associated persons) have a 50% or greater interest in the trust)

Provides for uniformity in the rules by adopting a standard set of provisions, whilst recognising trusts as entities.

 a landholder is entitled to the land and assets of a linked entity to the extent of the relevant percentage entitlement (directly or indirectly) of the landholder in the linked entity.

Ensures that only assets in controlled entities are included as assets in the landholder, and is consistent with the policy approach of land rich duty

-4-

.. .. .. .. .

Sell-down of new trusts

 a linked entity is one in which there is a 50% direct or indirect interest.

On the basis that land rich duty is payable only on an acquisition of 50% or more, then the same test should be used for tracing. If a lower percentage tracing threshold is used, it creates an anomaly that an equivalent investment directly in the entity would not be subject to duty, but that an indirect investment would be. It also ignores the fundamental nature of an investment in marketable securities being a passive investment.

 duty is only payable if the target is a landholder, and is not payable on the indirect acquisition of a linked entity which may be a landholder.

It is not appropriate to tax an investment in a target entity if the entity itself is not land rich. Simply because a corporate group organises its structure so that all of its land holdings reside in a single entity should not necessarily cause that investment to be subject to land rich duty. Such a taxing policy would discourage appropriate and efficient corporate.

 no duty on the sell-down of equity interests in a landholder (by way of transfer or issue) if ad valorem duty was paid on the acquisition of the property within the previous 5 years, and the sell-down occurs under an offer document open to the public (being 5-10 or more non-associated persons), provided no one investor (together with its associated persons) acquires a 50% or more interest.

There is no policy reason why the unitisation of property into the hands of investors should be subject to two rounds of duty. The purpose of this provision is to promote and facilitate the public ownership of land in a tax efficient manner. If land is acquired to be sold down to the public, then it should not be taxed twice, subject to avoidance considerations, and an investor taking control of the relevant land.

 if the above does not apply, then duty will only apply if a person (together with its associated persons), or persons acquiring under one arrangement between the acquirers, acquire a 50% or more interest.

Where the land does not fall into the above category, it still remains appropriate that it can be sold to investors without double duty. Also, current practice has shown that the greatest certainty arises from adopting the test in the NSW Duties Act of "one arrangement between the acquirers".

-5-

.. .. .. .. . Other/general

 pre-land interests in a landholder are quarantined.

Investors who acquire their interest in a landholder before the landholder has land bear the economic cost of the duty paid on the acquisition of the land. Therefore, it is appropriate that this interest be quarantined from further duty.

 interests acquired before the introduction of land rich duty are quarantined

Retains the status quo.

 aggregation of interests acquired for the purposes of a relevant acquisition within 3 year period

Retains the status quo (currently found in some jurisdictions) and recognises that acquisitions which are more than 3 years apart are the subject of separate and distinct investment decisions and are not part of the same arrangement to acquire control.

 excluded assets of a landholder only include assets which the have been acquired to defeat the ratio

It is inappropriate for assets to be excluded for the purposes of the 60% ratio simply because they are current assets. Certain business are required by law (such as certain APRA regulated entities) to retain certain cash and other liquid investments. It is, however, appropriate to exclude assets which are acquired for an avoidance purpose.

-6-

.. .. .. .. .

Exemptions

 custodians are ignored – ie any bare trust or custodian relationship is ignored for the purposes of relevant thresholds, provided that the custodian does not make investment decisions.

To avoid the uncertainties and complexities found in current provisions, it should be clear that custodians and bare trust arrangements are ignored. This is also consistent with the overall policy of looking to economic equivalence, and treating unit trust as entities. In addition, it also recognises that it is the beneficiary of a bare trust or custodian relationship who directs all investment decisions, and will bring the legislation up to date with current investment trends, including accommodating certain investor directed investment platforms such as IDPS schemes. Finally, this accords with the approach of treating a unit trust as an entity.

 CRE from land rich duty as per the PCA Model

An exemption from land rich duty is consistent with an exemption from land transfers.

 retain all other existing exemptions

Maintains the status quo.

-7-

.. .. .. .. ..

Attachment 8: Unit Trust CRE Rationalisation Model

The Voice of Leadership 142 GAWLER PLACE, ADELAIDE SA 5000 PH 08 8236-0900 - FAX 08 8223-6451 www.propertyoz.com.au

.. .. .. .. .. Issue

Corporate group

Proposed Model

The PCA recommends that the corporate group be defined to include: 

Bodies corporate and unit trusts (not just companies)



Stapled entities, listed and unlisted.



group control at >50% beneficial ownership.

Rationale

(a)

There is no policy justification for differentiating between bodies corporate or unit trusts. The choice of investment vehicle is often influenced by commercial and income tax issues, rather than stamp duty. This is consistent with the PCA’s policy on harmonising the application of land-rich provisions to companies and unit trusts.

(b)

The choice of a stapled structure is often influenced by commercial and income tax issues, rather than stamp duty. Where corporate groups operate through stapled entities, they should not be disadvantaged against those that can operate through a single entity.

(c)

Group control is generally regarded as a majority interest (cf the concept of subsidiary in the Corporations Act, and accounting consolidation for subsidiaries). The PCA’s policy on harmonising the application of the land-rich provisions recommends that land rich duty is applied to acquisitions of 50% or more in a land holding entity. Treating subsidiaries as group members for corporate restructures is consistent with this, since lesser interests in dutiable property could leave a corporate group without incurring land rich duty. With the consolidation of the duty base to land, this consistency is significant.

The Voice of Leadership 142 GAWLER PLACE, ADELAIDE SA 5000 PH 08 8236-0900 - FAX 08 8223-6451 www.propertyoz.com.au

.. .. .. .. . Preâ&#x20AC;&#x201C;association requirements

The PCA recommends no preassociation period. If some pre-association period must be adopted then it should be no greater than 12 months from when the entities become members of the group and subject to the following exclusions: Dormant company/trust.

(a)

The absence of a pre-association period is consistent with the existing requirements for relief in Western Australia, Victoria, the United Kingdom and Hong Kong. Preassociation unnecessarily prevents group restructuring, particularly following the acquisition by a group of new entities that have assets better held elsewhere in the group.

(b)

Dormant entities have (by definition) not been active in any other operations and therefore present no avoidance threat.

(c)

Newly formed companies and trusts should be treated in the same manner. As mentioned above, the choice of investment vehicle is often influenced by commercial and income tax issues, rather than stamp duty. There is no policy justification for differentiating between bodies corporate or unit trusts.

(d)

Where entities became associated before the transferring property was acquired, the potential existed for the property to be acquired elsewhere in the corporate group. The restructure is therefore related to group benefits rather than avoidance associated with acquiring or holding the property.

Newly formed company/trust. Entities which become associated before the property was acquired.

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.. .. .. .. . Permitted transactions

The PCA recommends that relief should be available for all duties, including: (a)

All dutiable transactions / conveyances as defined by legislation (eg declaration of trust).

(b)

Land rich duty.

(c)

Interposition of new head entities (cf CGT).

(d)

Demerger of a group entity.

(e)

Motor vehicle registration.

-3-

(a)

There is no policy justification for limiting relief to only particular kinds of dutiable transactions. The form of the transaction is often determined by commercial and income tax issues, rather than stamp duty (particularly where an alternative form of transaction would be exempt from stamp duty).

(b)

Land rich duty should be included as a direct statutory exemption rather than depending upon any other provisions. The very policy rationale for imposing land rich duty is that the interest in the land holder is a substitute for direct land holding; therefore the transfer of an interest in a land holder should be subject to the same relief as a corresponding transfer of an interest in land would be. The same degree of certainty of relief should be provided.

(c)

Relief should be provided for interposing a new head entity in situations where the ultimate group ownership remains the same. The availability of this relief is consistent with rollover relief for capital gains tax. It will be particularly important given the introduction by the Federal Government of CGT relief for interposing a new head entity above stapled entities.

(d)

A demerger is a logical corollary of interposing a new head entity. Ultimate ownership of the new separate groups is widely spread but retains common ownership.

(e)

Although charged on a different basis, motor vehicle registration duty is no different in principle from a transfer of other kinds of assets. Therefore relief should be available on the same basis as for transfers of other kinds of assets.

.. .. .. .. . Degree of relief

The PCA recommends that relief should be: (a)

Statutory and not ex gratia

(b)

Proportionate to the percentage of group ownership

(a)

It is important that taxpayers have certainty in their taxation affairs (including stamp duty). Therefore relief should be based in statute and should not depend on acts of grace. Although having a statutory basis, jurisdictions may choose to have relief guidelines with statutory effect, as this can give greater flexibility to amend the guidelines in future to adapt with changes in commercial practices or perceived avoidance issues.

(b)

Extending relief to a broader concept of â&#x20AC;&#x2DC;corporate groupâ&#x20AC;&#x2122; could result in duty leakage if full relief is available. If relief is provided based on the percentage of common group ownership between transferor and transferee then this will facilitate relief while protecting the revenue base. For example: a parent company holds 60% of the shares in a subsidiary. Land transferred from the subsidiary to the parent would be exempt from duty on 60% of the value, representing the economic interest retained in the corporate group.

Clawback

The PCA recommends no postassociation period. If some post-association period must be adopted then it should be no greater than 12 months and subject to the clawback exclusions that follow.

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(a)

Post-association unnecessarily hinders group restructuring since groups must preclude the potential for certain transactions within any clawback period. Revenue protection could be achieved by precluding relief only where there is some present intention (at the time relief is obtained) for that part of the group holding the transferred property to be separated (other than in the circumstances described below), similar to Western Australia.

.. .. .. .. . Exclusions for clawback

The PCA recommends the following exclusions from any clawback provision: (a)

Float on ASX or recognised stock exchange (by issue of new securities or sale of existing securities).

(b)

Liquidation/ deregistration/ termination of trust.

(c)

Becomes widely held.

(d)

Demerger.

(e)

Transferor leaves the corporate group.

(f)

Scrip for scrip exchanges.

Any clawback should focus on the transferee entity remaining part of the corporate group. In particular, it should not be concerned with retaining the underlying property within the group since any transfer of dutiable property outside the group will attract duty. (a)

Float is already a recognised exclusion from clawback in most jurisdictions. This should not be limited to ASX. With increasing involvement in global capital markets, float should be allowed on any recognised stock exchange.

(b)

These are already a recognised exclusion from clawback in most jurisdictions. Where one of the entities ceases to exist by virtue of the liquidation, deregistration or termination, it does not facilitate avoidance opportunities since the other entity would remain in the group.

(c)

Some widely held groups are not listed on an exchange. This is particularly so with retail investment funds which will typically involve widely held trusts. These widely held groups should not be disadvantaged compared with listed groups, given that the diversity of public participation can be equivalent. In determining whether a group is widely held for this purpose, certain entities should allow a look-through to determine the spread of ownership. The nature of these look-through entities can be defined in a limited way (eg CSFs, PSTs, widely held trusts, WFE listed entities) to prevent avoidance but assist groups that are genuinely widely held.

(d)

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Float is already a recognised exclusion from clawback in most jurisdictions. Demerger is similar to a float, except that the ultimate ownership remains the same rather than being offered to the public at large. Maintaining the ultimate ownership in this way is consistent with the policy underlying the â&#x20AC;&#x2DC;groupâ&#x20AC;&#x2122; concept of relief.

.. .. .. .. . (e)

The policy behind corporate reconstruction relief is to enable movement of assets within a corporate group without hindrance by transaction costs. Once property has been transferred within a group, ultimate ownership is retained by the transferee within the corporate group. It is not necessary for the transferor to remain within the group in order to protect this continuation of underlying ownership of the transferred property. Therefore clawback should not apply where the transferor leaves the group. With the consolidation of the duty base to land, any remaining land in the transferor will attract duty under land rich provisions so that there will be no revenue leakage.

(f)

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Scrip for scrip exchanges are subject to relief from capital gains tax in certain circumstances. That relief is allowed in circumstances where the investor maintains its economic interest in the underlying entities, which are therefore part of an overall corporate group. A clawback in these circumstances is inappropriate because the corporate group retains the same entities but expands to include others.

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Attachment 6: Barriers to Multi-Level Residential Position Paper

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