Circular Letter PD 4/2003 27 June, 2003 Development Contributions A chara, I wish to refer to Sections 48 and 49 of the Planning & Development Act, 2000, which were commenced on 11th March 2002. These sections significantly revise the development contribution system in order to increase its flexibility and the range of infrastructure that can be funded by this mechanism. The Act provides for three types of development contributions that can be attached as conditions to planning permissions granted under Section 34 of the 2000 Act – - general development contributions, special development contributions, and supplementary development contributions. Both general and supplementary contributions are based on a scheme adopted by the members of the authority. 1. General Development Contribution Schemes Under Section 48, planning authorities must draw up a development contribution scheme in respect of public infrastructure and facilities provided by, or on behalf of the local authority that benefit development in the area. A scheme must be made under this section by 10th March 2004 (Until then the provisions of the Local Government (Planning & Development) Act, 1963 will continue to apply). Once adopted all planning permissions granted subsequently will be subject to the conditions of the new scheme, regardless of when the permission had been applied for. If they have not already done so, all planning authorities must now commence preparations for adoption of a scheme. If the planning authority wishes, different schemes can be made in respect of different parts of the area of the planning authority. This may be appropriate for example for the area of a local area plan. A consultation process for the adoption of a development contribution scheme is provided for in section 48 (4)-(9) the Act. It would be appreciated if planning authorities could consult with the Department at an early stage in the 1 drafting process, in addition to sending the draft scheme to the Minister for observations as required under these sections. The planning authority should also consider an early consultation with any other relevant interest groups on whom the development contribution scheme may impact. Public infrastructure and facilities to be included Under a general development contribution scheme planning authorities do not need to show a direct connection between the development contribution paid and works done which facilitate that development. However, it will be important for the planning authority to satisfy itself that the basis for determining the contribution levels can be adequately justified and supported. The types of public infrastructure and facilities that can be funded by this mechanism are: (a) the acquisition of land, (b) the provision of open spaces, recreational and community facilities and amenities and landscaping works, (c) the provision of roads, car parks, car parking places, sewers, waste water and water treatment facilities, drains and watermains, (d) the provision of bus corridors and lanes, bus interchanges facilities (car parks for those facilities), infrastructure to facilitate public transport, cycle and pedestrian facilities, and traffic calming measures, (e) the refurbishment, upgrading, enlargement or replacement of roads, car parks, car parking places, sewers, waste water and water facilities, drains or water mains, and (f) any matters ancillary to paragraphs (a) to (e). Planning authorities should have regard to suitable sources for determining the infrastructure and facilities for which contributions will be levied, in particular the development plan and any specific strategies under the plan. Other possible sources are local area plans, the annual report of programme of capital projects, the County Development Board Strategy, village and urban renewal projects, the Annual Roads Programme, etc. In the interests of transparency authorities should indicate in the scheme the public infrastructure or facilities or the general classes of same, for which contributions are payable. Planning authorities can include contributions towards the cost of infrastructure and facilities which have already been recently provided and which continue to benefit new development in the authority’s area. The planning authority may require the payment of contributions towards this infrastructure and facilities even where other sources of funding are available, for example Department grant aid. However authorities should bear in mind that development contributions are not intended to cover the full annual capital cost of all infrastructure within the authority’s area and should not be set at an excessively high level (See Level of Contribution below). Planning authorities should also determine the proportion of the capacity of the infrastructure and facilities provided that will benefit existing development and reduce the estimate of contributions to be paid accordingly. 2 In relation to water and wastewater infrastructure, local authorities should exclude costs recoverable from developers in accordance with the Government water-pricing framework1 [See Circular L 16/02]. Development contributions can only be levied as capital funding for public infrastructure and facilities and as such cannot be used to pay current costs. For example, refurbishment, upgrading, enlargement or replacement referred to in (e) above should all involve adding value to a network, rather than simply the maintenance of a network that already exists. Any money accruing to the local authority under this section must be accounted for separately in the Capital account. In addition, the annual report produced by the local authority should indicate the monies paid and owed to it under this section and how this money was spent. Level of Contributions The purpose of introducing the development contribution scheme is to introduce transparency into the way in which development contributions are levied and applied. Planning authorities must ensure that, when a prospective developer examines a scheme, he or she will be able to clearly see the level of contribution they are expected to pay, as well as the basis for levying the contribution. Therefore a development contribution scheme must state clearly the level of contributions to be payable under the scheme, including any different levels of contributions in respect of different classes or descriptions of developments. A scheme can allow for a reduced contribution or no contribution in certain circumstances. For example a local authority may decide to provide that a lower (or no) contribution will be payable on permissions for particular types of community infrastructure, shops, etc, in areas in need of regeneration, in brownfield areas or for charitable developments. However, where it is proposed to allow for reduced or no contributions, the basis on which it will be applied should be clearly set out in the scheme. In accordance with accepted practice, development contributions should not be charged in respect of social housing units, including those which are provided in accordance with an agreement made under Part V of the Act (as amended under the Planning & Development (Amendment) Act, 2002) or which are provided by a voluntary or co-operative housing body, whether or not under Part V. While it is expected that the planning authority should ensure that developers make an appropriate contribution towards the costs of public infrastructure and facilities, the local authority should take care to avoid development 1 Water services pricing policy provides for the recovery of the marginal capital costs of water services: from the general non-domestic customer on the basis of a consolidated, county or city wide, metered charge and the water in/water out principle; through individual contracts with significant, generally larger, customers; and through development contributions (of particular relevance to residential development). Marginal capital cost is the additional cost of water treatment and distribution and waste water treatment and collection over and above the cost of servicing the domestic sector. 3 contributions that are excessively high. Although this may maximise funding for projects, it can also lead to negative social and economic impacts, e.g. excessive development contributions could push up housing costs and therefore decrease developer interest or affect the affordability of houses. In addition, authorities should be mindful of the policies adopted by other local authorities in their immediate area when devising and implementing development contribution schemes as major divergence in the level of contributions may be difficult to defend. Where contributions are index-linked, the inflator used should be clearly stated in the scheme, and planning authorities should publish the revised contributions as soon as possible after the relevant adjustments are made. Period of scheme The Act does not specify the lifetime of a development contribution scheme. The scheme should however be adopted for a specific period. When deciding on the lifetime of the scheme, the planning authority should consider the period within which the provision of capital projects may be reasonably projected. For example a planning authority which determines the projects to be included in the contribution scheme on the basis of the development plan may decide to relate the lifetime of the scheme to that of the plan. Although not provided for in the Act, it would be advisable to review the scheme at 2 to 3 year intervals at least, where the scheme is adopted for a longer period. Where reviewing a scheme, where a scheme expires, or where a development contribution scheme does not reflect a revised programme of capital projects or the objectives of a new or revised development plan, the scheme should be revised and adopted in accordance with the procedural requirements set out in section 48. Appealing Development Contributions A developer can only appeal a general development contribution on the basis that the terms of the scheme were not properly applied. In order to minimise this type of appeal the planning authority should ensure that the terms of scheme are clearly stated and that planners and administrative staff implement the scheme in a way that is consistent and equitable. 2. Special Development Contributions A special development contribution may be imposed under section 48 where exceptional costs not covered by the general contribution scheme are incurred by a local authority in the provision of a specific public infrastructure or facility. The particular works should be specified in the condition. Only developments that will benefit from the public infrastructure or facility in question should be liable to pay the levy. If the works in question are not commenced within 5 years, or completed within 7 years of the receipt of payment, or where the authority decides not to proceed with the proposed works or part of works, the applicant should be refunded the special contribution levy. This refund should be in proportion to 4 the work not carried out and include any interest accrued over the period while held by the local authority. Unlike contributions levied under a general scheme, these contributions may be appealed. Where an appeal is made concerning the development contribution and no other aspect of the permission is appealed, the Board is required to consider only the matter of the development contribution. As soon as the period for the taking of an appeal has expired, the authority must grant permission, provided that the applicant has provided security to the authority for the full amount of the contribution pending the Board’s decision. 3. Supplementary Development Contributions Scheme Section 49 of the Act provides for the drawing up of a supplementary development contribution scheme in order to facilitate a particular public infrastructure service or project which is provided by a local authority or a private developer on behalf of and pursuant to an agreement with a local authority (e.g. through Public Private Partnership), and which will directly benefit the development on which the levy is imposed. Supplementary development contribution schemes may be used for rail, light rail or other public transport infrastructure, particular new roads or particular water or waste water infrastructure. However they should only be used where the project will bring a direct benefit to the developments which it serves. In the case of a rail or light rail project, for example, provision of the infrastructure will facilitate increased residential densities surrounding the infrastructure. In general the same rules of procedure apply to the adoption of a supplementary development contribution scheme, as to the adoption of a general contribution scheme. However, the scheme must in addition specify the area or areas within the functional areas of the planning authority where the scheme will apply and the particular public infrastructure project or service for which the scheme is being applied. In the area for which the scheme is adopted, these contributions will be payable in addition to those payable under section 48. Developers should not be required to make two payments in respect of the same infrastructure, and therefore a public infrastructure project should not be included in both a general and supplementary contribution scheme. Where the project is to be provided by way of a PPP, the PPP agreement can specify the way in which these contributions will be applied to pay for the infrastructure in question. 4. Enforcing Development Contribution Conditions Where developers fail to pay development contributions in accordance with the conditions of their permission, the burden of funding public infrastructure and facilities falls more heavily on those who do comply. In the interests of ensuring a fair development contribution system, authorities should put in place mechanisms to ensure that contributions are paid as required. 5 Authorities should also consider using the enforcement provisions in Part VIII of the Act to ensure payment of contributions. Queries in relation to this circular may be addressed to the undersigned (01 8882811; oonagh_buckley@environ.irlgov.ie) or Ms. Deirdre McCarthy (01 8882719; deirdre_mccarthy@environ.irlgov.ie). Queries in relation to the water services pricing framework may be addressed to Mr Michael Layde (01 8882331; michael_layde@environ.irlgov.ie). Is mise, le meas, Oonagh Buckley, Assistant Principal Officer, Planning Section. 6