$10 million Developer Charges funding commitment generated by A’Ohlin Commercial Insights’ research
Developer Charges Reform Program: Phase I
as at 25 June 2013, A’Ohlin Commercial Insights, PCA’s media release 27 November 2013
OUTCOME: $10 million commitment by the Liberals to waiver water and sewerage developer charges for a period of two years upon winning government in Tasmania.
It is well recognised that commercial activity coupled with improved spending conditions are key drivers of economic fortunes. To this end the Property Council of Australia commissioned an investigation into the potential impact of promoting commercial activity by waiving developer charges for a limited period of time, and enabling spending by redistributing water and sewerage distributions back into the community by reducing charges (price reductions).
In April 2013, CommSec’s State of the States report confirmed that the Tasmanian economy is lagging the rest of Australia in terms of economic growth, retail trade, equipment investment, construction work, population growth, housing finance, and dwelling starts. Adding to Tasmania’s economic misery, Tasmania had the second strongest real wage growth at 2.3 percentage points (behind ACT and just exceeding the country’s strongest economy of Western Australia) and yet reported the nation’s highest trend jobless rate of 7.2%, being 21.3% above its decade average; the pressure is on to turn Tasmania around.
The analysis prepared by A’Ohlin Commercial Insights shows that over the three years to 2014-15, Tasmania’s water and sewerage corporations[1] are planning to withdraw just over $80 million in the form of Distributions.
Four (4) options are examined where development activity and spending are enabled by stimulating:
- Construction and development via a two (2) year waiver of Developer Chargers; and
- Spending through the reinvestment of these Distributions into the various businesses and applying them to fund a reduction in fixed water and sewerage charges.
Bottom line savings of between $50 and $100 (or up to 33%) each year could be made available to the average householder, whilst simultaneously affording the State’s economic activity a shot in the arm, and expediting the transition to sustainable water and sewerage pricing.
The figures used in our analysis are conservatively based on:
- Distributions planned for the three regulated entities and Onstream as reported in various financial reports over three years to 2014-15
- Foregone Developer Chargers revenue estimated at $10 million.
These figures exclude any windfall water and sewerage income that may arise due to:
- Average household water usage exceeding the Final Determination’s budgeted 200kl per annum, amongst other assumptions made within the Water and Sewerage Price Determination process
- Industry efficiency gains (estimated at $7 million)
[1] Onstream plus the three Regulated Entities (REs) of Southern Water, Cradle Mountain Water and Ben Lomond Water
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