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New outer suburbs could be built with fewer kindergartens, libraries and sports fields because developer contributions relied on to pay for the crucial community infrastructure are falling hundreds of millions of dollars short.
The huge funding shortfall is forcing councils to review how much infrastructure they can afford to build in fast-growing communities, and to consider cutting or scaling back planned projects intended to make the outer suburbs more liveable.
Growth-area councils say they cannot afford to build the community infrastructure new suburbs require.Credit: Penny Stephens
The City of Wyndham, in Melbourne’s outer south-west, has identified a funding gap totalling $533.89 million for 49 infrastructure projects that it plans to build for future suburbs that will eventually house about 180,000 residents.
The list of projects under a cloud includes more than two dozen public open spaces, several kindergarten rooms, community and child maternal health centres, libraries and a performing arts centre.
The projects rely on the council raising tax revenue from developer contributions and community infrastructure levies, but internal documents reveal those sources are not on track to raise anywhere near enough.
According to the internal report, Wyndham plans to build 22 community facilities and 27 public open spaces at a cost of $1.011 billion, but has secured less than half the necessary funding.
The shortfall has led the council to review its commitment to the projects. It is weighing up options including scaling them back to meet its smaller budget, cutting some from its plans or pursuing public-private partnerships.
There is contention among state agencies about why developer contributions fall short of their aims, including councils wrestling rising costs and changing circumstances between when contributions are set and the infrastructure is delivered.
Victoria’s auditor-general found in a 2020 report that the system is not delivering the infrastructure growing communities need because the revenue raised is not strategically managed to maximise its value.
The Victorian Planning Authority said development contribution plans are meant to pay for basic and essential community infrastructure, but councils sometimes deliver projects beyond those benchmarks, with architectural design embellishments.
City of Wyndham Deputy Mayor Josh Gilligan said the state government had been warned that housing sprawl in the outer suburbs was unsustainable.
“Now we’re faced with walking away from sporting pavilions, kinders and libraries that were promised because there isn’t enough tax to go around,” he said.
Wyndham’s residents are among a surging class of Victorians living in the suburbs, stuck in gridlock, with limited access to jobs, Gilligan said.
Wyndham Deputy Mayor Josh Gilligan.Credit: Jason South
“This is a David and Goliath battle on securing equity and fairness for the basics, despite tens of billions showered over the inner-eastern suburbs for golden infrastructure projects.”
Cardinia Shire Council, in Melbourne’s outer south-east, has similarly identified a $63 million shortfall for a planned new precinct near Pakenham. The council said the shortfall could be greater than $63 million and would jeopardise development of the jobs and housing precinct.
The Officer South precinct was listed in the Allan government’s September housing statement as a project of state significance for its potential to provide 22,000 jobs. But the council warned “development will stop” at Officer South unless extra funding comes from state sources.
“Council does not have sufficient funds or capacity in its long-term financial plan to respond to this shortfall,” it said in a report tabled at its last council meeting.
Projects in doubt include a new road bridge over the Princes Freeway, pedestrian and equestrian paths and crossings, a community centre, three sessional kindergartens and a drainage channel.
“Council is being put in an impossible position, namely that it will be required to administer and manage an [infrastructure contributions plan] that will not raise nearly enough contribution funds to deliver the community and transport infrastructure items required,” it said.
Cardinia Shire councillor Kaye Cameron says a planned development near Pakenham will stall without a funding injection.Credit: Penny Stephens
Cardinia Shire councillor Kaye Cameron, whose ward includes part of Officer South, said the precinct’s development was critical to plans to create more jobs closer to home. Fewer than one in three shire residents work locally, census data shows.
“There is a large amount of people who live in the area who leave the shire to work elsewhere, and we need to offer opportunities for them to stay and work here, that is why it is so significant,” she said.
She said the precinct needed state government support to fill the funding gap.
“We need the money, but we are not the only council that is struggling to find external funding. If they [the state government] want it to go ahead, they are going to have to come up with the money.”
A spokesperson said the Allan government had invested more heavily in the transport network in the growing outer suburbs than any previous state government. “As part of the housing statement, we’re bringing forward a $400 million package of works along growth corridors, which will help fund the essential infrastructure new and growing communities need.”
SGS Economics and Planning principal Marcus Spiller said Victoria’s system of development contributions did not give councils the means to pay the full cost of providing infrastructure for new suburbs.
“A couple of things can happen: either those communities just have to wait, particularly for community infrastructure, which is profoundly underfunded, or they’re expected to fund it via rates,” he said. “But they’ve run into problems with rate-capping, so there is a structural problem with them [councils] funding infrastructure.”
Victorian Planning Authority chief executive Stuart Moseley said developer contributions “are always carefully calculated and targeted to deliver the infrastructure new communities need”, but local councils have an important part to play ensuring that funding is adequate.
According to the authority, developer contribution plans sometimes fall short of raising enough money for what is planned as costings become out of date over time.
Councils can manage this by delivering infrastructure as early as possible, the authority says.
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