Productivity Commission | Inquiry Into Better Urban Planning

Inquiry Into Better Urban Planning – Revenue Funding Options

Urban landscape with cityscape in background

Author

Olivershaw Ltd

Date published

17 November 2016

Downloads

Robin Oliver report on local government funding options [776 KB PDF]

Urban development creates a paradox: it generates economic benefits but places significant infrastructure spending burdens on local councils. While councils should ideally fund this investment through the development's economic gains, the reality is often "growth does not pay." Development benefits tend to flow to developers and existing landowners, while councils and current residents bear the extra costs. This discourages councils from investing, hindering development and reducing overall national welfare.

To address this, the paper proposes a framework for aligning infrastructure investment costs with benefits:

Apply user charges where costs and benefits are readily identifiable and attributable to users.
Use development contributions and the like to the extent users cannot readily be identified but developments benefiting from the infrastructure can be identified.
Use targeted/differential rating on land values where the benefits of the investment are likely to be reflected in an increase in unimproved land value over a specific geographic area.
Use betterment taxes on the increase in land value if that can reasonably capture the value created by the investment.
Consider other tax bases that may be proxies for aligning costs and benefits.
Use general rates/government grants as now to the extent that infrastructure investment
cannot be funded from the above.

Tags Finance and tax Housing and urban development Local government

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