9th May 2007 Circular Letter pd 5/2007




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9th May 2007
Circular Letter PD 5/2007


Development Contributions

A chara,
I wish to refer to sections 48 and 49 of the Planning and Development Act 2000. The 2000 Act comprehensively revised, streamlined and consolidated the planning system in Ireland. Sections 48 and 49 specifically provided for a radical overhaul of the development contributions scheme. The primary objectives of these revisions were to:




  • Provide a mechanism by which developers and others can contribute to the cost of providing public infrastructure and facilities that benefit development in their area.

  • Increase flexibility for local authorities in relation to the range of projects that could be funded from this source, by allowing authorities to fund public infrastructure provision without necessarily tying it to a specific development

  • Introduce greater transparency into the way in which development contributions were levied and applied (so that developers would be able to establish in advance what levy should apply to them)

  • Ensure that local authorities could manage and maintain growth by providing key infrastructure to support local economies going forward

Sections 48 and 49 of the Act have now been in operation since 11 March 2002. These sections provide for three types of development contributions that can be attached as conditions to planning permissions granted under Section 34 of the 2000 Act. These are:




  • general development contributions under section 48,

  • special development contributions under section 48(2)(c), and

  • supplementary development contributions under section 49.

Local authorities were required to prepare their first schemes under the 2000 provisions by 10 March 2004, setting out how general development contributions would apply in their area.  All planning authorities adopted schemes by the required date: in most cases these first general schemes are liable for review over the coming 12-18 months.


1. Impacts of the Development Contribution Schemes

In the 5-year period since their introduction the schemes have had a very significant impact on the delivery of key infrastructure across all local authority areas. The operation of the schemes has coincided with an era characterised by unprecedented levels of construction activity in Ireland. The heightened levels of construction activity in turn give rise to increased demand for supporting infrastructure. As a result of this increasing demand, and the increased flexibility afforded to authorities under sections 48 and 49, the amount collected in development contributions has increased greatly in recent years.


This means that the development contribution mechanisms have come to constitute a very significant income stream for planning authorities over recent years, totalling approximately €519m in 2005 (for all local authorities).

The table below sets out the development contributions collected during the period 2000 to 2005:




Year

Development Contributions

2000

110m

2001

122m

2002

151m

2003

215m

2004

337m

2005

519m

This additional revenue has been used to fund a range of key public infrastructure such as roads, sewers etc. that are necessary for all housing and commercial construction to proceed and for purposes of specific community benefit (such as recreational areas, parks etc.) as well as for more general purposes supporting economic growth and competitiveness (for example, Luas Green Line extension from Sandyford to Cherrywood part funded by special section 49 scheme, Navan to Dublin railway, Wicklow Port Access, as well as a number of critical road projects).


According to the National Development Plan it is estimated that €2.1 billion will be collected in development contributions during the lifetime of the plan (2007-2013)1.
2. Review of Operation

The Department initiated a review of the operation of the updated provisions in late 2005, by establishing an Interdepartmental Committee on Development Contributions to evaluate the effectiveness of the schemes to date, and to discuss operational issues of interest to a number of Departments. The Committee was tasked with considering whether policy guidance in relation to sections 48 and 49 of the 2000 Act needed to be updated.


This Committee comprised officials from:

  • The Department of the Environment, Heritage and Local Government (Planning Section)

  • The Department of Finance

  • The Department of Transport

  • The Department of Enterprise, Trade and Employment

  • The Department of Justice, Equality and Law Reform

  • The Department of Education and Science.

The discussions of the Committee were informed by, and took place in the context of, detailed consideration of a range of issues from sectoral interests, including a position paper prepared for the Department on behalf of the City and County Managers Association. The discussions were also informed by reports on the issue from the Small Business Forum Report and Chambers Ireland.


On the basis of the issues discussed and the concerns raised, the Committee agreed that certain improvements to the operation of the current development contribution mechanisms should be made. It was further agreed the necessary adjustments could be most effectively and immediately effected through the provision of revised guidance to local authorities.
This circular sets out revised guidance agreed on foot of the deliberations of the Interdepartmental Committee. It is intended to supplement, not replace, circular letter PD 4/2003. It should be noted that no legislative changes are proposed at this time, and the general terms of sections 48 and 49 will therefore continue to apply.

3. Specific Issues

A. Level of Contributions

The increased revenues generated by the current schemes have enabled local authorities to set about addressing infrastructural deficits in their operational areas on a more ambitious scale than was previously possible. This, of course, has had a positive and direct impact on local communities throughout the country. However, local authorities are reminded that it is essential that this revenue growth be set in the proper macro economic context.


While it is important that the right infrastructure be put in place to attract and support investment in any authority’s functional area, it is essential that development charges are not pitched at such a high level as to act as a deterrent or disincentive for future prospective investment and development, or as a penalty on, or barrier to, enterprise start-up. Excessive charges can also affect the affordability of housing. The amount collected in respect of a facility or public infrastructure project should be no greater than the economic cost of providing that infrastructure.
Securing future income streams from development contributions depends on achieving the appropriate balance between the necessary levels of funding now, and the need for local authority areas to continue to represent an attractive location for future inward investment. This must also require the involvement of all stakeholders in consultation processes for the drawing up or revision of contribution schemes (the importance of extensive consultation is discussed at section D below).
B. Variations and linkages across Planning Authorities

While factors such as varying settlement patterns, levels of construction activity, and quality of existing infrastructure are valid causes for variation between local authority areas, concerns have been expressed that in certain instances the degree of variation under the current schemes was beyond a level that could be explained by these factors, particularly between neighbouring authorities.

 

While the Planning and Development Act 2000 has provided for increased transparency and accountability, the provision of information to stakeholders can provide a means by which concerns over levels of variation across local authorities can be allayed, for example, concerns that development contributions for industrial/commercial developments differed considerably across local authorities. 


It is essential that development contributions are not perceived by stakeholders to be a means for authorities to source additional income from development contributions to meet estimated internal expenditure costs.
Consistency in terms of the quality and level of detail of the schemes themselves should also be a central consideration for authorities in drawing up future schemes. While each individual authority is best placed to draw up their development contributions schemes based on their particular needs, there is a requirement for a basic uniformity of approach across all authorities, with specific details being informed by particular local needs. Without a fundamentally similar methodology there would be a risk that the overall system of applying development contribution schemes could be viewed as arbitrary or even haphazard. Authorities are reminded that one of the primary objectives in introducing the current schemes was to bring greater transparency the way in which development contributions are levied and applied. It is essential therefore that all prospective developers can clearly identify from a scheme the level of payment required in addition to the basis for the levy in the first instance.
Transparency in the drawing up of schemes and in the application of revenues collected are essential elements in achieving cross community, and cross sectoral support. It is essential that all stakeholders are provided with good quality information on the levels of charges, and the means by which such charges are calculated. It is equally important that clear linkages be demonstrated between the charges levied and infrastructure provided.
Authorities are further requested to carry out reviews of their development schemes. This would require that as existing development contribution schemes fall for review (as many do over the course of the coming months) authorities would carry out an evaluation of the operation of the schemes to date, taking account of, inter alia, the comments of stakeholders. This review would then be forwarded to the relevant County Development Board for comment (CDB) as is proposed for all draft schemes (see D below).

C. Double charging

The practice of “double charging” is inconsistent with both the primary objective of levying development contributions and with the spirit of capturing “planning gain” in an equitable manner. All local authorities have been advised that any development contribution already levied and paid should be deducted from the subsequent charge so as to reflect that this development had already made a contribution.


Double charging can also potentially arise where development contributions are supported by local area plans (LAP’s). This can occur because development which is located in the area which is the subject of an LAP, and levied under the LAP, can then be subject a second development charge according to the county scheme. This type of double charge is also at odds with the spirit of the provisions set out in the 2000 Act.
Local authorities should ensure that the necessary monitoring and control procedures are in place to prevent double charging.
D. Need for extensive consultation

Active engagement with all stakeholders is an essential element in confidence building, demonstrating openness and transparency, and, above all, in ensuring that the final adopted scheme is robust, objective and equitable.


Under the 2000 Act local authorities are required to notify the general public that the draft scheme is available for comment by publishing details in a local newspaper. The advice issued in PD 4/2003 urged local authorities to consider early consultation with relevant interest groups on whom the scheme may impact.
However, it is important that authorities are proactive in disseminating information on draft schemes. It is, after all, in the interests of the authorities to have the maximum degree of support for their schemes, and the fullest public consultation could facilitate this.
The County Development Board (CDB) structure provides a key platform for consultation on Development Contribution Schemes in general. All sectors participate in this structure and share information on plans and resources and give views and feedback as required. The CDB structure also provides a means of ensuring that County Council / Development Contribution scheme investment compliments and adds value to spending programmes of CDB stakeholders – economic, social, cultural – and that resources can be coordinated to ensure optimum use, creation of synergies and to maximise added value.
Therefore, in addition to the consultation process for the adoption of a development contribution scheme as provided for in section 48 (4)-(9) of the Act authorities should furnish all draft development contribution schemes to the relevant County Development Board (CDB) for comment. The members of the CDB, which include representatives from all sectoral interests, would then have responsibility for ensuring that their constituent members were given adequate notice in relation to draft schemes, and that they were aware that submissions and observations could be made to the local authority responsible. Authorities are also to be encouraged to utilise a variety of media, such as local radio, local authority website etc. to raise awareness regarding the drawing up of schemes. A more widespread consultation process would also assist authorities in addressing any particular operational issues identified by stakeholders, when reviewing existing schemes.


E. Transparency

Reporting structures should demonstrate a maximum of accountability and openness, and clearly set out the role of development charges. The enhanced reporting structures on development contributions in the Annual Financial Statements of all authorities from 2005 onwards to the level of detail new reporting arrangements mark a significant improvement in the quality of information available on the collection of development contributions


However, the issue of transparency is also important in relation to the extent to which linkages between the revenues collected and the infrastructure projects funded from those revenues are demonstrated. Developers should reasonably expect to be able identify the infrastructural gain to which their contribution has been put. This is an essential element not only in terms of transparency, but also in terms of garnering support for the entire mechanism. One local authority has already taken steps to brand key projects being funded by development contributions.
This approach is welcome and other authorities are encouraged to “brand” projects. This branding could, for example, follow a similar approach to NRA\NDP projects.

F. Possibilities for waiving development contributions in respect of certain types of development

The Inter Departmental Committee also discussed the issue of providing for waivers from development contribution schemes for certain classes of development as a means of supporting or promoting the delivery of projects of these types to the communities where they were most needed.


Authorities are encouraged to adopt a more flexible approach to waiver options to support Government policies in relation to specific classes of development. The following examples are included for illustrative purposes – this does not purport to be an exhaustive list of developments for which waivers are encouraged.

Government policy in relation to the provision of adequate childcare facilities is set out in the Guidelines to Planning Authorities on Childcare facilities. This states, “Government policy on childcare is to increase the number of childcare places and facilities available and to improve the quality of childcare services for the community”. The National Childcare Investment Programme provides a funding mechanism primarily for voluntary/not for profit childcare providers. Planning authorities are therefore encouraged to give consideration to waiving development contributions in respect of such development (as opposed to childcare facilities operating on a for profit basis).


Government policy on the provision of drug services as set out in the National Drugs Strategy launched in 2001 is to “significantly reduce the harm caused to individuals and society by the misuse of drugs through a concerted focus on supply reduction, education and prevention measures, treatment, rehabilitation and research”. The Department of Community, Rural & Gaeltacht Affairs provides funding through Local and Regional Drugs Task Forces to community-based projects, which are mainly voluntary/not for profit organisations. Planning authorities are encouraged to consider waiving development contributions in respect of such not for profit community-based projects delivering drug treatment and rehabilitation services and drug education/prevention services.
Similarly, in the area of social housing, the voluntary and cooperative sector is making a valuable contribution to delivery. Government policy in relation to housing provision by this sector, as set out in the recent Statement on Housing Policy Delivering Homes: Sustaining Communities, is “to further support the delivery over the coming years” through new funding arrangements, provision of sites and lands, and improved governance. This policy objective could also be supported where planning authorities provide waivers from development contributions schemes for voluntary and cooperative housing bodies.
At an individual household level, authorities may wish to consider allowing for a reduced fee, or waived fee, for persons in receipt of a disabled persons grant (DPG). As this grant provides funding for adapting a dwelling house to cater for the needs of a disabled person it may be proportionate to provide for a reduced fee.
In summary, authorities are also encouraged to apply such special exemptions or waivers to voluntary housing schemes and other community infrastructural projects provided by voluntary or not-for-profit non-statutory groups, such as drug treatment/rehabilitation facilities, supported accommodation for homeless persons, sheltered housing schemes for vulnerable groups such as the elderly, disabled, and persons with mental health issues, etc. In addition, the proposed circumstances under which a reduced (or no) fee should be included as part of the published draft development schemes.

G. Flexible funding arrangements for public infrastructure and facilities.

High quality recreational and community facilities are vital for all sections of the community. Community groups can work in partnership with County Councils, in a County Development Board context to provide essential infrastructure in a timely, ordered, and cost effective manner, with County Councils providing a financial contribution subject to legal agreement and within an agreed strategy framework. Development Contribution Scheme funding is key to this approach going forward, providing essential capital funds to facilitate the implementation of required projects, which might otherwise not be possible, or at best implemented at a much slower pace with consequent disadvantages for communities.


This mechanism for investment can help overcome capacity related bottlenecks arising under direct provision by local authorities provided water tight legal agreements / clawback arrangements are in place to safeguard investment of funds derived from development contributions. This approach is also relevant in relation to essential community enterprise infrastructure.

H. Evaluation of the Operation of Existing Development Contribution Schemes

It is particularly important that each authority should carry out an evaluation of its existing Development Contribution Scheme prior to drawing up a new or updated scheme.


The evaluation or review would be expected to provide:


  • Outcomes achieved against the objectives set,

  • Information on the total revenue collected and monies spent under the scheme,

  • A List of key projects completed, and

  • Commentary on the consultation process etc.

The evaluation would provide a key input into the further development of the scheme and should be made available to Planning Section of the Department and to the relevant County Development Board for comment.


Queries in relation to this circular should be addressed to Mr Philip Nugent (01 888 2227: philip_nugent@environ.ie) or Mr. David Hanlon (01 888 2810: david_hanlon@environ.ie).

Is mise le meas,


______________

George Burke

Principal Officer

Planning Section

 

 




1 National Development Plan 2007-2013: TRANSFORMING IRELAND A Better of Quality of Life for All






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