Councils get clarity on the levying of infrastructure charges

A recent decision of the Queensland Court of Appeal has provided welcome clarity for local governments regarding the approach to be applied in levying infrastructure charges.

In Toowoomba Regional Council v Wagner Investments Pty Ltd & Anor [2020] QCA 191 (Wagner), the Queensland Court of Appeal (CoA) considered the important issues of when infrastructure charges notices (ICN) may be issued by a local authority, and how infrastructure charges levied under an ICN are to be calculated.

A number of principles arising from the CoA’s decision have broad application to the levying of infrastructure charges generally, and will be welcomed by local governments, as they effectively reaffirm commonly applied infrastructure charging practices that had been brought into question by an earlier, related court decision.   

Background to the case 

The Wagner case involved an appeal by Toowoomba Regional Council (Council) against an earlier decision of the Planning and Environment Court (P&E Court) to allow a number of appeals against decisions of the Council to issue ICNs for development approvals relating to the Brisbane West Wellcamp Airport and Business Park, under the provisions of the former Sustainable Planning Act 2009 (SPA). The total amount of the charges was approximately $2.9 million.   

Although the developer was not entirely successful in the P&E Court, it succeeded in its challenge against Council’s infrastructure charges for stormwater and (partly) traffic, and charges imposed for development that was reconfiguring a lot (ROL).

A key issue in the appeals concerned the proper construction of section 636(1) of SPA, which provided:

“A levied charge may be only for additional demand placed upon trunk infrastructure that will be generated by the development.”

Section 120(1) of the current Planning Act 2016 (Qld) uses substantially the same terms.

Historically, local governments had generally approached this provision on the basis that development could be assumed to inherently generate demand for infrastructure. In calculating the extent of that demand, local governments relied upon ’broad brush’ demand generation rates in their charges resolutions. For example, charges resolutions typically adopt charges for commercial developments based on a $/m² gross floor area (GFA) rate, as a rough approximation of estimated demand – regardless of the level of demand that a particular development actually generates.

Similarly, local governments had also typically adopted charges for development that was a ROL, generally based on the permitted use of the land following reconfiguration.

In the Wagner case, the developer essentially contended for a more bespoke assessment, requiring at least some extent of case-by-case analysis.

In summary, the key principles from the P&E Court’s decision were as follows:

1. Preconditions to issuing ICNs. The P&E Court held that two conditions must be met for a charge to comply with section 636(1) of SPA.[1] First, there must be relevant trunk infrastructure for which demand is generated. Absent any trunk infrastructure, there can be no reasonable basis for imposing an infrastructure charge. Second, there must be additional demand placed upon that trunk infrastructure.
   
   
2. Assessing ‘additional demand’. In determining the existence and extent of additional demand (see second precondition above), the P&E Court held that in some instances, the ‘broad brush’ GFA methodology commonly adopted by local governments may offend against the principle of Wednesbury unreasonableness embodied at section 478(2)(a) of SPA, and now at Schedule 1 of the Planning Act 2016 (Planning Act). This means that a levied charge may be overturned on the basis that the Council’s assessment of demand is so unreasonable that no reasonable local government could reach that conclusion. Instead, at least some extent of case-specific analysis was required. 
   
   
3. Levying charges for ROL. The P&E Court noted that, while under SPA the term ‘development’ included an ROL, it did not automatically follow that that form of development would be capable of generating an additional demand on infrastructure. Instead, the P&E Court emphasised that an ROL does not involve the carrying out of physical works, nor does it inherently involve any change of use. Instead, formally, it is merely concerned with re-arrangement of title boundaries. On that basis, the P&E Court considered that, in most circumstances, it would not be appropriate for local governments to levy infrastructure charges for an ROL.[2]

The CoA 

On appeal to the CoA, the Council was partly successful in challenging the P&E Court’s decision.

Again, some of the principles that can be drawn from the CoA’s decision are only relevant in particular contexts. However, the CoA’s decision has the following key implications of relevance to the general principles discussed above:

1. Preconditions to issuing ICNs. The CoA agreed that the preconditions to issuing an ICN are as identified by the P&E Court. This meant (because of the first precondition) that the Council was unsuccessful in an appeal involving stormwater charges, for which no infrastructure in fact existed.
   
   
2. Assessing ‘“additional demand’. Importantly, according to the CoA, section 636(1) of the SPA “does not require the calculation of the levied charge to be by reference to actual additional demand generated by the development, provided there is some additional demand”. Rather, “the appropriate infrastructure charge for additional demand generated by the development is reflected in the ‘broad brush’ application of the adopted charge.”
   
   
3. Levying charges for a reconfiguration of a lot. According to the CoA, it is appropriate for local governments to levy infrastructure charges for an ROL, unless the maximum adopted charge for the development has been exceeded.  The CoA noted that, “It was not to the point that, technically, the mere reconfiguration of a lot did not result in any change to the demand on infrastructure networks (as observed by the primary judge at [98] of the reasons). What was relevant was that the reconfiguration of a lot is one of the trigger points for the issuing of an ICN in relation to that development.”[3]

A further general principal arising from the CoA’s decision concerns the application of section 478 of SPA, and the right to appeal against an ICN. According to the CoA, the terms of section 478 confine narrowly the grounds of appeal about the decision to give an ICN, such that an appeal cannot be made in respect of the amount of an adopted charge itself, in a general sense. Rather, an appeal against an ICN may only be commenced on the basis of Wednesbury unreasonableness, or where there has be an error in the calculation of the levied charge.       

Practical implications

Although the Council was not entirely successful in the CoA, the CoA’s decision will nonetheless come as welcome relief for local governments across Queensland.  

Following the P&E Court’s decision, there had been significant uncertainty as to whether, and to what extent, local governments needed to undertake case-by-case micro-analysis of infrastructure demand. Necessarily, any need for such assessment would place additional resourcing demands on local government. In contrast, the CoA’s decision has, largely, confirmed that the traditional, ‘broad brush. approach is appropriate.

However, the CoA’s decision in relation to stormwater charges shows that some care is still required.  While it is appropriate for local governments to apply the broad brush rates in a charges resolution if development will generate demand on a trunk infrastructure network, that first precondition must be met. If a trunk infrastructure network is not impacted at all, then charges should not be levied.