The Price of Growth

Geelong is growing and the rate of that growth may be about to accelerate beyond many of our expectations. How that growth is planned for and implemented will reshape the entire city over the next twenty to thirty years.

Having signed a Memorandum of Understanding with the City of Greater Geelong, a consortium of Lovely Banks landowners wants to bring forward plans to develop their 70 per cent share of the 1100-hectare future development zone to the north west of the city centre.

As developers, this all makes good financial sense.

The scale of the development pressure across Melbourne is quite extraordinary. The population of Wyndham has been growing by 6 per cent, year on year, for the past five years. One advantage that Lovely Banks has as a future development is that there is already good infrastructure in place and the area has been planned as a future growth zone since the Geelong Regional Commission identified it as such in 1979, along with the Geelong Ring Road corridor and the future development of Armstrong Creek.

Both Lovely Banks and Batesford South were considered areas of medium- to long-term development potential under the G21 Regional Growth Plan and are respectively referred to in planning circles as the northern FIA (Further Investigation Area) and western FIA. The G21 Plan identified that all things being equal - and at the current levels of population growth and availability of existing land supply - that these areas would be developed in around fifteen to twenty years time.

State Opposition leader, Matthew Guy, gave the Lovely Banks development a shot in the arm when, as then Planning Minister, he allocated Urban Growth Zone status to Lovely Banks just weeks before the November 2014 state election.

An Urban Growth Zone is effectively a holding zone for future residential land, with that land set aside for that purpose under the planning scheme. The rezoning triggered a change of approach in planning at the local level, looking particularly at the financial implications to Council if development of one or both of the FIAs was to be brought forward and the preferred timing of land release.

At a purely economic level, there are strong advantages to bringing the Lovely Banks development forward – not just of keeping the housing construction industry rolling on, and the downstream boost to the retail sector, but also of bringing forward population growth.

In this case, ‘build it and they will come’ is almost certainly true. Affordable housing within easy commuter distance to Melbourne would have a natural appeal. But the question isn’t one of ‘would they come’ but rather one of ‘are we ready for them’? And what would it mean for the city as a whole to have large-scale developments on multiple fronts of its boundaries?

These are big questions and incredibly complex ones. Anyone who tells you that there is a simple answer to them is either naïve, disingenuous or worse. There are no simple answers because there are simply too many variables.

At the most basic level Geelong has a problem of scale; that’s my personal view. We just aren’t big enough as a city, and while it’s understandable that there are concerns around population growth effectively raising unemployment, stress on infrastructure – and the inevitable complaints around parking - I believe that logic is flawed. Apart from the parking - but some people need to have something to whinge about and parking invariably fits the bill.

Industry and investment are attracted by well-planned population growth and we need more of both. Jobs follow people. It’s why small regional towns are facing jobs crises across Australia; and on a much larger scale population deceleration is one of the reasons Japan continues to languish in the economic doldrums.

Mind you, we’ve also seen what happens when development outstrips planning, certainly in Wyndham and also in the high-rise boom in central Melbourne.

The case of Wyndham is an interesting one. At 6 per cent annual population growth, Wyndham is growing at a far greater rate than the national average, which is currently at 1.4 per cent. But unemployment across this booming residential area is also higher than the national average at 6.6 per cent, with 8000 people out of work across the City of Wyndham (source ABS, March 2016).

In Geelong, the unemployment rate is sitting at 5 per cent and is below the national average of 5.6 per cent. The lesson: even with master planning, growing too much too fast causes big problems.

The potential for future development of the Lovely Banks area was first mooted in 1979 along with the planning for what is now the Geelong Ring Road – around the same time that long-term plans for a new suburb at Armstrong Creek emerged. The ring road and then Armstrong Creek were green-lighted, but Lovely Banks, along with land to the west of the city remained as longer-term opportunities.

The development of Lovely Banks would be a fifteen-year project that would see homes built for around 30,000 people. The northern growth area at Lovely Banks is matched by a development proposal for Batesford South to the west of the city that would provide housing for a further 30,000 to 40,000.

The local landowners that formed the Lovely Banks consortium would like to see the first homes being built in the new Lovely Banks in 2020.

Todd Devine is the General Manager of Property at Costa Asset Management, the investment firm chaired by Robert Costa, and is the spokesperson for the Lovely Banks Landowners Consortium that is driving the move to bring forward the development of Lovely Banks.

He said the signing of the MoU is a small but very significant step in progressing the project.

“We are delighted to be moving forward with what we believe will be a major boost for Geelong’s north.

“Critically, Lovely Banks has the potential to create around 8,000 jobs and add $2.4 billion in economic activity. As a consortium which includes local families, we are all only too aware of just how much Geelong’s north will benefit from the social and financial stimulus this will bring to the area.”

He said the developers were keen to work with the Geelong Region Opportunities for Work (GROW) program to open up apprenticeships and jobs across the construction phase.

The landowners consortium has been working together for four to five years on developing the background reports and research that will form the basis of the technical reports required for planning the future development.

An Integrated Infrastructure Delivery Plan (IIDP) – that will look at what infrastructure is needed to support the future developments to the north and west of the city – is due to be completed around August 2017. A Framework Plan, as was done in the development of Armstrong Creek, will be prepared for each of the northern and western development areas and will be followed by the next phase of planning, the Precinct Structure Plan (PSP).

Community consultation comes under the PSP process, which could take anywhere from twelve months to two years. This is the phase that details what that community would look like, where the public spaces would be and how the area as a whole would work. The Precinct Structure Plan phase is also where the developer contribution towards community infrastructure is worked out – known as, you guessed it, another acronym, a DCP or Development Contribution Plan - and this is one of the most fraught aspects of any new large-scale development.

The theory is simple: new developments need community spaces and as developers are the ones making the money from the development, they should contribute to the cost of the roads, community infrastructure and services needed for that development. The reality is not quite so simple and by far the majority of the costs of supplying roads, public transport, schools, health and community services is paid for by governments – costs that we all contribute to.

Mr Devine said he believes that lag time in developer contributions is a very real concern for Council.

Mr Devine said “The cost of the infrastructure needs to be funded by someone and as developers seeking to make a profit from development it seems only fair that we should contribute and assist council and the authorities to fund that infrastructure including any ‘gaps’ in the timing of that funding. We want to create great communities not leave a legacy of debt for those communities.” 

Developers directly contribute to new community infrastructure needed in new developments in a couple of ways. Firstly, there is a Community Infrastructure Levy that contributes to the cost of things like libraries, sporting pavilions and youth centres. That contribution is capped under legislation at $900 per lot. The levy is paid prior to a building permit for that lot being issued.

A further Development Infrastructure levy, that contributes to public transport infrastructure, streetscape works, sporting grounds and parks, stormwater drainage, kindergartens, and child care/maternal and child health facilities, is paid as a dollar per hectare figure and is paid at subdivision.

Where the gaps in funding for councils exist is in the upfront funding for the full cost of infrastructure before the Community Infrastructure Levy is received, and also the full cost of big-ticket items such as new libraries and sporting pavilions as the developer contribution to these is capped at $900 per lot.

Other funding pressures come from infrastructure that isn’t funded by either type of levy, the cost of acquiring land for community spaces and interest on borrowings to fund these shortfalls.

The City of Greater Geelong’s 2016 budget showed that the cost of funding projects Council has already committed to will blow out to $93.3 million by June 2017.

Council is already facing a $22.5 million funding gap over the next 15 to 20 years for community infrastructure in new developments under its existing Developer Contribution Plans.

The debt issue can’t be ignored and chairwoman of the CoGG administration, Kathy Alexander, has signalled that she will be targeting debt reduction as key order of business. Council will have to borrow $50.6 million in the next year to cover existing projects and the wider Geelong community is paying the interest on those ballooning borrowings.

Image Caption Here

The public infrastructure at Armstrong Creek and the Jetty Road development in Drysdale came at a cost to Council of $19 million. There is a limit to how much growth the community purse can afford.

These are all considerations for Peter Bettess, CoGG’s General Manager for Planning and Development. Mr Bettess said the rezoning of the Lovely Banks development area to an Urban Growth Zone had been followed by a number of proponents advocating various positions to Council regarding land either in or adjacent to the northern and western further investigation areas.

  • The Lovely Banks Landowners Consortium seeking a Planning Scheme amendment and to commence a Precinct Structure Plan (PSP) process;
  • Batesford South (major shareholders in the western FIA) requesting detailed studies required under the G21 Regional Growth Plan and rezoning to Urban Growth Zone;
  • Ramsay Property Group (landowners in the western FIA) advocating for the development of the Bell Post Hill area in the northern section of the western FIA;
  • Adept Developments seeking to extend the northern FIA boundary by 500ha to incorporate land to the north of Lovely Banks and west of the Lara settlement boundary.

“It is important that the planning for these long term future growth areas is undertaken in an orderly and proper manner,” Mr Bettess said. “Council needs to undertake detailed infrastructure and framework planning for these areas to guide development and ensure the creation of attractive neighbourhoods, where residents have good access to services.”

He said recent land supply reviews showed that Geelong has over 20 years of residential land. That is 20 years of residential land supply based on historical levels population growth.

“If Council supports the delivery of these areas prior to the timeframe adopted in the G21 Regional Growth Plan Implementation Plan, it is imperative that the financial implications of this be considered and planned for, along with the orderly planning of these areas to ensure they develop as communities.

“Council’s current commitments under its DCPs across the municipality identify a total funding gap for Council of $22.5 million over the next 15 to 20 years,” Mr Bettess said.

Mr Devine said the Lovely Banks Landowners Consortium understands those financial implications and are having discussions with Council around how to address them.

“We don’t want to send Council broke or the water authorities broke. We are happy to work with Council and the other authorities to understand if there are gaps in the funding, and if there are gaps where do those gaps exist and how can we assist in bridging those gaps,” he said.

Another problem for Council, however, is that they are already bound by Developer Contribution Plans in Lara West to fund local infrastructure in that area. Council will only recoup developer contributions for Lara West as land there is sold. Bringing the Lovely Banks development forward could take away land sales from Lara West to Lovely Banks, meaning Council would have to wait longer for developer contributions from Lara.

The cost considerations are considerable. We know that Council is already facing ballooning debt and part of that growing debt level is money Council will have to borrow to fund its commitments to new infrastructure in current developments like Lara West.

G21 chief executive, Elaine Carbines, said it was the view of Geelong Region Alliance that unless further investigation being undertaken by Council reveals evidence to the contrary, Lovely Banks and Batesford South should remain medium- to longer-term projects.

“G21 continues to support the approach set out in its G21 Regional Growth Plan, identifying two Further Investigations Areas (FIAs) for medium- to longer-term growth of Geelong. Lovely Banks is within one of those FIAs,” Ms Carbines said.

“G21 strongly believes that the processes set out in the Growth Plan, which are being implemented by the City of Greater Geelong Council, need to be followed. This approach is in everyone’s interests, to ensure the best standards of development in these areas. It will also examine financial implications for Council.

“Once this is complete Council will take all information into consideration in deciding the appropriate timing for the future development of these areas.

“It would be inappropriate to rush into development without taking a regional perspective.

“Future phases will include opportunities for community engagement. In particular, an opportunity to provide comment on the draft Framework Plans for each area.”

Framework Plans inform the community of what these new growth areas will look like for the years and decades to come. We see the community spaces, the roads, the schools, community centres, libraries, sporting facilities, shopping and health centres and all the other infrastructure that create the soul of an urban area every bit as much as the houses form the fabric.

The infrastructure that we need in new developments when those first houses are going up is one thing. Looking ahead to the doubling or even tripling or quadrupling of the region’s population and trying to plan infrastructure that can cater for an unknown level of growth is another thing altogether, but it is what is needed if we are really going to learn from the lessons of the past.

Just imagine, for instance, if planning authorities and developers in Melbourne had looked ahead and set aside a rail corridor from the CBD to the airport. In Geelong, public transport systems could be described as limited at best. Public transport has been, until now, a back up for those who can’t drive. On the verge of a population boom, public transport will need to be a solution to increasing road and city parking pressures. It will need to cater for everyone and we have an opportunity to plan a truly forward-thinking system.

The same can be said for water and drainage, energy systems, telecommunications and internet services, community spaces and sports and recreation facilities, including things like safe bike tracks. Housing affordability also needs a new approach in Victoria, particularly in Melbourne and Geelong, and this is another consideration when we look at expanding our city’s residential boundaries.

Mr Devine said the infrastructure study being undertaken between the Lovely Banks Landowners Consortium and the City of Greater Geelong is looking at what the infrastructure requirements will be in the longer term as developments to the north and west of the city expand over the next decade or more.

Armstrong Creek marked a big shift in how planning for large-scale development was undertaken in Geelong. It was also in many ways the prototype. Overall, it has exceeded expectations. Community facilities in particular are fantastic and forward thinking and there are plenty of them. Property values are rising and the latest sales data is showing a rising number of buyers are moving to Armstrong Creek from across all areas of Melbourne. But, as is the case with any prototype, there have been issues that we, as a city, need to learn from.

The traffic pressure on surrounding roads – particularly Barwon Heads Road and the Grovedale section of the Surf Coast Highway have provided some pointed lessons. The need for better public transport, for instance. And the lag time between building all that community infrastructure and developer contributions covering the cost of them is another.

The cost of building community infrastructure at the Armstrong Creek and Jetty Road Drysdale developments was $19 million, not including the cost of libraries, pool, indoor sports centre. That is $19 million that has had to be found in Council budgets and that inevitably means increasing Council borrowings.

The Lessons from Armstrong Creek:

A report to Council in April this year detailed what has worked so far in Armstrong Creek and what could have been better about the development process.

The Good

  • A strong vision
  • Strong planning via the Integrated Infrastructure Delivery Plan (IIDP)
  • Baanip Blvd
  • Waurn Ponds Train Station
  • Recycled Water
  • Strong Governance
  • Memorandum of Understanding with developers
  • Developer capability and capacity (demonstrated capability to develop before Precinct Structure Plans underway)
  • Strong communication between government departments, developers and politicians
  • Great public open space

The Bad

  • Delay in community facilities and services
  • Employment not developed before residential development
  • Lack of housing diversity
  • Small lots sizes with large houses (poor private open space)
  • Large responsibility on Council to facilitate development (due to fragmented land ownership)

The Opportunities

  • Upfront Developer Agreements
  • Facilitate early development of infrastructure
  • State Government Back to Work Plan 2014 (attract early investment to generate employment)
  • Early engagement across government, council, developers and agencies
  • Meet international trends in sustainability policy, technology & community expectations

Mr Devine pointed to the advanced infrastructure already in place or currently underway in northern Geelong as a great advantage the Lovely Banks development has.

“Certainly some of the infrastructure that we have here is designed and specified for a population far greater than what currently exists out there,” he said.

“Of course we are still going to do all the work and we won’t be taking any planning shortcuts, because this is going to be a community of 30,000 people, that’s half the size of Armstrong Creek.

“The other thing that we would say is that we think that Lovely Banks is an opportunity to rebalance growth in Geelong. The vast majority of residential growth in our region is to the south. This will provide opportunities for people in the north. There are a lot of people who grew up in the north, who have family in the north and they would rather live in the north. We see this is an opportunity to provide them with a master planned community, with all the attributes and benefits of the other master planned communities to the south,” Mr Devine said.

The potential to leverage off the rapid expansion of residential development in Melbourne’s west is a huge carrot for the landowners’ consortium to bring forward the development of Lovely Banks. Developer forecasts of 8000 jobs created in the construction phase and economic activity in the order of $2.4 billion are sizeable carrots for the rest of us.

Feature Image Courtesy: Tract Consulting
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