NEW INDUSTRY PLAN TO BOOST ECONOMY

Written on the 4 February 2011 by Tom Reid

NEW INDUSTRY PLAN TO BOOST ECONOMY

THE Gold Coast’s peak development industry body has outlined a bold five-point plan to stimulate the construction sector and get the city’s economy back on track.

Urban Development Institute of Queensland (UDIA) in conjunction with other leading industry groups aims to bring the Gold Coast economy back to its $12 billion peak of 2006-07.

Gold Coast UDIA president Steve Harrison, says the ‘Turning Point Five’ program will examine the relationship between the development industry and the wider business sector.

At the top of Harrison’s action list is pressuring Gold Coast City Council to address high infrastructure charges, while a plan to lobby the big four banks to ease restricted lending conditions is also on the cards.

“It’s a common thing that we are struggling and there is less activity and less jobs, not just in the construction industry but across the whole board,” says Harrison.

“But there remains the simple fact that any foreseeable economic recovery for the Gold Coast in the next 10 years will be reliant on the development industry.

“This is to say to council that this is not about the white shoe brigade, this is about everybody coming together and coming up with a strategy and definable initiatives to ensure that the city turns around and gets to where it should be.”

Triple bottom line sustainability

The northern region of the Gold Coast last year recorded a record high 10.8 per cent unemployment with 9400 jobs lost in the construction industry alone.

For the first time since 1982, more people are moving from the Gold Coast to Melbourne than the reverse.

According to Harrison, at the root of the city’s economic problems lies with the Council’s focus on environmental and social sustainability factors and instead of stimulating the economy through jobs creation.

He says talks are being regularly held with Council to push the economic agenda.

“The council is really focusing on the environmental and social aspects of triple bottom line sustainability, but we need to get some sort of balance there,” he says.

“At this point of time we’re saying maybe the economics is more important at the moment. Creating jobs rather than having such a strong focus on the environmental and social aspects.

“The first thing there to recognise is that with all these job losses and the adverse impacts on all industries, how do we get back to the importance of economics and fundamentally what this industry is about, and that’s the creation of communities.

“For whatever reason, that aspect is lost on a lot of people. Developers these days do have all the components in leaving a positive legacy on the community.”

Taking it to the banks

Harrison admits the collapse of second tier lenders such as MFS and City Pacific has had a massive impact on funding within the construction sector as companies fight ‘arduous’ criteria to get projects off the ground.

Some industry representatives fear an in-house policy of not investing in the Gold Coast has been implemented within the big four banks and the UDIA is adamant that lobbying the big four will lead to improved lending conditions.

“We haven’t had the opportunity, nor have we done so with council to meet with the CEO’s of the big four banks and really present the case for the city,” says Harrison.

“It’s also an opportunity for us to get from them what they would need for the city to be given more funding and exposure to those big four. What will create a reduction in risk and provide more incentive for them to invest in the Gold Coast.

“We need to engage them rapidly within the next six months to get some answers from them.”

Sky high infrastructure charges

According to the UDIA executive team, the high infrastructure charges implemented through the Gold Coast Priority Infrastructure Plan (PIP) has destroyed the Gold Coast’s competitiveness to build viable projects.

This presents the biggest obstacle to obtaining bank finance as projects appear unviable to key financiers.

Harrison highlights the opportunity presented to Ipswich and Logan City developers who are enjoying lower infrastructure costs.

“There has been a real business acumen in Logan and Ipswich and the Gold Coast has lost that competitiveness,” he says.

“We need to get back our competitive edge, so we’re saying to Council that we need to do what we can to ensure that your economic development branch can achieve its goals, and this city can achieve its goals.

“If it’s at the right level of charging, council will actually have the opportunity to attract more revenue, better for the city.”

The stifling affect infrastructure charges are having on development dominated discussions at the UDIA’s Turning Point Five launch at the offices of Colliers International in Surfers Paradise today.

At the coalface Potter Group spokesman Brent Hailey told Gold Coast Business News the infrastructure charges on its newly-approved $450 million Broadbeach development will likely come to around $5.4 million.

“It’s a big number. It’s good to see it get through (the approval process) but we’ve got a lot of work to do yet,” says Hailey.

“With the Gold Coast not being flavour of the month with the banks at the moment, trying to put a funding package together for a project of that size will be a major challenge.

“We have queried the infrastructure charges purely on the basis of some of the area calculations that they’ve used. Our consultants came up with different calculations based on design plans to both Allconnex Water and Gold Coast City Council.”

Hailey says a meeting is scheduled with the three parties within two weeks to clarify ‘ambiguities in the wording’ of the infrastructure charges.

UDIA executive member Jeff McDermid says Council imposed charges have ‘destroyed’ the viability of Gold Coast projects.

“If you want to build a shopping centre out at Nerang, (you’ve got) $20 million infrastructure charges, you can’t do it. It just doesn’t happen, it’s not viable,” says McDermid, a partner at accountants WMS Solutions.

“It’s not fair to the banks, they’ve been hurt and have needed to rerate the risk and that is all about taking a hard look at viability. One component of that equation is cost in the infrastructure charges.”

The UDIA’s Turning Point Five program involves:

1) Joint Council and industry lobbying of the big four banks
2) A focus on true triple bottom line sustainability: recognition that the economic impacts of development are equally important as the social and environmental factors
3) Capping Greenfield infrastructure charges at $20,000 per lot for residential developments; and five per cent for non-residential developments
4) Ensuring Gold Coast workers are given priority access to work on publicly-funded capital works through a Local Industry Participation Plan
5) Lobbying new water entity Allconnex Water to adapt Council’s Temporary Local Planning Instrument, which will reduce water and wastewater costs for new homes.


Author: Tom Reid

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