DEVELOPMENT CONTRIBUTION PRINCIPLES APPLIED IN STELLENBOSCH By Vincent Harris Manager: Development Services Directorate: Engineering Services

DC Principles applied in Stellenbosch INDEX APPLICATION OF DC’s Legislation Principles as proposed by Venter Commission In-house Development Conditions Typical land-use process Bulk infrastructure in-lieu of dc’s (SA’s) DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)← Principles as proposed by Venter Commission In-house Development Conditions Typical land-use process Bulk infrastructure in-lieu of dc’s (SA’s) DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch There is no legal obligation on Council to provide municipal services to land simply because the owner wishes to develop his or her land. Section 152 of the Constitution emphasises the fact that Council must structure its administration and budgeting and planning processes to give priority to the basic needs of the community. Chapter 5 of the Municipal Systems Act no 32 of 2000 (the Systems Act) requires municipality to adopt an integrate development plan for the development of the municipality. This document aligns the resources and the capacity of the municipality with the implementation of the plan and forms the policy framework and general basis on which annual budgets must be based.

DC Principles applied in Stellenbosch A municipality is required in terms of the Systems Act to undertake developmentally orientated planning. “Development” is defined as sustainable development, which includes integrated social, economic, spatial, infrastructural, institutional, organisational and human resources up-liftment of a community aimed at – Improving the quality of life of its members with specific reference to the poor and other disadvantaged sections of the community; and Ensuring that development serves present and future generations.

DC Principles applied in Stellenbosch Therefore, Council’s expenditure on infrastructure will be guided by the IDP and will be aimed primarily, but not solely, on the provision of basic services. Additional expenditure for services in other areas, where there is no reserve created by development contributions will therefore have to wait in line until there is additional funding available. If a developer wishes to develop outside the programme developed by Council, he or she will have to fund the provision of services to enable to development to take place.

DC Principles applied in Stellenbosch In terms of section 42 of the Land-use Planning Ordinance (LUPO) developers may be required to contribute towards the cost of the infrastructure, based on the size of the development and the capacity taken up in the services. LUPO is very prescriptive as to how the contribution from developers must be calculated.

DC Principles applied in Stellenbosch Any condition relating to the payment of money is subject to the stipulation that the amount must be directly related to the requirements resulting from the authorisation. Furthermore, section 42(2) also stipulates the factors which may be taken into account when imposing conditions relating to the payment of money.

DC Principles applied in Stellenbosch At present the relevant provisions of section 42 reads as follows: “(1)When the Administrator or council grants authorisation, exemption or an application or adjudicates upon an appeal under this Ordinance, he may do so subject to such conditions as he may think fit.

DC Principles applied in Stellenbosch (2)Such conditions may, having regard to – (a)the community needs and public expenditure which in his or its opinion may arise from the authorisation, exemption, application or appeal concerned and the public expenditure incurred in the past which in his or its opinion facilitates the said authorisation, exemption, application or appeal, and (b)the various rates and levies paid in the past or to be paid in the future by the owner of land concerned, include conditions in relation to the cession of land or the payment of money which is directly related to the requirements resulting from the said authorisation, exemption, application or appeal in respect of the provision of necessary services or amenities to the land concerned.”

DC Principles applied in Stellenbosch In addition to the factors, which must be taken into account when determining the amount of money to be paid, the payment of money must be directly related to the requirements arising out of the authorisation (money must be used to upgrade the services leading to that particular development) and money may only be claimed for the provision of necessary services. The implication is that LUPO can not be used to collect such moneys over a broad spectrum of different developments…..

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission← In-house Development Conditions Typical land-use process Bulk infrastructure in-lieu of dc’s (SA’s) DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch The Commission of inquiry into township establishment: Venter Report (1982/1983), recommends: “(i) The determination of cost liability should firstly be a matter for negotiation between the township establisher and the local authority.”

DC Principles applied in Stellenbosch (ii) In the absence of an agreement the general principles spelt out below should apply and should be taken into account by the appeal body referred to…….” Phrases included in principles: “equal treatment” “old township not to subsidise the new township” “internal cost for developer” “payment to be determined at early stage” “payment should make provision for connecting internal with external services” “township establisher should have control over installation of such services” “internal and external services must be defined”

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions ← Typical land-use process Bulk infrastructure in-lieu of dc’s (SA’s) DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch Development Conditions related to DC’s 97.that the “Developer” hereby acknowledges that development contributions are payable towards the following civil services: water, sewerage, roads, stormwater and solid waste as per Council’s Policy; 98.that the “Developer” hereby acknowledges that the development contribution levy as determined by the “Municipality” and or the applicable scheme tariffs will be paid by the “Developer” towards the provision of bulk municipal civil services in accordance with the relevant legislation and as determined by Council’s Policy, should this land-use application be approved;

DC Principles applied in Stellenbosch 99.that the “Developer” immediately familiarise himself with the latest development contributions applicable to his/her development; 100. that the “Developer” accepts that the development contributions will be subject to annual escalation up to date of payment. The amount payable will therefore be the amount as calculated at the time that payment is made; 101that the “Developer” may enter into a development agreement with the “Municipality” to install or upgrade bulk municipal services at an agreed cost, to be off-set against Development Contributions payable in respect of bulk civil engineering services;

DC Principles applied in Stellenbosch 102.that the “Developer” is aware that a contribution is required for municipal services to permit the development at this stage; 103.that the “Developer” accepts the average amount, as reflected in this document as the amount required for the provision of municipal services in the event that the development is approved; 104.that the Development Contribution levy to the amount of R … (Excluding VAT) as reflected on the BICLS Contribution calculation sheet, dated ……… , and attached herewith as Annexure BICLS, be paid by the “Developer” towards the provision of bulk municipal civil services in accordance with the relevant legislation and as determined by Council’s Policy;

DC Principles applied in Stellenbosch 105.Based on the 2013/2014 tariff structure and the approved lay-out, the following amounts are payable: Phase 1 Water:R X Sewerage:R X ,00 Roads:R X ,00 Stormwater:R X ,00 Solid Waste:R X ,00 Total (Phase 1 Civil Services) exclusive of VAT:RZZ ,00 Phase 2 Water:R X Sewerage:R X ,00 Roads:R X ,00 Stormwater:R X ,00 Solid Waste:R X ,00 Total (Phase 2 Civil Services) exclusive of VAT:RZZ ,00

DC Principles applied in Stellenbosch 106.that the Development Contribution levy be paid by the “Developer” per phase – -prior to the approval of any building- and/or services plans in the case of a Sectional title erf in that phase and or; -prior to the approval of a Certificate in terms of Section 31 in all cases and or; -prior to the erf or portion thereof being put to the approved use; 107.that it be noted that the Development Contributions as reflected on the BICLS Contribution calculation sheet will be subject to annual escalation up to date of payment. The final amount payable will therefore be the amount as calculated at the time that payment is made;

DC Principles applied in Stellenbosch 108.that the development shall be substantially in conformance with the Site Development Plan submitted in terms of this application. Any amendments and/or additions to the Site Development Plan, once approved, which might lead to an increase in the number of units i.e. more than xx units, or which might lead to an increase in the Gross Leasable Area i.e. a GLA of more than xx m², will result in the recalculation of the Development Contributions; 109.Bulk infrastructure contribution levies and repayments are subject to VAT and are further subject to the provisions and rates contained in the Act on Value Added Tax of 1991 (Act 89 of 1991) as amended;

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions √ Typical land-use process← Bulk infrastructure in-lieu of dc’s (SA’s) DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch

APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions √ Typical land-use process √ Bulk infrastructure in-lieu of dc’s (SA’s) ← DETERMINING OF DC’S WC024 excluding Klapmuts & Klapmuts Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch Bulk infrastructure in-lieu of dc’s (SA’s) ← refer to Master Plans … refer to 15 year budget planner … refer to Insufficient capacity in general – 3 / 4 wwtw’s, 8 reservoirs, bulk pipeline, roads … Almost no new developments does not need bulk infrastructure upgrade to accommodate that development… Bulk services installed by developer in-lieu of the development contributions he/she would have paid... Services Agreement between Developer and Local Authority … (item 76 b of MSA)

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions √ Typical land-use process √ Bulk infrastructure in-lieu of dc’s (SA’s) √ DETERMINING OF DC’S WC024 (excluding Klapmuts) & Klapmuts ← Escalation LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch WC024 (excluding Klapmuts) Tender 2009/2010 for determining dc’s and compilation of Development Policy Final document submitted in March 2011 Combined Greenfield and Brownfield approach Policy and amendments to it get approves by Council annually Klapmuts Greenfield process commenced in 2007 Final dc’s determined and presented to Council by end of 2008

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions √ Typical land-use process √ Bulk infrastructure in-lieu of dc’s (SA’s) √ DETERMINING OF DC’S WC024 (excluding Klapmuts) & Klapmuts √ Escalation← LESSONS LEARNED & SUGGESTIONS

DC Principles applied in Stellenbosch APPLICATION OF DC’s Legislation (LUPO)√ Principles as proposed by Venter Commission √ In-house Development Conditions √ Typical land-use process √ Bulk infrastructure in-lieu of dc’s (SA’s) √ DETERMINING OF DC’S WC024 (excluding Klapmuts) & Klapmuts √ Escalation √ LESSONS LEARNED & SUGGESTIONS ←

DC Principles applied in Stellenbosch LESSONS LEARNED (from an engineering perspective) DC’s will differ from area to area due to different stormwater – and sewer catchments, different water supply zones, status of road network, wwtw’s, etc. Most LA’s already does not have the bulk services capacity to accommodate a new development … therefor bulk needs to be provided in-lieu of dc’s; LA’s does not have the capacity (finance and personnel) to be pro-active and stay ahead in providing bulk services for future developments; LA’s Procurement policies and cash flow (of the developer)makes it impractical to receive dc’s and to provide the services thereafter; Whether the concept of the developer providing services in-lieu of dc’s is acceptable or not ….. it was the concept responsible for successful investment of billions of rands of infrastructure over the past decades; Don’t change something if it is working ….

DC Principles applied in Stellenbosch SUGGESTIONS FOR A REVISED SCHEME (from an engineering perspective) Acknowledging that DC’s will differ from area to area, the formula for calculation therof (methodology) must be consistent for all areas; The principles as per Venter Commission should still be applicable; Providing of bulk services by the developer in-lieu of dc’s needs to be based on fair, transparent, general acceptable and audible practices; DC’s paid MUST be ring fenced to ensure utilization therof for the specific services for which it was paid; Keep it simple!

Thank you Dankie Enkosi Tel: | Fax: Physical Address: Plein Street, Stellenbosch, 7600 | Postal Address: PO Box 17, Stellenbosch, 7599 Website: