Highways (Works for Residential Developments) Amendment Bill

Committee Stage

In committee.

(Continued from 15 October 2024.)

Clause 1.

The Hon. D.G. PISONI: I have a question on the title. Can the minister clarify the stakeholder engagement process it undertook prior to drafting the bill, particularly with local councils, developers and the Local Government Association?

The Hon. A. KOUTSANTONIS: We did not consult with councils. We attempted to arrange a bilateral agreement with Marion council; Marion council refused. There was no assistance by any other council or agency to assist the government in attempting to repair damage done by Felmeri to that group of residents, so the government has prepared this legislation and consulted on it internally.

The Hon. D.G. PISONI: Just to clarify, this bill is not about Felmeri. That has been dealt with. This bill is for posterity. So what you are saying is that there has been no consultation outside of the government. Is that what you are saying? The minister nods his head. Okay. Has the government conducted any risk assessment or cost-benefit analysis of the bill's potential impact on local councils and smaller regional governments?

The Hon. A. KOUTSANTONIS: That is not usual practice for legislation and it certainly was not the practice of the former government either. The way legislation is drafted is that the actions of the City of Marion and the Felmeri developers left the taxpayer with great expense and left a series of householders without their homes. This was a unique situation. This is a situation we want to avoid. This is a measure attempting to make sure that we do not have this occur again. I am not sure if the member was here during my concluding remarks yesterday when I undertook to consult with the opposition between the houses on potential amendments and the LGA.

I accept that there are some concerns about how blame is assigned or fault is deemed and I understand the opposition have some concerns about this legislation potentially being used to have the government conduct infrastructure and then force that cost onto councils. That is not the intent of the legislation. I am happy to clarify that between the houses because that is not what we want to do. What we want to do is to make sure that there is an orderly order to developments that local councils oversee and regulate.

In this case, there is a Commissioner of Highways road that abuts a private road. Before the developer should have been allowed to sell any allotments, that work should have been completed. Then a private road should have been completed allowing services to be laid out and access put in to build those houses. The council chose to skip that step and allow the developer, before all those steps were done, to sell the allotments, take money and deposits and payment, and then fall over, and we are in this situation. So I am not interested in a piece of legislation that would allow the government to say, 'It would be nice if we upgraded this intersection in a regional community or a local council area. I will deem negligence, do the work myself and then charge the council for it.' That is not what we are interested in.

I spoke to the LGA yesterday and to the shadow treasurer, so I undertake that this bill will not be brought to the upper house for debate until we have had a series of amendments considered, so it could mean a longer period for it to pass. I am actually attempting to try to futureproof the taxpayer to make sure that we do not have this situation occur again. I think there is general acceptance that we cannot have developers and councils allowing an ad hoc approach to development in different council areas that lead to these types of outcomes. We want to see some sort of order. We also do not want to see any adverse impacts.

I am happy to consult between the houses with the LGA and the opposition on some potential amendments, but just to reassure the opposition, this is not an attempt by the government to force councils to pay for infrastructure that they normally would not pay for because we just want them to do it. This is about making sure that there is an orderly process of development, and if the councils facilitate or a developer facilitates a skip in that step which leads to this type of outcome, and if the government has to step in and use taxpayers' money to remedy the situation, then we can recover that money of behalf of the taxpayer. That is all we are asking. If there is another way for us to do that, I am open to suggestions. I am not coming in here saying, 'It's my way or the highway'. I am open to suggestions from the opposition, and I have undertaken with the shadow treasurer to do so between the houses.

Mr TELFER: Thank you, minister, for putting that on the record during this committee stage, which is important in the lower house and, as you said, a unique situation. It is one which we would never want to see repeated and one you are trying to dissipate the risk of being repeated through this legislation. I certainly thank you for the communication with me, and I note your commitment, too, with the LGA as well.

Is there consideration being put, presuming we get to a point of agreement within the detail of this bill, around support or guidelines for councils in trying to navigate what this means? Would there be a body of work that your department would do perhaps in conjunction with the LGA that would more readily clarify exactly the circumstances and the arrangements as we have spoken about privately. This is obviously going into different aspects of planning law as well, and the process that is followed.

Is it the mind of the minister to go about putting together that body of work for the information of local government to try to make sure they do not get to the point of the example that you have given around the Marion council arrangements? Is that body of work something which the department and you as minister are considering?

The Hon. A. KOUTSANTONIS: I think this is really work that we have to do with the Office of Local Government, the LGA, the opposition, infrastructure and transport—and, most importantly, planning because PLUS are going to be integral to this. I think we can all agree we do not want to burden developers with additional costs they will pass on to householders who are attempting to build a brand-new home, but we also want to make sure that these things are done in an orderly way. That should not really add any extra cost.

Ultimately, the connection to a major road needs to be built. Whether it is a council road or a Commissioner of Highways road, that connection from a private road to a road—that intersection, that driveway—needs to be built at a stage, so that money needs to be expended. The question is when: should it be first or should it be last? In my view, this work has already been done by the State Planning Commission and we can simply make a referral to that, if there is a suggestion that potentially we can have this legislation set in place yet allow an independent third party to decide who is at fault, because ultimately there might be a case where there is no-one at fault. It is tricky.

What I am attempting to do, as I spoke of yesterday: there is a perverse incentive on councils to incentivise more development and more properties because the one thing that they cannot grow is their boundaries. What they can grow is the number of residents within their boundaries, and they are perversely incentivised to grow those numbers of properties because it increases their revenue base exponentially, larger than rate increases. What we want to make sure they do is that when they do allow these allotments to be sold, they do so in an orderly way and that the infrastructure is put in place.

So I am up for a mechanism that recognises good governance. If good governance has been followed, then we can come to an alternative solution. The question for me right now is that right now we have nothing. The City of Marion can do what they did with Felmeri again tomorrow, and there is nothing to prohibit them—nothing. There is no stick at the end of this. Consider this for a moment, and I know the shadow minister agrees with me on this, the City of Marion—after they allowed those allotments to be sold through a change of condition on application of the developer—was unrepentant at what they had done when that developer fell over.

Now the taxpayers of Eyre Peninsula and the taxpayers of Yorke Peninsula, the taxpayers of the Adelaide Hills and the taxpayers of Unley had to bail out the City of Marion because of a decision they took unilaterally, which they should not have taken. That is why we have this legislation in place. My view about this legislation is hopefully it is never used and it is there simply as a measure to stop councils, give them a moment of pause, before they allow developers to sell allotments before the appropriate infrastructure is in place, because there should be a consensual order.

I am open for this discussion. I know that the LGA will have their views but state planning will have theirs. I think it is fair to say I will err on the caution of state planning for what we think is an appropriate level of infrastructure to be built before allotments can be sold or what the appropriate order is and we can reference that in the act. There are ways of us doing this.

Again, like I have said, for me, I do want bipartisan support on this because ultimately one day members opposite will be in government and hopefully this can stop councils from behaving irresponsibly, because it puts all taxpayers at risk. So if we can have a good bipartisan outcome here I think it's good for the state. But, ultimately, there needs to be a measure that allows the state to recover its costs from developers and/or councils that act negligently. And in this case they did and the state has no mechanism to recover its costs—none.

Mr TELFER: I appreciate that and the context that that provides. Obviously we are looking at considering a legislative solution to an issue which is unique, but there is the potential for it to happen again. It could happen tomorrow, like you say. Did the minister consider other options for trying to get to the same end result? For instance, amending consumer protection laws, building insurance arrangements, indemnities, bonds, guarantees, amendment of the Community Titles Act, the Building Work Contractors Act? For example, the Community Titles Act could be amended to provide the provision by the developer of a bond or a financial guarantee in favour of the community corporation which it could call upon to undertake or complete works contemplated by the development contract in the event of that default by the developer.

Consideration could be given, indeed, to amending the Building Work Contractors Act to require the developer of a community-titled division where a development contract requires work to be undertaken in the common property to take out building indemnity insurance in favour of the community corporation which could be called upon to complete works in the event of default by the developer. There are other mechanisms that could be contemplated. I am interested if the department and the minister considered a few of these arrangements, as opposed to the legislative change which we are seeing at the moment.

The Hon. A. KOUTSANTONIS: My initial instinct was special purpose legislation just to target the Marion council and to force them to pay. So just special purpose legislation that would have been retrospective, aimed at them. But I thought that would be unfair and it would be an unfair burden on the ratepayers of Marion. It is not their fault their council was negligent in its duty. It is not the ratepayers' fault, it is the council's fault, and that is why the legislation has the mechanisms in it not to allow councils to pass it on.

Currently CBS is out to consultation on a number of measures and state planning has issued also a series of guidelines that they are consulting on now as well, so there are many other considerations. I am looking at a prophylactic measure. I am looking at a measure that we can say, collectively, to councils and developers, 'Follow a sequential order or we can use this legislation.'

I think there are three arguments that are going to occur during this committee stage: the potential merits of whether or not the government should have this power to do this on a council that acts negligently and then there are the unintended consequences of whether this could be used in other scenarios inadvertently and whether it can evolve over time with different governments and different ministers forgetting the true aim of this and then expanding its scope. And then there is whether we should do this at all.

I think the one that we agree on is that something needs to happen, and the question, from what I undertook from the shadow treasurer's contribution in the second reading debate, was your concern of scope creep and this legislation being used in other scenarios. I am happy to address that. I think that is a legitimate concern, and I am happy to address that. I think that is what we can work out.

If the opposition's concern is whether we should have this at all, then the government and the opposition are at odds, because I believe we do need to have a mechanism where if we are forced to conduct infrastructure works—for example, a developer is allowed development approval to build a series of shops on a shopping centre strip, and they begin construction without building the appropriate intersection or access to a Commissioner of Highways road or a council road. They go bankrupt, and there is a series of tenants who already have tenancies in place.

The council are refusing to build this, and the tenants cannot begin, and the small businesses cannot start trading and they cannot do the work. What do we do? There is no insurance. There is a liquidation, and these businesses have mortgages that they are paying. The government ultimately would more than likely be forced to step in through public pressure and political pressure. The question then is: who gave the developer the approval to build those buildings before they built the appropriate exit and entry into the property? That is what we are attempting to deal with.

I accept your point that if the government believes there should be a roundabout in a local government area and the council just have not built it, then we go away and build it and use this and say, 'You should have built this roundabout five years ago and you have not, therefore we are going to build it and then charge you using our powers under this legislation,' then I agree: that is not the intent of this legislation. It is simply about development. That is why I am up for—

Mr Teague: But that is what it says at the moment.

The Hon. A. KOUTSANTONIS: I know you are just trying to be combative, but what I am saying is that I am open to the opposition coming up with a solution. I know you have walked in late to the debate and you are interested in having a fight; that is fine. I want to have a constructive outcome with the opposition. If the shadow attorney-general wants to blow that up, go your hardest.

Mr TELFER: Following on from the previous answer the minister gave, he spoke a bit about when a potential road development is abutting a highway, but—and we will probably unpack it a little bit further as we go into the clauses—it is not just road infrastructure that is being considered. What is the mechanism, and is it purely—maybe it is; I will seek the guidance of the minister—the decision of the minister or the CEO of the department, as to what level of infrastructure will be decided upon for a development coming in?

I will give you an example. Within the scope of the later clauses, which we will explore, it talks about stormwater, it talks about power, it talks about telecommunications. A development can happen with overhead powerlines, it can happen with underground powerlines. It can happen with a rolled-gold wastewater system in place or it can happen, depending on where the area is, with a lesser degree of infrastructure.

What is envisioned by the minister as to who is going to make the determination of what level of infrastructure is going to be invested into? A lot of the time within a development planning approval, that specificity is not actually there within the sequential arrangements that would have to be in place for these powers to be used. Is this going to be something that is on the shoulders of the minister at the time or the CEO of the department? What is the minister envisioning for this process for the decision around infrastructure?

The Hon. A. KOUTSANTONIS: In my experience, in all government infrastructure, it is minimum viable product. We do not attempt to gold plate anything and never have, and that has been the history of infrastructure in this country. We put in minimum viable product to ensure that we can have the cheapest piece of infrastructure possible because we are a massive landmass with a small population, so we do not gold plate anything.

Overhead powerlines versus underground powerlines: there are policies in place where I think new developments have undergrounding. I am assuming, but I am not quite sure. It is whatever the existing policies are. There is no incentive on any agency here to gold plate, but again, that is why I agree. If we want to put some criteria in here, I am open for that, as I said to you and for which I gave you my undertaking yesterday.

Mr TEAGUE: I take the opportunity at the outset to indicate I am here as a participant in the committee and I hope I can add some small value to it by raising questions about what is on the face of the bill. In light of what the minister has just said, I just highlight there are limits as to what can be done in terms of statutory interpretation based on expressions of intent. What we have on the face of the bill is what we have on the face of the bill. We can only just read it. The fact is that it does not provide for any sort of triggering mechanism for the undertaking of works.

The question might be asked: why is it not something that we are seeing as an amendment to the planning process? I just refer back to my brief contribution in the second reading: are we not going to see circumstances where there is no direct link between some sort of breach on behalf of the assessment body or the oversight body, which might or might not be a council? It might be the minister We can happily workshop the bill in the course of the committee. Maybe if the minister is truly intending to alter the way that this works, we might up stumps now, adjourn debate, and go away and work on it all together.

We actually need to understand the structure as it is set out on the face of the bill. So I foreshadowed that at the moment, because it is so open ended on the face of it, whether a council likes it or not, the question is whether a council is going to have to take audit advice to provision for a decision of this kind being made, with or without fault. I understand the Marion council is the villain in the piece here and I understand the minister is saying his first instinct was to come in and legislate to deal with the Marion council.

In the event that we are providing for general purpose legislation to respond to those circumstances using that as the example, then at the outset I just raise the question as to whether or not it is prudent to include a pretty precise set of criteria that would operate to trigger these powers because at the moment it is the minister determining that the commissioner can get on with just about anything with or without fault.

I am completely delighted to hear the minister say that nothing about what is described in the bill is what is intended by the government in terms of its operation. If the operation of the bill, the exercise of state power, is intended to operate in circumstances where there has been a breach, then why not say so? If it is intended to operate in circumstances where it is a source of funding of last resort, then why not say so? And if it is intended to work in circumstances where the planning process has failed, then ought not it be appropriate to articulate the various ways in which the approval has been made and the various steps that are supposed to occur have failed.

I hear the minister talk about the negligence, in this case, of the council and there certainly appears to be frustration on the side of the government finding itself as the only one that is left to fund the works. Just to cite the example—again, I am curious; the minister might answer with a positive or negative view of this. The problem of Heysen Boulevard at Mount Barker is enormously frustrating.

Many might argue that that is the result of a planning failure by a government a couple of governments ago, so does the council then have a role, and do the various developers involved, in terms of their covenants to, at the appropriate stage, build their bit of Heysen Boulevard? At what point does that become sufficiently cause of political pressure for a government just to say, 'Do you know what? We're going to step in. We think it's justified. We've got the power to do so under this act.' It may well be something the minister says, 'Oh well, yes, at some stage that may be what this is about.' So we can only read the face of the bill. At present, it is open-ended.

A question to the minister at the outset is: if these changes, these amendments that are foreshadowed, are really that substantial, then ought we not have the opportunity to debate what they are in this place and then send up to the other place something that resembles what might finally emerge?

The Hon. A. KOUTSANTONIS: I point out that Heysen Boulevard is a cooperative piece of infrastructure being built by the Mount Barker council and the state government, a $2½ million apiece piece of infrastructure, so I am not quite sure that the example works.

Mr Teague interjecting:

The Hon. A. KOUTSANTONIS: I didn't interrupt you. The State Planning Commission is out to consultation on practice direction 12. I just have a series of procedures and practices and how things can operate, and I have undertaken to the opposition that I am prepared to negotiate with this between the houses. That offer stands. I am not in any way attempting to force this through the upper house. This is something that I am trying to remedy, so we cannot allow lax councils to simply attempt to have as many developments as possible occur in areas. No piece of legislation is perfect. If the shadow minister has found flaws, congratulations; big tickets for you. I undertake to work with the opposition between the houses. That offer stands. If you want to frustrate it, frustrate it; I do not care.

Clause passed.

Clause 2.

Mr TELFER: Clause 2 is around the commencement and the words about the day to be fixed by proclamation; that will be worked out. The interesting part for me around the commencement is that obviously there are developments at different stages of construction or otherwise throughout the state. Is this going to be something which at a point in time the legislation is in and then with anything that is happening the government then has powers to be able to come in and do this, or is it from that point of commencement, then for any developments which start from there onwards that powers can be used?

I ask this because the point that I made in my second reading contribution is that I worry that, with something like this in place, there is going to be extra obligation, perhaps, on a council to try to work out whether a builder is legit, is this the sort of thing that they need to be considering as part of the process? A lot of the time, as someone who has experience in local government, trying to work through those processes with developers or potential developers as applications come in is a challenge with resources that are often limited. The question stands by itself. The commencement date will be fixed. Will projects that have already commenced be encapsulated within that legislation or is it only for projects that will follow from that time?

The Hon. A. KOUTSANTONIS: The legislation will apply from the moment of proclamation. So if a project has commenced and a council has been negligent and that work cannot be completed and the government is the last resort, then we can apply the act. I go back to my original point.

Councils follow a sequential order. It will allow us to ensure, as a measure that will give councils a moment of pause, that gas infrastructure is in place if gas infrastructure is being offered, footpath access off a Commissioner of Highways road or a council road that has been built, workforces can come in and out, stormwater has been appropriately done, and that the sequencing of the development is done in an appropriate way to allow allotments to be sold. The development should occur in a sequential order that protects the householder without adding cost.

I suspect what occurred in the Felmeri situation is that the developers had a number of projects that were occurring around the state and they were attempting to finish a project somewhere else and were short on cash. They went to the Marion council and said, 'Look, we want to sell allotments now,' to either assist with cashflow or whatever other excuse they gave. The council for whatever reason agreed; they sold allotments without having the appropriate infrastructure in place and took that money and spent it somewhere else. When it came time to move on to the Felmeri development, the pyramid scheme had ended and Felmeri had no money to complete the works.

Building and indemnity insurance was unable to complete the works because it covered homes—not the private road infrastructure, not the stormwater, not the electricity infrastructure. The stormwater had to be redone completely; there was very little compliance checking by council. Stormwater is the responsibility of local government. It is clear as night and day. I can see the LGA representative in the gallery and I make that point very, very clear. They are responsible for stormwater.

The government had to step in and remedy all of that, at great expense to the taxpayer, for I think 16—Erin, was it 16 households?

Ms Thompson: Twenty.

The Hon. A. KOUTSANTONIS: Twenty households' worth of public money was spent on a private road because council did not do its job. I do not want to labour the point, but if that occurs again and the act is in place and we have to step in, once the legislation is in place, then yes. That does not mean we can go retrospectively, in my opinion. I could be wrong. It is not the intent of the bill to be able to have retrospective powers. But if a development is underway and we have to step in, then yes, it will apply.

It will not be about developments that commence after the commencement of the act. If a development is underway and there is something that occurs and we have to step in, then yes, we can step in. But as I said to the shadow minister, I undertake between the houses to come up with a working model with the LGA and the opposition that can actually work and function, because this legislation has to stand the test of time.

We cannot have developers and councils allowing this to continue to occur, because a lot more developments are occurring where we have very large residential blocks of 800 to 1,200 square metres, sometimes 1,400 square metres, being carved up with one large private road in the middle with services being rolled out for a series of homes, and developers selling allotments without putting any of the infrastructure in place and then falling over.

Building indemnity insurance is not enough to cover the private infrastructure that is required to finish those developments. Householders are being required to put more and more of their own money in, and if they cannot they are in serious financial trouble. This gives us the ability to make sure that councils do not allow that to occur.

The Hon. D.G. PISONI: I pick up on your reference to gas infrastructure, minister. Can you clarify whether through this bill the commissioner could actually insist that there be gas infrastructure, NBN or any other infrastructure put in place in a development when there are other choices or other options for providing these same services? I understand electricity, sewerage and water would all be essential, but gas is an option.

There may very well be some developers that as part of their marketing plan are not offering gas—I do not know why, but they might. It may very well be that NBN is not there if the developers believe that 5G is a much better option. Is there anything in this bill that will enable the commissioner to override those business decisions that those developers have made not to include those services in the development?

The Hon. A. KOUTSANTONIS: No, that is not the intent of the bill, but if the opposition believe that is what can occur, I am happy to look at that. I will give the example in this scenario. If people are being sold a home that has gas hot water services and the developer has done the development in a way that sequentially means we have to dig up footpaths again, or they have not laid down the infrastructure before being given the approval to sell allotments, it means that they have not done the work in a sequential way.

It is not about us deciding, 'Well, this development was built with no gas. Dig it all up and charge the council to put gas in the ground.' That is a matter for AGIG and a matter for the developer. That is not the intent of the bill. This is simply about a sequential rollout of infrastructure, where the government, as the last resort, has to step in and use taxpayers' money to see the developments completed and, if there is negligence on the council or developer, give the taxpayer a recourse to recollect that money.

It is not about ensuring that the infrastructure meets an ideological standard where you must have gas or not have gas. It is simply about making sure the infrastructure is in place sequentially to allow the development to proceed. Of course, all infrastructure, we believe, should be a minimal viable product. If a development on a site is not going to have gas, why would you lay a gas line?

If a development is, though, required to have stormwater—as it should—and the developer goes broke having not put in stormwater, having not put in the connections to the commissioner's road or the council road, having not built the basic infrastructure to allow works to commence, how are they allowed to sell these allotments? I see the point that the member is making, and it is a good one. That is not the intent of the bill.

The Hon. D.G. PISONI: Just to be clear, if people bought into that development knowing that there was not gas, then they got a petition signed by everybody saying they want gas and they go and see their local member of parliament—

The Hon. A. KOUTSANTONIS: They have to pay for it then.

The Hon. D.G. PISONI: So the act will not be used to force gas to be fitted? Okay. Thanks for clarifying that.

The ACTING CHAIR (Mr Odenwalder): Are there any questions on the commencement? Clause 2, the member for Heysen?

Mr TEAGUE: Yes. We are all clear. Marion is the villain of the piece, and the minister's first instinct was to have special purpose legislation against Marion, so why does the legislation not apply retrospectively, at least in respect of the one egregious case that we all say this is driven by and that is a rare event that is hardly ever going to occur again? That is a question.

If we are applying this in circumstances where it is not driven by an articulated process of breach but it is just left open on the face of it, why not—and I just ask this question—just make provision for a great big whacking fine to apply to a council that takes advantage in that way? I think that cascading of the pyramid example is a good one.

If you are the softest council in the group and you say, 'Alright, we want our rate money and you don't have to do that infrastructure development that you are supposed to do,' then your disincentive might be, if it is to be applied generally, the prospect of a great big whacking fine and the prospect of the government going ahead and seeking an order for exemplary damages on top, based on the facts of the particular case.

The question at the outset is: this bill certainly contains a substantial chunk of retrospectivity in that it applies to developments that have been approved prior to the enactment of the bill. Why not go back and say, 'Thanks very much. We will claw back the $4 million, or whatever it was, that had to be expended'?

The ACTING CHAIR (Mr Odenwalder): Before you answer, minister, I am happy to be flexible, but clause 2 is specifically about the commencement of the act. You started off well, but I will be guided by the minister's answer. I am happy to support the minister if he thinks the question is out of order, but I will be flexible about it.

The Hon. A. KOUTSANTONIS: I do not think that special purpose legislation would have remedied the issue ongoing. I think it just would have been a one-off sugar hit. It would not have fixed the problem and it would not have stopped it from occurring again, so it would not have solved the problem. What we are attempting to do is solve the problem holistically. But, as I said, no legislation is perfect. I am open to suggestions and options to alter it between the houses.

What we are attempting to do here is the right thing. There is no doubt that councils will not like this because it will caution them and put them at risk of making errors, and errors do occur. That is the part that concerns me the most: councils can inadvertently make errors where developers are able to get the upper hand and do things that they should not be allowed to do, or should not do, or their rights and obligations are not being met to the people who have bought properties from them and councils are not enforcing their development approvals appropriately. That can also include the state, so I want to make sure we get this right.

As I said, if there are errors, if I had just brought in special purpose legislation, it would not have solved the problem. As for making this retrospective, I do not think it is retrospective legislation. It does not go after completed developments, it goes after developments that are underway, and I think that makes sense. You have to draw a line somewhere and we have chosen that line, and the government is entitled to make those decisions.

Clause passed.

Clause 3.

The Hon. D.G. PISONI: My understanding is that the commissioner has some extraordinary powers to bypass the usual planning process and local government authority. Can you confirm whether that is the case and why it is necessary?

The Hon. A. KOUTSANTONIS: The Commissioner of Highways already has extraordinary powers to do things without development approval, but these are developments that already have approval, so to seek approval again would be a time-wasting exercise.

The Hon. G.G. BROCK: The end of subclause (2)(b) provides 'if the Minister thinks fit, to any owner of the land.' In actual fact, I would have thought it would go, if a developer was negligent, back to the council to actually claim the money, but this one here says either go back to the council or 'if the Minister thinks fit, to any owner of the land.' Can you explain the difference there?

The Hon. A. KOUTSANTONIS: What clause are you referring to?

The Hon. G.G. BROCK: Clause 3 (2)(b).

The Hon. A. KOUTSANTONIS: That is just a statutory notice to let people know that we are coming onto their land.

Mr TELFER: Obviously, this is the clause that has the majority of the detail which I unpacked a little bit in my second reading speech, and also the main bulk of what this bill delivers. For the prescribed works as defined within this clause, the commissioner can come in and undertake those prescribed works on private land. Does the relevant council receive any benefit or service from that work? What I am trying to get at is: is this trying to make it so that a council is paying a fee for service?

What I am referring to is the well-meaning aspect about councils not being able to recover expenses incurred by way of a rate, a charge, a levy or fee, or another amount imposed on ratepayers, and then without limiting the cost imposes a separate rate. As I said in my second reading speech, I worry about foreseeing a circumstance where we could have a council which may not be able to afford to be able to incur this level of debt and cost without those. Upon my reading of it, I feel that there is the opportunity for works to be undertaken even if there is no obvious fault from the process of a council.

So, as a former mayor of a regional council with a small budget who has dealt with their fair share of shonky, shifty developers, to put a potential financial risk on a council without the ability for them to be able to afford the prescribed interest rate 5 per cent above the cash rate which is probably higher than what the rest of their borrowings would be through the Local Government Finance Authority and the like. I would like some reassurances to the motivation behind the levy, the rate which is disallowed, and the motivation of the minister and the intention of the minister within this legislation.

The Hon. A. KOUTSANTONIS: Tumby Bay is a good example. There will be residents in Tumby Bay, there will be businesses in Tumby Bay that have a higher turnover and a larger net worth than the council, and there would be some farmers who would have a lot more money than the council who might seek development approval from the council, and the council grants it, and then those developments lead to massive losses for those involved because a development approved by the council was negligent.

Now do we let Tumby Bay off? This is the point. If Tumby Bay or any smaller council, or any council, follow the appropriate development approval process to make sure that they eliminate their risk of fault, and developments are done in a sequential way—we are not talking about a developer who goes broke and therefore the council is liable for that developer not being able to complete a development, but if a development goes broke because of negligent development approvals being given not in a sequential way, which means a development cannot be completed through an insurance program because things were not done sequentially and there is a gap, well the council is at fault.

The problem you raise is that a small regional council does not have the ability to fund this which is why they should be very careful about the way they do developments. I just remind the member, this could happen now. It could happen right now. The council in Tumby Bay, where there are some beautiful parts of our coastline, can approve relatively large developments, and if they allow developers to get away with doing things that do not allow a sequential development that ultimately see other investors lose money and go bankrupt, and a development cannot be completed because the development was not done in a sequential way that allows the insurance to cover the remaining cost of the development because of council negligence, well who do we blame?

We are not talking about recovering the cost of the entire development, are we? We are talking about the appropriate infrastructure. So if it is an access road off a Commissioner of Highways road or it is the appropriate level of stormwater, that is what we are interested in here. So what we are trying to do is just because councils cannot afford to pay, does not give them the right to behave badly simply in an aim to grow their rates base. Like I said, it is a difficult egg to crack here so I am open to suggestions.

Look at Wirrina Cove, look at marinas across South Australia. There are large developments that small councils have approved that have left legacy issues where investors, because of council decisions—poor decisions—have been left high and dry. What we are saying is that there should be no impact from a decision of government or council that should impact the viability of a development.

If you want to build a development, this is the sequential order you should follow. If you do this, you are fine. How can you sell tenancies, how can you sell plots, how can you sell options and the like before you have the appropriate infrastructure in place because you could fall over and then that burden then falls on the taxpayer, which is entirely unfair. It is unfair on the taxpayer, it is unfair on the investors and it lets the developer get away with it.

What if the developer does have the ability to pay? This legislation gives the commissioner the ability to recover money from them. Currently, with Felmeri there are two entities. We cannot recover any of the money. This legislation will allow us to recover the money.

Mr TELFER: The question I am asking is reflecting on the bill in the current form, already noting that the minister is open to undertaking to put other measures in place to try to clarify some of the concerns. Within what we have been provided here—the sections in this clause at the moment—there is no commentary or description around fault or blame on a council.

On my reading of it, the commissioner can come in and make whatever decision. With this aspect around the ability for councils to be able to pay or not, I think there is some clarification to seek. Maybe that clarification is, as the commitment has already been made by the minister between the houses, to pay the obligation under section 26. If a council cannot raise the money by way of rates, charges, levies, fees, how can they then raise the funds?

There is the example of bigger councils, and I made this point earlier, that may be able to absorb it within current operating budgets but obviously there are some that cannot. Does the minister envision with this legislation that councils will go into debt to comply with section 26, and even then how can councils service or even repay the debt if there is not the ability for them to be able to raise moneys by additional rates, charges or fees?

I worry about setting up a circumstance where a council cannot lawfully by the letter of the law repay a debt over and above what their capacity currently is at the moment. You talked about the opportunity to recover it from a developer, but the vast majority of the time we are in this circumstance because the developer has gone belly up and they have declared they are bankrupt, or whatever the circumstance may be. So there are potential circumstances with this legislation that there is no lawful way for a council to raise money to service a debt or to repay a debt. What is the minister's perspective on that?

The Hon. A. KOUTSANTONIS: That is a good question. I think we are conflating two issues here. Developers go broke often. We are not attempting to be the insurer where we just step in and start finishing everything on their behalf. There is building indemnity insurance to deal with that and other insurance to deal with it. We are talking about critical government infrastructure that needs to be built before developments are done. Basically, it is roads, gutters, footpaths, stormwater, access and egress. That is what we are looking at. Let's not make this legislation look like it is doing more than it is intended to do.

A developer can go broke in any development, but there are insurance policies and statutory insurances that should cover a lot of that. I have a number of constituents who are currently building right now, who have been subject to a developer who has gone bankrupt, but the development has been done in a sequential way and the council has no fault, the government has no fault, and the building indemnity insurance that remains is adequate to complete those properties. They do not have to build access and egress into a private road, they do not have to put down footpaths, they do not have to do the other infrastructure because the development was done sequentially, so I do not think your concern is valid.

However, this is also about a government and another form of government. The government is not going to bankrupt the community to recover its costs for a footpath.

An honourable member interjecting:

The Hon. A. KOUTSANTONIS: Well, no, it's not, because the councils are our creation and ultimately they are our constituents as well. What we are attempting to do here is to stop negligence. That does not mean they get a blank cheque to do as they please. There is also common sense and goodwill that has to operate in any piece of legislation. You can take any piece of legislation to its extent and you can catastrophise it in any way you like. Of course, we operate within guardrails in our Westminster system and in a democracy, so there are consequences for overreach. I think we are catastrophising here slightly.

However, I will give you an undertaking. I am not interested in bankrupting Tumby Bay; I think you did a fine job of that yourself. You do not need my assistance. Small regional councils are probably less likely to be subjected to this than metropolitan councils, in my opinion, because they are more cautious and there is a lot more community concern that occurs on local government councils in regional areas than there is with metropolitan councils. Metropolitan councils have very large big bureaucracies and in big bureaucracies, in my experience, councils are given advice by the agency and councillors generally follow that advice.

What occurred with Felmeri was an officer within Marion council, with delegated authority, gave approval for X, Y and Z to occur, which led to the consequence that we are in. The elected councillors were not at fault. Ultimately there was an oversight issue, ultimately it could have been remedied, ultimately if there was goodwill with the council to work with the government and there was a general acceptance that this could have been avoided, we would not need to be here today. I think the actions of Marion council show what can occur if a council digs in and, despite their negligence, despite being the root cause of the problem, they refuse to assist.

The contribution the South Australian government asked of Marion council was half a million dollars, capped, and they said no. Why is it that the taxpayers of Tumby Bay have to bail out the Marion council? Do you see my point? I accept your concerns. That is why I have agreed and made an undertaking between the houses. I can assure members that this legislation merely being in the house is enough to focus the attention of the LGA and its membership to make sure that they are doing things appropriately.

I am not in a rush to pass this legislation. We will pass it through the house tonight. I will not reintroduce it in the upper house until we have an agreement. I am up for that, no problem at all, unless, of course, the agreement is completely unfair. I am up to working reasonably with the shadow treasurer about an outcome here that is fair and reasonable, as well as with the LGA. But the very fact that we are debating this, the very fact that this is here and the government has shown a resolve to do this, will focus the attentions of councils to make sure that their development agencies are working appropriately to make sure that a Felmeri never occurs again.

The details we can work out. We can have an argument, if you like, philosophically about why it was not perfect before it came here, but the truth is that councils, as I said earlier, have a perverse incentive, because they want to grow their rates base because escalation is causing them and their budgets harm as well. We have seen what rate increases can do to councils; 8.9 per cent I think in Burnside, 7.1 per cent in Holdfast Bay, well above inflation. These are high numbers in a cost-of-living crisis.

The way they are incentivised is to have more development, which means more rate base over the same landmass. Of course, what councils are also doing is pushing a lot of that infrastructure cost that traditionally councils built—like roads, like stormwater, like footpaths—onto developers and that is being handed over to them afterwards to maintain.

My point is that if that is not being done, that should be a liability of the council, because the council have control about whether these things are done sequentially and in an order that is of good cause for building and making sure that development is done properly. So I think we are on the same path. We are not interested in bankrupting small councils. We are not interested in debt burdening small communities. What we are interested in is councils doing their job and doing it properly because they are remunerated exceptionally well.

They have the resources to do this. They are not overwhelmed. You walk into any metropolitan council and there is a very large infrastructure bureaucracy in place with very highly paid staff who do exceptional work. Human error is human error, but this was a deliberate choice by a council that led to consequences that have cost the taxpayer millions of dollars. The taxpayer has no recourse, and that is unacceptable for a government agency.

Mr TELFER: Just one more question, and it probably flows on. The responsibility and obligation on councils as far as the planning process is significant. The challenge for a lot of councils is ensuring there is appropriate resourcing of different departments, and a lot of councils around South Australia are challenged when it comes to development and planning staff in particular.

Does the minister envision that there may be a discussion or even a negotiation, perhaps, with the planning minister potentially on advice, direction and guidelines for councils around the ramifications of this legislation? Minister, you spoke about how it was a deliberate decision by a staff member. It often comes down to a single staff member or a cohort within a council bureaucracy to make decisions around planning and development. A lot of councils have to outsource that to planning professionals.

I envision a worry that there could be potential extra costs that could come with this because the councils that are more conservative or more reticent to make decisions around planning are more likely to go to an external planning consultant that comes with a price tag when considering the ramifications of a piece of legislation such as this. Minister, do you see a role for the planning department to play over and above what they currently do with the extra obligation involved with this legislation, which they may have to understand and understand the ramifications of?

The Hon. A. KOUTSANTONIS: We are working with the State Planning Commission. The truth is there are two measures that could solve all of this: security being taken and the common infrastructure being put in place at the appropriate time of the development. None of this is necessary. As I said, I am more than happy to work out a way of us articulating that in the act to ensure that councils are protected if they have done the right thing. I am not interested in going after councils that have done the right thing. But we are working with planning agencies, absolutely.

Mr Telfer interjecting:

The Hon. A. KOUTSANTONIS: Yes.

Mr TEAGUE: To get back to a question I foreshadowed in the course of my second reading contribution, just as it stands, I am hearing the minister say that this might be transformed by the time it passes the parliament. We are obliged to consider it as it is at the moment. Has the government taken any advice, does the minister have any indication for the committee, as to whether or not the presence of these provisions will require a properly overseen council, via audit and provisioning, to have to provision for the risk of this being imposed?

Given it applies in the general, and it is a ministerial discretion to go ahead and do works and then sheet home the cost to the council, is there a financial consequence that council, prudently provisioning, would have to apply as the result of this passing?

The Hon. A. KOUTSANTONIS: No, and I cannot imagine any council getting that past their elected members, that they would provision for errors and negligence. Who does that? Who says, 'We are such a hopeless council that we are going to provision X amount because we are going to be found to have not done works appropriately'? In any way, the legislation does not allow them to provision for this because the legislation specifically prohibits them from increasing rates and charges to pay for it. So, no, I do not think they would.

Again, the prudent thing for a council to do is to take security or put conditions on developments that need to be met which are common infrastructure needs to be put in place before allotments can be sold, which is common practice and is what most councils do just through the normal course of events, but there is no consequence for a council not doing that—none.

The shadow attorney said, 'What about a fine or a penalty?' That is no different from recovering the costs. A fine or a penalty, how would they pay for that? They would want the ability to raise those rates. What we are saying here is we want to provision infrastructure. The appropriate thing to do is if a developer is a bad actor, and despite the appropriate provisions being put in place by the council, the council would not be liable here.

If the council did the right thing and gave development approval on the basis of common infrastructure being put in place or took security, none of this would be an issue. It is when they do not do that and are attempting to stimulate activity in their communities to increase their rate base that we are interested in. There are ways between the houses that I think we can come up with an amendment that would cover that.

I accept the member's point, the legislation is as it stands now, as it passes the house, but we have a bicameral system. It has to pass both houses. I am up for change between the houses. I have said that now I think 10 times. I have told the LGA that as well. But I think the very fact that it is here has focused our attention and that is a good thing.

Mr TEAGUE: On that and then to cover the broad concept, the point about taking security is maybe a central example of an obligation that might be imposed by another form of legislation that might say, 'Right, henceforth the granting body is required to take relevant security sufficient to cover the defined work that needs to be done, and failure to do that is a breach causing the imposition of a fine.'

The legislation does not, with respect, apply in circumstances of breach. It applies in circumstances where the minister determines that it is appropriate to get on with prescribed works, having designated a particular area the subject of development approval. It is actually not couched in terms of breach and consequence. It is not imposing some fresh obligation upon the body that is going to suffer the consequences.

Again, I do not mean to just freewheelingly come up with ideas, but one approach might be a breach in consequence approach, coupled with a new stipulation that security needs to be obtained, and even the failure to obtain the security might lead to the breach, regardless of the consequences. Do an audit of all the council approvals and say, 'Hang on, have you got adequate security in advance? If not, hang on, there is a first substantial fine that might apply just for doing that.' That could contribute to a fund; then the point about there being anyway a necessary wrongdoing that stipulates the consequence of bearing the cost.

The Hon. A. KOUTSANTONIS: Yes, you could do all that, but either way someone has to determine there has been a breach. The way I would envisage determining if there has been a breach is that a developer, on the advice of the State Planning Commission, on advice of the planning minister, allowed a disorderly development without common infrastructure, took no security, the government has to step in, and when we step in it is usually the infrastructure agency that steps in, and we have no ability to collect that money.

You can design this all series of ways. You can have consequential amendments and other pieces of legislation that will lead us to the same path. This is just a standalone piece of legislation that gives the Commissioner of Highways, if we have to do it—because, just to reassure members, I am basically talking about the issue that I am concerned about most, which is access and intersections from either council roads or Commissioner of Highways roads, which is the largest common user expanse a developer will undertake generally in rolling out infrastructure to a development. That is what they usually do first. Here, they did it last, and we had to do it.

This act should not really ever have to apply if councils are doing their jobs. I accept what you are saying. We could do it another way through another path, but they all lead back to the same thing, which is someone in my agency is going to have to commission and do the work. This is the path we have taken, right or wrong. I think it is a good measure.

Again, I have said I am up for discussion and debate about the alternatives. I will schedule meetings with the LGA next week and meet with the opposition, and I am sure we will go off to parliamentary counsel. I want to go through all the second reading speeches to try to find ways to remedy some of the concerns you have and come back to the opposition and consult with them about whether or not they are happy with it. I think this legislation has to stand the test of time. We cannot allow councils to continue to behave this way because the way they are incentivised will lead to more of this, especially in a housing crisis.

Clause passed.

Remaining clauses (4 and 5) and title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (17:52): I move:

That this bill be now read a third time.

Bill read a third time and passed.