Friday, 25 September 2015

Reform to the development contributions system

In 2012, the (then) Minister for Planning announced a preferred framework for the development contributions system in Victoria in A New Victorian Local Development Contribution System - A Preferred Way Forward. Issues such as the cost and time taken to prepare a development contributions plan and the level of detail required to justify a contributions levy were identified as reasons that the existing development contributions system in the Planning and Environment Act 1987 should be changed.

The Standard Development Contributions Advisory Committee was appointed by the Minister for Planning in 2012 to review and report on the new system. It did this in two reports: Report 1; Setting the Framework (2012) and Report 2: Setting the Levies (2013). The Advisory Committee examined the existing development contributions system and recommended reforms to it. These included using standard levies that could be applied in all Victorian municipalities in various development settings, to make the process for producing development contributions plans less costly and more efficient.

Recently, the Planning and Environment Amendment (Infrastructure Contributions) Act 2015 (Amending Act) was passed. It is expected to commence early 2016 and will implement some of the recommendations of the Advisory Committee, including setting a standard levy to raise revenue to pay for infrastructure which is needed because of the development of land for residential and other purposes.

What is an Infrastructure Contributions Plan?

The new Infrastructure Contributions Plan (ICP) system will operate in a similar way to the existing development contributions plan (DCP) scheme, with some significant differences. Similar to DCPs, ICPs are a mechanism to raise and distribute money required to pay for certain infrastructure.

Like DCPs, an ICP can be included in a planning scheme to levy financial contributions (an infrastructure levy) to fund the construction of infrastructure (works, services and facilities), the need for which is generated by the development of land. The levy is payable when a person seeks to develop land.

ICPs cannot be used to levy contributions for State infrastructure in areas where the growth areas infrastructure contribution (GAIC) applies.

What levies can be required under an ICP?

Unlike DCPs, the infrastructure levy imposed under an ICP can consist of a standard levy or a supplementary levy.

Although not explicit in the Amending Act, it is proposed that the Minister for Planning will make directions which will state that the standard levy is to be used to fund 'basic and essential' infrastructure items selected from a pre-set list of 'allowable' items for residential, retail and commercial development. The allowable items are to be defined in the Ministerial directions and are likely to include items such as transport, community and recreation facilities, and a public land component. The standard levy can be picked 'off the shelf' from the allowable items list for certain areas.

The supplementary levy can be imposed to fund infrastructure that cannot be funded from the standard levy. The use of the supplementary levy (and the rate at which it will be set) will need to be justified each time it is used, unlike for the standard levy.

Where do ICPs apply?

Although it is not explicit in the Amending Act, it is expected that the Minister's directions will initially permit ICPs to be used in greenfield growth areas and strategic development areas in metropolitan and non-metropolitan areas. Greenfield growth areas will accommodate Melbourne's urban growth and are usually located on the periphery of urban areas. Strategic development areas are generally identified in Plan Melbourne and are located on sites that provide development opportunities close to public transport and other infrastructure.

Who are the levies paid to?

The levies are paid to local councils, and relevant State agencies who will be responsible for constructing the infrastructure specified in the ICP (such as VicRoads for certain roads and intersections). With the agreement of the State agency or council, land can be set aside on which infrastructure such as roads, community facilities and parks can be constructed.

How is this relevant?

Once the ICP system is operating, State agencies who have a role in providing works, services and facilities to meet the infrastructure needs of new development in greenfields growth areas and strategic development areas will need to be aware of the differences between the existing DCP system and the new ICP system.

This will include familiarity with the types of State infrastructure that can be funded under ICPs (such as public transport improvements). Funding for State infrastructure is expected to be raised via the supplementary levy (and only for areas where the GAIC does not apply).

State agencies can be expected to have a role to play when a supplementary levy is required to fund the cost of providing State infrastructure, including having input into the justification for a supplementary levy for these purposes.

Victorian Government clients seeking advice on land, planning and environment issues can contact:

Managing Principal Solicitor
8684 0299

Principal Solicitor
8684 0489

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