What's your contribution? Proposed changes to the NSW developer contributions regime

By Brendan Bateman and Rachelle Hoare.

Key Points:
The NSW Government has unveiled significant amendments to the developer contributions regime which supports the provision of public infrastructure, which it says will deliver a more accountable contributions system.

The NSW Government has released an exposure draft of the Environmental Planning and Assessment Amendment Bill 2008, which if passed will introduce the most extensive suite of amendments to the Environmental Planning and Assessment Act 1979 ("Planning Act") since the introduction of the Part 3A major projects regime in 2005.

The changes are wide-ranging and we look at them here; in this article we'll focus on amendments to the developer contributions regime.

Key aspects of the proposed amendments

The proposed amendments repeal Divisions 6 and 6A of Part 4 of the Planning Act, which is where the current developer contributions regime sits. It creates a new and separate Part of the Planning Act, "Provision of Public Infrastructure", proposing the following types of contributions:

• community infrastructure contributions: this replaces the current local infrastructure contributions regime, otherwise known as section 94 and section 94A contributions
• contributions by way of voluntary planning agreements: although essentially a re-enactment of the current planning agreement regime, there are some important amendments which we discuss below;=
• State infrastructure contributions: this replaces the current special infrastructure contributions regime; and
• development contributions for affordable housing.

There are also new reporting provisions applying to planning authorities, aimed at improving their accountability.

We discuss the community infrastructure and planning agreement provisions below.

Community infrastructure contributions

The proposed amendments would see consent authorities being able to require either:

• direct contributions, being either a reasonable development contribution (that is, the dedication of land free of cost or a monetary contribution) for the provision, extension or augmentation of community infrastructure within the area, or a reasonable monetary contribution towards recoupment of the cost of existing infrastructure in the area; or
• indirect contributions, being monetary contribution representing the proposed cost of carrying out the development.

In this way, the reforms continue the distinction between section 94 (direct contributions) and section 94A (indirect contributions) for community infrastructure (being public amenities and public services, but does not include water supply or sewerage services). Either direct or indirect contributions may be levied on developments, but not both.

As is currently the case, a council's contributions plan will be pivotal to determining what contributions a council can require of a developer. A council's contributions plan will only allow contributions for "key community infrastructure" to be made, however a council may seek Ministerial approval for the possibility of contributions for "additional community infrastructure" in the contributions plan.

The following community infrastructure will be prescribed in the regulations as "key community infrastructure":

• local roads
• local bus infrastructure
• local parks
• local sporting, recreational, cultural, civic and social service facilities
• drainage and water management works
• land for any community infrastructure (except for riparian corridors); and
• district infrastructure of the kind referred to in the first four bullet points, but only if there is a direct connection with the development to which a contribution relates.

As "key community infrastructure" is prescribed by regulation, the Government will be able to change the definition relatively easily. According to the Government, requiring Ministerial approval to levy for infrastructure outside this list "will ensure that there is some rigour and accountability for the types of things that can be funded by contributions, and to ensure levies are affordable".

All other community infrastructure can be approved by the Minister as additional community infrastructure for inclusion in a contributions plan, apart for land in riparian corridors.

What will happen to contributions plans in force under the existing legislation? That will depend on the contents of the contributions plan. Current contributions plans will be repealed on 30 June 2009, unless:

• they deal with only "key community infrastructure", in which case they will be repealed on 30 June 2015; or
• the Minister preserves the contributions plan by order in the Gazette, if he or she is satisfied that the plan provides for a contribution in respect of community infrastructure that is either:
  • subject of a contract with the council for its construction
  • subject of a loan or debt financing arrangement for its funding
  • subject to a commitment in the council's budget for construction in the 2007-2008 financial year; or
  • for which land acquisition has been commenced by the council.

A condition of development consent imposed under the current legislation will be, on repeal of the current legislation, taken to have been imposed under the new corresponding provisions.

Finally, the Minister will be given powers to direct consent authorities in relation to certain matters, including as to what constitutes a reasonable time for the application of contributions. According to the Explanatory Note to the Bill, as directions are made, they will be available on the Department of Planning's website.

Planning agreements

There are some important changes proposed which would impact upon how planning authorities and councils are able to negotiate planning agreements. For example, when entering a planning agreement, planning authorities (including councils, the Minister, and development corporations) must have regard to certain key considerations for development contributions proposed to be included in the Planning Act:

• can public infrastructure that is proposed to be funded by a development contribution be provided within a reasonable time?
• what will be the impact of the proposed development contribution on the affordability of the proposed development?
• is the proposed development contribution based on a reasonable apportionment between existing demand for public infrastructure to be created by the proposed development to which the contribution relates?
• is the proposed development contribution based on a reasonable estimate of the cost of proposed public infrastructure?

In addition, a council can enter into a voluntary planning agreement for key community infrastructure without Ministerial approval, but the agreement cannot require contributions for any additional community infrastructure without Ministerial approval (thus in effect mirroring the contribution plan provisions). The Minister can waive this requirement in certain circumstances.

On the enactment of the proposed legislation, existing planning agreements will be taken to be planning agreements under the corresponding provisions of the new contributions provisions.

Conclusion

Community reaction to the Bill has been mixed. For example, the Property Council of Australia has indicated its strong support for the new developer contributions regime, subject to more detailed analysis. As might be expected, some local Councils have not expressed support for the Bill in their submissions to the Department of Planning.

The Bill's public consultation period ended on 24 April 2008, and we anticipate that the Bill (along with the associated Building Professionals Amendment Bill 2008) will be introduced into Parliament shortly.

For further information, please contact Brendan Bateman.