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Focus: The NSW Planning Bill – Part III – infrastructure and development contributions

30 October 2013

In brief: In this third of our four-part series of articles providing commentary on the anticipated future direction of the NSW Planning Bill 2013, Partner Paul Lalich and Senior Associate Trent March discuss the infrastructure and development contributions regime proposed under the Bill.

How does it affect you?

  • Local and regional infrastructure contributions are to be specified in Local Plans (LP) and will be imposed by development consent conditions.
  • Planning agreements are to be utilised only in limited circumstances.
  • Biodiversity offset contributions may be levied via conditions of consent. If imposed, a condition of this type is not appealable.
  • The Bill was introduced into the NSW Parliament on 22 October 2013.

Background

The White Paper indicates there will be three forms of infrastructure contributions under the new system:

  • Local Infrastructure Contributions (LICs);
  • Regional Infrastructure Contributions (RICs); and
  • Regional Growth Funds (RGFs).

Relevant infrastructure will be identified in strategic documents (Local Infrastructure Plans (LIPs) and Growth Infrastructure Plans (GIPs)), which will be developed in conjunction with the strategic planning framework discussed in detail in the first article in this series. The infrastructure having been identified, all contributions will then be set out and given legal effect in a council's LP.

According to the White Paper, planning agreements will only be available for state significant development, except in exceptional circumstances.

Local Infrastructure Contributions

The White Paper anticipates that local infrastructure, such as local roads and traffic management, local open space and embellishment, basic community facilities (land and capital) and capital costs of drainage, may be the subject LICs. Standardised and benchmarked costs are to be applied in determining the cost of the local infrastructure. A contributions task force, comprising councils, state agencies and industry, will refine the list of essential local infrastructure over time.

Under the Bill, a LP can only impose a LIC on infrastructure the subject of a LIP. The Bill follows the requirements under the current section 94 regime in this regard. Both 'direct' LICs (ie s94 contributions) and 'indirect' LICs (ie s94A levies) may be imposed. For new infrastructure, a direct LIC may only be imposed if the development concerned will increase the demand for that infrastructure. For existing local infrastructure, a direct LIC can be imposed if the development will benefit from the provision of the existing infrastructure.

A council will be required to hold any LIC for the purpose for which it was imposed (though LICs for separate purposes may be pooled and used progressively). The exposure draft of the Bill provides that monies held must be applied for the relevant purpose within three years. Conditions of development consent imposing a direct LIC may be subject to appeal on reasonableness grounds. Indirect LICs may not be appealed.

Regional Infrastructure Contributions

According to the White Paper, RICs may be imposed on residential, commercial and industrial development to fund subregional priorities for regional and state roads, other transport infrastructure, schools and upgrades to regional open space within the relevant subregion. Conditions of development consent imposing an RIC may not be appealed. The Bill provides for the creation of a Regional Contributions Fund into which RICs are to be paid.

Regional Growth Funds

The White Paper indicates that the cost of acquiring regional open space and drainage land will be funded through RGFs, with the relevant charges calculated on a regional basis. All new development within a region will be required to contribute to the relevant RGF. The Bill does not provide separate labels for RICs and RGFs in the manner the White Paper does. It does, however, provide a distinct payment mechanism for regional infrastructure contributions for regional open space and drainage land. Such contributions will be required to be paid into the relevant Planning Growth Fund (to be created for each region under the Planning Administration Act 2013 (NSW)).

Biodiversity Offsets

Biodiversity offset contributions (BOCs) will be separated from infrastructure contributions. Rather than being identified in a LIP or GIP, BOCs may be identified in a Regional Growth Plan (RGP) or Subregional Delivery Plan (SDP) and, having been so identified, will be given legal effect in a council's LP. Conditions of development consent imposing BOCs may not be appealed. Such contributions will be required to be paid into a biodiversity offset fund (to be created under the Threatened Species Conservation Act 1995 (NSW)).

Payment methods

The White Paper indicates that greater flexibility will exist to provide contributions later in the development cycle: eg closer to the point of sale. Works-in-kind and land dedication will also remain available as flexible options. The exposure draft of the Bill simply includes a place holder to the effect that:

[Provision to be included to enable deferral of the payment of regional infrastructure contributions up to the transfer of land ....]

Planning agreements

According to the White Paper, planning agreements will only be available for state significant development and under exceptional circumstances. The restriction in the Bill is not necessarily in those terms. Under the Bill, a planning agreement may relate to:

  • the provision of infrastructure identified in an LIP or GIP or the subject of a Ministerial planning order (where there is no LIP or GIP);
  • the provision of affordable housing identified in a RGP or SDP; or
  • the conservation or enhancement of the natural environment of the State.

As is presently the case, there will be no right of appeal against the failure of a public authority to enter into a planning agreement or against the terms of such an agreement.

Commentary

As we have done with each article in this series, we have reviewed the public submissions of key agencies and stakeholders on the White Paper and exposure draft of the Bill, along with Government statements on the reasons for the deferral of the introduction of the Bill to Parliament. The substance of those as they relate to the infrastructure contributions provisions of the Bill are outlined below:

  • The proposed integration of infrastructure provision and strategic planning was generally well received, however, there is concern that this aspect of the Bill remains uncertain, given:
    • there is little detail as to how the cost of local infrastructure will be benchmarked;
    • the make-up of the proposed Contributions Taskforce is unresolved, with many stakeholders laying claim to representation; and
    • consideration of the financial impacts of RICs and RGFs will have to await preparation of the relevant GIPs.
  • Local government authorities strongly opposed the requirement to apply LICs to relevant infrastructure within three years. As a result, the NSW Government has confirmed that the period will be extended to five years.
  • Concern has been expressed regarding the 'nexus' test for LICs. A LIC may be imposed for existing infrastructure if the development will 'benefit' from the infrastructure. Currently, it must be demonstrated that the relevant development is likely to 'increase the demand' for the infrastructure, a test that imports a consideration of 'nexus' between the amount of the contribution and the scale of the development.
  • Concern has also been expressed with the ouster of appeal rights for indirect LICs, RICs and BOCs. A similar limitation currently applies to the imposition of a special infrastructure contribution (SICs) (arguably, the current RIC equivalent).
  • The restriction – identified in the White Paper, in particular – on the use of planning agreements, was opposed by local government and stakeholders. In the short to medium term, the timing of the integration of infrastructure provision and strategic planning is likely to create issues that could be overcome with a more flexible approach to planning agreements. As it stands, if there is no LIP and LP in effect and a LIC cannot be imposed, a planning agreement will only be able to be used if a Ministerial planning order is issued.
  • The restrictions on the use of planning agreements aside, the existing planning agreement provisions have generally been imported into the Bill. It has been said that this represents a lost opportunity to include provisions designed to address impasses that arise between consent authorities and proponents in the negotiation of such agreements.

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