Posted on October 14, 2015 by Lindsay Taylor

The governance & probity framework for voluntary planning agreements in NSW

As noted in the previous post titled “Voluntary Planning Agreements in NSW – Ten Years On”, dated 12 July 2015, voluntary planning agreements (‘VPAs’) under s93F of the Environmental Planning and Assessment Act 1979 (‘EPA Act’) have become an important planning tool enabling planning authorities to achieve developer funding for public infrastructure, facilities, and services that are necessary to support new development in metropolitan and regional growth areas and established urban areas and, in appropriate cases, also to achieve valuable additional community benefits.

The key concerns with any facility for bargaining within the planning system are governance and probity. This post summarises the mechanisms which exist in NSW to ensure that VPAs are used for proper planning purposes and in a fair and ethical manner.

Statutory provisions 

Several important provisions in the EPA Act protect the probity of the VPA bargaining process, including the following:

• development consent cannot be refused because a VPA has not been entered into or the developer has not offered to enter into one,
• a development consent condition can only require a VPA to be entered into by the developer strictly in accordance with an offer made by the developer,
• an environmental planning instrument (‘EPI‘) has no effect to the extent that it requires a VPA to be entered into before a development consent is granted, or prevents a consent from being granted unless a VPA is entered into.

Likewise, some important provisions in the EPA Act protect the probity of the planning process in which planning agreements operate, including the following:

• a VPA cannot require an instrument change (ie. planning proposal) to be made or a development consent to be granted,
• a VPA is void to the extent that it allows or requires a breach of the EPA Act, an EPI, or a development consent.

Departmental best practice guidelines

The NSW Department of Infrastructure Planning Natural Resources (as it then was) published a practice note on VPAs in 2005 shortly after the EPA Act was amended to include VPAs. The practice note is not legally binding.

The practice note states that it is intended to provide best practice guidance on the use of VPAs, and expressly recognises that it may advocate greater restrictions on their use than is provided for in the statutory scheme. It identifies that the ‘paramount need’ of the planning system is to secure the fair imposition of planning control for the benefit of the community and as between different developers, and advocates the need for principles, policies, and procedures relating to VPAs to safeguard the public interest and the bargaining process.

The practice note discusses the need for an awareness of the ways in which VPAs can be misused by planning authorities and developers. It states that the primary fundamental principle governing the use of VPAs is that they may not be used to buy or sell planning decisions. To this end, it recommends that planning authorities apply an ‘acceptability test’ when assessing proposals for VPAs. The test is set out in the practice note.

The practice note sets out a framework of policies and practices intended to promote best practices relating to the use of VPAs, and requires these to be complied with ‘to the fullest extent possible’. Some key elements of this framework for planning authorities, such as the Minister and local councils, include:

• limiting the use of VPA for value capture (*this issue will be the subject of a separate future post),
• involving independent third parties in planning agreement negotiations in appropriate cases,
• publishing planning agreements policies and procedures, and
• standardising planning agreements documents and procedures.

Local government policies

Some but not all planning authorities in NSW, mainly local councils, have adopted and published polices and procedures on the use of VPAs as recommended by the Departmental practice note.

There is substantial similarity between the various VPA policies in relation to their presentation, arrangement, and content. They tend to be formulaic and not bespoke to the circumstances of the particular councils. Although they reflect an attempt to comply with the requirements of the practice note, they are generally substantively inadequate, reveal little about the use of VPAs by the councils concerned, and ultimately provide little assistance to the VPA process for planning authorities and developers.

Some particular aspects of local council VPA policies are discussed under the headings that follow.

Purposes of VPAs

Most policies identify the same common purposes of using VPAs. One proposes using VPAs to ‘adopt innovative approaches to the delivery of facilities and services’ without explaining what this may involve and in what cases it may be relevant.

Broader context of VPAs

Few policies attempt to explain the wider context within which VPAs are used by the council. Where this is done, little explanation is provided.

None of the policies discuss:

• VPAs in the context of the councils’ mandatory corporate strategic planning documents under Part 2 of Chapter 13 of the Local Government Act 1993, despite the obvious links,
• the role of VPAs in promoting or achieving the aims, objectives, policies, and strategies of the statutory planning framework within which they operate,
• particular land use planning or development issues that are addressed by the planning controls and the role of VPAs in that regard, nor
• the role of VPAs in the councils’ overall development contributions or infrastructure funding and management systems.

Development context

None of the policies describes the types of development to which VPAs will be applied, nor differentiate their use in relation to different types of development or apply any thresholds or exemptions to their use.

Public facilities

Few of the policies specify the particular types of public facilities that will be sought through VPAs.

Valuing public benefits

Most policies address how non-monetary benefits under VPAs will be valued, and distinguish between valuing land and works. There is general consistency in the approach to valuing works. There is less consistency relating to valuing land. Only one policy relates values back to its contributions plan.

Security

Most policies state that security in the form of unconditional bank guarantees will generally be required in respect of the developers’ obligations under VPAs. None discusses any other means of providing security or differentiates between different types of security for different purposes or in different situations.

Registration

Most policies state that VPAs may be required to be registered on the title to the land to which the agreements relate. However, the policies do not indicate the relevant circumstances or considerations in this regard, nor do they discuss procedural issues relevant to registration.

Dispute resolution

Most policies require disputes arising under VPAs to be mediated. None provides for expert determination of disputes about technical matters arising under the agreements.

Monitoring and review

Most policies contain the broad statement that the councils will ‘continuously’ monitor and review the performance of the developers’ obligations under VPAs. None set out the process for monitoring or staff responsibilities.

Some policies state that VPAs will impose periodic reporting obligations on developers without explaining any requirements. Some provide for periodic reviews of VPAs, but do not set out any criteria or procedures.

Standard / template VPAs

Most policies contain a VPA template document, and require developers to prepare and submit proposed VPAs using the templates contained in the policies. Some policies require that the councils will prepare VPAs.

Negotiation

Most policies set out steps in the negotiation process for a VPA. The significant element of all policies is the requirement for VPA negotiations to occur at pre-application lodgment stage, and for draft VPAs or formal written offers by developers to accompany the lodgment of the applications.

Costs

The consistent approach in the policies is to require developers to pay the costs incurred by councils in negotiating, preparing, executing, monitoring, and enforcing VPAs, including associated costs such as valuation costs.

Staff roles and responsibilities

Most policies discuss the roles and responsibilities of council officers in VPA negotiations in the context of probity issues. Only one policy discusses the substantive functional roles of different council officers.

Probity matters

All policies identify and discuss probity matters which are relevant to negotiating VPAs. The significant elements of the policies include the need for appropriate delegations and separation of staff responsibilities within councils, the exclusion of elected members of councils from face-to-face VPAs negotiations, and the involvement of independent persons in the negotiation process, where appropriate.