Posted on June 24, 2021 by Lindsay Taylor and Megan Hawley 237

Bill to Reform NSW Development Contributions System Introduced into Parliament

As part of a suite of reforms introduced with the 2021–22 Budget, the NSW Government introduced the Environmental Planning and Assessment Amendment (Infrastructure Contributions) Bill 2021 (‘Bill‘) to the Legislative Assembly on 22 June 2021.

The Bill proposes to rewrite the NSW infrastructure contributions system under Part 7 of the Environmental Planning and Assessment Act 1979 (‘EPA Act‘). Many of the provisions of Part 7 of the EPA Act are to be re-enacted, including sections 7.11 and 7.12. The Bill also proposes some changes to planning agreements and local strategic planning statements under the Act.

Key changes to the development contributions regime proposed by the Bill include:

• introducing a new land value contribution condition in section 7.11,
• replacing the flat percentage levy in section 7.12 with a monetary levy required  by a local levy condition, and
• replacing Subdivisions 4 and 5 of Part 7, currently providing for special infrastructure contributions, with new subdivisions providing for regional infrastructure contributions.

Land value contributions and s7.11

The Bill introduces a new concept of ‘land value contribution‘.

Section 7.11 is proposed to be re-enacted to enable a consent authority to impose a local infrastructure contribution condition requiring a land value contribution in addition to a contribution for public amenities or public services.

A land value contribution is defined in the Bill as ‘a contribution required in relation to land in a land value contributions area‘. A land value contributions area is defined as ‘an area of land identified as a land value contributions area in a contributions plan‘.

The proposed new section 7.18(5) provides that a contributions plan must not identify land for which a land value contribution is required unless:

‘(a) a change to the planning controls that apply to the land will enable more intensive development of the land and, as a result, increase the value of the land, and

(b) the intensive development will require land to be provided for a public purpose.‘

Section 7.18(6) will provide that a contributions plan that identifies land in a land value contributions area must:

‘(a) identify the land in the land value contributions area that is required for a public purpose, and

(b) specify the maximum amount of the land value contribution, including by reference to a maximum percentage of the value of the land, and

(c) specify the way in which the owners of land in the land value contributions area will be notified of the land value contribution, and

(d) be published on the NSW planning portal.‘

The purpose of this regime would appear to be a mechanism to enable value capture.

In summary, the regime would work as follows:

• contributions plans may create land value contributions areas,
• a local infrastructure condition under s7.11 can require payment of the land value contribution,
• the land value contribution becomes a charge on the land,
• the charge may only be be discharged from the land upon full satisfaction of the land value contribution,
• if a land value contribution has not been paid and the land has not been sold since it was included in the land value contributions area, then the vendor in the sale of the land must satisfy the contribution on or before completion of sale,
• finally, before the Registrar-General can register an instrument effecting the transfer of land within the land value contributions area, the instrument must be endorsed by an authorised person indicating that the land value contribution has been satisfied.

The vendor or purchaser in a land transaction may apply for a ‘land value contribution certificate‘. The council then determines the contribution in accordance with the regulations and the contributions plan concerned. The land value contribution certificate issued by the council must specify certain information, including the extent of any land value contribution remaining and a unique identifying number for the land known as the ‘land value contribution assessment number‘.

Some other aspects of the new section 7.11 could have significant implications for the operation of the local infrastructure contributions system, including:

• the reference to a consent authority being satisfied that there will be or is likely to be an increased demand for public amenities or services as a result of development has been replaced with an objective test,
• previously, a section 7.11 condition could only be imposed on the grant of a development consent, but the new wording is that ‘a consent authority may impose a local infrastructure condition on a development consent‘, which may enable section 7.11 conditions to be imposed on the approval of an application made under section 4.55 of the EPA Act to modify a development consent,
• there is  a new requirement that the cost of providing public amenities or public services ‘be calculated in accordance with the regulations and relevant Ministerial directions‘,
• the new section 7.11 will allow consent authorities to accept ‘the provision of a material public benefit in part or full satisfaction of a local infrastructure condition‘ meaning that two things not currently permitted by the wording of the existing section 7.11 will be allowed, namely, the dedication of land in satisfaction of an obligation to pay a monetary contribution and works in satisfaction of an obligation to dedicate land free of cost.

Local levy condition

Section 7.12 is proposed to be re-enacted to provide for the imposition of a local levy condition on a development consent to require the payment of a monetary levy determined in accordance with the regulations.

The new section enables the regulations to ‘make provision about local levy conditions‘, including in relation to the following matters:

• the maximum amount of a levy that may be imposed for specified types of development, including development involving a specified number of dwellings or a specified gross floor area,
• the types of development in relation to which a local levy condition may be imposed,
• the local government areas in which, or the land on which, a consent authority may impose a local levy condition.

The last of these may mean that some local government areas may be denied the power to impose a local levy condition.

Unlike the existing section 7.12, the new section makes no reference to ‘a levy of the percentage…of the proposed cost of carrying out the development‘ and, on its face, the new section has the potential for a significantly broader and more varied application than the existing section. It remains to be seen what limitations are imposed by the regulations.

Regional infrastructure contributions

The Bill proposes to repeal the provisions of the EPA Act dealing with special infrastructure contributions (SICs), and replace them with provisions for regional infrastructure contributions (RICs).

There are savings and transitional provisions proposed which would save the former SIC provisions in the EPA Act in respect of certain SIC determinations and directions under sections 7.23 and 7.24 of the EPA Act. However, the savings provisions will rely on regulations, which are clearly not yet available.

RICs are contributions required in respect of development for public amenities or public services (including infrastructure that enhances public open space or the public domain), affordable housing, transport infrastructure, regional or State roads, and measures to conserve or enhance the natural environment.

Regional infrastructure can be provided by the provision of infrastructure, recoupment of the costs of infrastructure, funding recurrent expenditure in respect of infrastructure or by the Minister, Planning Ministerial Corporation or Planning Secretary carrying out research or investigations, preparing a report or study or doing any other thing to administer Part 7 of the EPA Act.

RICs will be required under a State environmental planning policy (SEPP), rather than, as with SICs, the making of a determination and direction by the Minister. There are detailed provisions in the Bill for what a SEPP must contain in order to impose a RIC. If a SEPP requires a RIC in relation to development, a consent authority or certifier must impose a condition requiring the RIC in accordance with the SEPP.

However, even if a council or certifier fails to impose a condition of consent for RICs in accordance with a SEPP, the condition will be taken to be imposed. No appeals  to the Land and Environment Court under the EPA Act will be allowed in relation to the imposition of RICs.

Other changes to development contributions

Section 7.13

There are two changes to note about this proposed section, which governs the circumstances in which local levy conditions and local infrastructure conditions may be imposed.

Firstly, there is an additional requirement that a local infrastructure condition or local levy condition is ‘imposed in accordance with the regulations and relevant Ministerial directions‘.

Secondly, the words ‘[t]his subsection does not authorise the Court to disallow or amend the contributions plan or direction‘ have been deleted from the current section 7.13(3). It remains to be seen whether this change will result in judicial intervention into contributions plans and Ministerial directions in planning appeals.

Expanded scope for regulations

Section 7.16A proposed by the Bill expands the scope of what the regulations can provide for, such as when and how monetary contributions must be paid. Normally, this would be provided for in a contributions plan. This would mean that local infrastructure conditions which are imposed in accordance with a contributions plan but not the regulations could be disallowed by the court.

Ministerial directions

The proposed section 7.17(1) makes minor changes to the Ministerial directions which can be made. For example, the proposed provision would allow the Minister to issue a direction about ‘the matters that must be considered when preparing a contributions plan, including matters relating to the efficient design of infrastructure‘. However, the Minister will not be able to issue a direction about local infrastructure conditions requiring a land value contribution. The Minister will also be able, in certain circumstances, to extend directions about the time at which a monetary contribution or levy is to be paid to existing development consents.

Proposed Section 7.46(2)

If passed, this sub-section would allow consent authorities and councils in the area of a development to recover unpaid contributions required under local infrastructure conditions as debts in a court of competent jurisdiction.

Planning agreements

There do not appear to be any significant changes proposed in respect of planning agreements, except in relation to public notice of planning agreements.

The current provision regarding public notice of planning agreements is proposed to be repealed and planning agreements will become subject to the community participation requirements under Division 2.6 of the EPA Act.

The mandatory notice period for exhibition of planning agreements will remain 28 days. However, a lesser notice period for amendment or revocation of a planning agreement may be provided for in a community participation plan.

Local strategic planning statements

The Bill also proposes to require councils to prepare LSPSs every 5 years instead of every  7 years.

Further information & contact

As of the date of this article, the Bill has only had its first reading. We will monitor the progress of the Bill and provide updates if any changes are made, and if and when the Bill becomes law.

The full text of the Bill (and Explanatory Note) is available here.

To discuss this Bill and its implications, please contact Dr Lindsay Taylor on 02 8235 9701 or Megan Hawley on 02 8235 9703.