New Public Land Contributions Regime for Victoria

On 2 July 2018 the Planning and Environment Amendment (Public Land Contributions) Act 2018 (the Act) came into effect.

The Act implements a new land contributions model to the Infrastructure Contributions Plan (ICP) system, which originally took effect on 27 October 2016 for metropolitan greenfield development.

Previously, the ICP system allowed for a monetary levy only, with standard levies pre-set for particular development settings and land uses. This resulted in difficulties where the cost of providing basic and essential infrastructure was far less than the levy itself.

The new model is expected to:

• Reduce the overall monetary levy paid by developers under an infrastructure contributions plan by spreading the cost of securing public land across an ICP area;

• Reduce the financial risk to councils through escalating land prices over time and the potential for underfunding of infrastructure and public open space;

• Overcomes the longstanding issue of developers contesting the compensation that is payable when land for public purposes is acquired;

• Secure the early transfer of land for public purposes in the development of a new community; and

• Provide a simpler model than the current methodology.

The purpose of the land contribution model is to secure land needed for public purposes by requiring landowners to contribute this land directly as part of their infrastructure contribution, instead of paying a monetary levy. The Act also amends the existing legislation to increase and index the community infrastructure levy that may be imposed under the current development contributions system.

Key features of the new ICP system include:

1. A land contribution model allowing landowners to transfer land as part of their ICP contribution.

The infrastructure contribution provided by landowners may consist of either or both of the following:

• A land component – being land identified in an approved infrastructure contributions pan for public purposes (such as land for roads, parks and community facilities). The land may be located within the area to which the ICP applies (‘inner public purpose land’) or outside of this area (‘outer public purpose land’)

• A monetary component – a monetary levy that may be used to fund the provision of plan preparation costs and works, services or facilities identified in an approved ICP.

An ICP incorporated in a planning scheme will be the mechanism for imposing an infrastructure contribution in relation to development of the land and the ICP will specify the type, amount and location of public purpose land.

2. Land contribution equalisation and credit system to ensure landowners contribute equally to provide land for public purposes.

The new regime is based on the principle that owners of land in the ICP plan area should contribute equally to the provision of public purpose land. However, in practice public purpose land is not evenly distributed throughout the ICP plan area. Some parcels will have to contribute more than others, which means some landowners will have less developable land than others.

To ‘equalise’ the contributions made, the combined area of the public purpose land relative to the overall contribution land within the ICP for a particular class of development is used to calculate the contribution percentage, ‘ICP land contribution percentage’. The extent to which public purpose land is located within each parcel of land of that class within the ICP is then calculated as a percentage, ‘parcel contribution percentage’.

The equalisation mechanism works by then reconciling whether the parcel contribution percentage is above or below the ICP land contribution percentage. If the parcel of land contains more public purpose land than the average across the ICP, the landowner is compensated with a land credit amount. Conversely, if the land contains less public purpose land than the average across the ICP, the landowner pays a land equalisation amount.

3. Valuation methodology is to be used to value certain inner public purpose land and resolve disputes about the value of that land.

Under this process the affected landowner must be notified of, and may make a submission in relation to the estimated value of the inner public purpose land, which the planning authority must consider. A valuer-general can assist the parties in reaching agreement or make an independent determination if the parties fail to agree.

4. Indexation of the community infrastructure levy involves annual indexation of the levy amount to construct a dwelling specified in an approved development contributions plan. The maximum community infrastructure levy has been increased to $1,150 per dwelling. To be indexed annually starting 1 July 2019 to be adjusted using a formula set out in the Act.

Any existing ICPs will need to be amended to include mandatory detail about land contribution and land equalisation amounts. The new regime can then be applied to these ICP areas.

It is expected that the strengthened powers for the Collecting and Development Agency (typically the council) to compulsorily acquire land as required for timely development of key infrastructure within ICP areas may assist greenfield developers in negotiations with Council, as they may be more willing to assist by compulsorily acquiring the land.

The ICP regime currently only applies to greenfield growth areas. However it is expected that, over time, the model will also be applied to regional growth areas and strategic development areas, such as Fishermans Bend. Whilst benefits of such a regime can be seen for greenfield areas, careful consideration needs to be given to whether the model is an appropriate instrument for regional growth areas and strategic development areas. Concerns include:

• Financial loss to a landowner where an ICP is applied, given there is currently no compensation mechanism in place where a landowner sells its land at a reduced price due to the existence of an ICP. This is not as problematic in a greenfield area where the whole of the land in an ICP area will benefit from a future rezoning; and

• The new model does not appear to deal with situations where a landowner’s site can be wholly acquired for public purposes. This can be contrasted with the situation where a infrastructure is proposed to be provided on a large greenfield site.

If you have any queries or would like assistance determining your public land liability or taking into account the changes effected by this Act, please contact us.

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.