Infrastructure Contributions Plans: let’s use them properly

By David Passarella, Partner, and Hannah Wilson, Lawyer.

The PLC Act

On 2 July 2018, the Planning and Environment Amendment (Public Land Contributions) Act 2018 (PLC Act) came into operation. The PLC Act proposes a new model for the infrastructure contributions plan (ICP) system, whereby affected landowners are required to transfer any part of their land identified for public purposes to a collecting agency (typically, the local council) as part of their infrastructure contribution, rather than paying a monetary amount.

The new model is based on the principle that all landowners under an ICP should contribute equally to the provision of land for essential infrastructure needs. In practice, however, some landowners may be required to hand over more than others, and be compensated accordingly under an equalisation process described further below.

Key features of the new ICP model

ICPs are approved via an amendment to the relevant planning scheme. An approved ICP must specify an ‘ICP land contribution percentage’ (ICP LCP) for each class of development, which is the starting point for how much land is required to be transferred over to the collecting authority by each landowner. Landowners that contribute a greater percentage of their land than what is prescribed by the ICP LCP are compensated with a ‘land credit amount’. On the other hand, landowners that contribute a lesser percentage of their land than what is prescribed by the ICP LCP are required to pay an ‘equalisation amount’, which is then used by the collecting agency to pay the land credit amounts.

Land credit amounts and equalisation amounts are to be calculated in accordance with the Ministerial Direction on the Preparation and Content of Infrastructure Contribution Plans. A landowner may only object to the estimate value per hectare relating to its land at the time the planning authority is preparing the ICP. If the planning authority rejects the landowner’s submission on the estimated value, the matter is referred to the Valuer-General for final determination. Distinct from standard land acquisition processes, there is no opportunity for a landowner to dispute the value of a land credit amount when it comes time for payment.

A landowner will become liable to make its infrastructure contribution upon applying for a planning or building permit. Where the landowner’s contribution includes the transfer of a parcel of land, that land must be vested in the relevant agency via a plan of subdivision.

Which land does an ICP apply to?

At present, ICPs only apply to metropolitan greenfield growth areas. However, it is expected that the new regime will in time also apply to regional growth areas and strategic development areas.

Interestingly, the PLC Act has come into operation just weeks after the conclusion of the Fishermans Bend Planning Review Panel Hearing, during which the Minister for Planning proposed to implement the new system as a mechanism for reserving and acquiring privately owned land throughout Fishermans Bend for public purposes. While we acknowledge the benefits of employing an ICP in greenfield areas, in our view, there are a number of reasons why the ICP model introduced by the PLC Act is not an appropriate instrument for areas like Fishermans Bend.

In summary:

  1. The PLC Act does not recognise that a landowner incurs a financial loss as soon as an ICP is applied, reserving all or part of its land. This is not as problematic in greenfield areas, where the whole of the land contained in the ICP is benefitting from a future rezoning. The same cannot be said for urban environments, like Fishermans Bend, where the land has already been rezoned and the financial losses are more evident. For example, in the event that a landowner wants to sell its land, it will be forced to do so at a reduced price and will be unable to recover that loss. Ordinarily, if a public acquisition overlay applied, a landowner would have that right pursuant to Part 5 of the Planning and Environment Act. Similarly, the PLC Act does not recognise a compensation mechanism for existing tenants.
  2. The PLC Act does not take the value of land improvements into consideration. Therefore, for an area like Fishermans Bend, which comprises various built forms and existing uses, the PLC Act will not fairly compensate landowners.
  3. A collecting agency is empowered under the PLC Act to compulsorily acquire land identified for public purposes whenever it so desires. This has the potential to create a situation where landowners, not wanting to develop their land but rather to continue an existing use, may have part of their land taken without receiving fair, or in some cases any, compensation. In an urban setting like Fishermans Bend, where land parcels are smaller in size, a reservation can take quite a significant portion of a site and have larger consequences for existing uses. This can be contrasted with infrastructure proposed to be provided on large acreage farms.
  4. The new ICP model is not equipped to deal with situations where the entirety of a landowner’s site is to be acquired for public purposes. In the Fishermans Bend context, it is proposed that 17 out of 38 landowners whose land has been identified as being required for public purposes will have the whole of their land acquired.

Conclusion

There is no doubt that the ICP model introduced by the PLC Act, if used fairly, will be an invaluable tool in outer metropolitan greenfield areas. It provides a clear process for the making of contributions and the provision of community infrastructure in areas where all land is relatively equal in value.

Our concern is that attempts will be made to apply ICPs to urban renewal areas like Fishermans Bend. For the reasons outlined above, we consider this would be a grossly inappropriate use of the new model. Accordingly, we would urge the authorities to act cautiously in the application of the PLC Act.

For further information, please do not hesitate to contact us.

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