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Planning and Environment Act 1987

Standard Development Contributions Advisory Committee

Report 1‘Setting the Framework’

17 December 2012

Planning and Environment Act 1987

Advisory Committee Report pursuant to section 151 of the Act

Standard Development Contributions Advisory Committee

Kathy Mitchell, Chair

Trevor McCullough, Member Rodger Eade, Member

Chris De Silva, Member Bryce Moore, Member

ContentsPage

Executive Summary 1

Part A Introduction and Background 5

1 Introduction 61.1 Setting the Scene61.2 The Advisory Committee and Terms of Reference 71.3 Other Inputs 101.4 Approach to this Report 11

2 Historical Context 132.1 Development Contributions in Victoria 132.2 Implementation Framework - Victorian Planning System 182.3 Funding Context 222.4 Development Levies in Other States 24

3 A Preferred Way Forward 273.1 The Current System 273.2 Issues with the Current System 303.3 The New Model – A Preferred Way Forward 323.4 Operational Features 33

4 Submissions and Consultation 344.1 Process Adopted by Committee 344.2 Summary of Submissions 354.3 Key Principles 37

Part B The Proposed Framework 41

5 Proposed Development Settings and Development Levies 425.1 Context 425.2 Defining Development Settings 425.3 Proposed Model of Development Levies 485.4 Operational Issues 50

6 Application to Types of Development 526.1 Context 526.2 The Proposed Infrastructure Categories 526.3 Basic and Essential Infrastructure 53

7 Defining the Levies – Growth Areas 597.1 Context 597.2 Growth Area Levy Structure 597.3 Standard Levy for Growth Areas 60

Standard Development Contributions Advisory Committee Report 1 17 December 2012

7.4 Development Levy Scheme for Growth Areas 617.5 Community Infrastructure and Recreation Facilities in a Growth Area

DLS 627.6 Transport Infrastructure in a Growth Area DLS 707.7 Drainage Infrastructure in a Growth Area DLS 797.8 Public Land in a Growth Area DLS 827.9 Administrative Costs 847.10 Level of Justification Required in Implementing the Levies 85

8 Defining the Levies – Urban Areas 868.1 Context 868.2 Submissions and Commentary 868.3 Standard Levy in Urban Areas 868.4 Allowable Items 888.5 Level of Justification Required in Implementing the Levy 918.6 Findings 91

9 Defining the Levies – Strategic Development Areas 929.1 Context 929.2 Standard Levies in Strategic Development Areas 929.3 Submissions and Commentary 929.4 Development Levy Scheme in Strategic Development Areas 939.5 Allowable Items 949.6 Level of Justification Required in Implementing the Levies 949.7 Findings 97

10 Apportionment - When is it Required? 9810.1 Context 9810.2 What are the Key Issues? 9810.3 Submissions and Commentary 9910.4 Proposed Approach to Apportionment 9910.5 Findings 103

11 Valuing Public Land 10411.1 Context 10411.2 What are the Key Issues? 10411.3 Submissions and Commentary 10511.4 Discussion 10511.5 Findings 106

12 Works in Kind 10712.1 Context 10712.2 Works in Kind 107

13 Developer Delivered Infrastructure and GAIC 10913.1 Context 10913.2 Developer infrastructure delivered on site 10913.3 State Infrastructure and GAIC 110


14 Using Permit Conditions for Infrastructure 11614.1 Context 11614.2 What are the Key Issues? 11614.3 Submissions and Commentary 11614.4 Discussion 11714.5 Findings 121

15 Administration of Development Contributions 12215.1 Context 12215.2 Accountability and Reporting12315.3 Indexation 12615.4 Efficient Decision Making 128

16 Response to the Terms of Reference 130

17 Summary of Key Findings 132

Appendix A Terms of Reference

Appendix B Stakeholder Consultation

Appendix C Written Submissions

Appendix D Small Group Meeting Participants


List of TablesPage

Table 1 Defining Development Settings 44

Table 2 Summary of Proposed Alternative Development Levies. 49

Table 3 Growth Areas Community and Recreation levy – Allowable Items65

Table 4 Growth Areas Community and Recreation Levy – indicative list of items to be used to calculate fixed levy 69

Table 5 Growth Areas Transport Levy - Allowable Items 78

Table 6 Growth Areas Drainage Levy - Allowable basic and essential infrastructure items 82

Table 7 Justification required to apply or vary Development Levies in a Growth Area 85

Table 8 Urban Areas Standard Levy – Allowable Items 90

Table 9 Justification required to apply or vary Development Levies in an Urban Area91

Table 10 Strategic Development Areas Standard Levy and DLS – Allowable items 95

Table 11 Justification required to apply or vary Development Levies in an Strategic Development Area 96

Table 12 Apportionment for Development Settings 102

Table 13 Response to the Terms of Reference 130


List of Abbreviations

the Act Planning and Environment Act 1987

DC Development Contributions

DCP Development Contributions Plan

DCPO Development Contributions Plan Overlay

DLS Development Levy Scheme

DPCD Department of Planning and Community Development

DSE Department of Sustainability and Environment

GAA Growth Areas Authority

GAIC Growth Area Infrastructure Contribution

LPPF Local Planning Policy Framework

MSS Municipal Strategic Statement

NDH Net Developable Hectare

PAO Public Acquisition Overlay

PSP Precinct Structure Plan

PTV Public Transport Victoria

SPPF State Planning Policy Framework

UGB Urban Growth Boundary

UGZ Urban Growth Zone

Standard Development Contributions Advisory Committee Report No. 1 17 December 2012 Page i

Executive SummaryIn May 2012, the Minister for Planning announced a preferred framework for the development contributions system in Victoria which is set out in A New Victorian Local Development Contributions System – A Preferred Way Forward, prepared by the Department of Planning and Community Development. It proposes a combination of standard contributions and other variable contributions for five infrastructure categories, in different development settings.

In September 2012, the Minister for Planning appointed the Standard Development Contributions Advisory Committee (the Committee) to review and report on the new system. The purpose of the Committee is to provide advice to inform the Minister’s decision on the final framework for a new Victorian development contributions system and for the establishment of standard levies.

More specifically, the Committee is to provide advice on the implementation and operation of the new system, including setting and implementing standard levies for different development settings, and for different categories of infrastructure.

This report (Report 1 Setting the Framework) is the first of two reports required by the Terms of Reference and provides findings on matters required to finalise the features and operation of the new development contributions system. The Committee has approached preparation of this report by identifying the issues raised in A Preferred Way Forward and its Terms of Reference as the key parameters for its review, consideration and findings.

The Committee undertook targeted consultation, where it invited various stakeholders to meet with it. Over 100 people from 33 organisations attended these meetings. The Committee received 58 written submissions in response to the framework set out in A Preferred Way Forward.

Additionally, the Committee ‘road tested’ three key themes (development settings, overview of development levies and applying the levies) in confidential discussion forums with representatives of councils, State agencies and planning and development interest groups prior to finalising this report.

This report should be read as an interim report that provides the thoughts and views of the Committee based on its work to date. It does not represent its final views, nor does it provide final recommendations. In some instances, it proposes a range of options for further consideration prior to its work being finalised. The Committee’s response to the Terms of Reference and a Summary of Findings are shown in Chapters 16 and 17 respectively.

Following the release of this report by the Minister for Planning, the Committee will invite submissions from stakeholders on the issues raised prior to preparation of Report 2 Setting the Levies, in May 2013.

Standard Development Contributions Advisory Committee Report 1 17 December 2012 Page 1 of 136

In summary, the Committee is proposing a new development contributions system that provides for three development settings:

Growth Areas; Urban Areas; and Strategic Development Areas (Large Scale and Small Scale).

A Standard Levy is proposed as the default in each development setting, but with the opportunity to apply a tailored Development Levy Scheme (in Growth Areas and Large Scale Strategic Development Areas) if strategically justified. A Standard Levy will be applied per net developable hectare for Growth Areas, or per dwelling for Urban Areas and Strategic Development Areas in both a metropolitan and non-metropolitan context.

Lists of Allowable Items are proposed for each infrastructure category and each development setting in order to set clearly defined limits on what can be included in a development levy.

The new system will operate as a contribution towards infrastructure, and not full cost recovery.

Table A provides a summary of the key elements of the proposed framework with reference to the relevant Chapter(s) where the various elements of the proposed framework are discussed in more detail.

RecommendationThe Committee recommends that:

1. The Minister for Planning receive Report 1 Setting the Framework, and endorse the Report for public release; and

2. Report 1 Setting the Framework be used as a basis for further consultation to inform the Committee’s Report 2, Setting the levies.


Table A Summary of the Proposed FrameworkCommittee Proposal Chapter(s)

DEVELOPMENT SETTINGS

Three Development Settings are proposed: Growth Areas, Urban Areas; and Strategic Development Areas.

5

A NEW DEVELOPMENT LEVY SYSTEM

Different development levies may be applied in metropolitan and non-metropolitan Development Settings.

5

The new system is based around two alternative levies; a Standard Levy or a Levy determined through the preparation of a Development Levy Scheme (DLS).

5

New terminology is proposed to distinguish the new DLS from current DCPs. 5

Standard Levies will apply for each of the Development Settings. 5

The Standard Levy will apply unless the preparation of a DLS can be shown to be strategically justified (for Growth Areas and Large Scale Strategic Development Areas only).

5

A DLS will not be permitted in Urban Areas or Small Scale Strategic Development Areas. 5

INFRASTRUCTURE CATEGORIES

The following infrastructure categories are proposed: Community and Recreation infrastructure; Transport infrastructure; Drainage infrastructure; and Public land.

6

BASIC AND ESSENTIAL INFRASTRUCTURE

Basic and essential infrastructure is not defined as such. The term ‘Allowable Items’ is used to define infrastructure that is able to be included in each levy for each Development Setting.

6

Whilst some items in the lists of Allowable Items may be fully funded, Development Levies are considered a contribution to infrastructure.

6

Land acquisition is to be considered a priority in development levies to ensure appropriate provision can be made for the long term development of infrastructure.

6

Development Levies are more appropriately based on bottom up costing than on historical bases, where possible.

6

GROWTH AREAS

A Standard Levy will be developed for Growth Areas. The option of preparing a DLS will also be available.

7

A fixed Community and Recreation Levy will apply (as part of a Standard Levy or a DLS). 7For a set per net developable hectare Standard Levy for Growth Areas, the following is assumed: Expenditure on Community and Recreation Allowable Items will be permitted up to a

fixed maximum charge level; Expenditure will be permitted on Transport and Drainage (where applicable) from the

list of Allowable items; Expenditure will be permitted on land acquisition as defined in the PSP; Expenditure on the above will be allowed up to the standard per hectare levy; and

7


Committee Proposal Chapter(s)

Land values in different Growth Areas will mean that the Standard Levy will most likely vary between municipalities.

A fixed Community and Recreation Levy is proposed to be calculated on a list of infrastructure that will be scoped and costed in the Committee’s Stage 2 work

A standard per metre rate may not be possible for Transport because of widely varying circumstances.

7

Scoping and costing of a series of standard intersection designs and road cross sections will be a useful benchmark in developing and assessing a variable Transport Levy.

7

The draft Arterial Roads Protocol should be reviewed prior to being formalised. 7

A standard levy for drainage may not be possible because of widely varying circumstances. 7

The Committee supports the variable land levy as proposed in A Preferred Way Forward. 7

JUSTIFICATION OF STANDARD LEVY AND DLS

Applying a Standard Levy (or varying it) will require strategic justification. A higher level of justification will be required when a DLS is prepared.

7, 9

URBAN AREAS

A Standard Levy will be set for Urban Areas, possibly with a range. No DLS for Urban Areas. 8

A Standard Levy for Urban Areas will fund infrastructure attributable to population growth only. Allowable Items will relate to population growth.

8

STRATEGIC DEVELOPMENT AREAS

Two Standard Levies will be set for Strategic Development Areas reflecting Small Scale and Large Scale developments.

9

A list of Allowable Items applicable to the setting is proposed. 9

The preparation of a DLS will be an option in Large Scale Strategic Development Areas. 9

EXTERNAL APPORTIONMENT

External apportionment of the costs of some infrastructure should continue to be permitted but the principles under which this can occur will be more carefully defined.

10

PUBLIC LAND

The Committee supports the approach to determining the variable public land levy as proposed in A Preferred Way Forward.

11

WORKS IN KIND

Works in Kind should continue to be encouraged at the discretion of a council and undertaken under the terms of a section 173 or other agreement.

12

OFF- SITE IMPACTS

The existing legislative framework should be retained to enable responsible authorities to mitigate the off-site impacts of individual developments through permit conditions and this should be reinforced through the development of appropriate guidelines.

14


Part A Introduction and Background


1 Introduction1.1 Setting the Scene

In May 2012, the Minister for Planning announced that the Victorian Coalition Government had identified a preferred framework for the Development Contributions System currently operating in Victoria.

In July 2012, the Department of Planning and Community Development (DPCD) prepared A New Victorian Local Development Contributions System – a Preferred Way Forward (A Preferred Way Forward).

The objective of the new system is to provide fairness, certainty and a simplified approach for councils, developers and the community through the use of pre determined standard‐ levies. In order to deliver the objectives of the new system, the Government has identified A Preferred Way Forward.

A Preferred Way Forward outlines a preferred framework for a new system that proposes a combination of standard contributions (that cannot be varied) and other variable contributions for different development settings, in five infrastructure categories:

Community Facilities; Open Space Facilities; Transport Infrastructure; Drainage Infrastructure; and Public Land.

The calculation of standard levies is proposed to be based on the identification of basic and essential infrastructure and will apply to a range of development settings including:

Growth Areas; Regional Settlements; Rural Settlements; Established Areas; and Strategic Redevelopment Sites.

Development contributions have been an important part of the planning and development process in Victoria since the 1990s. There have been a number of refinements since legislation was first introduced in 1995 to formalise the development contributions system, and this current review has the potential to change the way development contributions are applied into the future.

Under the model proposed, it will be possible to set different contribution rates for residential and non-residential land. The new system proposes to draw a distinction between local and higher order infrastructure and establish a number of operational requirements. Significantly, the new model seeks to base a new system around a clear and defined understanding of what constitutes basic and essential infrastructure in urban areas. Upon a consistent approach to the standard of provision, it is intended to establish a system of standardised levies, which will reduce uncertainty and the administrative complexity for all parties in the preparation and implementation of development contributions plans. If successfully implemented, these key features will represent a significant change from the


current system, which is characterised by a high levels of complexity, uncertainty and cost in preparation.

1.2 The Advisory Committee and Terms of Reference

In September 2012, the Minister for Planning appointed an Advisory Committee (the Committee) to review and report on the new system. The Committee comprises:

Ms Kathryn Mitchell, Chair; Mr Chris De Silva; Professor Rodger Eade; Mr Trevor McCullough; and Mr Bryce Moore.

The Committee is assisted by: Ms Jessica Cutting, Senior Project Manager with Planning Panels Victoria, who was

responsible for stakeholder engagement and management. Mr Andrew Natoli, Lawyer who was engaged by DPCD to assist the Committee with

aspects of its work, particularly in relation to legal issues. Ms Mandy Elliot, Consultant, to assist with reviewing and summarising the submissions

received.

Additionally, Ms Anne Larkins of Dench McLean Carlson was engaged by DPCD to provide probity oversight of the Committee processes.

The Minister for Planning issued Terms of Reference (dated 25 September 2012) to provide the framework for the Committee’s work (see Appendix 1). The purpose of the Committee is to provide advice to inform the Minister for Planning’s decision on the final framework for a new Victorian local development contributions system and for the establishment of standard levies. Specifically, the Committee is to provide advice on the implementation of the new system, including:

Recommended operational arrangements for the new system. Recommended scope of works that should be included in each

infrastructure category. Recommended standard development contributions levies for each

infrastructure category and development setting.

The Terms of Reference note that the new system should: Ensure guaranteed delivery of land required for infrastructure in the long

term. Ensure delivery of works in kind by developers can be provided as an

alternative to a cash payment to achieve efficiencies and deliver infrastructure earlier.

Ensure the development contribution requirement clearly articulates the infrastructure contribution obligation.

Further, the Terms of Reference state that in setting standard development levies, the Committee should seek to ensure that levies:

Are simple to implement and administer.


Are based on the basic and essential local infrastructure required to support the development of land and support the foundation of new communities.

Do not unreasonably affect housing affordability for new home owners. Retain a nexus to the development which triggers the levy.

The Committee is required to prepare two reports as part of a two stage process for the Minister for Planning as follows.

(i) Stage 1: Setting the framework for the new standardised levy systemThis report is to provide recommendations on matters required to finalise the features and operation of the new system including:

Any required changes or improvements to the proposed framework as outlined in the attached Position Paper, A new Victorian Local Development Contribution System (July 2012).

Advice on the definition of the development settings for which levies will be established. These may include, but are not limited to, growth areas (both Melbourne’s Growth Areas and similar with areas in some regional cities), regional settlements, rural settlements, established areas and strategic redevelopment sites.

Advice on how development contributions should be applied to residential and non residential development, including retail, commercial and‐ industrial development, in each of these development settings.

Advice on how the new system should operate in the different development settings.

The scope of the basic and essential infrastructure to be included in the standard levy for each of the following infrastructure categories:- Community facilities- Open Space facilities- Transport infrastructure- Drainage infrastructure- Public land

The circumstances, if any, in which a simple apportionment of development contributions levies is needed. For example, the ability to apportion standard rates may need to be retained for transport infrastructure located on or across the boundary of a contribution area.

The circumstances, if any, in which councils should be able to agree to the provision of infrastructure or building works in kind (including their valuation) in lieu of cash.

A simple methodology for valuing the public land infrastructure component.

An appropriate method for annual indexation of the standard levies and charges, construction costs and land valuations (for example, by reference to an appropriate industry index), and for periodic review to ensure that the levies reflect contemporary infrastructure requirements.


Clarification of the infrastructure to be directly provided by the developer and what infrastructure should be provided by the State through other funds sources such as the Growth Area Infrastructure Contribution.

The circumstances where councils and State agencies should be able to require a developer to enter into an agreement to provide funds for additional off site infrastructure required to mitigate the off site impacts of a proposal‐ ‐ through a permit condition.

The appropriate requirements for accountability and reporting of the contributions by councils.

The appropriate financial and administrative processes for councils to ensure development contributions funded infrastructure is delivered at the time it is required. This may include recommendations on funding options for the delivery of infrastructure in advance of sufficient funds being collected.

This report (known as Report 1 Setting the Framework) is to be completed and provided to the Minister for Planning by 17 December 2012. As per the Committee’s Terms of Reference, this report is to be publicly released to enable stakeholder input through submissions and commentary. The Committee will undertake further consultation in March 2013 to inform its final report.

(ii) Stage 2: Setting the standard levies for the new systemThis report is to include:

A schedule of standard levies for each category of infrastructure for each development setting including levies for residential and non residential‐ development.

A review of the appropriateness of standard levies for a range of infrastructure categories.

A schedule of standard transport infrastructure rates (fixed rate for each item) for transport infrastructure for each of the defined development settings. If appropriate, different rates for transport items may be required for each Metropolitan Growth area corridor and for different regions of Victoria, including:- Roads – per linear metre, by type.- Signalised intersections – per item, by type.- Roundabouts – per item, by type.- Pedestrian operated signals – per item.- Culverts – per linear metre, by type.- Pedestrian paths – per linear metre.- Cycle paths – per linear metre.- Shared paths – per linear metre.- Standard bridges – per square metre by type (e.g. vehicular or

pedestrian/cycle over creek, road or railway). A definition of non standard transport infrastructure for which a‐

standard construction cost cannot be determined and which will need to be individually costed (e.g. larger, more complex structures).

The level of justification required to access the levies for each development setting.


This report (to be known as Report 2 Setting the Levies) is to be completed and provided to the Minister for Planning by 31 May 2013.

1.3 Other Inputs

There have been a number of other inputs that have assisted the Committee undertake its work. These are briefly outlined as follows.

(i) DPCD Reference GroupIn 2011, the DPCD convened a Reference Group (chaired by Peter Allen) to assist its review of the way in which development contributions are undertaken in Victoria. The Reference Group held a number of meetings to work up alternative options for review, through the production of a Discussion Paper Options for a new local development contribution proposal for Victoria, dated September 2011. This paper explored three options as follows:

Option A – Improve the current system and methodology: Fix current problems with the existing system to simplify the operation of the existing development contributions systems and activate the available ‘off the shelf’ provisions.

Option B – Develop a new system and methodology: Develop new standard levies for different development settings and remove the requirement to prepare and fully cost a development contributions plan.

Option C – Replace the current system with a tax: Introduce a new local infrastructure tax similar to the Growth Areas Infrastructure Contribution (GAIC) where the funds are pooled for a defined area or areas and the Council determines the infrastructure priorities the funds are spent on.

Once the Discussion Paper was prepared, DPCD reviewed the options and the work of the Reference Group was completed.

The Government’s Preferred Way Forward has pursued Option B and develops it further.

(ii) Urban EnterpriseConcurrent with the work of the Reference Group, DPCD commissioned Matt Ainsaar, strategic planner and land economist of Urban Enterprise Pty Ltd, to undertake other research to examine and explore the potential financial implications of a standard levy system for local government and industry. His firm produced three reports as follows:

DCP Levy Analysis (August 2011); Indicative standard levies for local development contributions (May 2012); and Review of local infrastructure charges for regional and rural Victoria (June 2012).

These reports were all placed on the DPCD website for the review and information of interested parties.

At the commencement of the work of this Committee, DPCD commissioned Urban Enterprise to undertake two additional research projects, namely:

The impact of local development contributions on council financial resources; and The impact of local development contributions on housing affordability.


Both of these studies were provided to the Committee on 29 November 2012. Due to the date of their receipt, the Committee has not been able to review these reports in any great detail, and it will refer to them as appropriate as part of Stage 2.

Additionally, on 14 November 2012, the Committee commissioned Urban Enterprise to undertake a review of data to provide it with information and analysis on the average cost of Development Contributions Plans (DCP) per net developable hectare in each of the six growth areas of Melbourne since the Precinct Structure Plan (PSP) process was introduced in 2008. As part of this additional work the Committee requested Urban Enterprise to provide the average land value for each DCP area. This work was received on 21 November 2012 and it has provided some useful analysis which is discussed later in this report.

(iii) Melbourne, lets talk about the futureThe discussion paper Melbourne, lets talk about the future was prepared by the Ministerial Advisory Committee for the Metropolitan Planning Strategy for Melbourne. It was released by the Minister for Planning on 26 October 2012. This discussion paper identifies nine principles to inform the Metropolitan Planning Strategy, and of significance to this work is Principle 8: Infrastructure investment that supports city growth. In this regard, the paper notes that:

The type, quality and capacity of urban infrastructure influences how well a city performs economically … Infrastructure is not simply roads and railway lines, ports, airports, pipes and cables. It also includes social and community infrastructure such as schools, health and welfare facilities, sports facilities and learning hubs.

Infrastructure needs to be provided to Melbourne’s growing suburbs in a timely manner. The cost of servicing needs to be considered when identifying areas for development. Leveraging urban renewal and development off existing infrastructure and transport investment makes infrastructure provision more effective, efficient and affordable.

In exploring this issue, the discussion paper notes a legacy of historic under-investment and the need to make infrastructure “work harder”. It asks the question of who should pay for infrastructure. The paper notes that if Melbourne is to deliver “much needed infrastructure”, it may need to explore alternative funding sources, which it says could increase investment, send better price signals to the market, and facilitate public-private partnerships. It further says that “Proper consideration should be given to providing greater flexibility for Councils to source suitable funds to enable delivery of much needed local services and facilities”.

The paper acknowledges this current review of the Victorian local development contribution system. In this regard, the Committee met with members of Ministerial Advisory Committee for the Melbourne Metropolitan Strategy on 30 November 2012. The two Committees will meet further in 2013 as the Stage 2 work is undertaken.


1.4 Approach to this Report

The Committee has approached preparation of this report by identifying the issues raised in A Preferred Way Forward and the outcomes of its Terms of Reference as the key parameters for its review, consideration and findings. It has structured the report as follows:

Part 1 – Introduction and Background (introduction, historical overview of development contributions, A Preferred Way Forward, submissions and consultation);

Part 2 – The Proposed Framework (proposed development settings and development levies, application to different types of development, defining the levies, apportionment, valuing public land, works in kind, developer delivered infrastructure and the GAIC, using permit conditions for infrastructure, administration of development contributions); and

Part 3 – Conclusions and Recommendations (summary of the proposed development levy framework).

It is important to note that it has been put to the Committee by a number of stakeholders that approximately 90% of development contributions are realised in the six Growth Area municipalities of metropolitan Melbourne (Casey, Cardinia, Hume, Melton, Whittlesea and Wyndham). This report might read as being ‘growth area’ centric, in parts it does. It was put to the Committee that much of the work of Urban Enterprise and the commentary in A Preferred Way Forward is also growth area centric. That cannot be avoided. However, the Committee is conscious that the proposed development contributions system for Victoria is state-wide and it has been careful to ensure that its work, while having a heavy focus on the growth areas, is inclusive of all parts of Melbourne and Victoria. The Committee considers that its interim position reflects that position well.

Additionally, the Committee has generally focussed on development levies for residential development. The time available to it has not allowed it to explore in detail development levies for non-residential development, including industry, retail and commercial. This will occur as part of Stage 2.

This report should be read as an interim report that provides the thoughts and views of the Committee based on its work to date. It does not represent its final views, nor does it provide final recommendations. Rather the report proposes a range of options for consideration prior to the Committee’s work being finalised. The Committee encourages further submissions from interested parties to assist in the formulation of the final report.


2 Historical ContextIn undertaking its role of responding to the Terms of Reference and testing the ability to implement A Preferred Way Forward, the Committee considers it important to provide commentary in relation to the context within which the current system is operating.

This Chapter reviews how development contributions schemes have evolved in Victoria and other States, describes the current implementation framework in Victoria and briefly discusses how development contributions fit within the broader infrastructure funding context.

2.1 Development Contributions in Victoria

What are known as development contributions in Victoria are referred to by a wide variety of terms in other jurisdictions including ‘development levies’, ‘planning gain’, ‘planning obligations’, ‘development exactions’, ‘impact mitigation payments’ and the like. Whilst their functions differ according to their particular statutory framework, they are all essentially administrative law mechanisms used by local authorities or agencies to require the provision of works, services or facilities considered necessary to make a use or development acceptable in ‘planning terms’.

The following general definition of a development levy was adopted by the Administrative Appeals Tribunal in its decision of Eddie Barron Constructions Pty Ltd v Shire of Pakenham & Anor [1990] 6 AATR 10 (the Eddie Barron decision) and provides a useful starting point (at page 17):

A development levy is a monetary contribution, or a contribution in kind through undertaking works, to the public sector by an individual involved in the land development conversion process. Such contributions are for the purpose of funding infrastructure, the need for which has arisen as a direct result of development taking place.

In this context infrastructure refers to all physical facilities and services required to create a workable community with an acceptable standard of health, safety and amenity for all residents.

There are two typical scenarios in which contributions towards infrastructure are imposed on development proponents through planning approval processes:

Where a proposal forms part of a wider precinct or ‘planning unit’, typically a PSP or growth area, encompassing multiple land owners and where the cumulative impacts of development in that area generate the need for infrastructure to which it is appropriate that the developers make contributions. In Victoria, these types of contributions can only be imposed through a DCP or otherwise provided voluntarily by agreement; and

Where an individual development alone generates the need for off-site infrastructure, e.g. upgrading of a bridge, in order to mitigate impacts which could not have been planned for or anticipated and it is appropriate that the proponent partly or fully meets these costs. These types of contributions are typically referred to as ‘impact mitigation payments’ and historically have been imposed in Victoria according to the


principles set out in High Court decision of Cardwell Shire Council v King Ranch Australia Pty Ltd [1984] HCA 39.

This Committee’s Terms of Reference are primarily concerned with the evaluation of a new simplified system for managing contributions towards planned infrastructure i.e. the first scenario under DCPs. However the Terms of Reference also require the Committee to consider of the circumstances in which permit conditions are used to require funds for off-site infrastructure to mitigate off-site impacts. This topic is addressed in Chapter 14.

A distinction is also to be made here between off-site or communal infrastructure of the nature described above, and local or on-site infrastructure, e.g. internal subdivision roads or drainage, which although may ultimately be added to the stock of public infrastructure, are integral to, or part of a particular development and primarily serve the development’s needs. Whilst this report is primarily concerned with communal infrastructure, the Committee’s Terms of Reference require it to consider the types of infrastructure which should be provided on-site or directly by the developer. This issue is addressed in Chapter 13.

(i) Are development contributions a tax?Development contributions are not a tax. As noted above, a development contribution is a charge or contribution towards works, services or facilities, the need for which arises from the use or development of land. Therefore, to be validly imposed in the context of planning legislation that is for a planning purpose a contribution must bear some relationship to use or development and the works, services or facilities which are needed and proposed to be funded.

In the Administrative Appeals Tribunal decision of Eddie Barron Constructions Pty Ltd v Shire of Pakenham & Anor [1990] 6 AATR 10 (the Eddie Barron decision), the Tribunal concluded that there was no inherent reason why a planning condition involving the payment of money cannot be valid, provided (at page 23):

1. There is a need for the facility created by the development;

2. The money collected is impressed with a trust which would prevent its expenditure for any other purpose;

3. There is a reasonable nexus between the facility and the development.

Money payments which do not meet these criteria may in fact be taxes and may therefore be invalid. But as was said in Rockdale's case the question of characterisation will depend on a consideration of all the circumstances. Whether the condition is reasonably capable of being regarded as related to the purpose for which the function of the authority is being exercised must be ascertained from a consideration of the planning scheme and the Act under which it is made (in this case the Planning and Environment Act 1987).

More generally, when courts are asked to consider whether a monetary imposition is a charge or a tax, they have had regard to range of considerations and are generally dealt with on a case by case basis. An often cited decision is that of the High Court in Airservices Australia v Canadian Airlines [1999] HCA 62. This case concerned the imposition of charges on an airline in connection with the provision of air traffic control services. In characterising


the imposition as a charge for services and not as a tax, the factors considered significant included the following:

the charges were not imposed to raise revenue; the charges were undoubtedly charges for the provision of services and facilities; the charges were imposed to recover the cost of providing services and facilities across

the entire range of users; the charges for categories of services were reasonably related to the expenses

incurred in relation to the matters to which the charges related; the services and facilities were, of their nature, part of an activity (air services) which

must be highly integrated to be effective; and there was a rational basis for the discrimination between users.

In terms of which key legal principles should manifest in the new simplified levy system and how they should manifest, the Committee considers that the Eddie Barron decision provides a ‘first principles approach’ and it remains as the best authority. This decision is discussed below.

(ii) The Eddie Barron decisionThe Eddie Barron decision was a landmark case for the understanding of the legal principles which underpin development contributions within the framework of the Victorian Planning System.

The Eddie Barron decision not only laid down tests for distinguishing a levy from a tax but, more significantly, how levies could be validly imposed through the Planning and Environment Act 1987, which in 1990 had no specific statutory framework for dealing with development contributions which were imposed under general condition making powers. Therefore as a ‘first principles’ authority on the implementation of development contributions in Victoria, this decision is an important guide for the Committee in evaluating the new model and concepts proposed in A Preferred Way Forward.

The decision concerned a review of permit conditions imposed on a residential subdivision of a seven hectare parcel of land within the Pakenham township. The proponent challenged the legality of a permit condition that required it to enter into an agreement to provide works or monetary contributions towards a range of community infrastructure items.

The Tribunal analysed a long history of legal decisions on development levies and clarified that they could be validly imposed through permit conditions within the framework of Victorian law and the Victorian planning system. Significantly for planning authorities, the Tribunal also clarified the nature of the nexus that must be established between the development and infrastructure to be provided. In particular, the Tribunal identified four criteria that must be met before a levy could be validly imposed as a planning permit condition, namely (at page 25):

1) Need

The need created by the development and the measures to satisfy the need must be adequately identified.

2) Equity


The payment or levy must be a fair and reasonable apportionment of the cost of implementing the need satisfaction measures.

3) Accountability

The responsible authority should implement procedures to ensure that the money collected cannot be used for any purpose other than that for which it was levied and which clearly show how, when and where the money collected is spent.

4) Nexus

There must be a reasonable nexus between the development and the need satisfaction measures.

In relation to the ‘nexus’ principle and the nature of the nexus that must be established, the Tribunal rejected any narrow approach which only examined whether facilities would be physically used by the occupants of new development. Rather it raised the question of whether the development formed part of a wider ‘planning unit’ that would ultimately need the infrastructure. In making these findings, the Tribunal commented on the distinction in nexus which existed between ‘community infrastructure’ as opposed to ‘local infrastructure’ and the level of justification required. This passage is quoted at length below (at pages 30 to 31):

It is the Tribunal's conclusion that under the Planning and Environment Act if a development levy is to be justified the nexus which must be established between the use or development proposed and the facilities to be provided is not confined to the question of whether the facilities will be physically used by the residents of the subdivision or whether the subdivision alone generates the need for the facilities. The subdivision must be looked at not in isolation but as part of any wider planning framework. Where a subdivision forms part of a wider planning unit and where it has been established that social and physical infrastructure will be needed by that larger unit then it is sufficient if the nexus is established between the facilities and that wider unit.

In the application of this principle a distinction needs to be drawn between community facilities needed by the larger planning unit and local facilities which will be needed by the development itself. Those facilities for which a need is generated solely by the development itself should still be required to be provided as a condition of permitting that development. Streets and roads within the subdivision, access to the subdivision, drainage, the type of upgrading of a bridge which was the subject of the condition under appeal in Cardwell Shire Council v King Ranch Australia Pty Ltd, are all examples of this type of "local" infrastructure.

Community facilities are those for which the community which will be constituted by the wider planning unit will generate a need. Thus, where a particular subdivision or development will form part of that community as part of a cumulative development process so should that subdivision or development contribute part of the cost of providing those facilities. Thus the condition must fairly and reasonably relate to the total development of which the specific


development in question is a part. The sorts of questions which may be asked in testing this proposition are:- Will the community benefit collectively from the infrastructure?- Will the community suffer costs if the infrastructure is not provided?- To what extent will the capacity to use facilities throughout the

community be reciprocal?

It must be borne in mind that development levies should not be seen as a general means of raising revenue for specific projects. They are a contribution to genuine needs which will be created by a cumulative development process. That process may result in a new residential area or a new commercial centre. The Tribunal perceives more difficulties in establishing the requisite nexus where new development will be fitting into an established area (as was the situation in the Fred Phillip case). In those situations the establishment of the need, the equity of the apportionment of costs and the definition of the wider planning unit of which the development is part will all need to be examined very closely.

The concepts and principles of this decision continue to inform the preparation of DCPs and provided the basis for subsequent reforms to the Act and the introduction of Part 3B, discussed below.

(iii) Part 3B of the Planning and Environment Act 1987In response to concerns about the inconsistency of approach in the application of development contributions in Victoria, a review was announced by the then Minister for Planning, Robert Maclellan, in August 1993.

As a result of this review, Part 3B of the Act was enacted in 1995 and was an attempt to codify the key principles of the Eddie Barron decision, but it arguably went further in terms of the detail it requires for DCP s and the degree or lack of flexibility it provides for.

Part 3B created the legislative framework for preparation and administration of DCPs and amendments to section 62 effectively removed any other scope for councils to require contributions towards infrastructure other than through an approved DCP.

(iv) 2001-2003 Development contributions reviewIn 1999, the Department of Infrastructure commissioned a review of the DCP system. This was in response to the disappointing level of uptake of DCPs by local government, which appeared to stem from their complexity and lack of flexibility and risk attached to their implementation.

This review was overseen by an independent steering committee with broad representation from local government and the development industry.

The steering committee made a number of recommendations for reform which were ultimately adopted by the Government and taken forward as a package of reforms in May 2003. From this, it announced a number of reforms to improve the workability of the development contributions system, including:

Detailed guidance about the use of DCPs, including new guidelines adopting the methodology put forward by the steering committee;


‘Off the Shelf’ DCPs – the introduction of standardised off the shelf levies which could be adopted in the preparation of a DCP;

A clearer framework for the use of permit conditions – amendments to the Planning and Environment Act 1987 to clarify the ability to impose permit conditions for the provision of infrastructure required as a result of a specific use or development;

A new definition of development infrastructure – a Ministerial Direction (dated 15 May 2003) was issued by the then Minister for Planning, Mary Delahunty, which clarified what infrastructure items may be funded from a development infrastructure levy (this is discussed further below);

Removal of the $450 cap on community infrastructure (however for housing affordability reasons this position was later modified to raising the cap to $900 and not complete removal);

State Government agency DCPs – providing greater flexibility to State Government agencies to administer DCPs and collect infrastructure levies directly; and

Improving the collection of community infrastructure levies – through the release of a practice note to building surveyors raising awareness of their obligations not to issue building permits where levies have not been paid.

The measures requiring legislative approval were implemented through the Environment (Development Contributions) Act 2004 (No. 101/2004) in December 2004. Relevantly, a new head of power was provided to the Minister to issue a Ministerial Direction (section 46K(1)(d)) specifying standard levies to apply to specified infrastructure. However, for reasons which are not clear, it does not appear that any work has been undertaken to calculate or implement standard levies via a Ministerial Direction since these reforms.

2.2 Implementation Framework - Victorian Planning System

The current system for development contributions is implemented at a number of different levels within the Victorian planning system and local planning schemes. The following provides a summary of key elements of the existing implementation framework for development contributions.

(i) Planning and Environment Act 1987Part 3B of the Act provides the legislative framework for the preparation and administration of DCPs.

Section 46K of the Act sets out the requirements for the contents of a DCP. In relation to the infrastructure proposed to fund it, it requires a DCP to include the following information:

(a) specify the area to which it applies; and

(b) set out the works, services and facilities to be funded through the plan, including the staging of the provision of those works, services or facilities; and

(c) relate the need for the works, services and facilities to the proposed development of land in the area; and

(d) specify in respect of each of the works, services and facilities:


(i) the estimated cost of the works, services or facilities; or

(ii) the standard levy applicable to the works, services or facilities.

(e) unless a standard levy is applied, specify the proportion of the total estimated cost of the works services and facilities which is to be funded by a development infrastructure levy or community infrastructure levy or both; and

(f) specify the land in the area and the types of development in respect of which a levy is payable and the method for determining the amount of levy payable in respect of any development of land; and

(fa) specify the Minister, public authority or municipal council to whom or to which the community infrastructure levy or development infrastructure levy is payable under this Part (the collecting agency); and

(fb) specify any Minister, public authority or municipal council that is to be responsible for the provision of the works, services or facilities for which the community infrastructure levy or development infrastructure levy or part of that levy is payable under this Part (the development agency); and

(g) provide for the procedures for the collection of a development infrastructure levy in respect of any development for which a permit under this Act is not required.

The Act currently distinguishes between development and community infrastructure levies. While not defined, a development infrastructure levy is generally imposed at the planning permit stage and collected prior to a statement of compliance being issued for subdivision. A community infrastructure levy can only be imposed at the building permit stage, generally on the home builder, prior to a building permit issuing for a new dwelling. The community infrastructure levy must also not exceed $900 whereas the development infrastructure levy is not subject to any cap.

As implied by its description and timing for its collection, a development infrastructure levy generally is intended to fund infrastructure which is needed by the development of the land and which must be provided or set aside earlier such as roads, drainage and open space. A community infrastructure levy generally funds infrastructure needed later in the development of a community by its occupants such as sporting pavilions. A Ministerial Direction (discussed below) currently provides some clarity around the types of infrastructure that may be funded through a development infrastructure levy.

The Act sets up the machinery for ‘accountability’ in the administration of DCPs and imposes the following responsibilities on councils (see section 46Q) under which they must:

Keep proper accounts of any amount of any levy paid to them; Apply any levy to the provision of works, services and facilities in respect of which the

levy was imposed and in accordance with the approved DCP; and If the funds are not applied to the infrastructure within the timeframe specified in the

DCP, a council must either refund the levy or apply it to other projects (with the consent of the Minister) that benefit the area or apply to the Minister to amend the DCP.


(ii) State Planning Policy FrameworkState planning policy for development contributions is set out at clause 19.03 of the State Planning Policy Framework (SPPF). This clause confirms the role of DCPs as the primary mechanism for securing contributions towards the timely provision of planned infrastructure and includes the current guidelines as a reference document. This clause states:

19.03-1 Development contribution plans

Objective

To facilitate the timely provision of planned infrastructure to communities through the preparation and implementation of development contributions plans.

Strategies

Prepare Development Contributions Plans, under the Planning and Environment Act 1987, to manage contributions towards infrastructure.

Collect development contributions on the basis of an approved Development Contributions Plan.

Policy guidelines

Planning must consider as relevant:

Development Contributions Guidelines (Department of Sustainability and Environment, June 2003 – as amended March 2007).

The Committee notes the SPPF offers no guidance in terms of types or standard of infrastructure which should be included in DCPs, other than to make reference to the guidelines. This confirms the relevance and importance of DCP ‘practice’ in establishing types of infrastructure, approaches toward apportionment and gradual shift away from concepts of ‘basic and essential’ toward the concept of funding for infrastructure that is required to meet the reasonable needs of a newly emerging community. The shift is significant as the relatively coarse tests of ‘basic and essential’ have been overtaken by a value judgement about the reasonable needs of a newly emerging community where social needs are just as, or in some ways, more important than physical infrastructure.

(iii) Local Planning Policy FrameworkThere is no requirement for planning authorities to include strategies or policies for collecting development contributions in their Local Planning Policy Frameworks (LPPF). However, where development contributions are part of a council’s strategy for delivering infrastructure and meeting community needs, they are typically acknowledged and identified throughout the Municipal Strategic Statement (MSS). At a strategic objective level, their implementation is typically foreshadowed through the application of the Development Contributions Plan Overlay (DCPO) to particular areas.

The Committee notes that a number of growth area councils have local policies which relate to the formulation of DCPs, which tend to provide strategic support for the types of development and community infrastructure included in the DCPs.


In light of the simplified framework proposed in A Preferred Way Forward, it will be important for the Committee to consider what role the LPPF could play in a new simplified system.

(iv) Development Contributions Plan Overlay (Clause 45.06)The DCPO has formed part of the Victoria Planning Provisions since their inception and was amended following the 2003 reforms. It is the primary mechanism for implementing DCPs which are incorporated into local planning schemes.

The DCPO performs two important functions within planning schemes. As an overlay, it maps the area where the DCP applies and provides notice to landowners/developers whose properties are affected by a DCP incorporated into a planning scheme. Secondly, it distils the key information from the DCP i.e. the charges, rates and liabilities for easy reference and application, and avoids the need to refer to the full incorporated document which are typically voluminous.

Again, in light of the simplified approach proposed in A Preferred Way Forward it will be important to consider how notice is provided to landowners/developers of any potential contribution liabilities under the new system and whether an overlay mechanism has a role in this regard. The Committee seeks feedback on this issue.

(v) Ministerial DirectionsSection 46M of the Act provides that the Minister may issue written directions to planning authorities in relation to the preparation of DCPs. Ministerial directions are a flexible mechanism which can be approved and amended by the Minister in response to implementation issues as they arise in the Victorian planning system.

The powers provided under this section are extensive and enable the Minister to provide direction about very detailed aspects of the preparation of DCPs, including specifying the following (summarised):

Works, services or facilities for which a levy may or may not be imposed under a DCP or funded from a development infrastructure levy or a community infrastructure levy;

The means by which or the factors in relation to which the estimated cost of the works, services or facilities may or may not be calculated;

The means by which or the factors in relation to which levies may or may not be calculated or determined;

The means by which or the factors in relation to which the amount of levy payable in respect of any development of land may or may not be calculated or determined; and

Standard levies for specified types or classes of works, services or facilities.

Despite the relative flexibility of Ministerial Directions and their potential to provide greater certainty for the preparation of DCPs, to date two Directions with limited scope have been issued under these powers:

Ministerial Direction (15 May 2003) flowed from the 2003 reforms and was intended to provide greater certainty about what could be funded from a development infrastructure levy, which was not defined. In addition to confirming that a development infrastructure levy could be used to fund basic infrastructure such as roads and drainage, this Direction broadened the definition to include the construction


of essential family and children community facilities and ‘basic improvements’ to open space; and

Ministerial Direction (25 January 2012) that DCPs could not impose levies in respect of the development of land for non-government schools.

The Committee notes that the 2003 Ministerial Direction relating to development infrastructure levies has largely failed to clarify the distinction between development and community infrastructure levies. The Committee is aware that considerable time is consumed at Panel hearings over disputes regarding whether particular items can be funded from a development infrastructure levy (so as to avoid the cap that currently applies to community infrastructure levies).

The potential role for Ministerial Directions under the proposed framework will be discussed further.

(vi) Development Contributions GuidelinesThe Development Contributions Guidelines (DSE June 2003, as amended March 2007) are a reference document at Clause 19.03-1 and must be considered by planning authorities as they relate to planning scheme amendments.

The Guidelines were reviewed and re-written following the 2003 development contributions reforms with a more detailed methodology based on the principle of ‘share of usage’, whereas previous guidance was based on the Eddie Barron principles.

Given the fundamentally different approach to development contributions, in particular how contributions are to be strategically justified; the role of guidelines in implementing the preferred approach will be particularly important.

2.3 Funding Context

The Committee is cognisant of the wider funding context of development contributions, their role in financing and delivering new urban infrastructure, and how they impact on council finances.

In order to gain a better appreciation of these impacts, DPCD commissioned Urban Enterprise Pty Ltd to undertake an assessment of the impacts of DCPs on local government financial resources and rates, in terms of the initial upfront costs of infrastructure costs and ongoing maintenance costs. The assessment examined financial data from participating growth area and established area councils, focussing on capital expenditure on infrastructure, including sources of funding and the potential funding liabilities for councils into the future.

The final report of this assessment was provided to the Committee on 29 November 2012 and it provides an important context for its deliberations about the principles and framework underpinning a new simplified system.

Capital expenditure for infrastructure varied across the councils, comprising between approximately 4% and 30% of their total revenue bases. The study found that the councils’ preferred method for funding infrastructure was through development contributions. These


however, did not cover the full costs and infrastructure works, and often required matched or external funding, generally from the following three key sources (at page 26):

Rates revenue. Utilising the existing rates base as well as growth in the rates base from increases in property values and new development.

Borrowing. Borrowing capital to fund infrastructure provision. Debt is serviced and paid down using existing rates revenue and the growth in rates revenue.

Grants. Utilising government funding where possible, to bridge gaps in infrastructure funding. These grants can include:- Commonwealth Financial Assistance Grants which is ‘untied’ and gives councils the

flexibility in spending.- Commonwealth Specific Purpose Payments – often subject to conditions on

expenditure.- The Commonwealth Regional Development Australia Fund - provides funding for

regional infrastructure.- State programs which provide funds to local government for a variety of outcomes

such as Local Government Infrastructure Program, the Putting Locals First program, the Energy for the Regions program, the Green Light Plan, and the Community Green Funds Grants program.

The assessment identified considerable discrepancies between the levels of funds secured by councils utilising these various sources. It is clear that some councils have been more successful than others in minimising funding gaps in their DCPs. Of particular note was the growth in these gaps and the reliance on borrowings with flow on consequences for expenditure in the broader municipal area (at page 27):

All respondent Growth Area Councils are facing, or will face, significant capital funding gaps arising from their DCPs. At least two growth area Councils anticipate an existing or upcoming funding gap of at least $100m. These Councils will need to service this infrastructure through increased borrowing. However, the ability to borrow in some Growth Area Councils is being restricted by current levels of debt and other calls on capital funding in the municipality. This will therefore impact on both their ability to borrow and their ability to fund ongoing capital works programs.

The reasons identified for funding gaps include the underestimation of costs due to changes in standards, underestimation of revenue, items or embellishment works which were outside the scope of the DCP, and costs associated with bringing forward the delivery of infrastructure before sufficient funds have been collected. Many of these issues have been identified further in the submissions to the Committee by councils.

The assessment confirms that development contributions form a crucial component of the funding mix for urban infrastructure. In particular, the Committee notes the findings that confirm that the degree of success a council has in implementing DCP levies can have significant implications for its financial position and the delivery of services to the broader municipality.


2.4 Development Levies in Other States

The Committee is aware that pressures, similar to those experienced in Victoria, have brought about significant reforms in other jurisdictions resulting in new systems comprising capped or simplified levies. The following provides a snapshot of the key reforms in Queensland and New South Wales.

(i) QueenslandThe framework for development levies in Queensland is provided by Chapter 8 of the Sustainable Planning Act 2009. The objectives of this legislation (inter alia) seek to integrate land use and infrastructure plans and establish a funding framework for local government and South East Queensland distributor-retailers. Under this framework, infrastructure charges can only be levied for 'trunk infrastructure' which includes land and works for water, sewerage, transport and open space infrastructure and community facilities. Generally speaking, trunk infrastructure is that which is planned for and commonly provided by local governments, and which is shared between developments.

In 2011, the Queensland Government introduced a simplified system for implementing infrastructure charges flowing from the final recommendations of the Infrastructure Task Force (Final Report, March 2011). Key reforms arising from these recommendations were the introduction of maximum adopted charges and a system of 'adopted' infrastructure charges for trunk infrastructure.

Under the new system, local governments may charge different amounts for local government areas by passing an adopted infrastructure charges resolution, as set out in Section 648D of the Sustainable Planning Act 2009. The charge can be set equal to or below the maximum adopted charge in the State planning regulatory provision (adopted charges) (July 2012). Under this instrument, the maximum charges are set at $20,000 per 1 or 2 bedroom dwelling or $28,000 per three or more bedroom dwelling. Rates are also set for non-residential developments including retail, which is set at $180 per square metre of gross floor area.

Integral to the Queensland framework is the preparation of Priority Infrastructure Plans by local government, which show when and where the infrastructure for water, sewerage, stormwater, transport, parks and land for community use is proposed to be rolled out to service communities. Priority Infrastructure Plans must be adopted into local planning schemes and be reviewed every five years.

Where a local government does not have a Priority Infrastructure Plan in place, it may use the adopted resolution to specify the trunk infrastructure for its area to which an adopted infrastructure charge applies, including the standard of service and the costs of the infrastructure.

A recent example of an adopted infrastructure charges schedule is that of Brisbane City Council which includes the following charges (see Brisbane Adopted Infrastructure Charges Resolution (No. 2) 2011):

$18,000 for a one or two bedroom dwelling of which $8,000 is for transport and community facilities;


$26,000 for a three bedroom dwelling, of which $12,000 is for transport and community facilities; and

$190 per square metre of gross floor area for retail uses.

(ii) New South WalesThe framework for implementing development levies in NSW is provided by Part 5B of the Environmental Planning and Assessment Act 1979, which sets out key considerations for determining, collecting and then spending development contributions. The basis for collecting contributions is the preparation and adoption of contributions plans by local councils.

This legislation establishes a two-tier system in which councils can levy 'key community infrastructure' without approval from the Minister. However, councils require Ministerial approval to obtain a contribution, or enter into a planning agreement, for any other kind of community infrastructure (called additional community infrastructure). A council must demonstrate that a legitimate case exists for the extra contribution with a business plan and an independent assessment of the proposal. Key community infrastructure includes:

Local roads; Local bus facilities; Local parks; Local sporting, recreational and cultural facilities, and local social facilities (being

community and child care centres and volunteer rescue and volunteer emergency services facilities);

Local car parking facilities; Drainage and stormwater management works; Land for any community infrastructure (except land for riparian corridors); and District infrastructure … but only if there is a direct connection with the development

to which a contribution relates.

Through the adoption of a contributions plan, councils can choose whether to impose direct or indirect contributions:

Direct contributions must be reasonable and fairly relate to the development, which requires the plan to demonstrate a nexus between the types of development expected, and the need for community infrastructure created by those developments. These types of contributions are generally imposed in urban release areas and major urban renewal precincts where growth is faster, and higher levels of contributions are able to offset the considerable administration costs and financial risks; and

Indirect contributions are the payment of a monetary contribution that is a percentage of the proposed cost of carrying out the development. The maximum percentage that is set by the EPA Regulation is currently 1 percent, although the rate can be varied with approval of the Minister in the same way as additional community infrastructure can be approved. These contributions are generally applied to established areas where growth rates are less certain.

To improve housing affordability and supply, the NSW Government announced a number of initiatives in 2010 concerning the development contributions system, including the capping of development contributions by a Ministerial Direction applying to all contributions plans. Under the Ministerial Direction (dated 21 August 2012) the following caps apply:


a cap of $30,000 per dwelling or lot in greenfield or new release areas; and a cap of $20,000 per dwelling or lot in established infill areas.

Where councils have contribution plans which exceed the caps, they are required to review their plans to ensure that they only contain 'essential infrastructure' as defined by Ministerial Direction.


3 A Preferred Way ForwardThe Government’s paper A New Victorian Local Development Contribution System: A Preferred Way Forward is the catalyst for this review. This Chapter of the report provides commentary about the current DCP system and the key issues and problems that have emerged through its use. It then explores the key features of A Preferred Way Forward.

3.1 The Current System

(i) Growth AreasWhilst the current DCP system has been operational since 1995, the most significant use of the system in terms of the number of approved DCPs has occurred in the last 5 to 6 years. This period of increased use of the DCP system coincides with the impact of the Growth Areas Authority (GAA) in coordinating an accelerated PSP program throughout Melbourne’s growth areas.

In this same period DCP rates increased significantly on average from $107,000 in 2004 (pre GAA) to $225,000 and up to $300,000 in more recent years. The approved DCPs have assumed a more refined/consistent structure and list of infrastructure projects during this time.

Strategic justificationGenerally speaking, prior to 2005-6 the DCP system was selectively used in Melbourne’s growth areas. Where DCPs were prepared and successfully implemented, the DCPs were reliant on a broad range of supporting strategic investigations to respond to the various requirements contained in 46K of the Act.

Where Planning Authorities have been unsuccessful in achieving approval of a DCP, it was typically due to the absence of rigorous background investigations that justified the need for, and properly apportioned, the share of, usage and costs of the infrastructure.

ApportionmentIn relation to apportionment of share of usage and associated costs, there has been increasing recognition that strict application of the user pays principles, via adoption of complex methodologies, can cause practical problems in delivery of infrastructure and the emergence of funding gaps. This is particularly evident in the assessment of levels of external apportionment for roads projects.

This highlights the problems associated with the application of precise apportionment methodologies to planning conditions that are sometimes imprecise and which ultimately require a broader assessment of what is reasonable in the given circumstances.

A complicating factor in the apportionment of roads projects has been a general trend toward improved specification of infrastructure costs and a perception that there has been a progressive transference of costs to achieve the ultimate conditions, particularly where higher order roads and intersections are involved. Improved specification and costing of infrastructure projects is clearly evident in the most recently approved DCPs.


Changes in scope and standards of infrastructure in DCPsThe most significant shift in DCP formulation and cost apportionment has been in relation to community and recreation infrastructure.

Over the last 10 years, most councils in growth areas have moved to a ‘hub based’ community infrastructure service delivery model. Further, most councils support co-location and clustering of active sporting fields with specified minimum locational criteria such as two ovals per reserve.

Beyond being more capable than before in assessing the need for such infrastructure, based on provision ratios and/or specific needs assessments, growth area councils have consistently sought to give greater recognition to the importance of social or community infrastructure in supporting the health and well-being of newly emerging communities.

In this context, it is argued consistently that such infrastructure is of equal or greater importance to that of development infrastructure. The relevance of the terms basic and essential, particularly as used in the Minister's Direction, have lost relevance and clear meaning. What has become accepted practice has overtaken any strict application of the Ministerial Direction particularly with regard to embellishment of active open space.

As a consequence, the application of the Ministerial Direction and the guidelines, via review processes, has been variable. The broader issue is the relevance of the somewhat arbitrary distinction between infrastructure types and the associated question of what is considered to be a reasonable standard of infrastructure provision.

Open spaceTreatment of open space and maintenance of the distinction between passive and active open space has been an area of inconsistency between approved DCPs. Some have included all land costs whereas others have used Clause 52.01 of planning schemes to secure open space for active and/or passive open space. Irrespective of the apparent differences in the mechanisms used to secure open space, the last 10 years have seen a progressive move towards a rate of provision of 10% for open space in growth areas (which is the standard S2 in the PSP Guidelines). More recently, debate has emerged in relation to provision of higher order district or regional open space areas and the question of whether such spaces should be embellished via DCP contributions. Significant increases in open space provision ratios have reaffirmed industry views that use of encumbered land should be allowable for certain types of open space uses.

Standardisation of active and passive open space provision templates has generally coincided with adoption of common provision benchmarks for active and passive open space as councils have sought to achieve efficiencies in operation and maintenance.


Implementation issuesApproximately 10 years of operation of DCPs in some growth areas has proved to be very valuable in confirming that successful DCP implementation and management is possible, and the principle of shared contributions to necessary infrastructure can deliver good outcomes. However the following issues remain:

Assumptions regarding the timing, location and rates of growth are rarely realised for a range of reasons;

Cost estimates are often exceeded for a combination of reasons including but not limited to, changed specifications, impact of Government policy, increased development costs and changed community expectations;

Successful implementation of a DCP fund requires deliberate and practical management;

Competing development fronts can very readily put a DCP into a negative position; The discrepancy between land valuations before and after DCP preparation and the

land compensation process is a significant threat to the implementation of a DCP; Carefully controlled staging of land release/development rarely works as either

Government or a large developer/s is required to bring forward infrastructure to allow other smaller developers to operate effectively and to make a contribution;

Agencies and other authorities are having significant impacts on DCP costs without assuming any financial responsibility; and

Developers are paying an increased share of contributions, but there are inevitably funding gaps and a necessity to increase funding from other sources.

Impact on housing affordabilityAs DCPs have been prepared and implemented to adapt to the various challenges set out above - councils, the State Government and developers have raised concerns regarding their impact on housing affordability. Concerns regarding impact on affordability have been raised in recent Panels with little success in demonstrating any tangible negative or unreasonable connection to affordability. However, more recently, the impact of increasing development contributions on affordability has been raised within the context of additional costs that will be passed onto the consumer including:

GAIC charges; Increasing costs associated with environmental regulation; Increased construction costs; and Land tax obligations.

The Committee recognises that the new system will be required to address general affordability concerns if Victoria is to retain a competitive advantage in affordability of land supply. The recent work of Urban Enterprise addresses this matter further.

(ii) Infill and non-metropolitan situationsWhilst use of DCPs in growth areas has become relatively widespread, use of DCPs in infill and regional/rural locations is far less common. The reasons for non-use of the current system vary.

In metropolitan infill areas, use of DCPs has been very sporadic due to a combination of factors including:


Concern regarding the complexity involved in satisfying the relevant tests to demonstrate need and nexus;

Difficulty in identifying projects with clarity for inclusion in a DCP; Concern that any identified unfunded liability will become the responsibility of the

council; A lack of specific awareness of the incremental impact of infill development; Lack of resources and expertise; Challenges associated with introduction of a contribution that may affect the timing

and rate of development; A general view that the DCP system is not suited to infill locations; and A preference for more flexible section 173 agreements as a mechanism for

infrastructure provision on key redevelopment sites.

In rural and regional areas there has been infrequent use of the current system for a range of reasons including:

The timing and rate of development is less predictable and infrastructure provision thresholds are often not reached;

Lack of transparent strategic justification; Lack of resources and expertise to prepare and implement a DCP and the high costs in

doing so; Complications associated with role of councils as the local drainage authority in some

instances; and Preference for more flexible section 173 agreements.

These observations confirm the need for the introduction of a new system. It is clear however that the new system will need to be particularly mindful of application to settings other than the designated metropolitan growth areas as the extent of infill development in metropolitan, rural and regional locations will assume increased significance into the future.

3.2 Issues with the Current System

As part of its work, the paper prepared by DPCD for the Stakeholder Reference Group listed what it considered at the time were the issues with the current system. These are discussed briefly below and are supplemented by the Committee’s understanding of problems with the current system arising from the consultations which it has undertaken to date and the submissions received.

Resources, costs and timeDCPs are complex and require significant resources allocated to their preparation and can take up to two years to prepare. This has led some councils to pursue section 173 agreements for smaller developments in lieu of a DCP.

Contribution or full cost recovery A number of the stakeholders believe that recent DCPs had tended towards full cost recovery rather than being a contribution towards the provision of infrastructure, with the balance being funded from other sources.


FairnessStakeholders representing the development industry were of the view that the current system is unfair. The following matters were raised:

Developers are often under pressure to accept infrastructure items in DCPs which they reluctantly agree to under pressure to get a development approved for market, or to meet other deadlines. This is exacerbated by the long lead time to get a matter that they considered unacceptable to be heard at VCAT;

The changing scope of many DCPs; When construction takes place, the imposition by some State agencies of higher

standards and therefore increased costs from those in the approved DCP; and Apportioning, particularly arterial road infrastructure to DCPs which have a tenuous

nexus to the development, and lack of clarity about what should be developer funded, what should be DCP funded, and what is appropriately considered to be State infrastructure.

Infrastructure requirementsDifficulty with projecting infrastructure costs and demands, particularly over the extended period of time to which a DCP applies, which has led to ambit inclusions of infrastructure which some see as difficult to justify and leading to ever increasing scope.

Lack of flexibilityDCPs once approved are relatively difficult to change to adapt to changing needs, priorities and other circumstances.

Poor accountability and uncertainty of leviesThe Auditor General in Audit summary of Use of Development Contributions by Local Government (Tabled in Parliament 9 December 2009) identified a lack of accountability of how contributions are spent and infrastructure is delivered. Developers claim that it is difficult to get information on the flow of funds into DCPs and what they are subsequently spent on.

Developers cannot predict what costs will be applied.

Financial risks There are financial risks to developers, but more particularly to councils. To some extent developers can price risk into their financials. However councils can be left to manage community expectations about the provision of infrastructure if DCPs and their rate revenue do not adequately provide for that infrastructure. This risk also applies to the State Government in terms of State funded infrastructure.

3.3 The New Model – A Preferred Way Forward

The model selected by the Government in A Preferred Way Forward has the following characteristics:

Standard Development Contributions based around five infrastructure categories: Community facilities (fixed levy);


Open space facilities (fixed levy); Transport infrastructure (variable levy); Drainage infrastructure (variable levy); and Public land (variable levy).

The capacity to impose development levies on new development in the following development settings:

Growth areas; Regional settlements; Rural settlements; Established areas; and Strategic redevelopment sites.

It is proposed that different levies be set for residential and non-residential development in these areas. The standard development levies are proposed to be a contribution towards basic and essential infrastructure. The model needs to be supported by a structure plan or equivalent strategic planning.

As noted previously, the release of A Preferred Way Forward was accompanied by three background papers which among other things, proposed methodologies for both allocating infrastructure to these categories and for calculating a levy for each infrastructure category in the main development settings. They are based on levies that have been set in recent approved DCPs. Urban Enterprise utilised its database of all DCPs approved in the last decade or so to undertake these calculations. It is not proposed to detail these methodologies here.

In the accompanying papers, one approach to setting a standard levy is to base it on the mean cost of DCPs plus one standard deviation for each infrastructure item. The use of one standard deviation was to account for outlier costs and the wide range that is observed in some infrastructure categories. A Preferred Way Forward acknowledges the challenge likely to be faced in setting standard transport levies. Two options were discussed:

Option 1: Standard levy per infrastructure item. These could be set from recent DCPs with some allowance and variation to accommodate different topographies, geology and remedial works and services. It is proposed that if the set charge is not suited to particular site conditions, it can be varied. No mechanism to achieve this was proposed.

Option 2: Standard levy per geographic area. A standard levy could be set per growth area or per municipal area. This would be based on a developed and costed road network plan and would result in a standard or average levy being applied across the whole of that area. Any cross subsidies would therefore be contained within the defined area.

In existing urban areas, the paper Indicative Standard Levies for Local Development Contributions proposed that charges calculated for growth areas would be discounted by 25%, on the basis that there is a greater legacy of existing infrastructure in these areas.

In rural and regional settings the paper Review of Local Infrastructure Charges for Regional and Rural Councils proposed ‘off the shelf charges’ based on average levies for a range of DCPs in non-metropolitan settings. These are significantly lower than average levies in metropolitan areas, implying a much lower provision of infrastructure in such areas. Whilst


this may be justified, it can lead to concerns about sub-standard provision outside Melbourne and the other main regional areas.

3.4 Operational Features

The key operational features of this new model based on the Committees’ consultations to date, together with its own observations, are as follows:

The need to address defining basic and essential infrastructure, taking into account both changes in scope of such infrastructure over time and changes in the standards of infrastructure;

The levies would provide new infrastructure or the extension or upgrading of existing infrastructure;

Land for higher order community infrastructure such as libraries, regional open space and indoor sports centres is proposed to be included, but not construction costs;

Levies would not normally cover items provided by the developer at the subdivision construction stage;

Population thresholds would be established for community infrastructure facilities. Capped levies would be set for infrastructure items and these may be waived or

lowered, but not raised; A mechanism for indexing of levies and periodical review should be established so that

the problems with the current $900 per household cap on community infrastructure are not carried forward into the new system;

Works in kind would be facilitated, with a mechanism established for these to be credited against development contribution liabilities;

More transparent and accountable mechanisms should be established for the collection of development contributions and expenditures against these;

To access the standard levies, a council would be required to demonstrate need and nexus between new development and the proposed infrastructure. No mechanism is proposed, but this is likely to be via the structure planning process;

Section 173 agreements to implement development contributions would not be permitted where there is an existing section 173 agreement or an approved DCP;

No State infrastructure should be included in the development contributions levy, nor should there be any unfunded liability imposed on the State;

Land for future arterial roads would be identified through strategic planning and be part of the public land contribution. Construction of at least the first carriageway would be included in development contributions to allow for a local road function in the interim period; and

Existing approved DCPs would continue to operate.


4 Submissions and Consultation4.1 Process Adopted by Committee

The Committee was keen to hear as much as possible from the full range of stakeholders to inform its considerations. Additionally, the Committee was aware that all Victorian councils were involved in local government elections and would be in ‘caretaker’ mode from late September to late October. Taking this into account, the Committee adopted a three phased program of consultation:

The Committee wrote to the Chief Executive Officers of all municipalities in Victoria, inviting them to provide a written submission in response to the Committee’s Terms of Reference. This was also followed up by an email to each council;

The Committee maintained a web link through the DPCD and Planning Panels Victoria web site, which was activated on 24 September 2012, and which was updated at regular intervals; and

The Committee provided two spots through the weekly ‘Planning Matters’ in September and October 2012, which is subscribed to by some 3,900 stakeholders.

(i) Stakeholder meetingsThe Committee undertook targeted consultation, where it invited various stakeholders to meet with the Committee, as well as with individuals/organisations who requested a meeting. The Committee met with over 100 people from 33 organisations is this regard.

The details of the representatives in attendance from each of these organisations are shown in Appendix B.

(ii) Written submissionsThe Committee sought written submissions on A Preferred Way Forward by 31 October 2012. Due to the tight timeframe, the Committee allowed a number of stakeholders to provide late submissions upon request, and in total, 58 written submissions were received, the list of which is provided at Appendix C. The Committee is particularly grateful to all submittors for the way in which responses were framed and for the overall timeliness of the submissions. These submissions have added a great deal of value and have provided excellent input into the deliberations of the Committee.

To assist stakeholders in responding to the issues raised through the Committee’s Terms of Reference and A Preferred Way Forward, the Committee developed ‘consultation questions’ to provide the framework of its consultation sessions and to assist submittors in addressing the key issues through written submissions.

(iii) Small group meetings Additionally, the Committee ‘road tested’ some of its ideas in confidential discussion forums with representatives of council, State agency and planning and development interest groups on 28 November 2012, prior to finalising Report 1. These forums were particularly useful as they allowed the Committee to test some key themes (particularly around proposed development settings, development levies and setting the levies) with users of the development contributions system. The list of stakeholder groups is provided in Appendix D.


Following the release of this Report 1 Setting the Framework by the Minister for Planning, the Committee will invite submissions from stakeholders to comment on the issues raised prior to finalisation of Report 2, Setting the Levies in May 2013.

4.2 Summary of Submissions

A review of the matters raised in consultation and the written submissions has found that the proposed reforms to the current DCP process have been generally well received amongst councils, developers and industry groups, and all confirm the need for such a review. Many councils could not comment in great detail about how effective and beneficial the new system may be until further detail is released and further clarification provided. If the new DCP process reduces costs, time and resources to all parties, whilst providing adequate funding to deliver the required and agreed infrastructure items, then it will be an improvement on the current system. However, many submittors suggested that the issues of the current system (resourcing, costs and timeframes) will still remain with the new system, particularly the need to justify the levies through structure planning or the like by councils. Also, many councils questioned what would happen to the strategic work already undertaken to date for DCPs currently being prepared.

It is evident from the submissions that there is a need for detailed definitions of what constitutes ‘basic’ and ‘essential’ infrastructure, and the rationale for why an item is not considered as basic and essential. Continued consultation with stakeholders will be essential in striking the balance on these defined lists.

Many submissions stated that the proposed new system is focused on the growth areas of Melbourne and the GAA’s preferred approach, which may not necessarily be applicable to regional and rural councils or established councils dealing with ‘infill’ development. It was raised many times that the differing issues for regional and rural councils versus those in metropolitan Melbourne had not been adequately reflected in A Preferred Way Forward.

Submittors were concerned that collecting levies sooner in the process and not at the building permit stage is important to councils so that essential community infrastructure can be developed earlier in the subdivision process.

Many submissions expressed uncertainty about how the new system will impact upon their organisation until its detail is known. All councils considered that benefit would be gained from a more streamlined system; however the issue of resourcing to undertake the necessary strategic planning still remains, and is considered one of the larger impacts for councils. In particular, council submittors suggested that the problems of the existing system will mostly remain so there may be a reluctance of councils to use a new standard levies system.

As outlined in the City of Greater Geelong’s submission, the particular benefits to its organisation were considered to be potential for increased funds from township, infill and strategic development sites due to the ‘easier’ application of 'off the shelf' standard levies. The new approach may offer the potential to reduce legal costs associated with implementation of development contribution schemes through the amendment process. Particular concerns of councils included the management of two development contribution systems (existing and new) that might create administration issues. Others suggested that


the development of fixed rate community and recreation levies is unlikely to satisfy any council, whatever figure is adopted.

The City of Melton considered that the implementation of a standardised DCP system is likely to create higher administrative costs for the Council. Currently, two different DCP charging methodologies are being utilised for the urban growth and residential zones, and a standardised system would introduce a third. This may create additional administrative duties and costs for council in managing IT and data systems, as well as different auditing and reporting requirements.

The Property Council of Australia suggested that the current cost structure affects their members’ ability to continue to maintain sustainable operations in Victoria.

The GAA saw positive impacts in the use of fixed levies for community and open space facilities by reducing arguments about the scope and cost of these facilities.

A key concern about the new system is the issue of 'one size fits all'. There may be unintended consequences of implementing one set of rules and expecting it to fit in every circumstance (or development setting). The new system maintains principles of justification of growth, nexus and timelines, and with threshold population numbers invoked, for many rural councils, it is not clear that the new system will be able to offer any opportunities for these areas as they pointed out that growth area thresholds will not be reached.

Councils expressed general difficultly in seeing how the strategic work, cost and resourcing required from councils will be simplified or reduced, and how councils will be protected from cost overruns with the new system. The new system may also create community expectations for the provision of specific items of infrastructure.

The ability to levy standard rates would be of benefit, however issues such as mis-matches between funds collected and costs of infrastructure still remain.

As the City of Casey submitted, if relying on councils to contribute funds, the development potential of an area may be delayed until funds are sourced. Inadequate and delayed provision of open space and community facilities can lead to social and health issues for these communities.

The City of Greater Geelong expressed concern that one of the consequences of the new system will be an assessment of areas of new vulnerability that developers will challenge to lower the rate, including:

Population thresholds and household occupancy rates; Development staging; Development rates; The continued claim that levies impact housing affordability; and Lack of detail in a structure plan to inform levies.

A confidential submission commented that there is no recognition that Local Government is effectively the agent for the State's policy of facilitating growth on the fringe.


4.3 Key Principles

From an examination of the history and practice of development contributions and from the submissions received through the consultation (both written and through workshops and meetings), the Committee believes that a number of important principles emerge which should guide the development of the new system.

These principles vary in how they relate to the subject matter of this report but they can be broadly described as falling into two categories, framework principles and operational principles. Framework principles by their nature are higher order and relate to the regulatory framework and derive from a number of sources, but primarily from the Eddie Barron decision and A Preferred Way Forward. Operational principles relate primarily to the practice of preparing development contribution plans and to the outcomes that the plans should facilitate, which have been derived primarily from the submissions received and from A Preferred Way Forward.

(i) Framework PrinciplesThe framework principles are proposed as follows:

NeedThe planning unit across which a charge is levied must have a demonstrated need for the proposed infrastructure. The degree and level of detail to which this principle must be demonstrated will inevitably vary according to the development setting and the nature of the infrastructure needs which exist in that setting.

NexusThere must be a reasonable nexus between the infrastructure that is levied for, and the planning unit across which it is intended to impose the levy. It may not be necessary to demonstrate that an individual development causes the need for the infrastructure, but that it forms part of a wider planning unit that will need the social and physical infrastructure. How need and nexus are demonstrated in a development setting with a standard charge is addressed further in this report.

ApportionmentLevies should be fair and represent a reasonable apportionment of the cost of delivering infrastructure, having regard to the quantum of development and its likely use as a percentage of the overall use of the facility. The concept of ‘user pays’ underpins this principle but in the context of overall metropolitan development over time and complex usage patterns, this is a difficult concept to operationalise fairly or precisely.

Simple, flexible, provide certainty and be fairThe Committee accepts that these principles should be achievable and should provide a benchmark against which any framework proposals can be judged. It has been put to the Committee in consultations that achieving each of these principles simultaneously may not always be possible, but the Committee intends that the new system addresses each principle to the greatest extent possible. A number of submissions have emphasised the importance


of fairness in a new system. The Committee believes that fairness has the following dimensions:

A significant contribution by new residents to the basic and essential infrastructure that they generate a need for;

Existing residents in growth areas make a contribution through their rates to infrastructure delivered to address the needs of new residents, but which they are also likely to benefit from;

Some contribution through grants and other contribution from the revenue base of the State and Commonwealth governments for infrastructure that is provided State and Australia wide;

New residents pay a contribution over time through their rates for some of the infrastructure they require; and

Fairness is a matter of judgment and not a matter of objective assessment.

AccountabilityFunds that are collected as a result of levies must be applied to the purpose for which they were collected and used for infrastructure items which benefit the planning unit. Systems should be in place to ensure that information on this collection and disbursement is available in a transparent way.

(ii) Operational PrinciplesThe operational principles are proposed as follows.

Housing affordabilityThe new system should not result in levies that unreasonably affect housing affordability for new homeowners.

Development levies are not full cost recoveryAlthough levies may recover the costs of individual items, they will rarely recover the costs of delivering the full suite of urban infrastructure required for new communities. Councils will ultimately need to rely on other streams of funding to deliver the full suite of urban infrastructure, particularly in established areas, which will include general rates and external grants. A key challenge for the new system will be to ensure that financial liabilities imposed on any level of government can be effectively managed by that level of government.

Development levies are a mechanism to deliver planning outcomesDevelopment levies are just one of a number of planning mechanisms that can be used to meet the physical and social infrastructure needs of growing urban communities. They are not a planning outcome in themselves. In this way, development levies must be seen as at the very tail end of a strategic planning process though which needs are identified and strategies are devised and then implemented to meet those needs. When focusing on the technical aspects of implementing development levies, there is perhaps a risk of losing sight of this principle, particularly when new models seek to simplify processes for implementation.


Basic and essential infrastructureOnly infrastructure that is needed to establish new communities should be levied for through the new system. In determining the quantum of the standard levies or any modification from the standard, the Committee believes that it is necessary to clearly define the scope and specifications for basic and essential infrastructure as a benchmark. What is considered basic infrastructure will vary between development settings and will also need to be reviewed over time.

Flexibility in spending and infrastructure deliveryWhilst there is a need to provide certainty in specifying the scope of new infrastructure which levies should fund, the Committee believes that councils should have some flexibility to determine priorities for the specific infrastructure, timing and ultimate standard of delivery of the infrastructure. It has been made clear to the Committee that specifying infrastructure too tightly will not allow for changing needs over the relatively long life of a levy scheme.

Different approaches to setting standard levies in different development settingsDifferent approaches will be needed in establishing standard levies across different development settings in order to reflect the varying levels and nature of infrastructure needs which will exist across growth areas and established urban settings.

Charges should be collected at the same point in timeCharges for all items of infrastructure funded under the new system should desirably be collected at the same point in time. The Committee believes that this is needed to ensure efficiency in collection and administration of levies and for the timely provision of infrastructure.

Works in kind are integral to the efficiency of the new systemIn setting out this principle, the Committee is mindful of the challenges of managing the timing of works in kind and the cash flow issues associated with both funding the works in kind and timing, and the amount of credit to be provided to the developer against their development levy liabilities.

The new system should facilitate the provision of infrastructure above and beyond defined basic and essential infrastructure, at a cost to the developerDuring the consultation period the Committee heard from a range of stakeholders that this principle is necessary in order to provide a diversity of development outcomes and to allow developers to position themselves as they see fit in a competitive environment.

Active and passive open space should both be treated in the same wayThe Committee was informed that the different approaches to acquiring and developing different types of open space are confusing and therefore can lead to inefficiencies. It believes active and open space should be one and the same.


Charges can be used to extend the capacity of existing infrastructure to accommodate growthStandard charges should be able to be used to fund new infrastructure or replace obsolete infrastructure, but only in proportion to its likely use by new population. Replacing obsolete infrastructure that serve the existing population or to simply raise existing service levels should be funded from rate or other revenue sources, and not be paid for by new development.

Indexation methodologies for both land and infrastructure should reflect likely real cost increasesThe Committee understands that one of the main failings of many early DCPs was the inadequate indexation of infrastructure and land costs. Whilst this issue may have been substantially overcome in the more recent DCPs, it is nevertheless an important operational principle for the new system.

Increases in standards of provision should be funded by agenciesAgencies that seek to extend the scope or increase the standards of an agreed infrastructure scheme under the new system should be required to contribute financially to the extra costs that are imposed as a result of any changes sought. This is consistent with the principle of not imposing unfunded liabilities on other authorities. In consultations, the Committee was informed that some agencies are frugal with their ‘own’ funds but are sometimes less careful with imposing liabilities on other agencies.

Individual property rights should not be compromisedThe Committee was informed of the inequities that can arise in the approach to the valuation of land under different legislation. In addressing this issue, the Committee is cognisant of property rights.

Early identification and reservation of land to accommodate future infrastructureThe Committee was reminded of the importance of ensuring that appropriate land is set aside for future infrastructure. This outcome was, in the view of a number of stakeholders, a particularly important component of structure plans and accompanying DCPs. Whilst early acquisition of public land was regarded as important by some councils, other councils and State agencies have experienced significant problems aligning their intentions with their organisational budget imperatives.

In setting out the principles above, the Committee is mindful that while it believes that each of the principles is important in its own right, they are not all necessarily consistent with one another. The Committee sees its role to develop a system of standard levies that implements these principles as much as is possible.


Part B The Proposed Framework


5 Proposed Development Settings and Development Levies

5.1 Context

In Section 4, A Preferred Way Forward defines development settings that cater for community needs across the State, where development contributions levies could be developed for:

growth areas; regional settlements; rural settlements; established areas; strategic redevelopment sites.

This Chapter responds to the Committee’s Terms of Reference (22, dot points 2 and 4) that seek:

Advice on the definition of the development settings for which levies will be established. These may include, but are not limited to growth areas (both Melbourne’s Growth Areas and similar scale growth areas in some regional cities), regional settlements, established areas and strategic redevelopment sites.

Advice on how the new system should operate in different development settings.

The current system of DCPs is applicable throughout the State, but is applied mainly in Melbourne’s growth areas. There are however, a number of problems with the implementation of DCPs under the existing system, as discussed in Chapter 3.

Many of those consulted and the stakeholders who made submissions were concerned that the new system proposes, or could by default, lead to an inability to apply different responses to different circumstances. The Committee acknowledges this and through this Chapter, proposes a classification of development settings which, within limits, allows councils to determine the development settings which best meet their needs.

5.2 Defining Development Settings

(i) What are the issuesAs indicated previously, one of the challenges of the new approach is to have a workable system which is capable of being applied to a range of development circumstances and settings across all areas of the State. In order to achieve this, a classification of development settings needs to be proposed and clearly defined so that each area of the State can unambiguously be included in a development setting which then leads to a Development Levy that is appropriate to its needs. An obvious complexity in this requirement of the new system is that not only do the development settings vary, but the circumstances within the various development settings may also vary considerably.

The Committee is of the view that the key issue that it needs to address with respect to development settings is defining a range of development settings for which standard levies


can be applied and which will attract councils to adopt those rates in a significant majority of situations.

(ii) Submissions and Consultation A significant number of the submissions received by the Committee commented on the development settings proposed. In general, the five development settings proposed in A Preferred Way Forward are considered as appropriate by most of the submitters. A number of councils including Boroondara, Darebin, Whitehorse, Wyndham, Maribyrnong, Yarra, and Ballarat indicated that they are broadly supportive of the development settings proposed in A Preferred Way Forward. Others, including Moonee Valley, Surf Coast, and Glen Eira Councils and Public Transport Victoria (PTV) indicated that the development settings need further explanation or need to be better defined. This includes an explanation of where the various development settings are proposed to apply.

Other submissions commented that that there needs to be a clearer distinction in the development settings between ‘brownfield’ redevelopment and infill development on the basis that the infrastructure needs and therefore the levies will need to vary. Very few submissions suggested additional development settings, although Stonnington Council did suggest that there needs to be an additional setting called ‘activity centres’. Mornington Peninsula Council commented on the need to have flexibility in the way in which the different development settings are applied. There was also some questioning of where the ‘growth areas’ category might be able to be applied, with Latrobe Council pointing out that DPCD had not allowed it to apply the Urban Growth Zone (UGZ) in that municipality’s growth areas.

Definitions of each development setting proposed are critical to the implementation of the new system, as it will determine how they are applied. The City of Greater Geelong requested that the new system provide clear guidance in the classification of the development setting for a particular site. For example, does a 500-lot development in rural or regional Victoria classify as a growth area or a settlement area, or even an urban infill?

The HIA submitted that “clear guidance and objective criteria are required by the State Government to guide both councils and developers in identifying which development setting applies to which location. For example, how are rural settlements differentiated from regional cities?” This issue was also raised by some of the regional and rural councils.

The Property Council of Australia suggested that to assist with defining the proposed development settings that “DPCD should be required to literally and spatially define the areas it proposes to include and the definitions associated with each”. It will also be important for councils to be able to apply a variety of development settings within the same municipality. This issue was raised by Frankston City Council and would be an issue for a number of peri-urban councils, and likely many other.

Moorabool Shire Council suggested the inclusion of ‘Peri-Urban’ as a development setting as peri-urban Councils did not seem to fit comfortably into any of the proposed settings.

(iii) Proposed development settingsThe Committee notes that the five development settings proposed in A Preferred Way Forward effectively combine different planning units and their possible locations throughout


the State. The Committee believes that this may have contributed to the confusion apparent in some submissions it received. The Committee believes that a simpler approach to defining the development settings is to separate planning units from their location. The Committee therefore proposes to adopt three Development Settings based on the type of planning unit as follows:

Growth Areas; Strategic Development Areas; and Urban Areas.

These areas are defined in Table 1.Table 1 Defining Development Settings

DEVELOPMENT SETTING DEFINITION

Growth Areas Land which is in, or planned to be included in, the Urban Growth Zone.In Melbourne’s growth areas this will be land where planning is coordinated by the Growth Areas Authority. In regional cities and other non metropolitan areas the council is generally the planning authority.

Strategic Development Areas(Large Scale, orSmall Scale)

Key sites or broader areas within a municipality where significant development or redevelopment is proposed to occur and will generally be sites where intensification is planned.Identified growth sites or areas not large enough to be zoned UGZ could be included in this category.Sites or areas would be nominated through the relevant MSS and would be clearly identified in a supporting structure plan, framework plan, settlement plan or similar.

Urban Areas Areas of existing or planned urban development in a city, town or settlement. Includes all urban areas, other than those designated as Growth Areas or Strategic Development Areas.The areas to which an Urban Areas levy can apply should be set out in an MSS, structure plan, framework plan or the like. Councils are to nominate the extent of each catchment at the time of implementing the levy scheme. It may be applied over the whole municipality or part.

The Committee believes that if this model is used it is not necessary to have separate settings for activity centres or peri-urban areas (as suggested by some submitters) as each of these can fit within one of the three settings proposed.

In applying the levies, however, different levies may be appropriate for metropolitan or non-metropolitan locations. The issue of whether different levies should be applied and how the locations should be defined will be addressed in Stage 2 of the Committee’s work.

Defining Growth AreasIt is proposed to treat Growth Areas throughout the State on the same basis, that is all designated growth areas will apply the Urban Growth Zone in the seven growth area municipalities in metropolitan Melbourne plus any non metropolitan growth areas. This is most likely to be in one of the 10 regional cities and some of the peri-urban municipalities.


Defining Urban AreasThe definition of the Urban Area development setting in metropolitan areas is slightly different to that proposed for non-metropolitan areas.

In metropolitan Melbourne, Urban Areas will be within the continuous part of the Urban Growth Boundary which surrounds Melbourne. Those smaller towns in some of the growth area municipalities which have the UGB around them may be defined by their respective Councils as non metropolitan to allow for the non metropolitan standard levy to be applied if they so wish. This distinction is made on the assumption that a lower Standard Levy may be applicable in non-metropolitan areas.

Urban Area development settings in non metropolitan areas (including rural) of the remainder of the State can defined as follows:

Areas inside a growth boundary which is established through the relevant planning scheme; or

Where this is not established, the urban area as defined for Census purposes by the ABS; or

As defined by the Responsible Authority.

Once the approaches to defining the Urban Area development setting in each of the metropolitan and non-metropolitan areas is agreed, the Committee proposes that councils would then determine where the Urban Areas setting is to apply within each municipality, at the time of applying levies into the planning scheme. A three part process for undertaking that is proposed in Chapter 8.3(ii).

Defining Strategic Development AreasA Preferred Way Forward refers to strategic redevelopment sites in its classification of development settings. Clause 16.01-3 of the State Section of the SPPF refers to Strategic Redevelopment Sites and states as the objective:

To identify strategic redevelopment sites for large residential development in Metropolitan Melbourne.

A brief review of the MSSs of many metropolitan councils has identified six municipalities that make reference to ‘strategic redevelopment sites’ as such. Moonee Valley also identifies Major Redevelopment Sites. The other terms which are used in MSSs and which are usually supported by the identification of particular areas in structure plans or similar, are set out below:

Strategic Redevelopment Areas (Hobsons Bay); Strategic Redevelopment Precincts (Port Phillip);* Strategic Development Sites (Brimbank); Key Redevelopment Sites (Manningham); Large Redevelopment Sites (Stonnington); Urban Renewal Areas (Melbourne/ Port Phillip); and Major Redevelopment Sites (Moonee Valley).*

* In addition to Strategic Redevelopment Sites

The Committee notes that the terminology used is variable and that unless there are clear strategic reasons to do otherwise, that as MSSs are reviewed and amended consistent


terminology should be used and given the term Strategic Development Area if this proposal is adopted. It is noted that this is not the term currently used in Clause 16 of the SPPF.

For the purposes of consultation it is proposed by the Committee that each of the sites and areas covered in metropolitan planning schemes and included in this list may apply the proposed Strategic Development Area Standard Levy.

In the case of urban renewal areas, this term applies to areas such as Fishermans Bend and can also apply to urban renewal sites such as Arden-Macaulay and City North in the City of Melbourne. (Melbourne City Council advised the Committee that it was in the process of drafting DCPs for these areas).

Large Redevelopment Sites are also identified in the Stonnington Strategic Framework Plan. The Committee was advised that developers initiated a DCP for part of one of these sites. In addition, both Banyule and Darebin have identified Priority Development Zones.

Consistent with State policy, a number of councils made reference to the need to increase housing density in areas adjacent to (or in some cases part of) Central Activities Districts and Principal Activity Centres. In some cases particular terminology such as Higher Density Development, Residential Renewal Area, and Substantial Change Area is adopted in the MSS and at least some of these areas are identified in related structure plans. Councils will need to consider on a case by case basis which planning unit category is most appropriate for these.

The Committee notes that the SPPF confines Strategic Redevelopment sites to metropolitan Melbourne municipalities. The Committee has not attempted to review the MSSs of all rural councils but a brief review of major rural cities has identified only Greater Geelong has used a similar term in its MSS, that is Key Development Areas. These are existing urban areas of urban Geelong. The Committee sees no reason why the way should not be left open for the identification of such areas in non-metropolitan Victoria.

The Committee recognises that the Strategic Development Area setting needs to cover a wide range of developments of varying scope and type. For this reason, in Strategic Development Areas two categories are proposed; that is Large Scale and Small Scale.

These categories will enable different development levies to be applied to sites of different scale. The Committee has not yet defined the thresholds between Large Scale and Small Scale; this will be done as part of Stage 2 of the Committee’s work.

The way in which the levies may vary between the two types of Strategic Development Areas is discussed further in Chapter 9.

Other development settings consideredThe Committee explored different development settings for regional cities and/or peri-urban municipalities, but is of the view that if the councils have the ability to propose a development setting appropriate to their needs, the development settings proposed should be workable. In the Committee’s opinion, adding extra development settings has the potential to violate the ‘simplicity’ objective.

Similarly, adding a development setting ‘Activity Centres’ was explored but is not considered by the Committee as appropriate at this stage. The Committee believes that activity centres


can be categorised as either Urban Areas if growth is relatively slow infill type development, or a Strategic Development Area where council wishes to nominate an area for higher levels of growth or redevelopment.

The Committee does not favour a zoning based approach to defining the development settings as this would introduce a layer of complexity and inflexibility that would weaken the approach. When the Committee road tested these settings, most participants supported the settings proposed, and agreed that land use zones should not be used to define the parameters. Rather, a more strategic approach would be required. The Committee prefers providing the flexibility for planning authorities to apply the settings based on the most appropriate approach for each planning unit.

The Committee is conscious of the issues surrounding the infrastructure needs generated by low density and rural living areas and is aware of the work on this commissioned by the MAV. The Committee does not wish to exclude the option of applying development levies to development in zones such as Rural Living Zone, Rural Conservation Zone and Low Density Residential Zone (where it can be justified) and for this reason the Committee has proposed in Table 1, that councils define Urban Areas for development levy purposes. This will potentially allow low density residential areas on the periphery of urban areas to be included for Development Levy purposes, should councils so wish and provided that the need and nexus can be justified.

The Committee believes that rural zoned land should not have development levies applied. In many cases the impact on infrastructure from development in rural zones is likely to be relatively minor. It is acknowledged that larger developments in these zones may result in some impacts on the need for additional infrastructure; however the Committee is of the view that applying development levies in rural settings is likely to introduce a set of complexities around need, nexus, and in some cases municipal boundary issues. The Committee concludes that the costs and complexities are likely to exceed any benefits derived, so a pragmatic approach to exclude rural land is proposed to be adopted.

(iv) FindingsThe Committee makes the following findings:

The following three development settings are proposed:o Growth Areas;o Urban Areas; ando Strategic Development Areas, comprising:

Small Scale Large Scale.

The development settings should be defined by planning units rather than zones.

For each of the development settings, different Development Levies may generally be applied in metropolitan and non metropolitan settings.

The Committee seeks feedback on the proposed development settings and their definitions.


5.3 Proposed Model of Development Levies

(i) Submissions and commentaryThrough its consultations and the submissions made to it, the Committee was informed that there are likely to be a variety of situations in both metropolitan Melbourne and elsewhere in the State where local circumstances are such that a standard rate may leave an unacceptably high unfunded liability on the councils. For this reason, the Committee proposes that the option of varying the standard rate should be available and, in some circumstances, the option of applying a location specific levy may be justified and should be retained.

It is proposed that a new system of Development Levies comprise the following options:

Standard Levy (generally comprising a single rate or in some instances a rate within a defined range); orA levy determined as a result of the preparation of a Development Levy Scheme (DLS).

A standard rate is proposed for each of the proposed development settings so defined, with the exception of Strategic Development Areas where two rates are proposed, one for larger development sites likely to generate demand for additional new infrastructure, and one for smaller development areas.

The Committee proposes that the Standard Levy will be preferred unless it can be demonstrated that circumstances exist such that preparation of a DLS is warranted. The Committee is conscious that for this proposal to be workable Standard Levies will need to be set at levels so that appropriate infrastructure can be provided and unfunded liabilities minimised. The Committee is not underestimating the challenge it faces in doing this. The criteria that will be used in making a decision to proceed with a DLS and the decision making mechanism will be addressed in the Stage 2 report. The Committee seeks feedback on this approach, the criteria that might be used to make a decision to develop a DLS, and a streamlined mechanism that could be used to facilitate decision making.

The use of the term DLS is proposed as the Committee is aware that existing DCPs will continue to apply in their current form for many years. It is of the view that the use of new terminology will avoid confusion between the two schemes as the new system is adopted and implemented.

The main differences between the new DLS and the existing DCPs are as follows: The DLS is limited to Allowable Items (discussed in Chapter 6); Standard rates are used where possible; and The distinction between the capped Community Infrastructure Levy and Development

Infrastructure Levy has been removed.

The other changes proposed are concerned with clarification, simplification and standardisation of the elements of the levy system. The classification of the proposed new system of Development Levies is summarised in Table 2.

In Chapters 7 to 9, the approach pursued by the Committee to applying these new Development Levies to the range of proposed development settings is outlined. Chapters 7


to 9 also outline a possible approach to calculating both the Standard Levy and a levy calculated within a DLS for each of the proposed development settings.Table 2 Summary of Proposed Alternative Development Levies.

Growth Area Strategic Development Areas Urban Areas

METRO

Metro Growth Area Standard Levy (per hectare)

Metro Large Scale Strategic Development Area Standard Levy (per dwelling) orMetro Small Scale Strategic Development Area Standard Levy (per dwelling)

Metro Urban Area Standard Levy (per dwelling)(May be a range)

orLevy calculated in an approved DLS

orLevy calculated in an approved DLS (Large Scale Areas only)

N/A

NON METRO

Non Metro Growth Area Standard Levy (per hectare)

Non Metro Large Scale Strategic Development Area Standard Levy (per dwelling)orNon Metro Small Scale Strategic Development Area Standard Levy (per dwelling)

Non Metro Areas Standard Levy (per dwelling)(May be a range)

orLevy calculated in an approved DLS

orLevy calculated in an approved DLS (Large Scale Areas only)

N/A

Different levies may be set for metropolitan and non metropolitan areas. The Committee has taken no formal position on this at this stage and seeks feedback on whether different rates should be established.

In Urban Areas, it is proposed that the default position would be that there will be no Development Levy applied and the planning authority would implement a Standard Levy through their planning scheme. In doing so it effectively activates a levy, and consequently sets a level at which the levy would be applied. The proposed approach to applying the Urban Areas Standard Levy on an ‘opt in’ basis is discussed in Chapter 8.

This scenario was provided to the three small group workshops on 28 November 2012 and it was generally accepted by all parties in attendance as workable.

(ii) FindingsThe Committee makes the following findings:

The new development levy system is proposed to be based around alternative levies as follows:o Standard Levy; or


o Where it can be justified, determined through the preparation of a Development Levy Scheme; and

Development levies will not generally be applied to non-urban areas.

The Committee seeks feedback on the proposed levy structure and how it may apply to different locations and development settings.

5.4 Operational Issues

A Preferred Way Forward indicates that:

To access standard levies a council would still be required to demonstrate that a need and nexus to the proposed development arises. In all cases a Council would need to identify the charge area, the anticipated level of growth, the type of infrastructure required to support that growth, and the type of infrastructure required to support the growth and the applicable development setting.

(i) What are the key issues?The key operational issue addressed by the Committee is the level of justification that is proposed to be required when a council wishes to apply either a Standard Levy or to develop a DLS.

(ii) Proposed levels of justificationThe Committee is of the view that some level of justification is required regardless of which approach is being taken to Development Levies for the following reasons:

To ensure that the Development Levy is seen as a levy that can be applied under the Act and can not be interpreted as a tax; and

To demonstrate need and nexus both for the principles outlined in Chapter 4 and also to ensure accountability for proposed expenditure on infrastructure to those from whom the levy is collected and other ratepayers.

The Committee is firmly of the view that the level of justification required should be greater when calculating a DLS, because in most cases the levy will be significantly higher. Additionally, there will be incentives to adopt the Standard Levy in as many circumstances as possible, thereby contributing to the simplicity of the proposed new system.

The levels of justification required for each of the Standard Levies and the DLS, and the justification required to vary the Standard Levy (where permitted) are set out in Chapters 7 to 9.

(iii) Application to residential and non residential developmentCurrently the practice in metropolitan growth areas is that Development Infrastructure Levies are applied to all development, but that Community Infrastructure Levies are only applicable to residential development. During consultations, the City of Melbourne informed the Committee that those working within the municipality are significant users of community and recreation infrastructure, and that, in its view, there is a case for community and recreation infrastructure to be charged on all new development. The Committee has


some sympathy for this position and notes that this is likely to be an issue in other employment nodes, particularly as they develop in coming decades.

A further issue is that in many activity centres, particularly higher order activity centres, there is an increasing mix of residential and non-residential uses.

The Committee proposes that the norm will still be that where a DLS is prepared, the Standard Levy component for Community and Recreation infrastructure should only apply to residential development or developments which include a residential component. However it may be applied to other development if appropriate justification is provided. Equivalence tables to convert charging rates from ‘per dwelling’ or ‘per hectare’ to ‘per floor area’ for non-residential uses will need to be developed and applied. The Committee believes that this will occur as part of the development of new guidelines which will need to accompany the proposed new system. These may well be similar to those in the current Guidelines.

Standard Levies can be applied to both residential and non-residential development. Conversion factors will be required to be developed for non-residential uses.


The application of Standard Levies, or a Development Levy Scheme, or any variation of a levy will require a level of strategic justification.

The application of a Development Levy Scheme will generally require a higher level of justification than a Standard Levy.

The Community and Recreation component of a levy calculated under a Development Levy Scheme will generally only be applied to residential development but can be applied to other uses if it can be justified.


6 Application to Types of Development6.1 Context

A Preferred Way Forward identifies in Section 3 that the new system would provide councils with a set of standard development contributions levies for different development settings based around five infrastructure categories.

The Committee’s Terms of Reference (22, dot point 5) requires recommendations on:

The scope of the basic and essential infrastructure to be included in the standard levy for each of the following infrastructure categories:

- Community facilities- Open space facilities- Transport infrastructure- Drainage infrastructure- Public land

This Chapter reviews feedback received on the proposed infrastructure categories, examines the use of basic and essential infrastructure lists and considers how these lists might be applied to defining levies for each infrastructure category in each of the development settings.

6.2 The Proposed Infrastructure Categories

(i) General commentsThere was broad agreement from most groups that the Committee consulted with and received submissions from that the five general infrastructure categories are an appropriate basis for setting development levies. Many of the submitters however, commented that the categories need more careful definition, and several submitters (including Stonnington and Yarra) suggested that improvements to the public realm be added to cover more infrastructure items in areas of urban redevelopment or infill areas.

There was general agreement on community facilities and open space facilities being fixed levies and transport infrastructure, drainage infrastructure and public land being variable, although submitters raised a number of qualifications or questions that are discussed later on. There was also wide support for the community infrastructure and open space levies being combined and pooled, and support for allowing flexibility within this combined levy for councils to allocate funding priorities to projects on a local needs basis.

The Committee is of the view that the term ‘Recreation’ is preferable to ‘Open Space’, as it is inclusive of indoor facilities and avoids any confusion with land, as opposed to embellishments of that land for recreation purposes.

The Committee supports the pooling of funds for the community infrastructure and recreation levy, and allowing councils flexibility to implement projects in line with local needs. The Committee notes the comment by the GAA that this pooling may also drive some efficiency through shared use of multi-purpose facilities and through councils being required to ‘cut the cloth’ to fit within a fixed budget.



The infrastructure categories as proposed in A Preferred Way Forward are supported.

The community facilities and recreation levies should be combined as one fixed levy.

Transport, drainage and public land levies should be variable.

Funds collected from the fixed community infrastructure and recreation levy should be pooled within a collection unit and the council should be given the flexibility to determine priorities for implementation.

6.3 Basic and Essential Infrastructure

(i) What are the key issues?The concept of defining ‘basic and essential’ infrastructure requirements, and using this as a basis for setting development contributions, seems widely accepted. Parties not surprisingly, differed on the make up of the list of ‘basic and essential’ items and how items should be interpreted in calculating contributions.

In this section, the Committee has reviewed the following issues: What is the rationale for defining infrastructure that can be funded from a

development levy; What are the differences in definitions across the development settings; and How might the basis for levies change over time?

The Committee proposes that revenue collected from levies may only be expended on ‘Allowable Items of Infrastructure’ in each category. This is discussed further later in this Chapter and lists of proposed Allowable Items are included in Chapters 7 to 9. The appropriate scope and standards of facilities are discussed in these following Chapters.

(ii) Submissions and commentary

What can be included in a development levyIt is a widely held view that the current definitions of what can be included in development contributions schemes are inadequate. Section 46J of the Act provides that a DCP may provide for either or both of a development infrastructure levy or a community infrastructure levy. Although the Act goes on to define limits on the community infrastructure levy and administration arrangements for both levies, it does not define what can be included in each levy.

The Ministerial Direction on Development Contribution Plans dated 15 May 2003 sets out the works, services or facilities that may be funded from a development infrastructure levy. It is of note however, that this list includes infrastructure such as public transport infrastructure, the higher order items of which are now funded via the GAIC in growth areas and not allowable in a DCP. The Ministerial Direction does not define what can be funded from the community infrastructure levy. As a result a large amount of time has been spent


in debate at Panel hearings over what items should be funded from the capped community infrastructure levy as opposed to the uncapped (and broadly defined) development infrastructure levy.

A number of submitters including the GAA and VPELA highlighted the difficulties that have arisen from the lack of clear definition of allowable development items in the current legislation. The GAA submitted that this has resulted in items that can be included in DCPs being defined by evolving custom and practice.

Changing definitionsBased on the submissions received, there are a number of dynamics that have contributed to the escalation of development contributions in growth areas in recent years. Many of these issues relate to how the definition of basic and essential infrastructure has changed over time.

Scope creep

A number of submissions commented on the extent of items that have come to be regarded as ‘basic and essential’ in more recent DCPs. They referred to it as ‘scope creep’. Submitters representing the development industry, including UDIA and the Property Council, submitted that the extent of basic and essential items has ballooned out in growth areas during boom times. During the property boom years, it was submitted developers were inclined to agree to more and more items being included in order to get their property to the market quickly. With land being in relatively short supply, and profit margins on land healthy, developers had scope to pay higher contributions. The GAA agreed with this contention, acknowledging that they may have contributed to this artificially high expectation of what should comprise basic and essential infrastructure through their efforts to the increase supply of land in growth areas.

Some submitters commented on the evolving nature of the draft Arterial Roads Protocol and argued that this has contributed significantly to scope creep, with VicRoads seeking to include a higher proportion of works on arterial roads and major intersections in DCPs.

Improved understanding and better cost estimating

Growth area councils submitted that the increase in scope of basic and essential items is at least in part related to a better understanding of the requirements of new communities and more detailed costing of items. They said the expansion is completely justified in order to minimise funding gaps and hence the unfunded liabilities that are accumulating in their accounts.

Change in standards

A number of submitters highlighted the changes that had occurred to externally imposed standards such as:

Changed space requirements for child care; Changed minimum hours for kindergarten places; Changes to safety standards required by sporting associations; and Changes to amenity standards for umpires and players required by sporting

associations, as well as segregation of male and female rooms and facilities.


Changing community expectations

Changing community expectations is an often cited reason for cost escalation. There is no doubt that what were accepted levels of provision of infrastructure by communities in some growth areas a decade or two ago, is no longer regarded as acceptable. Similarly, what many new households were prepared to accept in the past is accepted by fewer households now. However, it was put to the Committee by industry sources that these changing expectations are not documented, and the reliance on community expectations with respect to some infrastructure which is being required in DCPs is not evidence based.

Transport infrastructure

Some of the growth area councils pointed out that as growth precincts move further out of established urban areas, basic road networks are less defined or non-existent, requiring entire road reserves to be provided.

A further road issue raised by growth area councils was the increasing cost of VicRoads imposed requirements. They submitted that the standards required by VicRoads had increased and the level of construction required at the ‘interim’ stage had increased. Developer representatives shared similar opinions.

Relevance of historically agreed items

A number of submitters made the point that the list of basic and essential infrastructure contained in A Preferred Way Forward was not appropriate as it had been developed only on growth area experience. It was submitted that the list had little relevance to non growth areas settings.

A number of submitters, including the GAA and the City of Greater Geelong, suggested a ‘bottom up’ approach to developing a list of items based on a typical development scenario in each development setting.

What is generally agreed?Despite the differing perspectives, there was nevertheless general agreement from most submitters on a number of matters relating to the list of basic and essential infrastructure items proposed in A Preferred Way Forward:

The list should be more clearly defined to reduce variations in interpretation; The items in the list will need to vary in different development settings; The scope and standards that apply to each item should be more clearly defined; The removal of the distinction between the capped community infrastructure and the

uncapped development infrastructure levy is supported; and The existing maximum $900 per dwelling community infrastructure levy (as provided

for in section 46 of the Act) should be abolished if it is replaced by a broader community and recreation levy.

Very few submitters argued against the merits of these proposed changes to the system. Some councils cautioned however, against the risk that fixed levies, if set too low, would create significant funding gaps for councils and/or result in some critical infrastructure not being provided.


Should all basic and essential items be fully funded?One issue where there was little agreement was the appropriate proportion of cost contribution from developers to items in a development levy.

Most councils submitted that development contributions should, as a matter of principle, cover the full cost of all basic infrastructure required to support new communities. They argued that failure to do this would mean that critical projects would be under-funded, requiring councils to fund the gap from council rate revenue. Councils submitted that this, in turn, affects the affordability of living in the community.

Other submitters (including some councils and most industry representatives) submitted that the term ‘development contributions’ should mean just that i.e. a contribution towards the cost of infrastructure, and there should not be an expectation that all items should be fully funded. Typically, a contribution in the order of 70% to 80% was suggested as appropriate. Views on this, however, varied depending on the extent and scope of items on the list. Generally the argument was that if councils wanted a longer list of allowable items, then the proportion should be lower and conversely, if the list was shorter the level of contribution could be closer to full recovery. A number of submitters supported the notion that development contributions should only provide for the initial set up of a community and that it was appropriate for the council, through rates, or the community, through fundraising, to pay for anything beyond basic facilities.

Different lists for different development settingsA number of metropolitan councils submitted that the list of basic and essential items for established areas should be different to allow for different infrastructure provision for those areas, catering for the local variations in demographics. Some councils suggested that it is unlikely that development in an infill area would be sufficient to trigger the need for an entirely new facility, but that incremental expansion would be required, for example an additional room on a community centre. Other councils submitted that the scope of allowable items should be expanded to include for example, facilities for older residents in areas where the population is ageing. Some councils, including Melbourne, submitted that public realm improvements should be included, as the public space in inner urban areas often performed a passive open space function in space constrained areas.

(iii) DiscussionThe Committee agrees that the current legislation and Ministerial Direction dated May 2003 do not adequately define allowable items in DCPs.

A Preferred Way Forward indicates that the “new system intends to define basic and essential infrastructure and who is responsible for the provision of this infrastructure”.

The Committee is aware that considerable time has been spent at Panel hearings debating the meaning of the terms ‘basic’ and ‘essential’. This has not resulted in clear, consistent and non-disputable outcomes. The Committee also notes that in the Eddie Barron decision the Tribunal in its determination said:

Only those facilities considered essential for basic liveability should be considered eligible for cost recovery via up front payments; and further


What is essential may vary from case to case and should take account of the varying needs of each locality.

The Committee notes that what is considered basic and essential will to some extent, be in the eye of the beholder. Some developers will try to narrow the definition to keep costs that they have to pass on to a minimum, and at the other end of the spectrum some councils will expand the definition in order to minimise the infrastructure that they have to provide from future rate revenue.

Attempts to provide precise definitions of the terms basic and essential inevitably lead to the use of other words and terms which in turn lead to further questions of interpretation and room for debate.

For these reasons the Committee prefers the term ‘Allowable Items’ to define what can be included in a development levy. In order to reduce the extent of interpretation required, it is proposed that a list of Allowable Items be produced for each category of infrastructure and for each development setting. Formulating these lists is an implementation issue which will be addressed more fully by the Committee in its Stage 2 report. The Committee has however, prepared draft Allowable Items lists for discussion purposes, and these are included in Chapters 7 to 9 in the discussion on each levy. In defining each of these lists, it is proposed to use the principles established in the Eddie Barron decision i.e. items should be ‘essential for basic liveability’ and the need and nexus should be demonstrable.

The Committee believes that this will better define infrastructure that is directly relevant to each of the development settings. The adopted lists of infrastructure items would be subject to regular review.

The Committee considers that the rationale for defining Allowable Items of infrastructure can be guided by the following broad description:

In the case of new growth area communities, Allowable Items would include infrastructure that is essential to enable the basic functioning of a new community. This would include infrastructure designed to meet the initial needs of a community in the first 5 to 10 years of its development. It would not generally include higher order or regional infrastructure, but may include a proportionate contribution to infrastructure in neighbouring precincts if a clear justification can be demonstrated. Land acquisition to ensure appropriate provision can be made for the long term development of higher order infrastructure should be encouraged; and

In the case of Urban Areas or Strategic Development Areas, Allowable Items would include a contribution towards increasing the marginal additional capacity required so as to not unreasonably stretch existing facilities or disadvantage surrounding communities. In some cases, larger sites may generate the need for an entirely new facility(ies).

The Committee accepts that development contributions in growth areas have increased in recent years and most, if not all, of the factors listed above have contributed, albeit probably in varying proportions in different areas. The Committee agrees that development contributions should be contained in order to assist affordability of new housing, but also agrees that the system should not lead to unreasonable funding gaps.


The Committee believes that the proposed DLS should aim to balance the competing objectives of certainty, fairness and flexibility. One of the key means to achieving such a balance, and enabling the system described in A Preferred Way Forward to work is through the system of defining Allowable Items.

The Committee agrees that the setting of levies would be better done on the basis of bottom up costing of infrastructure within a defined scope and standard. The experience from the GAA and growth area councils can be used to inform a model for this in growth areas, and the experience of other councils can be used in setting up a similar model for established urban areas and Strategic Redevelopment Areas.


Finite lists of Allowable Items to be included in development levies should be formalized.

Lists of Allowable Items need to be tightly defined in terms of the scope and standards that apply to each item.

The removal of the existing capped community infrastructure levy is supported.

The list of Allowable Items should vary to match the needs of the different Development Settings.


7 Defining the Levies – Growth Areas7.1 Context

A Preferred Way Forward proposes an approach to setting Standard Levies that is based primarily on growth area experience. This Chapter (and the next two) propose approaches to setting Standard Levies and DLSs in each of the Development Settings. The levies are examined in the context of the findings of the previous Chapters and an approach to guide the next stages of the Committee’s work in setting the quantum of the levies is set out.

The Committee’s Terms of Reference (22, dot points 1, 3, 4 and 5) for Report 1 requires recommendations on:

Any required changes or improvements to the proposed framework ...;

Advice on how development contributions should be applied to residential and non-residential development, including retail, commercial and industrial development, in each of the development settings;

Advice on how the new system should operate in the different development settings; and

The scope of the basic and essential infrastructure to be included in the standard levy for each of the following infrastructure categories:- Community facilities- Open space facilities- Transport infrastructure - Drainage infrastructure- Public land

The Committee’s Terms of Reference for Report 2 require the Committee to set the levies. In practice, there is some overlap between how the new system will operate and how levies might be calculated. The Committee has therefore given some consideration to the methodology required to set levies in considering the model, and the Committee’s initial thoughts on this are also included in this and the following two Chapters. The issue of the level of justification required in order to apply a levy is also addressed.

7.2 Growth Area Levy Structure

Chapter 5 concluded that the Development Levy for Growth Areas should include the following options:

Standard Levy (per hectare); or Apply a DLS comprising a fixed community infrastructure and recreation levy plus

variable levies for transport, public land and drainage (where applicable).

In Chapter 6 the Committee concluded that the infrastructure categories listed in A Preferred Way Forward are appropriate, and that lists of Allowable Items for infrastructure could be used to formulate and implement the levies.


This Chapter examines the proposed model for the options of a Standard Levy and a DLS in Growth Areas.

7.3 Standard Levy for Growth Areas

(i) Setting a standard levyA Preferred Way Forward suggests a Standard Levy be developed for each Growth Area.

The Committee believes that a Standard Levy could be calculated by one of the following methods:

Calculate an overall levy based on the historical costs of recently completed or approved DCPs; or

The sum of the Community and Recreation, Transport, Drainage and Public Land levies for a ‘typical’ Growth Area.

Based on some initial research, the Committee notes that the cost of DCPs in growth areas has generally ranged between $100,000 and approaching $300,000 per net developable hectare, including land and the fixed Community Infrastructure Levy. This range includes some of the very early DCPs which did not include some of the items typically included in later schemes.

DCP charges have varied widely with the cost of each infrastructure category, but most notably the transport and public land components vary considerably. Drainage costs in non-metro areas are a further non-standard variation.

The Committee is of the view that a capped maximum charge level should be established for the Community and Recreation infrastructure component of any levy. This should define the maximum level of expenditure which is permitted on Allowable Items of Community and Recreation Infrastructure, regardless of whether the Standard Levy or a DLS applies. A methodology for establishing the level of this particular fixed levy is proposed in Chapter 7.5 (iii) and (vi).

Whichever of the above methods is used to set a per net developable hectare Standard Levy for Growth Areas, the following approach is proposed:

Expenditure on Community and Recreation Allowable Items will be permitted up to a maximum charge level;

Expenditure on Transport and Drainage (where appropriate) from the list of Allowable Items will be permitted;

Expenditure on land acquisition as proposed in the Allowable Items lists will be permitted; and

Expenditure on all of the above will be allowed up to the standard per hectare levy.

Land values in different Growth Areas will mean that the Standard Levy will vary between growth corridors.

The Committee recognises that drainage in non-metropolitan areas is problematic and widely variable, and may have to be excluded from the Standard Levy. Feedback on this is sought from relevant councils and other stakeholders and agencies.


In practice the development of a fair Standard Levy for each Growth Area will be complex and may need to consider other local variables. These issues will be examined in more detail in Stage 2 of the Committee’s work after feedback is considered.

(ii) Applying a standard levyThe Committee believes that if a Standard Levy is applied, each infrastructure item proposed to be implemented within the planning unit, and the public land required, should be identified in the PSP. Each Responsible Authority (normally council) would be responsible for delivering (directly or through works in kind) the identified infrastructure from within the set budget of the Standard Levy. All infrastructure funded by the Standard Levy should be limited to those items identified in the Growth Areas Allowable Items.

In its consultation, the Committee questioned stakeholders on whether of a Standard Levy would be applied. Most stakeholders saw value in a Standard Rate in terms of driving efficiencies in implementing works. Some councils responded that they would never apply a Standard Levy, as to do so would risk either over charging or under funding, and they would prefer to do the more detailed work required of a DLS to make sure. Other councils responded that they would make an assessment on a case by case basis about which approach would result in a better outcome. The Committee acknowledges that there will inevitably be some situations where the preparation of a DLS will be preferred and be warranted.

The Committee notes that the decision to apply a Standard Levy for some planning units and a DLS in others may create some inequities between developments, or be seen to ‘favour’ some developers. An appropriate decision making mechanism will be required to ensure transparency of decision making.

The Committee nevertheless believes that the Standard Levy for Growth Areas could have value for the following reasons:

It provides a benchmark against which DLS rates can be examined. DLS rates that are substantially higher than a Standard Levy should require higher levels of justification;

A Standard Levy may be preferred where the development of a particular precinct is time critical (or for sound policy reasons is to be promoted) and the extra work associated with a DLS can be avoided; and

The Standard Levy could be used as an ‘interim levy’ to apply while the planning authority goes through the process of justifying and then developing a DLS. The Standard Rate could apply to land where development commences prior to the formalisation of a DLS for the land and adjusted once the final DLS rate set. This has the potential to improve transparency and potentially avoiding inequities that now arise through the application of development specific section 173 agreements.

The proposed level of justification required at the time of implementing a standard levy is summarised in Chapter 7.10.

7.4 Development Levy Scheme for Growth Areas

A Preferred Way Forward proposes a new framework for a standardised levy model based around four component levies:


Fixed Community and Open Space facilities levy; Variable Transport levy; Variable Drainage levy; and Variable Public Land levy.

The Committee has received detailed submissions in response to the proposed model in the Preferred Way Forward and has separately reviewed each of the components of the DLS.

7.5 Community Infrastructure and Recreation Facilities in a Growth Area DLS

(i) What are the key issues?A Preferred Way Forward proposes an approach to developing a fixed community and recreation infrastructure levy.

The key issues for the Committee are: How should the fixed rate be set? How should it be applied? and What should comprise the Allowable Items?

(ii) Submissions and commentaryThere was general agreement amongst submitters that the items listed in Attachment 4 of A Preferred Way Forward for direct delivery by the development proponent are appropriate. The Committee has not reviewed this list in detail and has instead concentrated on the items proposed for inclusion in the development levy.

Most comments related to whether items should or should not be included as basic and essential infrastructure in Attachment 3 to A Preferred Way Forward. Some comments were also received on the nominated funding sources in Attachment 2 – Possible infrastructure matrix.

Many of the submissions, particularly from councils, commented on additional items that ought to be included in the list of basic and essential items. In some cases, submitters drew a distinction between what the levy should be able to be spent on (Allowable Items) and whether they should be considered as fully funded items in calculating the levy. In some cases, the implication by councils was that if the item is on the list, it then ought to be fully funded by a development contributions levy.

Items suggested by some submitters to be added to the Allowable Items list included: Libraries; Aquatic centres; Lacrosse fields; and Indoor recreation facilities.

In the Committee’s discussions with DPCD officers and with Matt Ainsaar of Urban Enterprise, it was made clear by them that the list of basic and essential infrastructure was intended to be a list of allowable items which could be included in a levy. A number of submitters suggested that the terminology was misleading and the list should be titled ‘allowable’ or ‘possible’ infrastructure items.


Submissions representing developers and land owners submitted that the list had (for the reasons discussed in the previous Chapter) grown too long, and included higher level items that served a broader regional community or were more characteristic of a ‘more mature’ community. It was proposed that infrastructure such as libraries and performing arts centres should be excluded. Most submitters argued that land for such higher order or regional facilities could be included in development contributions plans on a proportionate basis, if sufficient strategic justification was demonstrated.

A small number of submissions argued that only local items should be included in the list of basic and essential items i.e. all items must be basic infrastructure built within the boundary of the development.

The most contested items were: Community infrastructure:

- Performing arts centres;- Libraries; and - Business accelerators.

Recreation:- Regional sports facilities;- Relatively low participation sports such as bocce; and- Synthetic surfaces.

A Preferred Way Forward, Attachment 5, shows indicative provision rates (or population thresholds) for community facilities and recreation items. The indicative provision rates and land requirements have been developed based on growth area experience. The general response from growth area councils was that the provision rates were close to reality, although there was some feeling that there should be allowance to vary the requirements for different demographics.

Non-growth area councils noted that the provision rates were generally not applicable to infill or strategic development sites, or non metropolitan areas, although they accepted that a similar methodology might be useful in setting standard rates for those settings.

(iii) Setting the levyIn its written submission, the GAA proposed a methodology for setting the Community and Recreation Infrastructure Levy that nominates a selection of community and recreation items for the purposes of calculating a levy from the longer list of Allowable Items. The GAA method proposes the calculation of a levy based on the typical basic items that would apply to a typical square mile in a growth area. These costs are apportioned to arrive at a charge per net developable hectare. The GAA model proposes that when it comes to delivering infrastructure, councils would be able to choose from the full list of Allowable Items.

The assumptions made by the GAA in this model for setting the fixed rate included: Only initial start up items in each facility are funded e.g. the first oval or field, with

lights and fully sealed car parks delivered later; Bottom up costing of the nominated levy items, based on average costs for

comparable items; Provision rates essentially as per Attachment 5 in A Preferred Way Forward; and


A proportionate contribution is proposed to be made to ‘level 2’ and ‘level 3’ community facilities in addition to the more local ‘level 1’ facilities.

The proposed approach arrives at a combined community and recreation infrastructure levy of approximately $60,000 per net developable hectare ($4,000 per dwelling) compared with typical current costs (according to GAA) of approximately $80,000 per net developable hectare. The costs exclude land and are based on average costs for typical recent DCPs.

The GAA included typical land requirements for infrastructure required as part of the Community Infrastructure and Recreation Levy in its submission. The Committee notes that this information could be used to assist in setting the public land requirements in a PSP.

The Committee thinks that this approach has a number of advantages: It is more clearly defined; It removes any argument about the proportion of costs to be paid by the developer; It retains the flexibility for councils to decide priorities; It provides certainty for developers; It prevents uncontrolled ‘scope creep’; and It enables simpler indexing and review on a regular basis.

The levy arrived at using this approach would then become the maximum charge level for Community and Recreation Infrastructure referred to in Chapter 7.3(i) and would be applicable regardless of whether a Standard Levy or DLS applies. This figure would then be indexed on an annual basis and would be reviewed regularly in terms of changing standards and changing community expectations. The infrastructure proposed by the Committee to be included in this core list is addressed in Chapter 7.5(vi).

(iv) Applying the levyThe Committee supports the concept of pooling of funds from the Community and Recreation levy. If a council wishes to provide anything outside the list of allowable items, funding cannot be drawn from development contribution funds (This does not preclude councils negotiating the voluntary provision of extra items by developers outside the development levy process).

The Committee believes that councils should still be required to specify the projects it proposes to spend the funds on at the time of applying the levy i.e. in the PSP. The Committee believes that this is necessary to demonstrate the nexus between the collection and expenditure of the levy.

(v) Allowable ItemsThe Committee is of the view that the list of Allowable Items for Growth Areas should be limited to items normally or typically found in a new community plus the acquisition of land for higher order infrastructure. The Committee believes that specialist or regional facilities such as performing arts centres, libraries and delivered meals facilities are not representative of items that most communities would have in their neighbourhood early in their development, and therefore the construction of these should not generally be on the list of Allowable Items.

The Committee has weighed the arguments presented to it and suggests the list of Allowable Items for growth areas be as shown in Table 3. The list draws on Attachment 3 of A


Preferred Way Forward as its starting point, the suggested changes from the GAA and other comments received in submissions. The Committee points out that the Allowable Items in Table 4 allows considerable flexibility for councils to respond to local needs, but there should be no expectation that development levies will fund all such infrastructure.

The Committee prefers that the levy be used to fund the acquisition of land for all planned community and recreation facilities and for embellishment of local facilities only. However, the list of allowable items in Table 4 provides for some embellishment of higher order facilities, if councils regard these as priorities and can strategically justify them from within the fixed levy.

The Committee’s preferred list differs from that proposed in A Preferred Way Forward on the following points:

The list distinguishes between Level 1, 2 and 3 community centres as suggested by the GAA to clarify expected provision rates;

A business accelerator is seen as a Level 2 item rather than Level 1; A delivered meals facility is seen as a Level 3 item rather than Level 2; Adult day care/planned activity group is seen as a Level 2 item rather than Level 3; and The list of sports fields has been expanded to include additional outdoor sports to

provide wider flexibility to respond to local demand and differing demographics.Table 3 Growth Areas Community and Recreation levy – Allowable Items*1

Facility Allowable items Land in levy?

Construction in fixed levy?

COMMUNITY FACILITIES

Level 1multi-purposecommunity centre

Level 1 multi-purpose community centre: Building Multi-purpose community rooms Kindergarten/pre-school/3 yr old group Occasional childcare centre Maternal & child health consulting room Childcare Centre Youth space/facility Consulting Rooms Adult Education Space Community arts & cultural space Kitchen Ancillary space including storage, amenities,

circulation space, foyer, office space etc Playground, car parking, landscaping

Yes Yes

Level 2Community centre

As above for level 1 plus: Neighbourhood House Space for adult day care/planned activity group Space for community arts & cultural

facility/performing arts Space for business accelerator

Yes Yes


Facility Allowable items Land in levy?

Construction in fixed levy?

Level 3Specialist community centre or stand alone facility

As above for level 1 and 2 plus: Community learning centre/library Youth centre Performing arts centre Delivered meals facility

Yes No

OPEN SPACE

Local and district sports facility

Local and district sports facilities including Football ovals, Soccer pitches, Cricket ovals, Rugby fields, Tennis courts, Basketball courts, Netball courts, Bowls lawns, Bocce lawns, Baseball diamonds, Softball diamonds, Hockey fields, and other local sports*2 facilities which may include: Earthworks, levelling and preparation of playing

surfaces Turf and irrigation Goal posts, score boards, fencing, lights Coaches, interchange shelter/seating Buildings for indoor sports Pavilion, clubhouse, change rooms (player and

umpire), toilets, seating, first aid, kiosk

Yes Yes

Park improvements (including drainage reserves.)

Playground, car parking, internal roads, bicycle, pedestrian paths, seating, landscaping, BBQ, picnic facilities

Yes Yes

Regional sports facility

Including Aquatic Centres, Velodromes, Ice Staking Rinks

Yes No*3

Notes to Table 3:

1. Councils can direct funds collected via the fixed levy to construction and/or land for the items listed in the tables as indicated.

2. Other local sports may be appropriate, depending on local needs and the demographics of the area.3. Construction of these higher order facilities may be allowable in some circumstances but only if it can

be demonstrated that the proposed regional sports facility is clearly justified for funding within the fixed levy.


(vi) Items to be used as a basis for calculating the fixed community and recreation levy

The Committee believes the GAA methodology has merit, although the detail of exactly what is included in the list of items to be used as the basis for setting the levy needs to be closely examined and tested with stakeholders. This is part of the second stage of the Committee’s work. Based on an initial examination, the Committee suggests the following changes to the items proposed by GAA to calculate the fixed levy:

Delete the contribution to construction of Level 3 community facilities as the Committee believes these are higher order facilities.

Include earthworks and leveling component of a second oval, or a second and third soccer field should be included in the base levy. This site preparation work for playing surfaces is typically done by the developer as a works in kind item and is more efficiently done at the time that the heavy earthmoving equipment is on site.

The Committee’s proposed list of items to be used for the purposes of setting the fixed Community and Recreation charge as both a component of the Standard Levy and also in a DLS levy for growth areas is shown in Table 4. The Committee seeks comment on the proposed list of Allowable Items and the proposed methodology for setting the fixed levy as part of the next stage of its work.

Clearly the level of the charge derived from this list will be heavily dependent on the nature and scope of each infrastructure item and this forms part of the work to be undertaken by the Committee for its Stage 2 report.

(vii) Per hectare or per dwellingThe GAA submitted that the Community and Recreation Levy should be applied on a per dwelling rather than per hectare basis and should be applied across both residential and non-residential areas. It said that this approach will achieve a clearer nexus between the development and the type of infrastructure being funded through the development levy, and would pick up on the greater need for community and recreation infrastructure that would be generated from higher density residential development.

The Committee agrees that the need for community and recreation services is driven by population rather than land area, however it is concerned that if the levy was to be per dwelling it may act as a disincentive for higher density developments. The Committee also considers that if a per dwelling levy is applied to residential components of business developments in growth areas, as suggested by the GAA, it may result in many of these proposals becoming unviable. The Committee believes that this type of residential development should be encouraged in growth area activity centres. The Committee notes these dwellings in business zones would house a very small proportion of the population of a new growth area and is therefore unlikely to materially affect the quantum of levies collected.

The Committee therefore favours a per net developable hectare Community and Recreation Levy in the Growth Areas setting.


(viii) Applying the levy to non residential developmentIn Chapter 5.4(iii) the Committee proposed that the Community and Recreation component of a levy would generally only apply to residential development. This has implications for how a Standard Levy would be applied to non–residential development and this implementation issue will be addressed in the Stage 2 report.

(ix) Reviewing levies over timeOther general issues raised in relation to the Community and Recreation levy (and indeed other levies) included:

The need for indexing costs annually including a possible annual revaluation of land to account for cost inflation; and

A mechanism to review allowable and core lists of infrastructure to ensure that the new system responds adequately to changes in externally imposed standards and to changing needs and expectations.

The first of these is self explanatory. The second point relates to the need to respond to changes in service standards imposed by bodies such as the Commonwealth Government in relation to child care standards, or peak sporting bodies in relation to safety standards or amenities.

(x) Going forward – a possible methodology for setting the leviesThe Committee proposes to use the indicative list of items shown in Table 5 for the purposes of calculating the capped maximum charge level for Community and Recreation infrastructure for Growth Areas.

The Committee proposes the following methodology for developing the rate in Stage 2 of its work:

Review feedback on the proposed indicative lists and methodology; Develop a clear definition of each of the items on the list, including floor areas, design

standards and scope of works; Consider appropriate costing options (e.g. historical costs or use of industry standards

such as Rawlinsons) and what, if any, contingencies are to be applied; Apply the methodology to calculate a possible levy; and Review the quantum of the levy to ensure that it fits within reasonable and fair limits

that will (i) not unreasonably affect housing affordability and (ii) avoid unreasonable funding gaps.

The Committee will undertake further research and consultation to assist it in arriving at a final proposed levy.


Table 4 Growth Areas Community and Recreation Levy – indicative list of items to be used to calculate fixed levy

Facility Levy to be calculated based on including these items

Level 1multi-purposecommunity centre

Level 1 multi-purpose community centre: Building Multi-Purpose Community Rooms Kindergarten/Pre-School/3 Year Old Activity Group Occasional Childcare Centre Maternal & Child Health Care Space Childcare Centre Youth Space/Facility Consulting Rooms Adult Education Space Community Arts I Cultural Space Kitchen Ancillary space including storage, amenities, circulation space, foyer, office space

for service providers etc Playground, Car Parking and Landscaping

Level 2Community centre

As above for level 1 plus: Neighbourhood House Adult Day Care/Planned Activity Group facility Community Arts/Cultural Facility / Performing Arts Space Business Accelerator

Local and district sports facility

Football oval/Cricket oval: Earthworks, levelling and preparation of basic playing surfaces for all ovals Turf and irrigation for one oval only Goal posts, score boards, perimeter fencing Coaches, interchange shelter/seating

Football/cricket pavilionSoccer field: Earthworks, levelling and preparation of basic playing surfaces for all fields Turf and irrigation for one field only Goal posts, score boards, perimeter fencing Coaches, interchange shelter/seating

Soccer pavilionTennis courts: Earthworks, levelling for all courts Playing surface, fencing for one court only

Tennis pavilionNetball courts: Earthworks, levelling for all courts Playing surface for one court only

Netball pavilion

(xi) FindingsThe Committee makes the following findings:


The Allowable Items as set out in Table 3 should be adopted for the purpose of expending funds collected from the Fixed Community and Recreation Infrastructure Levy for Growth Areas.

The items as set out in Table 4 should be adopted for the purpose of setting the Fixed Community and Recreation Infrastructure Levy for Growth Areas.

A per net developable hectare rate for the Community and Recreation Infrastructure Levy in Growth Areas is preferred.

Fixed levies for residential and non-residential development will be pursued in Stage 2 of the Committee’s work.

The Committee invites feedback on the proposed Allowable Items as input into its further work in Stage 2.

7.6 Transport Infrastructure in a Growth Area DLS

(i) What are the key issues?A Preferred Way Forward proposes that the transport infrastructure levy be a variable levy based on one of two options:

Option 1 – Standard rate per item; or Option 2 – Standard levy set per geographic area.

The Committee has reviewed the responses to these options and puts forward an approach for consideration, along with a possible methodology for formulating a variable transport levy as part of a DLS.

Key issues considered by the Committee include: The prospect of achieving standard rates; The variability of transport costs; Apportioning higher order or regional transport costs; The Arterial Road Protocol; Defining interim works; and Public transport.

(ii) Submissions and commentary

Standard rates for roadsA Preferred Way Forward suggests two methodologies for setting the transport infrastructure levy as follows:

Option 1 - Standard rate per item

A unit measurement rate and standard construction cost can be determined for some standard transport items. Each item would have a corresponding set charge. For example, a $ rate per linear metre of urban road. Each item selected is then totalled to obtain the transport construction levy. Non standard items such as a bridge would need to be individually costed.

The standard construction cost can be calculated by:


- Figures from recent DCPs. Some allowance would need to be made to accommodate different topography or geology, remedial works and services. For example, the standard rate plus additions for variations.

- An industry index such as Cordell’s.

The transport items would be identified and justified through the structure plan or an equivalent plan. If the set charge is not suited to the particular site conditions, the charge can be varied. The varied transport costs would need to be agreed between the planning authority, the council and VicRoads and adequately justified.

Option 2 - Standard levy set per geographic area

Under this option a standard levy would be calculated per growth area or municipal area. A road network plan for the growth corridor or municipal area would need to be prepared and costed. The cost of the works can be based on a standard unit cost as described in Option 1 above or individually fully costed. A standard levy would then be applied across a growth area or municipal area.

This option would also be able to include regional strategic road infrastructure and accommodate different construction standards for different topography or geology. Cross subsidisation needs to be contained within the municipality.

There was a broad view from many submitters that there are too many variables in road costs to set a standard levy. The variables noted in submissions included:

Site specific conditions including sub-base conditions, climate (rainfall), and terrain; Service relocation requirements – these can add dramatically to cost, particularly if

telecommunications are involved; Service clearances required – can add considerably to the extent of road reserve

required if underground or above ground services are required to be accommodated in the road reserve;

Variations in the interpretation of design standards between councils; Variations in traffic volumes and traffic type (proportion of heavy vehicles) can result in

different construction design standards for the same classification of road. ie all arterial roads are not equal;

The extent of the existing road network in an area prior to development can dramatically affect the requirements for new roads. As growth area precincts move further out, and away from pre-existing road networks, more work is required to establish new road reserves (Wyndham Council gave the example of how this had created a very large difference in DCPs costs in different areas of Wyndham);

The extent of existing roads will also vary, with some existing roads being able to be readily upgraded and others requiring significant widening or upgrade; and

In some cases the extent of adjoining development will physically restrict the ability to acquire land for widening. This is particularly so in existing urban areas.

This led a number of submitters to conclude that it would be better to calculate each case on its individual circumstances based on preliminary design and cost estimates.


Some submitters agreed that there may be some value in having standard per kilometre rates but cautioned that there would need to be the opportunity to be able to vary the standard rates for local conditions.

Some submissions favoured the idea of having a series of typical intersection and road cross section designs in order to define the land and scope of works for most situations likely to be encountered in a precinct. Such typical designs could be costed to assist in quantifying amounts to be inserted in the variable levy. The Committee understands that VicRoads may be developing standard intersection designs that may be a starting point for this work.

While most submissions favoured a variable levy for transport, they noted that if all transport items have to be scoped or effectively designed to establish the levy, there is no advantage over the current system.

Scope and standardsOf importance to many submitters was the need to define the scope and standard of works included in the calculation of development levies for transport. They argued that existing DCPs vary from council to council or even within one council, because changes in the scope of works included in transport infrastructure items had crept up over time. Intersection works in particular were cited as the cause of contention, differing in the length of approach carriageways, treatment of pram crossings and footpaths etc. The Committee heard that developers sometimes wanted to see longer lengths of approach carriageways on local collector roads included in a DCP to reduce the cost of direct developer funded roads.

The standards of construction applied by councils also appear to vary, and while some of this relates to responding to local climate, soil or terrain conditions, part of the variation appears to be due to differing standards adopted by respective council engineers. A number of submitters, particularly those representing landowners and developers, suggested that a consistent definition of the standards to apply items included in a new Development Levy system would be useful in order to reduce risk and improve certainty.

A further issue raised by developers was the difficulty in obtaining a quick resolution of some matters relating to changes in scope or standards. They submitted that appeals against permit conditions through VCAT were time consuming and costly in terms of delays to construction. Some councils indentified concerns about the difficulties in making changes to DCPs to correct errors or make sensible changes to the scope of projects. There was a call for a streamlined process to resolve these issues.

Arterial Road ProtocolThe GAA, VicRoads and councils have developed a Draft Arterial Road Planning Protocol for Growth Areas (the Arterial Road Protocol). The Arterial Road Protocol remains a draft as it is not formally agreed by relevant parties and is not incorporated into planning schemes. The document aims to clarify funding of existing and future arterial roads in growth area DCPs, and the responsibilities of VicRoads and councils in providing and funding both interim and ultimate arterial roads. The Arterial Road Protocol allows for the construction of at least the first carriageway of a future arterial (or upgrade of an existing road) to be funded from a DCP (and land set aside for future widening) and for the cost of future duplication or widening to


be funded by the Road Management Authority (council or VicRoads, depending on whether the road has been declared under the Road Management Act 2004).

The Arterial Road Protocol distinguishes between interim works (to accommodate development in the short to medium term, typically ten years) and ultimate works (required to meet the fully developed traffic requirements, typically 30 years). VicRoads and the GAA have more recently adopted the traffic generated by 80% take up of development potential of a precinct as a proxy to design for interim conditions. Under the Arterial Road Protocol, interim works and both interim and ultimate land requirements are funded through the DCP, and ultimate works are funded by the Road Management Authority.

According to VicRoads, the Arterial Road Protocol operates as follows:

Carriageways- Land for the ‘ultimate’ (including bridges etc) and construction of at-least

first carriageway ‘interim’ 100% DCP/Levy funded (Committee emphasis).- Construction of second carriageway only if required to accommodate

development traffic in interim period.

New controlled intersections (roundabouts and signals)- Land for the ‘interim’ and ‘ultimate’ 100% DCP/Levy funded.- Infrastructure for ‘interim’ 100% DCP/Levy funded.

Existing arterial road intersections- Mitigating works generally to restore to base (pre-development)

conditions, 100% DCP/Levy funded.

Bicycle and pedestrian facilities- Pedestrian (bicycle) operated signals to provide safe movement across

arterial roads 100% DCP/Levy funded.

Major infrastructure items (bridges etc)- Some very expensive infrastructure items (railway grade separations,

major waterway crossings) typically cannot be funded by DCPs/Levies.- Unless absolutely critical to manage the transport impacts of the

proposed development, everything other than the land required for these items will typically be excluded from the DCP/Levy (Committee emphasis).

Minor (uncontrolled) intersections- These are 100% funded by individual developers as a matter of course.

Upgrades to ultimate- The State is ultimately responsible for upgrade costs to meet regional

needs (duplication, grade separation, etc) at a later date—independent of the DCP/Levy.

- However, all projects are considered through the standard State budget processes and prioritised with consideration to the transport needs around the state, so timing cannot be guaranteed.

Submissions expressed general support for the notion of the Arterial Road Protocol and suggested that it should be formalised. A number of concerns were however, flagged with the Committee:


The Protocol has evolved away from the initial intent of DCPs only funding the first carriageway and associated intersection works. As noted previously this scope creep is a significant contributor to the cost escalation in recent DCPs. The effect of the more recent interpretation is that DCPs are now more often required to construct the full ultimate roads and intersections without funding support from the Road Authority;

The requirement for the second carriageway to be included in some precincts can place a heavy burden on these DCPs and is seen as inequitable;

The ultimate arbiter of the standard required for an interim intersection rests with VicRoads or council. Some submitters argued that this was not equitable;

Particularly in growth areas, the future designation of VicRoads declared roads may not be known at the time of planning the road network, creating uncertainties for councils in relation to future funding commitments. Some councils claimed this is made worse by a reluctance of VicRoads to commit to the timing of the declaration of roads; and

The UDIA opposed including the land for the ‘ultimate’ configuration of an arterial road in a DCP. This is a significant cost in many growth area DCPs. It argued that it is a council/VicRoads responsibility.

VicRoads design requirementsAnother issue raised by growth area councils and developers was the level of inconsistency, and in some cases over-design, of requirements by VicRoads. VicRoads are a referral authority for all roads in a Road Zone 1, meaning that it must approve the design of roads and intersections so designated. Developers and growth area councils gave the Committee the following examples:

VicRoads changing the scope of what was being required late in the project, requiring changes to design and changes to the land required to be set aside. Examples of these changes included: changing the type of intersection from roundabout to signals; addition of bus lanes or bike lanes; wider traffic lanes; and wider verges;

VicRoads requesting (in the view of the submitters) unreasonable land requirements for future road widening based on overly conservative interpretations; and

Very high charges from VicRoads to provide design advice on changed options.

Some growth area developers submitted that they had been disadvantaged because VicRoads’ approval was required before their projects could proceed.

A further issue identified in submissions was the uncertainty about whether land for future VicRoads arterial roads can be included in a development levy. Since the introduction of the GAIC in July 2010, Section 46IA of the Act specifies that growth area DCPs cannot include a development agency that is not a municipal council. This has led to some confusion about whether land for future VicRoads arterial roads can be legitimately included in a DCP, i.e. land for infrastructure for which VicRoads will be the development agency. The Committee believes that the position on this issue is clear, as follows:

Land that is required for a arterial road that, at the time of preparation of the DCP or charging of a levy is the responsibility of council, should be able to be included in a levy; and

Land required for an arterial road that is the responsibility of VicRoads at the time of preparing a PSP should be identified in a Public Acquisition Overlay (PAO).


Apportioning higher order or regional transport infrastructureA point of contention raised by some submitters is how larger regional items of infrastructure (e.g. bridges) are to be funded. Current practice is to allow a contribution to some such items, but only on the basis of an apportionment of the costs in accordance with the proportion of benefit derived by the planning unit. In other cases, depending on the nature and location of infrastructure, it could be State infrastructure or developer provided. Some submitters argued that infrastructure should only be funded within a planning unit, with no contribution to external items.

Public transportIn its submission PTV noted that growth area DCPs prior to the 2010 introduction of the GAIC, included land and construction contributions for public transport. PTV noted that since the introduction of the GAIC, growth area DCPs cannot include a development agency that is not a municipal council.

(iii) Discussion

Standard per metre or per item ratesThe Committee agrees that Option 1 in A Preferred Way Forward (standard rate per item) may not be practical or possible in the way envisaged due to the large number of variables in road construction. The Committee believes however, that there would be significant benefit in developing a suite of typical intersection designs and typical road cross-sections for Growth Areas to be used as a basis for specifying the scope of works, land requirements and costs in preparing a variable transport levy within a DLS.

Rather than operating as ‘standard per item rates’ the suite of typical designs could act as benchmarks against which a proposed variable levy for a precinct could be assessed when preparing a DLS. In a Panel (or other independent body) assessment of a DLS, significant deviations from the typical designs, in terms of land required, scope of works or cost, would require a higher level of justification by the proponent.

Once the suite of typical designs was established, the designs and costs could be reviewed and indexed on a regular basis to ensure that the benchmarks are up to date. The Committee is of the view that this would make the preparation of the variable transport levy within a DLS easier, and streamline the Panel process of introducing the PSP and levy into the planning scheme.

A Standard Levy (Option 2 in A Preferred Way Forward) may be possible for a geographical area (growth front) but the extent of local variations may mean that in practice, it may not ever be used. The calculation of a Standard Levy for a typical growth front would require a large number of assumptions to be made about pre-existing conditions and the proposed road network. If a standard transport levy was required as an input into a Standard Levy for a growth area, an average of historical costs may provide a satisfactory basis.

Scope and standardsThe Committee believes that the process of preparing the variable transport levy in a DLS would be assisted if consistent benchmark standards were adopted for roadworks. As an extension of the creation of the suite of typical intersection designs and road cross sections


suggested in the previous section, the Committee suggests the introduction and incorporation of benchmark standards into a Design Manual for Roads in Growth Areas.

The Design Manual could be created by combining standards that already exist in some growth area councils with those of VicRoads. The Committee believes that the creation of a Design Manual would greatly assist in simplifying the preparation of the variable levy and would provide greater consistency and certainty of costs.

The Committee believes that some streamlined mechanisms dealing with implementation issues with respect to levies once they are in place would be useful. One option could be to form a Standing Advisory Committee for development contributions that hears proposals for changes to levies, with the opportunity for all parties to be heard. A Standing Advisory Committee could be set up to operate and report on these matters, once operational, within short timeframes.

Arterial Road ProtocolThe Committee agrees that the Arterial Road Protocol should be formalised, including the adoption of a clear definition of what constitutes interim and ultimate works, and a clear definition of funding responsibility.

The Committee notes the concerns raised about the way in which the current Arterial Road Protocol has evolved over time and suggests that it be reviewed. The review should particularly examine the definition of interim and ultimate works with a view to arriving at a fair compromise. The nature and process for this review will be addressed by the Committee in Stage 2 of its work.

The Committee agrees that it is generally appropriate for development levies to fund a second arterial road carriageway if the proposed development triggers the requirement for the second carriageway early in its life. GAIC implications will also need to be addressed. However the Committee believes defining interim works based on traffic volumes for 80% completion may be excessive, and should be clearly justified if adopted into a formal Arterial Road Protocol.

The Committee believes the Design Manual proposed in the previous section will assist in the certainty of specifying the requirements and reduce the likelihood of any ‘over-design’.

The Committee is not clear on what can be done to improve the certainty by which roads will become future declared roads. The Committee notes that VicRoads engages with the GAA and each growth area council in planning the future road networks, and roads likely to become VicRoads responsibility are generally informally identified in this process. Further comments by submitters in this regard are welcome.

Apportioning higher order or regional transport infrastructureThe Committee believes that contributions to construction and land for transport projects should be included in the variable transport levy, as shown in Table 5. For transport projects outside the planning unit or precinct, inclusion will depend on clearly demonstrating the nexus between the project and the benefit to the planning unit. Guidelines for this apportionment are addressed further in Chapter 10.


Higher order or regional transport infrastructure project costs can be apportioned to a planning unit only if it is on the list of Allowable Items and meets required level of strategic justification.

(iv) Applying the levyThe Committee believes that all transport projects to be included in a DLS should be specified at the time of preparation of the PSP and should form part of any incorporated document.

(v) Allowable ItemsThe Committee generally agrees with the funding sources identified in Attachment 2 of A Preferred Way Forward but believes the designation of which items can be funded from a development levy would be simplified by reference to interim and ultimate works to be defined in the Arterial Road Protocol once reviewed and formally incorporated into the planning scheme.

The Committee proposes the following table of Allowable Items for the purpose of preparing the variable transport levy in a DLS for Growth Areas.


Table 5 Growth Areas Transport Levy - Allowable Items

Category Allowable items Land in levy? Construction in levy?

TRANSPORT

Arterial road - council

Interim as per Arterial Road Protocol, including upgrade to existing to restore to pre-development operating conditions

Yes Yes

Ultimate as per Arterial Road Protocol Yes No

Arterial road –VicRoads


Yes Yes

Ultimate as per Arterial Road Protocol No (PAO) No

Intersections with council arterial roads


Yes Yes

Ultimate as per Arterial Road Protocol Yes No

Intersections with VicRoads arterial roads


Yes Yes

Ultimate as per Arterial Road Protocol No (PAO) No

Other Regional pedestrian and bike trails Apportioned Apportioned

Pedestrian operated traffic signals where required to provide safe pedestrian and bicycle access across arterial roads

NA Yes

Bridges, culverts required as part of the construction of an interim road

Yes Yes

Larger items of regional council road infrastructure Apportioned Apportioned

Larger items of regional State road infrastructure or public transport corridors

No (PAO) No

(vi) FindingsThe Committee makes the following findings:

A Design Manual for Roads in Growth Areas be created which sets out:o Typical ‘benchmark’ intersection and road cross section designs for different

situations;o The scope of works and benchmark costs for the typical designs; ando Design standards to be applied to works included in the development levy.

A streamlined mechanism should be created for timely resolution of implementation issues with respect to development levies once they are in place.


The Arterial Road Protocol should be reviewed and subsequently formalized. The Committee will consider an appropriate approach to this in Stage 2 of its work.

The Allowable Items as set out in Table 5 be adopted for the purpose of preparing the variable transport levy for Growth Areas. The Table includes a number of larger regional items that may be included through apportionment if adequate justification is provided.

7.7 Drainage Infrastructure in a Growth Area DLS

(i) What are the key issues?A Preferred Way Forward proposes that drainage infrastructure be included in the development levy for non-metropolitan Growth Areas as a variable levy.

The Committee has reviewed where and how this might apply in the preparation of a DLS.

(ii) Submissions and commentary A Preferred Way Forward sets out two options for setting the drainage infrastructure levy as follows:

The drainage infrastructure levy would be set similar to the transport levy described above that is either as a standard rate per drainage item or as a standard rate set per geographic area.

Option 1 - Standard rate per item

A provision rate and standard construction cost can be determined for some drainage items. Each item would have a corresponding set charge. Each item selected is then totalled to obtain the drainage levy. The drainage items would be identified and justified through the structure plan or an equivalent plan. If the set charge is not suited to the particular site conditions, the charge can be varied. The varied drainage costs would need to adequately justified.

Option 2 – Standard levy set per geographic area

A standard levy would be calculated per growth area or municipal area. A drainage plan for the growth corridor or municipal area would need to be prepared and costed. The cost of the works can be based on a standard unit cost as described in Option 1 above or individually fully costed. A standard drainage levy would then be applied across a growth area or municipal area.

This option would also be able to include regional drainage infrastructure and accommodate different topography or geology. Cross subsidisation needs to be contained within the municipality.

A Preferred Way Forward nominates only land required for drainage, such as drainage reserves for a major drainage path or drainage basin, for inclusion in the drainage levy for metropolitan growth areas. Local estate drainage is directly funded by each developer.

The submission received from Melbourne Water outlined the approach to drainage schemes in metropolitan growth areas where it is the drainage authority. The Melbourne Water


drainage contribution scheme operates outside the current DCP process. The following features of the Melbourne Water drainage schemes are worthy of note:

It is based on a drainage catchment rather than the planning unit; Adjustments are made on a regular basis to address changes in construction costs and

land acquisition costs; The contribution rate is reviewed each year based on the cost of works constructed,

estimated cost of future works and the landowner contributions received; Standard construction rates have been developed that reflect the different soil

conditions in the different regions of Melbourne; Works in kind are permitted; Residential rates are two thirds that of industrial and commercial land as it is cheaper

to drain residential land (less runoff, lower proportion of impermeable area); and An interim rate is used to apply in areas where development commences prior to a

scheme being established. Any payments are adjusted once the final rate has been struck.

Melbourne Water submitted that item 37 in Attachment 2 to A Preferred Way Forward was incorrect in that it indicated the cost of land set aside for a drainage channel may be reimbursed by Melbourne Water. Melbourne Water “does not acquire land required for the conveyance of stormwater within drainage channels (floodways) but we do acquire land that would be otherwise developed if it was not required by Melbourne Water for a retarding basin or a stormwater treatment are such as a wetland or bio-retention area”.

Submissions from regional and rural councils reminded the Committee that they are the drainage authority outside the metropolitan area, and in those cases drainage head works need to be included in a DCP. In the cases of recent Armstrong Creek and Ballarat West DCPs, the drainage costs are a significant proportion of the total DCP cost.

The City of Greater Geelong submitted that works on waterway improvements, wetlands and water quality improvements should be able to be included in Development Levies in any new system. The Council submitted that basic paths and seating should be able to be included for drainage reserves that double as passive recreation areas.

The submission from Greater Shepparton Council noted that drainage schemes need to consider regional flood mitigation requirements, and as such may need to include other items such as fill removal and storage, stormwater retention basins and wetlands.

The submission from the Master Builders Association recommended the drainage levies ought to be applied by drainage catchment mapping rather than through a variable development levy.

(iii) DiscussionThe Committee acknowledges that drainage infrastructure generally does not need to be included in development levies for metropolitan Growth Areas.

Growth areas outside the Melbourne Water area will need to include drainage in an infrastructure levy based on a catchment drainage plan. In saying this, the Committee notes that drainage catchments will normally not coincide with the boundaries of the planning unit, and a significant amount of work may be required to create a drainage scheme to apply


to a growth area precinct in regional areas. The Committee notes that this may result in a council being required to commit to significant co-funded works or head works outside the planning unit. It may require a council to establish a further drainage scheme outside the boundaries of the growth area to pick up contributions from other properties in the event that they are developed.

Despite these issues, the Committee favours the fully costed approach, which essentially is Option 1 as set out in A Preferred Way Forward. In the Committee’s view, the standard rates used by Melbourne Water may be able to be used to help prepare fully costed schemes. The Committee sees no value in repeating this work if standard rates have already been adopted by Melbourne Water, although it is noted that some adjustment may be required to allow for further variations in soil conditions (and possibly other variables) in rural and regional areas.

A Standard Levy for a geographical area (Option 2 in A Preferred Way Forward) may not be practical for drainage in growth areas. It is not required in metropolitan areas, and in regional areas the variations in regional flood mitigation requirements will make the standardisation of a rate very difficult.

The Committee agrees that non-metropolitan growth area drainage levies based on catchment drainage plans should include all drainage requirements not directly funded by developers. Further, the scope of Allowable Items on which non-metropolitan drainage levies should be based, should include land for retention basins and water treatment systems such as wetlands and bio-retention areas. In the case of metropolitan Growth Areas, the PSP would define land required for Melbourne Water drainage requirements, but this land is not funded through the DLS.

The Committee agrees that paths, seating and other basic improvements should be allowed out of the development levy funds, but believes this should come from within the fixed community and recreation infrastructure levy.

The comments of the Master Builders Association are noted. The Committee believes that councils (as the drainage authority) should retain the option to apply a separate drainage levy on a catchment basis rather than include drainage in the development levy.

(iv) Allowable Items The Committee notes that the funding sources identified in Attachment 2 of A Preferred Way Forward do not allow for non-metropolitan situations where councils are the regional drainage authority as well as the local drainage authority.

Proposed Allowable Items for the purposes of preparing the variable drainage levy for Growth Areas are set out in Table 6.


Table 6 Growth Areas Drainage Levy - Allowable basic and essential infrastructure items

Category Allowable items Land in levy? Construction in levy?

DRAINAGE

In areas where a council is the drainage authority

As specified in drainage plan for the catchmentIncludes retarding basins and stormwater treatment

Yes Yes

(v) FindingsThe Committee makes the following findings:

Non-metropolitan growth area drainage levies should include all drainage requirements not directly funded by developers, including infrastructure required to meet regional flood mitigation requirements.

Paths, seating and other improvements in drainage reserves where used as open space, should be Allowable Items in the Development Levy, from within the fixed Community and Recreation Infrastructure Levy.

In non-metropolitan areas, the drainage levy in Growth Areas should be calculated as a fully costed levy, based on a drainage plan for the catchment.

Standard cost rates may be able to be devised to assist the costing of non-metropolitan drainage plans, based on the Melbourne Water standard cost rates.

7.8 Public Land in a Growth Area DLS

(i) What are the key issues?A Preferred Way Forward proposes that public land contributions be a variable levy in growth areas. It sets out the proposed approach to determining the public land contribution:

The land contribution for local open space, roads and community facilities would be determined by a structure plan or equivalent plan.

The structure plan will identify the land to be set aside for a public purpose and specify a percentage to be provided.

The public land contribution includes all land required for a public purpose, as set out in the structure plan, that is all land required for transport, community facilities and active and passive open space. The exact location and size of land required from each property will be set out in the structure plan.

The developer would need to give the council:- All the land set aside in the structure plan for public purpose on their site

up to the percentage nominated in the structure plan; or- A monetary value for the land if none of the public land is contained on

their site or if the land to be developed contains less than the percentage of the public land contribution specified in the structure plan.


The council would pay a developer the monetary value for public land on their land that is more than the percentage of the public land contribution specified in the structure plan.

All land required for a public purpose would be valued to determine:- The amount of ‘cash in lieu’ payments required where the development

area has less than the percentage of public land required by the structure plan; or

- The value of the offset of the land contribution where the development has more than the percentage of public land required by the structure plan.

If a land contribution for local open space is not established through the structure plan, council could apply the provisions of section 18 of the Subdivision Act or clause 52.01 of the planning scheme for the provision of local open space.

The methodology for valuing the land component would need to be developed and agreed to by the Minister.

The key issues identified by the Committee in dealing with public land in a DLS are the valuation, and timing of acquisition of land required for and the disparate approaches to dealing with land under the various Acts which are applicable. This in turn is relevant to the issue of the disparate ways in which land for open space is treated under Clause 52.01 of the planning scheme and under the Subdivision Act 1988.

This section reviews what land should be provided through Development Levies.

(ii) Submissions and commentarySubmissions received by the Committee generally supported the approach to allocating and equalizing the cost of public land as proposed in A Preferred Way Forward. A number of submitters noted that the term ‘public land’ requires better definition, or further detail is necessary as to how the area of public land is to be determined.

Some submitters sought clarity on the relationship between the public land specified in a structure plan and land required to be provided under the Subdivision Act 1988 or under clause 52.01 of the planning scheme. Other submitters commented that they supported the proposed approach on the basis that it incorporates the same treatment of passive and active open space, along with other public land into the same system of equalization across a precinct.

Several submitters sought clarification on how land with conservation significance is to be treated in the allocation of public land. Other submissions in relation to the need for a fairer system of valuing land are dealt with in Chapter 11.

(iii) DiscussionThe Committee believes that the approach to allocating public land as set out in A Preferred Way Forward is clear, and combined with the further detail of what land is included in each of the lists of Allowable Items for each infrastructure category, is adequately defined.

The public land required in a growth area is as determined in the PSP. The Committee believes that in specifying the requirements in a PSP, a proponent should be able to include


land for Allowable Items with a minimum of justification. A table of typical land allocation rates for community and recreation (as provided by the GAA in its submission), and the proposed typical intersection and typical road cross section plans should assist with this work. When it comes to providing land for regional or higher order facilities, a higher level of justification may be required to determine the need for and location of each facility. Land for different facilities will be valued in different ways as discussed in Chapter 11.

The Committee supports the approach proposed in A Preferred Way Forward to spreading the burden of providing public land across land owners in a planning unit.

The Committee believes that any confusion about the relationship between public land required through a PSP, open space land required under the Subdivision Act 1988 and land required under Clause 52.01 of the Planning and Environment Act 1987 is best resolved by making it clear that the land requirement specified in a Growth Area PSP overrides the other requirements. The aim is to eliminate any confusion as to which mechanism applies and this will be considered further in Stage 2 of this process. To do this, a PSP needs to consider and clearly specify all public open space as well as any public land required to be included in a PSP. Change to the current legislation may be required to achieve this.

While individual cases need to be considered on their merits, the Committee believes it is generally appropriate to locate all recreation open space facilities within land designated as public open space. In other words, a separate allowance for public land should not be required. Some regional level facilities may be an exception to this.

(iv) Findings The Committee makes the following findings:

The Committee supports the approach to determining the variable public land levy as proposed in A Preferred Way Forward.

7.9 Administrative Costs

A Preferred Way Forward makes no reference to administrative costs, i.e. costs associated with the preparation of relevant plans and the development levies themselves. The Committee notes that these costs have been included in a number of recent Melbourne and Geelong growth area DCP’s, and are usually no more than about 1% of the total revenue that it is projected that the DCP will collect. The Committee is of the view that including such costs in the proposed DLSs and Standard Levies is justifiable. The challenge is to develop a mechanism to allow such costs to be included across the full range of development levies being proposed but to constrain them to a very small percentage of the revenue collected. One council submitted that it had investigated the possibility of developing a DCP under the current provisions but had abandoned it upon realising that it would cost some 50% of the revenue likely to be collected to develop the DCP. Costs at such levels would not be acceptable to be included in the new system. The Committee intends to address this aspect in Stage 2.


7.10 Level of Justification Required in Implementing the Levies

Whether a Standard Levy is applied or a DLS is prepared, some justification is required for both the application of the levy and for varying that levy where permitted. The issue of justification was addressed in principle in Chapter 5.4(ii). Table 7 summarises the justification proposed and the ways in which that justification may be provided when applying the levies.Table 7 Justification required to apply or vary Development Levies in a Growth Area

Justification required in a DLS Justification of Standard Levy Justification for Variation of the Standard Levy

The following information is to be provided: Identification of the planning

unit The strategic justification for

its development Detailed list of transport

infrastructure, drainage infrastructure (if applicable ) and land proposed

Strategic justification for each item of infrastructure above;

Detailed costing of each item of infrastructure above

Detailed demonstration of need and nexus for each item of transport and drainage infrastructure, including any land component

Items of community and recreation infrastructure on which it is proposed to spend the fixed component of the Levy

Brief justification of the need and nexus of that Community and Recreation infrastructure

The allocation of proposed charges to each property in the precinct.

This must be provided in the form of a detailed PSP

The following information is to be provided: Identification of the planning

unit The strategic justification for

its development List of infrastructure

proposed to be provided consistent from the list of allowable infrastructure

Estimated costs of infrastructure items proposed

Brief demonstration of the need for that infrastructure and its nexus with the planning unit

This may be provided in: PSP, Infrastructure Plan,

Priority Infrastructure list or similar

Where existing strategic documents are being used the information required may be in the form of a supplementary report

No variation of the Standard Levy is permitted.


8 Defining the Levies – Urban Areas8.1 Context

A Preferred Way Forward does not include a detailed proposal for how established urban areas should be regarded differently from other settings. The Terms of Reference however, call for the Committee to provide advice on how the proposed new system should operate in the different development settings.

In Chapter 5 the Committee concluded that an Urban Area Standard Levy could apply in established urban areas. The possible approaches to defining these Development Settings have been set out in Table 1. That table provides for the possibility the Standard Levy being set within a defined range.

The preparation of a site or area specific DLS is not proposed to be an option in Urban Areas.

This Chapter examines how such a Standard Levy could be set, how it might be given statutory force and what infrastructure might be included in a levy for Urban Areas.

8.2 Submissions and Commentary

The Committee received submissions from a number of councils that have in place, or have contemplated, municipal-wide DCPs aimed at collecting contributions towards infrastructure for growth. Without exception, the submissions highlighted the complexity of such schemes under the current legislation, and the very time consuming and expensive process that was required to implement and administer such schemes.

Darebin City Council is one metropolitan municipality that has a municipal wide DCP, and the Committee gained some valuable insights from that Council in the discussions about this.

There was strong universal support from councils for a simplified system of applying development levies to urban areas. In discussions with development industry groups, there was a general acceptance that such a levy in infill areas was reasonable and ‘inevitable’, particularly given the government policy of increased densification in some urban areas and the consequent pressures on various types of existing infrastructure.

The Committee tested aspects of the methodology set out below with industry and council groups and the broad approach was generally supported, subject to resolving a number of issues of detail around the implementation and administration of the scheme.

8.3 Standard Levy in Urban Areas

The Committee has developed the following notional model for setting, applying and administering a Standard Levy in an Urban Area setting. The model is not yet fully developed and the Committee seeks feedback on the issues raised in order to further develop the model in Stage 2 of its work.


(i) Setting the levyIn this section a methodology for setting a Standard Levy is considered. As in other Development Settings, in order to ensure that the requirements of need and nexus are met, the Committee believes that any Standard Levy in an Urban Area needs to be limited to infrastructure that is contributing directly and unambiguously to creating additional capacity for a community to accommodate population growth. Chapter 8.3 proposes a list of Allowable Items upon which a Standard Levy could be spent for Urban Areas.

A possible model for setting a levy could be: Collect historical data from council capital works programs on expenditure on

infrastructure that falls within the list of allowable items in relevant areas; Examine the population growth in the same areas over the same period; Using this data as a guide, apportion the capital expenditure that has occurred

between existing population and the new population as a result of population growth; Determine a levy that will fund this proportion proposed capital expenditure in the

future; and Apply this levy to future development.

If this approach can be successfully applied, it would ensure that the quantum of the levy is established with a clear need and nexus to providing for population growth.

Issues for the Committee to resolve in taking this approach forward include: Is the data that would be required to guide this calculation readily available? What should be the ‘life’ of a levy and how is this connected to infrastructure life? Should the Standard Levy be the same across the whole State or vary for metropolitan

and non-metropolitan settings? Should planning authorities be able to reduce or waive the rate in some

circumstances? How the rate could apply to non residential development? and How the Standard Levy could be indexed and reviewed?

As allowed for in Chapter 5, the Committee envisages that the Standard Levy for Urban Areas may be set as a range to enable councils to reduce or waive the levy where this might be justified. This is discussed in the next section.

(ii) Applying the levyOne alternative the Committee has considered for applying a Standard Levy is through an overlay or schedule to a particular provision in a planning scheme. Applying the levy could involve three parts:

Part A – MapA map would be created to show the areas where the levy applies.

The levy may be applied across the whole municipality or may be split into a number of different planning units. Splitting a municipality into different areas might be useful if a council wants to distinguish between lower and higher growth areas, and demonstrate a higher level of nexus between funds collected and spent in the same area.


Part B – Applying the levy within the rangeA Schedule would specify where a levy might be reduced or waived for each planning unit. The required justification proposed for varying a Standard Levy is set out in Chapter 8.5.

Part C – Nominating how the levy funds will be spentIn order to ensure the nexus between the funds collected and how they are spent, the Committee believes it will be necessary to provide some level of specification of the projects, or types of projects that the levy will be used for at the time of introducing the levy into the planning scheme. This is detailed further in Table 8.

The planning authority must nominate for inclusion in the schedule to the planning scheme, either:

A description of the type and location of projects it will spend the levy funds on, over the life of the levy; or

A list of specific projects to be completed over the life of the levy.

It is envisaged that councils would typically nominate projects where the levy funds might be a contribution to a project substantially funded from rates, for example a percentage contribution to a new community centre or drainage upgrade.

Other mechanisms to give statutory effect to the Standard Levies will be considered by the Committee as part of its Stage 2 work.

The project description or list must be from the list of Allowable Items, i.e. there must be a direct link between the infrastructure and serving an increased population. The planning authority will be required to demonstrate this link to have the project schedule approved.

The Committee thinks that whilst the requirement for a description or list of projects might be viewed as being prescriptive, it is essential to establish need and nexus.

(iii) Spending the levy and reportingCouncils would collect the levy from new development over the life of the levy and could spend the funds on the projects that are specified or described in the Schedule.

Issues for the Committee in relation to this are: Must the funds be spent in the area it is collected, or is some pooling of funds

allowed?; and How are funds dealt with at the end of the life of the levy?

Councils would be required to report levies collected and funds spent on the projects in the Schedule, and any works in kind in its Annual Report.

8.4 Allowable Items

The approach to setting the rate and developing a list of allowable infrastructure items in Urban Areas is different to the approach for Growth Areas because there will be substantial pre-existing infrastructure. Levies should only allow for incremental upgrades to infrastructure required to cater for growth.


In preparing the list of Allowable items for Urban Areas, the Committee has considered types of infrastructure likely to be needed as a result of urban infill development.

Some judgement calls have been made based on the degree of impact that infill development may have on a particular type of infrastructure. For example, larger collector road projects and public transport projects have been excluded on the basis that small scale infill development will generally be able to be absorbed within existing capacity. The Committee accepts that there may be exceptions to this, but believes that generally it will hold to be true. Local traffic management treatments, on the other hand, have been included on the basis that increasing development may create amenity or safety issues on existing residential streets. Higher density population may create a need to upgrade pedestrian and bicycle connections and therefore these have also been included.

The types of projects on the Allowable List are generally smaller scale, local level works.

Land contributions have not been included on the assumption that increasing capacity of these infrastructure items can generally be achieved on existing publicly owned land. Again, the Committee realises that there may be exceptions to this, but makes the judgement that the levy can be kept simpler by excluding land acquisition.

Table 8 sets out the proposed allowable infrastructure for Urban Areas and is proposed to be used as the basis for setting and applying the Urban Areas Standard Levy. Feedback on the proposed list of Allowable Items is sought.


Table 8 Urban Areas Standard Levy – Allowable Items

Facility Allowable Items Land in Standard Levy?

Construction in Standard Levy?

Community Services

Contribution to expanding or upgrading space for: Multi-Purpose Community Centre Kindergarten/Pre-School/Occasional childcare Maternal & Child Health consulting room Other stand alone community services facilities

No Yes

Sporting facilities Upgrade or extension of sporting facilities including: Additional outdoor sporting fields or courts Upgrading surfaces, installing irrigation or

installing lights to increase usage Additional or upgraded change rooms Additional courts for indoor facilities

No Yes

Park improvements (incl, drainage reserves)

Upgrades to: Playgrounds, car parking, internal roads, bicycle,

pedestrian paths, seating, landscaping, BBQs, picnic facilities

No Yes

Drainage Upgrades to existing council drainage assets Stormwater treatment projects to improve

water quality including Water Sensitive Urban Design treatments and wetlands

No Yes

Roads Installation of traffic management items to reduce the impact of increased traffic

Improvements to bicycle and pedestrian connectivity

No Yes

Public realm Urban design elements that improve pedestrian access or enable higher density living

Creation of high quality public spaces – incl. paving, seating, landscaping

No Yes

Public transport Bus, tram shelters No Yes


8.5 Level of Justification Required in Implementing the Levy

Some justification is required for both the application of the levy and for varying that levy where permitted. The issue of justification was addressed in principle in Chapter 5.4(ii). Table 9 summarises the justification proposed and the ways in which that justification may be provided.Table 9 Justification required to apply or vary Development Levies in an Urban Area


A DLS is not an option in Urban Areas

The following information is to be provided: Identification of the

relevant planning unit The strategic justification

for the development or the specific infrastructure item

Types of infrastructure or specific infrastructure items proposed

Broad description of need and nexus with the planning unit

This may be provided in one of the following: MSS Structure Plan or similar Capital Plan (Existing plan

amended as required) Infrastructure Plan Priority infrastructure list

No increase in Standard Levy is proposed to be permitted.If the Standard Levy is proposed to be lowered the following is likely to be required: Identification of the relevant

planning unit The rationale for the lower

rate.The justification must be based on one or more of the following: MSS Settlement plan or Economic development plan or Community plan or Other plan which includes or is

accompanied by an explanation of the basis of the proposed lower rate

8.6 Findings

The Committee makes the following findings:

The Committee has put forward a possible model regarding how a Standard Levy might be set and applied in an Urban Area.

The Committee invites feedback on the model and the proposed list of Allowable Items. It will use this feedback to further develop the model and recommend a Standard Levy in Stage 2 of its work.


9 Defining the Levies – Strategic Development Areas

9.1 Context

A Preferred Way Forward does not include a detailed proposal for how the proposed Development Levies should be applied to Strategic Development Areas. The Terms of Reference however, call for the Committee to provide advice on how the proposed new system should operate in the different development settings.

In Chapter 5, the Committee has allowed for larger strategic developments, which it has termed Large Scale. The options of a Standard Levy or a DLS should be available for these larger development sites. The Committee also concluded that for smaller scale strategic development areas, only a Standard Levy should apply.

This Chapter examines how these levies could be set, how they might be implemented into the Planning Scheme and what Allowable Items of infrastructure might be included in levies for Strategic Development Areas.

9.2 Standard Levies in Strategic Development Areas

The Committee believes that a similar methodology to that proposed for Urban Areas could apply to the setting and application of a Standard Levy in Strategic Development Areas.

As discussed in the next section, there are some differences in the proposed Allowable Items.

In setting the Standard Levy for Strategic Development Areas, the methodology would require an examination of past infrastructure costs for such areas and is likely to be a significantly higher figure than for Urban Areas due to the higher impact of the larger scale developments. As for Urban Areas, the Committee believes that the levy should be able to be reduced or waived.


The Committee met with representatives of Places Victoria to discuss some of the more unique challenges that might arise in larger Strategic Development Areas, such as Fishermans Bend. The Committee also met and received submissions from Melbourne, Yarra, Manningham, Moonee Valley and other councils who have larger urban redevelopment areas.

Places Victoria and councils submitted that infrastructure such as connections or upgrades to road and drainage networks, public realm improvements, contributions to public transport, and contributions of public land are more likely to be appropriate for large scale Strategic Development Areas.

PTV submitted that strategic development sites should contribute to public transport infrastructure where the project contributes to or imposes capacity issues or delays. For example where new road access contributes to tram delays, works to tram stops,


intersections or traffic lights should be provided to restore the operating conditions to pre-development levels.

While many of the issues raised by submitters in relation to Strategic Development Areas are similar to Urban Areas in that there is pre-existing infrastructure to be considered, the extent of impact of a strategic development project can be much larger. Some of the public infrastructure improvements required to support such developments can be in the form of upgrades to existing infrastructure in the surrounding community, but in some cases, the scale of development will warrant new infrastructure items.

As indicated above, the Committee proposes the possibility of Standard Levies at two levels to allow for the higher costs associated with larger scale projects compared with smaller scale projects. At this stage, no threshold for determining the boundary between these two Standard Levies is proposed. The Committee seeks feedback both on the levies being identified at two levels and at what level the threshold between them should be set, or alternatively what the criteria should be for determining that threshold.

9.4 Development Levy Scheme in Strategic Development Areas

The Committee believes that a DLS could be applied to Large Scale Strategic Development Areas that is very similar in structure to the DLS proposed for Growth Areas. A DLS based around the same infrastructure categories is proposed comprising of:

Fixed Community and Recreation levy; Variable Transport levy; Variable Drainage levy; and Variable Public Land levy.

There will be a number of differences in application of the DLS including taking into account that the GAIC does not apply and a different list of Allowable Items of infrastructure will apply. The following sections of the report set out comments on how each of the levies might apply in the Strategic Development Areas setting, and some of the main differences compared with the Growth Area setting.

(i) Fixed Community and Recreation LevyThe Committee considers a fixed levy could be set using a similar methodology to Growth Areas, and projects to be funded should be set out in a Development Plan or similar strategic plan. A similar approach of allowing projects to be allocated from the Allowable Items list could also apply, and contributions to any projects outside of the project area that councils wish to allocate money to will need to demonstrate a clear nexus at that stage.

The main difference between the approaches will be in the different Allowable Items that will apply to Strategic Development Areas. This is discussed in Chapter 9.5.

In the process of applying the DLS into the planning scheme, the infrastructure items that the levy is to be expended on will need to be nominated. It is expected that this will be drawn from a Development Plan or similar piece of strategic work that would normally be done for larger strategic projects.


(ii) Variable Transport LevyThe variable transport levy for a Strategic Development Area DLS could be prepared from a transport plan in a Development Plan. Such a plan would normally set out the contribution required to road works or public transport works off the site. For both road works and public transport works, the approach is generally to undertake works to restore operating conditions to pre-development levels.

As the GAIC does not apply outside Growth Areas, contributions to State infrastructure, including public transport and VicRoads roads may be appropriate.

(iii) Variable Drainage LevyUpgrades to drainage connections may be required in line with Melbourne Water or council catchment-based drainage schemes. Projects should be included in the DLS on the same basis as for a Growth Areas DLS.

(iv) Variable Public Land LevyThe public land required would be specified in the Development Plan or similar plan. Open space requirements would generally be outside the DLS and be specified in Clause 52.01 of the planning scheme and/or the Subdivision Act 1988.

Land for expanded public transport facilities and upgrades to VicRoads arterial roads could be included in the DLS or in a PAO.

9.5 Allowable Items

The Allowable Items in Strategic Development Areas are somewhat of a hybrid of the other two development settings to accommodate a range of developments scales. Some large scale developments will trigger the need for new facilities in their own right as well as a contribution to upgrading existing facilities.

Table 10 sets out the proposed Allowable Items for Strategic Development Areas and is proposed to be used as the basis for setting and applying the Strategic Development Areas Standard Levy and DLS. Comment on this list and any proposed additions, deletions or clarification is invited in Stage 2 of the Committee’s work.

As with the lists of Allowable Items for the other Development Settings, the scope and specifications for items will be detailed as part of the Committee’s Stage 2 work.

9.6 Level of Justification Required in Implementing the Levies

Whether a Standard Levy is applied or a DLS is prepared, some justification is required for both the application of the levy and for varying that levy where permitted. The issue of justification was addressed in principle in Chapter 5.4(ii). Table 11 summarises the justification proposed and the ways in which that justification may be provided.


Table 10 Strategic Development Areas Standard Levy and DLS – Allowable items

Facility Allowable items Land in Levy?

Land in Levy?

Construction in Levy?

Small Scale

Large Scale

Community Services

Contribution to new facilities or expanding or upgrading space for: Multi-Purpose Community Centre Kindergarten/Pre-School/Occasional childcare Maternal & Child Health consulting room Other stand alone community services facilities

No Yes Yes

Sporting facilities

New, or upgrade of existing sporting facilities including: Outdoor sporting fields or courts Upgrading surfaces, installing irrigation or installing

lights to increase usage Change rooms; additional courts for indoor facilities

No Yes Yes

Parks and Open Space (incl, drainage reserves)

New or upgrades to existing: Playgrounds, car parking, internal roads, bicycle,

pedestrian paths, seating, landscaping, BBQ, picnic facilities

No Yes Yes

Drainage Connections to or upgrades to existing council drainage assets

Stormwater treatment projects to improve water quality including Water Sensitive Urban Design treatments and wetlands

No Yes Yes

Roads Installation of traffic management items to reduce the impact of increased traffic

Improvements to bicycle and pedestrian connectivity

No Yes Yes

Works on council arterial roads and intersections to restore network capacity to pre-development conditions

No Yes Yes

Works on VicRoads arterial roads to restore network capacity to pre-development conditions

No Yes Yes

Public realm Urban design elements that contribute to the creation of high quality public spaces – incl. paving, seating, landscaping

No No Yes

Public transport Works on the road network to restore public transport operating conditions to pre-development conditions

No Yes Yes

Corridors for new public transport connections No Yes Yes Bus, tram shelters No No Yes


Table 11 Justification required to apply or vary Development Levies in an Strategic Development Area


LARGE SCALE

The following information is proposed to be provided: Identification of the

planning unit The strategic justification

for its development Detailed list of transport

infrastructure, drainage infrastructure (if applicable) and land proposed

Strategic justification for each item of infrastructure above

Detailed costing of each item of infrastructure above

Detailed demonstration of need and nexus for each item of transport and drainage infrastructure, including any land component

Items of community and recreation infrastructure on which it is proposed to spend the fixed component of the Levy

Brief justification of the need and nexus of that Community and Recreation infrastructure

The allocation of proposed charges to each property in the precinct

This must be provided in the form of a detailed Structure Plan or similar

The following information is to be provided: Identification of the

relevant planning unit The strategic justification

for its development Broad description of need

and nexus with the planning unit

Items of infrastructure from the Allowable list proposed to be provided

Estimated cost of that infrastructure

This may be provided through one of the following: Structure plan or similar Capital plan (including

existing plan, amended as required)

Infrastructure plan or Infrastructure Priority List

No increase in Standard Levy is allowedIf the Standard Levy is proposed to be lowered the following is required: Identification of the relevant

planning unit The rationale for the lower rate

The justification must be based on one of the following: MSS Structure Plan or similar which

includes or is accompanied by an explanation of the basis of the proposed lower rate

SMALL SCALE

A DLS is not allowed in Small Scale Strategic Redevelopment Areas

As above. As above.


9.7 Findings


The Committee has put forward a possible model for how a Standard Levy or a DLS might be set and applied in a Strategic Development Area setting.

The Committee invites feedback on the model and the proposed list of Allowable Items. It will use this feedback to further develop the model and recommend Standard Levies in Stage 2 of its work.


10 Apportionment - When is it Required?10.1 Context

A Preferred Way Forward identifies that cost apportionment would not normally be necessary under the proposed scheme as the cost is to be apportioned across the whole of a planning unit.

This Chapter responds the Committee’s Terms of Reference (22, dot point 6) that seeks:


Apportionment of charges between users is based on the overarching principles of fairness and nexus, that is a future resident in an area should only be charged in proportion to their possible use of an infrastructure item. The way in which apportionment is proposed to be implemented in the preparation of a full cost apportionment DCP is set out in the Development Contributions Guidelines 2007. In those guidelines, apportionment is explained in terms of what may described as internal apportionment, that is the apportionment of costs between multiple planning units within an area to which a DCP is proposed to be applied. There is also reference to external apportionment, which is the apportionment of costs to external users of infrastructure in proportion to their projected use of the infrastructure.

Whilst there are a number of DCPs in operation with multiple catchment areas, these tend to be a number of years old. Recent DCPs, particularly those prepared by the GAA, have tended to be based on a single planning unit. Where more than one planning unit is used, it tends to be because the shape or topography of the area to which the DCP is to apply is such that the nexus between one part of the area and infrastructure in another part of the area is very weak. For these reasons, discussions about apportionment in recent DCPs have been substantially about apportionment to external users.

10.2 What are the Key Issues?

As indicated above, A Preferred Way Forward states that apportionment will not normally be necessary under the new system. The Committee accepts that will generally be the case for internal apportionment but is of the view that external apportionment may be required in limited circumstances in the Standard Levies and DLSs it proposes. The situations in which apportionment may be required and a framework for apportioning costs are the issues that are addressed in this section. Where a Standard Levy is being applied, some of the costs associated with the infrastructure being funded may be apportioned to other users, either in neighbouring areas if there are Standard Levies being applied there or to other general revenue sources if the apportionment of some part of the costs to existing residents who may also use the infrastructure can be justified.



The consultation questions developed by the Committee did not directly address the issue of apportionment. Consequently only very limited number stakeholders with whom the Committee has met to date or from whom submissions have been received have commented directly on apportionment. Where comments have been made, there is a view expressed that depending on the detail of the approach proposed, external apportionment may be necessary in some circumstances. In particular the GAA, whilst acknowledging that most instances of cross subsidy may be dealt with by the appropriate setting of planning unit boundaries, said:

… there may be instances where significant transport infrastructure (such as major intersections or bridges) provide benefits to a number of different charge areas, or the item may be on or across the boundary of a charge area. The capacity to only charge a proportion of the cost to a charge area or to apportion or ‘share’ costs between different charge areas should be retained in these circumstances.

The Committee agrees with this approach.

10.4 Proposed Approach to Apportionment

The Committee proposes an approach to apportionment based on the following three levels of principles:

Broad principles to underpin the proposed approach to apportionment; Principles to guide apportionment for specific types of infrastructure; and Principles to guide apportionment in the different development settings proposed.

These principles are proposed to guide development levies and to significantly reduce areas for dispute where some discretion is still available in the setting of levies that will be charged. Each of these is addressed below.

(i) Broad PrinciplesThese are proposed to be as follows:

The planning unit should be of such a size that the large majority of possible external costs are internalised. Wyndham City Council achieves this with respect to arterial roads by applying a DCP across a growth front i.e. across a number of contiguous PSP areas. This is an approach which the Committee would support where it is possible. It is acknowledged that this is only achievable in a limited range of circumstances in some growth area settings. In proposing this approach the Committee is aware that significant inequities can exist in the amount of major transport infrastructure which is apportioned to a planning unit because of:- The standard and condition of the existing road network; and- The shape, geography and topographical features of the planning unit;

External apportionment, where it is to occur, should be in proportion to the projected external usage. Where applicable, external usage should be based on standard population thresholds for the provision of individual infrastructure items. Where no


such thresholds exist, external apportionment should be justified by relevant usage data within and outside the planning unit;

Where out of sequence development is proposed by a developer, a development levy may be applied in accordance with the Arterial Road Protocol, if applicable, to ensure appropriate arterial road connection to the nearest existing development or approved PSP area;

Where infrastructure is required external to the planning unit, and it can be demonstrated that it is only required because of the development in the planning unit, full costs should be apportioned to the planning unit regardless of any minor or incidental benefits which may flow to users external to the planning unit;

A single planning unit in a proposed PSP area or structure plan area should generally be the norm. Multiple planning units will need to be justified;

Where external apportionment is to occur, the total cost that is to be apportioned should be adjusted for any grants or contributions as a result of co-located infrastructure and should be deducted before costs are apportioned; and

In developing a system of apportionment, care will need to be taken to ensure that there is not an incentive created to select the option of a fully costed DLS.

(ii) Infrastructure specific external apportionment guidelinesThe Committee notes that in a number of development settings apportionment will not be required or permitted. These circumstances are set out in the table below. Where apportionment is permitted, it will be guided by the following:

Arterial Roads, Intersections and RoundaboutsWhere these works are internal to a planning unit i.e. not on a boundary, there should be no external apportionment.

Where these works are on the boundary of a planning unit and adjacent to another existing or proposed planning unit, the cost should be shared equally (adjusted for the length of common frontage where necessary). Intersections at the corner of a planning unit may be externally apportioned up to 75% as appropriate. Where the boundary of the planning unit abuts a growth boundary or an existing area, the cost may be fully apportioned to the planning unit. The Committee acknowledges that this raises equity issues, but this approach is consistent with some recent GAA prepared DCPs and has been generally accepted by Panels on the basis that future residents of the planning unit will also use road infrastructure external to the planning unit and to which they will make no contribution.

Community and Recreation InfrastructureWhere a DLS is being prepared and where apportionment is permitted, it should be in proportion to the projected external usage. When calculating likely external usage it should be assumed that this will only occur when the population threshold for the provision of an infrastructure item is higher than the projected population of the planning unit. External usage should be in proportion to the difference between the two.

External apportionment is only permitted for higher order community and recreation infrastructure defined as:


Specialist Community Centre (level 3) or stand alone facility including: Level 3 Community Learning Centre/Library; Youth centre; Performing arts centre; Delivered meals facility; Indoor courts or recreation centre; and Aquatic centre.

The Apportionment proposed for infrastructure items in difference development settings is set out in Table 12.

New guidelines which will be prepared before the implementation of the new system will need to address a number of issues associated with external apportionment, particularly with respect to major items of transport infrastructure such as future arterial roads and major structures such as bridges. These will need to take into account the Arterial Roads Protocol which the Committee is recommending that it be reviewed and formalised as part of the implementation of the new development Levy system. The Committee understands that it is debate about these matters that consumes time and resources in the current process where much of it is argued out before Panels. The aim of the new Guidelines would be to ensure that uncertainties are minimised and the room for time consuming and therefore potentially costly disputes are significantly narrowed if not eliminated.


Table 12 Apportionment for Development Settings

Development Settings

Standard Levy Development Levy Scheme

GROWTH AREAS


External apportionment permitted in line with the principles set out earlier in this section


Drainage infrastructure



Community and recreation infrastructure

External apportionment permitted for high order infrastructure items only and in accord with the principles set out earlier in this section

External apportionment permitted for high order infrastructure items only and in accord with the principles set out earlier in this section

STRATEGIC REDEVELOPMENT AREAS


Funds collected through application of the Standard Levy for a large Scale area may be expended either inside or outside the defined development area but this must be justifiedExternal apportionment is permitted based on proportion of usageExternal funds will generally be rate revenue or grants, not other planning units. Grants will generally be deducted before apportionment of external usage to rate revenue unless grant conditions dictate otherwiseNo external apportionment permitted for Small Scale areas but funds may be spent outside the planning units if this can be strategically justified

Funds collected through application of the Standard Levy for a Large Scale area may be expended either inside or outside the defined development area but this must be justifiedExternal apportionment is permitted based on proportion of usageExternal funds will generally be rate revenue or grants, not other planning units. Grants will generally be deducted before apportionment of external usage to rate revenue unless grant conditions dictate otherwiseNo external apportionment permitted for Small scale areas but funds may be spent outside the planning units if this can be strategically justified


As for transport infrastructure (where relevant)

As for transport infrastructure (where relevant)


External apportionment permitted for high order infrastructure items only and in accord with the principles set out earlier in this section for Large Scale areas only No external apportionment permitted for Small Scale areas

External apportionment permitted for high order infrastructure items only and in accord with the principles set out earlier in this section for Large Scale areas onlyNo external apportionment permitted for Small Scale areas

URBAN AREAS

Transport Infrastructure

External apportionment not permitted. The planning unit should be defined so as to internalise costs. It is envisaged that in many instances these are likely to be municipality wide planning units

DLS not permitted


Development Settings

Standard Levy Development Levy Scheme


As for transport infrastructure (if relevant) DLS not permitted


As for transport infrastructure DLS not permitted

10.5 Findings


External apportionment should be minimised by the careful choice of planning unit boundaries.

External apportionment should not be permitted for lower order community and recreation infrastructure.

External apportionment will generally only be permitted for larger and more complex planning units.

Where external apportionment is to occur, it should be in proportion to external usage.


11 Valuing Public Land11.1 Context

This Chapter responds to the Outcomes of the Committee’s Terms of Reference (22, dot point 8) that seeks:


The escalation in land values has been one of the more significant causes of the increase in DCP levies in recent years. This is partly attributable to the increase in property prices witnessed during the recent buoyant period in the property market, and to recently prepared DCPs more accurately reflecting actual values for land required for public purposes.

Public land for open space can be identified and set aside through the Subdivision Act 1988 and local planning schemes at Clause 52.01 at the time of subdivision or funded through a DCP. There are different approaches to valuation of the land required in each situation.

Where a land contribution is not required for a specific site under the Subdivision Act 1988 or through Clause 52.01, a cash contribution in lieu of land can be required. This monetary contribution is determined by a valuation made under Section 19 of the Subdivision Act 1988, which generally provides that the land is to be valued as a part of the total area being subdivided effectively as undeveloped land. It is therefore provided at a discount as the land set aside as public open space is developed land with roads, services and other improvements.

Where the purchase of additional public land is funded through a DCP, there is no specific power to reserve the land or require its transfer unless a PAO is put in place. In the absence of a PAO and the compulsion that this can provide the acquiring authority, the transfer of the land must generally be negotiated. Typically this is achieved via the subdivision process where there is no dispute regarding the value of the land as set out in the relevant DCP.

Recently approved DCPs have generally included site specific valuations; however older DCPs have typically adopted a broad hectare approach to the valuation of land. In addition, the older DCPs have adopted a variety of approaches to indexation (which were not linked to land price growth). In many instances the actual compensation based value of land has resulted in land payments vastly in excess of the DCP provision.

It remains to be seen whether the more recent DCPs will adequately deal with the gap between land value provisions and payments made.


The key issue identified by local government is that estimations of land value made during the formulation of a DCP cannot be assumed with a sufficient degree of confidence if there is a difference in the basis of assessing land value for the DCP and the avenues available to agree on a land value with an affected landowner. Local government has highlighted the significant risk associated with gaining access to land and funding shortfalls where land payments exceed DCP provisions. This potentially undermines a simplistic but essential


assumption that is made in formulating all DCPs i.e. the fund will balance at the end of the life of the DCP as incoming payments should match outgoing payments, and all landowners will make an equitable contribution on that basis. The potential for this assumption to be compromised, with significant risk to councils and all landowners within the DCP area, has highlighted the need for clear guidance to the approach to valuation of public land.

Development industry submitters have commented that the escalation in DCPs has reached a point where no further cost imposts can be borne by purchasers, with the cost of land being identified as one of the key causes of the increase in DCP levies.


There were widely divergent views on the most appropriate approach to the valuation of public land and a general acknowledgment that this was a key area of risk to local government and the development industry, but for different reasons.

A number of local government submitters commented that dealing with public land valuation and securing its transfer early in the life of the DCP were key steps in mitigating risks associated with the acquisition of public land. However, it was suggested that such measures have been adopted in response to the limitations of the current system, in which they suggested a ‘disconnect’ between the Planning and Environment Act 1987 and the Land Acquisition and Compensation Act 1986, which in their view, was resulting in excessive payments for public land.

Development industry representatives also expressed concerns with respect to the duration of time in which land is required to be held before being purchased by acquiring authorities, effectively requiring them to ‘bank’ land for public authorities for indefinite periods.

11.4 Discussion

There are significant issues of fairness and equity in the allocation and valuation of land for public purposes.

Discussion of this issue must begin with the manner in which land is identified for a public purpose, which in some instances can be somewhat arbitrary. For example, where a road widening is identified on one side of a road but not the other, or where open space is identified on one private lot, but others are left unencumbered.

In one consultation session it was stated by a council representative that “we identify the public uses on land already owned by developers rather than other owners as we have greater confidence of securing the land”. In these circumstances the concern about access to and securing public land is distorting planning decisions about the most appropriate location for public land. It is also identifying and allocating low yielding uses between land owners in a manner that lacks fairness and equity.

In these circumstances, the approach to valuing public land should ensure that the land is taken on a fair and equitable basis. In this context two important principles must be noted:

Firstly, it is not the role of a DCP or the proposed Standard Levies or DLS to determine land requirements for public purposes, that is the role of a PSP or equivalent


document. During formulation of a PSP the rationale for the location and area of the land that is required for public purposes will need to be established; and

Secondly, it is inevitable that some land will need to be set aside for public purposes in order to achieve a form of development that is consistent with the objectives of the Act and planning policies that provide direction regarding expected form of development and the composition of new communities.

With these principles in mind, what remains is to determine an appropriate means of valuing land as input into the formulation of a DCP that equitably and accurately sets the cost of the land.

In order to provide some compulsion for land owners to provide land and agree terms of sale it is necessary to reserve land for public purposes through the application of a PAO. This is unlikely to be welcomed by local government as whilst it provides certainty by compelling the transfer of the land, it also triggers rights with respect to compensation claims, which would ultimately be welcomed by the development industry. Whilst use of the PAO raises issues in terms of timing, certainty and capacity to pay, the method of valuation and relationship to other Acts are key issues that will be the subject of on-going debate and concern for all stakeholders.

It is clear that the DCP framework and the relatively simple concept of shared contributions toward the cost of land for various public purposes, has not been implemented with sufficient regard to the interrelationship between related Acts or with regard to the process of transferring land into public ownership. Various practices, such as equalisation mechanisms, have evolved in an attempt to address some of these issues. The Committee is of the view that whilst recent DCPs have sought to address the method of valuation in terms of the shift away from broad hectare valuations toward site specific valuations in conjunction with adoption of more specific indexation methodologies, the broader issues regarding the relationship between the various Acts requires clarification.

Taking into account the significant risk associated with possible variations in compensation value and the apparent equity issues, the Committee is of the view that a detailed review of the issues relating to land valuation and transfer be conducted as part of the Stage 2 report. This review should seek to identify mechanisms to simplify and give certainty to the process of securing land for public purposes within the recommended DCP framework.

11.5 Findings


A detailed review of the issues relating to land valuation and transfer should be conducted as part of the Stage 2 report.

The review of land valuation in Stage 2 should seek to identify available options to:o Simplify and give certainty to the process of securing land for public purposes;o Ensure that there is an equitable approach toward the valuation of land for

public purposes; ando Ensure that the principles of the recommended DCP framework cannot be

undermined.


12 Works in Kind12.1 Context



12.2 Works in Kind

(i) What are the key issues?The key issues identified by the Committee are as follows:

Whether works in kind proposals should be accepted in all situations; Whether the full project cost set as specified in the contributions plan or the actual

project cost should be used for credit purposes; and Complexity in management of works in kind projects.

(ii) Submissions and commentary Most submitters, irrespective of the development setting, supported the ability to accept works in kind. Reasons offered in support of acceptance of works in kind generally included:

Ability to achieve efficiency in infrastructure delivery; Acceptance of works in kind enables infrastructure delivery to be responsive to

demand; Direct delivery of infrastructure reduces the extent of payment and management of

funds; and Direct delivery of key infrastructure projects simplifies the contributions plan via

progressive removal of infrastructure items.

Notwithstanding the general support for acceptance of works in kind, growth area councils highlighted the complexity in relation to competing development fronts seeking acceptance of works in kind potentially at the expense of other projects due to lack of cash flow. Some councils also raised concern in relation to the tendering requirements of the Local Government Act 1989.

(iii) DiscussionThe current system and A Preferred Way Forward broadly support the concept of delivery of works in kind. Works in kind is considered to be a practical and potentially more efficient means of infrastructure delivery particularly in a growth area setting where large landholdings are involved.

What is not properly understood is that direct delivery of works in kind requires the planning authority to determine the DCP liability for the landholdings in question, and having established the financial liability, to then identify a reduced number of infrastructure projects that will be delivered. This process and approach is not anticipated by the current system that assumes a shared or pro-rata contribution to all of the infrastructure projects


that are contained within the DCP, and ultimately delivery of the infrastructure by the collecting agency.

While acceptance of works in kind is considered to be a more practical and potentially more efficient means of infrastructure delivery, complexity arises in relation to:

The conditions under which works in kind will be accepted, particularly where there are competing growth fronts;

The means by which the works in kind projects are agreed and documented; Whether a credit should be provided for the value of the works that are specified in

the DCP or whether a credit should only be received for the actual value of the works; and

Whether direct delivery of works in kind contravenes the requirements of section 186 of the Local Government Act 1989.

Added complexity arises in relation to the requirements of the Local Government Act 1989 where a collecting agency may be required to pay a developer to deliver works in kind or bring forward delivery of works where the value of such works exceeds the DCP liability for the landholding in question. This is an issue for some rural councils who are then left with the difficulty of determining whether value for money or best value has been achieved.

In relation to the requirements of the Local Government Act 1989, the Committee is of the understanding that it is possible for particular types of contracts to be exempted from the requirements of section 186 of the Act. This ability should be explored and documented in the Stage 2 report.

(iv) Findings The Committee makes the following findings:

It is essential for the new development levy system to retain the potential for acceptance of works in kind.

Acceptance of works in kind proposals should be at the discretion of the collecting agency.

Accepted works in kind proposals should be documented in a section 173 Agreement or other suitable form of agreement.

Credit for the full cost of the infrastructure up to the value specified in the contributions plan should be provided (on the assumption that the infrastructure is delivered to the required specifications and standard) to encourage efficiency in infrastructure delivery.

The ability to exempt works in kind projects from the requirements of section 186 of the Local Government Act 1989 should be explored and documented in the Stage 2 report.


13 Developer Delivered Infrastructure and GAIC13.1 Context

A Preferred Way Forward assumes that there will be three levels of contribution toward infrastructure provision in growth areas:

Site specific infrastructure that will be directly provided by developers (as set out in Attachment 4 of A Preferred Way Forward);

Precinct or growth area based shared contributions for which monetary payments (and/or works in kind) will be sought from developers as development takes place; and

State wide shared contributions for which monetary payments (and/or works in kind) will be sought from developers in metropolitan growth areas as development takes place (GAIC).


Clarification of the infrastructure to be directly provided by the developer and what infrastructure should be provided by the State through other sources such as the Growth Area Infrastructure Contribution.

13.2 Developer infrastructure delivered on site

(i) What are the key issues?The key issue in relation to developer provided infrastructure is the need to ensure that there is a clear distinction between developer provided infrastructure and other infrastructure for which contributions will be sought (local and State).

(ii) Submissions and commentary Developers have generally identified that infrastructure standards in terms of specification for directly delivered infrastructure have increased significantly in the recent past. Attempts to standardise engineering standards within growth areas have typically resulted in increased construction costs wherein the highest specifications have generally been adopted as the standard.

(iii) DiscussionPrior to introduction of the current DCP system in growth areas, it was usually accepted that developers would be responsible for the infrastructure that is required to service land and to make the land available for the intended land use. Provision of access and services were regarded as essential, as was provision of local open space and landscaping.

In this context, where small scale subdivisions were involved, the definition of developer provided infrastructure was relatively easy to determine. However, as the scale of developments has increased over time, including the shift toward master planned communities, the distinction between what is regarded as necessary to directly service and provide access to the land and as opposed to what infrastructure is of broader benefit, has been more difficult to define.


The disparate, and at times remote location of land that is proposed to be developed, has also caused difficulty at times in determining access requirements where development is brought forward. Generally master planned developments have become characterised by a higher standard of infrastructure provision and landscape amenity.

The Committee is not of a mind to pursue further comments regarding increased costs and/or standards of infrastructure specification over time, but is concerned to ensure that the new system retains recognition that there will be some items of infrastructure that will be directly provided by developers.

With reference to Appendix 4 of A Preferred Way Forward, it is considered that the list of developer provided infrastructure is generally acceptable save for the construction of a football oval. Construction of active playing fields and associated infrastructure are well recognised as contribution items.


The framework for the proposed Development Levy System confirms the need for developer provided infrastructure.

As part of its Stage 2 work, the Committee will review Appendix 4 of A Preferred Way Forward to remove any items, such as the construction of a football field, that are included within the new system as direct developer provided items.

13.3 State Infrastructure and GAIC

(i) What are the key issues?The key issues in relation to State infrastructure and the GAIC in growth areas are that:

The GAIC has been introduced as an additional development charge rather than a betterment tax, and as such is likely to contribute toward reduced affordability levels in growth areas;

There is a lack of clear guidance regarding the distinction between items that should be funded by a DCP as opposed to GAIC funding; and

There is a perception of increasing transference of State infrastructure items into DCPs.

According to the GAA information sheet in relation to the GAIC Work In Kind August 2011:

The introduction of a Growth Areas Infrastructure Contribution (GAIC) on land brought into Melbourne’s Urban Growth Boundary (UGB) was announced in December 2008 and came into effect from 1 July 2010. The GAIC raises funds to contribute to the cost of state infrastructure required for development of land in growth areas. All funds raised by the GAIC will be used to provide vital infrastructure in the growth areas. The revenue collected is to be paid equally into two GAIC funds. One fund is to be spent on public transport, and the other on a range of community, environmental and economic infrastructure.


The GAIC applies, at differing rates, to land zoned for urban development brought into the UGB in 2005/2006 and land brought into the UGB from 2010. GAIC becomes payable once it is triggered by a GAIC event.

Section 201V of the Planning and Environment Act 1987 provides for establishment of the two growth areas funds. Sections 201V(1) and (2) specify that:

(1) There must be established in the Public Account as part of the Trust Fund-(a) an account to be known as the Growth Areas Public Transport Fund;

and(b) an account to be known as the Building New Communities Fund.

(2) There must be paid into each Fund-(a) 50% of all money received by the Commissioner in respect of growth

areas infrastructure contributions; and(b) interest received from the investment of money in the Fund.

Sections 201VA and 201VB provide more detail in relation to the purpose of each of the funds. Section 201VA states:

There must be paid out of the Growth Areas Public Transport Fund amounts authorised by the Minister with the approval of the Treasurer-

(a) to be used to provide financial assistance for or with respect to the following matters-(i) capital works for State funded public transport infrastructure in any

growth area;(ii) the acquisition of land and other infrastructure necessary or required

for the establishment, operation or maintenance of infrastructure referred to in subparagraph (i): and

(b) for the payment of any recurrent costs relating to the provision of a new public transport service in a growth area for a maximum of 5 years after the commencement of that service; and

(c) for the payment of the costs and expenses incurred by the Commissioner as a result of exercising of performing his or her functions, powers and duties relating to growth areas infrastructure contributions.

Section 201VB states:

(1) There must be paid out of the building New Communities Fund amounts authorised by the Minister to be used to provide financial assistance for or with respect to capital works for State funded infrastructure in any growth area including the following-

(a) transport infrastructure including walking and cycling but excluding major public transport infrastructure;

(b) community infrastructure including health facilities, education facilities, regional libraries, neighbourhood houses and major recreation facilities;

(c) environmental infrastructure including regional open space, trails and creek protection;


(d) economic infrastructure including providing access to information and technology and infrastructure supporting development of commerce and industry;

(e) the acquisition of land and other infrastructure necessary or required for the establishment or maintenance of any infrastructure referred to in this subsection.

(2) The Minister must not authorise the payment of an amount of $2 million or more from the Building New Communities Fund for the purpose of particular capital works, except with the approval of the Treasurer.

Recent changes to the Planning and Environment (Growth Area Infrastructure Contribution) Act 2011 provide the potential for all or part of the GAIC to be paid for via the provision of land, infrastructure or building or works rather than payment of cash via a works in kind agreement. The Act specifies that a works in kind agreement must be authorised by the Minister for Planning. Section 201SLB of the Planning and Environment Act 1987 provides that:

(1) The Minister may, in accordance with this Subdivision, enter into an agreement with a person for the provision by that person of land or works or a combination of land and works to meet the whole or part of that person's liability or expected liability to pay a growth areas infrastructure contribution (a work-in-kind agreement).

(2) A work-in-kind agreement may be entered into with other parties in addition to the person liable to pay the growth areas infrastructure contribution.

Note:

Other parties may include another Minister or a public authority or an owner of land affected by the work-in kind agreement.

There was relatively little by way of direct submissions on this particular issue. This is in part because many submitters focussed on the key issues relating to development settings and the introduction of standard levies.

(ii) DiscussionIn May 2003 the then Minister for Planning, issued a Ministerial Direction, Development Contributions Plans, in response to ongoing uncertainty regarding the development and community infrastructure definitions. This was of course well prior to introduction of the GAIC on 1 July 2010. That Ministerial Direction sought to clarify what specific items could be funded with a development infrastructure levy. Clause 4 of the Ministerial Direction specifies that:

The following works, services or facilities may be funded from a development infrastructure levy:

(a) Acquisition of land for:- roads- public transport corridors


- drainage- public open space, and- community facilities, including, but not limited to, those listed under

clause 4(f).

(b) Construction of roads, including the construction of bicycle and foot paths, and traffic management and control devices.

(c) Construction of public transport infrastructure, including fixed rail infrastructure, railway stations, bus stops and tram stops.

(d) Basic improvements to public open space, including earthworks, landscaping, fencing, seating and playground equipment.

(e) Drainage works.(f) Buildings and works for or associated with the construction of:

- a maternal and child health care centre- a child care centre- a kindergarten, or- any centre which provides these facilities in combination.

Whilst this Ministerial Direction provided some clarity in relation to what community infrastructure items could be funded from the uncapped development infrastructure definition, it is significant that this Direction included the possibility that a DCP could fund a broad range of State infrastructure items including “construction of public transport infrastructure, including fixed rail infrastructure, railway stations and bus stops and trams stops and acquisition of land for roads and public transport corridors”.

In the period prior to and following release of the Ministerial Direction, very few DCPs included provision for State infrastructure (land or works) other than bus stops. The Mernda Strategy Plan, Development Contributions Plan 2002, is one DCP that includes provision for land for a future railway station. In practice however, there was a general reluctance to include land or works for what were considered to be State infrastructure items as the accepted practice is that inclusion of such items would require an authority, other than a council, to be nominated as the collecting agency. Gathering funds would require the collecting agency to nominate and commit to delivery of the infrastructure project.

As a consequence, DCPs were generally confined to funding local infrastructure items with no provision for State infrastructure. Notwithstanding this, the Committee is generally aware from submissions and experience that the last 10 years have seen a general increase in the level of contribution toward future arterial roads.

Since introduction of the GAIC in 2010, and since the method of collection shifted away from a betterment tax approach,(that landowners would pay upon the sale of land toward a development charge that would be met by developers upfront, or at the time of development), there has been ongoing uncertainty and concern in relation to affordability.

In terms of distinction between State and local infrastructure, the underlying questions that require clarification are:

What is the relationship between a development levy and the GAIC?; What specific projects are the GAIC intended to fund?; and


Should some or any items that were previously funded via a local DCP become GAIC projects under the terms of the new development levy system in the future.

An amendment to the Act at section 46IA, which was introduced post July 2010 when the GAIC was introduced, has clarified that a development contributions plan must not be included in a planning scheme for the purpose of “levying contributions in respect of land in the contribution area (within the meaning of Part 9B) by a development agency that is not a municipal council”.

It is noted however, that the 2003 Ministerial Direction continues to provide for levying of contributions in respect of land and works for state infrastructure. The only clarity that the amendment to section 46IA provides is that the collecting agency cannot be an agency other than the council in question.

Notwithstanding the clarification that has been provided via the above amendment in relation to levying contributions in respect of land, it is apparent to the Committee that:

The GAIC will effectively operate as an additional development contribution in the applicable growth areas; and

There is a lack of clarity regarding the items of infrastructure that are intended to be funded via the GAIC as opposed to a growth area based DCP.

In terms of the lack of clarity regarding the items of infrastructure that are intended to be funded via the GAIC, it is apparent to the Committee that of the two GAIC funds, the Building New Communities Fund lacks clarity in terms of the scale of the infrastructure and the potential items that could be funded. As a consequence, the relationship back to a growth area based DCP is equally unclear.

Part (1) of section 201VB provides for “financial assistance for or with respect to capital works for State funded infrastructure in any growth area” however, the following may be legitimate questions in relation to the subsections that follow:

What constitutes State walking and cycling infrastructure in a growth area context and what is ‘major’ public transport?;

Why are neighbourhood houses listed as State infrastructure and how do they relate to community activity centres?;

What is a ‘major’ recreation facility and should the land for such be excluded from a DCP?;

What is environmental infrastructure and is land that is set aside and managed for conservation purposes eligible for a GAIC credit?;

What is economic infrastructure and could it include for example, provision of fibre optic networks?;

How does the ability to fund land for State transport infrastructure relate to the practice of a DCP funding the total road reserve for future arterial roads?; and

Is the list of specified infrastructure exhaustive or could other items of infrastructure be funded?

What is also unclear is whether any thought has been given to the purpose of the GAIC fund other than to fund necessary infrastructure. In other words, on the assumption that GAIC funding will only account for a proportion of necessary State infrastructure funding, should potential funding projects be assessed according to their ability to:


Bring forward timing of delivery of infrastructure; or Somehow affect positive change in the nature of growth area planning and delivery.

In the absence of nomination of projects that will be funded via GAIC from the outset, as is required in formulating a DCP, formulation of transparent assessment criteria may be worthwhile. The first criteria being that the infrastructure should be located within or be of direct benefit to the location from which the funds were gathered.

In terms of impacts on affordability, the Committee has not had the opportunity to properly consider the impacts of development charges including GAIC upon affordability in growth areas in formulating its first report. In setting the levies in Stage 2, it will be essential to have careful regard to affordability in growth areas.

(iii) FindingsThe Committee makes the following findings:

The affordability implications of GAIC charges should be reviewed within the Stage 2 report.

The definitions of State and local infrastructure be reviewed as part of the Committee’s Stage 2 work with reference to the recommended development levy framework and allowable funding items.

The Minister’s Direction dated May 2003 be further examined by the Committee within the context of the recommended development levy framework and the GAIC provisions as part of its Stage 2 work.


14 Using Permit Conditions for Infrastructure14.1 Context


The circumstances where Councils and State agencies should be able to require a developer to enter into an agreement to provide funds for additional off-site infrastructure required to mitigate the off-site impacts of a proposal through a permit condition.


In relation to the use of section 173 agreements and permit conditions A Preferred Way Forward proposes that:

Where a standard levy is applied, a council would not be able to enter into an agreement for the further provision of local infrastructure of the type being levied for. A council may enter into limited agreements for specific infrastructure required by a condition of a permit to mitigate the off site impacts of a proposal.

A Preferred Way Forward proposes to continue to allow the use of agreements to formalise arrangements for works in kind proposals, where there is a need to specify details regarding the standard of provision, timing and credits to be applied in respect of DCP liabilities. This issue was addressed in more detail in Chapter 12.

In addition to permit conditions implementing DCP requirements, the Act provides limited scope for responsible authorities to impose conditions on permits requiring the provision of additional infrastructure where it is considered necessary as a result of the grant of a permit and is to be paid for wholly by the applicant or in part where the remaining amount is to be met by a public authority. Conditions can also be imposed at the direction of referral authorities that may require the provision of off-site infrastructure to mitigate planning impacts.

The Act provides the ability to impose permit conditions to require the provision of infrastructure through a section 173 agreement; however, such agreements must be voluntary.

It is unclear whether A Preferred Way Forward proposes to prevent all section 173 agreements, including those voluntarily entered into by a developer, but it is assumed not. Nevertheless, it is clear that there is an intention to provide greater certainty about the use of agreements and permit conditions that require infrastructure over and above that proposed to be funded by a levy.


Amongst councils there was general support to retain the ability to use section 173 agreements to address particular infrastructure requirements not covered by a DCP or where a DCP does not apply. Section 173 agreements were generally regarded as providing


necessary flexibility as a mechanism to implement individual voluntary agreements regarding the provision of infrastructure.

Some councils also wished to retain the ability to use section 173 agreements (in place of standard levies) to implement agreements with individual developers of larger strategic redevelopment sites. Some councils expressed support for the proposals set out in A Preferred Way Forward whilst others remained unclear as to their intent and sought further clarification.

It was generally accepted that agreements should not be used if they would result in ‘double dipping’, however one council suggested that they could be used to address underfunding issues regardless of whether this is seen to be double dipping.

The GAA supported the continued use of section 173 agreements and permit conditions to require infrastructure which is needed to mitigate off site impacts, however it requested further guidance about the circumstances where this is appropriate. It does not support the use of section 173 agreements to require infrastructure that should be included in a DCP.

Peak industry groups and developers generally supported the proposals to prevent the use of section 173 agreements where levies are imposed.

MAB expressed the desire to retain the ability to use a section 173 agreement where it was needed to document a variance in the approach by a developer to infrastructure provision.

The Property Council expressed a particular concern in relation to requirements imposed by VicRoads which result in greater road work requirements than identified in a DCP or PSP.

There appears to be general support from submitters for the continued the use of section 173 agreements for implementing agreements in relation to works in kind proposals.

14.4 Discussion

(i) When can section 173 agreements and permit conditions be used?The circumstances in which permit conditions can be imposed to require the provision of off-site infrastructure are regulated by section 62 of the Act and guidance is also provided by case law which has interpreted these provisions. In particular, sections 62(5) and (6) state:

(5) In deciding to grant a permit, the responsible authority may—

(a) include a condition required to implement an approved development contributions plan; or

(b) include a condition requiring specified works, services or facilities to be provided or paid for in accordance with an agreement under section 173; or

(c) include a condition that specified works, services or facilities that the responsible authority considers necessary to be provided on or to the land or other land as a result of the grant of the permit be—

(i) provided by the applicant; or

(ii) paid for wholly by the applicant; or


(iii) provided or paid for partly by the applicant where the remaining cost is to be met by any Minister, public authority or municipal council providing the works, services or facilities.

(6) The responsible authority must not include in a permit a condition requiring a person to pay an amount for or provide works, services or facilities except—

(a) in accordance with subsection (5) or section 46N; or

(b) a condition that a planning scheme requires to be included as referred to in subsection (1)(a); or

(c) a condition that a referral authority requires to be included as referred to in subsection (1)(a).

The purpose of these provisions is to ensure that Part 3B of the Act, which establishes DCPs, is not circumvented by the use of permit conditions or section 173 agreements on a case by case basis. Clearly where a responsible authority seeks to collect contributions from multiple developers towards infrastructure, a DCP is the only mechanism currently available.

However, with the approval of the 2004 amendments to the Act, in particular section 62(5)(c), there was a clear intention to confirm the ability of responsible authorities to impose conditions requiring the provision of works or facilities as a direct consequence of a particular development, but which could not have been reasonably planned for or included in a DCP. These conditions are frequently referred to as 'impact mitigation' or 'King Ranch' type conditions following the principles set out in the High Court decision of Cardwell Shire Council v King Ranch Australia Pty Ltd [1984] HCA 39 (the King Ranch decision). Following amendments to the Act in 1995 and the repeal of section 62(2)(h), there was some confusion about whether councils had the ability to impose King Ranch type conditions. The intent of the 2004 amendments is usefully summarised in the VCAT decision of Dennis Family Corporation v Casey CC [2006] VCAT 2372 (23 November 2006) (the Dennis Family decision) at [85]:

Read together, and in the context of the amendments to the Act in 2004 referred to earlier, we consider that omission of the option to enable a condition requiring a person to pay an amount for or provide works, services and facilities that will also be contributed to by payment or provision in part by other persons (other than solely by a Minister, public authority or municipal council) is deliberate. The combined effect of sections 62(5) and 62(6) was to overcome the doubts and deficiencies regarding the ability to impose conditions revealed by Curry v Melton CC and Christian Brothers Vic Pty Ltd v Banyule CC referred to in A New Development Contributions System for Victoria and the Minister’s second reading speech for the Planning and Environment (Development Contributions) Act 2004. Together, sections 62(5) and 62(6) make it clear that there is no impediment to imposing a King Ranch type condition on development and that there is no distinction to be drawn between works, services or facilities in this respect. However, King Ranch type conditions, whether imposed by some general condition making power or specifically under the provisions of section 62(2) of the Act, relating to the payment or provision of works, services or facilities, are


subject to the limitations imposed by section 62(5).[27] In other words, approved development contributions plans are the only means by which contributions to the provision of works, services or facilities can be obtained from more than one developer. This was the finding also of the Tribunal in Springhaven Property Group Pty Ltd v Whittlesea CC[28]and Naprelac v Baw Baw SC[29].

As evident in the passage above, impact mitigation conditions are often referred to as ‘King Ranch type’ conditions. This follows the High Court's decision in the King Ranch decision in which it considered the validity of a condition imposed (under Queensland legislation) on a residential development requiring the developer to contribute $25,000 to the upgrading of a bridge and the sealing of a section of road that were necessary to provide access to the development. Due to the traffic generated by the proposed development, and the wear and tear on the road, the life of the bridge was shortened and its reconstruction was required to be brought forward by a number of years. Relevantly, the $25,000 was only to defray a proportion of the total bridge costs, which were estimated to be over $300,000. It was also clear that the bridge section of sealed road and the bridge would not exclusively benefit the developer but would be use other members of the community. Ultimately the court upheld the validity of the conditions finding that they were "reasonably required" and that there was an “obvious connection” between the effects of the subdivision and the purpose to which the contribution would be put in defraying the costs incurred in addressing those effects i.e. the wear and tear on the bridge and road.

Under the existing framework it may be possible to use permit conditions to address the impacts of an 'out of sequence' development which brings forward the need for infrastructure in a DCP and causes additional costs. As the Tribunal noted in the Dennis Family decision, these costs can only relate to the cost of bringing forward the works and not the works themselves (at [73]):

If there is a staging schedule for the infrastructure included in a development contributions plan, and if a developer wishes to depart from that staging by bringing forward works to suit its own convenience, then we consider that the additional cost of bringing forward those works would be the responsibility of the developer. But this relates only to the cost of bringing forward the works to provide for them out of sequence; it does not relate to the cost of the works themselves.

No particular examples of this were brought to the attention of the Committee and it is not clear how these conditions would work in practice. Clearly, a council would have to demonstrate a clear nexus between the timing of the development and the necessary infrastructure and the additional costs of bringing its delivery forward.

Regardless of the specific power being relied upon under section 62, all permit conditions imposed must fairly and reasonably relate to the permitted development1 and otherwise be “relevant, reasonable and certain”2.

1 See Pyx Granite Co Ltd v Ministry of Housing & Local Government [1958] 1 QB 554 at [572].2 See Dennis Family Corporation v Casey CC [2006] VCAT 2372 (23 November 2006) at paragraph 81.


In summary, the following principles emerge from the legislation and Victorian case law in relation to the use of permit conditions to require the provision of infrastructure:

The works, services or facilities must be considered necessary as a result of the grant of a permit;

The works, services or facilities must be paid for in whole by the developer or in part where the responsible authority or other public authority is to meet the remaining amount. This requirement reflects the causal nature of the nexus of the proposed development with the works services or facilities, which must be deemed necessary to mitigate its impacts;

The above requirements do not preclude the provision of infrastructure that provides benefits to other land, but the extent to which other land benefits may be reflected in the reasonable proportion of the cost to be borne by the developer;

DCPs are the only means by which contributions to the provision of works, services or facilities can be obtained from more than one developer;

It is not open for a responsible authority to include a condition in a permit requiring the provision of works, services or facilities where they are already included in a DCP.

Responsible authorities may not ‘double dip’ by collecting levies and requiring the provision of the infrastructure by permit condition; and

Any permit condition must also meet the other general requirements of validity in every other respect, including reasonableness, certainty and relevance.

Whilst these principles do not prescribe the circumstances in which it is appropriate to use permit conditions to mitigate off-site impacts, the Committee does not consider there to be anything inherently problematic about their application to the typical range of circumstances encountered in Victoria.

Each development will present its own particular challenges to councils as responsible authorities and as infrastructure providers. These circumstances will often involve land outside growth areas where there is no opportunity to levy contributions for isolated pieces of infrastructure which would not have been needed but for the impacts of a particular development.

Even in growth areas it will not be possible to anticipate every single development parameter to enable the orderly planning of a particular precinct or growth area and each subdivision will need to be considered on a case by case basis.

Where infrastructure is to be funded by a levy it will not be possible to require its provision by a permit condition. Nevertheless there may be circumstances where an aspect of a particular development is clearly outside the parameters of the planning for a precinct, and results in particular impacts on local infrastructure which must be mitigated in order to achieve an acceptable planning outcome. These circumstances may include an out of sequence development or one that is problematic in terms of its intensity or access arrangements.

The Committee considers that there will continue to be a need for a flexible mechanism to address these types of circumstances, irrespective of whether a levy is imposed or is capable of being imposed on a particular development. To address the ongoing nature of particular impacts or the timing of the provision of necessary infrastructure, it may also be appropriate


to implement the requirements through section 173 agreements as part of such conditions, as currently occurs.

(ii) Referral authoritiesThe other exception to the requirements of Part 3B of the Act is the power of referral authorities to direct a responsible authority to impose conditions which may include a condition that the permit applicant provide works, services or facilities on other land (section 62(1)(a)).

Unlike conditions imposed by responsible authorities, conditions imposed at the direction of referral authorities are not subject to the same requirements of section 62(5)(c). These conditions must still meet the normal validity requirements and are subject to review on their merits.

It is appropriate that responsible authorities continue to have the power to use permit conditions to require the provision of infrastructure in order to mitigate off-site impacts of a particular development, whether or not it is affected by a development levy.

Where a development levy is applied to a development, a responsible authority should not be able to require the provision of infrastructure by permit condition where that infrastructure is to be funded by the levy.

The principles that currently apply through legislation and relevant case law should continue to apply to the use of permit conditions.

Given the nature of the powers provided under section 62(5)(c), it will be difficult to anticipate or codify every circumstance in which it will be appropriate for responsible authorities to exercise this power. Each matter will need to be considered on a case by case basis.

The Committee believes that there is scope to provide further guidance about the circumstances in which the use of permit conditions to require the provision of infrastructure is appropriate.

14.5 Findings


The existing legislative framework be retained to enable responsible authorities to mitigate the off-site impacts of individual developments through permit conditions.

New guidelines for the simplified levy system reinforce the principles which are currently applied to permit conditions for off-site infrastructure.

The new guidelines should provide advice and examples of circumstances in which it is appropriate to use permit conditions to provide additional off-site infrastructure, in particular for out of sequence developments.


15 Administration of Development Contributions15.1 Context

A Preferred Way Forward identifies that similar to the current system, revenue would be collected by each council and held in a special account established for this purpose.

This Chapter responds the Committee’s Terms of Reference (22, dot points 9, 12 and 13) that seeks:




To ensure accountability and transparency, councils would be required to account for and report annually on the receipt and expenditure of the development contributions. The annual report would need to detail:

Any amounts received; Any land received; Any items of works and facilities received as works in kind; and Council’s expenditure on infrastructure.

Under the current system, the requirement to administer a DCP as specified in Clause 46Q of the Act. It requires careful and deliberate management of all incoming and outgoings whether in the form of cash or works or a combination of the two. In order to strictly adhere to the relevant requirements of the Act, it is necessary to administer the fund and accounts for all transactions at the individual project level and for every individual title, or group of titles if amalgamated. According to the current system, it is not possible to pool funds within or between infrastructure types or categories.

Under the new system it is proposed that councils will have the ability to ‘pool’ funds within the following infrastructure categories:

Community and recreation facilities; Transport infrastructure; Drainage infrastructure; and Public land.

Pooling of funds within infrastructure categories is advanced in A Preferred Way Forward as a possible practical means to assist councils with the process of delivery of infrastructure in a more flexible way without the burden of waiting until sufficient funds are available within the account for each infrastructure project.


15.2 Accountability and Reporting

(i) What are the key issues?In other parts of A Preferred Way Forward and the Committee’s specific Terms of Reference, there has commonly been a divergence in key issues as they relate to the various development settings.

With regard to accountability and reporting however, there are some key issues that are common irrespective of the development setting. The common key issues are:

Project specificity and responsibilities under the current system; Variable and unpredictable timing, location and extent of growth; Changing infrastructure needs over time; Complexity in management of works in kind projects; and Desire for transparency and accountability.

(ii) Submissions and commentary Many submitters raised difficulties associated with the requirement to identify a specific list of projects from the outset to formulate a DCP on the one hand and the need for flexibility to respond to changing needs over time on the other.

Aside from the desire to have some level of flexibility over time with regard to changing needs, councils also commonly pointed out that assumptions with regard to the predicted timing and priority of infrastructure provision were often influenced by the unpredictable nature of the timing, location and scale of growth.

The scale of growth was a key issue raised by a number of rural municipalities to the extent that some councils have to deliver key infrastructure projects up-front in order for development to take place (often drainage infrastructure). In this instance, councils are effectively using DCP payments to recoup costs, often over an extended timeframe, with little definite predictability in the rate of growth. In these situations, it was apparent to the Committee that funds are being pooled to recoup costs which is in turn causing difficulties in undertaking specific and regular reporting.

Notwithstanding the difficulties associated with the current system, councils and developers identified the need to undertake more regular reporting given the amount of money that is involved in contributions plans. Councils often commented that the ability or desire to undertake specific reporting as required by the Act was compromised by either changing priorities, lack of financial and other systems and/or practices used to achieve delivery of infrastructure that are not anticipated or supported by the current DCP system.

The Committee notes that the Auditor General’s 2009 report entitled Use of Development Contributions by Local Government drew the following overall conclusion:

There is little assurance that the development contributions system is operating as intended across local government. A lack of effective oversight and transparent reporting remain, despite similar issues being identified in 2005. Greater accountability is needed, as is a better understanding of the future obligations that arise from the contributions received.


(iii) Discussion

Project specificity and responsibilities under the current systemUnder the current system, strict adherence to the requirements of Clause 46Q of the Act requires the planning authority to assume responsibility for delivery of each of the infrastructure projects that are contained within the relevant DCP.

Beyond adoption of responsibility for delivery of each of the infrastructure projects, the Act specifies amongst other requirements, that the timing or delivery trigger for the infrastructure must be set out in the DCP. Irrespective of the often unpredictable nature of the development process, and these timing or delivery triggers are viewed by developers and the general community as binding obligations of the Planning Authority.

Effective accounting for each of the infrastructure projects in accordance with the requirements of the Act requires creation and active management of individual funds for each of the infrastructure projects. Discussion during the consultation phase and experience of the Committee indicates however, that:

Approaches toward and expertise in relation to DCP management vary considerably; Typically rural and some metropolitan and regional councils are struggling with

transparent implementation of DCPs; and Funds are being pooled within and between infrastructure categories as a practical

means of managing infrastructure delivery.

As a consequence, it is commonly the case that there is either an inability or a reluctance of the Planning Authority to properly account for administration of the DCP and to report on performance in a transparent way. The lack of transparent financial management and reporting in relation to administration of DCPs is considered by the Committee to be an area of significant financial and general risk to councils.

Variable and unpredictable timing, location and extent of growthDuring the consultation phase, no planning authorities made reference to infrastructure roll out occurring precisely according to that which was assumed in formulating a DCP. In fact, most planning authorities highlighted an expectation and practice that development typically takes place broadly in response to a range of market demand and other development factors that are largely beyond the control of the planning authority.

The unpredictable nature of the development process then causes the planning authority to have to become, to a greater or lesser degree, reactive in the delivery of infrastructure.

The need for councils to respond to infrastructure needs in a reactive way is often exacerbated in situations where there are multiple development fronts competing for delivery of infrastructure. Competition for delivery of infrastructure tends to occur in relation to lower order infrastructure such as roads, intersections, open space and community facilities rather than higher order shared infrastructure that are typically delivered toward the end of the life of the DCP.

Commencement of development on multiple fronts, particularly where DCP infrastructure projects are triggered early in the life of development often causes stress on the DCP fund and on-going uncertainty in relation to delivery of the other infrastructure projects. The


emergence of multiple development fronts in competition for infrastructure can also cause decision making in relation to infrastructure priorities and delivery to be less transparent and less strategic.

Changing infrastructure needs over timeA common theme amongst councils during the consultation phase was the inability to predict with confidence the infrastructure needs that would be triggered throughout the life of a DCP, despite the requirement to establish a clear nexus and need for infrastructure projects from the outset in formulating a DCP.

In recognition of the binding nature of a DCP, councils indicated a reluctance to report on administration of the DCP and delivery of projects particularly where the scope or nature of projects had changed over time. In one infill municipality, the reluctance to report on administration where projects had changed was based on legal advice despite the reality that more infrastructure projects had been delivered by the DCP fund than was initially anticipated. Such is the general concern regarding the binding nature of DCPs where the current system does not anticipate nor support changes to the list of infrastructure projects or scope over time. In this context, it is necessary to draw a general distinction between the circumstances under which infrastructure projects may change over time.

In growth areas, a careful distinction should be drawn between the emergence of different infrastructure needs over time as opposed to scope creep, the influence of changing Government policy requirements, and the increases in the cost of infrastructure. Whilst each of these factors are possible threats to successful implementation of a DCP, it is most likely that changing infrastructure needs will be most relevant to the combined community and open space facilities infrastructure category. This is on the assumption that in growth areas, the other infrastructure categories will be less affected by changing needs over time as the area in question will require the specified range of transport projects, drainage projects where relevant, and public land.

In infill locations by contrast there is likely to greater potential for infrastructure needs, or perhaps more importantly infrastructure priorities, to change over time in all categories.

Notwithstanding the various implementation issues associated with delivery of infrastructure and the complexity they can raise in the management of funds, the Committee is of the opinion that it is important for an annual report to be prepared. The annual report should reflect council’s obligation to account for contributions and detail summary information in relation to the receipt and expenditure of contributions.


To ensure accountability and transparency, councils should be required to account for and report annually on the receipt and expenditure of the development contributions.

Council annual reports should detail the following in relation to development levies:o Any amounts received;


o Any land received;o Any items of works and facilities received as works in kind;o Council’s expenditure on infrastructure.

15.3 Indexation

(i) What are the key issues?The key issues in relation to indexation are:

Whether an appropriate land and construction index can adequately keep pace with changes in costs over time;

Whether there is a need to apply a project based or general contingency; What types of indexation best suit contributions plans; and When should indexation take place and according to what process.

(ii) Submissions and commentaryMost submitters identified the need to apply indexes to both construction and land costs; however general concern was expressed with regard to the inclusion of what were considered to be excessively highly contingencies.

(iii) DiscussionA complex and significant area of risk for collecting agencies and developers in growth areas, for related but different reasons, is that typically development contributions are gathered and administered over an extended timeframe. The need for indexation is brought about by the requirement to ensure that the value of contributions keep pace with escalation in the value of projects and/or the value of land over the life of the contributions plan.

A problem with the earliest DCPs in growth areas was that indexation was not addressed at all or only a minor value index (such as CPI) was specified. This lack of a specific mechanism to ensure that contributions (for both land and construction) keep pace with escalation of costs over time has caused significant finding gaps to emerge in the earlier DCPs. This has left councils with an increasing share of funding responsibility and/or the need for developers to make additional contributions to ensure that projects can be delivered.

More recently the refined and improved DCPs have become more rigorous in their composition and typically include a combination of:

Improved project specification and costing; Relatively high project contingencies (varying from 5% to 30%); and Specified indexes for both land and project cost escalation to be applied annually.

The temptation is to conclude that the early DCPs were simply deficient in their composition and the more refined approach that has been applied more recently properly addresses the earlier deficiencies. This removes or significantly reduces risk that the fund will not balance over time via the measures set out above.

This conclusion fails to address the broader issue that the earlier growth area based DCPs were formulated at a time when the DCP system was embryonic and had not been properly tested. At this time the relatively simplistic assumption that was applied was that the costs


specified in the DCP were somehow ‘fixed’ via an amendment process and all that was required was management of the incoming and outgoing costs and/or credits.

What has since come to pass, as discussed in other sections of this report, is that escalation in construction costs have been more significant than the value of money over time, and the DCP cannot ‘fix’ the value of land that is required to be set aside for a public purpose. The second issue is particularly significant as a landowner can pursue compensation via the Land Acquisition and Compensation Act 1986. Through this process, in simple terms, the value that has been assumed in formulating the DCP has no bearing upon the outcome of the site specific valuation process. This ability has the potential to completely undermine the basis for formulation of the DCP leaving the collecting agency with very significant risks if developers/landowners are unwilling to accept the value of land that is specified within the DCP.

This is a serious deficiency of the DCP process that cannot be fully addressed via inclusion of: Improved project specification and costing; Relatively high project contingencies; and Specified indexes for both land and project cost escalation to be applied annually.

This significant limitation (addressed in Chapter 11), notes that it is important that the new system includes reference to specified indexes for escalation of construction costs and escalation in the value of land.

In the absence of identification of a satisfactory means to clearly define the underlying value of land, it is likely that planning authorities in growth areas will seek to avoid land take requirements affecting smaller titles, preferring to designate land for public purposes on land that is owned or controlled by known developers who are less likely to challenge land value assumptions. This is an example of the DCP process influencing the strategic planning process in an undesirable way due to a deficiency of the system that causes significant financial risk.

The remaining significant issue is the lack of consistency in application of indexes and the timing and method of their application. The more recent PSPs in growth areas have however specified the Rawlinsons Construction Cost Guide for construction cost escalation and an annual site specific revaluation process for land. In infill locations where a Standard Levy may apply however the relevant index will only need to address escalation in the value of the Standard Levy over time.

The Committee is of the view that indexation of contributions is required for both Standard Levies and contributions specified in a DLS. It is considered desirable to identify standardised indexes that will satisfy the requirements in relation to construction and land costs in a DLS and the value of Standard Levies in other development settings.

Feedback is sought in relation to the preferred indexes for the various development settings prior to setting the levies in the Stage 2 report.

In relation to the need for and quantum of project contingencies, the Committee is of the view that contingencies should not exceed 10% of the project cost. In drawing this conclusion, the Committee is mindful that the detailed specification and costing of projects undertaken in more recent DCPs will provide more certainty in relation to infrastructure delivery.


Notwithstanding comments above in relation to the need for indexation, the Committee is of the view that annual indexation will not replace the need to periodically review contributions plans. A periodic review (every five years) will enable the performance of the fund to be actively assessed and, where found to be inadequate or failing for other reasons, provide the opportunity to consider amendments to the plan.


The framework for development levies should include standardised construction and land indexes and a general index for standard cost rates.

Feedback is sought on the most appropriate standardised indexes for each development setting.

A standardised timing and process for application of the preferred indexes will be specified in the Committee’s Stage 2 report.

Project contingencies should generally not exceed 10% of the project value.

There should be a five yearly review of a Development Levy System and the approach to Standard Levies under the new system.

Feedback is sought on the most appropriate standardised indexes for each development setting.

15.4 Efficient Decision Making

(i) Issues and DiscussionThe issue addressed in this section is the timeliness and efficiency with which decisions surrounding the development and implementation of development levies are made.

The timelines involved in decision making and in particular the delays experienced if a determination at VCAT is required to resolve a particular issue or to implement a change to a DCP was raised by a number of submitters and those with whom the Committee consulted.

A number of times throughout this report the Committee has made reference to the role of Panels and to the need to develop efficient decision making mechanisms to ensure that the proposed new system of development levies can be implemented with the minimum of delays. The Committee is acutely aware that delays in decision making can delay development and can add to costs which may be passed in the form of higher prices. The success of proposed new system will to some extent be dependent on quick and efficient decision making.

The Committee has been giving some thought to a mechanism that will give councils, the GAA and developers access to quick outcomes where both transparency of decision making is required and when some disputes arise over aspects of implementation. This would not of course remove the right of redress VCAT or indeed the courts where appropriate. The Committee will address this further in its Stage 2 report but seeks submissions on such a mechanism.



A decision making and advice mechanism to address a range of Development Levy implementation issues will be proposed as part of its Stage 2 work.


16 Response to the Terms of ReferenceThe Committee’s Terms of Reference require it to make findings to the Minister on a number of matters and a summary of the response to each of these is summarised in Table 13.

In a number of cases, the Committee has deemed it more appropriate to provide a preliminary response in this report and leave a more detailed recommendation until Report 2 Setting the Levies, by which time it will have been able to assess the further submissions to the main elements of the framework as proposed in this report.Table 13 Response to the Terms of Reference

Terms of Reference Committee response Report Chapter

Any required changes or improvements to the proposed framework as outlined in the attached Position Paper, A new Victorian Local Development Contributions System (July 2012).

The framework proposed by the Committee adheres broadly to that proposed in the Position Paper but includes a number of proposed adjustments and refinements.

5 to 15

Advice on the definition of the development settings for which levies will be established. These may include, but are not limited to, growth areas (both Melbourne’s growth areas and similar scale growth areas in some regional cities), regional settlements, rural settlements, established areas and strategic redevelopment sites.

Three Development Settings are proposed: Growth areas; Urban areas; Strategic development areas.

5.2

Advice on how development contributions should be applied to residential and non-residential development, including retail, commercial and industrial development, in each of these development settings.

A preliminary position on this issue has been adopted and it will be refined after response to the proposed Development Settings have been assessed by the Committee as part of its Stage 2 work.

5.4 (iii)

Advice on how the new system should operate in different development settings

Standard Levies, and in some instances the possibility of preparing a full Development Levy Scheme, have been outlined for each of the proposed Development Settings.

5.3 & 7, 8 & 9

The scope of basis and essential infrastructure to be included in the standard levy for each of the infrastructure categories.

The Committee is proposing lists of Allowable Items upon which revenue collected may be expended.

6.3 (iii)

The circumstances, if any in which a simpler apportionment of development contributions levies is needed. For example the ability to apportion standard rates may need to be retained, for transport infrastructure on or across the boundary of a contribution area.

General principles upon which apportionment should be permitted are proposed and apportionment principles are proposed for particular infrastructure types.

10

The circumstances, if any, in which councils should be able to agree to the provision of infrastructure or building works in kind, (including their valuation), in lieu of cash.

Works in kind are to be permitted at the discretion of the Collecting Agency.

12


The complex issues with respect to ensuring a fair and equitable approach to land valuation

11


Terms of Reference Committee response Report Chapter

are set out in this report for feedback, with a review of valuation mechanisms to form part of the Stage 2 work.

An appropriate method for annual indexation of the standard levies and charges, construction costs and land valuations and for periodic review to ensure that the levies reflect contemporary infrastructure requirements.

The issues are canvassed in this report but specific mechanisms and indexes will be proposed after the broad framework has been finalised. A regular review of the system is agreed, but the specific mechanism is to receive further consideration will occur in Stage 2.

15.3

Clarification of the infrastructure to be directly provided by the developer and what infrastructure should be provided by the State through other funds sources such as the GAIC.

Submitters have generally agreed on the approach in A Preferred Way Forward and the Committee generally accepts this. Further refinement will occur as part of Stage 2.

13

The circumstances where councils and State agencies should be able to require developers to enter into an agreement to provide funds for additional off site infrastructure required to mitigate the off-site impacts of a proposal through a permit condition.

The use of both permit conditions and section 173 agreements for the provision of infrastructure, particularly to mitigate off-site impacts is discussed and it is proposed that new guidelines be developed to reinforce existing principles

14.4


Councils should report annually on receipts and expenditure under the new scheme.

15.2

The appropriate financial and administrative processes for councils to ensure development contributions on funding options for delivery if infrastructure in advance of sufficient funds being collected.

This is recognised as a key issue by the Committee but it is considered more appropriate to address it in detail once feedback on the broad framework has been received. It can then be addressed as an implementation issue in Stage 2.

15.2

An analysis of the issues identified by the Committee.

The report includes detailed analysis of the key issues raised in these Terms of Reference.

Report

A list of persons and organisations consulted. Lists are provided in the Appendices. 4Appendices B, C & D.


17 Summary of Key FindingsIn summary, the Committee makes the following findings:

Development settings1. The following three development settings are proposed:

Growth Areas; Urban Areas; and Strategic Development Areas, comprising:- Small Scale- Large Scale

2. The development settings should be defined by planning units rather than zones.

3. For each of the development settings, different Development Levies may generally be applied in metropolitan and non metropolitan settings.

Development levies4. The new development levy system is proposed to be based around alternative levies as

follows: Standard Levy; or Where it can be justified, determined through the preparation of a Development

Levy Scheme; and

5. Development levies will not generally be applied to non-urban areas.

6. The application of Standard Levies, or a Development Levy Scheme, or any variation of a levy will require a level of strategic justification.

7. The application of a Development Levy Scheme will generally require a higher level of justification than a Standard Levy.

8. The Community and Recreation component of a levy calculated under a Development Levy Scheme will generally only be applied to residential development but can be applied to other uses if it can be justified.

Infrastructure categories9. The infrastructure categories as proposed in A Preferred Way Forward are supported.

10. The community facilities and recreation levies should be combined as one fixed levy.

11. Transport, drainage and public land levies should be variable.

12. Funds collected from the fixed community infrastructure and recreation levy should be pooled within a collection unit and the council should be given the flexibility to determine priorities for implementation.

Basic and Essential Infrastructure13. Finite lists of Allowable Items to be included in development levies should be formalised.


14. Lists of Allowable Items need to be tightly defined in terms of the scope and standards that apply to each item.

15. The removal of the existing capped community infrastructure levy is supported.

16. The list of Allowable Items should vary to match the needs of the different Development Settings.

Growth Area fixed community and recreation levy17. The Allowable Items as set out in Table 3 should be adopted for the purpose of

expending funds collected from the Fixed Community and Recreation Infrastructure Levy for Growth Areas.

18. The items as set out in Table 4 should be adopted for the purpose of setting the Fixed Community and Recreation Infrastructure Levy for Growth Areas.

19. A per net developable hectare rate for the Community and Recreation Infrastructure Levy in Growth Areas is preferred.

20. Fixed levies for residential and non-residential development will be pursued in Stage 2 of the Committee’s work.

Growth Area variable transport levy21. A Design Manual for Roads in Growth Areas be created which sets out:

Typical ‘benchmark’ intersection and road cross section designs for different situations;

The scope of works and benchmark costs for the typical designs; and Design standards to be applied to works included in the development levy.

22. A streamlined mechanism should be created for timely resolution of implementation issues with respect to development levies once they are in place.

23. The Arterial Road Protocol should be reviewed and subsequently formalized. The Committee will consider an appropriate approach to this in Stage 2 of its work.

24. The Allowable Items as set out in Table 5 be adopted for the purpose of preparing the variable transport levy for Growth Areas. Table 5 includes a number of larger regional items that may be included through apportionment if adequate justification is provided.

Growth Area variable drainage levy25. Non-metropolitan growth area drainage levies should include all drainage requirements

not directly funded by developers, including infrastructure required to meet regional flood mitigation requirements.

26. Paths, seating and other improvements in drainage reserves where used as open space, should be Allowable Items in the Development Levy, from within the fixed Community and Recreation Infrastructure Levy.

27. In non-metropolitan areas, the drainage levy in Growth Areas should be calculated as a fully costed levy, based on a drainage plan for the catchment.


28. Standard cost rates may be able to be devised to assist the costing of non-metropolitan drainage plans, based on the Melbourne Water standard cost rates.

Growth Area variable public land levy29. The Committee supports the approach to determining the variable public land levy as

proposed in A Preferred Way Forward.

Urban Area standard levy30. The Committee has put forward a possible model regarding how a Standard Levy might

be set and applied in an Urban Area.

Strategic Development Area levies31. The Committee has put forward a possible model for how a Standard Levy or a

Development Levy System might be set and applied in a Strategic Development Area setting.

Apportionment32. External apportionment should be minimised by the careful choice of planning unit

boundaries.

33. External apportionment should not be permitted for lower order community and recreation infrastructure.

34. External apportionment will generally only be permitted for larger and more complex planning units.

35. Where external apportionment is to occur, it should be in proportion to external usage.

Valuing public land36. A detailed review of the issues relating to land valuation and transfer should be

conducted as part of the Stage 2 report.

37. The review of land valuation in Stage 2 should seek to identify available options to: Simplify and give certainty to the process of securing land for public purposes; Ensure that there is an equitable approach toward the valuation of land for public

purposes; and Ensure that the principles of the recommended DCP framework cannot be

undermined.

Works in kind38. It is essential for the new development levy system to retain the potential for acceptance

of works in kind.

39. Acceptance of works in kind proposals should be at the discretion of the collecting agency.

40. Accepted works in kind proposals should be documented in a section 173 Agreement or other suitable form of agreement.


41. Credit for the full cost of the infrastructure up to the value specified in the contributions plan should be provided (on the assumption that the infrastructure is delivered to the required specifications and standard) to encourage efficiency in infrastructure delivery.

42. The ability to exempt works in kind projects from the requirements of section 186 of the Local Government Act 1989 should be explored and documented in the Stage 2 report.

Developer delivered infrastructure43. The framework for the proposed Development Levy System confirms the need for

developer provided infrastructure.

44. As part of its Stage 2 work, the Committee will review Appendix 4 of A Preferred Way Forward to remove any items, such as the construction of a football field, that are included within the new system as direct developer provided items.

45. The affordability implications of GAIC charges should be reviewed within the Stage 2 report.

46. The definitions of State and local infrastructure be reviewed as part of the Committee’s Stage 2 work with reference to the recommended development levy framework and allowable funding items.

47. The Minister’s Direction dated May 2003 be further examined by the Committee within the context of the recommended development levy framework and the GAIC provisions as part of its Stage 2 work.

Permit conditions48. The existing legislative framework be retained to enable responsible authorities to

mitigate the off-site impacts of individual developments through permit conditions.

49. New guidelines for the simplified levy system reinforce the principles which are currently applied to permit conditions for off-site infrastructure.

50. The new guidelines should provide advice and examples of circumstances in which it is appropriate to use permit conditions to provide additional off-site infrastructure, in particular for out of sequence developments.

51. To ensure accountability and transparency, councils should be required to account for and report annually on the receipt and expenditure of the development contributions.

52. Council annual reports should detail the following in relation to development levies: Any amounts received; Any land received; Any items of works and facilities received as works in kind; Council’s expenditure on infrastructure.

Administration53. The framework for development levies should include standardised construction and

land indexes and a general index for standard cost rates.


54. Feedback is sought on the most appropriate standardised indexes for each development setting.

55. A standardised timing and process for application of the preferred indexes will be specified in the Committee’s Stage 2 report.

56. Project contingencies should generally not exceed 10% of the project value.

57. There should be a five yearly review of a Development Levy System and the approach to Standard Levies under the new system.

58. A decision making and advice mechanism to address a range of Development Levy implementation issues will be proposed as part of its Stage 2 work.

Feedback sought by the Committee59. The Committee seeks feedback on all aspects of its work and this report, and specifically,

the following key elements of the proposed framework: The proposed development settings and their definitions; The proposed standard levy structure and how it may apply to different locations

and development settings; The proposed Development Levy Scheme; The proposed model regarding how the levies might be set and applied; The proposed lists of Allowable Items for each type of infrastructure in each

development setting; The most appropriate standardised construction and land indexes and a general

index for standard cost rates.

60. The Committee will use the feedback received through submissions and additional consultation to further develop a model and recommend the Standard Levies in Stage 2 of its work.


Appendix A Terms of Reference

Standard Development Contributions Advisory Committee Report 1 17 December 2012 Appendices

Planning Panels Victoria Department of Planning and Community Development Level 1, 8 Nicholson Street, East Melbourne 3002

Terms of ReferenceStandard Development Contributions Advisory CommitteeAdvisory Committee appointed pursuant to Part 7, Section 151 of the Planning and Environment Act 1987 to report on the finalisation of a new standard levies system for the provision of basic and essential infrastructure to local communities.

Version: 21 September 2012

Name1. The Advisory Committee is to be known as the ‘Standard Development Contributions Advisory

Committee’.

2. The Advisory Committee is to have members with the following skills:

Expert knowledge and experience in land use planning in different development settings, including urban renewal and growth areas

Land development experience

Expertise in the preparation and administration of Development Contribution Plans.

Purpose3. The purpose of the Advisory Committee is to provide advice to inform the Minister for Planning’s

decision on the final framework for a new development contributions system and for the establishment of standard levies.

4. The Position Paper A new Victorian Local Development Contribution System (July 2012) at Attachment 1 outlines the policy framework and the Government’s preferred new system.

5. The Advisory Committee is to provide advice on the implementation of the new system, including:

Recommended operational arrangements for the new system

Recommended scope of works that should be included in each infrastructure category

Recommended standard development contributions levies for each infrastructure category and development setting.

6. The new system should:

Ensure guaranteed delivery of land required for infrastructure in the long term

Ensure delivery of works in kind by developers can be provided as an alternative to a cash payment to achieve efficiencies and deliver infrastructure earlier

Ensure the development contribution requirement clearly articulates the infrastructure contribution obligation.

7. In setting standard development levies, the Committee should seek to ensure that levies:


Are simple to implement and administer

Are based on the basic and essential local infrastructure required to support the development of land and support the foundation of new communities

Do not unreasonably affect housing affordability for new home owners

Retain a nexus to the development which triggers the levy.

Background8. The current local development contributions system, based on the preparation of a Development

Contributions Plan (DCP) under the Planning and Environment Act 1987, has been in place since 1995.

9. Each DCP must identify and justify the total cost of all works, services and facilities proposed to be funded and apportion the costs for that infrastructure according to the projected share of usage, taking into account both existing and future development.

10. Currently, DCPs are often expensive and complicated to prepare because a high level of justification for the charges and apportionment is required. DCPs can also be inconsistent in their application across areas and can be restrictive in their administration.

11. There has been a steady increase in the contributions required under DCPs as community expectations have changed. For example, in the late 90s, DCP levies in new growth area suburbs were around $50,000 per hectare. By 2008, this had risen to around $150,000 per hectare and by 2011, to around $250,000 per hectare, with some exceeding $300,000 per hectare.

12. This is having a significant impact on the cost of development and affordability of housing in these areas for new home owners. In June 2011 the Minister for Planning established a Stakeholder Reference Group from industry and council representatives who provided advice on the possible models for a new standardised development contributions system.

13. In May 2012, the Minister for Planning announced a preferred framework for a new Victorian Local Development Contribution System. The new system will provide a standard contribution levy based around five infrastructure categories:

Community facilities

Open Space facilities



Public land.

14. Under the new system a different levy will be set for different development settings such as greenfield development, metropolitan infill development and regional and rural development as well as a levy for residential and non-residential development including retail, commercial and industrial development.

Method15. The Advisory Committee may inform itself in anyway it sees fit, but must consider:

The policy framework and issues outlined in the attached Position Paper.

Recent DCPs approved in across Victoria including in Growth Areas and in regional Victoria.

Three reports prepared by Urban Enterprise titled:

DPC Levy Analysis (August 2011) at Attachment 2


Review of Local Infrastructure Charges for Regional and Rural Councils (December 2011) at Attachment 3

Indicative Standard Levies for Local Development Contributions (May 2012) at Attachment 4.

16. The Advisory Committee will conduct targeted consultation, workshops or forums to explore the issues or other matters: including:

Targeted consultation in October 2012; and

A call for submissions in January/ February 2013 in response to Report 1 (which may include further consultation as required by the Committee).

17. The Advisory Committee may meet and invite others to meet with them when there is a quorum of at least two of the Committee members.

18. The Advisory Committee may ask the Minister for Planning to vary these Terms of Reference in any way it sees fit prior to submission of its report.

Submissions are public documents19. The Advisory Committee must retain a library of any written submissions or other supporting

documentation provided to it directly to it until a decision has been made on its report or five years has passed from the time of its appointment.

20. Any written submissions or other supporting documentation provided to the Advisory Committee must be available for public inspection until the submission of its report, unless the Advisory Committee specifically directs that the material is to remain ‘in camera’.

Outcomes21. The Advisory Committee must produce two written reports for the Minister for Planning.

22. Report 1: Setting the framework for the new standardised levy system

This report is to provide recommendations on matters required to finalise the features and operation of the new system including:

Any required changes or improvements to the proposed framework as outlined in the attached Position Paper A new Victorian Local Development Contribution System (July 2012).

Advice on the definition of the development settings for which levies will be established. These may include, but are not limited to, growth areas (both Melbourne’s Growth Areas and similar scale growth areas in some regional cities), regional settlements, rural settlements, established areas and strategic redevelopment sites.

Advice on how development contributions should be applied to residential and non-residential development, including retail, commercial and industrial development, in each of these development settings.

Advice on how the new system should operate in the different development settings.

The scope of the basic and essential infrastructure to be included in the standard levy for each of the following infrastructure categories:

Community facilities

Open Space facilities




Public land.





Clarification of the infrastructure to be directly provided by the developer and what infrastructure should be provided by the State through other funds sources such as the Growth Area Infrastructure Contribution.

The circumstances where councils and State agencies should be able to require a developer to enter into an agreement to provide funds for additional off-site infrastructure required to mitigate the off-site impacts of a proposal through a permit condition.



An analysis of issues identified by the Committee.

A list of persons and organisations consulted. 23. Report 2: Setting the standard levies for the new system

This report is to include:

A schedule of standard levies for each category of infrastructure for each development setting including levies for residential and non-residential development.

A review of the appropriateness of standard levies for a range of infrastructure categories.

A schedule of standard transport infrastructure rates (fixed rate for each item) for transport infrastructure for each of the defined development settings. If appropriate, different rates for transport items may be required for each Metropolitan Growth area corridor and for different regions of Victoria, including:

Roads – per linear metre, by type.

Signalised intersections – per item, by type.

Roundabouts – per item, by type.

Pedestrian operated signals – per item.

Culverts – per linear metre, by type.

Pedestrian paths – per linear metre.


Cycle paths – per linear metre.

Shared paths – per linear metre.

Standard bridges – per square metre by type (e.g. vehicular or pedestrian/cycle over creek, road or railway).

A definition of non-standard transport infrastructure for which a standard construction cost cannot be determined and which will need to be individually costed (e.g. larger, more complex structures).

The level of justification required to access the levies for each development setting. An analysis of issues identified by the Committee.

A list of persons and organisations consulted.

Timing24. The Advisory Committee must submit its findings and recommendations in two stages:

A report detailing the framework of the new system (Report 1) by Monday 17 December 2012 following which it will be will be released for public comment.

A report detailing the schedule of standard levies (Report 2) by Friday 31 May 2013.

Fee25. The fee for the Advisory Committee will be set at the current rate for a Panel appointed under Part 8

of the Planning and Environment Act 1987.

26. The costs of the Advisory Committee and any necessary research will be met by the Department of Planning and Community Development.

Project Manager27. The Department of Planning and Community Development will provide administrative and

operational support to the Committee.

.


Appendix B Stakeholder Consultation


Stakeholder Consultation (October and November 2012)Organisation: Represented by:

Urban Enterprise Matt Ainsaar

Urban Development Institute of Australia (Victoria) (UDIA)

John Cicero, PresidentDavid Payze, Vice PresidentPeter Vlitas, Past President, SecretaryTom Trevaskis, Planning CommitteeTony DeDomenico, Chief Executive OfficerMartin Musgrave, Policy Officer

Growth Areas Authority (GAA) Peter Seamer, Chief Executive OfficerTim Peggie, PSP DirectorLeisel Thomas, Infrastructure Planning Manager

Property Council of Australia (PCA) Jennifer Cunich, Executive DirectorDanni Addison, Policy Advisor and Public Affairs ManagerBrad Paddon, Residential CommitteeKris Daff, Planning CommitteeGreg Bursill, Residential CommitteeJason Shaw, Residential Committee

Victorian Planning and Environmental Law Association (VPELA)

Tamara Brezzi, PresidentAdrian Finanzio, Vice President - Legal

Victorian Bar Association Inc, (Local Government, Planning and Environment Group)

Jeremy Gobbo QC, Chair

Places Victoria Geoff Ward, Development DirectorCameron Brenton, Senior Development Manager

Geoff Underwood and Ian Robins (from 1995 Development Contributions Plan Review)

Housing Industry Association (HIA) Victoria Fiona Nield, Executive Director – Planning and Development Stuart Grigg, Planning Services AdviserCraig Muse, Chair, Planning CommitteeNick Drougas, Planning Committee

VicRoads Giles Michaux, Team Leader, Regional StrategiesVasilios Hronopoulos, Manager Planning, Metropolitan South East

Department of Transport Jeremy Hanlon, Manager Strategic Planning and Priorities

Public Transport Victoria (PTV) Richard McAliece, Manager Planning Referrals and Structure Planning Mark Burton, Senior Transport and Land Use Planner

Hume City Council Michael Sharp, Manager Strategic Planning Aaron Chiles, Growth Area Planning CoordinatorAndy Johnston, Coordinator Integrated Planning


Organisation: Represented by:

Lucy Anderson, Senior Strategic Planner

Whittlesea City Council Steve O’Brien, Director Planning and Major ProjectsAiden O’Neill, Team Leader Strategic Projects and Policy George Saisonas, Manager Strategic Planning and Design

Shire of Mitchell Kerry Birtwistle, Director Sustainable Development Stacey Gardner, Manager Strategic Planning and EnvironmentAmy Reynolds, Senior Strategic Planner

Wyndham City Council Bill Forrest, Director of AdvocacyJohn Moore, Manager Strategic PlanningLois Bunney, Manager City Presentation and RecreationPaul Rickid, Development Contributions

Melton City Council David Voltaire, Infrastructure Planning CoordinatorBronwyn Pittit, Coordinator Major DevelopmentLaura Jo Mellen, Strategic Planning Coordinator

Casey City Council Liam Hodgetts, Manager Strategic DevelopmentKathryn Seirlis, Team Leader, Integrated PlanningJimmy Yung, Development Contributions Program Manager

Cardinia Shire Council John Holland, Manager Strategic PlanningKevin White, Development CoordinatorHilary Ruttledge, Coordinator, Growth Area Planning

Darebin City Council Darren Rudd, Manager City DevelopmentChris Meulblok, Manager Assets and PropertiesGreg Hughes, Principal Strategic Planner

Planning Institute of Australia (PIA) Gavin Alford, Vice PresidentJason Black, Director

Municipal Association of Victoria (MAV) Michelle Croughan, Planning ProjectsGareth Hately, Policy AdviserCouncillor Chris O’Connor, Corangamite Shire (Rural Councils)Councillor Michael Tuckwell, Moorabool Shire Council, Chair, Peri-Urban Group of Rural CouncilsTeresa Dominik, Director Planning and Environment, Manningham City CouncilSatwinder Sandhu, General Manager Growth and Development, Moorabool Shire CouncilMatthew Cripps, Acting General Manager of Development, Frankston City CouncilDavid Turnbull, Chief Executive Officer, City of Whittlesea

Yarra City Council Vijaya Vaidyanath, Chief Executive OfficerDavid Walmsley, Manager City Strategy

Department of Planning and Community Development

Peter Allen, Director of the Office of Planning Reform


Organisation: Represented by:

Jim Papadimitriou, Manager, Statutory Management Systems

Geelong City Council Terry Demeo, Manager Planning Strategy and Economic DevelopmentRob Anderson, Coordinator Urban Growth PlanningOmy Allthorpe, Business Accountant and Development Contributions OfficerShelley Taylor, Project Engineer and Development Contributions Officer

Dennis Family Corporation Bert Dennis, ChairmanGrant Dennis, Executive Chairman

Melbourne City Council Robyn Hellman, Coordinator, Local PolicyLeanne Hodyl, Team leader, Strategic PlanningMichael Naughton, Principal Engineer, InfrastructureRose Semmler, Policy Planner

red c Andrew Evans, Director

Moonee Valley City Council Brian Labadie, Senior Strategic PlannerHenry Bezvidenhout, Manager, Strategic and Statutory PlanningPeter Gaffney, Manager Infrastructure

Latrobe City Council Chris Wightman, Manager City PlanningTom McQualter, Manager Urban GrowthGail Gatt, Senior Strategic PlannerLorrae Dukes, Senior Strategic Planner

Greater Shepparton City Council Dean Rochfort, Director Sustainable DevelopmentColin Kalms, Manager PlanningMichael MacDonagh, Senior Strategic PlannerMichael Dwyer, Team Leader AccountingJohn Griffen, Team Leader Development

Ministerial Advisory Committee for Melbourne Metropolitan Strategy

Roz Hansen, ChairChris Gallagher, MemberBernard McNamara, MemberBrian Haratsis, MemberLester Townsend, Consultant

Victorian Coastal Council Jon Hickman, ChairKate Kraft, Senior Policy OfficerNicola Waldron, Senior Policy Officer


Appendix C Written Submissions


Written SubmissionsOrganisation

1. Ashwen Pty Ltd

2. Yarra Ranges Shire Council

3. East Gippsland Shire Council

4. Moonee Valley City Council

5. Catholic Education Office

6. City of Kingston

7. Surf Coast Shire Council

8. Southern Grampians Shire Council

9. Glen Eira City Council

10. Latrobe City Council

11. Boroondara City Council

12. Public Transport Victoria

13. Brimbank City Council

14. Master Builders Association of Victoria

15. Manningham City Council

16. Rural City of Wangaratta

17. Darebin City Council

18. Golden Plains Shire Council

19. Greater Shepparton City Council

20. Corangamite Shire Council

21. Mornington Peninsula Shire Council

22. City of Greater Geelong

23. Frankston City Council

24. MAB Corporation Pty Ltd

25. Warrnambool City Council

26. City of Greater Dandenong

27. City of Stonnington

28. Municipal Association of Victoria

29. Woolworths Ltd

30. City of Melton

31. City of Port Phillip

32. Whitehorse City Council

33. Cardinia Shire Council


Organisation

34. Wyndham City Council

35. Colac Otway Shire Council

36. Bicycle Network Victoria

37. Maribyrnong City Council

38. Yarra City Council

39. Baw Baw Shire Council

40. Ballarat City Council

41. Housing Industry Association (Victoria)

42. Moorabool Shire Council

43. Hobsons Bay City Council

44. City of Casey

45. Mildura Rural City Council

46. Moreland City Council

47. Hume City Council (Confidential)

48. Bus Association of Victoria

49. Shopping Centre Council of Australia

50. City of Melbourne

51. Urban Development Institute of Australia (Victoria)

52. Property Council of Australia (Victoria)

53. Growth Areas Authority

54. (Duplicate)

55. VicRoads

56. Melbourne Water

57. Planning Institute of Australia (Victoria)

58. City of Whittlesea


Appendix D Small Group Meeting Participants


Small Group Meeting Participants (Invited)Group 1 – Councils

Casey City Council

Darebin City Council

City of Greater Geelong

Melbourne City Council

Moorabool Shire Council

Municipal Association of Victoria (MAV)

Warrnambool City Council

Whittlesea City Council

Wyndham City Council

Group 2 – State Agencies

Department of Planning and Community Development (DPCD)

Growth Areas Authority (GAA)

Melbourne Water

Places Victoria

Public Transport Victoria (PTV)

VicRoads

Group 3 – Planning and Development Stakeholder Groups

Housing Industry Association (HIA)

Planning Institute of Victoria (PIA)

Property Council Australia (PCA)

Urban Development Institute of Australia (UDIA)

Victoria Planning and Environmental Law Association (VPELA)


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