NSW Infrastructure Contributions – What are local councils saying?

The council submissions reveal a significant divide between the State and local government in relation to funding local infrastructure. Concerning was the lack of evidence provided to support council submissions, contrary to the councils calling for further evidence from the Government to support the proposed reforms. 

These different positions further reinforce why a review is overdue.

Key themes in submissions:

Threshold triggers for reviewing a contributions plan to be significantly increased 

The discussion paper suggests options for value thresholds to trigger an independent review process of a local contributions plan by IPART. Most Councils recommended that the Department implement the highest threshold option, which would result in one single threshold of $45,000 per dwelling/lot, whilst several Councils stated that the preference was to have no threshold.

Levies to be increased up to and beyond 3%, in more locations

The Department’s discussion paper sets out some principles to be applied when councils seek to introduce Section 7.12 development contribution levies that are higher than the 1% standard maximum. The principles are aimed to limit the additional contributions to areas experiencing growth, identified as centres in a strategic plan. These areas will have significant employment growth and local planning controls aligned to support that growth.

Some Councils have called for an increase to the standard maximum percentage for all areas within their LGA. Other Councils have requested the maximum development contribution rate increase up to the proposed 3% and be applicable to areas of ‘significant residential growth’, as well as employment growth. There are also Council submissions calling for assessment criteria and a clear process to seek a higher section 7.12 levy above the 3% maximum.

Will the Government draw the line at 3%? We are aware that there are currently contributions plans under consideration that extend to 4%.

Prevent the removal of existing exemptions from the review process

Some Councils do not support the removal of grandfathered plans. The Government have rightly sought to remove the grandfathered plans, as with the uncapping of contributions, the thresholds now to operate as the triggers for the review of contributions plans. In this regard, it is no longer appropriate to exempt these contribution plans from the review process.

Increase levies to capture administrative costs in Contributions Plans

The Department has proposed a maximum of 0.2% of a contributions plan to capture administration costs associated with a contributions plan.  Some Councils are seeking to increase this to 1.5%.

It needs to be carefully considered whether this level of additional contribution is reasonable, especially for Contributions Plans in high growth areas where capital works are in excess of $100 million.

Support the Introduction of Special Infrastructure Contributions (SIC) Guidelines

The introduction of guidelines for SICs is generally welcomed by Councils, who are also seeking the guidelines to promote greater coordination and collaboration with local government.

In 2017, Minister Stokes identified a need for greater collaboration between the NSW Government and Councils on strategic planning and sequencing of regional infrastructure to enable more effective delivery of infrastructure.  The finalisation of SICs needs to be a priority to ensure the efficient delivery and coordination of infrastructure to unlock housing and employment opportunities. 

Planning Agreement Guidelines to allow value capture

Many Councils support the use of Planning Agreements to capture a portion of the increased value of land. Planning Agreements are a useful component of a flexible planning system. To retain flexibility and impartiality, while allowing for the timely delivery of infrastructure, the process requires certainty.  

Concerns arise where Councils have sought to capture a portion of the value uplift particularly as part of Planning Proposals.   The guidelines are an important step forward to ensure that Planning Agreements are aligned with strategic planning and robust evidence of the need for additional social infrastructure.

The Government is responding to the challenges of the COVID-19 pandemic, through reforms to the planning system to keep the economy moving, support our communities and keep people in jobs, both now and in the months ahead.  

While infrastructure contributions reform has been on the agenda for over four years, the current pandemic and impacts on the economy has further inspired temporary changes to the system. The initial measures, listed below, have attempted to introduce greater flexibility to assist the different parties responsible for making, managing and spending developer contributions:

• Temporary deferral of local contributions payments to the Occupation Certificate stage, for

• • developments with a construction cost of more than $10 million
  • payments under Sections 7.11 and 7.12 of the Environmental Planning and Assessment Act 1979 and the Western Sydney Growth Areas and Gosford City Centre Special Infrastructure Contributions Plans

We see this as a temporary win for the development industry to manage costs and improve project feasibility, with no major downside for Councils and communities, as contributions are not lost. It is noted however that this temporary reprieve does not apply to projects in City of Sydney with obligations under Section 61 of the City of Sydney Act 1988. We believe this has strong implications for many city development projects during the pandemic period and call for the same provisions to these levies.

• Certain councils to provide information relating to how they will deliver public amenities and public services specified in local contributions plans, including the staging of works.

We support this approach to remove many service/infrastructure delivery blockages.  This will give greater transparency and certainty around the delivery of local infrastructure to support growth.

• Pooling of infrastructure contributions to accelerate the delivery of local infrastructure.

We believe this is a win for Council and communities to provide the flexibility to prioritise the delivery of key local infrastructure.

Whilst a number of improvements identified in the exhibition materials and the early reforms introduced to support economic recovery are welcomed, the more challenging and fundamental aspects of reform are being addressed by the NSW Productivity Commissioner. This week the Commissioner released an Issues Paper which focusses on the role of infrastructure contributions and the key issues and challenges in its application. Feedback can be lodged until 5 August 2020.

Ultimately, it will be important that the Government strike the right balance so as not to undermine the economic recovery efforts, whilst providing new local infrastructure to support sustainable growth.

How can we help?

We will be reviewing the Productivity Commission paper and providing further insights into this important reform agenda.

We would be pleased to assist you to further understand any of the proposed reforms and how they may impact you.