Key Points: Changes to the law in NSW will affect the way developer contributions are determined in Voluntary Planning Agreements.

Changes to the law are about to be introduced to promote consistency and transparency in the way developer contributions are determined in Voluntary Planning Agreements (VPAs).

The Environmental Planning and Assessment Amendment Act 2008 addresses issues which planning authorities and developers will need to consider when determining developer contributions in VPAs, including

  • the time-frame for the delivery of infrastructure;
  • the impact of the contribution on the cost of the development; and
  • estimates of the cost of infrastructure and demand.

The Act was first passed in 2008 and was due to commence on 1 July 2010. Although it did not in fact come into force in July, the Act is due to commence shortly.

Voluntary Planning Agreements

To re-cap, the most significant aspects of the VPA regime are:

  • a VPA is a commercial agreement between a developer and a planning authority under which a developer agrees to make contributions to be used for the provision of public infrastructure;
  • there is scope for a developer to make development contributions either as a cash contribution or as works-in-kind, to dedicate land to the planning authority or to provide any other material public benefit (or a combination of any of these);
  • a VPA will be entered into when a developer has either made, or proposes to make, a development application or has sought to change an environmental planning instrument (or a combination of these);
  • there is no requirement for developer contributions under a VPA to be linked with the development the subject of the VPA (such as increased demand or pressure on local infrastructure and services resulting from the development); and
  • as a VPA is a "voluntary" agreement, the terms of which are proposed by a developer, the nature and extent of the contributions are the subject of negotiation between the developer and the relevant planning authority.

Recent amendments

While the law relating to VPAs has not changed significantly, the Act has brought in a number of changes to the scope of developer contributions under a VPA.

Planning authorities will now need to consider the "key considerations" before entering into a VPA. These are five new tests which apply consistently to the new law relating to development contributions:

  • Can the proposed public infrastructure be funded by a development contribution within a reasonable time?
  • What will be the impact of the proposed development contribution on the affordability of the proposed development?
  • Is the proposed development contribution based on a reasonable apportionment between existing demand and new demand for public infrastructure to be created by the proposed development to which the contribution relates?
  • Is the proposed development contribution based on a reasonable estimate of the cost of proposed public infrastructure?
  • Are the estimates of demand for each item of public infrastructure to which the proposed development contribution relates reasonable?

There are additional requirements where a developer proposes to enter into a VPA with a council. In these circumstances, the development contributions must be limited to the following "key community infrastructure":

  • local roads;
  • local bus facilities;
  • local parks;
  • local sporting, recreational, cultural, local and social facilities;
  • local car parking facilities;
  • drainage and water management works;
  • land for any community infrastructure (except riparian corridors); and
  • certain additional direct infrastructure related to above.

The Minister for Planning must approve any "additional community infrastructure" beyond the scope of "key community infrastructure". The Minister must have regard to the "key considerations" when deciding whether or not to approve a request for "additional community infrastructure.

The Minister cannot approve any development contributions relating to land for riparian corridors.

The Minister must be given a business plan when a request is made for the approval of "additional community infrastructure". A business plan must set out how the "additional community infrastructure" will be funded, provided and be operational within the period specified in the VPA. A report by an independent expert must also be given to the Minister.

It will be important for planning authorities, including the Minister, to adopt procedures to ensure that the "key considerations" are taken into account when developer contributions are being considered and negotiated with developers in connection with VPAs.

Procedures will also need to be put in place for the preparation of business plans and the commission of independent reports where the Minister's approval is required for "additional community infrastructure". Planning authorities and developers should also consider how the requirement both for the Minister's consent and the preparation and submission of a business plan and independent report will impact upon the timing to finalise and enter into a VPA.

Community Infrastructure Contributions

The Act has also brought in a number of changes to the scope of section 94 and 94A contributions, which have been renamed as "direct contributions" and "indirect contributions" respectively and collectively as "community infrastructure contributions".

The current law provides that a planning authority can only require a developer to make "community infrastructure contributions" if those contributions are permitted by a contributions plan.

Under the Act, contributions plans must be limited to "key community infrastructure" unless approved by the Minister. The approval regime is the same as for VPAs. In other words, the Minister must be given a business plan and report from an independent expert when a request is made for Minister's approval for any "additional community infrastructure" beyond the scope of "key community infrastructure".

As with VPAs, the Minister must have regard to the "key contributions" when deciding whether or not to approve the "additional community infrastructure" in a contributions plan.