A new public land contribution regime was introduced in Victoria this week with the passing of the Planning and Environment Amendment (Public Land Contributions) Bill 2017 (Vic) (PLC Bill) by the Victorian parliament.

What is the PLC Bill?

The PLC Bill will replace the existing Infrastructure Contributions provisions of Part 3AB of the Planning and Environment Act 1987 (Vic) with a regime that is intended to equally spread the cost of securing public land across an Infrastructure Contributions Plan (ICP) area. The PLC Bill will do so by introducing a mechanism for the direct allocation and equalisation of the cost of securing public land in an ICP.

A regime six years in the making

A direct allocation and equalisation model has been in the making for some time. Back in 2012 and 2013, the Standard Development Contributions Advisory Committee[1] proposed a land contribution and equalisation regime in response to various problems that had been identified by the then Victorian Government with the provision of public land under the existing Development Contributions Plan regime.[2]

In 2016, following the commencement of the Planning and Environment Amendment (Infrastructure Contributions) Act 2015 which introduced the foundations of the ICP regime with standard and supplementary levies, some of the tools to set up a land equalisation regime where included in the Ministerial Direction on the Preparation and Content of Infrastructure Contribution Plans, 20 October 2016 and the Infrastructure Contribution Plan Guidelines, October 2016 (albeit with different terminology).

Key features of the new regime

Under the new regime:

  • Land within the ICP for which an infrastructure contribution is payable if it is developed is described as ‘contribution land’.
  • Land identified in the ICP as being required for public open space, community and recreation facilities, transport or other infrastructure is described as ‘public purpose land’ (this may include land inside and outside the ICP area).
  • The ICP will specify the type, amount and location of public purpose land.

The new equalisation mechanism operates as follows:

  • The combined area of the public purpose land relative to the overall contribution land within the ICP for a particular class of development is used to calculate the contribution percentage = ‘ICP land contribution percentage’ (i.e. the average public land contribution across all parcels that can be developed in the ICP for a particular class of development, e.g. residential).
  • The extent to which public purpose land is located within each parcel of land of that class within the ICP is then calculated as a percentage = ‘parcel contribution percentage’.
  • The equalisation mechanism works by then reconciling whether the parcel contribution percentage is above or below the ICP land contribution percentage (i.e. above or below the average). If the parcel contribution percentage:
    • > the ICP land contribution percentage, i.e. if a particular parcel of land contains more public purpose land than the average across the ICP, the landowner is compensated with a land credit amount ($).
    • < the ICP land contribution percentage, i.e. if a particular parcel of land contains less public purpose land than the average across the ICP, the landowner pays a land equalisation amount ($).

EXAMPLE

A simple worked example is useful to illustrate the mechanism. To start with, we assume that an ICP identifies, for the residential class of development, 100 hectares of net developable land and a total of 10 hectares of public purpose land. This means that the ICP land contribution percentage is 10%.

Applying this to an individual parcel of land earmarked for residential development then works as follows:

Parcel ID

Total net developable area (ha)

Total public purpose land within the parcel (ha)

Parcel contribution percentage

Public land contribution reconciliation

Consequence

1

10

2

20%

10% (1ha) more than the ICP land contribution %

Land credit amount payable to the landowner to compensate for the additional 1ha

2

20

1.2

6%

4% (0.8ha) less than the ICP land contribution %

Land equalisation amount payable to the collecting agency for the 0.8ha shortfall

etc…

Land credit and land equalisation amounts

Land credit amounts and land equalisation amounts are to be specified in the ICP and therefore all landowners will have advance notice.

The method for calculating the land credit amounts and land equalisation amounts is to be specified in Ministerial Directions (which are expected to form part of an updated edition of the existing Ministerial Direction on the Preparation and Content of Infrastructure Contribution Plans).

The land credit amounts and land equalisation amounts are to be based on a valuation of the underlying public purpose land prepared as part of the planning scheme amendment for the ICP.

If the valuation method set out in the existing Ministerial Directions and ICP Guidelines is followed, the Public Land Estimate of Value method will apply. This applies a broad hectare land valuation for land where a land equalisation amount is payable, and a site specific valuation where a land credit amount is payable.

The land valuation process is considered private and therefore general submissions cannot be made on this as part of the planning scheme amendment preparation process. However, an affected owner who is eligible for a land credit amount will be given notice of the valuation and has a right to object to the estimated value, so long as the objection is supported by a further valuation prepared by a qualified valuer. If the planning authority does not accept the affected owner’s valuation, then the matter will be referred to the Valuer-General for determination.

How will the new regime work in practice?

When an ICP liability arises under the ICP Overlay, the PLC Bill provides that the contribution will be met by either or both of:

  • a monetary component (which can include works-in-kind);
  • a land component (which, somewhat confusingly, can be a monetary land equalisation amount payable as above).

In practice, a landowner will:

  • calculate the monetary component of its ICP liability under the ICP Overlay;
  • determine if any public purpose land is within the landowner’s parcel of land, and if so, the landowner must satisfy the land component of its ICP liability via a direct land contribution; and
  • reconcile the direct land contribution against the ICP land contribution percentage to determine if the landowner is required to pay a land equalisation amount to fulfil the land component of its liability, or if it is entitled to be paid a land credit amount.

When is the ICP liability triggered?

An ICP liability is imposed upon the earlier of:

  • an application for a planning permit under the Planning and Environment Act 1987; or
  • an application for a building permit under the Building Act 1993.

A landowner must provide any land component by ensuring the land is set aside in a Plan of Subdivision to vest in the developing agency or collecting agency as applicable. The Plan of Subdivision must be lodged for registration within the time specified in the planning permit or an agreement between the collecting agency and applicant.

The landowner must pay any monetary component and land equalisation amount to the collecting agency in the manner specified by the collecting agency either:

  • before the earliest of:
    • the issue of Statement of Compliance if development includes a Plan of Subdivision;
    • the issue of a building permit if development requires one; or
    • the time specified in the ICP; or
  • before the time specified in an agreement between the collecting agency and the applicant.

Looking ahead

Upon receiving Royal Assent, the PLC Bill will commence on 1 September 2018 unless proclaimed earlier.

We look forward to seeing the existing Ministerial Directions and ICP Guidelines amended in the interim to ensure consistent terminology is adopted. This will assist in simplifying the administration of this technical regime.

Similarly, existing ICPs will need to be amended if they are to be brought into line with the new regime. This is because they do not presently specify mandatory detail about the land contribution and land equalisation amounts. Once the ICPs are amended, the land equalisation regime can then be applied to these ICP areas.