10 June 2015

Mr WYNNE (Minister for Planning) — I move:

That this bill be now read a second time.

Speech as follows incorporated into Hansard under sessional orders:

Development contributions play an important role in delivering essential infrastructure to local communities, like roads, parks and local sporting facilities. Development contributions help ensure that when new communities arrive, essential works, services and facilities are in place to meet their needs.

The existing development contributions system has been in place since 1995. In that time it has become uncertain, costly and a barrier to new development in Victoria. Stakeholders are concerned about the rising costs associated with preparing development contributions plans, the rising levies imposed by those plans, and the lack of clear rules on infrastructure items that may be funded by levies.

There has been incremental creep in the scope and standard of infrastructure being funded under the existing system, and a shift in the extent of cost recovery expected from levies toward full cost recovery. This has contributed to increased levies over time.

The complexity and rising costs associated with preparing development contributions plans has also contributed to rising levies and put the existing system out of reach of many rural and regional councils.

In 2013 a Standard Development Contributions Advisory Committee completed a detailed review of the existing system. After extensive consultation with local councils, developers, peak industry groups and other stakeholders, the committee put forward a new system for setting and applying development levies and made various recommendations about how it should work.

It is clear that reform to the existing system is needed. Accordingly, this bill introduces a new system for levying development contributions under the Planning and Environment Act 1987.

The new system, which is to be called the infrastructure contributions system, is based on the principles that developers, local government, state agencies and other stakeholders share the responsibility for funding infrastructure and levies are a contribution towards infrastructure provision.

The new system has three key components: an infrastructure levy; a preset list of ‘allowable’ infrastructure items that may be funded through the levy; and an infrastructure contributions plan that details the levy payable and the infrastructure items being funded.

The infrastructure levy is made up of two parts: a standard levy and (where appropriate and justified) a supplementary levy.

The standard levies are preset levy rates that may be used to fund transport, community and recreation infrastructure and public land provision. The rates will be set so they provide an appropriate contribution for basic and essential infrastructure. There will be different standard levy rates for different types of development in metropolitan and non-metropolitan areas.

In particular circumstances, the infrastructure levy may also include a supplementary levy to fund infrastructure that cannot be adequately funded from the standard levy. The use of a supplementary levy, and the rate at which it is set, will need to be justified in each case. A ministerial direction will set out when supplementary levies may be used and the level of justification required.

Under the new system, the standard and supplementary levies may only be used to fund infrastructure items selected from a preset list of ‘allowable items’. Allowable items will be defined for each development setting and will include transport, community and recreation works, services, facilities and land.

Central to the operation of the new system is an infrastructure contributions plan. This enables an infrastructure levy to be imposed and provides the justification and basis for imposing the levy. Among other things, it sets out the levies payable, the types of development to which the levies apply and the infrastructure items being funded.

The new infrastructure contributions system will deliver a number of benefits.

Firstly, the time and cost involved in preparing a contributions plan will be significantly reduced. By presetting standard levies, councils will no longer need to cost and provide detailed justification in the plan for the levy amounts. A defined list of allowable infrastructure items provides certainty about what constitutes basic and essential infrastructure and also reduces the need for detailed justification about why particular infrastructure items are required.

Secondly, by providing more clarity up-front about the levy amounts and types of infrastructure that may be funded in a particular setting, there is less potential for infrastructure ‘scope creep’, developers will have greater certainty about project costs, and councils will be able to forward plan for infrastructure provision more effectively.

Thirdly, by making the process of preparing a contributions plan more efficient, this will reduce the cost to developers of holding land pending the completion of the plan.

Fourthly, by providing a simpler and less costly mechanism for levying contributions, the new system puts this important funding source within reach of rural and regional councils experiencing significant growth.

Finally, setting standard levies that provide a reasonable contribution to an acceptable standard of infrastructure will ensure that levies do not escalate faster than costs.

The important tests of need, nexus, equity and accountability will apply in the system and are reflected in various provisions of the bill relating to the imposition, collection and expenditure of levies under the new system.

That is a brief overview of the reforms. I will now discuss the key provisions of the bill for the new system, in the order in which they appear in the bill.

Part 2 of the bill introduces part 3AB into the Planning and Environment Act 1987 to establish the new infrastructure contributions system.

The bill enables the new system to be used anywhere in Victoria. However, initially the new system will be used in greenfield growth areas and strategic development areas, in both metropolitan and non-metropolitan areas, followed by Melbourne’s CBD. Greenfield growth areas include areas on the periphery of urban areas that will accommodate urban growth. Strategic development areas are sites or precincts that provide development opportunities close to public transport and other infrastructure.

Proposed section 46GA inserts new definitions for key terms used in the bill.

Proposed section 46GB provides the power for levying contributions under the new system. Contributions may be levied by including an infrastructure contributions plan in the planning scheme, and those contributions may be used to fund works, services and facilities. They may also be used to recover the reasonable costs that a planning authority has incurred in preparing an infrastructure contributions plan, up to a certain level.

Proposed section 46GC prevents the use of an infrastructure contributions plan to levy contributions for the provision of state infrastructure in growth areas where the growth areas infrastructure contribution scheme applies.

Proposed section 46GD provides that the infrastructure levy may consist of a standard levy, a supplementary levy or both.

As I have mentioned, the standard levy rates will be set so they provide an appropriate contribution for ‘basic and essential’ infrastructure. The rates will be set in a minister’s direction made under proposed section 46GF.

Councils will be responsible for prioritising the infrastructure needs of their community, within the ‘budget’ set by the standard levy. Infrastructure items that may be funded by a standard levy are likely to include parks, roads, community facilities, public realm improvements and sporting facilities.

The information requirements for an infrastructure contributions plan are set out in proposed 46GE. Among other things, a plan must set out the area to which it applies, the infrastructure items to be funded through the plan, the types of development to which the levy applies, relate the need for the infrastructure to the development, and specify the levy amounts. To become operational, the plan must be incorporated into the relevant planning scheme.

Proposed section 46GF establishes a broad head of power for the minister to issue directions on the preparation and content of infrastructure contributions plans. This power will be used to define where the new system may be used, the types of development that may be levied, the kinds of infrastructure that may be funded, and how much of the infrastructure levy may be spent on certain classes of infrastructure items. Planning authorities must comply with these directions.

Proposed section 46GG sets out the requirements for collection of the infrastructure levy. The levy becomes payable when a person seeks to develop their land. In the case where a planning permit is required for the development, any permit issued must include a condition setting out when the levy must be paid.

Proposed section 46GH enables a collecting agency to secure payment of an infrastructure levy and to accept, with the agreement of the relevant development agency, ‘works in kind’ in part or full satisfaction of payment of the levy.

Proposed section 46GI sets out the responsibilities of councils that collect levies or receive funds under the new system. A council must keep proper accounts, ensure it forwards any levy to the relevant development agency (where it is acting as a collecting agency), and use any funds it receives as a development agency in accordance with the relevant infrastructure contributions plan. Provisions for reallocation or refund of unspent funds are also included.

Proposed sections 46GJ and 46GK set out similar responsibilities and requirements for other agencies that act as a collecting agency or a development agency.

Proposed section 46GL provides for a collecting agency to recover a levy as a debt due to that agency.

The reforms in this bill will provide a simpler, less costly and more effective system for levying contributions in Victoria.

I commend the bill to the house.

Debate adjourned on motion of Mr CLARK (Box Hill).