New Infrastructure Contributions Plan (ICP) System for Victorian Greenfields Growth Areas 

New Land Contribution Model

The Planning and Environment Amendment (Public Land Contributions) Act 2018 came in effect on Monday 2 July. This legislation introduces a land contribution model for the Infrastructure Contributions Plan (ICP) system in Victoria.

The land contribution model enables land for public purposes to be provided as part of an infrastructure contribution when land is developed. This replaces the monetary public land component of the standard levy. Currently, the ICP system only applies to metropolitan greenfield growth areas.

The VPA’s current Works Program: https://vpa-web.s3.amazonaws.com/wp-content/uploads/2018/02/PSP-Status-Map-Public-Feb-2018.pdf

Source: VPA website

The existing ICP system has commenced since 27 October 2016 and two Precinct Structure Plans (PSPs) with ICPs have been approved since. They are:

  • Donnybrook/Woodstock
  • Mt Atkinson and Tarneit Plains

What does this mean to landowners and developers?

Landowners will directly transfer all land on their parcel that has been identified for public purposes as part of their infrastructure contribution. This means that developers will not receive a monetary credit or cash reimbursement for transferring all land on their parcel for public purposes.

“Landowners will directly transfer all land on their parcel that has been identified for public purposes as part of their infrastructure contribution”.

This may have implications for developers who under the Development Contributions Plan (DCP) system were able to offset their infrastructure contributions. Consequently, this may change developers cashflow and developers may be less inclined to transfer all land on their parcel identified for public purposes in the early stages of development. It will rest with Council to negotiate the timing of when the public land is transferred. The land contribution model also has many benefits such as locking in the value of the land and reduces financial risk through increasing land prices and secures the early transfer of land for public purposes.

What is public purpose land?

Land that is identified for public open space, community and recreational facilities, transport or other infrastructure is described as ‘public purpose land’. This may include land inside and outside the ICP area.

What is inner public purpose and outer public purpose land?

Inner public purpose land is land within the ICP area whereas outer public purpose land is land located outside of the ICP area that is required to be set aside, such as a drainage reserve located outside of the ICP area and is required to provide drainage for the ICP area.

Will land owners be able to seek compensation for the public purpose land?

The short answer is No.  Council is also not required to implement a Public Acquisition Overlay (PAO) on land that they intend to acquire for public purposes (inner and outer).

The ICP public land contribution model allows Councils implementing ICPs to acquire inner public purpose land. An instance where that may occur is land set aside for a road that is identified in the ICP and there are many different parcels owned by different land owners and Council is required to acquire the necessary separate parcels of land in order to construct or extend the road, or there is a necessary parcel in order to construct an intersection.

How will the new contribution model work?

The combined area of the public purpose land relative to the overall contribution land within the ICP for a particular item is used to calculate the average contribution across all land parcels.

Each land parcel will then contribute above or under that contribution average, hence “overs” and “unders”.

Will there still be a cash contribution for public land?

Those land parcels that are under contributing towards the contribution average “unders”  will be required to pay a ‘land equalisation amount’.

Those land parcels that are over contributing towards the contribution average “overs” are entitled to a ‘land credit amount’ from the those that are under contributing towards the contribution average.

Council will be the collecting agency to ensure that the ‘uppers’ are being compensated by the ‘unders’.

This is the new equalisation mechanism.

Generally in an ICP area, there will be more land parcels that are ‘unders’ and are required to pay a ‘land equalisation amount’ and there will be less land parcels that are ‘overs’ who will be entitled to a ‘land credit amount’.

For instance, the interim gazetted ICP for Donnybrook-Woodstock ICP for residential is 15.05% and zero for commercial & industrial, as shown below:

Source: Donnybrook-Woodstock ICP, July 2018 VPA

 

Therefore, any parcel of land that contributes over 15.05% for public land will be an ‘over’ and thus will be entitled to a ‘land credit amount’.

In the above example, Property 20 is contributing 22.73%, thus is an ‘over’ and is entitled to a ‘land credit amount’ of 6.9932 hectares.

For the Mt Atkinson & Tarneit Plains, it is 12.41% for residential and 4.17% for commercial and industrial and for Plumpton & Kororoit ICP it is 13.95% for residential and 5.20% for commercial and industrial.

Source: Plumpton & Kororoit ICP, July 2018 VPA

The Plumpton & Kororoit ICP provides a further breakdown of the public land contribution in hectares:

What will be the time frame for the payment of ‘land credit’?

In the case of a developer receiving a planning permit and the land parcel is an “over”, hence entitled to a ‘land credit amount’, and Council has not received a ‘land equalisation amount’ from those land parcels that are ‘unders’, then it will be the decision of the Council as the collecting agency to determine the time frame for the payment of ‘land credit’ for the ‘overs’. Council may need to have consideration to their cashflow and forecast future collections of the ‘land equalisation amount’. Any agreed timing for the payment of a ‘land credit amount’ should be formalised in an agreement pursuant to Section 173 of the Planning and Environment Act 1987 to prevent disputes between parties.

What will happen to PSPs with existing ICPs?

PSPs with existing ICPs will transition to the new ICP public contribution land model. The following PSPs are affected by the new model:

  • Donnybrook – Woodstock
  • Mt Atkinson & Tarneit Plains
  • Plumpton & Kororoit
  • Beveridge Central
  • Sunbury South Lancefield Road
  • Minta Farm
  • McPherson
  • Lindum Vale
  • Pakenham East

The first three PSPs have new ICPs with the public land contribution model under Amendment GC101 for Donnybrook – Woodstock and C197 for Mt Atkinson & Tarneit Plains and Plumpton & Kororoit on 2 July 2018.

What will happen to existing planning permits affected by the new ICP public contribution model?

At a recent UDIA forum on June 2018, Alix Rhodes, Executive Director Outer Melbourne at the Victorian Planning Authority (VPA) have confirmed that existing planning permits will remain valid. It is uncertain how progressed some developers are in acting on their permits and if some have executed Section 173 agreements that now may need to be amended.

Ok do I still need to pay monetary levies?

Yes there is a Standard Levy and a Supplementary Levy. Not all ICPs will have a Supplementary Levy but the three interim ICPs gazetted with the public contribution model on 2 July 2018 all have a Supplementary Levy.

What is the difference between Standard Levy and Supplementary Levy?

The Standard L evy is determined by the Ministerial Direction and is specific and set for different classes of development. The levy is indexed annually and only funds standard levy allowable items. The most important aspect of the standard levy is that infrastructure does not need to be costed and the surplus can be used to fund supplementary allowable items.

The Supplementary Levy is used to fund specific infrastructure listed in Ministerial Direction and is based on the actual cost of the infrastructure. There are specific tests that must be met to determine if there is a need for a supplementary levy. Collection of the supplementary levy must be spent on the specific infrastructure.

The Plumpton & Kororoit ICP has a Supplementary Levy of $25,801 per net developable hectare for both residential and commercial and industrial.

Source: Plumpton & Kororoit ICP, July 2018 VPA

In the first table, the Supplementary Levy for Plumpton & Kororoit is $25,801 per net developable hectare and is used to fund Transport. The second table provides a breakdown of the total monetary levy rates per net developable hectares. Therefore, the Standard Levy is $200,689 (2018-19) plus Supplementary Levy of $25,801 with a combined levy of $226,490 for residential and $139,863 for commercial and industrial.

Below is the table showing the Donnybrook-Woodstock ICP with a Supplementary Levy of $810.42 per net developable hectare and a total monetary levy of $201,449.42 per net developable hectare.

The below table shows the Mt Atkinson & Tarneit Plains ICP with a Supplementary Levy of $600.83 per net developable hectare for both residential and commercial and industrial. The total monetary levy for Mt Atkinson & Tarneit Plains ICP is $201,289.83 for residential and $114.662.83 for commercial and industrial.

 

ICP standard levies for Metropolitan Greenfield Growth Areas for 2018-19

Pursuant to section 46GJ of the Planning and Environment Act 1987, the standard levy amounts are to be indexed on 1 July of each financial year in accordance with the method of indexation specified in the applicable Annexure in the Direction.

The table below shows for residential developments, it is $200,689 per net developable hectare and for commercial and industrial developments it is $114,062 per net developable hectare.

Source: VPA website

Is the ICP better than the DCP?

The DCP system has a monetary levy called Development Infrastructure Levy (DIL) that is used to fund both public land for community, recreation and transport infrastructure and construction costs for infrastructure.

Construction for community and recreation infrastructure are funded by the Community Infrastructure Levy (CIL) which is capped at $1,100 per dwelling. CIL are generally paid by owners before the issue of a building permit.

Under the DCP system, the transfer of public land entitled land owners and developers to a credit that offset their monetary Development Infrastructure Levy or cash reimbursement as agreed by Council as the collecting agency.

The DIL is derived by Council undertaking annual land valuations by an independent accredited land surveyor in accordance with the specified valuation methodology in the DCP.

For DCPs gazetted around 2011, an average broad hectare rate is applied and DCPs gazetted around 2015, the Public Land Equalisation Method (PLEM) is applied which is a mix of broad hectare and site specific valuation. Generally, if there has been a significant increase in property land values, this will affect the DIL rate. Therefore, the DIL rate is directly related to the cost of infrastructure items and the value of public land.

The ICP system sets a standard levy and a supplementary levy (in some ICPs) and land parcels for public purposes are not subject to monetary levy. Therefore, the monetary levy is not affected by escalating values for public land. Valuation of public land is undertaken by the Valuer General Victoria. Also, the CIL has been removed.  Under the ICP system, the monetary contribution is less, however all parcels of land for public purposes are transferred without a monetary credit or cash reimbursement.

Precinct Structure Plans (PSPs) with existing Development Contributions Plans (DCPs) will continue to operate under the existing DCP system and new PSPs will operate under the new ICP system and the new public land contribution model.

Interim ICPs

Three PSPs with interim ICPs with the adopted public contribution model have been gazetted on 2 July 2018.

  • Donnybrook-Woodstock
  • Mt Atkinson & Tarneit Plains
  • Plumpton & Kororoit

The three existing ICPs were required to be updated to a format consistent with the new ICP system and legislation. The new public contribution model resulted in the removal of the public land standard levy amount and in these three ICPs resulted in transport construction rates in an existing ICP now exceeding the total standard levy rate for transport construction. Therefore, the three updated ICPs have a Supplementary Levy. These ICPs will have an effect on an interim basis and will remain in place until on-going ICPs can replace them. Supplementary Levy will follow a normal planning scheme amendment process.

The interim ICPs enable Council as the Responsible Authority to start issuing planning permts in these ICP areas, with provisions to collect infrastructure contributions.

When do you need to pay for a ‘land equalisation amount’ and monetary component?
Monetary component levies and any land equalisation amount must be paid to Council as the Collecting Agency for the land, after Certification of the relevant plan of subdivision but cannot be required more than 21 days prior to the issue of a Statement of Compliance with respect to that plan.

Any Works-in-Kind or provision of land must be secured by an agreement pursuant to Section 173 of the Planning and Environment Act 1987.

What if there is no subdivision?

If there is no payment of a monetary levy or land equalisation amount on the subject land , then any required monetary levy or land equalisation amount must be paid to the Council as the collecting agency in accordance with the provisions of the ICP for each net developable hectare proposed to be developed prior to the commencement of any development. Development includes buildings, car park, access ways, landscaping and ancillary components.

Is there still a monetary levy or land equalisation amount if there is no building?

If there is no payment of a monetary levy or land equalisation amount on the subject land and there is no building permit required, the land cannot be used and developed if the monetary levy and land equalisation amount is not paid unless agreed by Council as the collecting agency in a Section 173 agreement.

What if the Works-in-Kind exceeds the monetary component obligation?

Where a developer provides for an infrastructure that exceeds the ICP monetary component then they are entitled to reimbursement for the value above the ICP monetary component. The amount and timing of reimbursement are to be negotiated with Council and formalised by a Section 173 agreement.

What if my land has a different net developable hectare (NDA) to that in the ICP?

The amount of monetary levy will be determined by the net developable hectare in the ICP. Unless Council as the collecting agency agrees to a variation to the parcel specific land budget and associated tables in the PSP and ICP (and this should be formalised in a Section 173 agreement).

Are there any exemptions from the requirements of an infrastructure contributions levy?

Development of land for government and non-government schools and housing to be provided by or on behalf of the Department of Health & Human Services (DHHS) are exempt from infrastructure contributions levy in accordance with the Ministerial Direction on the Preparation and Content of Infrastructure Contributions Plans.

 

For more information on the new ICP system and public contribution model and how it affects your development in the PSP area, please contact Diana Au on 03 8547 9510 or 0400 326 899.

Share this:

Share

Share