Over the past decade, I have worked extensively with developers in growth areas where Development Contribution Plans (DCPs) are applied. A DCP is a document incorporated into a planning scheme that raises levies for infrastructure and development within a precinct, typically in Urban Growth Zones in Victoria. Under the Planning and Environment Act 1987, DCPs levy contributions to fund services and facilities in a precinct area. These contributions cover the costs of public infrastructure projects.
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Best Hooper Lawyers
19 November 2024
Councils typically act as both the Collecting Agency (collecting the levies) and the Development Agency (delivering the infrastructure). This dual role can create a conflict of interest, particularly when councils also serve as responsible authorities for issuing permits and subdivisional approvals. In many cases, councils use this position to impose "works in kind" or “land in kind” agreements on developers, requiring them to deliver infrastructure instead of paying the levy contribution outlined in the DCP. A key term that councils will require in such agreements is the fixing of credits or reimbursements for the project to be undertaken, irrespective of the actual cost. This arrangement often places developers at a disadvantage, leaving them out of pocket for projects that benefit the entire precinct, not just their development.
A key risk that arises is the gap between the funds collected and the actual project costs. Councils frequently try to shift the financial burden onto developers, leveraging their authority to lock developers into funding shortfalls through section 173 agreements or planning permit conditions. This approach shields councils from financial responsibility while leaving developers to bear the risks. We often see developers in the millions of dollars out of pocket in such arrangements.
Despite review mechanisms and project indexation built into DCPs, underfunding remains a common issue. The incentive for councils to continue this practice stems from the ability to keep levies low while transferring financial risks to developers. This entrenched behaviour, reinforced by commercial pressures, has gone largely unchallenged.
It’s crucial for developers to carefully review permit conditions and section 173 agreements to minimise risks associated with delivering public infrastructure. Legal challenges may be necessary to address unfair conditions, but the commercial realities often make such challenges difficult.
In conclusion, councils’ actions in applying DCPs often place undue financial pressure on developers, allowing councils to avoid funding infrastructure shortfalls while developers bear the brunt of the costs.
Adapted from an original article by Joel Snyder, Partner at Best Hooper Lawyers.
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