By Aaron Gadiel, Partner

State parliament has rushed through legislation to completely strip local councillors of their power to decide development applications in Sydney and Wollongong.  This is a major change to the NSW planning system.

The changes are set out in the Environmental Planning and Assessment and Electoral Legislation Amendment (Planning Panels and Enforcement) Bill 2017.  The introduction of the legislation was announced on 8 August.  The proposal was then rushed through parliament in only two days.  This process normally takes several weeks.

The legislation was supported by the Labor opposition — although some Labor amendments were blocked by the Government and cross-bench legislators.

The legislation is currently waiting ‘assent’ from the Governor.  Once this assent is given it will become law (although not all of its provisions will have immediate effect).  Assent is normally a formality — it can be expected in a matter of days.

The new law is intended to reduce the risk of corruption and arbitrary decision-making.  It does this by promoting a more transparent and more technically-orientated development assessment process.

 What does the new law do to existing IHAPs?

The new law scraps the current system of ‘independent hearing and assessment panels’ (IHAPs) in the Greater Sydney Region and the City of Wollongong.  (The ‘Greater Sydney Region’ includes the local government areas of Wollondilly, Blue Mountains and the Hawkesbury, but excludes Wyong and Gosford.)

The present IHAPs are a voluntary arrangement embraced by only some local councils.  At least 15 local councils currently have IHAPs.  Some local councils have given their IHAPs the power to decide development applications (eg Strathfield Council, Mosman Council, Waverley Council, Northern Beaches Council and Georges River Council).  Some councils have merely given their IHAP the power to make recommendations (eg Liverpool City Council).

On 1 September 2017 (assuming the Governor’s assent has been given) the existing IHAPs in the Greater Sydney Region and the City of Wollongong will be legally re-styled as ‘local planning panels’ (local panels).

Those IHAPs that currently only make recommendations to local councils will immediately have the role of actually deciding development applications themselves.  Their decisions will no longer need to be reported to councillors for approval.

The membership of the IHAPs will remain the same until 1 March 2018.  Local councils will not be able to remove any of existing IHAP members before this date without the approval of the Minister for Planning.

Any panel set up under the Local Government Act 1993 to advise on or determine development applications (as a delegate of the Council) will be regarded as an IHAP and trigger the immediate (1 September 2017) operation of the new local planning panel regime (in the Greater Sydney Region and the City of Wollongong).  It does not matter if the panel is not actually called an ‘independent hearing and assessment panel’.

What does the new law require of local councils generally?

From 1 March 2018, the new law requires all local councils in the Greater Sydney Region and the City of Wollongong to set up a new local panel under the legislation.

All the members of the local panel are to be appointed by the local council.  Each panel will consist of:

• a chairperson (who must have expertise in law or in government and public administration);
• two experts (that have expertise in at least one of the following disciplines: planning, architecture, heritage, environment, urban design, economics, transport and traffic, law, engineering, tourism or government and public administration);
• a representative of the community.

Where a local council is divided into wards, the council must appoint a representative for each ward.  The representative that gets to vote on a matter is the representative who is from the most closely associated ward.

In any matter, if there is an evenly split number of votes, the chairperson has an extra deciding vote.

The local panel’s membership cannot include a councillor, a ‘close associate’ of a property development company or a real estate agent.

The new law requires that each local council appoint all of the members of its local panel.  However, the chairperson and the two experts must be ‘approved independent persons’.

An ‘approved independent person’ is either:

• an independent person approved by the Planning Minister for appointment to the local panel; or
• a person selected from a ‘pool’ of such persons approved by the Minister.

The Minister may approve different pools for different purposes.

The Government has told the parliament that the chairperson of each local panel will be chosen by the Planning Minister, and the council will choose the two other expert members from a pool.  This approach is not explicitly set out in the text of the new law.  This means that there is a risk that local councils will litigate any attempt by the Minister to deny them the opportunity to choose a chairperson from a ‘pool’ or from the several people approved for appointment to the panel concerned.

(The government published advertisements inviting applicants to serve on the new local planning panels on 12 August 2017.)

Once a local panel has been established (which must happen in Greater Sydney and the City of Wollongong come 1 March 2018), the councillors of that relevant local council lose all power to make any decisions under ‘Part 4’ of the Environmental Planning and Assessment Act 1979 (the EP&A Act).

This legal restriction applies from 1 September 2017 (assuming the Governor’s assent has been given) in the Sydney/Wollongong councils that already have IHAPs (as per above).

As a result, councillors will not be able to determine individual development applications, modification applications and some other matters that arise under ‘Part 4’ of the EP&A Act.  This ban even applies to local councils outside of the Greater Sydney Region and the City of Wollongong who choose to set up a local planning panel.  (This may be a reason that no other local councils will voluntarily decide to go down this path.)

Such decisions will instead only be able to be made by:

• Sydney planning panels;
• joint regional planning panels;
• local planning panels; or
• local council officers under ‘delegation’ from the councillors or the panels.

Even though the City of Sydney has previously been exempt from the ‘Sydney planning panel’ regime, it will also be covered by these new rules.

Who will make decisions on which development applications?

The responsibilities of the joint regional planning panels and the Sydney planning panels (the regional panels) will be the same — with one major exception.  Currently all types of development with a capital investment value of $20 million or more is covered by the regional panels.  This threshold will be lifted to $30 million — reducing the role of the regional panels.  The Government has not yet confirmed when this change to the threshold will commence (it does not have to happen immediately).  However, whenever the change occurs, it will not affect any development applications that are pending at the time.

In areas where local panels are established (ie at least Greater Sydney and the City of Wollongong), the remaining responsibilities will be divided between the officers of the local council and the local panel.

The new law gives the local panel the power to determine any development applications and modification applications that are made to a local council as consent authority (other than those assigned to a regional panel).

The new law also gives each local panel authority to make various ancillary decisions under ‘Part 4’ of the EP&A Act.  For example, a local panel (and not the councillors) will have the power to accept works-in-kind in lieu of a payment that would otherwise be required under an existing ‘section 94’ contribution consent condition.

The local council’s officers can also exercise the power to determine development applications and modification applications by ‘delegation’ given by:

• the council itself;
• by the local planning panel;
• a Sydney planning panel; or
• a joint regional planning panel.

However, the Planning Minister has the power to reserve the decision-making on certain development applications to just the local panel (to the exclusion of local council officers).  While a direction of this kind has not yet been issued, the Government says it will require development applications for the following development types to be dealt with by local panels (where they are not within the ambit of regional panels):

• developments valued above $5 million;
• developments where the applicant or landowner is the council, a councillor, a member of council staff or a State or Federal member of Parliament;
• any residential flat buildings assessed under State Environmental Planning Policy No 65—Design Quality of Residential Apartment Development;
• the demolition of heritage items,
• places of public entertainment;
• sex industry premises;
• ‘designated development’ (generally heavy industry); and
• where there are 10 or more objections.

This direction cannot cover modification applications — or other decision making — such as acceptance of works-in-kind in lieu of existing ‘section 94’ contribution conditions.   This means that local council officers will be able to exercise these powers (subject to a delegation from the council or a panel) in parallel with the local panel.

How independent will the local panels be?

The local panels will be presented with assessment reports prepared by the local council officers.  This suggests that local council officers will continue to have considerable influence in the local panel’s decision-making process.   It will also mean that, as a practical matter, local panels are unlikely to deal with an application until the assessment report has actually been provided.  (There is no mandatory timeline in which such a report must be provided.)

The new law includes a provision that allows the local panel to obtain additional assessment reports (beyond those provided by the council officers).  However, this type of provision has been in place for regional panels since their inception.  It has rarely (if ever) been used.  This tends not to be a realistic option for panels, as there is no clear source of funds — or a list of pre-approved experts —that panels could draw on for the preparation of such reports.

The most significant restraint on the independence of the local panels is the fact that all of the panel members (including the chairperson) will only serve at the pleasure of the council.  The councillors may resolve to remove any local panel member (including the chairperson) at any time, for any reason, without notice.  If this happens the general manager of the council must publicly release a written statement of reasons for removing the member from office.

This effectively means that reputable experts (including potential chairpersons) will be unlikely to accept appointments to local panels if they have a perception that their appointment has been foisted on the relevant local council by the Minister.

Additionally, once appointed, local panel members (including the chairperson) would probably be reluctant to put themselves in a situation of sustained conflict with the general wishes of the elected councillors.   This is because local panel members who are removed by the local council prior to the conclusion of their term may suffer reputational damage— particularly as the removal will be accompanied by a public written statement of reasons justifying the removal.

For example, there would be no legal reason why councillors could not resolve to remove a chairperson because (say) the local council felt that the chairperson generally did not adequately take into consideration the concerns of existing residents opposed to development.

In short, the members of the new local panels will not have the degree of independence currently enjoyed by either:

• commissioners of the Land and Environment Court (who are appointed on the recommendation of the Attorney-General for seven-year terms); or
• state appointees on the regional panels (who are appointed by the Planning Minister).

Will the local panels have a say on rezonings?

The government wants local councils to be able to call on local panels to provide advice on proposed rezonings.

The new law allows a local council itself to refer any planning proposal (adopted by the council) to its local panel for advice.  The Minister will also have a power to direct local councils that some or all planning proposals must be referred in this way.  The government has not yet said that it will actually make such a direction.

In any event, the government says that the local panels will not be making final decisions about whether to proceed with any rezoning proposals.  This role will rest with local councils (presumably, subject to the continuing rezoning review and gateway process).

How transparent will the decision-making process be?

The decision-making process for the local panels will be more transparent than the current IHAPs or regional panels.

Existing panels have generally adopted a practice by which meetings have a public component and a private component.  The actual discussion between panel members as to their position often takes place away from the public gaze.

The new law explicitly bans this practice.  It requires each local panel to conduct all meetings in public — this includes telephone meetings.  There is no exclusion for any ‘confidential’ matters.

The local panel must also make electronic recordings of its meetings.  The local council must make those recordings publicly available on its website.

As a consequence, differences of opinion between local panel members are likely to be more evident than under the current system.  Essentially, local panel members will have to declare their initial position to other local panel members in public.  The subsequent discussion between local panel members on the merits of each application must also take place in public.

If the local panel is to hold any ‘briefing’ meeting in advance of its ‘deliberative’ meeting (whether with council officers or developers) that meeting will need to be public and recorded.

Is there any downside to the change for development proponents?

This change is positive, in that it is likely to reduce the risk that development proposals will be arbitrarily blocked by local councils for blatantly political reasons.

It is also likely to reduce the corruption risks that have been highlighted in various ICAC inquiries and reports.

Nonetheless, development proponents may perceive two possible downsides to this change.

Firstly, while problems can arise as a consequence of the overt political intervention of councillors, there are many other problems with the assessment of development applications by local councils.

In our experience, it is not uncommon for local council officers to make arbitrary decisions that do not reflect statutory controls.  At times these decisions may arise because of:

• sustained objector campaigns (and a lack of courage by officers to put their careers on the line by resisting the declared wishes of large numbers of vocal ratepayers);
• capricious notions about what is ‘right’ for a particular site (that are not grounded in the actual controls for the site);
• a lack of appreciation of the performance-based nature of many controls; and
• bias or hostility against a particular proponent.

At present, some development proponents attempt to respond to bureaucratic resistance by approaching elected councillors.   There has been nothing inherently wrong with this— so long as an ethical approach is taken.

However, under the new system (in Sydney and Wollongong), local councillors will now only be able to (at best) express opinions, and make submissions, to their own officers or  panels.

The practical effect is that ‘release valve’ of approaching elected officials to overcome inappropriate bureaucratic obstruction will no longer be available (for development applications and modification applications).

If a local panel cannot be convinced (to reject an officer recommendation) in the brief time it allows for a developer to address it, a developer may be forced to appeal to the Land and Environment Court.

Secondly, councillors may decide to respond to the loss of the control by adopting even more restrictive planning controls than those already in place.

We saw this in 1998 when the NSW Government abolished ‘building approvals’ — removing the mechanism by which local councils oversaw the approval of construction detail.  Local councils collectively responded by dramatically increasing the regulatory content of development consents.  As a result, development consents are now more difficult to obtain and more complex documents (as they now routinely deal with considerable construction detail that was previously only considered in the ‘building approval’ stage).

The need to avoid more prescriptive development controls when separating policy-making from development assessment functions was considered by the Federal Government’s 2011 Productivity Commission inquiry into planning, zoning and development assessment.

The Commission recommended that broad and simplified development control instruments be mandated.  In theory this idea has already been embraced in Sydney.  The 2014 metropolitan strategy (known as A Plan for Growing Sydney) requires that action be taken to remove barriers which impede the delivery of more housing.  However, there has not yet been any sustained action to address such barriers in local environmental plans, development control plans and non-statutory local council policies.

If the government does not now proactively take preventative steps, it is likely councillors will respond by re-asserting control via more rigid and detailed local environmental plans, development controls plans and policies.

The bottom line

We will now see a major change to the way development assessment is carried out in Sydney and Wollongong.

The elimination of overt political intervention in the local development assessment process may reduce the need for some appeals to the Land and Environment Court.

However, the benefits to the planning system in reduced appeals of this kind may be cancelled out.  This is because local councillors will have less scope to intervene to overcome inappropriate bureaucratic blockages.

It is too early to decide whether these reforms will lead to a net increase or decrease in Court appeals.

Additionally, if the Government does not take preventative action, it is likely that the councillors will respond to their loss of power by seeking to introduce new prescriptive planning controls.  This may make local environmental plans, development control plans and non-statutory policies more difficult to work with.