Works in kind agreements
Local infrastructure contributions practice notes
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Councils can enter works in kind agreements with developers to deliver infrastructure or dedicate land identified in a section 7.11 plan. The value of the infrastructure is provided to partly or fully satisfy the development consent condition requiring a monetary contribution.
This module covers works in kind policy matters for councils. Credits for existing development or past contributions are discussed separately. Works in kind agreements are different to planning agreements, which can be used in a wider variety of situations with a broader scope.
Legislative requirements
The EP&A Act allows for a council to accept the ‘provision of a material public benefit’ instead of a monetary contribution. Land can also be accepted in some circumstances. The term works in kind agreement is used for the mechanism to deliver this land or material public benefit.
- Works in kind agreements are entered into after development consent imposing a section 7.11 contribution has been granted.
- Works in kind agreements cannot be used for section 7.12 levies as there is no provision in the EP&A Act to satisfy a section 7.12 levy through the dedication of land or provision of a material public benefit. However, councils and developers may decide to enter into planning agreements in these circumstances before development consent is granted.
| Requirements in the EP&A Act | Section |
|---|---|
|
Councils may accept the provision of a material public benefit (other than land or money) in part or full satisfaction of a section 7.11 contribution condition. |
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Councils may also accept land in part or full satisfaction of a section 7.11 contribution condition, but only if the condition is imposed under section 7.11 (3) to recoup costs for infrastructure already provided. |
Policy positions
Councils can accept material public benefits through a works in kind agreement
Councils can accept material public benefits in part or full satisfaction of a section 7.11 contribution condition. For example, a developer can provide an infrastructure item from the works schedule instead of paying a monetary contribution to council.
Material public benefits can be infrastructure that is specifically listed in the works schedule of a contributions plan or infrastructure that is not included in the contributions plan.
However, councils should generally use works in kind agreements to deliver infrastructure that is identified in the contributions plan.
For transparency, planning agreements are a more appropriate mechanism to deliver material public benefits that are not included in a contributions plan.
Councils can only accept land through a works in kind agreement for recoupment costs
There are two separate sections of the EP&A Act that allow councils to collect section 7.11 contributions.
- Councils can require a contribution towards the future provision of infrastructure under section 7.11 (1). These contributions can require money, land or both as a condition of consent. Council can later accept works in lieu of the monetary payment through a works in kind agreement.
- Councils can also recoup the costs of infrastructure items already provided under section 7.11 (3) but only as a monetary contribution when it is a condition of consent. Councils can later accept dedication of land and works in lieu of the monetary payment through a works in kind agreement.
The distinction is particularly important when it comes to land because future estimated costs are often different to recoupment costs. Councils should therefore be aware that the way they require or accept land for contributions may have additional considerations. This should not discourage councils from requiring or accepting land for contributions.
The table below details in what circumstances councils can required or accept land and works.
| Contributions for future provision - collected under 7.11 (1) | Recoupment for items already provided - collected under 7.11 (3) | |
|---|---|---|
|
What can be required as a contribution in the condition of consent? |
Money Land |
Money |
|
What can be accepted in lieu of money through a works in kind agreement? |
Works |
Land Works |
|
How can councils require or accept land? |
Councils can:
|
Councils can:
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Best practice guidance
Offers should be assessed against a standard set of criteria
Councils can enter into a works in kind agreement at their discretion. Any offers for carrying out works to offset a monetary contribution must be made in writing. Councils should follow a consistent and transparent approach when deciding to enter into a works in kind agreement. A council’s section 7.11 plan should include the criteria it will use in assessing offers for works in kind.
|
Criteria |
Assessment |
|
Infrastructure delivery |
Any benefits of early delivery of the works to the surrounding area |
|
Scope and standard |
Consistency of the works with the contributions plan |
|
Design and cost |
Consistency of the works with the estimated cost in the contributions plan |
|
Financial implications |
Impact of accepting works instead of revenue, on forecast cash flow and the contributions plan works program |
|
Timing |
Impact on the contributions plan delivery program |
|
Handover |
Proposed dedication and ongoing management arrangements |
Councils should have a policy on works in kind agreements
Councils should develop a policy on works in kind appropriate to the circumstances of their local government area. Information on how works in kind will be considered should also be included in a contributions plan. It should address:
- when council might consider entering into a works in kind agreement
- how and when a developer can make an offer
- the information required and the preferred structure of any offer.
The policy should be published on a council’s website along with any templates. To ensure transparency, councils should also publish all executed works in kind agreements.
Councils should apply their standard policies and practices to contracts
A works in kind agreement will cover a range of contractual matters such as obligations, enforcement, insurances, and handover arrangements. Councils should apply their standard policies and practices to these issues when preparing agreements and consider any relevant requirements under the Integrated Planning and Reporting Framework and the Local Government Act 1993.
Works in kind agreements may have tendering requirements
The Local Government Act requires councils to invite tenders before entering into a wide range of contracts. Contracts involving an estimated value of less than $250,000 are exempt from this requirement, as are contracts where, because of extenuating circumstances, remoteness of locality or the unavailability of competitive or reliable tenderers, a council decides by resolution (which states the reasons for the decision) that a satisfactory result would not be achieved by inviting tenders.
Where the value of the proposed works in kind is over $250,000, councils should ensure it complies with these requirements. Councils can find more information on their tendering obligations at Office of Local Government’s Tendering and Procurement.
Councils should require financial security and release it in full after a defects period
Councils should require financial security from a developer to ensure the works are delivered and land is dedicated. Refer to the module on security for more information. Financial security should be partially released when the works are handed over, with the full security released at the end of an agreed defects liability period.
Works in kind agreements do not need to be publicly exhibited but there are reporting requirements
Works in kind agreements do not need to be exhibited before they are entered into as they are a delivery mechanism for infrastructure in a contributions plan that has already undergone exhibition. Refer to the module on reporting for more information on reporting requirements.
Councils should undertake due diligence on land dedication offers
Offers to dedicate land should generally be limited to land that is identified in the contributions plan. When assessing land offers, councils should request from developers or arrange internally where appropriate:
- a detailed description of the land
- a plan by a registered surveyor
- a valuation of the land from a suitably qualified land valuer (the best practice is for a council to arrange this as an independent valuation)
- a contamination and other relevant consultancy reports, depending on the inherent characteristics of the land and its proposed use. Reports should detail any remediation works required to be carried out on the land.
Councils should require a cost estimate to compare the value of the works
Councils should require developers to provide a cost estimate of the proposed works from an independent quantity surveyor. The estimate should allow the council to verify that the works are of the same scope and standard as the relevant item in the contributions plan, or account for any variations.
The developer’s cost estimates should be substantiated. Methods can include using standard industry costs, quantity surveyors, council staff experience or other appropriate forms of verification.
Offsets should apply against a total contribution liability
Councils can apply offsets against the only equivalent infrastructure category or against the total contribution liability. However, applying the offset against the total liability is encouraged as it is the equivalent of pooling funds from multiple categories to deliver that item sooner.
Councils will need to keep robust financial records to ensure that all categories of works continue to be funded in the way anticipated by the relevant contributions plan.
Councils should only offset works in kind against a specific infrastructure category in situations where offsetting against the full range of infrastructure categories will impact council’s ability to meet other commitments under the contributions plan.
Procedure and process
The exact steps and process for preparing and implementing a works in kind agreement may differ between councils and should be detailed in a works in kind policy.
Indicative steps for preparing and implementing a works in kind agreement
Initial discussion
Either party identifies opportunities for infrastructure delivery or land dedication. Council provides its template works in kind agreement.
Offers
The developer makes a written offer after it has received development consent which details the contributions liability.
If the developer requests changes to the council’s template, these should accompany the written offer and be substantiated with reasoning.
Assessment
Council assesses the offer against its works in kind policy and assessment criteria. Where appropriate, the council may also need to assess tender response offers against relevant requirements.
Council determines whether the offer is supported and the developer is notified.
Drafting
The developer and the council will enter into a works in kind agreement using the council’s template. The developer is usually liable for all the council’s legal costs for considering variations to the agreement template.
Execution
Council sends a final copy of the agreement to the developer for execution. The developer signs the final agreement and returns it to council with any relevant security and any required construction plans or supporting documentation.
The council executes the agreement. The developer prepares and submits a new development application for the works if necessary.
Delivery
On execution of the agreement, the developer commences the works or arranges the transfer of land to the council.
After completion of the works, the council arranges for inspection and rectification of any identified defects per the requirements of the agreement.
The developer hands over the completed works. Where land is transferred, the developer must provide the required documentation to the NSW Land Registry Services and pay the relevant fees.
Post-delivery
Council provides offsets to the developer’s contributions liability and gradually releases security following certification, expiry of the defect liability period or dedication of the land.
Reporting
The council reports on all works in kind agreements as part of its contributions reporting.