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Legislative Assembly

16 October 2019
Second reading
Lily D'Ambrosio  (ALP)


Ms D’AMBROSIO (Mill Park—Minister for Energy, Environment and Climate Change, Minister for Solar Homes) (10:25:20): I move: That this bill be now read a second time. I ask that my second-reading speech be incorporated into Hansard. Incorporated speech as follows: This Bill establishes a Victorian framework for the existing Melbourne Strategic Assessment Program, originally established in 2010 under the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 to mitigate the environmental impacts of urban development in Melbourne’s growth corridors. Victoria is a growing state, with our population predicted to reach 10.1 million by 2051. This momentous population growth is centred on Melbourne, with more than 800,000 new residents joining the city over the past decade. The Melbourne Strategic Assessment program, implemented and administered by successive governments since its inception, has played a vital part in facilitating this growth by providing a planned environmental offset strategy for Melbourne’s expansion, and a corresponding streamlined environmental assessment process for urban development in Melbourne’s growth corridors. The Melbourne Strategic Assessment program was initiated to provide an overarching and strategic environmental assessment of the impact of urban development within Melbourne’s urban growth corridors. It was established under the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 and aligned with the Victorian native vegetation controls, enabling both State and Commonwealth regulatory requirements to be met under a single assessment and approval framework. The program began with an agreement, between the Commonwealth and Victorian Governments, for Victoria to undertake a vast and thorough strategic assessment of the environmental values within the urban growth corridors. Through the assessment, high value habitats within these areas were identified for protection, providing important reserves for threatened species and ecological communities. The assessment also identified large areas outside of the growth corridors for protection and for the management of their unique natural values. These reserves were chosen to provide both vital habitat for some of Victoria’s threatened species and ecological communities, and consolidated environmental offsets for the clearing associated with Melbourne’s continued long-term urban growth. Following the strategic assessment, the Commonwealth Minister administering the Environment Protection and Biodiversity Conservation Act 1999 endorsed the Victorian Government’s program for urban development in Melbourne’s growth corridors. In doing so, the Commonwealth Minister also endorsed the corresponding environmental mitigation measures to offset the impact of that development on Victoria’s natural environment. This endorsement, and the subsequent approvals that followed it, have allowed a streamlined, over-arching approval framework for urban development in Melbourne’s growth corridors—facilitating the development of areas for housing, businesses and industry. Under the Melbourne Strategic Assessment program, instead of having to seek separate approvals under both the Commonwealth Environment Protection and Biodiversity Conservation Act and the Victorian native vegetation controls, those undertaking urban development in Melbourne’s growth corridors simply pay a once-off contribution to the Victorian Government’s provision of the environmental offsets. These approvals remain valid until December 2060—illustrating the long-term nature of the program. By removing the need for multiple assessment and application processes, the Melbourne Strategic Assessment Program has resulted in a significant reduction in red tape, providing around $28 million in administrative savings to Victorian businesses every year. This does not include the significant savings made to both the Victorian and Commonwealth Governments in administration costs. This approach has been in place since 2013, and is now viewed as 'business as usual’ by the development industry in Melbourne’s growth areas. It is acknowledged as a vital part of the regulatory infrastructure and its simplicity allows the housing industry to quickly respond to changes in demand and maintain adequate supply. This Bill has been created to strengthen, improve and sustain the current program. The legislation will ensure the continuation of this effective, streamlined process for Melbourne’s continued development and support the program’s crucial role in the provision of adequate land supply over the next 40 years. The benefits of this program have been strongly supported by successive Victorian and Commonwealth governments since its beginnings in 2010, and this Bill represents a key milestone in what has been a long-standing bi-partisan process. The Bill sends a clear message to industry that the Government is committed to supporting urban development in Melbourne’s growth areas. The Bill will further simplify and clarify the current program’s levy structure and administrative processes in ways which will provide further administrative savings to both the Victorian Government and industry. The Bill also sends a clear message that the Government is committed to mitigating the impact of urban development on threatened species and ecological communities within the growth areas. The new legislative framework will provide confidence to the Commonwealth Government that Victoria has both the determination and the capacity to deliver on the environmental commitments which underpin the endorsed program, which will play a significant role in the protection and restoration of some of Victoria’s unique threatened species and ecological communities. With the creation of the Western Grassland Reserve in particular, future Victorians will appreciate and benefit from a large and significant ecological reserve on the doorstep of both of the state’s two largest urban centres, Melbourne and Geelong—a unique feature unparalleled in other Australian cities. Lastly, the Bill will improve the program’s operational and financial transparency—by requiring regular reviews of the levy rates imposed, ensuring that revenue is adequate and being spent in the most cost-effective ways; by requiring regular environmental performance audits by the Commissioner for Environmental Sustainability, ensuring that effective progress is being made toward achieving the program’s conservation targets; and by establishing a dedicated fund with strict statutory controls ensuring that spending from the fund is directed solely toward acquiring, protecting and managing the significant habitat areas identified under the program. To provide a strong basis for the forty-year lifetime of the program and to cement its role in the provision of Melbourne’s newest sustainable communities, the Bill will create a Victorian framework for the collection of the Environment Mitigation Levy. The Environment Mitigation Levy provides a transparent and accountable way for those undertaking urban development to ensure their projects have a neutral impact on our natural environment. The simple administration of the levy also means the housing industry can focus on delivering housing for Melbourne’s growth. The levy will apply to the vast majority of land within Melbourne’s urban growth corridors—specifically, the land within the expanded urban growth boundary following planning scheme amendment VC68 in 2010—excepting those areas where payment has already been made under the existing program. In all respects, the Bills aims to achieve a 'neutral translation’ of the existing program into Victorian statute, with additional clarification of elements of the existing program framework which may otherwise have been ambiguous or unclear. For example, the current framework imposes liability in relation to 'actions associated with urban development’—a very broad class of actions which is challenging to define in a practical sense, without creating a complex regulatory environment for those undertaking urban development to adhere to, and for the Victorian Government to administer. This Bill will vastly simplify the class of actions giving rise to liability. On private land, the new framework will require the payment of levies for three distinct trigger events associated with urban development—the processing of subdivision applications, the issue of extractive industry work plans, and applications for building permits. On the small amount of public land in the levy area, the levy may also be triggered by the construction of infrastructure works. The levy may only ever be collected once from the same piece of land—following payment, the levy liability associated with that land is permanently discharged. This improved framework provides much needed clarity to industry and the Victorian Government as to when a levy event has occurred and a levy liability due. Monies collected will be spent directly on delivering the program’s consolidated environmental commitments—creating vital reserves for the protection of threatened species and communities. The delivery of these commitments is managed by the Department of Environment, Land, Water and Planning. The commitments consist of: o The protection and management of the 15,000 hectare Western Grassland Reserves, primarily for the conservation of the critically endangered ecological community of Natural Temperate Grassland of Victoria’s Volcanic Plain. o The protection and management of 1,200 hectares of the nationally threatened Grassy Eucalypt Woodland ecological community to form a Grassy Eucalypt Woodland Reserve. o The protection of 36 areas of high biodiversity value within Melbourne’s Urban Growth Boundary, to provide for the conservation of native vegetation, and threatened species such as the Growling Grass Frog, a species still found in some of Melbourne’s vital watercourses, including the Werribee River, and the Merri and Cardinia Creeks. o Additional reserves outside the Urban Growth Boundary to conserve important habitat for the Golden Sun Moth, Spiny Rice-flower and Matted Flax-lily. o Other conservation actions for threatened species impacted by urban development, such as the Southern Brown Bandicoot, and the Australian Grayling, as well as migratory bird species protected under international treaties. The levy itself is comprised of seven different components, one each for native vegetation patches and scattered trees, and the other five each corresponding to threatened species listed as matters of national environment significance under the Environment Protection and Biodiversity Conservation Act (the Golden Sun Moth, the Growling Grass Frog, the Southern Brown Bandicoot, the Matted Flax-lily, and the Spiny Rice-flower), each of which were identified at the time of the original assessment as being significantly impacted by the urban development in Melbourne’s growth corridors. Each of the seven components is mapped across the levy area, with the mapping deriving from the extensive habitat survey work and modelling data that was collected during the original 2010 assessment. Each of the levy components have been mapped across the program area to create the Environment Mitigation Dataset. To ensure that all losses due to urban development since the commencement of the program are adequately captured, the dataset is 'time-stamped’ at 2010, and will not be subsequently updated or modified. Once levy event occurs on a land parcel in the program area, the levy liabilities for that specific parcel of land is calculated from this dataset, according to the levy components mapped against that parcel. Each of these levy components attract different levy rates, based on the estimated cost to mitigate the clearing of that type of vegetation or habitat for development. The rates currently being charged under the program were initially informed by a cost recovery model developed in 2013. and were calculated to fully recover the estimated cost of delivering the program’s conservation commitments, over the duration of the program to 2060. Calculating the costs of delivering a program over such a long time-frame inevitably involves a very high degree of uncertainty. It is therefore important to ensure that these costs are regularly reviewed in light of changing market prices and cumulatively improving evidence base available to the Department of Environment, Land, Water and Planning. The cost of delivering the program commitments was comprehensively reviewed between 2017 and 2019. The most striking feature of this review was the extent to which land immediately outside the urban growth boundary had increased in value, according to the assessment of the Valuer General Victoria, during the relatively short period of time between June 2017 and February 2019. This rapid escalation in land values has had a significant impact on the estimated cost of acquiring the land identified for the Western Grassland Reserve and the Grassy Eucalypt Woodland Reserve, and consequently, the cost of delivering the program overall. The current rates, which were set in 2013 to fully recover the total cost of program delivery, are now expected to only recover around half this cost. The Bill takes the opportunity to reset the levy rates to ensure to ongoing financial viability of the program. The Bill establishes a mechanism to return to rates which will return to the target of full cost recovery incrementally over five years. This means that by the 2024/25 financial year, persons clearing biodiversity values in Melbourne’s growth areas to allow for urban development will again be paying for the full cost of remediating their impacts. While the Bill does provide for significant levy rates increases over the next five years, these costs remain small compared to other comparable regulatory charges, and have a limited impact on a per-lot basis. When the Growth Areas Infrastructure Charge, Infrastructure Contribution Plan levies and Melbourne Water Drainage Charges are considered along with the Environment Mitigation Levy as regulatory charges typically faced by growth area developers, the Environment Mitigation Levy will only account for a 4.62 per cent increase in total regulatory charges by the 2024/25 financial year. On average, the increase to the Environment Mitigation Levy will impose an additional cost per lot of $152 in the 2020/21 financial year, incrementally increasing to $1099 by the 2024/25 financial year. These increases ensure that the cost of managing the biodiversity impacts of urban development in Melbourne’s growth corridors continues to be borne by the parties responsible for those impacts, and not by Victorian taxpayers at large. It should also be remembered that the levy is in place of the significantly more expensive and time-consuming case-by-case environmental approvals process under the Environment Protection and Biodiversity Protection Act and the Victorian native vegetation controls. The program is primarily designed to ensure the regular supply of residential land available in Melbourne’s growth corridors—keeping home ownership affordable and accessible for Victorians. To ensure that the levy does not impact directly on home buyers, there are also a range of exclusions included in the Bill. For example, an application for a building permit for a single dwelling is an excluded matter, as are building permits for repairs or reinstatement of existing buildings. The Bill provides significant flexibility for those liable through the ability to defer payments by paying in stages, retaining a key feature of the current framework which is greatly valued by the regulated community The Bill requires that the levy rates will be reviewed every five years through a transparent and open process, to ensure that adequate revenue is being collected and that funds are being expended efficiently and effectively. After having given a general overview of the Program and the proposed legislation, I will provide an outline of the Bill itself, its provisions, and some of its specific features. The Bill is divided into seven parts. Part 1 details the preliminary matters, including the details surrounding the commencement of the Bill. The Bill is intended to become fully operational on 1 July 2020, to align with the commencement of the financial year. This commencement date ought to provide industry with time to prepare for the upcoming regulatory changes, and to allow any necessary administrative alignment between the existing Commonwealth approval framework and the new Victorian legislation. Part 2 provides for the declaration of the levy area and the conservation areas, and the establishment of the environment mitigation information system. Division 1 of Part 2 provides for the Secretary of the Department of Environment, Land, Water and Planning having regard to the relevant Commonwealth approvals, to declare land within the urban growth corridors to be part of the 'levy area’. Division 1 also outlines how, to ensure transparency and accessibility, the levy area declaration must be made publicly available for inspection and publication on the internet. Division 2 of Part 2 establishes the Environment Mitigation Information System, which utilises the Environment Mitigation Dataset (containing the mapped and modelled areas of native vegetation and habitat, and comprehensive surveys for scattered trees within the MSA area) to calculate levy liability for specified parcels of land. Part 3 describes the Environment Mitigation Levy and imposes it within the levy area. Details are provided on when it is payable, for what land, and in what amount—including that it is payable only once for any particular area of land within the levy area. The component levy rates for the 2020/2021 financial year are set out, as are provisions for the indexation of the component levy rates in the 2021/2022, 2022/2023, 2023/24 and 2024/25 financial years. The method of indexation is set out separately in Schedule 2 to the Bill. Divisions within this Part identify liable parties and payment due dates, and establish mechanisms for both the payment of levies in stages, and for liable parties to reduce their levy liability by transferring privately-held conservation area land to the Crown. Further Divisions establish the framework for providing notification of levy events on Crown land, and for the recording of notifications of levy liability on the titles of land that may be subject to the levy. Part 4 provides for the assessment of liability and the collection of levies. It contains Divisions addressing objections and review, including the right of persons to seek a review of assessment of liability, the refunding of payments in the event of a successful objection, and the charging of interest on payments owing beyond the due date. Part 5 concerns the Melbourne Strategic Assessment Fund. It limits expenditure from the Fund to matters specifically related to the delivery of the Program, and requires the responsible Minister to report on the balance of, and expenditure from, the Fund in the Department’s annual report. Part 6 provides for a five-yearly review of the levy rates. The review process will commence three years after the commencement of the legislation, allowing two years for thorough analysis of the operation of the levy scheme, the development of a report setting out recommendations for the efficient and effective delivery of conservation measures, and (if appropriate) recommendation for the adjustment of levy rates. The bill provides that this review process is repeated every 5 years until the completion of the program. Part 7 contains provisions of a general nature. Division 1 provides for the Secretary to maintain, and make publicly available, a register of Crown land within the levy area to which there is no liability under this Act to pay the levy. Division 2 provides for a certificate regime which provides landowners with confirmation that they have met their levy liability (in whole or in part), are not subject to a levy in relation to a particular event, or have an approved staged payment arrangement. These certificates allow for plans of subdivisions to be lodged, a building permit to be issued, or provide a general official record of the levy status of land. Further Divisions address the information gathering powers of Authorised Officers and the Secretary, evidentiary provisions, provisions relating to the service of documents, and provisions relating to delegation of powers, the creation of regulations, and other administrative matters. Part 8 provides for the transitional arrangements, confirming the status of agreements and payments made under the current framework. Part 9 contains consequential amendments to other Acts. The Bill will amend the Building Act 1993 to ensure the Secretary is advised of applications for building permits in the levy area, and make the issue of certain permits conditional upon the discharge of levy liability, staged payment approval, or the issue of a certificate relating to an excluded event. The Commissioner of Environmental Sustainability Act 2003 will be amended to require the Commissioner to make a biennial strategic audit of the program’s implementation. The Mineral Resources (Sustainable Development) Act 1990 will be amended to ensure the Secretary is advised of extractive industry work plans approved within the Program area. The Subdivision Act 1988 will be amended to require a person to obtain a relevant certificate before seeking to register a plan of subdivision. Finally, Schedule 1 the Victorian Civil and Administrative Tribunal Act 1998 will be amended to provide for the conduct of review proceedings relating to an assessment of liability. Following the consequential amendments are two schedules. Schedule 1 sets out the process for the tabling and publication requirements for levy area declarations. The intent of the schedule is to reflect the provisions of the Subordinate Legislation Act 1994 in relation to legislative instruments, but with modifications better suited to a map-based instrument. Schedule 2 sets out the formula for the annual indexation of levy rates. The regulated community have a strong familiarity with the program. In undertaking the original strategic assessment, the Victorian Government wrote to all landowners within the Melbourne Strategic Assessment area notifying them of the agreement between the Commonwealth and Victorian Governments to undertake a strategic assessment of the biodiversity values on their land, and of the requirement for offsetting the matters of national environmental significance and native vegetation on parcels should they be developed. Since then, the Department of Environment, Land, Water and Planning has had extensive communication with landowners throughout the implementation of the Program. Aside from the previously mentioned administrative improvements, the substance of the legislation will be familiar to those in the development industry operating within the Melbourne Strategic Assessment area. One of the key components of the current system that will be maintained is the ability for liable persons to stage payments, essentially allowing for the matching of the levy liability against cash flow. For example, in large developments, payments can be scheduled as areas are subdivided and sold. Industry stakeholders have identified this as a useful and important component of the current system, and as such, the flexibility of tailored payment arrangements will be expanded by the legislation to include extractive industries and building works. Part 4 of the Bill sets out the arrangements of the Melbourne Strategic Assessment Fund and its application. This is one of the key drivers behind the legislation - to provide for the creation of a dedicated fund that will be an enduring source of resources towards the environmental mitigation measures required for Melbourne’s ongoing development. By stipulating the activities the fund may be spent on, the legislation provides a summary of the broad mitigation measures that the Victorian Government must deliver to mitigate the impacts of urban development within the MSA area. The mechanisms by which the Victorian Government will achieve many of these mitigation measures have changed since the beginning of the Program due to legislative, planning, policy, economic and technological progress, and in response to emerging and changing ecological threats. As the program progresses, the mechanisms to best achieve the mitigation measures will likely develop further, however the mitigation goals to be achieved will remain consistent. The Bill provides flexibility to the Victorian Government in how the mitigation measures are to be achieved, while also containing extensive provisions aimed at ensuring that the funds are invested efficiently and transparently. The Bill requires that the income, expenditure and balance of the fund is reported on annually by the Minister and included in the Department of Environment, Land, Water and Planning’s annual report of operations—which is tabled in Parliament under section 45 of the Financial Management Act 1994. Lastly, the scheme will require the Environment Mitigation Levy rates to be formally reviewed every five years. The Melbourne Strategic Assessment Program levy framework is based on the principle of full cost recovery. The five-yearly reviews are intended to prevent over- or under-recovery of funds and price-shocks. Based on the review, the Minister will be required to cause a report to be prepared that contains a cost-benefit analysis of the actions to meet the mitigation measures, an estimate of the total levy amounts to be collected, a statement as to whether the current rates and indexation will recover the required cost of the measures, and a recommendation should changes be required to the rates or indexation. The report will be required to be published and allow for submissions. Based on the report and any submissions, a final report will be prepared and also published. Future governments can then consider whether to reset the rates through future legislative amendments. While it is an extensive process, I believe that the vigorous review process will provide industry and the Victorian public generally with confidence that the levy rates are being collected for the exclusive purpose of meeting Victoria’s environmental mitigation commitments, and that the funds are being expended in the most effective and efficient manner possible. This Bill firmly establishes the Melbourne Strategic Assessment system into the future—providing the continuation of this streamlined environmental assessment process vital for Melbourne’s continued growth, and the establishment of the unprecedented consolidated environmental offsets which are key to the ongoing recovery of some of Victoria’s threatened species and communities. I commend the Bill to the house.