Navigating the Complexities of Drainage Schemes and Asset Delivery

Joel Snyder & Jonathan Hourigan
17 September 2024

Effective drainage schemes are crucial for urban development, ensuring flood protection, water quality, and environmental health. In Victoria, Melbourne Water plays a pivotal role in managing these schemes, leveraging its function and powers under the Water Act 1989. This article explores the legislative framework, Melbourne Water’s approach, and the implications for developers in relation to a development services scheme (also known as a drainage services scheme).

Legislative Framework

The primary legislative framework governing drainage schemes is the Water Act 1989.

Under this Act, Melbourne Water is empowered as a Water Corporation and an Authority, being ultimately responsible for waterway management, regional drainage, and floodplain management in its catchment. These responsibilities include ensuring that adequate drainage and flood protection standards are met in new developments.

Melbourne Water’s powers under the Water Act 1989 are extensive, particularly in relation to recovering development contributions. Sections 196 and 268 allow Melbourne Water to require property owners to contribute to the present day costs of works:

Section 196: Owner Finance

1. An Authority may require the owner of any property in its waterway management district to meet or contribute to the present day cost of any works used for or in connection with or as incidental to the carrying out of its functions under this Part for that district.
2. Division 6 of Part 13 (other than sections 268(3) and 271(1)(a)) applies to a requirement under subsection (1) as if it were a requirement under section 268(1).

 

Section 268: Authority may require payment

1. An Authority that intends to provide services which will benefit a property may, by notice in writing, require the owner of the property to meet or contribute to the present day cost of any works that are used or will be able to be used directly or indirectly for the provision of those services, and any fireplugs attached to those works.
2. If a proposal for the subdivision of land is referred to an Authority under the Planning and Environment Act 1987, the Authority may, by notice in writing, require the owner of the property to meet or contribute to the present day cost of any works that are used or will be able to be used directly or indirectly for the provision of services that will benefit the property, and any fireplugs attached to those works.
3. The amount of payment required from an owner must be assessed by the Authority to be fair and reasonable, taking into account the benefit to that property relative to the benefit to other properties.
4. The notice must specify:
   1. the amount of the payment required; and
   2. the reason why the payment is required; and
   3. any works or services that have been or will be provided; and
   4. the property in relation to which payment is required; and
   5. if payments are required in relation to a group of properties, the amounts required in relation to each property; and
   6. the right of the owner to object and apply for a review under section 271; and
   7. in the case of a notice under subsection (1), that details of the proposed services and the costs are available for inspection, free of charge, at the Authority’s office during normal business hours.
5. In the case of a notice under subsection (1), the Authority must make sure that details of the proposed services and the costs are available for inspection, free of charge, at the Authority’s office during normal business hours.
6. An Authority must bear any cost that would otherwise, under this section, be borne by the Crown in respect of land that:
   1. is used or reserved for a public purpose which specifically benefits the area; and
   2. does not require the service which is being provided

Importantly, there are circumstances which an owner should be aware of such as notice requirements, a “fair and reasonableness test” taking into account the benefit to that property, and the right to object.

Melbourne Water’s Approach to Development Services Schemes

While Melbourne Water is tasked with preparing development services schemes, it does not have the power to compel developers to undertake its drainage works under such a scheme. Instead, it typically seeks drainage contributions or encourages developers to undertake works.

Financial Contributions (Non-Works Offer)

Melbourne Water commonly requests financial contributions from developers to cover the present-day costs of works. While there is no specific trigger point, these contributions are often sought through the development approval process.

Works-In-Kind (Works Offer)

In cases where drainage works are required for a development, Melbourne Water may encourage developers to complete these works through a works-in-kind agreement. Although Melbourne Water cannot mandate this, developers often opt to undertake the works to avoid delays. These arrangements are typically formalised through a works-offer, where the developer agrees to complete the works in exchange for reimbursement.

Planning and Subdivision Considerations

When it comes to planning permits, Melbourne Water may impose conditions requiring drainage works. Under Section 62(2) of the Planning and Environment Act 1987, the responsible authority has broad discretion to include conditions it deems necessary. However, any condition must be fairly related to the planning purpose and the specific development application.

For example, a planning permit might include a direct condition such as requiring the construction of a drainage basin before a certificate of occupancy or stage of subdivision. Indirect conditions, like requiring approval of a Storm Water Management Strategy, can also lead to obligations for drainage works.

In the context of subdivisions, referral authorities like Melbourne Water can influence the approval process by requiring engineering plans or public works. However, if no subdivision is proposed, these forums may not apply.

We would always recommend seeking legal and other expert advice to help understand the validity of any condition or authority requirement.

Key Takeaways for Developers

Developers should be mindful of the complexities involved in drainage schemes. It is essential to seek legal advice early in the planning process, understand the specific requirements of Melbourne Water, and be prepared for negotiations regarding contributions or undertaking works. Missteps in this area can lead to delays, increased costs, or legal challenges.

Conclusion

Navigating the requirements of drainage schemes and the delivery of associated assets is a complex but necessary aspect of urban development. By understanding the legislative framework and Melbourne Water’s approach, developers can better position themselves to meet these challenges and ensure the success of their projects.