AS an investigation continues into Lake Macquarie City Council's controversial $44 million loan scheme, a NSW government spokesman said the legislation was "clear" on how developer contributions should be spent.
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The state government confirmed it was not aware of any council, outside of Lake Macquarie, borrowing money from a special fund meant to be spent on critical community infrastructure.
The Newcastle Herald revealed last month that Lake council had loaned itself $44 million over 20 years from the city's developer contribution fund, rather than borrow externally. Developer contributions are collected to fund community infrastructure required as a result of new developments.
A spokesman for the Department of Planning, Industry and Environment said it was still waiting on further information from the council.
"The Environmental Planning and Assessment Act is clear in its provisions that funds collected through development contributions must be spent on delivering infrastructure identified in the respective contribution plans," he said.
"It is the NSW government's expectation that developer contributions be used for the purpose for which they are collected as outlined in the relevant contribution plan."
The government and the council appear at odds over the loan scheme with Lake Macquarie mayor Kay Fraser describing it as "clever" and Planning and Public Spaces Minister Rob Stokes labelling it "an unacceptable breach of the public's trust".
Lake council is relying on independent legal advice that the loan scheme is permitted under the legislation.
Opposing legal advice, obtained by Johnson Property Group's (JPG) chief Keith Johnson, described the scheme as "unlawful".
JPG is locked in a protracted dispute with council over a voluntary planning agreement that sets out its commitment to invest in infrastructure due to its development of Watagan Park, Lake Macquarie's largest new residential subdivision.
Council chief executive Morven Cameron said no projects due to be funded from developer contributions had been delayed as a result of the three internal loans.
It's understood the council will save $7 million in interest by using the internal loans rather than external borrowings.
The government has announced it is considering major reforms to the planning system, including development contributions.
The Urban Development Institute of Australia (UDIA) NSW and Housing Industry Association (HIA) have called on the government to scrap the loan scheme.
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