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Development Contributions

In the first half of every year Local Authorities go through a massive process to define the services they provide and how they will charge for them, by consulting around and producing a Long Term Council Community Plan (LTCCP). This process is defined by the Local Government Act 2002 and was designed to create more transparency in decision-making and establishing rates.

In the development community the LTCCP has become a significant document as its arrival, coincided with a massive increase in the fees (called Development Contributions) associated with subdivision and housing developments. Developers now pay to connect to the network infrastructure (roading, drainage, etc) and contribute to a share of the proposed infrastructure upgrades that are planned to occur in the next 10 years. In some areas of Christchurch City this increase was up to 950% !! (To be fair to Christchurch City they decided to phase in the fee regime over three years after protests from the development community).

Some of the criticisms of this new process are:
1. It’s a very lengthy process that ties up Council staff, without achieving the desired transparency
2. The financial documents supporting the setting of Development Contributions are extremely complex and this doesn’t aid transparency.
3. There is generally no right of appeal at the time the Development Contributions are set. Appellants are told that they should have contributed to the consultation process, but by then it’s too late.
4. A lot of the LTCCPs were created at a time when development was quite profitable, and possibly the contributions were set relatively high to reflect that. Now that the pendulum has swung it remains to be seen if Councils adjust the contributions.
5. As the Development Contributions are a source of income for the Council it’s possible that Councils are unfairly shifting costs onto the development community to avoid increasing rates – for political expediency.
6. Development Contributions may not recognize that the growth represented by the development will benefit the local community in all sorts of ways (at the very least financially, by increased rate income).
7. Development Contributions are supposed to be targeted to specific infrastructure projects and if those projects are not carried out then they are supposed to be refunded. The logistics of this are horrific – who gets refunded? How does Council track 10 years worth of projects, and refund only on those that aren’t paid out?

It’s interesting that as a country we think immigration is desirable –it’s a substantial driver of economic growth. However on a local level the Development Contributions actively discourage growth.

And finally, we applaud the Central Otago District Council’s recent move to defer development contributions to the time of sale, brought into action by a sense of fairness from elected Councillors despite opposition from their staff (thanks to Owen McShane from the Centre for Resource Management Studies for the heads-up). ODT 29 May 2009.

Otago Daily Times 29 May 2009

Otago Daily Times 29 May 2009

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