Citizens paying out to meet developers’ costs

by Veronica Harrod in Levin

Taxpayers and ratepayers will have to  pay more for infrastructure to service new land developments at a time of exponential growth in the sector due to law changes made by the Government.

 

On 3 July last year, former prime minister John Key announced a $1 billion taxpayer-funded infrastructure loan to build roading, water, wastewater, and stormwater systems servicing new land developments. He said it would be paid back to central Government by ratepayers and development contributions. 

LGA changes hit Councils’freedom

But amendments to the Local Government Act in 2014 and amendments to the Resource Management Act this year means council’s ability to collect contributions from land developers has decreased or ceased entirely.

Until recently councils were able to charge land developers for increased infrastructure costs by two mechanisms, development contributions under the Local Government Act 2002 and financial contributions under the Resource Management Act 1992.

But a 2014 law change to the Local Government Act effectively reduced the amount of money council’s could collect under the development contribution category, “to make development contributions fairer and ensure that they do not unnecessarily contribute to rising house prices” stated a Government development contribution fact sheet on the changes.

Compounding the pressure on ratepayers to pay for infrastructure servicing new land developments, was an amendment to the Resource Management Act earlier this year which stops councils from collecting financial contributions under resource consent conditions.

Dr Smith’s medicine

In a March 15, 2017, press release, Environment Minister Dr Nick Smith said the amendments to the RMA would, “help increase housing supply and

affordability.”

But the combined effect of the Government’s legislative changes means most of the cost for infrastructure servicing new land development will now fall to ratepayers and, through the Government’s $1 billion loan, to taxpayers.

Only four councils currently qualify for the infrastructure fund — Auckland, Christchurch, Queenstown and Tauranga — but this will change in the future as demand grows in other areas.

According to a February 2013 Department of Internal Affairs Development Contributions Discussion Paper forty five out of sixty five territorial authorities charge development contributions ranging from $250 to $65,000.

Ratepayers hit

The Local Government legislative changes mean that not only will councils have to charge less for development contributions, but ratepayers who live in up to 20 territorial authorities which don’t charge development contributions will have to entirely fund new infrastructure because council’s cannot charge financial contributions under changes to the RMA.

One such territorial authority is the Horowhenua District Council. It voted to end development contributions in 2015, a decision largely made on the basis council would be able to collect financial contributions instead, according to a council officer’s report.

$400,000 extra per year for ragepayers

Documents released under the Official Information Act show that ratepayers will pay an extra $400,000 annually, a total of $4.1 million dollars over 10 years, due to increased debt levels from ending development contributions.

In the same year development contributions ended,  land developer and Horowhenua district councillor Wayne Bishop received resource consent to build a 500 house sub-division in the south east of Levin. Following close on the heels of Cr Bishop’s development, a 650-700 housing subdivision started being developed in the North east of Levin.

The council officer’s report also says the Council will also lose $16 million in development contributions from land developers over the next 10 years — and ratepayers will be expected to pick up the tab for this.

According to Horowhenua District Council’s 2016-2017 annual plan, the Council has prioritised an $8 million upgrade to the stormwater system in the North East of Levin after flooding was experienced in a big new new sub-division.

A decision on whether to re-introduce development contributions won’t be considered until the Long Term Plan is reviewed next year.

This means ratepayers will have to fund infrastructure to service the expected 1200-house projects at the two separate developments in Levin for another year at least.

And recently Horowhenua District Council advertised for expressions of interest to partner in a 30.77 hectare block in Foxton Beach referred to as a “prime development site….designated for future residential redevelopment.”