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Development contributions: Letter to Vision Kerikeri

Updated: Sep 17, 2020

Development Contributions

In his 13 December column ‘Are we being served? David Clendon of Vision Kerikeri, with reference to the Arvida Kerikeri Retirement Village (KRV) proposal, asks a crucial question, “Where is the balance point between the economic costs to be borne by the public purse, the profit to be derived by the developer, and the wider social and environmental costs and benefits?” The overall KRV project is described as 200 retirement units with a 90 bed care unit and communal facilities. Stage 1 consists of 28 two and three bedroom retirement units.

Record of a 7 November 2018 planning meeting between the Far North District Council and Arvida Group Ltd noted that Mayor John Carter supported the project and that it was important for the district. Regarding development contributions, the possibility of having a developer agreement (not development contributions) was discussed as it was indicated that capital expenditure was a challenge for Council. Dr Dean Myburgh of Council District Services Group confirmed that this needed to be considered sooner rather than later as 2019 was a local government election year. He also stated that this would need to be considered by Council’s senior leadership team.

Likely community and infrastructure issues from KRV affecting Council (i.e. ratepayers) are future arterial routes alignment, the new wastewater treatment plant go-live timeframe and other possible plans for non-vehicular routes or networks such as community walking and cycling tracks and Hall Rd water main timing. Discussion took place on the importance of infrastructure delivery by Council to align with the KRV programme and some of the challenges that will need to be addressed.

John Papesch, senior civil engineer at Haigh Workman, spoke about the various Council infrastructures needed for the project. He confirmed KRV's reliance on the new wastewater treatment plant being delivered, timely delivery of an agreed water supply pipeline along Hall Road and bringing forward the programme for upgrading of Hall Road to support both KRV and other Hall Road subdivisions beyond the immediate Stage 1 proposal. The extension of Hall Road to the KRV site will be constructed to an 8 metre width that complies with a Council road standard.

The Local Government Act, 2002, determines that the purpose of development contributions is to enable territorial authorities to recover from persons undertaking development a fair, equitable, and proportionate portion of the total cost of capital expenditure necessary to service growth over the long term. Some of the principles to be taken into account when exercising duties and functions under the Act when preparing a development contributions policy, or requiring development contributions, that they should only be required if the effects or cumulative effects of developments will create or have created a requirement for the territorial authority to provide or to have provided new or additional assets or assets of increased capacity.

Surely, this must be the case for the KRV and other major projects being developed within the Far North district.

The 2017 OECD environmental performance review of New Zealand defines development contributions as one-off levies imposed by territorial authorities on developers to finance parts of the capital costs associated with new development, notably the provision of trunk infrastructure. Their cost is commonly passed on to the purchasers of new houses or commercial premises as part of the sale price. They typically fund a relatively small part of local public infrastructure investment.

The OECD review states that development contributions are an important instrument to stimulate efficient use of land and infrastructure and to promote better environmental outcomes. It also adds that systematic use of such contributions and rates guide efficient and sustainable urban land use by, among other criteria, reflecting the true cost of development on infrastructure and service provision and associated environmental costs.

In 2015 Council resolved to suspend development contributions in light of a perceived economic downturn and has resolved not re-commence them for the term of the district’s’ Long Term Plan 2018-28 in spite of obvious significant economic upturn in areas such as Kerikeri and Waipapa.

In a March 2013 submission to the Department of Internal Affairs on development contributions, Local Government New Zealand made the very pertinent points that they were unaware of any evidence that reducing development contributions would reduce house prices or improve housing affordability and that there was an intrinsic link between development contributions, rates and the level of investment in providing infrastructure for growth. Any changes to one element in the financial mix would impact on the others and that removing development contributions would shift the burden on to other sources of infrastructure funding including rates.

Council’s plan to conduct a comprehensive review of all funding mechanisms, including rates, development contributions, fees and charges within the next two years is far too nebulous. It should already have been well under way.

In the meantime Council has signalled that it will negotiate development agreements for significant developments where there are significant infrastructure impacts from the development. That process needs to be totally transparent for ratepayers to trust that cost allocations have not been distorted in favour of developers as its policy has done so for the past few years.

For the Arvida financial year 2018 revenue of $132.3 million was up 30 percent on the previous year and underlying profit was up 43 percent to $33.0 million.

A developer is such sound shape must contribute fairly to the cost of ancillary infrastructure requirements and any move to exempt Arvida from contributions with respect to KRV should be soundly rejected.

If Mayor Carter's council continues to ignore this significant ratepayer issue there are bound to be electoral consequences late in 2019.



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