Developer fees put ratepayers at risk

OPINION: A Christchurch woman recently made national headlines with a story about the granny flat she got built for her deaf brother. A council planner told her the council fees would be $1,500, but it ended up over $23,000 – for a small 1-bedroom unit on her own land.

$1,500 seems reasonable for such a simple job. 

The planner can do a copy-paste report in an hour, and we all know the council will have another hour for “administration” to email it. The granny flat is a prefabricated standard unit trucked onto site so there’s little for the building inspector to do as the plans have been checked many times before. Maybe chuck in a couple of site inspections. The water, storm water and sewer are all joined to the existing house, so there are no new council connections, and vehicle access is by the same driveway so nothing on the street changes.

I understand her shock as the charges piled up, particularly when she got whacked with something called ‘development contributions’ – about half the total amount. 

Her payment is comparable to Hamilton City Council’s development contributions for infill one-bedroom units at around $11,000. 

Like most people, she had never heard of it before, despite it being so controversial that councils are required by law to make their development contributions policy available for public inspection, including the calculation methodology and what the money is used for.

Building a city is expensive and requires a lot of infrastructure. Some of this is hidden under ground, like the water pipes. Out of sight, out of mind. Even the visible stuff, like roads, barely get second thoughts. Rates cover the day-to-day operation, but as the city grows, new infrastructure is needed. 

This is what development contributions are for, and it is only fair that the new users pay for it. Payment is usually required when a building consent is issued.

The difficulty is setting the cost. The Local Government Act states that the council is not allowed to recover more than the reasonable costs incurred. That one extra person living in the granny flat did not result in, for instance, a new water treatment station being built – so was there any cost at all? We can all understand that he does use some water so there is an increase in demand on the service. But the law is clumsy and actually states “development contributions should only be required if the effects … have created a requirement…to provide additional assets of increased capacity.” No new treatment station means no charge.

It would be a bugger to be the next person in line after the existing station reaches full capacity. 

A $100 million contribution for a new one would be a shock. Sensibly, the law does allow for developments to be grouped together by geographic area or type of land use – provided that it balances administrative efficiencies with fairness. 

So the cost of a treatment station may be spread over a large number of people but consideration of actual individual usage is still important. This means you have a right to appeal the council’s assessment of your contributions. The new subdivisions of Peacocke and Rotokauri require massive infrastructure investment. 

A 4-bedroom house in most of Peacocke will be assessed at $49,000 while some parts of Rotokauri are an eye-watering $89,000. It is worse for commercial buildings so don’t expect to see a   supermarket anytime soon to support the new growth.

And even if you have no interest in building out there, Hamilton citizens need to pay attention to this. Rototuna development contributions for the same 4-bedroom house are $34,000. 

This disparity means people are not going to rush into Rotokauri, and uptake in Peacocke could be slow until Rototuna is full. That is not far away (in time), but also not far away (in distance) is Cambridge, Ngaruawahia and Morrinsville, where contributions are half that of Rototuna.

Hamilton simply won’t be competitive, and if few people build, then only a few development contributions will be paid.

If retailers and employers don’t develop supporting commercial buildings, then the first people to move there are going to struggle. The first new school isn’t planned until 2026, another disincentive.

Needless to say, some developers are already looking to challenge the numbers in court. If they win, then the council’s financial model for funding the growth will be screwed up. If they lose, the cost will kill off development. Either way, ratepayers are at risk, because we are guaranteeing the loans used to put in the council infrastructure. 

This is what you need to know.

I want Peacocke and Hamilton to succeed. It will generate work for me as an architect, and save my pocket as a ratepayer. I struggle to see how Rotokauri is going to work. There needs to be a way of getting these costs down. I have a few ideas which I will raise in future columns. I hope the council will read them.


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