Changes to the way in which Councils can levy development contributions will be proposed in the Local Government Reform Bill (the Bill) that will be introduced into parliament by the end of this year. Changes are well overdue as the current system of development contributions has been in place since 2002 and has not been comprehensively reviewed since. 

Development contributions are a charge on developers that allow territorial authorities to recover some of the capital costs that they incur when building or expanding infrastructure required to serve new developments. Approximately half of the $3.6 billion of local authority capital expenditure that is expected to be spent in 2013 is likely to be on new infrastructure.  This expenditure is financed through a mix of rates, grants, financial contributions under the RMA and development contributions under the Local Government Act 2002.

The Productivity Commission's Housing Affordability Inquiry report in October 2012 considered whether alternatives to development contributions were appropriate and whether they should be capped or removed.  Having considered the Productivity Commission's report along with a number of other factors, Local Government Minister Chris Tremaine considered that development contributions should not be capped or removed but that improvements should be made to both the legislation and the way the development contributions are applied.  As a result six key areas of change are being proposed, which are:

1.    Introducing new purpose and principles provisions concerning development contributions into the Local Government Act 2002;

2.    Clarifying and narrowing the range of infrastructure that can be financed by development contributions;

3.    Improving the transparency of territorial authorities' development contributions policies;

4.    Encouraging greater provision of infrastructure through the use of development agreements;

5.    Introducing a development contributions objection process with decisions made by independent decision-makers (development contribution commissioners); and

6.    Clarifying legislative provisions to make them more workable and easier to use.

The development contributions objection process

The introduction of an objection process is an improvement on the current regime as developers currently have to resort to judicial review or an application for declaratory relief from the High Court.

Objections will be able to be made in respect of a council:

•    Failing to properly take into account features of development that increase or decrease the demands on infrastructure;

•    Charging a developer for infrastructure that will not be used by people in the area being developed; and

•    Incorrectly applying its development contributions policy.

Objections will not extend to the development contributions policies themselves, as these policies already go through a public notification process.  However if there is any doubt over the development contribution policy itself, a developer would still have recourse to judicial review or declaratory relief in the High Court.

We regularly advise clients concerning the calculation and application of development contributions and always advocate for the fairest outcome that is in the interests of our clients.  We welcome the Government's leadership in proposing to set a clearer direction for Councils.  This will hopefully in turn create a more certain development contributions environment for developers, but we await the detail to be included in the Bill.

As stated above, the Bill will be introduced into Parliament at the end of this year. 

If you require any assistance to prepare submissions on the soon to be notified Bill, please feel free to get in contact with either Michelle Paddison or Joshua Gear to discuss how best to present your interests.

Written by Joshua Gear, Michelle Paddison at 09:00





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