The Auckland Council's warning that the city's homeowners face additional rate hikes of a cumulative 8.5% within the next eight years if proposed Government changes to so-called 'development contributions' proceed as planned.
The council also warns that the same Government measures could push up the city's debt by $480 million within the same period.
Additionally, it says a planned new 'objections' process relating to the development contributions could cost the city up to $4 million a year.
The council is set to push for substantial changes to the Government proposals and the council's even throwing in veiled threats that some planned infrastructural developments in the Auckland region won't go ahead if the Government doesn't change its mind.
Among changes the council wants included deferring the start time of the proposals by a year, broadening of the types of infrastructure included in the charging regime and changes to the new objections process.
The council's comments are contained in a draft submission on the Local Government Act 2002 Amendment Bill (No3). While the bill ostensibly falls under the jurisdiction of the Local Government Minister - which was Chris Tremain, but he has now been replaced by Paula Bennett - Housing Minister Nick Smith is closely involved with pushing it through.
Smith and the Auckland Council have previously clashed over Auckland's housing policy, though peace broke out at the end of last year with the formalisation and adoption of the Auckland Housing Accord, through which it is aimed to add a further 39,000 houses/sites in the Auckland region within three years.
But now the country's biggest council seems set to face off against Smith and the Government again. And given the scope of the council's disagreements against the proposals it is unlikely to be alone - it can be presumed other local governments have similar concerns.
On February 4 the Auckland Council's Regional Strategy and Policy Committee is meeting to discuss and approve the draft submission through which it would then seek changes to the development contributions policy.
The detailed significant changes to the development contributions proposal included in the draft submission include:
- seek changes to the definition of community infrastructure to include libraries, swimming pools, sports infrastructure and other public amenities
- seek an additional principle to allow councils to continue to perform an individual development contribution assessment based on category and geographical location
- suggest that as an alternative to the proposed review (objections) process the Bill offers the option to councils to have their development contributions polices reviewed on an ex-ante basis, with subsequent disputes to be resolved on the basis of whether they are consistent with that policy
- seek to amend the independent objection process to take into account the amended principles including the additional principle of averaging
- seek changes to the commencement date for the new community infrastructure definition to align with the 2015-2025 Long-term Plan
- seek a number of technical amendments to the development contributions provisions, as documented in the appended table to the draft submission.
Development contributions are charges levied by local authorities on developers to go toward the costs of infrastructure that may be required to service those developments.
But it is fair to say the contributions have become extremely unpopular.
The Government says they’ve trebled nationally over the past decade.
Smith says “this huge increase” could be attributed to the local government law change in 2002 that “gave councils carte blanche to charge whatever they liked and removed any check or appeal on these charges”.
The bill containing the amendments to the development contributions passed its first reading before Christmas and submissions are due on February 14, with the bill set to be considered by Parliament again in May.
Before Christmas Smith said constraining development contributions was "an important part of the Government’s work programme to improve housing affordability".
"These charges on housing developments have gone up by more than any other component of housing costs over the past decade from an average of $3,000 to $14,000 and are as high as $64,000 per section in some communities," he said.
"The changes will narrow the charges councils can put on new sections. Development contributions need to be set in a way that fairly balances the costs that should rightly rest with a new development and those of community benefit that should be paid by general ratepayers."
But in the executive summary contained in the agenda for the February 4 council committee meeting it is stated that some of the Bill’s proposals on the current development contributions system will have a "significantly adverse effect on council revenue and its ability to cope with expected growth in the decades to come".
"The Bill’s proposal to narrow the definition of community infrastructure will severely compromise the council’s ability to deliver planned infrastructure to meet the needs of a growing population," the summary said.
"[Council] officers have calculated that this change in conjunction with the impact of the external objections process will lead to a cumulative rates increase of 8.5% by 2021/2022.
"This will replace lost development contributions revenue that otherwise would have been used to meet the interest on debt taken on to invest in community infrastructure.
"In addition debt will rise by $480 million in the same time period. In effect this represents a subsidy from existing ratepayers to developers and new residents."
The summary also said the proposal to introduce an external objections process, whereby independent commissioners are able to issue binding rulings on disputed development contributions decisions, "also has the potential to impact adversely on Auckland Council finances and its ability to cater for growth".
"Officers estimate that the loss of revenue associated with the proposed review process (estimated at $3 million to $4 million per annum), and the costs of administering it ($1 million per annum), will also need to be funded from rates."
In more detailed comment, the council officials said the proposed Government changes would require territorial authorities to "adopt a more rigid planning structure".
"This does not align with other pieces of legislation focused on increasing housing provision for Auckland, which requires flexibility in infrastructure planning."
Rates increases needed
The officials said that without development contributions to fund planned investment in community infrastructure, rates increases would be needed from 2016/17.
"This does not assume the recovery of debt incurred to provide growth infrastructure, only the servicing of this debt," they said.
"Current ratepayers will incur an additional burden to fund facilities for new residents, along with paying for the services they presently receive.
"The alternative is for Auckland Council not to build this type of community infrastructure and remove it from the Long-Term Plan."
The officials went on to stress that there was a "real risk" Auckland Council would be able to provide sufficient community infrastructure in growth areas if the proposals were passed in their present form.
The officials also said that some of the council's investment decisions in the past were "likely to have been different" if they had known at an earlier time that future development contribution funding for these projects could not be relied upon and was to be abolished in the near future.
In detailed comment about the ojections process, the official said development contributions charges could not be set in a way that allowed for both the individual assessment of the specific infrastructure requirements of each development and the full recovery of costs allocated to development contribution funding.
"This reality is at odds with the proposed objection process which allows for developers to essentially ‘opt in’ to an individual assessment for their development through the objections process without any reference or regard to the broader considerations such as the ‘averaging’ or ‘grouping’ required within development contributions policies, or the consideration of cumulative effects.
"The result of the current proposal will be that developments with below average infrastructure requirements will seek objections and most likely be successful.
"Developments with above average infrastructure requirements cannot be charged more to offset this. Even if this were possible the administrative burden would render it impractical.
"As a result some ‘genuine’ growth-related costs budgeted to be funded by development contributions will have to be transferred to ratepayers. This could well be a significant portion of these growth-related costs, summing to between $3 and $4 million per annum."