Cause for Concern

David McGregor, Senior Partner | September 2002

David McGregor offers timely comment on the alarm triggered by two potentially competitive regimes for financial contributions on developments.

The early election stalled the report of the Local Government and Environment Select Committee on the Local Government Bill 2001, and the Bill still awaits its political fate. Proposed provisions under the Bill considerably complicate the question of how financial contributions are applied.

David McGregor offers timely comment on the alarm caused by two potentially competing regimes.

Under the RMA

Developers and local authorities are familiar with the power in the Resource Management Act for consent authorities to impose financial contributions as a condition of resource consent. District plans developed in recent years tend to make extensive provision for such financial contributions against the council's predicted infrastructure requirements. Such provision is necessary in a district plan because a financial contribution condition cannot be imposed as a condition of resource consent unless it is in accordance with purposes specified in the district plan and at a level of contribution determined in the plan.

A transitional provision harking back to the former sections of Part XX of the Local Government Act 1974 applies where the district plan does not include relevant provision for financial contributions.

The new financial contribution requirements inserted in district plans throughout the country have caused significant disquiet amongst developers, and in many cases have been or are subject to appeals relating both to content and application.

The rigorous public examination process on the introduction of a new district plan or changes to a district plan has in some instances resulted in the financial contribution provisions being substantially trimmed or modified.

Development contributions under the Local Government Bill

Proposed provisions contained in the Local Government Bill 2001 will considerably complicate the question of how financial contributions are applied.

Clauses 161 through 164 of the Bill make provision for what are termed “development contributions”. A territorial authority when granting resource consent under the Resource Management Act 1991 for a development, or a building consent under the Building Act 1991, or an authorisation for a service connection, will be empowered to require a development contribution.

The development contribution can only be imposed if –

• Under the Bill a contribution is for costs associated with the incremental provision of reserves and network infrastructure for roads and other transport, water, waste water and stormwater collection and management for the development; and
  
  
  
• The development contribution for network infrastructure is prescribed by regulations; and
  
  
  
• The development contribution for reserves may not exceed 7.5% of the value of any additional allotments created by a subdivision, or the value equivalent of 20 square metres of land for each additional household unit.

The Bill provides for regulations to be made prescribing the development contribution for network infrastructure. This would suggest the contribution would be based on a national standard rather than actual costs.

The development contribution is an alternative to the financial contribution that can be required as a condition of resource consent under section 108 of the Resource Management Act.

A council may impose either a financial contribution as a condition of resource consent under the Resource Management Act, or a development contribution under the Local Government Act - but not both.

Unlike the Resource Management Act provision, the requirement will be triggered by a development even when no resource consent is required.

"Development" is defined as the creation of any additional allotments by subdivision for residential, commercial, industrial or rural purposes; a commercial, industrial or administrative development; or a residential development creating one or more additional household units.

The Bill requires money or land given as a development contributions to be refunded or returned if the development does not proceed. A council must refund or return a development contribution if resource consent is surrendered, a building consent lapses or is cancelled, or the development or building does not proceed.

The Bill also requires a council to refund money received, or return land acquired for the purpose of a reserve, if the money is not applied to reserve purposes or the land used for reserve purposes within five years of receipt or acquisition.

It might be assumed this provision would encourage councils to give careful consideration to actual reserve requirements before imposing a reserve contribution.
It is intended that the development contribution apply not only to any resource consent granted or applied for after 1 July 2003 (the proposed commencement date of the Bill), but also to any application made since the day after the introduction of the Bill.

Overlapping procedures

There is no doubt the proposed provisions will add to the general debate about financial contributions on developments. There will be concern that overlapping procedures apply, and that councils will have a choice whether to proceed under the Resource Management Act or the Local Government Act when seeking such contributions.

This would seem to introduce a level of uncertainty that may be seen as unfair to developers. Further, the concept of prescribing development contribution for network infrastructure by regulation may disadvantage developers in some areas and local authorities in others.

Although it gives an element of certainty as to the potential contribution, it does not seem fair to impose a contribution which does not relate to actual costs of developing infrastructure.

It is also of concern that the element of public input is removed. Whereas the financial contribution provisions included in a district plan are subject to public submission, hearing, and on occasion appeal to the Environment Court this will not be the case for development contributions.

Development contributions are not reliant on any provisions of a district plan, and do not have to fit within the objectives, policies and rules of any district plan. They are entirely arbitrary being set by legislation and regulation, and not open to debate.

Furthermore, a financial contribution imposed as a condition of resource consent is subject to objection and appeal, there is no right of appeal against a council requirement for a development contribution.

Developers who have clashed with local authorities over the level of financial contribution and succeeded either at council or appeal level will not be pleased to learn an alternative procedure is available to council which gives them no right of objection or appeal.

Indeed there have been submissions to this effect to the Select Committee. The NZ Institute of Surveyors who were heard by the Select Committee shortly before it concluded the hearing of submissions presented one of the most recent.

In response the Committee told the Institute that they would be speaking with officials about tightening definitions within the Bill (what exactly is "network infrastructure"?) and the effectiveness of operating two different regimes under the two pieces of legislation.

The Committee's recommendation is unknown at this stage – as indeed is the legislative programme for the Bill.