Development tax a rort’

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Wakatipu developers are joining a national chorus of complaint about escalating “development contributions” levied by local councils. 

Councils supposedly charge these contributions to cover the financial burdens which new subdivisions and their occupants impose on community infrastructure – such as stormwater and sewerage systems, and roading and parking networks. 

But a joint report by the Local Government Forum and Property Council New Zealand says contributions can add up to $30,000 to the cost of a residential section. 

Many councils try to squeeze extra income from development contributions rather than raise rates, it’s claimed. 

The fees are a “rort”, Property Council boss Connal Townsend maintains. 

The report concludes contributions “lack transparency” and should be capped, as they are in Australia – and developers should have the right of appeal. 

Local subdivision developer David Broomfield says nine months ago, as growth started slowing, he proposed that QLDC halve development contributions over the next two years – “not double them”, he accuses. 

QLDC refused his advice and as a result Broomfield says his overseas partners have now frozen further development. 

Broomfield has no problem with developers paying infrastructure charges to link newly-developed sites to council services. 

“But [QLDC] have got no right to tack anything they like on. 

“One of the charges I had was for carparking in Glenorchy – to me it’s got nothing to do with a development I’m doing in Queenstown.” 

Another local developer, Wayne Foley, similarly argues that development contributions are often “just a random calculation that lacks a level of transparency”. 

“In the last two years, the [total dollar value] of contributions has diminished significantly and I would suggest it is going to get significantly worse, yet the demands and the costs for infrastructure have continued to grow. 

“The real demand on resources is from tourism growth, not from development itself.” 

In its half-yearly financial statement released last month, QLDC stated development contributions revenue of $3.4 million was $1.4m under budget. 

Foley: “The council needs to sit down and have another look at whether it wants to provide some stimulus to development.” 

Foley also believes the level of contributions has been a factor behind some projects not proceeding. 

Typically, Foley says, the cost of contributions for developing one freehold site is about $35,000 – “but it changes a lot”. 

“People just think [development] is high reward. 

“It’s not – there’s a hell of a risk, especially anything to do with residential, and things that aren’t strictly just commercial.” 

Remarkables Park developer Alastair Porter also argues that development contributions have “well and truly strayed from their original purpose”. 

“One of the worst features is that there is no basis for appeal. 

“Also, they’re a little bit unfairly levied because they work out the cost of them based on the value of the land being developed,” Porter says. 

“Councils almost try to point out that developers are bad people who are raping and pillaging the community, therefore they should be made to pay. 

“It completely overlooks the fact that developers provide many benefits – they enable the community to grow, the large greenfields developers often provide reserves and, like Remarkables Park, things like shopping centres.” 

Porter says contributions are inevitably passed on to purchasers and so become a deterrent to development. 

“[The levies] restrict the supply of developed land and you drive up the price of remaining lots,” he says. 

“A new family comes to town – if they buy an existing house they pay no development contributions, if they buy a new one, they pay. 

“It’s very difficult to see the equity in that arrangement.”