Rort claim 'flamboyant and irrational'

Local Government New Zealand says suggestions from the Property Council that development contributions are a rort are flamboyant and irrational.

A report, from business groups the Local Government Forum and Property Council, says development contributions can add up to $30,000 for a residential section in some districts and were a big reason for excessive housing costs.

While there are no formal legal complaints about development contributions in Wellington, there are some cases where developers are seeking to pay hundreds of thousands of dollars less than the council wants.

Property Council New Zealand chief executive Connal Townsend said the fees were a "rort" involving tens of millions of dollars, which were factored into prices and passed on to buyers – effectively a tax of tens of thousands for new home buyers.

"Many councils don't want to raise rates, so they try to squeeze income from development contributions [instead] to pay for works that should have been done in the past but were not," he said this week.

Local Government NZ manager governance Mike Reid said Mr Townsend's comments were "flamboyant and irrational". He gave the example of a High Court case taken by Neil Construction and some other developers against North Shore City in which the council agreed to refund more than $10 million in development contributions after the court found an "error of law".

Mr Reid said it was simply a reality that when Parliament brought in complex law it often took the courts to give a definitive interpretation. "The Neil case was important as it gave clarity about the way in which councils should undertake their assessments of benefits and councils adapted their processes accordingly.

"Interpreting legislation is an important role played by the courts and that is exactly what occurred and it shows the system works."

The report was commissioned by groups with strong vested interests, "which is not necessarily the public interest". The report did not adequately answer the question of who should pay for additional demand for public services when land was developed, he said. By law, councils had to determine charges on the basis of actual costs.

"This is complex and requires significant levels of judgment."

Wellington City Council's manager of development and planning, Warren Ulusele, said there had been no formal legal complaints about development contributions in the city.

The council had built in a process so applicants could come in and discuss the merits of their proposal and what the development contributions should be. "No complaints [have been received] around the principle of development contributions."

Council figures showed development contributions for the 2008-09 year, a slow year for developments, were $2.56 million.

Wellington was different from areas such as Tauranga, which struggled to deal with rapid population growth.

"Our development contributions are very low, relatively speaking, in the bottom third [of councils]," he said.

However, there are some cases before the council where developers are seeking to pay much less in development contributions than the council wants.

In one case before the development contributions subcommittee, Boulcott Land Ltd was assessed for a development contribution of $1.17m for the Willis Central development in the downtown area. Boulcott Land sought to pay just $156,695 in an application for self-assessment.

The assessment was revised down to $1.1m, remitting stormwater components, but council officers recommended no other reduction.

- © Fairfax NZ News