Will the tax be axed?

18:35, Feb 10 2013

The possible axing of council-imposed development contributions is on the table in a review announced at the weekend.

The review is likely to be popular with developers, who have objected to the contributions and have had no right of appeal.

But Palmerston North Mayor Jono Naylor said the contributions were necessary to make sure that  ratepayers were not unfairly lumbered with the costs of growth.

Newly appointed Housing Minister Nick Smith and Local Government Minister Chris Tremain have taken a swing at the contributions, claiming a reduction would help to make new housing more affordable.

The options up for debate include abolishing the charges, capping them, tightening the criteria, and reinstating a right to appeal them.

The review was welcomed by Palmerston North lawyer Maurice Rowe, who said the way the council imposed a tax for growth  on every development, and the absence of a right of appeal, needed to be challenged.


He said one of the worst aspects of the charges was that developers could not appeal to a higher authority for a judgment on whether they were fair and reasonable.

They could only seek a council review of whether the policy had been applied correctly.

Fast-food chain Wendy’s made such an attempt last year to have its $72,201 bill for its new Rangitikei St restaurant and drive-through reduced, but it was refused a hearing.

A council committee found the company had not proved it was ‘‘clearly arguable that the development contributions are manifestly excessive’’.

Mr Rowe said it was fair to charge development contributions where it could be clearly shown that extra services had to be built or provided.

But he did not agree with them being used to claim a contribution toward growth in demand or increase in capacity generally, without councils having to prove a clear link between their development and the added costs to the council.

‘‘I don’t think it is meant to work that way,’’ he said.

Mr Naylor said the Government should tread carefully in ‘‘tinkering’’ with the system.

Ratepayers would have to pick up the bill for any drop in development contributions, and there were more significant issues that affected housing affordability, he said.

‘‘They are a way of ensuring people who put new demands on infrastructure pay for them, rather than being subsidised by existing ratepayers.

‘‘If they are capped or abolished, it shifts the cost back to ratepayers, as we have no option but to pay for those things.’’

Defending appeals could also put an added cost on councils and ratepayers.

The city council has received $12.2 million in contributions in the eight years that its policy has been in effect, compared with the  estimated $23.6m it has cost to provide infrastructure and services to support city growth and increased demand.

The ministers said development contributions had been a significant factor in the doubling of section prices.

‘‘The average charge nationally has increased from $3000 per section to $14,000 per section over the past decade,’’ Dr Smith said.

‘‘These costs need to be contained if more Kiwi families are going to be able to afford their own home.’’

Mr Tremain said development contributions were a way to make sure the cost of infrastructure for new developments was paid for, but he wanted to make sure the charges were fair and  justified.

There needed to be greater consistency and certainty, he said.

The review could prompt changes to the Local Government Act 2002.

Submissions close on March 15.

Manawatu Standard