Council costs for development levy to hit $136,000

Rotorua. Photo / Andrew Warner / Rotorua Daily Post.

Legal and consultancy costs associated with a draft development contributions policy will reach at least $136,000, Rotorua Lakes Council expects.

The council confirmed consultants have so far cost more than $86,000, and while it has not yet received final invoices for legal advice on the policy, it is expected it will cost a further $50,000 to $60,000.

The council says the policy could return about $31 million over the next decade.

One property developer says the council should be considering more options with the help of developers.

Others welcome the proposed policy, which would compel developers to pay a levy to support infrastructure growth for their projects.

On Thursday, council organisational enablement deputy chief executive Thomas Colle said while the council was yet to receive a final invoice for legal advice sought on the policy, he expected the bill would be between $50,000 and $60,000.

"It’s important to note that if adopted, the development contributions policy could recover around $31 million over the 10 years of the Long-term Plan that could then be invested into new or expanded infrastructure.”

He said the legal advice was sought to ensure the draft policy was compliant with the Local Government Act.

A report for last Thursday’s council Strategy, Policy and Finance committee meeting stated there was a risk of legal challenge of the policy once implementation began, and the council had sought legal advice as a result.

Rotorua property developer Ryan Holmes. Photo / Ben Fraser / Rotorua Daily Post.

Developer Ryan Holmes said the council should have consulted with developers to "have a say" on how the policy was drafted, and provide more than one option to councillors.

In his opinion: "A lot of money's been poured into one option. [The council's] already gone down the one path such a long way and spent a lot of money."

Rotorua Residents and Ratepayers chairman Reynold Macpherson said the suspension of development contributions was a “massive subsidy by ratepayers which must now be rectified”.

The council revoked a previous development contributions policy in 2014.

Rotorua Residents and Ratepayers chairman Reynold Macpherson. Photo / Andrew Warner / Rotorua Daily Post.

Macpherson believed it would be “fairer” for development contributions to be paid at the completion of a project when cash flow was easier.

At Thursday’s committee meeting Colle confirmed the draft policy would seek the contribution at the beginning of the project.

Evolve spokesman Ryan Gray said the council seeking legal advice “to avoid possible litigation” was “sensible”.

"We think it's vital to get things right from the start to avoid the cost of mistakes compounding."

Gray said development levies were “commonplace” among councils.

"It's only fair that those who benefit most from the development contribute towards the infrastructure costs that ratepayers would otherwise have to cover.”

He said the district had a housing “crisis” and “an intolerable emergency housing situation” on Fenton St.

Evolve spokesman Ryan Gray. Photo / Ben Fraser / Rotorua Daily Post.

“If re-introducing the development levy means [the] council can move faster to consent a greater number of homes and build adequate infrastructure then it can only be a good thing for our city."

However, he said a question still hung over what impact Three Waters reform would have on the levy.

"If responsibility for Three Waters infrastructure is removed from [the] council, then we hope a reduced levy is introduced to reflect the true council cost as to not put off would be developers from building homes in our city."

On Monday, Colle confirmed consultants had also been used to help develop the draft policy, and it had cost more than $86,000.

That was made up of the cost of an “external subject matter expert” - $41,296 – and an external project manager - $44,793.

Colle said the consultants were used to ensure the process of developing the draft policy was “thorough and robust” and that the policy was fit for purpose.

He said there were “still many unknowns” about the implementation and timing of the Three Waters reform programme.

“When more specifics are known, if we have a Development Contributions Policy in place at that time, it would likely transition to the new Three Waters entity.”

According to a council statement on the policy, the aim of it is to ensure developers who create the need for growth infrastructure pay a fair share of the capital cost for new or expanded infrastructure, taking the burden off ratepayers alone.

The draft policy applies to the Rotorua urban area and would be calculated by multiplying the number of Household Unit Equivalents by the total cost of the relevant activities - water ($2050), wastewater ($1604) and stormwater ($7202) which does not apply to Ngongotahā.

A three-lot residential development in the east, west or central would pay the total charges multiplied by three ($32,568) while one in Ngongotahā would pay $10,962 as the stormwater costs are not included.

Last week, three developers said the policy could disincentivise development as costs were high and margins tight, but one developer said as long as the contributions were "realistic and reasonable" developers should pay a share.

On Thursday the committee unanimously agreed to put the draft policy out for consultation, which opened on Monday and will run until June 16.

It is expected the council will sign off on the final policy by August 25, with an implementation transition period to begin in September.

-Local Democracy Reporting is Public Interest Journalism funded through NZ On Air

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