Development contributions: The new regime

Introduction

Development contributions (“DCs”) continue to get a lot of media attention – and can leave a sour taste, especially as they do not just apply to “developers” as traditionally understood, but to all kinds of projects and people.   

Following a central government review in 2013, where the DC regime was described by the then Minister as “complex, difficult to understand, and … applied inconsistently”, the Local Government Act 2002 Amendment Act 2014 (“LGAA 2014”), which largely came into force on 1 July 2014, has significantly altered the landscape for development contributions. 

Background to development contributions

The legislation has its own terminology:

• “development” means a subdivision, building, land use, or work, that generates a demand for reserves, network infrastructure, or community infrastructure, not including pipes or lines of a network utility operator.  Many of these terms have their own definitions as well; and
• “development contribution” means a contribution provided for in the relevant policy of a Council, calculated in accordance with a statutory methodology, and comprising money, land, or both.

A Council may require a development contribution (“DC”) to be paid when a resource consent, building consent, or authority for a service connection is granted, as long as the DC is consistent with that council’s policy.  Every Council must have a policy before imposing DCs.

DCs may only be required if the effect of the development is to require new or additional assets, or assets of increased capacity - with the consequence that the Council incurs capital expenditure.  A DC is a tax or a charge, not a payment for services.

Complaint processes

The LGAA 2014 places significant emphasis on accountability for Councils in setting DCs.  Essentially it provides for two new processes –  reconsideration and/or objection.

Reconsideration

If a DC is imposed, there is an ability to request that the Council reconsider it, on the grounds that:

• the DC was incorrectly calculated under the Council’s policy; or
• the Council incorrectly applied its policy; or
• the information used to assess the development against the policy – or the way the policy was applied – was incomplete or contained errors. 

The Council’s policy must itself set out the process for seeking reconsideration. 

The request for reconsideration must be made within 10 working days of receiving notice of the level of DCs required by the Council.  The Council then has 15 working days after it has received all required relevant information to respond.

Objection

Objection is a more formal process, and can be sought on the grounds that the Council has:

• failed to properly take into account features of the development which would substantially reduce the impact of the development on the demand for community facilities; or
• required a DC for community facilities not required by or related to the development; or
• breached other provisions of the Local Government Act; or
• incorrectly applied its own policy.

A request for reconsideration may not follow an objection, but an objection may follow a request for reconsideration.

If an objection is made, there is then a specified procedure to be followed under Schedule 13A.  This includes:

• the Council appointing 1 – 3 Commissioners to the matter from a government-appointed list;
• exchange of evidence, and potentially a hearing; and
• consideration of the objection by the Commissioners, with regard to the grounds for the objection, the purpose and principles of DCs, the provisions of the Council’s DC policy, and the cumulative effect of the development.

The DC Commissioners’ costs are payable by the objector, as are the reasonable costs incurred by Council in preparing for, organising and holding the hearing.

Judicial review

Neither the reconsideration process, nor the objection process, affects the right to apply for judicial review of a Council’s decision.

Development agreements

Council and a developer may also enter into a development agreement.  The legislation refers to this as a voluntary arrangement, but also sets out what a development agreement must and may contain. 

A development agreement cannot force a Council to depart from its regulatory responsibilities, nor can it require a developer to go beyond what the developer would normally be required to do.  A development agreement may include such things as:

• the timing of the provision of infrastructure;
• ownership, operation, and maintenance of infrastructure;
•  mechanisms for dispute resolution; and
• terms as to enforcement and breach, including provision for a guarantee, bond, or encumbrance.

Within the boundaries of the legislation, there is the potential for developers and Councils to pursue creative solutions.  A dispute resolution arrangement that fits one development may not fit another; in some cases, an encumbrance may be better than a bond or guarantee. 

Conclusion

The provisions of the LGAA 2014 need to be understood by everyone who gets hit with a DC.  Developers now have greater rights to complain through seeking reconsideration or making an objection.  Councils have clearer obligations of transparency and accountability.  Development agreements will likely have a greater role in allowing developers and Councils to have a meeting of minds. 

If you are levied with a DC you do not like, there is something you can do about it.  Understanding the options is key, and the best approach for determining the way forward is a team effort between the planner, lawyer, and client. 

If you would like further information please contact Dale Thomas on 07 958 7428.