Submission on Auckland Council Development Contributions Policy 2018

By email: Contributions.PolicyTeam@aucklandcouncil.govt.nz

Introduction

Thank you for the opportunity to make this submission on the draft Development Contribution (DC) Policy. Heart of the City is the business association for the city centre, which includes more than 4000 commercially rated properties and 12,000+ businesses. Investment is prolific, both public and private sector, and we are committed to the growth and success of the city centre as a thriving place to do business.

We consider there is a fundamental issue with the council’s approach to allocating expenditure to DCs versus general rates.  We ask that the council considers options for improving the fairness of its rating policy in this regard and take this matter into account in setting DCs in future.

We consider that a scenario of significant increases in development charges and/or new targeted rates is not sustainable for either developers or ratepayers.  There is an urgent need to develop alternative infrastructure funding and financing options to reduce or replace the current reliance on property rates and charges.

We urge the council to examine such options during 2018/19, for example infrastructure bonds, value capture mechanisms, tax increment funding and Public Private Partnerships. Stakeholder input will be important and some options may require enabling legislation and advocacy to government. We would welcome the opportunity to engage with the council on a growth funding strategy during 2018/19 that is not confined to a choice between rates and DCs.

What we ask for

We understand that Auckland Council will undertake a further review of Development Contributions (DCs) policy later in 2018. We seek that that Council address the information related issues below (Nos. 1 - 3) in the course of finalising the DCs Policy 2018 and further, that the council engage with HOTC and other stakeholders during the process of developing the next DCs Policy to address the more substantive issues (Nos. 4 and 5):

1. On behalf of our members, we are concerned that it is difficult to consider the reasonableness of the apportionment to growth of the projects listed in Schedule 8 as it only shows the total amount attributed to growth, not the full project cost and the percentage share to be collected via DCs.  For transparency and completeness we suggest that the presentation of projects in Schedule 8 show such detail.
2. Similarly, Schedule 4 only shows a summary of the total budget attributed to growth. For example, it is difficult to see how the council’s total Reserve Acquisition and Reserve Development budgets have been split between existing residents and growth.  The combined growth component accounts for $1billion of DC charges, but the reasonableness of this attribution cannot be considered by the development community obliged to pay DCs.
3. We appreciate that the final DCs will need to reflect projects included in the final LTP and RLTP. That is, the DCs charges will need to be recalibrated if final decisions on those plans depart from the draft plans.
4. We consider there is a fundamental issue with the council’s approach to allocating expenditure to DCs versus general rates.  Whilst DCs purport to charge for the growth component of planned capital expenditure, and general rates fund the renewals component, the latter is spread across all ratepayers, including ratepayers in new rateable properties that are added to the rating base after the beginning of each financial year.  Those ratepayers effectively pay DCs (built into the cost of buying or renting a building) as well as contributing to the cost of replacing/upgrading legacy infrastructure that serves current ratepayers.  Conceptually it would be fairer to exclude funding for renewal of legacy infrastructure that has nothing to do with serving growth, from the rates charged to new additions to the rating base.  We ask that the council considers options for improving the fairness of its rating policy in this regard and takes this matter into account in setting DCs in future.
5. We believe that the burden of insufficient funding mechanisms under the Local Government (Rating) Act is leading to a significant ongoing problem for Auckland.  Members of HOTC are likely to face increases in rates and development contribution charges beyond 2018/19 due to:
   1. proposed DC charges being increased as part of the next DC Policy review
   2. the council may pursue targeted rates in 2019/20
   3. increased infrastructure growth charges (IGCs) following Watercare’s review of its existing IGCs during 2018/19.

We consider that a scenario of significant increases in development charges and/or new targeted rates is not sustainable for either developers or ratepayers.There is an urgent need to develop alternative infrastructure funding and financing options to reduce or replace the current reliance on property rates and charges. We urge the council to work with stakeholders to examine such options during 2018/19, for example including infrastructure bonds, value capture mechanisms, tax increment funding and Public-Private Partnerships. Stakeholder input will be important and some options may require enabling legislation and advocacy to government.

Another iteration of the DCs Policy should not be progressed without taking a broader review of the council’s funding strategy. We would welcome the opportunity to engage with the council on a growth funding strategy during 2018/19 that is not confined to a choice between rates and DCs.