Sept 9 2015

Development Contributions (DCs) are supposed to be the actual costs of your development on the existing infrastructure of the Council, but they don’t seem to be applied fairly.

Far North District Council did something radical on July 1 this year: cancelling all development contributions. There was very little growth up north, FNDC reasoned, so why not spur development with what’s essentially a massive tax break?

I wish WDC would look it that way. Whangarei’s population growth is as small as FNDC’s – less than 1% per annum growth is expected over the next 10 years. Even so, WDC wants to collect $30m in DCs over the next 20 years.

Most people feel DCs are a tax on them and their land, and the cost of DCs is commonly passed onto the purchasers of new houses or commercial premises as part of the sale price.

Councils get 2% of their revenue from DCs, on average, but the dollar amount can be concerning. WDC got $2.8m through DCs in 2012, for example.

It gets confusing when Councils want their DC money up front before a project has even started construction, or before a project has even been fully divided up at times, and not when the land is sold to a new buyer.  This means that a 10 lot subdivision around our city would cost the land owner something like $250,000 before they construct the new road and lay the pipes.  You can see why development in Whangarei is pretty slow and most people prefer to do up old houses.

The topic surfaced this past week when businessman Alan Lints told the Advocate he was halfway through building a new childcare centre at Tikipunga, which would create 20 jobs, when he opened a DC bill. The Council was asking for $105,000.

Following a Beehive review, the government has stepped in and now wants Councils to only charge what is needed to make the whole process fairer.  However most councils are sticking to their guns and expect land owners to pay up or try somewhere else.

Let's say we decided to change the process to either the FNDC’s tactic of removing the DCs, or at least let’s say DCs are only payable when the property is sold. This means that the Council needs to work with the developer and the real estate agent to get the project done faster and not act like a roadblock. It also means that once the subdivision is completed, even without land being sold the Council, we can start getting rates coming in.
Development in the district is going forward and the Council has money in the bank. Sorted.