Local Government (Community Well-being) Amendment Bill

Thank you, Madam Chair. Part 2 of this Local Government (Community Well-being) Amendment Bill concerns some other matters apart from the four well-beings, so, mindful that I’ve got a number of colleagues who are very keen to speak on aspects of Part 2, I’m going to confine my comments to development contributions. Again, this is a revision. This is a going back to where we were before, essentially, around how local authorities can charge for development levies. So once again development levies will be able to be levied on developers for infrastructure such as libraries, swimming pools, museums, and the like.

The amendments that were made in our time confined the number of activities or infrastructure that developers could be levied. So we’re really, again, going back to what was before: not a lot of policy, not a lot of policy development in there. In fact, can I suggest maybe just a quick sharp little conversation, good, tick that one off, get that one on the Order Paper, we can get it into the House, and show that we’re doing things. But actually it’s really just going back.

The sad thing about this particular aspect in Part 2 of the bill is that it might seem on the surface that being able to charge developers, those people who put time and effort and take the risk—it’s a business decision, obviously.

💬 Stuart Smith: Put their capital up.

Yeah, they put their capital up. They often highly leverage themselves—they’re like any other business. They take the punt and put up land, and sometimes land and building packages. With the reinstatement of the ability for local authorities to charge development contributions for other things, like a swimming pool over here and a library over here and perhaps a portion of the museum, rather than spreading the burden of what needs to be collected by way of rates and contributions for that development and, indeed, for funding other activities of council, what it really does is increase the cost and the price of the section and the home, because the only thing that the developer can do when faced with a development levy on their parcel of 10 sections or 20 or 100, or whatever it is—they build that cost, like they build every other cost, into the price of that section. So what does that do? It’s obvious. The cost of housing increases.

So in this bill that Labour have so very quickly brought out in an effort to be seen to be doing something, the effect of what they are doing is to increase the cost of housing on New Zealanders. I do question a couple of things. Did they think about that? Did they consider that adding cost directly on to developers could only go in one place, or two—two. Developers could stop putting their heart and soul into their business, which is developing properties and maybe, you know, house and land packages. They could either stop doing it—where does that get us?—or they could build the price of that into their property and land prices and their product.

Well, if one is looking for a way to enable New Zealanders to get into their own homes, can I suggest that this is not it—this is not it. I defy any member, I defy the Minister in the chair, Nanaia Mahuta, to get up in this House and convince anyone in New Zealand who cares to listen that loading cost directly on to a developer is going to do anything else except load the cost, then, of course, on to the purchaser of that land and/or land and housing package. Further, I invite the Minister and any member of the Government to justify the loading of costs on to homebuyers in New Zealand when they have spent so much time—so much time—putting the cost of housing as such a strong political issue for themselves. Once again, we see a policy that absolutely flies in the face of what they say. So what we have here, yet again, is “say something and do another.”

Madam Chair, thank you. I want to take a call on Part 2 of the Local Government (Community Well-being) Amendment Bill and talk about development contributions, which, for those of us involved in local government in the early 2000s, was the bane of our lives. There’s a very good reason for that, because, interestingly, in the early 2000s—and some of the members of this House won’t remember that far back—development and growth in New Zealand was very slow. Housing growth was slow, section sales were slow, and developments were very difficult to move on. That continued right through until probably 2009-10 or even later.

But the reason I raise that is because the issue with development contributions was that to calculate how you might operate a development contributions regime, you needed to have a timespan that they operated under, because they worked in a manner that—say you had a block of a hundred sections. You’d put a development contribution on that, which then contributed to parks and reserves, libraries, roads, whatever you wanted it to contribute to—well, probably not roads so much, because that’s an issue that’s specifically mentioned in this amendment, but certainly infrastructure, underground infrastructure primarily. That contributed to it in a manner that, I guess, was designed to take the share that the new sections needed to provide to the growth of that community—so, in other words, a bit like being a shareholder in a company. You’ve already paid for your shares, like Fonterra for example; you want new people that come along and contribute to buy shares in the company, and that’s how development contributions kind of worked.

The problem was development at that time was very slow, and because it was so slow, the cost of those development contributions got larger and larger and larger based on the interest calculations that stretched out into the future. So by the time they’d been in place for some time, they were putting a significant cost on those sections that were involved in the development contributions regime. So the National Government decided that that wasn’t the way to go, and they discontinued that. About that time, of course, development properties took off—the sales of properties took off. If that had happened initially with the development contributions regime, it might not have looked as bad or as costly as it turned out to be. That was because of the long-term interest cost that was factored into the development contributions regime.

So it was an interesting idea when it was first brought in by councils, and there were many different methods or regimes brought to bear by councils as well in that; they weren’t all the same. If the systems had all been the same and they’d all been calculated as one, it might have been a better system, but it wasn’t and they were different in every council and city. You could end up in an area like my electorate, where you’ve got six or seven councils where they all may have had—they didn’t all have a development contributions levy, actually, because some of them had no development at all. In fact, the population was diminishing in those days. So they all had a different regime. For people going into those areas to develop property, for example, it was very difficult to understand those regimes, and they were all complicated. That was the reason it was discontinued by the National Government in 2008 or 2009.

I mean, you can sort of see some reasons for bringing this type of system into being, and I’m in favour of this type of system. It’s just a matter of how you manage it so that you don’t get the costs running away on the ratepayers, and that’s the tricky thing. When you think about development contributions, they were initially designed to take the load off the current ratepayers and load it on to, effectively, the new ratepayers, which is not a bad system. If it worked, it would be good, but it’s so difficult, as I said earlier, to calculate how those things work, because the pace of sale of property has a big impact on the impact of the cost of those development contributions on that price of the property. So it was a complicated regime and one that I think some councils got into quite a significant amount of difficulty with. That was the reason for the disbanding of it.

Now, whether it’s right or wrong to bring it back, I’m not so sure. I mean, we’re obviously opposed to it, for the reasons that we disbanded it, but it could be that in different times, this type of system works quite well. I believe it’s a little unfair to expect the current ratepayers of an area or a district to pay for the new ratepayers coming in. They need to pay their contribution to that thing, and that’s what this was designed to do. Whether the system that’s now being implemented in Part 2 of this bill is the right way to bring it about, I’m not so sure, and as a consequence of that—and, I guess, as a consequence of history—we are opposed to Part 2 of this bill and the amendments that reintroduce those development contributions. But it is a complicated system, and it takes a fair bit of understanding. So that’s my contribution to Part 2. Thank you, Madam Chair.

Thank you very much, Madam Chair. I intend to take a very short call on Part 2 of the Local Government (Community Well-being) Amendment Bill and just have a short contribution around the development contributions. There also used to be another contribution that developers would be asked to make when undertaking a subdivision, new development, and that was the contribution towards recreational facilities. They would cover things like the contribution towards sports grounds or swimming pools or the skate parks that the Minister mentioned earlier.

Now, with these development contributions being defined differently within this Part 2 of the bill, I just wonder whether the Minister would give some consideration to the submissions from the likes of Federated Farmers or, indeed, the Local Government Business Forum, which includes in its membership Business New Zealand, the Electricity Networks Association, Federated Farmers, the New Zealand Initiative, the New Zealand Chambers of Commerce, and the Property Council of New Zealand, who all suggested that local government needed to get its own house in order before it was given any further tools to enable it to access new funding from development contributions. Also, Federated Farmers went on to suggest in their submission to the select committee that the bill should not proceed and that, in fact, the Government needed to be waiting on the upcoming Productivity Commission’s inquiry into local government funding and considering the recommendations from that inquiry before it actually moved ahead with these development contributions.

There seems to be a bit of unease around providing further tools for councils to make further deductions from developers when making these subdivisions. Also, I’d like just a bit of clarity from the Minister about whether these development contributions will be voluntary, whether there will be an expectation that they will be implemented, and whether discretion will be given to councils on whether to implement them. I know, as my colleague Ian McKelvie mentioned, that in some areas there is huge pressure on infrastructure when major developments occur, but in other areas—in some of those smaller areas like in the West Coast - Tasman electorate and in some of those smaller areas—those councils actually welcome development, and even in my own experience, I chose not to make development contributions compulsory as a mechanism for encouraging development.

So we don’t want to throw the baby out with the bathwater when we are debating these types of bills, because it is not horses for courses. Not every council is made equal with its major urban counterparts, and we just need to be cognisant of the fact that there will be a differential across the country in the need for these development contributions.

I would also suggest that when we’re talking about the kinds of things that development contributions may be used to fund in terms of infrastructure, perhaps it is better addressed through the mechanisms inside of the Resource Management Act (RMA), and we may need to be looking further at the RMA process rather than looking at the Local Government Act 2002 in terms of how we manage those developments. They are so intricately intertwined, I would suggest, that resource management and these development contributions need to work in parallel, and I just ask the Minister if she has given any consideration to that as well. With that, that’s the end of my call.

Just in response to some of the issues raised, the current narrower definition of “community infrastructure” has been in place since the 2014 amendments. Supplementary Order Paper 200, which I’m introducing, inserts a new clause 15 in Schedule 1AA—as members are aware—as a transitional arrangement. The clause will allow territorial authorities to recover development contributions for public amenities constructed before the bill comes into force, subject to additional transparency requirements. Councils will not be able to collect development contributions on public infrastructure that did not qualify under the 2014 definition until the bill has received Royal assent and councils subsequently amend their development contribution policies.

Territorial authorities who wish to recover development contributions on this infrastructure will be required to list the asset’s total cost, the proportion of the cost it wants to recover through development contributions, and the amount that is attributed to consents during the intermediate period, which cannot therefore be recovered through development contributions in the schedule of assets of the territorial authority’s development contributions policy—and there’s a key point. The councils, as members are aware, will consult on their development contributions policy and make it very clear to the community what the extent of the policy is and what it can cover and what it doesn’t cover. So the transitional provision will add, in addition to that, extra transparency criteria requirements to ensure that the community is very well aware of what can be attributed to community infrastructure.

Now, the point was made also about why we didn’t wait until the Productivity Commission placed its report and recommendations in the House, and that’s a point well made. However, it’s also salient to note that a member on that side of the Chamber did mention—and I agree—the approach of using development contributions as a tool that councils can draw on to attribute cost and seek those costs from developers. I think that if the criteria is transparent and if the community understands and is able to participate—as are the developers—on the development contributions policy, then that, in my mind, only strengthens the added advantage of having a tool such as this.

The question was put that the amendments set out on Supplementary Order Paper 200 in the name of the Hon Nanaia Mahuta to Part 2 be agreed to.