REPORT TO: Council
MEETING DATE: Tuesday 3 December
2019
FROM: Financial Policy Advisor
Ashley
Humphrey
SUBJECT: Howard
Street Development Contribution Submissions
1.0 EXECUTIVE
SUMMARY - TE KAUPAPA ME TE WHAKARĀPOPOTOTANGA
1.1 The
purpose of this report is to hear submissions which have been received to the
proposed amendment to the 2019/20 Development Contributions Policy.
1.2 This
proposal arises from the need to update council’s Development Contributions
Policy to reflect its proposed funding mechanism to recover the land and
corridor servicing costs required under the Howard Street Designation
1.3 This
decision contributes to the purpose of local government by primarily promoting the social and economic wellbeings and more
specifically through the council’s strategic objectives of providing residential development opportunities.
1.4 Council agreed to consult on its Amended 2019/20 Development
Contributions Policy on 22 August. Changes to the policy included the proposed
recovery of the internal servicing infrastructure costs by way of a ring-fenced
development contribution from those land owners within the residential zone
that benefit from the infrastructure.
1.5 Council received 5 submissions to the proposed policy with the
following general themes being expressed:
· concerns
around the quantum of the cost underpinning the ‘Internal Servicing
Development Contribution’ (ISDC),
· requests
that an independent peer review of the costs and design be undertaken and these
findings be made available to landowners,
· questions
around the compensation value for the land required by council for the road and
service corridor,
· frustrations around
the pace of the development proceeding, and not being able to proceed with
their own development aspirations,
· concerns
that no recognition of the wider beneficiaries of the infrastructure, nor the
additional rates that will be recovered from these properties, has been
made.
1.6 A summary of submissions is outlined within section 4.1 along with
officer comments in section 4.2 to further clarify / update council in respect
of some of the points outlined.
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2.0 RECOMMENDATIONS - NGĀ
TŪTOHUNGA
A) That the Council receives the report titled Howard Street Development Contribution Submissions.
B) That the
Council receive the submissions relating to the report in A) above.
C) That the
Council make a decision on the Amendment to the 2019/20 Development
Contributions Policy at its meeting of 10 December 2019.
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3.0 BACKGROUND – TE HOROPAKI
3.1 The
Howard Street Residential Zone consists of approximately 19 hectares of land
situated between Howard Street and Havelock Road. The land was rezoned for
residential use in May 2017, with appeals being resolved in March 2019.
3.2 The
land is made up of 11 different owners with almost half of the land bordering
the Havelock Road only. Development must access on to Howard Street in
accordance with the structure plan.
3.3 To
unlock the development, council proceeded with a notification of the
Designation of the Road Corridor including the three water services within the
road corridor. The designation was approved in February 2019.
3.4 Whilst council has no legal obligation to
purchase the land and construct the road and service corridor, there is a real
risk that development would be stifled and development may not proceed in a
timely manner if council left it to the market and asked each land owner to
construct their portion of the works.
3.5 Whilst not all developments are the same, the general principle for
the provision of infrastructure is for council to build services to the
boundary of the property with the land owner being responsible for all
internal works.
3.6 Based on concept plans, a budget of $12.2m (plus GST) is forecast to
be required to complete all the works, of which $8.7m (plus GST) relates to
land acquisition and infrastructure required under the designation.
3.7 Officers
brought a report to council titled Howard Street Urban Residential Zone on 27
June 2019, where the following recommendation was supported by council:
A) That Council gives authority for the Chief Executive to
negotiate to purchase the land required for the Howard Street Urban Residential
Zone road and services corridor up to the total cost of $2m (plus GST), noting
that before any land purchases can be concluded, Council is required to approve
the negotiated land purchase subject to an approved development contribution
funding model.
B) That Council consult with the Howard Street Urban Residential Zone
landowners on changes required to the Development Contributions Policy to
provide for the implementation of a ring-fenced Howard Street development
contribution which recovers all costs incurred by Council within the
development area.
C) That Council approve the continuation of design work to
enable the internal infrastructure solution to be more precisely defined and to
reduce delay risks.
3.8 With regards to Recommendation A), council has engaged NZ
Infrastructure Ltd (Ian Bates) to carry out negotiations with landowners to
acquire the land. Negotiations are ongoing and no contracts have been signed to
date.
3.9 With regards to Recommendation B) council adopted
its Amended 2019/20 Development Contributions Policy for special consultation
on 22 August 2019. This included a proposal to ring-fence the costs associated
with the road and three water services within the road corridor and recover
them by way of an ‘Internal servicing Development Contribution’
(ISDC) from those land owners within the residential zone.
3.10 Based
on concept plans, using a budget of $8.7m (plus GST), excluding interest, a development contribution of $33,500 (plus GST) per Household Unit
Equivalent was proposed. This is in addition to the standard
‘Greenfield’ development contribution of $19,000 (plus GST) per
Household Unit Equivalent.
3.11 Council
directly consulted with those landowners holding land within the residential
zone. An information session illustrating the proposed changes and the
financial impacts was provided to landowners on 27 September, which 5 landowners attended.
3.12 An
offer for a one on one meetings was provided to landowners of which 1 further
landowner took up this offer.
3.13 The
proposed changes were also communicated to the wider development community by
way of email including a link to our website, providing more detail around the
proposed changes.
4.0 DISCUSSION - TE MATAPAKITANGA
4.1 Council
received 5 written submissions (with a further submitter endorsing one
submission) in relation to the Amended 2019/20 Development Contributions
Policy. The following summarises the key points raised by each submitter.
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SUBMITTER & SUBMISSION NUMBER
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SUMMARY OF SUBMISSION &
OFFICER COMMENTS
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Chris Burns (1)
CP-03-10-10-19-19
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The submitter supports the calculation methodology, however:
· raises concerns around the quantum of the
costs underpinning the ISDC calculation,
· expresses concerns around the delays in
finalising detailed design plans,
· requests that an independent peer review
of the costs be undertaken.
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Marcus Hill (2)
(TW Property Holdings)
CP-03-10-10-19-20
Note this submission is supported by Barry
& Lynne Keane- owner of 214 Havelock Road
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The submitter:
· raises concerns around the quantum of the
costs underpinning the ISDC calculation,
· provides details of discrepancies between
the concept plan estimate and their experience of recent market rates,
· requests that an independent peer review
of the costs and design be undertaken,
· expresses frustrations around the timing
of the detailed design being provided to council,
· expresses frustrations around the pace of
the development proceeding, and not being able to proceed with their own
development aspirations.
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Daniel Robert (3)
CP-03-10-10-19-21
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The submitter:
· raises concerns around the quantum of the
costs underpinning the ISDC calculation,
· requests greater transparency of the
costs,
· requests that an independent peer review
of the costs be undertaken and be made available to landowners,
· questions the compensation value for land
required by council for the road and service corridor,
· expresses concerns around the impact of
the ISDC and DC on the economic viability of the land,
· raises concerns that HDC has not made
recognition of the wider beneficiaries of this infrastructure,
· sought confirmation as to how one land
parcel (250 Havelock Road) will be assessed.
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Ken Gee (4)
CP-03-10-10-19-22
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The submitter:
· questions the compensation value for land
required by council for the road and service corridor.
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Karen Cooper (5)
CP-03-10-10-19-23
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The submitter:
· opposes the proposed ISDC recovery
approach with the view that it will unfairly impacts landowners / developers,
and will become a cost they are unable to pass on,
· questions the compensation value for land
required by council for the road and service corridor.
· raises concerns that HDC has not made
recognition of the wider beneficiaries of this infrastructure or the
additional rates that will be recovered from these properties,
· raises concerns around the quantum of the
costs underpinning the ISDC calculation,
· requests that an independent peer review
of the costs and designs be undertaken,
· raises concerns around the refund
process,
· expresses frustrations delays around the
timing of infrastructure works.
The submitter asks council to consider:
· reducing the ISDC from the
‘additional rates’ recovered from Howard Street land,
· recovering a portion of the cost by way
of a targeted rate on land within the Howard Street Residential Zone,
· applying the ISDC on a land area basis
rather than per dwelling,
· allowing developers to construct the
services themselves.
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4.2 Officer
responses to the submissions raised can be summarised below:
· Officers
acknowledge the concerns raised by submitters around costs. The costs that
underpin the ISDC are based on concept plans. It was always
council’s intention to update its policy as detailed design plans are
developed and land acquisition negotiations are concluded, giving landowners
greater certainty as to what they will be required to pay. Council is legally
obliged to only recover the costs (including any interest) it has incurred. If
the costs are lower than the current estimates that formulate the ISDC, the
ISDC will be revised accordingly and a lower ISDC will be required from
landowners. As was the case for land within Irongate Industrial Zone, in the
event the landowner pays a ISDC which is higher than subsequent revisions,
council agrees to refund the difference between the two rates to the landowner
who paid the ISDC.
· It
is anticipated that detailed designs including revised cost estimates will be
provided to council early December. For transparency, Officers propose to set
up a meeting with submitters to understand where they believe savings could be
made. To alleviate concerns, officers would support some form or peer review
being undertaken by a suitably qualified independent civil engineer.
· Council
acknowledges the landowners frustration around the timing of the development,
although some of those delays have been due to the court processes and are
beyond council’s control. Council remains committed to working
proactively with landowners and help facilitate the development to bring
much-needed residential sections to the market.
· Officers
have provided detailed estimates under the concept plans to one landowner upon
request, and are willing to share this information with others to ensure
transparency.
· As
part of the land acquisition process, council engaged an independent valuer to
carry out an estimate of the cost of acquiring the land required for the road
and service corridor. Most properties were perceived to receive a betterment
from the land acquisition and road corridor construction, subsequently
resulting in little or no compensation being provided. Landowner negotiations
however continue. If council is required to increase its budget to acquire the
land, it will seek to recover these additional costs through a revised ISDC.
· The
quantum of the ISDC and DC combined is not insignificant, however officers are
of a view that the ISDC component should be viewed as a cost of developing land
not necessarily a ‘development contribution’ per se, as this cost
relates to infrastructure that the landowner would ordinarily expect to incur
as they develop their land. If council wasn’t constructing these services
under the designation, each landowner would have to construct their own
services (at their own cost) and they would have to sacrifice land for their
portion of the internal road corridor.
· The
ISDC covers the cost of infrastructure that directly relates to the servicing
of land within the Howard Street Residential Zone. Officers are of a view that
the need for, and the benefit of this infrastructure, lie with those Howard
Street Residential Zone landowners, and therefore consider it appropriate that
these costs be recovered from these landowners by way of the ISDC. If council
were of a view that the ISDC was prohibitive to development proceeding, it
could consider some form of ‘ratepayer subsidy’ although it has
historically refrained from doing this in the past.
· Officers
wish to clarify that the property at 250 Havelock Road currently contains a
residential dwelling which is connected to council water and has road access to
Havelock Road. A contribution would therefore only apply on this particular
property if, a) the property is required to connect to Council wastewater
services, or b) the land is subdivided. Under a) the wastewater portion of the
ISDC only (which is calculated at $5,998 (plus GST) and the standard Urban
Wastewater DC of $4,203 (plus GST) would apply. Under b) the additional lot
only would be subject to the full ISDC. This position would also apply to any
other residential dwelling within the zone.
· A
common misconception is that ‘growth’ (through the subdivision
of land and change in land uses) increases the amount of rates council
collects. This is incorrect as the rating budget is set independently by
council through the Annual Plan and Long Term Plan processes. It is
acknowledged that ‘growth’ does increase council’s rating
base (I.e the amount of land value our rates are recovered across) however,
this is often offset by the increased costs council incurs as a result of those
change of uses (I.e the renewal and maintenance costs associated with
maintaining those new roads supporting growth, the maintenance costs associated
with new reserves being provided etc).
· Whilst
council has historically chosen to recover ‘growth related costs’
through development contributions, council could consider recovering all or a
portion of these costs by way of a targeted rate on the land. Council needs to
be mindful that recovering a portion of the costs in this manner may not
necessarily reduce the cost to landowners; it will however impact who
pays and when they are required to pay.
A targeted rate
approach favours those wishing to develop their land early as it moves costs
from the developer to the end user (ratepayer) purchasing the section.
A targeted rate
approach however may not be supported by all landowners, as it disadvantages
those choosing not to develop early, as they will be required to pay a rate a
rate on their land irrespective of their development aspirations.
A targeted rate
may indirectly encourage landowners to develop their land or sell to a
developer to develop, however it may affect the affordability for the ratepayer
through higher rates for the duration of the targeted rate.
· Officers
considered calculating the ISDC on a land area basis, however for consistency
and simplicity, proposed a per Household Unit Equivalent (HUE) basis. Applying
the contribution in this manner is generally consistent with how residential
contributions are recovered by most councils, and it provides an alignment with
how our other residential contributions are applied. A per HUE basis also
arguably provides for a better reflection of demand for council infrastructure
I.e it is not unreasonable to believe that generally 15 dwellings on a 1ha site
are likely to place a greater demand on infrastructure than 10 dwellings on a
1ha site, and therefore should be required to pay a greater contribution
towards that impact.
· The
request to allow developers to construct their own portion of works is contrary
to the driver for the designation being put in place in the first instance.
Without the designation, each landowner would be responsible for their portion
of works on their land. However, some landowners may not have the opportunity
to develop until the neighbouring property brought services to their property
boundary. Council proceeded with the notification for the Designation or the
Road corridor and three waters services within the road corridor to unlock the
development and enable every landowner the same development opportunity.
Attachments:
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1⇨
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Submission No. 1 - Chris Burns
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CP-03-10-10-19-19
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Under Separate Cover
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2⇨
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Submission No. 2 - Marcus Hill
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CP-03-10-10-19-20
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Under Separate Cover
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3⇨
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Submission No. 3 - Daniel Robert
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CP-03-10-10-19-21
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Under Separate Cover
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4⇨
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Submission No. 4 - Ken Gee
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CP-03-10-10-19-22
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Under Separate Cover
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5⇨
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Submission No. 5 - Karen Cooper
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CP-03-10-10-19-23
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Under Separate Cover
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SUMMARY OF CONSIDERATIONS - HE
WHAKARĀPOPOTO WHAIWHAKAARO
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Fit with purpose of Local
Government - E noho hāngai pū ai ki te
Rangatōpū-ā-rohe
The Council is required to give effect to the purpose of
local government as set out in section 10 of the Local Government Act 2002.
That purpose is to enable democratic local decision-making and action by (and
on behalf of) communities, and to promote the social, economic, environmental,
and cultural well-being of communities in the present and for the future.
Refer paragraph 1.3 of the report.
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Link to the Council’s
Community Outcomes - E noho hāngai pū ai ki te rautaki matua
This proposal promotes the social and economic wellbeings of communities in the present and
for the future. Refer paragraph 1.3 of the report.
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Māori Impact Statement - Te
Tauākī Kaupapa Māori
No known
impacts.
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Sustainability - Te
Toitūtanga
At this stage of
the project, the significant sustainability issue being address is ensuring
the District has a sustainable supply of land for residential development
activity.
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Financial considerations - Ngā
Whaiwhakaaro Ahumoni
Refer paragraph 3.10 of the
report. The infrastructure costs are proposed to be recovered from growth
development in line with Council’s current approach to funding growth
related expenditure.
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Significance and Engagement - Te
Hiranga me te Tūhonotanga
In accordance with the Local
Government Act 2002 provisions, Council has consulted with the affected
community on this issue through the Special Consultative Procedure.
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Consultation – internal
and/or external - Whakawhiti Whakaaro-ā-roto, ā-waho
In accordance with the Local
Government Act 2002 provisions, Council has consulted with the affected
community on this issue through the Special Consultative Procedure.
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Risks: Legal/ Health and
Safety - Ngā Tūraru: Ngā Ture / Hauora me te Haumaru
Not Applicable.
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Rural Community Board - Ngā
Poari-ā-hapori
Not Applicable.
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Hastings District
Council