New Zealand: Local Government Bulletin I

Brief Overview On Development Contributions

Development contributions under the Local Government Act 2002 (LGA) are quickly replacing financial contributions under the Resource Management Act 1991 (RMA) as the growth funding mechanism of choice for territorial authorities (Councils).

In brief, development contributions are levied in accordance with a Development Contributions Policy (DCP) which is a policy contained in a Long Term Council Community Plan (LTCCP).

What are development contributions?

The DCP allows development contributions to be imposed on all developments which generate a demand on Council’s network infrastructure, community infrastructure and reserves for which Council incurs or has incurred capital expenditure to provide new assets, additional assets or assets of increased capacity (namely, growth-related capital expenditure).

Such development will be assessed against Council’s DCP at the time of grant of resource consent, building consent or authorisation for service connection. If a development contribution is not paid, Council has extensive enforcement measures including the ability to withhold a section 224(c) certificate for a subdivision consent, prevent other resource consents from commencing, withhold a code compliance certificate for a building consent, and withhold service connections to its water supply, wastewater, stormwater, and roading networks. Council may also register the outstanding development contribution as an outstanding charge against the subject land.

Development contributions under the LGA do not require the same nexus between growth and development as financial contributions imposed under the RMA. In some cases, this allows development contributions to be levied at a substantially higher rate per additional household or household equivalent unit than was the case for financial contributions.

What is happening now?

Councils must adopt a LTCCP (many of which will contain a DCP) for the period commencing 1 July 2006, using the special consultative procedure in the LGA. This means that many of the DCPs will be nearly finalised. However, Council can continue to refine their DCPs by making appropriate submissions as part of the special consultative procedure.

Time to review the Development Contributions Policy

In terms of substantive policy, we recommend that Councils have appropriate provisions in their DCPs in respect of the following matters:

  • An assessment procedure which allows Council to assess all development at every statutory trigger and again where a substantial amount of time has passed without the development contribution being paid.
  • An enforcement procedure which allows Council to use all the enforcement mechanisms available to it under the LGA.
  • A credits procedure which includes actual credits (for previous contributions paid by financial contributions, development contributions, or by development agreements) and historical credits (which covers activities comprising existing units of demand on the subject site).
  • A remissions procedure which allows Council to make appropriate provision for special developments or where circumstances justify a partial or full remission of the development contribution (which is particularly useful for development caught in the transitional period from the financial contributions regime to the development contributions regime).
  • A procedure allowing Council to require a special assessment from the developer or enter into a development agreement where appropriate.
  • Appropriate provisions in respect of GST liability, to prevent Council’s GST liability from arising prematurely (especially months or years before the development contribution is payable).
  • Appropriate provisions relating to the transition from the financial contributions regime to the development contributions regime.
  • Appropriate provisions relating to Council and Crown developments.
  • Appropriate provisions relating to the valuation of land (where Council agrees to accept development contributions in the form of land).

Council should also consider implementing an operational manual to assist Council officers to administer and interpret the development contributions regime. Such a manual would contain the necessary procedures and delegations to ensure that Council’s financial, building and resource consent officers are working together consistently.

Lysaght Developments Limited V Whakatane District Council Environment Court, Wellington, 21 February 2006, Thompson J, (W 015/06)

A recent judgment held that an appeal against a condition of consent, requiring the payment of a development contribution, could not be brought in the Environment Court. Consequently, the sole means of disputing a development contribution condition would be by way of judicial review in the High Court.

Section 198 of the Local Government Act 2002 provides that a territorial authority may require a development contribution to be made before resource consent is granted under the Resource Management Act 1991. In this case, the Council granted Lysaght application to subdivide a piece of land into 42 residential lots, one balance lot and one esplanade reserve.

The condition was worded as follows:

That pursuant to s198 Local Government Act 2002 and the Development Contributions Policy of the adopted Long-term Council Community Plan 2004-2014, a development contribution of $10,813.50 (inclusive of GST) shall be paid to the Whakatane District Council prior to the release of the s224 Certificate for each lot being created by this development. The contribution required for each stage of the subdivision will be calculated on the number of new lots being created in that stage, that being 30 lots in Stage One and 12 in Stage Two.

Lysaght argued that the development contribution was imposed as a condition of the subdivision consent, thus imposed under the Resource Management Act 1991 and amenable to appeal to the Environment Court. On the other hand, the Council argued that although the development contribution decision was contained in the same document as the subdivision consent, it was a separate decision and was made under a separate statutory provision.

The Environment Court found the Council position to be correct. What Lysaght was arguing would, in essence, result in the territorial authority having to decide on the requirement for a development contribution, and the quantum of that contribution, before it had decided whether the development was to proceed or not.

Casenote: Stay Of Abatement Notice – Austin & Anor V North Shore City Council (A14/06)

This case may lead to questions about the effectiveness of using an abatement notice to prevent a resource consent from commencing when the developer has not paid a development contribution.

Background

Bayswater Apartments Limited (BAL)was granted a landuse resource consent by the Council to convert an existing building into a resthome. The consent would commence when BAL paid the development contribution for which it was assessed. BAL did not pay the development contribution as BAL has challenged the Council’s legal entitlement to the development contribution by judicial review, set down for hearing in June 2006. Without making payment BAL proceeded to implement the consent. The Council issued an abatement notice to BAL and Austin, a director of BAL, requiring BAL to cease works until the resource consent commenced.

The arguments

The appellants sought a stay of the abatement notice on the following grounds:

  • The subject matter of the abatement notice is outside the scope of the Resource Management Act 1991 (RMA), and is not a condition of resource consent.
  • The subject matter of the abatement notice is subject to High Court judicial review.
  • The Council refused to consider the appellants’ application to review the development contribution imposed.
  • The appellants offered to make a ‘without prejudice’ payment to the Council which Council refused to accept.
  • It would be appropriate to hear the judicial review proceedings first as this is the only form of appeal available for a development contribution.
  • There would be no adverse effects on the environment if the stay was granted. The Council did not oppose, but did not accept the grounds for, the application for the stay.

Decision

The Court considered section 325(3D) of the Resource Management Act 1991 in making its decision to grant the stay. The Court held that it would be unreasonable to require BAL to comply with the abatement notice pending the determination of the Environment Court appeal and because of the judicial review proceedings underway challenging the development contribution. The Court was also satisfied that granting the stay would not have an adverse effect on the environment to any significant respect.

The appellants also made an application under section 11 6(1) of the RMA to have the resource consent commenced pending the Environment Court’s determination. The Court did not address this issue in this decision but indicated that if the appellants’ offer to make a ‘without prejudice’ payment to the Council was still available, the application was likely to be granted. If the 11 6(1) application was granted, the appeal against the abatement notice would become unnecessary.

Green Building Council

Local Government in New Zealand has been at the forefront of the move to create sustainable, ‘green’ buildings. The concept has taken longer to be picked up by the wider community but may be given impetus with the establishment of a Green Building Council in New Zealand. This note briefly considers what a Green Building Council is and what it might do.

Green building councils

The World Green Building Council has as its mission the ‘sustainable transformation of the global property industry.’1 The World Council and various member Councils are market focused and their vision of a sustainable property industry is one which ‘balances environmental, social and economic issues to ensure a viable and valuable industry for future generations’. As well as an advocacy and knowledge sharing role, the World Green Building Council is also concerned with encouraging the development of market based environmental rating systems for buildings.

Sustainability

A sustainable building is a ‘Green’ building but the reverse may not necessarily be true. A building that was truly sustainable would provide the perfect balance between present needs and the needs of future generations. Using current technology and materials, it is unlikely that standard would be met. As with sustainability, the concept of a Green building is aspirational. That is why commentators have talked about Green buildings as being ‘less bad’ than the type of buildings to which we are accustomed.

It is more helpful to consider what it is hoped Green buildings will achieve. A report prepared for the Ministry for the Environment2 characterised Green buildings as exhibiting:

  • Radically reduced energy consumption.
  • Improved resource efficiency.
  • Reduced environmental impacts.
  • Improved indoor environment.
  • Lower impact on local infrastructure.
  • Being easier to manage.

These characteristics clearly indicate a movement from the types and styles of buildings we are familiar with to something with a lower impact on the environment. That movement is not something isolated to the building industry but part of much wider global efforts to encourage broad-based sustainable development.

Rating systems

Knowing with certainty that you are dealing with a building of appropriate Green standards is important. The role of developing rating systems which provide a measure of ‘Greenness’ and enable comparison across buildings has been taken up by Green Building Councils.

There are a large number of different rating systems throughout the world. Since 1990, the UK has had BREEAM (Building Research Establishment Environmental Assessment Methodology); the US has had LEED (Leadership in Energy & Environmental Design) since 1999; Australia is developing ‘Green Star’ as an environmental rating system for buildings.

The Australian system, developed by the Green Building Council of Australia (which is comparable to the Energy Star system used increasingly in relation to household appliances), has as its goals to:

  • Establish a common language.
  • Set a standard of measurement for Green building.
  • Promote integrated, whole building-design.
  • Recognise environmental leadership.
  • Identify building life-cycle impacts.
  • Raise awareness of Green building benefits.
  • Reduce the environmental impact of development.

In New Zealand, one of the first tasks of the fledgling Green Building Council is to settle on an appropriate rating system which achieves the above in New Zealand.

Leading the way

Local government, with its longer term outlook is in the ideal position to build Green and show the rest of New Zealand that Green buildings work, are cost effective and save on operating costs. Once a rating system is developed or adopted by the New Zealand Green Building Council, local government can continue to lead by having its buildings rated.

What Parliament Taketh Away, The Greens Giveth Back...

The Resource Management (Climate Protection) Amendment Bill (No 27-1) passed its first reading in the House of Representatives on 29 March 2006. The Bill proposes to reinstate regional councils’ powers under the Resource Management Act 1991 (RMA) to consider the effects of greenhouse gas discharges on climate change. This will apply both to decisions to grant discharge or coastal permits, and to the development of regional plan rules.

Since the enactment of the Resource Management (Energy and Climate Change) Amendment Act 2004 (the 2004 Amendment Act) in March 2004, regional councils have had limited scope to look at the effects of greenhouse gas discharges on climate change when considering applications for discharge permits or coastal permits, or when formulating rules for regional plans.

In deference to the scale of the climate change issue, the rationale behind the 2004 Amendment Act was that climate change matters would be best controlled at a national level. This was to be effected by the implementation of a National Environmental Standard (NES) and a proposed carbon tax. However, two years have passed and a relevant NES has yet to be promulgated.

Similarly, in December 2005 the Government decided not to proceed with the carbon tax in its proposed form. Consequently, the effects of greenhouse gas producing activities on climate change are currently unregulated.

As an interim response to this situation, the new Bill, proposed by Greens MP Jeanette Fitzsimmons, seeks to reinstate local control of activities that may contribute to climate change by repealing sections 70A, 70B, 104E and part of section 104F of the RMA. This will allow regional councils to consider the effects of greenhouse gas discharges on climate change when considering applications for discharge permits or coastal permits, or when formulating rules for regional plans.

This will have an obvious impact on producers of greenhouse gases, who will need to establish the acceptability of discharges of those gases in the context of sustainable management when obtaining or renewing discharge permits. It also suggests that producers may need to get involved in plan change processes where regional councils seek to incorporate new rules relating to greenhouse gas discharges into their existing plans.

Significantly, the Bill also proposes to repeal section 9 of the 2004 Amendment Act (which revoked regional plan rules that controlled discharges of greenhouse gases to air on the basis of their climate change effects, as of 2 March 2004). Accordingly, those rules will automatically be reinstated into their parent regional plans and will take immediate effect, as the Bill does not propose any transitional mechanism in this regard.

The Bill has now been referred to the Local Government and Environment Select Committee, which is receiving public submissions and is expected to report back to the House on 28 September 2006.

Footnotes

1 See www.worldgbc.org

2 Value Case for Sustainable Building in New Zealand, December 2005 updated February 2006, Ministry for the Environment.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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