Consents put $35m hole in city purse
A developer stampede at the eleventh hour has seen a spike in housing consents and a $35 million funding gap for Hamilton City Council.
Staff are now scrambling to try to figure out the best way to recoup the cash and new ratepayers in two massive city developments look likely to foot the bill.
But chief executive Richard Briggs isn’t worried.
He said the scale of the gap is a result of the size of the Peacocke and Rotokauri developments.
A higher than expected number of resource consent applications were lodged in June – between the May 31 approval of long term plan budgets and their June 28 adoption.
That means 906 residential lots in the Peacocke area and another 590 lots at Rotokauri were assessed under old policy.
Developers were charged an average of $17,000 per lot compared to the $45,000 per lot in the new policy.
‘‘We communicate through the 10-year plan that the development contributions are going up and then they race to try and bring as much of their development in,’’ Briggs said.
‘‘For Peacockes, and to a lesser degree Rotokauri, we were aware that developers will be putting some through. The question is how much and when and they came in just prior to the 30th of June when we had [the LTP] all baked.’’
Council’s growth funding and analytics unit manager Greg Carstens told the finance committee meeting this week the funding gap is expected to be as high as $25m for the Peacocke area and $10m for Rotokauri.
Staff have been looking at what can be done to recover the shortfall.
‘‘These mechanisms that we are investigating, they are not like development contributions where they are immediate upon the subdivision,’’ Carstens said. ‘‘If there is a recovery mechanism, it can be stretched over 10 or 15 years.’’
Attempts at amending policy to account for the expected applications were made last December but Carstens said the legal risk was too high.
‘‘We can’t address the funding gap in the new policy because the law restricts us in terms of what we can charge,’’ Carstens said. ‘‘We are actually hamstrung by a clause in the Local Government Act that says when someone lodges a consent, that’s what they pay the development contributions at.’’
Briggs said the funding gap – which is yet to be realised – won’t affect council’s balance sheet.
‘‘These things happen over time,’’ Briggs said. ‘‘Even if developers had put their resource consents in under the old policy, we know they are not going to build for a while so that then gives us the opportunity to consider, over a period of time, how we close any gap that has arisen.
‘‘And because the infrastructure we will be putting in will be done over a period of time, we have the ability to work out what the best way of delivering that is as well.’’
Options include a targeted rate on the development area or an agreement with the developer to create a community asset for the city.
‘‘The whole thing is just business for us. We always know they are happening and every year they happen but this one is such a large development the gap is quite significant but it wasn’t a big surprise. We knew it was coming.’’
Mayor Andrew King said development contributions were increased to cover new subdivisions and the gap should be covered by the developer.
‘‘If the developer doesn’t pay then rates have to go up higher in that area to cover it.
‘‘Someone has got to pay. Either the homeowner or the future ratepayer of that property has to pay,’’ King said.
Cr Paula Southgate said the investigation should factor in affordable housing, too.
‘‘The reason we felt we had to be aggressive about growth is because home affordability is the key issue,’’ Southgate said.
Finance committee chairman Garry Mallett said ‘‘growth pays for growth’’.
‘‘We can make affordable housing but it means we have to take some of the utility out of those areas.
‘‘Sometimes it means that maybe there isn’t a park that we can afford because of all these things. When we try to build all of these lovely communities, it costs money and someone has to pay for it and the right person to pay for it is the person who benefits,’’ Mallett said.
Staff will report back to council with a proposal in February.
‘‘If the developer doesn’t pay then rates have to go up higher in that area to cover it.’’
Mayor Andrew King