Big hitters duke it out in court

The extent to which developers should pay for the cost of city growth is at the heart of a highstakes court case with potential ramifications for Hamilton ratepayers.

Nineteen applicants, representing some of the city’s business titans, have filed an application for a judicial review of Hamilton City Council’s development contributions policies.

Companies behind the legal challenge, which is being heard in the High Court at Hamilton, include the Gallagher Group, Chedworth Properties, Foodstuffs North Island, and Porter Properties. A total of 17 claims have been filed by the group.

Development contributions are the fees developers have to pay and are one of the main tools available to councils to help fund infrastructure needed for growth. Debt and rates are councils’ other main funding sources.

Counsel Sue Simons, acting on behalf of the 19 companies, said there is a widely held concern among city businesses about the council’s development contributions, known informally as DCs.

Hamilton is experiencing ‘‘tremendous growth’’ as are other councils around the country. Yet none of those other councils’ DCs are the subject of ‘‘wholesale concern and dissatisfaction’’.

‘‘Not a single applicant objects in principle to paying development contributions,’’ Simons said. ‘‘But for there to be 19 companies prepared to bring almost as many claims demonstrates that there is widespread concern about the way Hamilton City Council drafts and implements its DC policies.

‘‘The evidence makes it clear that the concerns about the Hamilton City Council’s development contributions policy, and its systemic overcharging, have been a concern for some years.’’

Although some companies may ultimately choose to take their business elsewhere, other companies, with longstanding commitments to Hamilton, are left with no other choice than to challenge the council’s policies.

Simons said the city council’s policies load a disproportionate amount of the cost of infrastructure onto those who have to pay DCs, resulting in businesses unfairly subsidising other funding sources, ‘‘in particular general rates’’.

‘‘In the submissions and evidence on behalf of the council, there is this reluctance to accept that it is actually acceptable to extract money from the ratepayers in the event there is a shortfall in the recovery of development contributions,’’ Simons said.

Counsel Alan Galbraith QC, representing Hamilton City Council, said DCs have to be consistent with the Local Government Act and their recovery needs to be fair and equitable.

The formulation of DCs is ‘‘rather unusual’’ and in a way the policies resemble a duck floating on water.

‘‘It looks fine . . . but there is an awful lot of activity going on beneath the surface,’’ Galbraith said. The best way to interpret and understand development contributions fees is with a touch of reality. Underpinning the policies are growth assumptions and projections.

‘‘Development contributions have to give its best shot, but it will be its best shot and, sure as anything, next year will be different,’’ Galbraith said.

‘‘It’s fine to say that it’s got to be a strict application of statute, but strict application . . . of something that isn’t strict, it’s an estimate. Every single aspect of the development contributions policies is an estimate.’’

Speaking at the city council’s draft long-term plan submissions hearing last week, John

Gallagher, a director of the Gallagher Group, said some firms his company works with have moved out of Hamilton because of rising costs.

Allowing firms to know the value of development contributions they have to pay before building would help their situation, Gallagher said.

Gallagher’s frustrations with the council’s DCs was echoed by Leonard Gardner, chief executive of Fosters, when he spoke at the council’s submissions hearing on Thursday.

Gardner is aware of the judicial review of the council’s development contributions policies and said Fosters is ‘‘supportive of that process’’.

‘‘We want to see what the outcome is because there is, in our view, a disparity in what Hamilton City [Council] is doing compared to other councils,’’ Gardner said.

Gardner said the development contributions policies have become ‘‘so, so complex’’ and its application is causing market uncertainty and distortion.

Gardner said one of its clients, the Hamilton Christian School, is building a 1379sqm classroom (which includes outside canopies) at a cost of $3.2 million. The development contributions bill for the build is

$500,000 plus GST – about five times the expected amount.

Gardner said Fosters was also hit with a

$190,000 development contributions bill when it subdivided the back part of its property on Arthur Porter Drive, in 2019, for use as a staff car park and for storage. Under the council’s new funding policies, that bill would have been more than $250,000, despite the entire site only costing $796,000.

‘‘In the past, I’ve just sucked it up and got on with it, but it’s got to the point where it’s actually out of kilter, and we actually need to resolve some fundamental issues,’’ he said.

The judicial review is before Justice Ian Gault and is set down for five days.