Council expects 40% lift in building fees
The city council is budgeting for development contributions to increase nearly 40% over the next five years to just under $220 million, despite concerns higher proposed fees from 2024-25 could hit growth.
A DC is a charge on developers to help meet the cost of infrastructure networks such as for water, wastewater, stormwater, reserves, community infrastructure and transport activities.
Figures supplied in response to an official information request show the council received more than $157 million in revenue from DCs between 2019 to 2023.
That compares to a budgeted $218 million collectively over the next five financial years, outlined in the 2024-34 long term plan which is currently out for consultation. In 2023 the council received $35.3 million, slightly higher than the $34.8 million it received in 2022.
2021’s revenue was significantly lower at $23.6 million, while 2020 saw the council receive $34.3 million. In 2021, it received $28.9 million.
By contrast, DCs of $30.4 million were budgeted for next year, followed by annual sums of $32.9 million, $43.2 million, $55.3 million and $56.8 million, funding and analytics manager Greg Carstens said. That makes just over $218 million in total.
The council’s plans to hike DCs by more than 100% in some instances has left developers shocked by the fee increase, with a warning it could add hundreds of thousands of dollars, even millions, to project costs. It raised questions about whether the higher DCs could hurt developers and rein in growth.
Failure to achieve budgeted DCs revenue could theoretically affect the ability to stay within the council’s key debt to revenue ratios - a measure which can affect creditworthiness.
Carstens said it was projected that for every $6 million in DCs below budget there could be a one percentage point reduction in the headroom between debt and the top of the ratio.
The Property Council - an industry group including many of Waikato’s largest developers - has said it was deeply concerned about the proposed DCs rises saying a better solution was needed to address Hamilton’s “funding gap“.
Hamilton developer John Kenel warned DC increases would ultimately be passed on to buyers and tenants.
“Currently we're paying about $18,000 per townhouse development contribution in Hamilton East. It's going to $41,000 and Hamilton West to $47,000.
“We're officially in a recession, which means people are suffering, businesses are suffering, you know everyone's struggling and the council is raising the fees by more than 100% when people are already on their knees.”
Also, a recent report to the council’s strategic risk and assurance committee has warned lower than anticipated development in the short term could have a material impact on DCs revenue.
There had been a significant drop in both residential and non-residential developments this financial year, with the report predicting another 10% drop in the next 12 months.