Council charges development contributions to help recover the cost of any additional infrastructure (for example pipes, roads, footpaths) needed to support growth in residential, commercial or industrial development.
Development contributions are collected under the Local Government Act 2002. Without development contributions, ratepayers would have to fund these costs.
Most large development projects across Waipā are loan-funded and currently Council does not charge the developer interest on these loans. The interest is paid for by all ratepayers.
With approximately $190m of development costs ahead of us, and no change to the way we fund development, ratepayers would cover the interest cost of $39m over the 10 year period. That would amount to an additional rate increase of 1.21 per cent in the 18/19 year, peaking at 2.43 per cent in year 5, just to fund interest on development contribution loans.
Council doesn’t think it is fair for ratepayers to cover the interest component of development loans.
Council believes that growth, and the cost of infrastructure to meet that growth, should be funded by those who genuinely create the need for, and benefit from, that infrastructure. In a nutshell, growth should pay for growth.
Council is proposing that if infrastructure is loan-funded by Council, the developer should bear the cost of interest and inflation. Waipā ratepayers would no longer cover the interest portion of the loan. This meets legal requirements and is what most other Councils in New Zealand already do.
Council will review development contributions every year to ensure they reflect the latest costs – this may result in reduced or increased fees from those currently proposed.
You can find out more detail on this in our draft Development Contributions Policy at waipadc.govt.nz
Over the next 10 years the cost of interest on development contribution loans is $39m. The rates requirement in our draft 10-Year Plan is therefore $39m lower than it would have been if this continued to be covered by rates.
This table gives you a rough idea of how much will be saved from your rates bill based on this proposal.
This table shows the impact in the 2018/19 year which is when the change would be in place. Savings will increase in the following 9 years.
|Town||Property type and value||Annual impact of on ratepayers
(for the 2018/19 financial year)
|Te Awamutu||Residential $430,000||Saving of $28.75|
|Cambridge||Residential $570,000||Saving of $32.63|
|Pirongia||Residenital $880,000||Saving of $41.18|
|Kakepuku||Rural $7,100,000||Saving of $212.85|
|Maungatautari||Rural $2,330,000||Saving of $81.20|
The other option is to stick with what we are doing now - ratepayers pay the interest of development contribution loans. This cost would be added to rates and the savings in the above table would not be realised.
We believe it’s a lot fairer for the developer to fund the costs of growth infrastructure.