Developers decry planned Auckland Council fee rise of up to 500pc

Retail developers are worried about the proposed council charges. Photo/Mark Coote/Bloomberg News

Developers are fighting a proposal which legal experts say could see Auckland Council fees for some categories of new buildings rise up to 500 per cent.

Property Council of NZ executive met this morning about the possible change in development contributions planned by the council, increasing fees last set in 2015. Their members are expected to make strong submissions opposing it.

"The Property Council is very concerned that the proposed increases in development contributions will slow down residential and business development at a time when we desperately need more," a spokesperson said this morning.

A developer went further: "They are trying to use development contributions to price big retail out of the city. They don't want it," he said.

But the council says it is making a substantial increase in infrastructure investment to support growth and allow developments to proceed. Development contributions are rising to allow the council to fund necessary investment. Without the proposed increase, the required investment in infrastructure either would not proceed or would fall on residential rate-payers, the council said today.

One developer said an Auckland retail outlet of about 5000sq m could see fees rise from the existing approximately $300,000 per new building to around $1.8m.

But larger-format stores might incur fees of up to $2m to $2.5m per development, he estimated, which would make such schemes financially untenable.

A legal expert said if the change goes ahead next year, those planning new retail real estate developments face a potential 500 per cent rise in fees which are development contributions - a tax on new buildings, varying between residential and commercial types of buildings.

Submissions opposing the scheme are being drafted.

The council released a draft contributions policy 2019 where the big fee hikes are disclosed.

The expert said the 2019 plan been amended quite significantly compared to the 2018 draft plan and reissued for public submissions by later this week.

"Some of those figures seem remarkably high," he said, worried about the effect the fees would have.

Development contributions for new retail, hospitality, recreation and personal services buildings appear to be six times as high - that is, a 500 per cent increase compared to the 2018 draft, the lawyer said.

Development contributions for commercial activities including offices are planned to be twice as high or to rise 100 per compared to the 2018 draft, he said.

Development contributions on new education and health activities buildings remain the same as in the 2018 draft.

Fee drops are proposed on production and distribution buildings, to be only about a third of the rate in the 2018 draft, he said.

But fees for a range of other non-residential uses are three times as high as in the 2018 draft.

"The residential ratios have remained largely unchanged," the lawyer says on fees applicable to new Auckland homes.

Andrew Duncan, the council's financial policy manager, said contributions recovered from developers pay for reserves, stormwater infrastructure, transport network improvements, cycleways, public transport and community infrastructure like halls, playgrounds and toilets.

The10-year budget, adopted in June, included a substantial increase in investment in infrastructure to support growth and allow development to proceed, Duncan said.

"The council will deliver $26 billion in capital investment over the decade of the budget. Of this, $3.3 billion will be recovered from development contributions, with $2.7b to be collected within the ten years of the 10-year budget," Duncan said.

Submissions to the scheme close on Thursday, he said.