Kiwi Property calculates major damage from council fee hike: 'severe' effect

Developers are concerned about the impact the changes would have. Photo/Getty Images.

Council fees on two big Auckland shopping malls would rocket from $1.96 million to $9.4m if a new payment structure was introduced, says New Zealand's biggest listed landlord, Kiwi Property.

It told Auckland Council of an $8.5m rise in development contributions if the new system came in.

Sylvia Park and LynnMall's retail and office areas cost $1.96m in council levies under the previous regime but would spiral to $9.4m if the proposed fee change is enacted, said a submission from Kiwi development general manager Ian Passau.

"The implications of the proposed increase in development contributions are severe," he wrote.

Building new towns or metropolitan town centres was extremely expensive and if the new fees came in, Kiwi's developments would either be delayed, rendered uneconomic or compromise quality.

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Kiwi, with $3b of property, had not challenged development contributions for stormwater or transport because it was appropriate that it pay, he said.

But contributions should not be imposed without proper consultation with affected parties, he said, and that was not the case with the council's new scheme.

"Those increases were unexpected and had not been discussed by the council with affected parties. Kiwi Property has not had sufficient time to prepare a comprehensive response the council proposals," Passau wrote.

Other landlords have complained that development contributions for retail will rise 500 per cent and offices around 100 per cent under the new fees, due to be introduced next year.

But the council says it must levy developers because they build projects which demand the construction of new services and under Auckland Council's 10-year budget approved this year, $26b must be spent on the city's infrastructure needs.

Andrew Duncan, the council's financial policy manager, said last week the council would only recover $3.3b of that $26b from development contributions.

Yet, a huge investment was needed in the city in the next 10 years and developers should pay their share.

Shops and offices put a much higher demand on infrastructure like transport than other types of projects, he said, yet development contributions set in 2015 had not reflected that.

Connal Townsend, Property Council chief executive, says developers will be forced to re-think planned projects if the new fees were introduced because they would affect plans across the city.

"It's a bit of a road smash," Townsend said of the draft proposal.

Submissions had to be with the council by last Thursday and Kiwi is just one of a number of property investors and developers to submit strongly-worded opposition to the plan.

Residential development contributions are proposed to stay the same, which developers says is unfair because they will shoulder all the burden.