A consortium of nineteen major businesses have banded together to take Hamilton City Council to court in a case that will have implications for all councils.
The subject matter is a judicial review of the council’s ‘development contributions policies’. Before your eyes glaze over, there is a simple explanation. When someone builds a new house, office, or factory, they are using infrastructure such as roads, water treatment plants, and parks that the council (i.e. existing ratepayers) has paid for. Development contributions allow the council to charge new users for their fair share.
‘DCs’ are essential to fund urban growth. Much of the infrastructure needs to be paid for in advance. You can’t build a house if there is no road to your house. Some of the infrastructure will be paid for by developers in preparing the land, but other parts will be funded by council, often using borrowed money. And the amounts are substantial. Hamilton is budgeting on receiving around $50 million per year in contributions.
The key words in the definition are “fair share”.
This is enshrined in the legislation that gives councils the power to set development contribution charges – the Local Government Act 2002. And it is this that the 36 pages of the Statement of Claim filed with the High Court in August is questioning.
If councils have been overcharging, and there is strong evidence that Hamilton City Council has, then not only does this throw the council’s growth planning into disarray, but there is the real risk of having to refund money that has already been spent.
In my experience, the council has indeed been overcharging. I was the architect for a large building. Council staff tried on three occasions to justify charging development contributions for council storm water services, despite the entire industrial estate having a private storm water system. Two of those attempts were after I had complained about the legality of the charges to the chief executive.
Despite that, or, even more disturbingly, because of it, the council invoiced my client for $900,000 of other infrastructure costs such as roads. Their reasoning was unjustifiable, and was challenged. It was reduced substantially but was still ridiculous. A second challenge saw it finally settled at $60,000 – a reduction on 93%. This proves how wrong the original claim was.
Most people simply do not have the resources or knowledge to successfully challenge councils, so they get away with it. The more they get away with, the more they will try to get away with.
The sad part is, the council wastes the money it gains unlawfully with inefficient practices and exorbitant overheads. Now it looks like ratepayers will be paying it back. Those in charge will, of course, be unaccountable.
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