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Development contributions
Development contributions are the primary tool councils can use to recover the costs of infrastructure to support growth from developers. To take development contributions, a council must have planned and costed infrastructure before a consent application for development is submitted.
Some Fast-track development applications are proceeding ahead of council infrastructure planning or relies on infrastructure that crosses council boundaries. This creates an issue of under-recovery of infrastructure costs, which can result in a funding shortfall that needs to be paid by ratepayers.
An amendment to the Local Government Act 2002 will ensure councils can require adequate development contributions from developers to recover the capital costs (attributable to growth) of meeting the increased demand on infrastructure from developments approved under the Fast-track Approvals Act 2024.
The key changes are that:
- councils can update their development contributions policy in response to an approved Fast-track development to collect development contributions; and
- councils can recover development contributions for cross-boundary developments, that place pressure on its network capacity, but are located outside its boundaries.
The existing development contributions system
What is a development contribution
Development contributions are the primary tool councils can use to recover the costs of infrastructure to support growth from developers. The purpose is to allow a council to recover a fair, equitable, and proportionate share of the capital expenditure needed to provide infrastructure for growth over the long term. Development contributions operate under the Local Government Act 2002.
See Local Government Act 2002 (Legislation website)(opens in new tab)
Development contributions may help fund growth-related capital expenditure for items such as:
- roads and other transport infrastructure
- water supply
- wastewater networks
- stormwater networks
- parks and reserves
- community infrastructure such as pools, libraries, community centres or halls.
Development contributions cannot be used to fund operating or maintenance costs. Development contributions are one of several tools councils can use to fund infrastructure. Other tools include rates, user charges, financial contributions, borrowing, government funding and mechanisms under the Infrastructure Funding and Financing Act 2020.
See Infrastructure Funding and Finance Act 2020 (opens in new tab)
Territorial authorities, including unitary authorities acting in their territorial authority capacity, can use development contributions. Regional councils cannot require development contributions.
A council that seeks development contributions must have a development contributions policy that complies with the Local Government Act 2002.
How the development contributions system works
A territorial authority may require a development contribution when:
- a resource consent is granted
- a building consent or certificate of acceptance is granted
- a project information memorandum for a (granny flat) small stand-alone dwelling is issued
- a service connection is authorised.
What’s new
Local Government (System Improvements) Amendment Bill
The Local Government (System Improvements) Amendment Bill amends the Local Government Act 2002 to provide councils with the tools to collect development contributions for Fast-tracked approved developments. The Fast-Track process itself is not changing.
To collect a development contribution, councils must have identified and costed infrastructure provision in its development contributions policy.
Some developments approved under the Fast-track Approvals Act 2024 may proceed:
- before the council has planned the infrastructure required and incorporated that into its development contributions policy
- earlier than the sequence set out in the council’s infrastructure programme and long-term plan
- in one council area while relying on infrastructure in another council area.
This creates an issue of under-recovery of infrastructure costs, which can result in the funding shortfall that needs to be paid by ratepayers.
Key changes
The Local Government (System Improvements) Amendment Bill will enable councils to:
- update its development contributions policy in response to an approved Fast-track development to collect development contributions
- recover development contributions for cross-boundary developments, that place pressure on its network capacity, but are located outside its boundaries.
However, councils must meet certain requirements before it can use this new pathway to charge development contributions for fast-track developments:
- the council must amend its development contribution policy no later than six months after the Fast-track approval is granted
- consultation is not required to amend a development contributions policy in these limited circumstances
- notify the authorised person for the Fast-Track development
- publish the amendment as soon as practicable after adopting it.
The changes do not alter the Fast-track process under the Fast-Track Approvals Act 2024. They amend the development contributions provisions in the Local Government Act 2002.
A council can choose to use their existing development contributions policy without having to make amendments, if it is satisfied this would recover a reasonable share of the costs of growth from a Fast-track development.
For a cross-boundary development, a council that recovers costs on behalf of another council must transfer the corresponding portion of the contribution back to that council.
Should there be concerns about whether the council’s development contribution charge is fair, developers will be able to raise an objection to the charge, as they can currently for development contributions under the Local Government Act 2002.
Councils and developers can also continue to use development agreements.
Which Fast-track projects are covered
When the legislation comes into force, the new settings will only apply to Fast-track projects at all stages up until the applicant has received a draft decision document under section 69 or a draft condition under 70 of the Fast-track Approval Act 2024.
The new settings do not apply to Fast-track projects that have already been approved. This provides a clear transition point while allowing the new settings to apply to more projects already progressing through Fast-track.
These changes will enable councils to charge development contributions on all future Fast-track approved developments, particularly where the development is unanticipated, out-of-sequence with council’s planned investment, or where it is cross-boundaries.
Moving to development levies
Over the longer term, the development contributions regime will be replaced with the more flexible development levies system. The Local Government (Infrastructure Funding) Amendment Bill is expected to be introduced in 2027. Councils would be able to start charging development levies once the Commerce Commission has completed work on methodologies to setting levy charges, expected to be early 2029.