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Prendergast, Colleen --- "Funding the infrastructure required to mitigate the effects of development" [2004] NZJlEnvLaw 11; (2004) 8 NZJEL 327

Last Updated: 12 February 2023


Funding the Infrastructure Required to Mitigate the Effects of Development

Colleen Prendergast*

The planning and funding of infrastructure (power and water supply, sewage and stormwater services, and roads) so as to ensure its provision prior to or at the same time as development has long been a difficult challenge for Councils. Essentially, the costs of growth can be funded in two broad ways – by the community at large in the form of rates, fees and charges; or by those creating the demand on the basis of the “polluter pays” principle.

This article examines the funding tools contained within the Local Government (Rating) Act 2002, the Local Government Act 2002 and the Resource Management Act 1991. After a brief overview of the historical position, the article looks at each of the tools and considers the purpose and procedural requirements of the relevant Act, the rationale behind the tool and the advantages and disadvantages arising out of its formulation and application. The article then looks briefly at the current sources and sufficiency of funding for infrastructure in three of the local authorities experiencing growth pressures within the Auckland region. The article concludes by identifying the circumstances where use of each of the tools is considered appropriate.


It is generally accepted that the physical environment in which we live plays a large role in our perceived quality of life. New Zealanders, and indeed the developed world, have come to expect a certain, relatively high, standard of

* BTP (Auckland). Currently employed as a Senior Tutor with the Planning Department, Auckland University, Colleen has over 20 years experience in planning for both central and local government, and has a particular interest in statutory planning. This paper was submitted in partial completion of the requirements for an LLB degree from Auckland University.

living. Within urban areas, this extends to a minimum expectation for power and water supply, sewage and stormwater services, and roads.

Such services, or infrastructure,1 are necessary as much to protect the environment from the effects of urbanisation and development as to service the communities established by that development. As development intensifies, the need for easily accessible open spaces and other facilities to satisfy the community’s needs for recreation and leisure also becomes increasingly important. Inadequate infrastructure can lead to the overloading of existing facilities, which in turn can result in consequential social and environmental problems, such as traffic congestion, air pollution, water pollution, and insufficient access to community facilities and open spaces.2

Thus a typical new development may require:3

The planning and funding of this infrastructure so as to ensure its provision prior to or at the same time as development, and thus to complement rather than hinder growth, has long been a difficult challenge for Councils. Significant capital expenditure is required to provide, extend, upgrade or replace the infrastructure necessary to meet the demands of growth and the community’s expectations for improved levels of service and environmental standards.4

Historically, many local authorities considered that the provision of infrastructure largely funded by rates would provide for future growth, and that the new development so occurring would broaden the fiscal base sufficiently to reduce the average cost per household.5 The modern day reality, however, has been that Councils, faced with ratepayer resistance to rates rises seemingly necessary solely to subsidise developer profits, have found it difficult if not impossible to obtain sufficient funds in this way to address the consequences of growth.6 As a result, Councils have increasingly used the powers given by

  1. Defined in this paper to mean water supply, wastewater and stormwater services and facilities, roading, community and recreation facilities, parks and reserves, and parking facilities.
  2. Cameron M, “Financial Contributions in Funding Infrastructure”, (1998) Planning Quarterly

March 1998, 24, at 25.

  1. LECG, “Development Contributions: Economic Analysis”, (2001), Report commissioned by the Working Group on Development Contributions, Auckland, August 2001, 4.
  2. Development Contributions Working Group Submission to Local Government Bill, (2002), at 1 (hereafter referred to as “DCWG submission”).
  3. Cameron, supra note 2, at 25.
  4. Ibid.

legislation to require those wishing to subdivide or develop to contribute towards the infrastructure required to maintain the well being of the present and future community.7

Currently the primary mechanism for taking contributions from developers on development is found within the financial contributions provisions of the Resource Management Act 1991 (“RMA”).8 However, local authorities have experienced significant difficulties in accessing sufficient funds through these provisions. This is at least partly as a result of the two rights of appeal given by the RMA – at the plan formulation stage against the inclusion of provisions for financial contributions; and again at the time of resource consent approval against the amount of contribution required.

Subsequent high compliance costs and uncertain revenue streams have resulted in some Councils “funding” growth by reducing the quality and level of service provided; eg by allowing assets to deteriorate, or by not addressing congestion or overloading of facilities.9 This approach is likely to lead to consequential adverse social and environmental effects and is not sustainable in the long term.

Under the Local Government Act 200210 (“LGA 2002”), local authorities are required to promote the social, economic, environmental and cultural well being of their communities, both in the present and for the future; to make democratic decisions by and on behalf of those communities; and to make those decisions in a sustainable way.11 In addition, Part 6 of the LGA 2002 imposes detailed decision making and accountability requirements on local authorities. Of relevance to this paper is the need for a local authority to manage its financial dealings “prudently and in a manner that promotes the community’s current and future interests.12 In particular, funding decisions are required to be justified on the basis of outcomes achieved; an appropriate distribution of costs and benefits, given the extent to which the costs or benefits are caused by, or will fall on, individuals or groups of individuals; and the overall impact of the funding choice on the sustainable development of the community at large.13

Essentially, the costs of growth can be funded in two broad ways – by the community at large in the form of rates, fees and charges; or by those creating

  1. Ministry for the Environment: Resource Management Ideas, No. 9 “Developing Financial Contributions Policy under the Resource Management Act”, 4.
  2. Resource Management Act 1991, s 108(2)(a) & Cl 3, Part II Second Schedule.
  3. LECG, supra note 2, at 5.
  4. Effective 25 December 2002 in respect of decision making and accountabilities, including financial management principles, and from 1 July 2003 in respect of development contribution provisions
  5. Local Government Act 2002, ss 3 & 10.
  6. Ibid, s 101. 13 Ibid, s 101(3).

the demand on the basis of the “polluter pays” principles contained within both the Resource Management and Local Government Acts. The purpose of this article is to examine these funding tools with a view to identifying the relative merits of each in the funding of the infrastructure required to meet the demands of growth. After a brief overview of the historical position, the article looks at each of the tools and considers:

(i) the purpose of the relevant Act and the rationale behind the tool

(ii) the procedural requirements of the relevant Act

(iii) the advantages and disadvantages arising out of the formulation and application of the tool.

The article then looks briefly at the funding choices of three14 of the local authorities within the Auckland region, in order to better understand the issues faced by Councils experiencing growth pressures. Finally, the article draws conclusions as to the circumstances where use of each of the tools would be appropriate.


2.1 Historical Overview

Statutory recognition of the need and desirability for a certain level of infrastructure in New Zealand is evident from an early stage. Requirements to lay out and build roads, and set aside land for public open space at the time of subdivision date back to the 19th century.15 In 1842, the Municipal Corporations Ordinance, the founding document for the system of local government within New Zealand, conferred upon the Councils so established powers to, among other things, carry out road works and construct water and sewerage systems.16 To this end, specific powers were granted to make bylaws and to make a borough rate on all real property according to a valuation.17

A review of relevant legislation in the first half of the 20th century suggests that developers in urban areas were expected to make at least some contribution towards public infrastructure from at least the 1920s.18 Initially, the provisions

  1. Auckland City Council, North Shore City Council, and Rodney District Council.
  2. Ministry for the Environment, supra note 7, at 4.
  3. Palmer K.A, “Local Government Law in New Zealand” (2nd ed, 1993), 2.
  4. Ibid.
  5. Kirkpatrick D, “Financial Contributions and the Law: An Overview”. (1999) (Paper presented to the NZPI Seminar on Financial Contributions, Auckland, November 1999) , 4.

were primarily aimed at ensuring adequate access to each lot,19 but this later moved towards also requiring the provision of adequate services for each lot.20 By 1964, developers were required to pay such amount as the territorial authority considered “fair and reasonable” towards the cost of providing water, drainage and/or sewage connections to the land being subdivided,21 as well as being required to meet the cost of internal connections. Territorial authorities were given the power to refuse approval if adequate provision for such services to each lot, other than those to be used primarily for rural purposes, was not made.22 The consolidation of the Municipal Corporations Act 1954 and the Counties Amendment Act 1961 into the Local Government Act 1974 (“LGA 1974”) by the 197823 amendment standardised the powers of territorial authorities over the control of subdivision.24 Recognition that the subdivider should meet the fair and reasonable cost of providing adequate services to each lot, which otherwise would fall to be borne by the ratepayer, was continued, as was the power to refuse approval on the basis of inadequate services to each lot. Further, the Council was given a discretion to refuse approval where public services would not be available within a five year period.25 In addition, the concept of a “development levy” on new developments26 was introduced as a means of compensating the community for the cost of providing additional services and

facilities to support those developments.27

In its final form before the passage of the RMA in 1991, the general philosophy of the LGA 1974 was that those responsible for land use intensification should contribute towards the provision of public facilities rendered necessary or desirable by that intensification.28 Contributions, generally on a “fair and

  1. Palmer K.A., “Planning and Development Law in New Zealand” (Vol 2,1984), 555.
  2. Municipal Corporations Act 1954, ss 351, 351BE; see also Kirkpatrick, supra note 18.
  3. Ibid, s 351BE.
  4. Ibid, s 351.
  5. Effective from 1 April 1979.
  6. Palmer, supra note 19.
  7. Local Government Act 1974, s 274(g) & (h). Also see Palmer, supra note 19, at 576.
  8. Defined in s 271A to mean the construction, erection, or alteration of any one or more buildings or other works for the purpose of providing three or more new, or two or more additional, household units; or the construction, erection, or alteration of any one or more buildings fixed plant and machinery, or other works intended to be used solely or principally for administrative, commercial, or industrial purposes or any combination of those purposes where the value of the value of that work is in excess of $100,000.
  9. Somerville CJ, “Financial Contributions under the Resource Management Act 1991: What is the Developer Paying for?” (1999) (unpublished LLB(Hons) dissertation, University of Auckland, 4.
  10. Milligan JR, “Financial Contributions: A Vanished Power?”, (1996) Planning Quarterly, 4.

reasonable” basis, were required on the subdivision or development of land in respect of the provision and upgrading of infrastructure, including:29

The reforms of the late 1980s and 1990s resulted in significant changes in the form and functions of local authorities. Of relevance to this paper was the introduction of a financial management structure requiring Councils to operate under accrual accounting principles, and the separation of regulatory and operational functions. Provisions relating to the control of subdivision, including those enabling Councils to require contributions on the subdivision and/or development of land, were removed from the LGA 1974 into the RMA, an Act which has as its purpose, the sustainable management of natural and physical resources.

In 1996, the financial management provisions of the LGA 1974 were further amended to require, among other things, that local authorities make funding decisions on the basis of a set of specified funding principles. In essence, these require local authorities to apply economic principles to the determination of who benefits from particular services, and to allocate costs in accordance with that benefit.30

Today, the statutory powers available to fund the infrastructure necessary to meet the demands of growth and thus mitigate the effects of development include:

  1. Bond CP, “Financial Contributions on Subdivision and Development under the Resource. Management Act 1991”, (1994) (unpublished Research Project (BPlan), University of Auckland; see also Local Government Act 1974, ss 283-321.
  2. McKinlay P, “Local Government Reform: What Was Ordered and What Has Been Delivered

– Part Two”, LGNZ Research Monograph Series 1997, 35.

  1. Defined in s 108(9) as land, money, or a combination of land and money.
  2. Defined in s 197 as money, land, or both.

These powers, together with the relevant portions of the subject Acts are identified and discussed in more detail below.

2.2 Local Government (Rating) Act 2002

Local authorities are for the most part, self-funding, with only a minor proportion of their income gained from central government or other agencies by way of subsidies or grants. In general therefore, Councils need to finance and/or recover the costs of services they provide. The ways in which they do this include user charges and general taxation. Land taxes in the form of rates are generally seen as a good source of revenue because of the accountability given by the direct relationship between those who pay the money and those who they elect to spend it.33

The Local Government (Rating) Act 2002 replaces the Rating Powers Act 1988 as the principal revenue raising statute for local authorities from the 2003/ 2004 financial year. It effectively provides the statutory basis under which a local authority is able to impose a tax on owners or, in some circumstances, occupiers of property within the district. To this end, the purpose of the Act is, in summary:34

to promote the social, economic, environmental and cultural well being of communities, in the present and for the future by providing local authorities with “flexible” powers to set, assess and collect rates for the purpose of funding local government activities, while ensuring that decisions to set the level of rates required are made in a transparent and consultative manner, and by way of a process that ensures ratepayers clearly understand their liability for rates.

  1. Gow L, “New Zealand’s Resource Management and Local Government Reforms” Paper presented to Session 1, Policy and Legislation Stream, GLOBE ’90 conference, Vancouver BC, Canada, March 1990, 5.
  2. LG (Rating) Act 2002, s 3.
The funding tools of relevance to the funding of infrastructure provision given by the Act are:

  1. The extent of provision of any service to the rating unit by the local authority, including any limits or conditions that apply to the provision of the service.

35 Ibid, ss 13-14.

  1. Defined in the Rating Valuations Act 1998; essentially is a property contained within a separate certificate of title or equivalent land law instrument; or is capable of separate definition, can be sold or transferred, and/or there is no larger or prior estate in the land. Note that the Valuer General has held that these criteria apply to the distribution networks of network utility companies. See also Telecom Auckland Ltd v Auckland City Council [1999] NZCA 259; [1999] 1 NZLR 426; Auckland City Council v Ports of Auckland Ltd [2000] NZCA 190; [2000] 3 NZLR 614,CA.
  2. LG (Rating) Act 2002, Schedule 2, Item 5.
  3. Ibid, s 15.
  4. Ibid, s 21.

40 Ibid, ss 16-18.

41 Ibid, Schedule 3, Items 8-10.

(Note that the extent of provision of any service must be measured objectively and be able to be verified.)42

  1. The number or nature of connections from the land within each rating unit to any local authority reticulation system.
  2. The area of land within the rating unit that is protected by any amenity or facility that is provided by the local authority.

12. The number of water closets and urinals within the rating unit (provided that a rating unit used primarily as a residence for one household must be treated as having only one w.c. or urinal).43

Targeted rates may be set on a uniform basis, or differentially for different categories. Thus, they may be calculated as:44

(a) A fixed amount for all rateable land targeted; or

(b) A fixed amount per factor used as the basis for calculation; or

(c) A differential amount per factor used.

Note that where targeted rates for purposes other than water supply or sewage disposal are imposed on the basis of a fixed amount per rating unit, (ie as in (a) above), the total of the revenue sought by way of that fixed amount together with any uniform annual general charge must not exceed 30% of the total rates revenue sought in any one year.45

Rates must relate to the whole, or part, of a financial year, be set by a resolution of the local authority, and be in accordance with the relevant provisions of the Council’s Long Term Council Community Plan (“LTCCP”) and funding impact statement for that financial year.46 Thus the decision making process of the LGA 2002, including requirements for consultation, notification, submission and hearing, must be followed.

The matters required to be addressed in a funding impact statement are set out in Part 1 of Schedule 10 to the LGA 2002, and include, by way of summary:

  1. Ibid, Schedule 3, Note 3.
  2. Ibid, Schedule 3, Note 4. 44 Ibid, s 16(4).

45 Ibid, s 21.

46 Ibid, s 23(1) & (2).

Rates not provided for within the LTCCP and funding impact statement may only be imposed if necessary to meet an “unforeseen and urgent need for revenue that cannot be met by other means” and then only after a further public process.47

One of the advantages of using rates as a funding tool for infrastructure is that the payment of rates in exchange for the provision of works and services has long been accepted as the major income source for local authorities. In recent times however, ratepayers have increasingly challenged the necessity for, and size of, rates increases.

In Electricity Corporation of New Zealand v Waimate DC,48 the High Court held that the power to rate is given subject to the implied limitation that it should be exercised reasonably, and that a local authority owed a fiduciary duty, in essence a duty of fairness, to all its ratepayers. In the same case, the Court also found that there must be some rational basis for the introduction of a differential rate and some reasonable relationship between the quantum and purpose of the differential. While this case was decided under the Rating Powers Act 1988, the principles are, in my opinion, still valid.

As a general rule, the primary benefits from local authority activities will accrue on the ratepayer. In this regard, it is important to note that the Rating Act changes the liability for rates from the “occupier” to the “owner” of the property or “rating unit”, subject to a proviso only in respect of existing leases or licences which provide for the payment of rates by the lessee/licensee.49 This has ramifications in respect of the judgement needed when making funding decisions as to the distribution of benefits and allocation of liability.

The flexibility given by the “targeted rates” provisions should enable various solutions to the allocation of the costs of growth. In particular, it will allow differentiation of rates levied on the basis of the level of service or activities provided. Further, it would seem that a local authority may set a targeted rate for more than one activity, or more than one targeted rate for a single activity.50

47 LG (Rating) Act 2002, s 23(3) & (4).

  1. HC, Christchurch, CP 47/90, 27 March 1992, Tipping J.
  2. LG (Rating) Act 2002, s 11.
  3. Local Government Know How “Local Government (Rating) Act 2002 – an Overview”

(2002), 46.

However, rates are essentially a blunt revenue-raising instrument. Use of the targeted rates provisions as a means of funding the infrastructure required as a result of development will result in the user, rather than the developer, of those services being liable. As such, the developer is given no incentive to take action to reduce or mitigate costs,51 a matter that may well be relevant in the judgements on funding allocations.

The integration of the rates setting process into the LTCCP and funding impact statements under the LGA 2002 is logical and should result in a more efficient and transparent process overall.

2.3 Local Government Act 2002

The LGA 2002 is a substantial reform of the LGA 1974, although parts of the latter Act are retained. In essence, the LGA 2002 provides the operational framework for local government. It continues the trend towards local authority accountability and prudent financial management begun in the 1989 reforms, and introduces more rigorous consultative and decision making requirements. The emphasis is away from local authorities as autonomous and discrete deliverers of services and towards responsive, collaborative facilitators of community outcomes.52 To this end, the purpose of the Act is, in summary, to:53

In respect of financial management, local authorities are required to manage their affairs “prudently and in a manner that promotes the current and future interests of their community”.54 In particular, the funding needs of each local authority must be met from those sources determined appropriate after consideration of the overall impact of any allocation of liability on the current and future social, economic, environmental and cultural well-being of the community together with the matters specified.55

  1. LECG, supra note 2, at 13.
  2. Wilson & Slater, A Guide to the Local Government Act 2002, (2003), 2.
  3. Local Government Act 2002, s 3. 54 Ibid, s 101(1).

55 Ibid, s 101 (3).

These matters include consideration of the community outcomes to which the activity contributes and the distribution of benefits between the community as a whole or part, and individuals.56 Importantly, consideration is also required as to the extent to which the need to undertake the activity is contributed to by the actions or inaction of particular individuals or groups57 – ie specific recognition of the polluter pays principle that those who create the effects should help to mitigate those effects.

A number of funding sources that may be used by local authorities to meet their operational and capital expenditure funding needs are identified in s 103. Those of relevance to the polluter pays principle include development contributions,58 and financial contributions under the RMA.59

No specific reference is made in s 103 to the ability for Councils to impose “user charges”. “Fees and charges” are included as a funding source, but no definition is given of this term. Reference to the section giving local authorities powers to charge fees60 would seem to indicate that these relate more to administrative or process charges, rather than meeting costs relating to the operational or capital expenditure required to meet the demands of growth. In my opinion however, it is arguable that a local authority can impose user pays charges on the basis of:

Turning now to consider development contributions in more detail. The rationale and requirements for financial contributions will be dealt with in the section of this article relating to the RMA.

56 Ibid, s 101(3)(i) & (ii).

57 Ibid, s 101(3)(iv).

58 Ibid, s 103(2)(g).

59 Ibid, s 103(2)(h).

  1. Ibid, s 150.
  2. Ibid, s 14(g).

62 Ibid, s 101(3)(ii) & (v). 63 Ibid, s 103(j).

Development contributions are defined in s 197 to mean, in part, a contribution of money, or land (including reserve or esplanade reserve (other than in relation to a subdivision consent)), or both, and calculated in accordance with the methodology set out in Schedule 13 to the Act.

Power to require development contributions is given in s 198, with the basis on which they may be required, and the limitations imposed on their requirement, identified in ss 199 and 200 respectively.

The Act provides three circumstances when a requirement for a development contribution may be triggered; viz, at the time of granting:64

(a) a resource consent under the RMA for a development

(b) a building consent under the Building Act 1991

(c) an authorisation for a service connection.

Essentially, development contributions may be required where the consequential effect (my emphasis) of a development65 is to require capital expenditure to provide appropriately for reserves, network infrastructure,66 and/or community infrastructure.67 Given the wording used in the relevant provisions, it seems clear that there must be a causal connection between the demand generated by the development and the requirement for a development contribution.

While development contributions may be imposed to recoup, in full or in part, expenditure already incurred in anticipation of the development,68 they cannot be required where a condition requiring a financial contribution has been imposed for the same development under the RMA. Similarly, contributions can not be required where the developer will fund or otherwise provide the required reserves or infrastructure, or where the territorial authority has, or will, receive separate funding from a third party, although voluntary additional contributions may be accepted in each case.69

In addition, development contributions can only be required where the contribution is provided for in a development contribution policy included within

  1. Local Government Act 2002, s 198.
  2. Defined in s 197 to mean “any subdivision or other development that generates a demand for reserves, network infrastructure, or community infrastructure” but excludes the pipes or lines of a network utility operator (as defined under the RMA).
  3. Defined in s 197 to mean the provision of roads and other transport, water, wastewater and stormwater collection and management.
  4. Defined in s 197 to mean land, or development assets on land owned, controlled, or to be acquired by, the territorial authority to provide public amenities.
  5. Local Government Act 2002, s 199.
  6. Ibid, s 200.

the LTCCP.70 Important to note also, that by virtue of the definition of “development contribution” and “development contribution policy” contained in s 197, a development contribution can only be imposed by a territorial authority, not a regional council.

The development contribution policy and attached schedule must contain sufficient information to enable clear identification of the purpose for which the contributions will be used, the amounts payable, and an explanation and justification of the methodology used and assumptions made in the calculations.71 The policy must summarise and explain the capital expenditure that the Council expects to incur to meet “the increased demand for community facilities72 resulting from growth”.73 It must also identify the proportion of that expenditure that will be funded by development contributions, financial contributions, and other sources, such as rates, and why those sources have been chosen.74

The Act prescribes the maximum amounts that can be taken by way of developer contribution,75 and requires the contributions received to be used for, or towards, the capital expenditure for which they were taken.76 Important to note here that while the contributions received may be used for development of the facility so obtained, they must not be used for maintenance of that facility.77

Specific requirements in respect of the use of contributions for reserves are set out in ss 205 and 206. To a large extent, these appear similar to the provisions identifying the purposes for which reserve contributions could be used within the LGA 1974 prior to their repeal by the RMA. They include the development of community or recreational facilities associated with the reserve, the purchase of land and the provision or improvement of recreational facilities on school land. In addition, the contributions may be used to secure an appropriate interest in perpetuity in land for conservation purposes.

As earlier indicated, to be able to take development contributions a territorial authority must have adopted a development contribution policy, and incorporated it within the LTCCP. Thus, this also imposes annual plan, funding impact statement, and annual report obligations.

70 Ibid, s 198(2).

71 Ibid, ss 201, 202.

  1. Defined in s 5 to mean reserves, network infrastructure, or community infrastructure
  2. Local Government Act 2002, s 106.
  3. Ibid, s 106.
  4. Ibid, s 203.
  5. Ibid, s 204. 77 Ibid, s 204(2).

The public notification and consultation requirements of the special consultative procedure apply both to the initial adoption, and to any subsequent amendment of the policy.78 Rights of submission in respect of matters within the policy and the LTCCP are given by the processes prescribed,79 but direct rights of objection or appeal in respect of the decision are not. Palmer, in his article “Local Government Act 2002 – some preliminary observations”,80 suggests that territorial authorities are likely to establish procedures for the review of development contributions where objections are taken, and notes that decisions are open to judicial review procedures.81

All decisions made by local authorities are required to be in compliance with the decision making processes set out in ss 76–82. These essentially require the Council to consider the views of those persons likely to be affected by, or to have an interest in, in this case, the development contributions policy, and to justify its decisions in a way similar to the justification of plan provisions required by s 32 of the RMA. Although Councils are able to exercise their discretion as to the extent to which this obligation is to be complied with under s 79, decisions made must still have regard to all relevant matters. These include the principles set out in s 14, which include the need to conduct their business in an open, transparent, and democratically accountable manner,82 and those in s 101 relating to the consideration and determination of “appropriate” funding sources83.

The reintroduction of the ability to take contributions from developers into the LGA 2002 is, I believe, appropriate, given the requirement for local authorities to manage their financial affairs in a manner that promotes the current and future interests of the community. Local authorities are required to promote the social, economic, environmental and cultural well being of their communities, both in the present and for the future. The provision of appropriate infrastructure to meet the demands of growth is necessary to enable these objectives to be met. Integrated management of the demands of growth and the provision of funding is necessary to ensure the appropriate infrastructure is provided when required. The LGA 2002 provides the framework under which local authorities must, among other things, make their funding decisions. Development contributions are, like rates and grants or subsidies, a valid funding tool that should be considered along with other sources at the time of making funding


  1. Local Government Act 2002, s 102.
  2. Ibid, s 83.

80 (2003) BRMB 1.

  1. Ibid, 3.
  2. Local Government Act 2002, s 14(1)(a). 83 Ibid, s 101(1) & (3).

The requirement for a development contributions policy within the LTCCP process also standardises the rights of the public to participate in the funding decisions of the Council. Given the interest shown by developers in litigating financial contribution provisions under the RMA, it will be interesting to see whether more people get involved in the LTCCP/annual planning processes once the development contributions policies are in place.

The statutory maxima imposed in respect of reserves raises some concern however. These are similar to those previously required under the former provisions of the LGA 1974, prior to their repeal by the RMA. In contrast to the methodology required to determine the maximum contribution for network and community infrastructure, the contributions required for reserves are based on an apparently arbitrary percentage or area equivalent of land value.

In all other respects, the Act requires decisions to be based on economic efficiency and analysis, and the need to deliver on social, environmental and cultural outcomes. The need for the provision of reserves, like the provision of other infrastructure, is dependent upon the demand generated by the development occurring. An arbitrary cap on the size of the contribution that may be required will not necessarily reflect that demand, and thus is unlikely to satisfactorily meet desired community outcomes. It would seem more logical and justifiable to require reserve contributions by reference to service catchments and levels of service desired.

It is interesting to note also that the maxima imposed on contributions for reserves relate to the additional allotments on subdivision, and the additional household units created on development. This leaves open the question as to whether such contributions can be taken in respect of other types of development. Reserves and open spaces contribute to amenity values, and people’s appreciation of an area’s pleasantness. They are as important within the central business district or other employment areas as they are within the residential or recreational environment. Research undertaken for the draft Open Space Strategy for the Auckland Region84 indicates that areas of quality open space utilised in conjunction with good urban design and architecture have positive psychological effects on individuals. Intensification and new growth places increased pressure on the reserve infrastructure as well as the networks and other community facilities. The ability to require contributions in this regard, regardless of the nature of the final use of the development, is therefore as important as other

infrastructure needs.

Further, the limitations on the use to which contributions for reserves may be put would seem to arbitrarily restrict the Councils powers to determine outcomes in consultation with its community.

84 Auckland Regional Council “An Open Space Strategy for the Auckland Region” (draft 1992).

2.4 Resource Management Act 1991

The resource management law reform (“RMLR”) which occurred in conjunction with the local government reforms of the late 1980s – early 1990s culminated in the enactment of the RMA in 1991. This brought the management of natural and physical resources in New Zealand under a single statutory regime for the first time and enabled a more holistic approach to resource management. As a result, the concept of integrated management of natural and physical resources was able to be introduced.

The RMA is essentially enabling legislation, concentrating on the management of effects, rather than the “direction and control” regulatory regime evidenced by the environmental and planning legislation it replaced. Local authority’s functions under the Act are therefore directed at achieving integrated management of natural and physical resources, and controlling the effects of the use, development, or protection of land and associated natural and physical resources.85

To this end, the RMA has a single, over arching purpose – “to promote the sustainable management of natural and physical resources”.86 Sustainable management is defined in s 5(2) to mean:

managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural wellbeing and for their health and safety while –

(a) Sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations: and

(b) Safeguarding the life supporting capacity of air, water, soil, and ecosystems; and

(c) Avoiding, remedying, or mitigating any adverse effects of activities on the environment.

In addition, the Act contains a series of principles, ss 6, 7, and 8, which are intended to give guidance as to the way in which the purpose is to be achieved.87 In general, the principles expand on the objectives which fall within the purpose

  1. Resource Management Act 1991, ss 30 & 31.
  2. Ibid, s 5.
  3. Reith v Ashburton DC [1994] NZRMA 241.

of the Act and impose duties to “recognise and provide for”,88 “have particular regard to“,89 and “take into account”90 those matters.

The RMA provides for financial contributions to be taken on subdivision or development as a means of funding the infrastructure required to meet the costs of growth. Financial contributions are essentially a form of environmental compensation – compensation payable to the community from the beneficiary of a resource consent so as to avoid, remedy, or mitigate, and/or offset the environmental effects of a proposed activity.91 They are therefore, an extension of the polluter pays principle.

The primary rationale for shifting the developer contributions from the LGA 1974 to the RMA was that financial contributions and reserves contributions were aimed at mitigating environmental effects and as such were more appropriately based in an environmental statute.92 However, while the former provisions were complex and specific, the power given by the RMA is broad and simply expressed. Thus, in contrast with the former development contribution provisions of the LGA 1974, and the current provisions of the LGA 2002, the RMA does not specify limits or quantum as to the contributions required. In this regard, it is interesting to note that the need for a maximum level/value of the contribution was expressly considered during the RMLR process and discarded in favour of reliance on the environmental impacts of the activity being the determinant of the level of contribution required.93

The power to take financial contributions is given by s 108 and cl 3 of the Second Schedule to the RMA. Section 108 allows for appropriate conditions, including those requiring a financial contribution, to be attached to the grant of a resource consent.94 The condition must be imposed for purposes specified within the plan,95 which by virtue of the definition of “district plan” and “regional plan” contained in s 2, must be an operative plan. In addition, the plan must be

  1. Resource Management Act 1991, s 6.
  2. Ibid, s 7.
  3. Ibid, s 8.
  4. Ministry for the Environment, supra note 7, at 6.
  5. Salter R, “Financial Contributions and the Environment”, (1999), (Paper presented to the NZPI Seminar on Financial Contributions, Auckland, November 1999), 5.
  6. Ibid, 4.
  7. Resource Management Act 1991, s 108(2)(a) & 10. 95 Ibid, s 108(10).

prepared in accordance with the Councils functions, the purpose and principles of the Act, and the duty, in s 32, to consider alternative courses of action.96

Thus, in summary, a condition requiring a financial contribution under s 108 must assist local authorities to carry out their functions to achieve the purpose of the Act and must:

The general law in relation the validity of resource consent conditions is also relevant to the formulation of conditions for financial contributions. To be valid, a condition of resource consent must:97

The power to require financial contributions on permitted activities is also given by virtue of their definition in s 2 of the RMA; viz

An activity that is allowed by a plan without a resource consent if it complies in all respects with any conditions (including any conditions in relation to any matter in described in section 108 and section 220) specified in the plan.

Financial contributions received in cash by the Council must be properly accounted for and used “in reasonable accordance with the purposes for which the money was received.”98 If the activity for which the contribution was received does not proceed, Councils must refund or return the contribution, but may retain a portion of the money or land equivalent in value to the costs incurred.99

During the period where a local authority does not have an operative plan containing financial contribution provisions, the authority to take financial contributions from developers is given by the transitional powers contained in

  1. Ibid, s 74.
  2. Newbury DC v Secretary of State for the Environment [1980] 1 All ER 731.
  3. Resource Management Act 1991, s 111.
  4. Ibid, s 110.

ss 407 and 409 of the RMA. Essentially, these continue, to a large extent, the powers to take contributions on the subdivision or development of land given by the LGA 1974 as if those sections had not been repealed.

Thus, contributions for infrastructure can be required during this transitional period, but only to the levels specified in the former provisions. In respect of contributions for reserves on subdivision, for instance, the Council can require not more than 130m2 of land, or not more than 7.5% of the value for each additional residential lot in a subdivision100; or not more than 10% of the value of the additional lots in a commercial or industrial subdivision.101 For the provision of sewerage and stormwater, a “fair and reasonable” contribution is required.102 Important to note here also that, where an activity is permitted under the transitional plan and is also a “development” as defined, it is deemed to be a controlled activity for the purpose of enabling conditions requiring financial

contributions to be imposed, if the Council so wishes.103

As noted, financial contributions are required to be determined in accordance with the provisions of the plan. In preparing a plan, local authorities are required to act in accordance with their functions, Part II of the Act (ie the purpose and principles), and the s 32 duty.104 The obligations imposed under s 32 are rigorous and must be undertaken prior to the initial notification of the proposed plan, and again at the time of making decisions on submissions.105 Essentially, the local authority is required to consider alternative courses of action, and to justify each provision in the plan on the basis that it is necessary to, and the most efficient and effective way of, achieving the purpose of the Act.

Part I of the First Schedule to the Act sets out the process to be followed, and requires consultation with, and later, notification to,106 specified statutory bodies as well as those “considered to be affected”.107 Rights of submission108 and further submission109 are given, as is a subsequent right of reference to the Environment Court110 in respect of the Council’s decision on those submissions.

  1. Local Government Act 1974, s 285.
  2. Ibid, s 286.
  3. Local Government Act 1974, s 283.
  4. Resource Management Act 1991, s 409(4).
  5. Ibid, s 74.
  6. Foodstuffs (Otago Southland) Ltd v Dunedin City Council [1993] NZPT 199; [1993] 2 NZRMA 497.
  7. Resource Management Act 1991, First Schedule, cl 5.
  8. Ibid, First Schedule, cl 3.
  9. Ibid, First Schedule, cl 6.
  10. Ibid, First Schedule, cl 8.
  11. Ibid, First Schedule, cl 14.

At the time of writing, requirements for financial contributions can be imposed only on the basis of provisions in an operative plan. The plan can not be declared operative until all submissions and references have been dealt with or withdrawn.111 Until the plan is operative therefore, requirements for financial contributions must be on the basis of the transitional provisions outlined above. From 1 August 2003 however, Councils will be able to impose such contributions on the basis of rules contained in a proposed plan.112

Resource consent applications are required for all activities other than those classified as “permitted”. These applications may be notified or non-notified.113 Where an application is non-notified, the applicant has a right of appeal114 in respect of the Councils decision to the Environment Court. In some circumstances, the applicant may also have a right of objection115 to the Council in the first instance against the decision made, and then a right of appeal to the Environment Court116. If the application is notified, the applicant and any submitters have rights of appeal to the Environment Court.117 In addition, the applicant may again have a right of objection to the Council, but only if there were no submissions, or if there were, all submissions have been withdrawn.118

One of the advantages of using financial contributions as a means of funding is the lack of prescription within the RMA. Thus, local authorities are able to quantify the sums required, identify the purposes for which they will be required and the circumstances in which they will be taken. Provided the s 32 duty is fulfilled, the local authority can tailor the contributions to the nature and circumstances of their particular district.

The counter balance to this however, is the rights of submission and appeal given at the plan formulation stage, and also at the time of consideration of the resource consent.

At the time of the enactment of the RMA, it was the clear intent that, after a transitional period, the former statutory based developer contribution regime would be replaced by plan based financial contributions determined by local authorities. However, difficulties in formulation together with limited or poorly defined linkages to funding policies resulted in significant numbers of challenges to the financial contributions provisions at the time of proposed plan notification.

  1. Ibid, First Schedule, cl 16.
  2. Resource Management Amendment Act 2003, s 45.
  3. Resource Management Act 1991, ss 93 & 94.
  4. Ibid, s 120.
  5. Ibid, s 357.
  6. Ibid, s 358.
  7. Ibid, s 120.
  8. Ibid, s 357.

Many of these were not satisfied by the Council’s decision and are awaiting hearing in the Environment Court. Thus, many local authorities are operating under transitional provisions for financial contributions, despite the plan being operative in all other respects.

In addition, dissatisfaction with a lack of consistency in the application of financial contribution requirements and concern that they were being seen as a politically convenient revenue-raising tool by some local authorities119 has led to a substantial number of challenges to financial contribution conditions on resource consent approval. Many of the challenges relate to the amount of contribution required, and the relativity between various developments.

It is clearly settled law that contributions required from developers are not a tax on land development and that they must relate to, and be used for, the purpose for which they were required.120 However, two distinct approaches can be taken to assessing a financial contribution requirement – either case by case, or on a catchment basis – each of which is valid but will give a different amount of contribution required. In the first approach, the amount required is determined on a fair and reasonable basis after an analysis of the specific development to ascertain its likely impact on the relevant resources.121 This approach, generally that argued for by developers, does not take account of cumulative effects.

The second approach requires an analysis of the catchment as a whole to estimate the works necessary to avoid, remedy or mitigate likely effects of development within that catchment. Those costs are then apportioned between existing residents (to be funded by rates) and new development on an equitable basis, possibly by a formula of some sort.122 In this approach, the cumulative effects of the development of the catchment as a whole are identified and taken into account in the costs of works required. This is the approach generally preferred by Councils, and in essence is the basis of that incorporated now within the LGA 2002.

Recent case law seems to endorse this approach. In McLennan v Marlborough DC123 the Court disallowed an appeal arguing that the financial contribution required should only be for items related to his subdivision, and held that financial contribution conditions may be imposed for purposes other than mitigating adverse effects as long as those purposes are specified in the plan in accordance

  1. Nolan D & Christie N, “Financial Contributions as a Market Mechanism and the Resource Management Act 1991” (1998) Paper presented to the New Zealand Business Roundtable Conference on Environmental Justice and Market Mechanisms, Auckland, 5-7 March 1998) para 5.9; See also Somerville C.J, supra note 27, at 41.
  2. Waitemata City Corporation v Auckland Regional Authority (Supreme Court, Auckland, A192/ 77, 15 August 1977, Richardson J); See also Kirkpatrick (1999) para 53.
  3. Kirkpatrick, supra note 18, at19; LECG, supra note 3, at 7. 122 Ibid, 18; See also LECG, ibid.

123 W 058/01 (Environment Court, Wellington).

with s 108(10)(a).124 In this case, the Council had “taken an integrated approach to the effects of land development and assessed the overall requirements of the identified areas”.125 The basis on which the contribution was to be required was clearly specified in the transitional district plan. Accordingly, it was appropriate for all subdivisions within the identified area to contribute to infrastructure upgrade.

Similarly, in Auckland CC v Retro Developments Ltd126 the High Court held that the contribution required should be determined in accordance with the provisions in the district plan. Unless the methodology in those provisions reserves a discretion, there is no discretion allowed, and the contribution required will not necessarily be related to the effects of the particular development.127 On appeal, the Court of Appeal accepted, without deciding, that s 108(10) authorises rules which apply prescriptively,128 but found that the section also contemplated plans providing for a lesser level of contribution at the discretion of the local authority.129 Most importantly, the Court held that plans notified or made operative under the law as it stood prior to the 1997 amendment are to be interpreted as fixing the maximum level of contribution that may be imposed, and not as operating prescriptively.130

To summarise then, where financial contribution provisions are included in an operative plan prepared after the 1997 amendment and do not allow for a discretion in their application, the financial contribution required is to be determined in accordance with the manner described in the plan. Until 1 August 2003, where a Council has a transitional plan and proposed plan in effect the financial contribution requirements must be on the basis of ss 407 or 409.131 Unless the transitional plan contains provisions relating to financial contributions, the former statutory provisions of the LGA 1974 apply, and there is no basis on which to fetter those with RMA provisions.132 Thus, in making an assessment of the quantum required, the statutory maxima will apply, and the condition must comply with the Newbury133 tests. This will also be the position where a discretion is given within the financial contribution provisions of an operative district plan,

  1. Ibid, para 46.
  2. Ibid, para 50.

126 (HC) AP 127/01; [2002] NZRMA 445 (HC).

  1. Ibid, paras 26, 27.
  2. Retro Developments Ltd v Auckland City Council CA 161/02, para 23; [2003] NZCA 31; [2003] NZRMA 360 (CA).

129 CA 161/02, para 21

  1. Ibid, paras 26-28
  2. Prospectus Nominees v Queenstown Lakes District Council A123/99; noted [1999] BRM Gazette 169; Application by Carrus Corporation Ltd [1999] NZEnvC 11; (1999) 5 ELRNZ 19.
  3. Re Waitakere City Council A10/2000, noted [2000] BRM Gazette 22.
  4. Newbury DC v Secretary of State for the Environment [1980] 1 All ER 731.

or assumed because the plan provisions were drafted prior to the 1997 legislative change.

What is “fair and reasonable” will depend on the circumstances of each case. In Housing NZ v Waitakere CC134 the Environment Court required payment of a reserve contribution, notwithstanding that the consent was for the subdivision of an existing development, on the basis that the contribution was to make up for past shortfalls.135 In Far East Investments Ltd v Auckland CC136 the Court considered “appropriateness” to include whether a condition is fair and reasonable. In considering “fair and reasonable”, it found the necessary tests to be that the condition is the result of a process of reason, rather than a whim or arbitrariness, is fair to both the appellant and the community, and is proportionate. With respect to whether financial contributions can be imposed on permitted activities,137 the debate has centred, to a large extent, around the need for certainty, and the ability to collect such a contribution. When read together, the High Court and Court of Appeal decisions in Retro Developments138 indicate that s 108(10) will operate prescriptively unless a discretion is expressly provided or the plan was prepared under the previous legislative framework. Given the reasoning in the decisions, provided the contribution is determined in accordance with the district plan and no discretion is involved, the requirement would, in effect, be a rule with which the activity must comply. Thus, a requirement for a permitted activity to provide a financial contribution determined in accordance

with the provisions of an operative plan would seem to be lawful.

It is clear also that the use of financial contributions to recoup the cost of providing public utility services in anticipation of development is a valid use of the power given. In Nicoll Management Ltd v Manukau CC139 the Court noted that this approach enables people and communities to provide for their social and economic well being (by sharing the costs and benefits of such services on a fair and reasonable basis) and health, while sustaining the potential of the resources of land and utilities to meet the reasonably foreseeable needs of future generations for utility services.

A clear theme running through the case law is the need for clear justification of the financial contribution requirement. Financial contributions are a form of

134 [2000] NZEnvC 67; (2000) 6 ELRNZ 139.

135 Ibid; A15/2000, at para 62.

  1. A048/01, noted [2001] BRM Gazette 78.
  2. See Milligan, supra note 28; Atkins H, “Financial Contributions” (1996) Planning Quarterly (December 1996) 2; Kirkpatrick D, “Financial Contributions and Permitted Activities” (1997) Planning Quarterly (March 1997) 2; Milligan J.R, “Defining Permitted Activities” (1997) Planning Quarterly (September 1997) 2.
    1. Auckland City Council v Retro Developments Ltd (HC) AP 127/01, [2002] NZRMA 445;

Retro Developments Ltd v Auckland City Council (CA) 161/02[2003] NZCA 31; , [2003] NZRMA 360.

139 (PT) A62/94.

economic instrument. Properly used and applied, they can be used to offset or mitigate adverse effects of activities, to modify behaviour and/or to assist with resource allocation, for instance by the use of pollution taxes, abstraction fees, or occupancy fees. To do so however, clear linkages need to be made with the Council’s financial strategies and funding policies. Provided the basis on which the contribution is based is clear and justifiable, the contribution is determined on that basis, and like cases are treated alike, the Court has shown a willingness to endorse the Council requirements.

In the past, the mechanisms available for road pricing and the provision of water services has been generalised and poorly targeted.140 The financial management and planning, decision-making and accountability obligations of the LGA 2002 will require Councils to ensure their forward planning and funding practices are integrated and appropriately targeted. In this regard, Palmer141 notes that the LGA 2002 imposes definitive and prescriptive obligations on every decision made by a local authority. In particular, a clear duty is placed on local authorities to disclose and explain the reasons for inconsistent decisions both under that Act or “any other enactment”.142 In his opinion Councils would be well advised to include a reference to compliance with the provisions of the LGA 2002 in any decision made under the RMA.143



3.1 Methodology

In order to better understand the issues faced by Councils experiencing growth pressures when using the current funding tools, I contacted officers within the Auckland and North Shore City Councils, and Rodney District Council, and circulated a short questionnaire for them to complete. Approximately one week later, I met separately with the officers from Rodney and North Shore City to discuss their responses. Unfortunately, I was not able to meet with Auckland City staff due to conflicting time schedules.

Questions asked related to the sources of their current funding, the sufficiency of that funding in respect of current and expected population growth, and their

  1. Kirkpatrick, supra note 18, at para 98.
  2. Palmer K. A, “Decision Making Under the LGA – Impact on RMA Procedures” (2003)

BRMB (March 2003), 16.

  1. Local Government Act 2002, s 80; See also Palmer, ibid, 18.
  2. Palmer, supra note 141, at 19.

opinions and likely use of the new development contribution provisions contained within the LGA 2002.

In addition, the questionnaire sought to discover the current status of the Council’s district plan, the time lag between notification and being made operative, and whether challenges to financial contributions provisions had any bearing on that matter. A further question sought similar information in respect of challenges to financial contribution conditions on resource consent.

3.2 Responses

All three of the Councils surveyed use a combination of funding sources as a means of funding the infrastructure required to meet the demands of growth in both greenfields144 and in areas subject to intensification. All but Rodney District use a combination of borrowing, rates and financial contributions. Rodney currently uses borrowing and financial contributions, finding rates too blunt a tool for the particular circumstances of its district.

All three of the Councils pointed out that borrowing is not a true funding source because the monies to pay the loan back have to be found from some other source at a later date.

All three Councils seek to take contributions from developers. In this respect, Auckland City is able to take such contributions on the basis of the operative section of the district plan within the Isthmus area, and in respect of the Hauraki Gulf Islands section of the plan. The Central Area section is not yet operative, and thus contributions are required under the transitional regime.

Both North Shore City and Rodney District are also operating under the transitional provisions in respect of financial contributions. Rodney’s district plan was notified in November 2000, and hearings on submissions have not yet begun. While North Shore’s plan is operative in part, outstanding references to the financial contributions section mean that it cannot be used at this point.

Auckland City receives sufficient funds in this way to cater for expected growth in greenfield areas, but not in respect of intensification of existing areas. Rodney and North Shore City receive insufficient funds in both situations.

As a result of Council policy, North Shore City are using financial contributions on a limited basis. Contributions are sought in respect of the City’s

  1. Land not currently used for, or land being developed for, urban purposes.

wastewater treatment plant and reserves acquisition only. From my discussions, it would seem that Council believes that it cannot recoup costs for past expenditure on the basis of the “modelling” data held. They are in the process of undertaking detailed identification and analysis of the relevant catchments and assets held and required.

Rodney is also using the transitional provisions, but in conjunction with a comprehensive analysis of its assets and catchment requirements undertaken for its proposed plan and earlier, in respect of proposed plan change 62. It is important to note here that because of high growth pressures and large land area, Rodney was one of the first Councils to seek contributions based on catchment identification and asset management.

Plan change 62 to Rodney’s transitional district plan, notified in October 1996, proposes a comprehensive regime for financial contributions whereby a “share value” is calculated on the basis of the total asset value for each category and divided by the number of separately rated properties in the catchment area. New development is then required to “buy-in” to existing infrastructure, as well as providing the internal infrastructure necessary for the development. If it were to become operative as it was notified, financial contributions of between

$10,000-$20,000 would be required for each new site or unit depending on location.145 The plan change is still currently before the Court, but a decision is expected in the near future.

Both Rodney and North Shore commented on the difficulties of identifying appropriate catchments. While catchment definition of the “hard” facilities (eg network infrastructure) is not seen as a problem, the basis on which catchments for facilities such as libraries, community centres, and recreational spaces and facilities becomes more difficult, particularly where contributions are required also from outlying rural areas.

All three of the Councils envisage using the development contribution provisions of the LGA 2002 – although Auckland City was a provisional “yes”, as the matter had not been finally decided at the time of my survey. The advantages and disadvantages of the development contribution provisions were seen as follows:

  1. Hartley S, “Buying into Existing Infrastructure” (1996) Planning Quarterly (December 1996), 4.
  1. Against financial contributions under the RMA:
  1. Against rates or targeted rates under the LGA 2002:
  1. Against borrowing under the LGA 2002:
The time taken between notification of the proposed district plan and it being made operative is generally quite substantial, and seems to vary with the complexity of the issues and the composition of the stakeholders (and possibly, the provocativeness of the councils proposals); viz

Auckland City
Hauraki Gulf Islands Section
Isthmus Section
Central Area Section
Not yet –
40+ references
North Shore City
2002 (in part)
Rodney District
Submissions not yet heard.

Similarly the relationship between the time taken between notification of the proposed plan and its becoming operative, and challenges to the financial contribution provisions was inconclusive. All Councils received submissions in respect of the financial contribution provisions, but these were not thought to be challenged proportionately more than other provisions. Similarly, while the financial contribution section of the North Shore plan is not yet operative, it is not the only part of the plan still outstanding.

Financial contribution provisions are contained in the proposed and operative plans of all three Councils. Rodney’s transitional plan contains provisions relating to the former LGA 1974 requirements within the plan, and those of proposed plan change 62.

All three Councils require financial contributions on permitted activities to some extent. North Shore identify the financial contribution provisions as rules attaching to some permitted activities. Where permitted activities are likely to lead to intensification, Rodney deems those activities to be controlled activities for the purposes of requiring a contribution. The Isthmus section of Auckland City’s plan requires contributions from residential units for open space purposes. In addition, where additional floor area is proposed in the Business 2 and 3 zones, contributions are required for streetscape purposes.

In general, challenges to financial contribution conditions were not settled out of Court. Interestingly, only Auckland City said that financial contribution conditions on resource consents were challenged more than other conditions. These challenges were made under both s 357 and s 120 of the RMA.

3.3 Summary

In summary, Auckland and North Shore City Councils and Rodney District Council are presently taking and using financial contributions, although in general

they do not receive sufficient funds in this way to fund the infrastructure required to meet the demands of growth.

As a general rule, they have not found that challenges to the financial contributions of the plan, or to resource consent conditions requiring financial contributions are proportionately greater in number than challenges to other provisions or conditions. However, there are more challenges to resource consent conditions for financial contributions than to others in Auckland City. Further, financial contributions do not seem to be the only obstacle to a plan becoming operative.

All three Councils require and are taking contributions from permitted activities, at least to some extent.

North Shore and Rodney Councils are intending to, and Auckland City will probably, use the developer contributions provisions of the LGA 2002 either in conjunction with, or instead of, financial contributions under the RMA. Advantages of these provisions are seen particularly to lie in the “more appropriate” process, the consistency of approach, the ability to target and influence developer behaviour, and the ability to pay off loans faster. The major disadvantage seen was the “capping” of the reserve contribution requirement.


The infrastructure required to meet the demands of growth and the community’s expectations for improved living and environmental standards is expensive to provide and maintain. Local authorities are required to promote the sustainable development of their communities in a fiscally prudent and accountable manner. In particular, justification of funding decisions is required on the basis of outcomes achieved and an appropriate distribution of costs and benefits. This paper has examined the statutory purpose and requirements of rates, developer contributions and financial contributions with a view to identifying the relative merits of each in the funding of infrastructure.

The purpose of the Rating Act is essentially one of funding – providing local authorities with the powers necessary to set, assess, and collect rates to fund local government activities. Rates target land owners in the district who receive the benefits of the improvements made, whether by growth and development or by Council provision.

Where the benefits fall on the community at large, rates – either a general rate or a uniform annual charge – are, I believe, an appropriate funding source. The targeted rates provisions are new and would appear to offer a number of flexible and innovative solutions to enable the rating burden to be distributed more equitably. They may be levied differentially, and in doing so, use different bases charging ratepayers eg a targeted rate can be set across the entire district,

and then differentiated on the basis of location. Thus, this tool would appropriately be used where it is desirable for specific beneficiaries or particular categories of land or activity to be targeted, or where the rates charged should reflect the level of service provided or debt imposed.

Developer contributions under the LGA 2002, and financial contributions under the RMA are similar in purpose and effect. Both seek to ensure that the creator, rather than the end user, of the effect or demand is targeted. However, the processes to be followed in their formulation and application are substantially different.

For developer contributions the power to take, the formulation of, and the way in which the contribution is to be applied is clearly prescribed within the LGA 2002. Integration of the process within the LTCCP provides an overall consistency of approach to the consideration of the activities of the local authority and the way in which those activities will be funded. While the community is to be actively involved in the process, no direct rights of appeal are given.

Financial contributions on the other hand, are contained within the legislative framework of the RMA. Their broad purpose is to mitigate or offset the adverse effects of activities on the environment and as such, they are required to be justified in accordance with the purpose of the RMA – ie the promotion of sustainable management. Limits on the nature or quantum of the contribution which may be required are not prescribed by the Act; neither are the purposes for which the contributions received may be used. Rather, local authorities are given the power to determine these matters within the district plan. Provided the contribution is taken for the purposes specified in the plan, and determined in the manner prescribed by the plan, the contribution will be valid. To ensure local authorities act appropriately, rights of appeal are given at the time of formulation of the plan provisions, and at the time of application for resource consent.

Thus, financial contributions enable de facto funding decisions to be made in isolation from the strategic planning process of the Council. Strong and clear linkages are required between the two processes to ensure transparency and consistency in approach. In the past this has not occurred to any great degree. The requirement to now identify the funding planned by way of financial contributions within the LTCCP process should assist in this regard.

The practitioners I spoke to in the course of writing this article were in general, enthusiastic about the opportunities provided by the developer contributions provisions of the LGA 2002. While acknowledging the difficulties inherent in the analysis demanded to achieve the accountability required, they accepted that necessity in the interests of efficiency and integrated management. Past difficulties with the formulation and application of financial contributions under the RMA seem to be easing – partly as a result of plans progressing through the process, but also partly as a result of a recognition of

the need for greater transparency and linkages with the financial practices and funding needs of their Councils. The obligations and accountabilities of the LGA decision-making processes will assist in this regard.

However, the fact remains that the purpose of the RMA is sustainable management. Financial contributions are therefore essentially required to mitigate environmental effects of activities in order to achieve sustainable management. They are not primarily a funding tool.

Accordingly, this article concludes that developer contributions under the LGA 2002 are the more appropriate tool to fund the large scale, city wide infrastructure required to meet the demands of growth. Financial contributions under the RMA should continue to be used to address the externalities of development that cannot be otherwise mitigated through the planning process.


For completeness, and further to the discussion in Section 2.4(f) of this article, the need for a sufficient causal nexus between the net costs of growth and financial contribution requirements has been reiterated in the recently released Environment Court decision on references to plan change 62 to the Rodney transitional district plan.146

Plan change 62 sought essentially to introduce a financial contribution regime whereby developers of land within the district would pay their fair share of the costs of future growth.147 Opponents had challenged the means of implementation, rather than the basic intent, of the plan change. The Court accepted the evidence that the Council had “fully and carefully” examined alternative possibilities, and that the methodology proposed was “the most apt approach”.148 It was not satisfied however that it would provide the “necessary degree of transparency” in demonstrating “an appropriate nexus between the sustainable management purpose of a contribution levy and the need for its imposition in the context of an individual consent proposal”,149 and accordingly required some revision of the methodology proposed.

The Turvey decision also contains some useful discussion in respect of the financial management provisions of the LGA 2002,150 and the interrelationship

  1. Turvey Company Limited et al v Rodney District Council (Environment Court, Auckland, A195/03, 31 October 2003).
    1. Ibid, para 1; See also discussion in text supra at Section 3.2(c).
  2. Turvey Company Limited et al v Rodney District Council (Environment Court, Auckland, A195/03, 31 October 2003), para 110.
  3. Ibid, para 113.
  4. Ibid, paras 76-96.

between the provisions of the RMA and the (former and current) LGA.151 Of particular interest to the author is the Court’s view that a territorial authority may require a development contribution under the LGA 2002 where a resource consent, refused in the first instance, is later granted on appeal to the Environment Court.152

  1. Ibid, paras 69-75.
  2. Ibid, para 86.


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