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Monday
Jul042011

Rates Remissions for Developers

A additional proposal providing Developer Rate Remissions is to be put to an Ordinary Meeting on Wednesday 6 July that has been convened specifically for the purpose of dealing with the Freedom Camping By-law changes.

The proposal added to the Order Paper proposes a rates remission for developers, together with less controversial papers concerning the tightening of rates remission for conservation purposes, and changes to the Community Assessment Tool used in the Ten Year plan that I have not yet had a chance to look at.

The following is the text of the 'background' within the Developer Remission paper. It makes interesting reading, and gives rise to the question as to why it is being introduced in this manner at the end of a Hearings and Deliberations Meeting - quite strange really:

At the Council meeting of 15 April 2011, the Council was asked to endorse the current rates remission policy. Part of this policy relates to what is called a "developer subsidy". The relevant section of the report from the 15  April meeting is re-produced below:

Developer subsidy

Staff have been made aware of the Council’s willingness to consider reintroducing a remission of rates for new developments. Under the 2006 Policy developers were able to have rates on new lots remitted for up to two years. This policy was repealed during the review of the 2009 Ten Year Plan due to the significant financial cost that this remission was having on Council. Note that some $271,000 were remitted in the year ended 30 June 2009, compared to only $189,000 for the year ending 30 June 2008.

The increase in the level of remissions that were being provided under the previous policy was a reflection of the economic recession. In effect, developers got 'caught' with a number of developments that were still in the development process when the economic recession and world financial crisis began. This meant that they had developed sections that were no longer readily saleable.

Following the onset of the recession the level of new development being completed within the district has slowed significantly and is not expected to increase until economic conditions improve. As a result the number of developments that would now qualify for a remission, assuming that the two year limit in the previous policy was retained, would be significantly less than the levels seen previously.

There is an argument that reintroducing this policy would encourage developers to obtain their section 224 certificate and pay development contributions sooner rather than later. This argument, fails, however, to recognise that development contributions and rates are a relatively small part of the overall costs of completing a new development. Hence, decisions on whether to proceed with a new development will be driven by a broad range of economic factors other than whether Council has a rates remission policy for new development.

The Council removed the remission of rates policy for new developments because it believed they were not warranted due to the unfair burden placed on the remaining ratepayers. Council staff believe also that the absence of a rates remission policy for new developments is not a critical success factor in determining the viability of a development and are therefore not an effective economic instrument to encourage development in the District.

You will see from this that although there is an appetite within Council to provide what amounts to a 'hand-out' for our beleaguered developers, staff are somewhat cool on the idea. The last Council got rid of the subsidy that was first introduced in 2006, and which cost $270,000 in the last year before it was junked.

There are no grounds whatsoever in my opinion for supposing that such a measure has the slightest effect on the decision making of developers, recession or no recession. I trust that our Council's munificence will be widely reported should it opt to go against the staff recommendation on Wednesday.

 

 

 

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