High Court Decides Development Contribution
"Top Ups" Unlawful
In a judgment delivered by Winkelmann J on 1 September 2008, the High Court made an order quashing a decision by Auckland City Council requiring a "top up" for development contributions on a development where a financial contribution had previously been taken for the same purpose.
The decision concerns a requirement by Auckland City Council to make Domain Nominee Ltd pay "development contributions" to fund the capital costs of parks (both reserves and community parks). The Council had already required a "financial contribution" from Domain in relation to the same development and for an equivalent purpose, but under the Resource Management Act 1991 ("RMA").
The case focused on the proper interpretation of section 200 of the Local Government Act 2002 ("LGA'02"):
"s 200 Limitations applying to requirement for development contribution
(1) A territorial authority must not require a development contribution for a reserve, network infrastructure, or community infrastructure if, and to the extent that-
(a) it has, under section 108(2)(a) of the Resource Management Act 1991, imposed a condition on a resource consent in relation to the same development for the same purpose; or
(b) the developer will fund or otherwise provide for the same reserve, network infrastructure, or community infrastructure; or
(c) the territorial authority has received or will receive funding from a third party.
(2) This subpart does not prevent a territorial authority from accepting from a person, with that person's agreement, additional contributions for reserves, network infrastructures, or community infrastructures."
The Council argued that section 200(1)(a) merely limits the development contribution able to be levied in certain circumstances, by requiring that the Council allow credit against the development contribution otherwise payable for the amount of the financial contribution previously imposed. It further argued that section 200 does not prevent "top up" development contributions being levied for the difference between the financial contribution already imposed and the development contribution that would otherwise have been payable.
Domain argued instead that the phrase "if and to the extent that" should be interpreted as preventing territorial authorities from requiring development contributions where a financial contribution had previously been levied by way of a consent condition under the RMA in relation to the same development and for the same purpose. On that interpretation, said Domain, while the Council is entitled to levy development contributions on subsequent resource consent and building consent applications for a development, it can only do that where it has not previously imposed a financial contribution for the same purpose.
Background
Part 4B of the Auckland City District plan allows for the levying of financial contributions to provide for the open space needs of new residences by requiring a contribution of land and/or money from developers.
On 20 January 2004, the Council issued a Resource Consent to Domain to construct 27 dwellings at 19-21 Birdwood Crescent, Parnell. Condition 4 of the Resource Consent was imposed pursuant to Part 4B.4 of the District Plan for financial contributions for open space. This included a reserve contribution for cash in the sum of $222,318.
Some time after the issue of that consent, the Council adopted a development contribution policy that allowed for the levying of development contributions to fund parks, an equivalent activity to open space previously funded under the "open space" provisions under Part 4B.4.
In a subdivision consent issued by the Council, dated 15 January 2007, in respect of the Birdwood Crescent development, the Council required a development contribution of $559,443.38 (including GST) but because a financial contribution of $222,318 (including GST) had already being paid, the amount requested represented the balance to be paid on the subdivision consent, or $337,125.38. The amount was broken down into contributions for parks – reserves, parks – community, community amenities and storm water.
In a letter dated 30 May 2007, the Council's solicitors wrote to Domain advising that the development contributions had been calculated incorrectly and the assessment for development contributions was accordingly reduced to $247,517.70.
Domain did not challenge the development contributions levied in respect of community amenities and stormwater. It accepted that it had not previously been required to pay a financial contribution in respect of those two activities. But Domain did challenge the lawfulness of the Council imposing a "top up" levy in respect of parks.
Analysis and Conclusions
Justice Winkelmann considered the legislative background and relevant statutory provisions of the LGA’02 and, in particular Part 8 Sub-part 5, concerning development contributions. She also considered submissions by the Council and Domain concerning the proper interpretation of the statutory scheme and undertook an in-depth analysis of section 200.
Justice Winkelmann concluded that:
"[83] To authorise the Council to levy a contribution of a nature something akin to a tax, clear and unambiguous words are needed. But s 200(1) is ambiguously expressed so as to allow either interpretation argued for.
[84] When I consider s 200 within its statutory context, and against the background of the reasons for the introduction of the new funding regime, a construction of s 200 that prevents the imposition of both a financial and development contribution for the same development for the same purpose seems far more likely. I therefore conclude that this ground of review is made out."
As a result, Justice Winkelmann made an order quashing the Council's decision to impose a development contribution for parks – reserves and parks – community on the subdivision consent in respect of the property at 19-21 Birdwood Crescent, Parnell but also significantly she made the following declaration:
"… that where the Council has imposed a condition on a resource consent for a financial contribution for a particular purpose, s 200 of the Local Government Act 2002 does not enable the Council to impose a development contribution on a subsequent consent in relation to the same development for the same purpose as the financial contribution".
Justice Winklemann’s decision has implications for all local authorities that impose “top up” development contributions. Councils that require a "top up" development contribution that is levied for the difference between any financial contribution already imposed and the development contribution that would otherwise have been payable if the condition on the resource consent had not been imposed should carefully consider this decision.
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Last updated: September 2008
This article is intended to be brief in nature and should be used for information only. It should not be relied on as legal advice. |
