How analytical testing can reveal when policy proxies overstate infrastructure demand
The Local Government Act 2002 (the Act) enables a council to charge development contributions (DCs). DCs may be required by a territorial authority when a resource consent is granted, building consent is granted or authorisation for a service connection is granted. The specific DC must be explained in the council’s adopted DC policy (the policy).
In my experience, New Zealand’s development contributions framework works best when the policy assumptions remain closely tied to the infrastructure demand a development is likely to generate. This also aligns with the DC principles within the Act.
The difficulty is that development contributions policies are often built around standardised proxies. Those proxies are understandable from an administrative perspective, but they can sometimes produce outcomes that are more reflective of the internal structure of a policy than of the real effects of a project. If that occurs, and an applicant considers they may wish to challenge the DC charge, they have the right to request a reconsideration and potentially lodge an objection.
The right to challenge a DC charge does not enable challenging the content of the policy. That is, it is not permissible to ‘look behind’ the policy or assess its merits, but only how it has been applied to determine the DC. In simplified terms, the grounds for challenging a development contribution charge, whether by way of reconsideration or objection, include whether:
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The DC is incorrect when calculated against the policy
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The DC is incorrect when assessed against the policy
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The DC is incorrect when applied against the policy
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The DC is incorrect because information used was in error
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The DC is incorrect because information used was incomplete
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The DC is incorrect because it failed to consider features of the development
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The DC is incorrect because development reduces requirements or does not require community facilities
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The DC is incorrect because development funds community facilities differently
Recently I was asked to investigate a DC charge against the above points. The central question was whether the charge had a clear connection to the specific development at its specific location.
My review was directed only to transportation infrastructure. This was deliberate. The assessed DC charge for transport made up about 92 percent of the total charge, so transport was clearly the dominant issue and the most appropriate focus for technical testing.
The question I examined was not whether development contributions as a concept were wrong. Instead, the question was whether the transport assumptions embedded in the policy materially overstated the demand this particular development would place on transport infrastructure, and hence the assessed DC was also overstated.
Abley approached the problem in a novel way.
Rather than arguing that the DC charge should simply be lower, we tested whether the policy’s assumptions produced a reliable answer for materially similar developments. That led to the alternative theoretical approach. In substance, the exercise asked whether the same kind of development could attract a markedly different transport DC charge simply because it was located somewhere else in the same DC catchment area, even though the development itself and its likely demand profile were broadly comparable.
In our assessment, that comparison exposed a flaw in the assumptions underpinning the DC: the method yielded very different answers even where the real-world transport demand was not materially different.
That is why the response from the Council involved matters. In relation to the development, the Council accepted that the alternative theoretical approach proposed by Abley provided a reasonable basis for assessing likely transport demand. It also accepted that the approach demonstrated the development was expected to place less than half of the assumed demand on transport infrastructure, and it reduced the DC charge accordingly.
This was a win for our client, but in my view, Council’s acknowledgement of the revised approach is much more significant. It shows that the approach was not merely argumentative; it was recognised by the Council as a credible analytical framework for demonstrating weaknesses in the assumptions underpinning the policy.
Although the theoretical approach was developed and applied only for transportation, I do not regard its relevance as confined only to transport. The same reasoning could be applied wherever a policy relies on broad assumptions as a proxy for actual infrastructure effects.
In principle, the same form of comparative, assumption-testing analysis could be used for water, wastewater or stormwater infrastructure where there is reason to believe policy assumptions may be overstating or mischaracterising demand.
For me, the broader significance of this work is it demonstrates that DC practice can be improved when policy proxies are tested rigorously against the realities of how developments function.
As a development contributions commissioner, I review development contribution charges and policies. If you would like to discuss a development contribution assessment or reconsideration, policy review or objection process, please get in touch.
