CODC defends $80,000 development fees for new Cromwell backpackers

by Kim Bowden - Feb 05, 2024

The Central Otago District Council is defending potential fees for a business owner investigating setting up small cabins aimed at seasonal workers in Cromwell.

Darren Fox, who this week is closing his backpackers in the centre of the town due to rising rent, has been told he would need to pay close to $80,000 in development charges to the council to get his new business idea off the ground.

Council infrastructure manager Quinton Penniall says Mr Fox has indicated he wants to put 18 units on his proposed site, and the council fee structure is based on a per 'visitor accommodation unit' charge.

Assuming each unit is self-contained, the development contribution cost would be $4,367.50 per unit, taking the total to $78,615.

Development contribution costs reflect the additional demand a new development would place on council's water, wastewater and roading infrastructure.

In the district, a visitor accommodation unit is assessed as generating half the demand of a standard home when it comes to this infrastructure, and is charged accordingly.

"Population and business growth create the need for new subdivisions and developments, and these place increasing demands on the assets and services provided by Central Otago District Council," Mr Penniall says.

"As a result, significant investment in new or upgraded assets and services is required to meet the demands of growth. Development contributions are collected to meet these costs."

Mr Fox, who has operated the Cromwell Backpackers for seven years, says there is a "severe need" for more accommodation options for lower-wage earners in the town, and is frustrated council fees may force him to bench his latest business idea.

He thinks there should be some discretion for the council to waive or reduce fees for developers committing to providing low-cost accommodation during a housing shortage.

"The things is, we need accommodation here. Why make it hard for people to start? I'm not trying to sell blocks of land and make millions of dollars, I'm just trying to make a living."

However Mr Penniall says the current policy relating to development contributions does not have room for flexibility depending on type of business or land use.

"The purpose of the policy is to recover from those persons undertaking development a fair, equitable, and proportionate portion of the total cost of capital expenditure necessary to service growth over the long term."

But it is Mr Fox's view the charges proposed to him are unfair as he is not creating any more demand, and is simply shifting his existing business from one location to another.

He says he thinks he is being caught out by a policy that should really only apply to new subdivisions requiring new infrastructure.

"Whereas I'm just trying to start a new business in an industrial area that already has all these services. I'm not actually causing a lot more infrastructure to be built or maintained."

Council planning officer Adam Vincent has joined online debate on Mr Fox's story, first published by Crux last week, attempting to explain and justify the council fees in a simple, easy-to-understand manner.

While Mr Fox is right that infrastructure is already in place at the new site, Mr Vincent says developer contributions still help pay for upgrades and maintenance to those assets.

"Councils can either charge contributions for every development and pool the money to pay for upgrades (for example an upgrade to a wastewater pump to accommodate more flow), charge the developer whose proposal happens to trip over the upgrade threshold for the whole upgrade cost, or go hat in hand to the general ratepayers to fund the upgrade," Mr Fox explains in a post to Facebook.

"CODC, and most other councils that I'm aware of, choose the former, supplemented by the latter, and only use the middle for large scale developments that need whole new infrastructure."

Yet Mr Fox remains unconvinced: "Their reasons for the extreme amount aren't really justified. It's actually quite shocking."

Mr Penniall did indicate Mr Fox's potential fees could lessen with some design changes, suggesting, for example, a shared shower and toilet block for use across multiple units could be assessed differently.

Read more: Council fees too big a hurdle, as Cromwell backpackers closes

Main image: Darren Fox is closing the doors on his Cromwell Backpackers this week, leaving 20 occupants, mostly seasonal workers, searching for alternative accommodation.


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