Growth boosts surplus

Hamilton City Council's finance committee last week heard the organisation had an unaudited $5m balancing-the-books surplus at the end of the financial year.

The report pointed to development contributions as being the largest contributor to the favourable result, but a leading property developer in the city has warned that these contributions cannot be relied upon.

Development contributions are payments made to council following the purchase of land in order to use the infrastructure put in place by Council.

Property developer Ian Patton said he was not suprised at the spike in development contributions in the past two years, which previously had never reached above $9m and went as low as $1.4m in 2006.

"The market is very good at present as far residential property is concerned.

He said developers could expect to pay around $30,000 to the council per residential lot, and with around 600 sections being developed per year it wasn't suprising the figure was so high.

He said the figures were sustainable for the next two years, but after this point developers would hit a wall.

"We are going to run out of land," he said.

In the short term, however, Mr Patton said he couldn't understand the Council's reduced prediction for next year, which sees developer contributions slip to $7.4m.

"I don't know why that would be. You don't have to be a rocket scientist to work out the developement will continue. Just pick up a newspaper."

"At the moment there's been a lift in construction activity but they can't rely on it because it's not sustainable. The Council has started a regime of rationing land to sustain the income, but that won't work either."

Councillor and finance committee chair Rob Pascoe said development contributions covered about 53 per cent of the actual cost of developing the infrastructure, which includes such things as water and gas pipelines and roads.

Mr Pascoe said the 47 per cent loss was offset by the growth the city would see when the land was developed.

"The money comes in as each section is sold. The logic is it helps growth. The arguement is that the whole of Hamilton will use those roads," he said.

He said relying on the contributions was always a gamble because they came with high cost and there was no gaurantee the council would recoup it.

Development contributions have spiked in the last few years, rising from $8.9m in 2013 up to $15m in 2014 and $15.8m this year.

"There are two things driving the development contributions, economic activity and Hamilton being a desirable destination."

Mr Pascoe puts the dip in next year's estimated development contribution revenue down to it being a conservative estimate.

This uncertainty is compiled by larged fluctuations in funding coming from developer contributions between different months of the year.

"Of course we don't know how much we are going to get in development contributions each year.

"With dairy incomes dropping and the sorts it may slow down."

Mr Pascoe said development contributions revenues constituted five-eighths of the surplus, and without them the council would have broken even rather than shown a $5m surplus.

Mr Pascoe said Council had also shaved costs in the organisation and sold a number of assets to achieve the surplus, including a carpark on Knox Street, the BNZ and ANZ buildings as well as a number of smaller sections of land.