Land development and the developers that lead their projects are often misunderstood. Local and regional authorities often view developers, and their agents as solely focused on spending the least amount possible on infrastructure or deliberately disregarding planning constraints. Similarly, the public often only sees the latest news article about an agreement between a developer and a council regarding who will pay for infrastructure upgrades, or their consent application being rejected.
The reality is that most long-term developers, and their agents such as planners, surveyors, and engineers, want to do the best for the communities they work in and for the environment they are adapting.
Infrastructure constraints are a common theme in development nowadays. Very few councils have spare capacity in their infrastructure and are often only just keeping their heads above the renewal bow-wave, let alone managing increased capacity for development. Stopping development due to infrastructure constraints might seem appealing, but the reality of population growth and changing demographics means communities will grow, and their infrastructure will need to respond to the differing needs of their residents.
Long-term developers, and their agents, are the ones with the resources, vision, and expertise to respond to these needs, and they all need to work within the framework that local and regional councils operate under.
Infrastructure constraints, natural hazards, and the natural environment are all challenges that developers face. The typical engineer will have a solution for these challenges, as long as cost isn’t an issue. However, to create affordable communities, development costs must be shared across the communities they serve.
This is where an understanding of asset management and the concerns of councils is beneficial to land development engineers. Engineers working for developers and helping negotiate the cost of infrastructure need to understand how councils fund their work programmes. An understanding of asset management plans and the development of renewal programmes is also important, especially where existing and ageing infrastructure needs to be upgraded for a development. This knowledge can be leveraged to help support infrastructure upgrades for development and can help navigate cost contribution discussions.
Council development engineers and the developers’ engineers should be working together on infrastructure challenges, focusing on the future communities they will serve and how best to equitably distribute these costs. Often, the engineering solution to an infrastructure challenge is easily agreed upon between councils and developers. However, the real challenge comes when deciding who will fund the infrastructure. Councils have long-term plan processes and long-term horizons for infrastructure funding, extending up to 30 years. They are also able to access financing through agencies such as the Local Government Funding Agency, which has a very strong credit rating and results in a low cost of borrowing.
Developers, by nature, operate within much shorter funding windows. They are often viewed as much riskier investments, and their financiers place a higher cost of borrowing on their capital funds. These financing costs ultimately get passed onto the community.
Conclusion
When discussing the cost share of an infrastructure upgrade, councils and developers need to consider the communities they will serve, both existing and future. The burden of costs should be equitably distributed and should leverage the lowest financing cost available so that the cost of infrastructure that the community pays for is as low as possible.
This thought leadership piece was written by Jeremy Rees, B.E (Civil) Hons, CPEng, CMEngNZ, IntPE(NZ) – Principal Civil Engineer at Bonisch, and member of the Āpōpō LDEG SIG.
Āpōpō has a network of subject matter experts, such as Jeremy, across the country in a range of technical areas. Jeremy shares some food for thought on land development funding.
Specialising in stormwater treatment design and three waters infrastructure, Jeremy is well-versed in asset management, horizontal infrastructure project management, construction observation, project cost estimation, and health and safety in design.
Do you also work in land development?
Make sure you join us at the Land Development Engineering Group Forum!
This year’s forum theme is “Transforming Assets for Communities.” We will explore what the land development engineers are doing to develop sustainable outcomes for new and existing communities, now and in the future.
We will consider the challenges facing the land development industry as it continues to grow and change. Whether it be changing legislation, total legislation reform, new construction methodologies, new products on the market, or constrained land due to intensification, there are many challenges impacting our profession that influence or dictate how we work on a daily basis.
When: 20-21 November 2024.
Where: Novotel Tainui Hotel, Kirikiriroa Hamilton.
