By Debbie Bidlake, Federated Farmers Senior Policy Advisor
Wairoa has boldly gone where few councils have gone before – never mind small, resource poor ones. It has introduced a x 4 forestry differential on the general rate to fund the impacts of afforestation on the community and the roading network, rather than using a targeted rate.
This means that in the Wairoa district foresters pay twice what other commercial properties pay on their property value, and over five times what other rural properties pay for most council services.
Wairoa District Council justified its decision to introduce this differential on the basis that the expansion of forestry has had a comparatively negative impact on community wellbeing.
To unpick this statement; Wairoa district has a small ratepayer base, with a population of around 8,960 people, an unemployment rate which is double the national average, and its population is comparatively poor – the median household income in Wairoa is $20,000 less than the national average.
It is no coincidence that Wairoa also has a large and expanding forestry sector (well over 70,000 hectares when I last checked). Over the years, trees have replaced people and local businesses, reducing the services and facilities available for those that remain. Wairoa has no dentist or public transport, for example, and forestry trucks have taken a big toll on the roads farmers rely on for safe access to their homes and businesses.
Around a quarter of Wairoa District Council’s budget is spent on maintaining rural roads. The Council has been scrambling to strengthen bridges, maintain roads, clean up slash and suppress dust – all to support growth within the forestry sector.
These costs have been socialised onto Wairoa ratepayers and the New Zealand public for years. Even with a 75% Funding Assistance Rate from central government and significant past Provincial Growth Fund contributions, Wairoa District Council’s roading budget is unsustainable largely because of logging trucks.
Feds has long argued that the forestry industry needs to shoulder more of the rates burden. Without differentials, forestry properties enjoy much lower rates because unlike fruit trees, nut trees, vines and berry bushes, pine trees are, under the Rating Valuations Act, not included in the land value of properties. Farm to forestry conversions therefore lower the overall rate income of councils.
It’s a double rates whammy for Wairoa farmers, because the above-market prices foresters can afford to pay for sheep and beef farms (due to government subsidies and policy incentives) also boosts the rateable value of the remaining sheep and beef farms.
Forestry differentials can help address the above rating inequities. When the forestry differential was introduced last year, the rates of some forestry properties increased by 56%. Unsurprisingly, several members of the NZ Forestry Owners Association, collectively owning 52,000 hectares of forestry in the Wairoa District, took exception to the increase. They took the decision to judicial review in the High Court, arguing that the council had acted unlawfully by failing to, among other things, consider the positive impacts forestry had on environmental wellbeing and climate change.
The High Court upheld the council’s decision, finding that local authorities have broad discretion as to their considerations and the weighting of them when allocating general rates. The Court held that while this discretion is not unfettered, for a decision to be invalidated as “unreasonable” it must be so “perverse”, “absurd”, or “outrageous in their defiance of logic” that Parliament “could not have contemplated such decisions being made by an elected council”. This is a high threshold.
This is the first judicial review of a rating differential on forestry, and it should support other councils wanting to introduce forestry differentials, providing they follow due process.
A note of caution for farmers though; it has been a long time since rates reflected principles of fairness and equity, and this decision reinforces the broad discretion local authorities have to impose high general rates on a subset of ratepayers, based on political decisions about ability to pay and localized environmental, social and economic impacts.