Hawke’s Bay: 600ha Wairoa forest to pay less in rates than some homes under proposal

Forestry owners will be big winners under the proposed changes. Photo / NZME

A 600ha forestry block in Wairoa will pay less in rates than some homeowners under a controversial rates proposal by Hawke’s Bay Regional Council.

A local government rates expert has criticised the council’s plan to dramatically change its rates system, which will see rates drop for the likes of forestry and rise for the likes of homeowners.

However, the regional council believes it will be “more equitable” to shift from land value (LV) to capital value (CV) to calculate rates, as well as simplify targeted rates and move some services to the general rate like pest control.

If adopted, the proposal will not see the council collect more rates overall but will change the proportion of rates each property pays.

In effect, forestry blocks and farmers will be among the winners with a reduction in rates, while homeowners and many growers will be among the losers facing an increase in their annual bill.

A regional councillor says one factor behind the reduction in forestry rates was an “accounting anomaly” by which trees will not be counted as “capital” if the council shifts to CV.

Pest management will also make an impact, as only a select number of properties like forestry currently pay for that service (through a targeted rate) which will move to the general rate and be shared by all ratepayers.

According to a list of sample properties, a 600ha forestry block in Wairoa will pay around $610 per year in regional council rates under the proposed changes, down from an annual bill of $2320.

Other forests will be charged more depending on where they are and their size.

Comparatively, certain homes in well-to-do areas like Napier Hill and Havelock North can expect to pay over $700 per year - an increase of more than $200 on homes with high capital values.

Most homeowners will see smaller rates increases - if the changes are adopted - paying on average an extra $100 per year in Central Hawke’s Bay, an extra $77 in Hastings district, an extra $46 in Napier and an extra $14 in Wairoa district.

Hawke's Bay Regional Council chair Hinewai Ormsby is supportive of the plans. Photo / NZME

The proposal is for the regional council’s annual rates bill and will not impact district and local councils.

A major part of the proposal is switching to capital value (CV) instead of land value (LV) to calculate each property’s proportion of rates. The council currently uses land value.

“CV can be considered to be more equitable than LV because it considers the value of, and the capacity to earn from, both the land and the improvements on the land [such as buildings],” a consultation document read.

Councillor Martin Williams said there was an “accounting anomaly” for setting values for forestry blocks by which trees were not counted as “capital” - which will impact valuations and therefore rates.

He said properties were valued by an independent valuer and not council, so the regional council could not simply change valuations for forestry blocks.

He invited people to submit on the proposal, including around the possibility to “apply a differential on forestry”.

In general, he said the proposal had merit.

“I think it has merit from the perspective of helping our communities bear future rates increases, which will be unavoidable if we are going to be able to do our job.”

HBRC strategy and governance manager Desiree Cull said moving pest management from a targeted rate to the general rate would also impact on forestry rates.

“The average reduction for the forestry industry as a whole primarily reflects the proposed change to how we rate for pest management for biodiversity,” she said.

“Council considered that the general rate is the most appropriate funding source as pest management contributes to biodiversity across the region and is a general benefit.”

She noted some homeowners would also have targeted rates which many forests don’t, such as public transport.

Common Ground Aotearoa head researcher Jesse Richardson, an expert in local government rating systems, said parts of the proposal had merit.

“It’s broadly good the direction they are moving in, in terms of trying to simplify and reduce the number of different rates that they have.”

However, he said moving from LV to CV to calculate rates had a number of negative impacts.

“It creates a disincentive toward development and ... has negative outcomes for housing supply.”

That is because land without much development will pay less in rates under CV, compared with land with homes or developments.

He said “there are two key problems” with forestry paying less in rates under the proposal.

The first was “the fact that forestry can have negative impacts on the environment” and should pay a fair share.

He said it also “goes against” the council’s principles of equity, because people who own high-value land like a forest “should be paying more than people who own small houses and have low-value property”.