The Government’s Resource Management Act Reforms will have a one-off cost of $864 million over 10 years split mainly between central and local government, and an 11 per cent increase in costs for councils.
But the costs are well outweighed by the benefits, according to an analysis by the Ministry for the Environment, which also floats the possibility the reforms could be usher in new revenue raising tools and “environmental tax”, in part to cover costs.
National and Act said this looks a lot like a tax grab.
The Government said that the Ministry for the Environment is not working on any environment tax proposal.
Officials reckon the establishment and ongoing costs of the reforms will be $3.891b over 30 years, but the monetised benefits are $10.039b. This figure excludes big non-monetary benefits like environmental quality.
The problem is not so much the costs of the reforms versus the benefits, but the fact that the benefits fall to developers and builders, hopefully flowing through into cheaper infrastructure and housing, while the costs will be carried by councils and the government.
Local Government representatives, whilst keen on some of the reforms, are concerned they are being lumped with finding ways of covering the costs - an example, they say, of a tendency for central government to create regulations that local government has to fund by putting up rates.
Environment Minister David Parker, who is driving the reforms, said he thought some of the cost figures were larger than what was likely to work out in practice.
“The cost to councils in the [supplementary analysis report] seems higher than (what) we would expect will be achieved in reality, given we are reducing the number of RMA plans from 100 to 15 regional plans.”
Parker drew attention to the analysis of the expected savings of the new regime, which aimed to cut the high cost of consenting new infrastructure and housing - often thought to be one of the drivers of New Zealand’s poor infrastructure and housing affordability.
“The Infrastructure Commission has established that consents for infrastructure projects cost $1.3b a year or 5.5 per cent of project costs. That is above the extreme end of costs in the EU and Europe which range from 0.1 per cent to 5 per cent.
“If we can reduce that 5.5 per cent to 4.5 per cent that alone would save about $250m per annum,” Parker said.
But it is not the cost of the reforms that is drawing controversy, but the way the Government intends to pay for them.
The paper said RMA “reform will also see the introduction of new funding tools” - including environmental taxes, though these were only “under consideration” . National said this is an example of the Government sneaking taxes into its work programme, the Government points to the fact that environment-directed taxes have been in train at the IRD since the Tax Working Group reported back in 2019.
New funding tools, but not new taxes
The Ministry for the Environment, they said, is emphatically not working on any environmental taxes.
The analysis of the RMA reforms was contained in a supplementary analysis report - a version of a regulatory impact statement.
It mentioned three possible new funding tools.
These included “allocation mechanisms” which would allow resources to be allocated using “auctions and tenders” at which money would change hands. It’s not clear whether these allocation mechanism would apply to the vexed issue of water rights, which the RMA reforms seek to resolve.
The second was “value uplift charges” which were “still under consideration, but could be used to recognise the private benefit gained from community investment infrastructure such as mass rapid transit systems”.
It was the final possible funding tool that most piqued the interest of the opposition. The report said the reforms could allow for the introduction of an “environmental tax”, which was “under consideration”.
Officials warned the reforms could cost local councils more than the current resource management system, putting pressure on rates. However, new revenue tools achievable under the new regime could “provide another revenue stream to offset reliance on rates”, for councils.
National’s finance spokeswoman Nicola Willis compared the “environment tax” to Parker’s now-dropped proposal to tax KiwiSaver fees.
“First we had the KiwiSaver tax debacle now it turns out Labour is considering a new environmental tax too.”
Willis said it was “yet another tax grab”.
“Instead of dreaming up yet new ways to tax people the Government should focus on reducing the massive cost of living burden facing all New Zealanders,” she said.
Parker’s office said that MfE is doing no work on new taxes. IRD is looking at the interaction of the tax system with the environment, and the way that the system encourages or discourages behaviour that leads to good environmental outcomes.
This work looks at when to use pricing instruments for environmental and resource issues and ensuring the tax system is neutral in that it is not biased towards emissions intensive parts of the economy.
This did not necessarily mean higher taxes. One example of this work was the decision to change the application of Fringe Benefit Tax to make it cheaper for workplaces to offer greener transport perks for their employees.
Act’s Infrastructure spokesman Simon Court said that the revenue tools were “interesting suggestions” and were “similar to some of the ideas Act released this week” in its own RMA reform policy.
“The trick will be to ensure that these policies fund faster development instead of being simply another tax grab.
“Act supports auctions and tenders to ensure valuable resources are put to their best use,” he said.
Repeal and replace
The Government’s RMA reforms will eventually see the RMA repealed and replaced with three pieces of legislation. The main piece is the Natural and Built Environments Bill and the Spatial Planning Bill.
In essence, the reforms make planning more predictable by creating nationally-led environmental standards and frontloading planning, merging more than 100 plans made under the current RMA to just 15.
Frontloading this planning is meant to make the system cheaper for users, which will cut the cost of building housing and infrastructure - one of the reform’s key aims. But the analysis warned that cutting costs for “users”, mainly developers and people requiring consents, would mean higher costs for central and local government.
The report said the new frontloaded planning regime would “help to drive more of the activity and costs towards the front end of the process (led by central and local government), reducing the number of activities requiring a consent and providing greater clarity for those activities that do require consent, thus reducing effort and cost”.
“The new RM system is expected to result in more effort (and cost) for central and local government in planning and monitoring (systems performance, compliance and environmental), less upfront cost for system users, and greater recovery of costs from users for compliance monitoring,” it said.
The costs to central and local government come largely from setting up new planning committees and establishing and enforcing new environmental standards.
“Central government and local government costs would increase when compared to the current system, by 112 per cent and 11 per cent respectively,” the report said.
“The largest cost savings in the new RM system are for system users – an estimated decrease of 19 per cent or around $150m per year.
“For central government, key new cost components include direct support to help iwi and hapū organisations participate in RM [resource management] processes, support through the model plan process, and additional MfE staff to undertake central functions related to ongoing monitoring of targets and environmental limits,” the report said.
For local government, the largest cost would come from:
- “Developing and monitoring new economic instruments”, costing about $27m a year.
- ”Increased monitoring and enforcement activity”, costing $18m a year.
- “Reviewing and implementing additional national direction” - that is the Wellington-led nationwide rules - costing $15m a year.
The paper said the new model had the “advantages” of being more accommodating to large infrastructure projects and housing, and probably mean less litigation.
Costs for local government
However, the reforms had the “disadvantages” of “relatively high upfront costs and greater ongoing costs” - however, these costs would be “offset” by reduced planning and consenting costs.
LGNZ chief executive Susan Freeman-Greene told the Herald these costs raised some concern.
“LGNZ recognises the need for these reforms, but have significant concerns around how they will be funded and resourced. Transformational reform requires funding at the same scale,” she said.
“Our main concern is that councils will have less say in developing planning documents, but will be expected to saddle the increase in operating costs that the new system brings with it. Without Government providing enough funding directly to councils to see them through the transition, this will yet again be another example of councils having to carry the burden of central government changes,” she said.
Freeman-Greene described the Treasury estimate of establishment costs as “eye watering”, particularly as council were already facing “rate rises to fund ageing infrastructure and keep up with increasing ongoing operating costs for day to day services”.
The Government is funding some of the implementation of the reforms, lifting some of the burden.
Budget 2022 contained implementation funding to support local government and iwi of $147 million through to 2026.
Parker’s office said work is ongoing to establish detailed funding streams for central government to assist local government with the implementation of the new system. Councils who are early adopters of the system will be helped through with central government investment.
The report noted that the legislation would weigh into the controversial issue of how much heritage values should be incorporated into the new regime.
The report said the new legislation doubled-down on this. The current RMA references “amenity value” as a category deserving protection. The reforms were initially meant to loosen this restriction by scrubbing reference to amenity value from the replacement bill.
However, it was discovered that “simply omitting any mention of amenity values would not prevent decision makers from considering them under another guise”.
Instead, the bill does mention these values, but only to make clear they have to be excluded from consideration.
The bill “explicitly” prevents “some types of effects from being considered in decision-making. This approach would mirror existing RMA provisions on trade competition, which prevent decision makers from considering the impact new activities would have on competitors,” the report said.