Gisborne district council 'hamstrung' on legislation when rating forestry blocks

Gisborne District Council wants the Valuer General to address "growing disparities" between the rating valuation of forestry land and other land uses. Photo / Supplied-LDR

As farms rapidly turn to forests, Gisborne district councillors say "very low land valuations" of forestry properties result in other ratepayers unfairly carrying the rates burden.

Gisborne's mayor says the tool used to rate forestry blocks is not realistic, while the deputy mayor says the district council is "hamstrung" on legislation.

The council wants the Valuer General to address "growing disparities" between the rating valuation of forestry land and other land uses, and has been backed by Wairoa District Council.

But Eastland Wood Council (EWC) says it is not fair to single out forestry and to assume all forestry is the same.

It says councillors should be calling on the Valuer General to look at mechanisms that ensure "fairness, transparency and stability" for all landowners, irrespective of industry.

Forestry properties are rated on land value, which does not include the value of the trees or other property improvements like roads.

Figures in a GDC report that came before councillors last month showed over time the rateable land value of pastoral land more than halved after being turned to forestry.

Councillor Kerry Worsnop raised the issue with her colleagues in the form of a remit — a request to Local Government New Zealand to advocate on behalf of councils.

Cr Worsnop said the decrease in rateable value after pastoral land was planted out with forestry created a "distortion" for rating purposes that was not evident in any other sector.

Councils were using "sub-optimal" mechanisms in the form of rating differentials to address this, but she said it was a "plaster" and not addressing the real issue.

The disparity in land value between pastoral and forestry had been exacerbated by the increasing price of carbon, which had increased the value of farmland as competition for farmland from foresters increased, she said.

This resulted in pastoral farmers paying higher rates although they had no ability to extract the carbon income unless they converted the land to forest.

"So while carbon income makes new forestry more profitable and pastoral land more valuable, only the pastoral sector sees this pressure reflected in their rates.

"We're acknowledging the fact that there's something not right here and it needs to be looked at by the people that the country tasks with addressing these issues," Cr Worsnop said.

"It's trying to level the playing field to recognise the fact that at the moment there's an issue when we're just rating on land value, when the land value of forestry drops so quickly once trees are planted."

EWC chief executive Philip Hope accepted the industry had a responsibility to pay for the scale and impact of its use of land, roading and other infrastructure, but did not support the remit singling out forestry, and assuming all forestry was the same.

"It is our view the valuation applied to carbon forestry blocks should differ from traditional forestry — the latter which is harvested (and replanted) and helps build the resilience of our local economy."

EWC acknowledged there were forestry blocks established purely for carbon farming, which had been incentivised by government policy.

"While carbon farming (forestry) provides great benefit to investors, this type of forestry provides far less benefit to our local economy.

"Traditional forestry blocks, for example radiata pine, established for eventual harvest are important building blocks for the local economy.

"However, this requires significant investment upfront. Land owners of traditional forestry blocks must meet significant costs over many years (two and a half decades), before they harvest and derive an income and to meet the costs of replanting (including erosion control).

"While we acknowledge the hugely important role of traditional forestry, it is our view that the valuation applied to native forestry blocks, which will not be harvested, should be different from traditional forestry blocks."

Gisborne Deputy Mayor Josh Wharehinga spoke in favour of the remit at the meeting on April 22.

"The forestry sector has inequitably less rates to pay and our only ability to be able to fund things is via rates, so we're really hamstrung by the legislation that we have at the moment," he said.

"So changing this inside the legislation would make this equitable across all land uses in our region and that will give our council the ability to actually deliver on the roading needs that our communities often talk to us about."

Forest Owners Association President Phil Taylor said the proposal would require a "radical and expensive change" to the national rating system with potentially unintended consequences, including a disinvestment in what was a major earner and employer for the region.

Eastland Wood Council says it is not fair to single out forestry and to assume all forestry is the same. Photo / Supplied-LDR

Mr Taylor said including the value of trees in the rateable value of forestry properties would be "likely impossible" to do in a fair and equitable way.

He suspected it would have significant unintended consequences for the Gisborne economy, wider regional New Zealand and the Government's climate change and post-Covid economic recovery ambitions.

"Rating trees would require rating livestock too, which with stock moving on and off properties and prices going all over the place is hugely complex to get right and equitable."

He also described the complexity of trying to value trees, which the council had acknowledged, and pointed out that many forest owners did not participate in the Emissions Trading Scheme and earn credits.

"Not only is there complexity over carbon prices and calculating carbon yields but trying to value trees, carbon plus timber, which won't be sold for sometimes more than 30 years into the future is extremely complex and uncertain and requires assumptions that can be challenged.

"GDC have displayed a jaundiced view about forestry for some time, despite the contribution to the economy that the industry makes.

"If this attempt to tax forestry profits is correct it will be yet another example of the council trying to extract revenue from forest owners in a way that is not related to the services provided by council."

Wairoa Mayor Craig Little said his council was in "full support" of the remit put forward by Gisborne District Council.

Mayor Stoltz said she hoped Local Government New Zealand (LGNZ) would look into the issue and assist with how forestry land is valued and used in rates calculations.

The targeted roading rate differential on forestry companies currently in use was "not a realistic tool", she said.

"Both council and the forestry industry agree that a differential is not the ideal way to capture this rate.

"Over the years, we have had reports and discussions with the forestry industry to look into alternative ways (for example weight) to see if there are better ways to capture this roading rate fairly."

GDC is about to find out whether the remit is supported by 35 other councils.

The LGNZ remit committee will decide whether or not to advocate on the issue at its annual general meeting in July.