Far North fairer rating system seems everything but

In May 2012 the Far North District Council (FNDC) published its draft Long Term Plan (2012-22) which was described as a "blueprint for a fairer rating system". The reason for it being called a "fairer rating system" was that it introduced the user pays principle, or in other words, a targeted rate. FNDC stated that logging trucks caused $2.5 million of road damage each year and yet forest blocks only contributed $200,000 in rates each year.

The forest industry quickly realised, in the three weeks we were given to prepare written submissions, that what the FNDC was proposing would result in rates increases to forest owners in the FNDC area of up to 500%. Some real examples (with names removed) of proposed rate increases are:

ClientCurrent annual ratesProposed new ratesPercentage increase
A $19,000 $90,000 374%
B $2,622 $9,964 280%

PF Olsen, along with all major forest companies in the FNDC, other interested parties and the NZ Forest Owners Association, made written and verbal submissions to the FNDC opposing the changes. The agriculture sector was also very concerned about the proposed changes and there was a good degree of information-sharing between the two sectors.

Some key points of the PF Olsen's written and verbal submissions were:

  1. The analysis undertaken by FNDC's consultants was flawed. We submitted that the rates collection from forest land was 300% higher than stated. Errors in their analysis created doubt about the validity of all their statements.
  2. The consultants did not recognise that some substantial forest holdings link directly to the State Highway system and do not use FNDC controlled roads at all.
  3. The land classification process to determine forest land was incorrect. Some owners of land with scrub cover had their land classified as forest and vice versa.
  4. The "fairer rate" further marginalised forestry economics, especially where the distance to Northport exceeds 150 kms i.e. north of Kaikohe.
  5. Pre-1990 forest owners are "locked in" to forestry under the Emissions Trading Scheme and have no viable alternative land use options.
  6. Community impact. PF Olsen and its contractors directly employs 134 people living and working in the FNDC area and any reduction in ongoing investment in the forest industry will negatively affect employment in the District.

Councils that consider differential rating systems for forestry often fail to recognise that forest owners have been contributing to district roading for decades in their general rates during the growing phase of the forest. During this time, the "consumption" or usage is negligible; limited to the infrequent passage of light vehicles. The high usage phase is restricted to a relatively short but intense period of harvesting and trucking logs to market. On a net present value basis, the forest owners have pre-paid for their road usage.

The FNDC Councilors considered the submissions and voted 9 – 1 in favour of reviewing the proposed rating changes. "…Council has decided that whilst it supports the newer system in principle, the submissions show that the new differential structure needs further research and analysis to ensure that it is both robust and fair to all ratepayers. As part of that additional work, Council will involve a variety of sector groups who made submissions to the draft plan before it finalizes any new proposals."

PF Olsen, as an active member of the Northland Wood Council, is involved in engaging with local and central government to represent the interests of forests owners in the Far North District.

People invest in planting forests based on the markets and operating environment "of the day". Major changes like huge increases in rates fundamentally undermine the viability of the investment and, at best, they can change land use at the end of the rotation. Some can't change land use at all due to lock-in from structures like the ETS or nutrient cap rules.