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‘NOT FAIR’

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.

Gisborne District 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.

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

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.

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 will find out whether the remit is supported by 35 other councils this week.

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

  1. Clive Bibby says:

    It’s about time that forestry blocks were rated, like most other agriculture sectors, on the massive increases in earning capacity.
    We have just seen huge increases to kiwifruit block rates as a result of the costly development and the earning potential of these properties.
    Nobody is arguing that the council has jumped on an opening to ramp up the associated fixed costs which are being justified on the likely return on investment.
    The same thing is happening with properties (like the recent sale of a large viable livestock block to forestry interests in the Wairarapa) where the change is due simply because the earning capacity in trees (via carbon credits) far outweighs the income generated from a livestock operation.
    From my perspective, this is the real issue here.
    If rates are based on earning capacity alone, we must expect collateral damage to society itself that are unintended consequences of these changes.
    When profitable hill county livestock properties go into trees, they are unlikely to ever change back and the end result is the decimation of rural communities that become ghost towns, with the attendant loss of employment opportunities from the traditional sources.
    I agree that the Government needs to introduce an enquiry into the current agriculture sector rating system, but in doing so, it must tidy up these anomalies that are influencing who we are and what we will become.
    If it doesn’t happen, then we are certainly heading towards a new identity as “Tokoroa by the Sea”.
    Heaven forbid.

    1. Phrippers says:

      “When profitable hill county livestock properties go into trees, they are unlikely to ever change back”. This statement ignores the historical fact that most of NZ’s agricultural land was cleared of trees in the first place. Why could this not happen again if farming became (more) profitable and sustainable (than forestry) again? The reason farmers are currently selling their properties to forest interests (and they are not forced to – willing seller, willing buyer) is that many are currently marginally profitable and they rely on capital gain to get an adequate return on investment – which is only realised on sale. One of NZ’s competitive advantages has been land use flexibility. Witness the fact that almost 100,000ha of high-productivity forestry land in the CNI was converted out of forestry into dairy in the early 2000 – it made sense at the time (it’s not allowed now due to environmental impacts) – did you hear foresters complaining? Maybe it will go back into trees once the externalities of intensive dairy farming are truly costed – as they are beginning to be. Nothing ever stays the same. We need to move on from the ideology that farming has priority over rural land use. If farmers want to sell and foresters want to buy – let them – it’s their choice.

      Also, rural depopulation has been going on for years, mainly through farm consolidation and farming efficiency drives – forestry is used as a convenient scape goat. Sure it may contribute but even if farmland were not converted to forestry – rural depopulation is, I would argue, inevitable.

      Rather than ‘taxing’ productivity and land owners more (and I include all land owners here not just forestry) maybe Councils should take a good hard look at themselves. It beggars belief that a country of less than 5 million people requires around 50 odd District Councils, 11 Regional Councils and 5 unitary authorities – if Councillors want to talk about ‘distortions’, ‘equity’ and ‘delivery’ then they should take a hard look at their own existence and performance and honestly ask themselves the question on whether they add more value than they do cost.

      Finally with reference to ‘anomalies’, the biggest one is that agriculture contributes close to 50% of NZ GHG emissions and yet it (currently) gets off scot free and this happens at the tax payers’ expense. Maybe we’d be better off focusing on that rather that targeting forestry, which at least plays its part in the far more critical challenges of climate change.

  2. Peter Jones says:

    Forestry properties are rated on land value, which does not include the value of the trees or other property improvements like roads.
    So why are kiwifruit growers being victimised?

  3. Clive Bibby says:

    It is obvious Mr Phrippers (?) has no appreciation of how important rural infrastructure is to the survival of regions such as the East Coast.
    If he or she did, they would know how dependent residents are on the servicing communities who support them with vital services that make their operations viable. And these services are just as important to the properties that are planted in trees as the ones that have for centuries proved their abilities as top producers of the products the nation sells on the world markets.
    He or she should have noted that the example I deliberately used in my piece describing the conversion of one large very viable property in the Wairarapa was a hill country property that simply couldn’t compete with the carbon credits as a return on the shareholders investment. I was just reporting the facts.
    It is farcical to suggest that this type of property might consider changing back to a livestock operation if and when the carbon credits are no longer a source of income.
    Unlike the CNI properties that have been converted, there is no chance of them considering dairying as an option of choice. The cost of rebuilding the farm infrastructure in order to operate as before would also be prohibitive.
    I have never met a single livestock farmer who promotes the “ideology” that they have priority over land use. My experience tells me that all farmers are first and foremost businessmen and women. They have to be or they will be history before lunchtime no matter the farming type of choice. The land is unforgiving and will reject any operator who is not committed to modern conservation techniques as a priority management tool. So forget the fallacy that livestock farmers aren’t concerned about climate change – the threat in regions like ours is the one thing that occupies every waking hour.
    The days of the “born to rule” boys are well and truly gone. You only survive by being on top of your game and when the environment turns against you, even that may not be enough.
    Yet Mr or Mrs Phrippers seems to think that we can just flit in and out of one farming type at will, with no responsibility to the those who depend on us for their own survival.
    Thankfully, it doesn’t work like that.

  4. Simon says:

    Land rating has always been on unimproved land value. Change that and the losers are capital-intensive land owners such as dairy. Rates are primarily for the provision of infrastructure. The only infrastructure a forest needs is road access. A carbon forest doesn’t even need that once it’s planted. Forested land has lower rating valuations only because forests tends to be on steeper and more remote land that is uneconomic for other land use.