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Setting charges for processing and monitoring consents under the RMA

Abstract

Section 36 of the Resource Management Act 1991 (the RMA) enables councils to charge applicants for receiving, processing and granting consents; and consent holders for administering, monitoring and supervising consents. Some resource users have expressed concerns about councils being inconsistent in how they approach these matters. This guidance note establishes good practice for setting such charges. It has been prepared to help ensure that the process of setting charges is transparent, uncertainty is reduced, and inconsistent approaches between councils are minimised.

This guidance note has been prepared as a companion piece with the Guidance Note Administering Resource Consent Charges.

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Guidance note

The contents of this Guidance Note cover seven main topic areas:

In preparing this Guidance Note regard has been given to existing guidance documents, together with the results of a 2003 Ministry for the Environment survey of territorial authorities and regional council staff. This Guidance Note was updated in July 2006 to account for case law developments and changes to the RMA.

This Guidance note does not deal with charges established under s36(1)(c) designed to recover the costs of a council's s35 resource management functions such as SOE monitoring, research and investigations. All charges discussed in this Guideline are exclusive of GST, which must be added to any charges set by councils.

There are four key terms that need to be defined at the outset of this Guideline:

Fixed charges
These are charges that cover the total cost of an application or compliance monitoring activity and which are levied at the start of the process. Fixed charges are not supplemented by additional actual and reasonable charges once the consent or compliance monitoring process is complete. Fixed charges are deemed to be 'actual' charges which are not subject to the rights of objection and appeal under s357B to s358 (Wellington RC v Aifric Developments Limited, AP355/94).
 
Fixed initial deposit charges
These are charges that are levied at the start of the application process (or preceding a compliance monitoring activity). Fixed initial deposit charges are supplemented by additional actual and reasonable charges once the consent process is complete. Fixed initial deposit charges are not subject to the rights of objection and appeal (s357B to s358), but they need to be developed through a formal publicly notified council process.
 
Additional charges
These are actual and reasonable costs that are charged at the end of the consent application process (or completed compliance monitoring activity) that recover the council's full costs less the fixed initial deposit charge already paid. Additional charges are subject to the rights of objection and appeal (s357B to s358).
 
Occasioned
The term 'occasioned' as used in s36(4) of the RMA is taken to mean “that it created a cause or reason to do something” (Redvale Lime Company Limited v Auckland Regional Council A132/2005).

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Statutory basis for charges

Resource Management Act

The statutory basis for setting charges for consent processing and compliance monitoring activities is found in s36 of the Act. Section 36(1)(b) provides for charges for the 'receiving, processing, and granting' of resource consents (including certificates of compliance and existing use certificates). Case law (Wellington RC v Aifric Developments Limited AP355/94) has established that this includes consent hearings and the costs of any independent commissioners used by a Council at the hearing. The term 'processing' also includes the declining of an application as noted by the Environment Court in Harrison v Northland Regional Council W67/2003. Section 36(1)(c) provides for charges for the 'administration, monitoring and supervision' of resource consents.

Councils must have regard to the criteria set out in s36(4) when setting fixed charges.

Additional charges may be levied under s36(3) where a fixed initial deposit charge is insufficient to cover the actual and reasonable costs incurred by the council. Case law (Black v Southland RC C095/02) has established that additional charges should also meet the criteria set out in s36(4).

The s36(4) criteria should be strictly adhered to when setting either fixed charges, fixed initial deposit charges, or additional charges. The relevant part of s36(4) reads:

(4) When fixing charges referred to in this section, a local authority shall have regard to the following criteria:
(a) The sole purpose of a charge is to recover the reasonable costs incurred by the local authority in respect of the activity to which the charge relates:
(b) A particular person or persons should only be required to pay a charge –
(i) To the extent that the benefit of the local authority's actions to which the charge relates is obtained by those persons as distinct from the community of the local authority as a whole; or
(ii) Where the need for the local authority's actions to which the charge relates is occasioned by the actions of those persons; or

Councils should develop fixed initial deposit charges for compliance monitoring activities. This is necessary as case law (Bird BG and Ors v Timaru DC and South Canterbury Car Club C016/95) has stated that actual and reasonable monitoring charges levied in arrears are effectively s36(3) additional charges, and as such they can only be levied once initial monitoring deposit charges have been fixed under s36(1).

Local Government Act 2002

Under s36(2) of the RMA charges for a council's s36(1) activities must be fixed in accordance with s150 of the Local Government Act 2002 (the LGA). Section 150(3) of the LGA provides that fees and charges may be prescribed either by way of bylaw, or by using the special consultative procedure set out in s83 of the LGA.

Section 150(4) of the LGA additionally requires that any charges must not recover more than the reasonable costs incurred by the local authority for the matter for which the fee is charged. This is consistent with s36(4)(a) of the RMA.

While it is acknowledged that s150 of the LGA provides the option of setting consent charges by way of bylaw, the setting of charges for consent processing and compliance monitoring should occur as part of the council's normal annual plan development and notification process and a schedule of charges should be included in the annual plan developed under s95 of the LGA. This is consistent with the LGA requirement to include a funding impact statement in the annual plan.

Section 83 of the LGA requires that the proposed charges be set out in a written proposal which is considered by the council, publicly notified and held open for public submissions for a least one month. Submissions are to be heard at an open meeting of the council.

Councils are also required to prepare long-term council community plans (LTCCPs) under s93 of the LGA. These are higher level documents with a ten year planning horizon.

While the amount of annual revenue anticipated from consent charges will need to be included in the LTCCP at an activity level, it should not generally be necessary to include the detailed schedule of charges in the LTCCP. That would entail unnecessary duplication with the contents of the annual plan.

However, it is recognised that for some councils the first LTCCP will contain the annual plan for that year, with separate annual plan documents being produced for the second and third years of the LTCCP cycle. In such cases the charging schedule will of necessity be included in the LTCCP at the start of each three year cycle.

Regional and district plans

In the past some practitioners have queried whether or not consent application and compliance monitoring charges should be set out in regional and district plans. It is inappropriate to do this for two reasons. First, it duplicates schedules that must be prepared under the LGA. Second, any charges so specified would effectively be fixed for the life of the plan and could only be changed through a First Schedule to the RMA process.

Accordingly, consent charges should not be included in regional or district plans. This advice is consistent with the finding of the Environment Court in Property Rights in New Zealand Incorporated v Manawatu Wanganui RC W036/03 that 'section 36(2) is very specific in requiring the costs to be fixed in the manner outlined. No other process is permitted'.

Some councils have established s108 financial contributions to cover the compliance monitoring of permitted activities. One example is the ARC's operative regional plans for Farm Dairy Discharges and Sediment Control. In such cases it is necessary to specify the level of such annual contributions (or charges) in the regional or district plan, or at least the method by which those contributions will be determined. Such charges are however quite distinct from the more typical s36 charges dealt within this Guidance note.

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Funding policy decisions

Local Government Act requirements

Under s102 of the LGA councils must adopt funding and financing policies, and in particular a revenue and financing policy. The revenue and financing policy must set out the council's policies for funding operational activities from all sources including fees and charges. These various policies may be included in the LTCCP and adopted as part of that Plan.

Under s102 of the LGA councils must adopt funding and financing policies, and in particular a revenue and financing policy. The revenue and financing policy must set out the council's policies for funding operational activities from all sources including fees and charges. These various policies may be included in the LTCCP and adopted as part of that Plan.

Public and private good split

Each council must decide the revenue sources for its consent processing and compliance monitoring activities. This will generally involve a split between consent charges and general income (general rates and investment income). This has traditionally been couched in terms of a private good/ public good funding split.

Consent activities funded by charges should have the attributes of a 'private good', namely the activity should be rival and excludable. (A good is rival if there is a marginal cost in supplying it to someone else. A good is excludable if its receipt can be withheld from someone who refuses to pay for it.)

Using s36 RMA terminology, consent applicants or holders should fund those 'private good' activities as they either:

Activities that are not funded by consent holder charges are either 'public goods' which are non-rival and non-excludable, or 'merit goods' which the council has decided it is meritorious for the community to receive. (Classic merit goods are primary and secondary education and the wearing of seat belts.)

Previous studies of council funding policies for consent activities have identified a wide variation in the level of funding from charges versus rates. However, this is largely attributable to the way in which the consent activity is described, and the level of detail to which it is broken down and analysed. For example, some councils group district plan development and consent processing into one activity.

The consent activity has a number of distinct components which have different underlying public good/ private good attributes. The consents activity could be broken down as indicated in Table 1 (below) with appropriate recoveries from charges (representing the private good attributes of the activity) being as shown.

Table 1: Consents funding policy
Activity Proportion recovered from charges (%)
Responding to general consent enquiries * 0 - 25
Responding to consent enquiries, where these proceed to an application 100
Receiving, processing and granting consents 100
Processing s357 - 357D objections 0
Responding to appeals 0
Administration – consent systems maintenance 100
Routine consent supervision, compliance monitoring, inspections and auditing 100
Routine abatement notice and environmental infringement notice proceedings ** 100
Abatement notice appeals, enforcement orders and prosecutions 0


* Note that the partial costs of this activity may be recovered through charges set under s36(1)(e) - sometimes referred to as “functions, powers and duties charges”.

** Council activities involving the identification of non-compliance with consent conditions, determining the appropriate level of enforcement response, and undertaking abatement notice and environmental infringement notice actions are all reasonable components of the monitoring and supervision of consents. However, once such matters escalate to the level of the Environment Court the council should cease directly charging the consent holder for staff time as the Court will award costs based on the submissions of all parties.

The Table 1 funding splits are considered realistic based on both economic principles and current practice. The splits recognise that:

If the Table 1 categories and funding splits are used for the consent activity then an overall or aggregate charge funded figure can still be derived for reporting purposes. Note that the various elements of Table 1 are discussed in more detail in following sections of this Guideline.

Experience at several councils indicates that the overall charge generated revenue percentage for the consents activity will generally be in the vicinity of 60 to 70%. It is highly unlikely that any council actually funds 100% of its consent activity wholly from charges although some purport to do so in their annual plans.

When establishing funding policies for the consent activity, the level of sub-activity detail disclosed in the annual plan, and in the LTCCP revenue and financing policy, should be in the order of that shown in Table 1.

Some councils may prefer a figure for consent processing that is in the range of 80-90%, given that processing costs can be increased as a result of vexatious submitters, or submissions that are more about disputes between neighbours and the like. Such realities are recognised. However they should be dealt with overtly on a case by case basis through a documented remissions process, rather than through a distortion of the funding policy. An example of this is one council that charges between 60% and 100% of hearing costs to applicants, with the actual amount charged being set after taking into account the nature of the hearing as assessed against a range of established criteria.

In that regard caselaw had found that “a hearing of any length and at any cost could not be properly charged under the section [s36]. But that would not be because it was not occassioned by the resource consent application in terms of (4)(b)(ii). It would be because it would not be a reasonable cost in terms of (3) and (4)(a)” (Redvale Lime Company Limited v Auckland Regional Council A132/2005). This reinforces the desirability of a council always considering the reasonableness of charging 100% of hearing costs to an applicant, particularly for unusually lengthy or costly hearings.

Setting charges for administration activities is discussed later in this Guidance note.

Budget setting

There are basically two approaches to setting the consent activity operating budget.

The top down approach involves determining an operating budget based on existing staff numbers and fixed overhead costs.

The bottom up or cost recovery approach involves making an estimate of the number of consents likely to be received and monitored during the year and the resources required to undertake those tasks. This determines the consent activity operating budget for annual plan purposes.

The bottom up approach more closely aligns with the requirements of s36(4) and should preferably be used.

The bottom up approach does however have practical difficulties if the council's human resource inputs are not flexible. The use of external contractors can greatly increase that flexibility and is recommended where the workload within an activity is relatively unpredictable or can vary at short notice. Permanent staff can undertake predictable base load tasks, with peaks in work load being met by contractors. Further guidance on these matters is provided in the guidance note on contracting out resource consents.

It is acknowledged that in practice many councils will have relatively fixed input costs for the consents activity, mainly comprising permanent staff salaries and fixed asset costs. If there are not enough chargeable hours accrued to generate the necessary annual revenue from charges then a funding shortfall will arise that must be funded from rates. This will distort the funding policy decisions of the council.

For this reason, councils should accurately record the actual time spent on various consent activities, consents staff should accurately fill in time sheets, and councils should record the number of consents received or monitored each year.

This will enable consent activity operating budgets to be more accurately determined from year to year and funding policies adhered to when using the recommended bottom up approach to setting the operating budget.

Administering the plan

There has been past debate about whether or not there is any public benefit in administering a district or regional plan. Clearly the development of planning instruments is a public good or perhaps even a merit good. Plan development should therefore be funded from general revenue (e.g. rates).

In terms of administering the plan it is important to define exactly what the term 'administering' means. It can include answering inquiries on consent requirements, processing consent applications, and monitoring consents that are granted. The public/ private good attributes of those functions have already been discussed in this Guidance note.

Other plan administration activities might include policy or technical research to underpin plan reviews, collating complaints, or identifying issues that point to plan deficiencies that might be rectified through plan changes or variations. These activities would generally be public goods funded from general revenue unless, for example, the research was targeted at a specific activity or group of consent holders. In that latter case it might be appropriate to recover some costs through annual s36(4)(iii) charges. However, that process is beyond the scope of this Guidance note.

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Recoverable activities and overheads

Councils must decide which elements of the consent process are cost recoverable. Previous guidance has been provided by the Ministry for the Environment and Local Government New Zealand on that matter. That earlier guidance is still relevant today.

Case law has also determined that a broad view should be taken of the parts of the consent activity that are able to be charged for. The High Court has stated in Wellington RC v Aifric Developments Limited, AP355/94

'On its face s36(1)(b) encompasses every step required of a local body in the course of dealing with an application for a resource consent. It is not for the Court to give a limited, narrow interpretation to the language of the Legislature'.

Cost recoverable consent activities should include:

Best practice recommendations on some of these items are provided below.

Pre-application activities

Time spent by council staff discussing proposed applications with applicants or their consultants should be charged if an application is subsequently lodged. This pre-application activity is occasioned by the applicant and there is no reason for it being funded by the general community (through rates).

Some councils provide for a small amount of 'free' pre-application advice (such as ½ or 1 hour) and this is appropriate if a council has a policy of funding environmental or RMA advice in that manner.

It is also appropriate to charge for the reasonable costs of retrieving information from databases, records or files and copying and providing any currently available information (research findings or monitoring information) requested by an applicant or their consultants prior to an application being received, as provided for by s36(1)(e).

It would not be appropriate to charge for the costs of undertaking the research, resource investigations or state of the environment monitoring required in the first instance to produce such information as those costs are 'sunk', having already been funded from other sources.

Consultant costs

In many cases councils use external consultants to process or monitor consents. In some cases contracts are negotiated whereby the consultant’s charges out rates are fixed at a level similar to that of equivalent internal council staff. However, an issue arises if a consultant has a higher charge out rate than equivalent council staff. A decision needs to be made on whether or not to charge those higher costs to an applicant. This is where s36(4)(a) provides useful guidance in terms of 'reasonable' costs. For more information see the guidance note on contracting out of resource consents.

The additional costs of consultants (over and above equivalent council staff charge out rates) should only be passed on to applicants where the applicant has occasioned the use of the consultant. Such situations would include:

In other situations it would not be best practice to charge the additional cost of consultants to applicants. Such situations would include:

In these situations the consultant's time should be charged out at the equivalent rate as for council staff.

Council staff will spend time managing consultants and undertaking consent processing tasks for which consultants do not hold delegated authority. Where a large amount of contracting out occurs this time commitment can be substantial. Decisions need to be made on whether or not to recover that time.

In terms of managing consultants, the criteria discussed above for the general use of consultants should also be applied to the costs of managing consultancy input to the consent or compliance monitoring process.

In terms of tasks for which consultants do not hold delegated authority, such staff costs should be recovered provided there is no 'double dipping', such as might occur where a staff member duplicates a task already undertaken by a consultant.

Travel costs

In order to avoid penalising applicants and consent holders domiciled in outlying areas it is not appropriate to automatically charge full travel costs and staff time for site visits or locally held hearings.

A 'reasonable' nominal travel and time cost should be charged based on what an average travel time within the region or district might be.

Councillor and commissioner fees

Where there is a hearing, the actual costs of councillors sitting as hearing committee members should be included in consent charges.

Councillors are now paid salaries out of the indicative salary pool set for each council by the Higher Salaries Commission. However, these councillor salary costs should not be passed on to the consent applicant as they would be incurred by the council regardless.

Instead, the Higher Salaries Commission has established 'resource consent hearing fees' for specified statutory hearings (including for notices of requirement and private plan changes) at $85/hour for the panel chair and $68/hr for other panel members, as set out in the Local Government Elected Members Determination 2007 (2007/172). It is these hearing fee costs that should be passed on to the consent applicant as they are occasioned by the need for a Hearing. Councils need to develop policy which clearly outlines how the councillors’ hourly rate applies to ensure that there is no confusion between time charged for the actual hearing, as opposed to preparation time (reading material), site visits, deliberations and travel time. (Note that the Commission has stated that it is not appropriate to pay separately for preparation time as members can take greatly different times to read the same material.)

Where external commissioners are used and their hourly rate is higher than that set by the Higher Salaries Commission for elected members, then a decision needs to be made on whether or not to pass on those additional costs to the applicant. The same best practice recommendations made in relation to consultant costs also apply in this situation.

The additional cost of using external commissioners should only be passed on to the applicant if the applicant has clearly occasioned their use. In other situations, external commissioners should be charged to consent applicants at the same hourly rate as elected members. For additional information see the guidance note on the use of commissioners.

An example of where it would not be appropriate to charge the additional costs of external commissioners would be where councillors had disqualified themselves from hearing an application because of their involvement in public debate on the matter, their personal interest or involvement in the application, or where the council was either the applicant or a submitter (thereby generating a conflict of interest and the need for independent commissioners).

Council staff can spend a significant amount of time organising councillors onto hearings committees, or deciding the composition of committees. This may be time consuming due to internal 'political sensitivities' associated with ensuring an equitable spread of hearings amongst councillors. Such organisational activities are not directly occasioned by the applicant and should not be charged to them.

Staff overheads

It is important that a council's method of allocating overheads and setting staff charge out rates ensures that the costs charged to consent applicants are transparent, justified and lawful. In that regard caselaw illustrates that it is appropriate to charge a “proportion of the overhead costs associated with running the Council’s Resource Consents Division” (Barfoote Construction Limited v Whangarei District Council, A80/01).

Any organisational or corporate costs included in staff overheads that are not relevant to the consents activity will need to be separated out and recovered elsewhere.

The recommended best practice starting point for determining staff charge out rates is to use an annual number of chargeable hours that exclude annual leave, sick leave and general staff training. A commonly used number is 1560 hours based on a 40 hour week. The staff member's salary is then divided by this number of hours to derive a base hourly rate. Appropriate overheads are then added to the base rate.

Section 36(4)(b) provides that a council's overhead costs can only be recovered from consent applicants if they either occasion them, or they receive benefit from them distinct from the general community. For example, the lodging of a consent application causes a council to have to employ consent processing staff and provide office space, office equipment and other resources to enable those staff to do their job. These are legitimate overhead costs that are sanctioned by s36(4) of the RMA.

However, other overhead costs generated by a council that are not caused by consent activities do not fall within the bounds of s36(4). It is difficult to list such overhead activities with precision as they will be many and varied and described differently in different councils.

Some examples of activities that should not generally be included in consent staff overheads would include:

However, while such overheads may not be caused by the consent applicants, it is possible that they might still receive some benefit from them distinct from the community as a whole. This might arise where the overhead activity results in a better quality consent process; in terms of timeliness, cost, or quality of outputs.

Each council overhead item or category should be passed through a two-stage test before being included in the charge out rates for consents staff. The first test is:

'is the overhead occasioned by the applicant or consent holder'

and the second is

'does the overhead activity benefit the consent applicant or holder distinct from the community as a whole'.

This will enable decisions to be made and recorded on which council overheads (and what proportion of them) should be included in the overhead component of the charge out rates for consent processing staff. This will determine what actual overhead costs should be added to a staff member's base salary cost.

Staff management

Decisions need to be made regarding the amount of consents section management time that is recovered from consent applicants.

Time spent on general staff or team management activities are more akin to 'overheads' and are not directly occasioned by any one applicant. Such time should not be charged for. However, management time directly related to a specific consent, such as peer reviewing or checking a s42 report, is occasioned by an applicant and will often be of direct benefit to them. Such time should be recovered.

Use of standard or council wide salary multipliers

Some councils use charge out rates that are solely based on standard or council wide multipliers of base salary costs. These multipliers typically range in value from around 1.8 to 2.9. It is not preferred practice to use this approach to setting charge out rates for consents staff. As discussed above, the charge out rate should be determined on the basis of actual salary costs together with any overheads that meet the requirements of s36(4)(b). In that regard the Environment Court has stated in relation to a council employee planning witness:

'The witness deposed that she understood the charge for her time at $50 per hour was intended to represent 2.1 times her salary, though she was not sure about that...we observe that a charge for a planner's time at double the rate of her annual salary does not represent an actual cost, and we have no evidence on which to judge whether it is reasonable.' (Wightman v Waipa DC A062/97)

If a multiplier approach to determining consent staff charges out rates is to be used it should be a 'consent activity' specific value based on a robust determination of appropriate overhead costs that comply with s36(4). Caselaw supports this practice and the Environment Court has found that “it has long been accepted that consent authorities may apply on-cost multipliers to basic salary costs to cover the costs of a consents department” (Harrison v Northland Regional Council W67/2003)

Section 357B objections

Section 357B of the Act provides for consent applicants to lodge objections to additional charges levied by councils (charges over and above fixed initial deposit charges).

There is no ability to charge consent applicants for the processing and deciding of s357B objections to such additional charges. In Wightman v Waipa DC the Environment Court has also stated:

'...we do not consider that the function [the costs of considering an objection under s357B - 357D] is within the scope of s36(1)(b), or any of the other items in s36(1). In the absence of any regulation in terms of s36(1)(g), we doubt whether a consent authority has authority to make a charge for processing and deciding an objection under s357[B - 357D].'

Some councils have adopted the practice of charging fixed “lodgement” fees for s357B objections. That practice is inconsistent with established caselaw and is not appropriate.

Independent commissioners should be used to hear and decide s357B objections. Council officers and councillors should not be used. The Environment Court has noted in Pease v Canterbury RC C193/99 that the use of council officers in s357B hearings where a council's own costs are the matter of contention 'may not be a particularly wise decision'. For more information see the guidance note on the use of commissioners.

Decisions on s357B objections should be clearly based on the criteria set out in s36(4)(b) and those criteria should be referenced in the written decision (Keystone Ridge Limited v Auckland City Council A142/2000).

In Black v Southland RC C095/02 the Environment Court has also noted that for s357 [to s357D] objections 'the council’s obligations become more formal and are of a quasi judicial nature'.

Section 127 applications and section 128 reviews

As stated earlier in this Guidance note, the Courts have determined that a broad view should be taken of the parts of the consent activity that are able to be charged for.

In terms of s127 applications the matter is clear. The consent holder has, of their own volition, lodged an application and has occasioned the council to respond to that application. This is no different from a normal consent application lodged under s88 and the council's processing costs should be fully recovered.

A s128 review can arise in response to one of the s128(1)(a)(i) to (iii) or s128(1)(c) matters. S36(1)(cb) now clarifies that councils may charge for the undertaking of s128 reviews of consent conditions where such reviews are requested by the consent holder, or at times specified in the consent (128(1)(a)), or if the supporting information for the original application was materially deficient (s128(1)(c)).

However, s36(1)(cb) does not provide for charging for reviews under s128(1)(b) or (ba), as these reviews are initiated in response to rules in operative regional plans or national environmental standards. In these cases the need for a review has not been occasioned by the consent holder, but by the council or Government. In such cases it is also unlikely that the outcome of the review will be of more benefit to the consent holder compared to the community as a whole. Consequently it is appropriate that the council bears the cost of such reviews.

The following approach to s128 reviews should be adopted:

Some councils currently specify within the wording of s128 review conditions that the consent holder is liable for paying the costs of reviews. Such wording should be reviewed in light of the above changes to the RMA and this guidance.

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Setting the charges - fixed fees versus actual costs

Consent processing

There are two options available to councils for setting consent application charges:

  1. Set fixed charges that are payable in advance for the entire consent processing activity; or
  2. Set fixed interim or preliminary deposit charges payable in advance with the balance of actual and reasonable costs being charged in arrears at the completion of the consent process.

It should be noted that fixed charges paid in advance under option 1 are not deposits. They are full and final total charges for the entire processing component of an application.

There are advantages and disadvantages with either option.

Using fixed charges

Option 1 has cash flow advantages for the council as the charges are received at the start of the process. It is also easy to administer. It provides absolute certainty for the applicant as the Environment Court has determined that a council cannot set and receive a fixed fee payable in advance and then charge additional actual and reasonable costs at the end of the process. See Aviation Activities Ltd v Mackenzie DC C015/98. A major disadvantage for the council is that actual costs can exceed the fixed charge and the difference will need to be met from general revenue. Consequently it is very important that any fixed charge structure is based on a sound understanding of what actual consent processing costs are.

Option 1 has potential equity problems. The fixed charges will ideally be based on average processing times for different categories of consent. Simple or well compiled applications will take less than the average time to process. Such applicants will effectively be subsidising applicants with more complex or less well compiled applications. Option 1 is also more likely to result in a complex system of charges as a council tries to cater for the wide range of conceivable consent applications and compliance monitoring regimes. This may result in a lower level of transparency as potential applicants could find it difficult to ascertain which category of fixed charge relates to their intended activity.

Another disadvantage of this approach is that the fixed charges will generally be large which may act as a disincentive to small scale applicants. This can be overcome by using a series of fixed charges payable say firstly at the time of application lodging to cover the costs of determining sufficiency of the application and the AEE supplied, secondly for the costs of notification once it has been determined whether there will be no notification, limited notification or full notification, and thirdly for the preparation and holding of a hearing.

Using deposit charges

Option 2 has cash flow disadvantages for the council as the activity costs must initially be borne by the council prior to them being charged to the applicant. However, this disadvantage can be reduced, particularly for large or contentious applications, by issuing interim (say monthly) invoices for actual costs incurred to date. Councils can also ensure that fixed interim deposit charges are set as close as possible to the actual likely costs of processing such applications. This also reduces the chances of a council having to invoice or refund applicants the balance of actual and reasonable costs, which in itself, also has the benefit of reducing council's administration costs. Setting deposit charges is discussed further in the next section of this Guideline.

Estimates

Under option 2 the applicant is disadvantaged as they do not know in advance what their costs will be. However, this can be overcome by councils providing applicants with written estimates for the likely costs of the consent process. The merits of this practice are now recognised within the Act as s36(3A) requires councils to provide estimates of likely additional charges upon request.

  • Councils should go beyond that statutory obligation and provide estimates for all applications received if the costs are likely to exceed the initial deposit.
  • Estimates should be realistic and should not be inflated to provide a council with a 'cushion'. If it is clear that an estimate is going to be exceeded then applicants should be advised of that in advance of the full costs being incurred. They can even be asked if they wish to continue with the application in light of the likely increase in costs. For more best practice advice on these matters see the Guidance note on charging for resource consents

Choosing an approach

Each council will need to decide for itself which charge setting option to choose. However under s36(4)(a) councils must have regard to the fact that 'the sole purpose of a charge is to recover the reasonable costs incurred by the local authority in respect of the activity to which the charge relates'. Option (b) can more easily comply with this statutory requirement and is consequently recommended as best practice.

If option 1 is used then it should be limited to situations where a council has a very clear appreciation of the costs of processing particular types of consents, and those consent applications do not vary widely in terms of their supporting information and notification requirements.

Combined approach

It is possible to combine options 1 and 2. This would entail setting fixed charges for a clearly defined part of the consent process, such as the process up to the point of notification, or up to the point of the hearing. Any costs incurred by the council for the remainder of the process would then be covered by a further fixed initial deposit charge (such as a hearing deposit for example) together with actual and reasonable additional charges levied in arrears.

The use of such a complex approach would need to be very clearly set out in the council's Schedule of Charges so that applicants were not led to believe that the first fixed charge covered the entire consent process. Such an approach is not recommended as it has little merit compared to option 2.

Setting the level of deposit - consent applications

If a council opts to use a system of setting fixed interim deposit charges payable in advance with the balance of actual and reasonable costs being charged in arrears at the completion of the consent process (option 2 above), then it needs to decide the level at which the deposit will be set.

There are two approaches to this:

  1. set the deposit at a nominal sum, usually somewhere in the range of $100 to $500 depending on whether or not the application will be publicly notified
  2. set the deposit at an amount that is likely to be close to the total processing cost.

Option 1 is currently by far the most common approach.

Some councils currently give themselves the discretion of negotiating a deposit for large applications. This may not be legitimate unless the council's Schedule of Charges contains an appropriate scale of charges for variable deposits. The reason for this is that deposits must be fixed in accordance with s36.

The advantage to the council with option 2 is simply one of cash flow, as the applicant will be required to pay the likely cost of their entire application process in advance. It also reduces the exposure of the council to under recovery of eventual actual costs (and the burden of chasing 'bad debts' from people who don’t pay invoices levied at the end of a consent process) as the Environment Court has determined that fixed initial deposits are not contestable under sections 357B to 358 of the Act. See Riddiford v Wellington RC, C025/98. It is only additional charges set under s36(3) that are so contestable.

Hearings

The costs of hearings are recoverable under s36(1).

To facilitate transparency the costs of a hearing should be separately detailed in the annual plan schedule. Hearing costs may be based on whole or part day charges and should detail the costs per councillor or commissioner, the fact that attending staff will be charged for, and the rate at which relevant disbursements will be charged.

Invoicing

When sending out an invoice for the processing of a consent application, or for the compliance monitoring of a consent, a detailed and itemised invoice should be prepared.

Simple one line invoices with a total amount payable are not acceptable.

The Environment Court in Pease v Canterbury RC C193/99 has noted the benefits of providing itemised accounts to consent applicants. It has stated 'People do rather resent being given bald, unitemised accounts'.

The time of all staff involved with the consent activity should be accurately recorded and invoiced. The only exception to this would be the avoidance of charging twice for the same service. An example of this would be administration staff time which is already funded through annual administration charges, or councillor salaries which are being paid regardless of whether or not the councillor sits on a consent Hearing.

When preparing invoices councils should:

Ideally the invoice should be prepared by the consent processing or monitoring officer, or a staff member from the consent administration team, using a standard template. This will ensure that important subjective decisions, such as whether all actual hours incurred will be charged, can be properly made before the invoice is generated.

For more best practice advice on these matters see the Guidance note on charging for resource consents.

Withholding the consent

It has been the practice of some councils to withhold the issuing of a consent until such time as the applicant has paid their application charge in full.

This is inappropriate and is not an acceptable practice. In particular the Courts in Belfield v Thames Coromandel DC A032/98 have stated 'the Act does not contemplate withholding of decisions on resource consent applications as a means of placing pressure on applicants to resolve disputes of that kind' [disputes about the costs of primary hearings].

It has been the practice of some councils to impose a consent condition requiring the payment of any unpaid additional charges. This is also not acceptable. There is a separate process open to councils for the collection of any unpaid debts.

Remissions and refunds

Section 36(5) provides for a council to remit the whole or any part of a charge.

Councils should develop formal policy or criteria that will be used to guide decisions on remissions. The simple test for remissions should be where the applicant or consent holder did not solely occasion the work or directly benefit from it.

Examples might include:

Some councils also offer remissions for poor service, including where statutory timeframes are not met.

Refunds are variously addressed elsewhere in this Guidance note. However, the overriding principle to be followed is that if a council collects money to undertake a service for a consent holder (such as compliance monitoring) and that service is not actually undertaken, then the council has at least a moral, and probably a legal, obligation to refund the money and it should do so.

Some councils have established a minimum level of refund such as $50 (refunds lower than that sum are not actioned). The reason for this is that the transaction costs of actioning smaller refunds may be higher than the refund itself. Consequently, this is considered to be a reasonable practice.

Councils should develop accounting systems that allow the need for refunds to be highlighted and indeed for them to actually occur.

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Consent monitoring and supervision

Section 36(1)(c) enables councils to charge for the cost of 'its functions in relation to the administration, monitoring and supervision of resource consents'. The same funding policy and legal constraints apply to monitoring charges that apply to consent application charges.

In terms of funding policy decisions, consent monitoring and supervision costs should be fully charged to consent holders as the monitoring activity is solely occasioned by the existence of the consent.

Many councils have staff resources dedicated to consent monitoring. However, as it is not a statutorily time bound activity it often lags behind what is planned due to more pressing needs on staff resources. This may be a reason for tempering the number or dollar value of fixed charges levied in advance of the monitoring actually occurring.

Types of monitoring

Some compliance monitoring activities will be routine, involving a simple site inspection and the filling in of a site visit form. These inspections might be one-off post commencement events, or occur annually. In these cases monitoring fees could be fixed and charged in advance.

Other compliance monitoring activities will be more complex, involving the taking of samples, or multiple visits each year. In these more complex situations any charges levied in advance should be limited to fixed initial deposit charges. These charges should be calculated based on the actual time and disbursements anticipated to be spent on monitoring the consent. Any additional actual costs can then be charged in arrears.

Where a simple post-commencement monitoring inspection is required, it is acceptable practice to invoice for that monitoring inspection at the time that the consent is deemed to commence, if such charges payable in advance have been fixed and included in the annual plan. Councils should note however that this would preclude them charging additional costs incurred if the inspection takes more time than was estimated when setting the fixed charge.

It is important that councils clearly identify what the fixed initial deposit charge for compliance monitoring is designed to cover. If the charge is based on the cost of undertaking a site visit and associated file maintenance for a compliant site then this should be stated in the Schedule of Charges. The costs of dealing with any non compliance would then be recovered through actual and reasonable additional charges.

Council monitoring charge requirements

Councils should ensure that:

Consent holder input

Fixed initial monitoring deposit charges payable in advance can total several thousand dollars for large or complex consents. As these charges are set through the annual plan process and the special consultative procedure under s83 of the LGA, they are not subject to RMA s357B objection and s358 appeal rights. This raises an issue of procedural fairness for the consent holder.

Consent holders should be advised early in the annual plan process what their monitoring charges are likely to be for the next year. They should be invited to comment on the charges. Councils should be willing to take on board any concerns expressed and act on them in a reasonable manner.

Consent holders should also be given the opportunity at this time to undertake self monitoring for some activities. An example would be the routine collection and analysis of water quality samples. If an applicant can do these tasks at less cost and to the same quality standards as the Council, then they should be allowed to do so. This might particularly apply where there are significant travel costs for council staff in visiting remote sites.

When the annual plan is notified, all named consent holders liable for fixed initial compliance monitoring deposit charges payable in advance should be written to, advised of their charge, and informed about the annual plan submission process. It would also be helpful if the new charge was compared to the previous year's figure, and the reasons for any significant changes listed. This does not mean that they need to be sent a copy of the entire annual plan, but simply informed about their compliance monitoring charges for the coming year.

Public good monitoring?

Some councils consider that consent compliance monitoring and supervision is a public good as it protects the environment and the community from potential adverse effects arising from the resource use or development activity authorised by the consent. In those cases compliance monitoring is largely or totally funded from general revenue (e.g. rates).

Such an approach is not appropriate. It ignores the fact that in terms of s36(4)(b)(ii) criteria the monitoring activity is solely occasioned (caused) because a consent has been granted. In other words, if there was no consent there would be no need to do any compliance monitoring, therefore why should the wider community bear any of the monitoring costs?

However, there may be situations where the consent holder's compliance monitoring programme yields 'public good' information that can be used by other parties (e.g. ground water levels or river water quality data). In such cases it may be appropriate to recognise that fact by reducing the compliance monitoring charge to the consent holder and accounting for the costs of the public good monitoring activities in other council programmes such as SOE monitoring.

Annual administration charges

Under the provisions of s36(1)(c) some councils levy an annual administration charge on consent holders. Such charges are typically in the range of $30 to $80 per consent per annum. The charges cover the routine administration costs of the consent activity that are not able to be charged directly to consent applicants for consent processing, or to consent holders for compliance monitoring.

Annual administration charges are quite legitimate. However care needs to be taken in determining their magnitude. It is not appropriate to use such charges as a simple top up between the total operating costs of the consents unit and the revenue received from application charges for example.

If annual administration charges are to be levied then they should be based on a careful analysis of the actual costs of consent related activities that are either occasioned by the applicant or consent holder, or are of direct benefit to them over and above the general community (the s36(4) tests). Such activities might include:

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Reviewing charges

There is a basic requirement to periodically review consent charges to ensure statutory compliance with the need to only recover actual and reasonable costs that are more properly met by consent applicants or holders as opposed to the community as a whole. This is particularly the case for fixed application charges, fixed compliance monitoring charges, and fixed initial deposit charges for the compliance monitoring of complex consents.

Such reviews should be aimed at utilising actual records of consent processing and monitoring costs to ascertain whether or not the fixed fees or fixed initial deposit charges are representative of actual costs.

Fixed application charges, fixed monitoring charges, and fixed initial deposit monitoring charges for complex consents should be reviewed annually as part of the annual plan development process. In this way actual historical recorded costs can be used to validate existing charges and there would be no need to apply inflation adjustments.

In the absence of the recommended annual reviews, reviews should occur no less frequently than three yearly. In that case the review period should be aligned with the three yearly LTCCP review cycle. In the intervening years it would be acceptable practice to simply increase the charges by the same percentage rate that staff salary costs have increased by in the preceding year (recognising that staff costs will largely underpin actual charges).

However, if a council uses a system of nominal ($100 to $500) fixed initial deposit charges with actual and reasonable additional charges in arrears for processing consent applications, then there is no need to review the application charges so frequently. In fact such a charging system should have a relatively long shelf life and might only need reviewing every six years or so (every second LTCCP cycle).

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A formal charging policy

As can be seen from the preceding parts of this Guidance note, there are many options open to a council in terms of its approach to setting consent and compliance monitoring charges. There is a need to record the approach taken by a council to these matters, for the purposes of transparency, internal continuity and for informing the public. Having a formal consent charges policy will also assist in meeting the LGA requirement for a revenue and financing policy for the LTCCP.

Councils should prepare and adopt formal consent charging policies that as a minimum record:

This charging policy should be formally considered and adopted by the council and reviewed no less than three yearly. It may be appropriate to include these policy matters in the revenue and financing policy required for the LTCCP.

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Best practice examples

For best practice examples, refer to the companion guidance note Administering resource consent charges.

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Case law

Aviation Activities Ltd v Mackenzie DC, C015/98 - a s358 appeal where the Court determined that fixed fees levied in advance can not be subject to additional charges. The Court also found that actual charges can be estimated in advance. Additional charges must fit one of the categories of s36(1).

Belfield v Thames Coromandel DC, A032/98 - the Court determined that the RMA does not contemplate withholding decisions on resource consents as a means of placing pressure on applicants to resolve disputes about charges for primary hearings.

Bird BG and Ors v Timaru DC and South Canterbury Car Club, C016/95 - an appeal on consent conditions where the Tribunal determined that additional monitoring charges under s36(3) can only be levied if 'initial' charges have first been fixed under s36(1) and those 'initial' charges prove to be inadequate.

Black v Southland RC, C095/02 - a s358 appeal where the Court considered the relative benefits to the applicant and the council of using commissioners, including matters of council bias, and that s357B procedures were formal and quasi-judicial compared to relatively informal s36 actions.

Harrison v Northland Regional Council W67/2003 - a s358 appeal against consent application fees charged by the Council which concluded that the costs were recorded and calculated in accordance with sound accountancy practices. Keystone

Keystone Ridge Limited v Auckland City Council, A142/2000 – a s358 appeal against consent processing fees which set aside the councils s357B decision as that decision did not refer to the criteria set out in s36(4)(b)(i) and (ii).

Pease v Canterbury RC, C193/99 - a s358 appeal where the Court determined that it was good practice to give applicants itemised accounts detailing all cost items in consent processing invoices.

Property Rights in New Zealand Incorporated v Manawatu Wanganui RC, W036/03 - a regional plan appeal case where the Court determined that section 67(1)(k) does not require the cost fixing process for consent applications to be contained within RMA plans.

Redvale Lime Company Limited v The Auckland regional Council A312/2005 – a s358 appeal against the quantum of additional charges levied by the Council under s36(3). The Court found that the community of the local authority as a whole did not derive a benefit from the processing of the consent application and the Council’s actions in processing the consents were occassioned by Redvale’s action in seeking the consents.

Riddiford v Wellington RC, C025/98 - a s358 appeal where the Court determined it had no jurisdiction to consider appeals against charges fixed under s36(1). Only s36(3) additional charges are subject to appeal rights.

Wellington RC v Aifric Developments Limited, AP355/94 – High Court decision that concluded the costs of a hearing are covered by s36(1)(b) and additional charges can be imposed for hearing. The Court also determined that s36(3) is to be read subject to s36(4).

Wightman v Waipa DC A062/97 - a s358 appeal where the Court determined that there is no authority to make a charge for processing and deciding an objection under s357 [to 357D]. Also, council charges under s36(1) must be based on evidence which on inquiry is able to establish that the charges are reasonable.

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Related guidance notes

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Relevant publications

A free lunch or a fair deal? A good practice guide for charging for resource consent processing (PDF 314 KB)
Published by Local Government New Zealand - March 2001
This report is intended to raise awareness of the key issues regarding the costs of resource consent processing, and also provide good practice advice on administrative charging for resource consents under the RMA. It is targeted to local authority managers and staff responsible for applying the administrative charge provisions set out in section 36 of the RMA.

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Current challenges in practice

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Acknowledgements and editorial comments

This Guidance note was prepared by Rob van Voorthuysen from Environmental Management Services Ltd (EMS) utilising research conducted by Irene Clark from the Ministry for the Environment (now Wellington City Council.) It was initially peer reviewed by Dr Brent Cowie and Janeen Kydd-Smith from EMS. Erica Sefton (from the Ministry for the Environment) coordinated a Ministry peer review of the Guidance note.

Additional external peer review was provided by senior consents processing and financial managers at:

Initially prepared June 2004 and updated in July 2006.