Q & A

Legal Eagle answers questions on different aspects of EcoCare rates.

EcoCare rates
Q
What are EcoCare rates?
A The EcoCare Scheme is the wastewater Scheme for the Mangawhai Drainage District. The Council levies targeted rates to cover the capital costs of the Scheme and the ongoing maintenance costs.  It also levies development contributions on those creating new titles.

Q What are targeted rates?
A They are a type of rate levied under the Local Government (Rating) Act 2002 (Rating Act) for a particular service in a defined area. It is a type of user-pays so that only the ratepayers who benefit pay the costs.

Q What rates are levied?
A There are two sorts. A one-off rate which a ratepayer pays when first connected to the Scheme, and an annual rate that is levied each year to cover the operational costs.

Q Do Council call the rates by different names?
A Yes, but Council’s use of the terminology is inconsistent and very confusing. If you use the terms one-off and annual you can’t go wrong.

Background
Q
Why is there a problem with EcoCare rates?
A When Council introduced EcoCare it intended to target separate units on a property. All other rates in Kaipara are levied on rating units. A rating unit under the Rating Act is all the land comprised in a certificate of title. So, effectively, you only pay one lot of rates per property irrespective of how many separate units you may have. To bring more properties into the rating base the Council decided to levy EcoCare rates against separate units as well.

Q Why was Mangawhai singled out for this special treatment?
A Ask Council.  Ask the Councillors.

Q So what went wrong?
A The details of the EcoCare scheme and the proposed rates were set out in a document called the Statement of Proposal. Unfortunately it was badly drafted and it is unclear what properties were to be targeted for the rates. It also used terminology that did not comply with the Rating Act.

Q Did Council clarify the situation?
A Council did not understand that there was a problem. All the subsequent rating documents used the same inappropriate terminology.

Q Council has charged EcoCare rates for two years. If all the rating documents were unclear as to which properties were to be targeted, how did Council go about levying rates?
A Council developed its own secret floor plan test for assessing whether a building was a separate unit and levied rates according to that test.

Q Why do you call it “secret”?
A Because ratepayers were not told what they criteria were. There was no apparent inspection and often ratepayers would only find out that they had a separate unit from the rate demand.

Q So what happened?
A Many ratepayers complained. Some refused to pay their EcoCare rates. As a result Council decide to “clarify” the situation by passing the unit of demand resolution.

Resolution
Q
Who was responsible for the resolution?
A The Chief Executive, Jack McKerchar introduced the resolution, but it is unknown who actually drafted the original. Some amendments were made by Bell Gully, the Council’s solicitors, and some were made by Councillors at a private workshop.

Q What does the resolution do?
A It defines unit of demand, which is the term Council has adopted to describe a separate unit so that Council can levy EcoCare rates on those units. It is based on the secret test that Council applied prior to the resolution being passed.

Q What is the definition of unit of demand in the resolution?
A Go here for the full definition.

Q Does the definition make sense?
A Council spent some time refining it. Bell Gully, their lawyers, had some input. Councillor Julie Geange voted against it because the definition of unit of demand was still unclear.  

Q You are a lawyer.  What is your view.?
A The resolution is one of the most badly drafted documents I have ever seen.

Effect of resolution
Q
The resolution was passed on 23 July 2010. Does it apply retroactively to the rates for the 2008-09 and 2009-10 years?
A The resolution is silent on this. However, prior to passing this resolution Council had its own secret test for assessing whether a building was a separate unit. For the past two years Council has charged EcoCare rates on separate units based on its secret test. 

Q Can Council do that legally?
A No. Rates once set cannot be changed (except pursuant to special provisions on the Rating Act, which Council has not used). In law rates are fixed once they are “set” by the rates resolution which is passed before the commencement of the rating year. Council can only levy rates according to the provisions of the rates resolution. If the provisions of the rates resolution are unclear Council does not have the power to "clarify" them at a later stage. In law Council has one go at setting rates and has to get it right.

Q So, there is no legal basis for the secret test that has been used for the past two years?
A None at all.

Q And what about the definition in the resolution. Can that be applied retroactively for the past two year?
A The answer is the same. Council cannot amend or clarify rates once they have been set.

Q And what about rates for the current rating year?
A The unit of demand resolution was passed on 23 July 2010. The rates for the 2010-11 rating year were set by resolution on 25 June 2010, and the rating year commenced on 1 July 2010. EcoCare rates for this year were set in the rates resolution and rates can only be levied on the basis of the provisions in the rates resolution. Council has no power to amend or clarify those rates by passing a simple resolution.

Q What about the 2011-12 rating year?
A The resolution cannot set rates in advance for that year. Rates can only be set by a rates resolution which comes at the end of the statutory rating process which is carried out on a yearly basis. 

Unit of demand
Q
Where does the term unit of demand come from?
A It is a term used under the Local Government Act (LGA) in relation to development contributions. The LGA sets out a very rigorous methodology for calculating development contributions. Part of that methodology is to calculate what demand there is for a project and what category of property benefits from that project. This is called a unit of demand. It has nothing to do with a unit in the housing sense. A unit of demand could refer to residential dwellings, commercial buildings, land over a certain size and is totally dependent on the project and what type of land would benefit.

Q What is the meaning of unit of demand in the resolution?
A Council has a habit of using inappropriate and conflicting terminology in rating documents. It appears that it does not understand the meaning of unit of demand as employed in the LGA and has hijacked the term to describe a housing unit that is separate from the main property. It then goes on to set out the criteria for such a unit. The difficulty is that it then says that this definition of unit of demand is to be used for the purposes of levying development contributions. It cannot do that. Development contributions can ony be set and levied pursuant to the rigoroous methodology in the LGA.

Q Does that mean that the resolution cannot define a unit of demand for the purposes of development contributions?
A` Absolutely.

Q The resolution states that the unit of demand definition is to be used in levying rates. Is this possible?
A The unit of demand expression has nothing to do with rates. The expression is not used in the Rating Act and you will not find it mentioned in any of the Guides that are referred to in this website. Rates can only be set pursuant to a strict statutory procedure laid down by the Rating Act. Council cannot set rates, amend rates or clarify rates by passing a simple resolution.

Q What expression should Council have used?
A If Council wanted to rate separate units it should have used the expression separately used or inhabited part of a rating unit. Under the Rating Act this is the expression that must be used. However, even the correct expression would have no effect in the resolution. To be valid it would have to have been used in all the rating documents.

Q In that case, why did Council not use the correct expression?
A Ask the Chief Executive. Ask the Councillors.

Legal advice
Q If the resolution has no effect why did Council pass it?
A I don’t know. The Chief Executive was very keen for Council to pass the resolution. He assured Councillors that the Council’s lawyers had approved it.

Q Did the lawyers approve it?
A Apparently so, and they even suggested amendments to the resolution.

Q In that case, surely it is legal?
A It depends on the quality of the advice and the detail the lawyer giving the advice went into. I have seen the advice given by Council’s lawyers and it appeared to me to be very superficial and did not really look at the issues.

Q As a lawyer, what is you view of the unit of demand resolution?
A It is incredibly badly drafted and shows a complete lack of understanding of the law relating to rates and development contributions.

Public Consultation
Q
Were ratepayers ever consulted about the EcoCare rates being levied on separate units?
A The draft Statement of Proposal for the EcoCare Scheme should have explained that separate units were to be targeted for EcoCare rates. Unfortunately, it was badly drafted and used conflicting and inappropriate terminology.

Q Can Council “clarify” what properties are to be rated without consulting ratepayers?
A No. If Council wishes to change the EcoCare rating base then it is obliged by the LGA to include those changes in the funding impact statement in the draft annual plan for 2011-12, and amend the long term council community plan. Both are then available for public consultation. It has no power to short circuit the statutory procedures

What next?
Q
Council says that the EcoCare rates are valid and that its unit of demand resolution is legal. You say the opposite. What happens next?
A Indeed. Either one party concedes or the matter has to be decided by the courts. That would be very expensive and it would take ages to actually get to court. The simple alternative would be to get an opinion from a barrister experienced in this field.

For a full legal analysis go to:  Legal analysis

Other relevant pages:

What next?

McKerchar unit of demand resolution

 

 

 

About Legal Eagle

Articles by Legal Eagle

Q&A:  Frequently asked questions about EcoCare rates with answers from Legal Eagle.

Invalid rates:  a summary of why the EcoCare rates are invalid.

McKerchar unit of demand resolution:  The resolution and why it was passed.

McKerchar unit of demand resolution - legal analysis:  An in-depth look at the legal aspects of this resolution.

EcoCare rates 2008-09 and 2009-10:  A detailed analysis of why these rates are invalid.

EcoCare rates 2010-11:  A detailed analysis of why thes rates are invalid under the following headings:

Rates resolution

Funding impact statement

Rating information database

Statement of Proposal