LGA: the Local Government Act.
LGRA: the Local Government (Rating) Act 2002, or the Rating Act
Rating unit: The standard way of rating is to set rates in respect of rating units. A rating unit means all the property included in a certificate of title
SUIP ; Introduced by the LGRA. Separately used or inhabited parts of a rating unit. Councils may now rate separate units in a rating unit. Each council has to provide a definition of a SUIP. The whole concept of SUIPs is based on "user pays": It is only fair that if there are two units on the one rating unit, occupied by separate households or businesses, then they should each pay separate rates.
Council's definition of SUIP: Together with guidelines, can be seen here.
"The present Chief Executive has acknowledged that such rates are illegal, but, sadly for his own reputation, has decided to sweep the problem under his ever bulging carpet."
Council has proposed to completely revamp its rating base by rating SUIPs right across Kaipara. Mangawhai residents are used to it. For the last four years Council has been levying illegal rates against what Jack Mckerchar termed "units of demand". The present Chief Executive has acknowledged that such rates are illegal, but, sadly for his own reputation, has decided to sweep the problem under his ever bulging carpet.
This time the Council is doing it properly and complying with the requirements of the LGRA, no doubt with the assistance of the recently seconded Jonathan Salter who recently completed the Salter Report on the illegality of the Ecocare rates.
The problem is that although Council has got one part right it has made a total hash of other requirements.
I have outlined below the major problems that the KDC faces in implementing a rating base base centred around SUIPs.
First, I provide a summary with the main points. I then provide a more detailed legal explanation for those who want to delve further.
+ Council is obliged to apply the "actual use" test rather than the "capable of" test.
+ There are many problems with applying Council's definition and guidelines.
+ Only second units that are legally consented can be SUIPs.
+ It is council's obligation to maintain an accurate database of SUIPs. It cannot shift that responsibility to ratepayers. If Council gets it wrong it risks making its rates assessments invalid.
+ Council can only charge rates for a SUIP if it has its own connection to the reticulation system (the sewer in the road). The majority do not.
+ Council has failed completely to comply with the requirements of sections 101 and 77 of the LGA when proposing to introduce SUIPs. It failed to consider the impact on the community of such changes and failed to consider all the practical options. There is therefore no information in the LTP to provide a basis for consultation.
+ The proposal to rate SUIPs is therefore illegal and Council would be advised to withdraw the proposal and consider it at a later date when it is in a position to satisfy legal requirements.
MORE DETAILED INFORMATION
Click on the heading required:
1. ACTUAL SEPARATE USE OR CAPABLE OF SEPARATE USE?
Letter from Steve Ruru 2 May 2012
QV use a definition of a SUIP being a unit that is capable of separate use. This is also the definition that Whangarei District use. What we have proposed is that there should be an actual separate use which is the approach that a number of other Councils use. There will obviously be a higher level of administration and with the approach that we have proposed.
Letter from Steve Ruru 7 May 2012
I have attached a copy of the page from the Office of the Valuer General valuation manual on how SUIPs are to be recognised in the valuation database. From these you will see that the requirement relates to a unit being one that is capable of separate use. Whangarei use the same ‘capable’ approach for defining their SUIPs.
The Manual from the Valuer-General states:
Each physical component within a rating unit, which is capable of separate use, constitutes a single unit of use. For example, a property combining a dwelling and a flat must be recorded as having two units of use.
12 May 2012
At the public meeting Steve Ruru stated clearly that Council would adopt an actual separate use policy.
LEGAL EAGLE'S VIEW
• In spite of Steve Ruru's flip flop in the letters above, he appears to be stating that Council will adopt the actual separate use policy.
• Can Council be trusted? It has broken its word on just about everything.
• There is no doubt that many councils adopt the "capable of" policy. It is far easier to assess. Actual use can be a nightmare and needs constant policing.
• The provision in the Valuer-General's manual is a red-herring. That provision refers to a unit of use. It is used solely for the purpose of valuation records, and is relevant only in describing the configuration of a property and in assessing the value of a property. It has nothing to do with rating.
• The concept of an SUIP is completely separate. It is an ungainly creature of the LGRA (Rating Act) and is an alternative method of charging rates. Parliament provided it with specific wording: a separately used or inhabited part of a rating unit.
• "Used" refers to non-residential use. "Inhabited" refers to residential use. "Rating unit" is the technical word for all the property in a certificate of title.
• Note that the wording is specific: Inhabited and used. That means actually inhabited or used. If parliament had intended those word to include "capable of" then it would have specifically included the words in the legislation.
• Some Councils throughout the country have adopted the "capable of" policy because it is easier, and because it brings in more revenue. Ratepayers either accept it or go to court for a ruling. No one has yet done that. If the matter went to court I am sure that the court would adopt the literal meaning of the words and support the actual use policy.
I have just reread the definition of SUIP in the LTP. This is the last sentence:
For the purpose of this policy, vacant land and vacant premises offered or intended for use or habitation by a person other than the owner and usually used as such are defined as 'used'.
This very much supports the view that Council will adopt a "capable of" interpretation. " Intended for use" is not too far away from "capable of use". The expression "usually used" is open to all sorts of interpretations. The problem is that it is going to be interpreted by a dishonest Council that is only intent on money-grabbing. It will interpret every situation in the way that favours Council, and if you disagree then you will be told to go to court.
Council has set out guidelines in the LTP for defining a SUIP. It has also sent out separately, to those who have queried the situation, some internal notes to help staff apply the guidelines. They can be seen here.
This would be one heck of an administrative problem. Read the guidelines and think of all the nuances. It would be a nightmare.
3. LEGAL USE
A simple way around all the problems, and a way which complies with the intent of the law, is to classify as SUIPs only those units that have the appropriate consents for separate use.
Under the District Plan properties zoned Residential are only permitted as of right:
Residential dwellings containing one household unit per site.
A household unit is defined as:
a self-contained home or residence of a single household
One household unit per site. Any second separate unit which houses a separate household requires therefore building and resource consents.
If a property is deemed to have a SUIP then it must be inhabited by a separate household pursuant to Council's proposed definition. It is therefore it in breach of the District Plan because there is more than one household on the property. That is, unless it has the appropriate consents.
If there are two households and no consents then it is an illegal use and Council should terminate that use.
Pretty simple really. Just base the assessment on permitted use which is simple to assess from Council's records.
If a ratepayer has a legal separate unit then I do not think that anyone would object to that unit being charged a separate rate. It would then save all the hassles of interpreting complicated rules and the nightmare of applying them to the peculiar circumstances of individual cases.
It seems quite ludicrous that Council could be rating units that are operating illegally under its District Plan. But logic and compliance with the law play second fiddle to the rapacious grab for money when it comes to the KDC.
A local authority is obliged to keep and maintain a rating information database that includes all information that relates to a rating unit. It also has to include all information that is required to calculate the amount of liability for a targeted rate. This means that Council is obliged to state in the database if the property is to be rated on the basis of SUIPs.
The KDC has serious problems in this regard. It has no knowledge of what properties have SUIPs. Under Jack McKerchar's regime all sorts of outbuildings were classified as "units of demand" and included in the database.
Council is now asking ratepayers to advise it if they object to their classification as a SUIP.
First, these are only proposals. Council is only going through the consultation stage. Nothing has yet been decided, so we do not know if the SUIP policy will go ahead and what definition is going to be finally adopted. It is therefore totally inappropriate for Council to ask for ratepayers cooperation at this stage when the whole SUIP policy is up in the air.
The final decision will only be available when the plan is amended following submissions and the final plan is adopted and the final audit report is issued. That will be well into June.
Only then can ratepayers ask Council to change the database for their properties.
Given the amount of work involved to apply the complicated guidelines, there is no way that Council will be able to amend the databases for all properties in time for the rates assessment. The assessment of rates, based on the database, effectively must be done on 30 June.
If the Council makes an error in assessing the rates and an incorrect assessment is sent to the ratepayer then Council runs the risk of the assessment not being valid and the ratepayer not being obliged to pay the rates.
Second, the legal obligation is clearly on Council to ensure that the database is correct. It cannot include incorrect information and then try and place the burden on to the individual ratepayer to advise Council if it is wrong. And if Council gets it wrong then, as I have said, it runs the risk of the rates being invalid.
This is a problem that many councils struggle with. There is a widespread belief that if two SUIPs exist on a property then they both can automatically be charged a separate rate.
That depends. A uniform annual general charge can be charged against a SUIP without any further qualification. (provided that it is a genuine SUIP)
It is a different story with targeted rates. Targeted rates must be based on some factor of liability. That sounds complicated but it means that there must be a basis for the rate. For wastewater the factor is:
The number or nature of connections from the land within each rating unit to any local authority reticulation system
That is what is clearly stated in the LGRA. It means that a rating unit can only be charged on the basis of the number of connections from the property to the reticulations system. (That means connections to the main sewer in the road.)
[The "nature" of connections allows councils to charge for different size pipes, dump stations etc]
Council has total misunderstood the law. Once it decides, say, that there are two units on the property it automatically charges two lots of wastewater rates.
That is only correct IF there are two actual connections to the reticulation system. If there is only one then it can only charge one wastewater rate. That is clearly what the law says.
Many councils, in the quest for more money, have been ignoring this very clear provision of the law. It is the old story that local authorities will push the law to the limit, and well past it, until someone has the fortitude and the money to go to court and prove them wrong.
I hazard a guess that very few of the so-called SUIPs that the KDC has identified have their own separate connections to the sewer. If that is the case they cannot be targeted for a separate annual wastewater charge or for the capital charge.
Another problem that the KDC faces is that it does not know which properties are actually connected to the sewer. Believe it or not some of the subcontractors failed to keep records of the properties that they connected. So if Council has absolutely no idea which properties are actually connected to the system, it is going to be very difficult to work out which units are genuine SUIPs.
All in all, given the clear provision in the LGRA, and given that Council does not know which properties are connected, charging rates against SUIPs is an exercise in futility.
In proposing to introduce SUIPs as a rating base Council has simply used it as a tool to raise revenue but without considering the decision-making and consultation requirements of the LGA.
Because Council has not provided the appropriate information to ratepayers in the LTP, ratepayers are not in a position to make informed decisions on the proposal to introduce SUIPs.
The LGA sets out the requirements for a Revenue and Financing Policy. Under subsection 101(3), Council is required to consider the following factors in making a decision on the funding sources of each activity:
(3) The funding needs of the local authority must be met from those sources that the local authority determines to be appropriate, following consideration of,—
(a) in relation to each activity to be funded,—
(i) the community outcomes to which the activity primarily contributes; and
(ii) the distribution of benefits between the community as a whole, any identifiable part of the community, and individuals; and
(iii) the period in or over which those benefits are expected to occur; and
(iv) the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity; and
(v) the costs and benefits, including consequences for transparency and accountability, of funding the activity distinctly from other activities; and
(b) the overall impact of any allocation of liability for revenue needs on the current and future social, economic, environmental, and cultural well-being of the community
It is clear that in formulating the revenue and financing policy, and introducing a completely new rating base, Council failed to consider the requirements of section 101 of the LGA.
It is also clear that Council failed to consider the obligatory requirements of section 77 LGA in respect of decision-making:
77 Requirements in relation to decisions
• (1) A local authority must, in the course of the decision-making process,—
• (a) seek to identify all reasonably practicable options for the achievement of the objective of a decision; and
• (b) assess those options by considering—
• (i) the benefits and costs of each option in terms of the present and future social, economic, environmental, and cultural well-being of the district or region; and
• (ii) the extent to which community outcomes would be promoted or achieved in an integrated and efficient manner by each option; and
• (iii) the impact of each option on the local authority's capacity to meet present and future needs in relation to any statutory responsibility of the local authority; and
• (iv) any other matters that, in the opinion of the local authority, are relevant; and
• (c) if any of the options identified under paragraph (a) involves a significant decision in relation to land or a body of water, take into account the relationship of Māori and their culture and traditions with their ancestral land, water, sites, waahi tapu, valued flora and fauna, and other taonga
Council also failed to take into account section 10 of the LGA:
10 Purpose of local government
• The purpose of local government is—
• (a) to enable democratic local decision-making and action by, and on behalf of, communities; and
• (b) to promote the social, economic, environmental, and cultural well-being of communities, in the present and for the future.
The draconian effect of the SUIP policy with rates rises reaching over several hundred per cent, which will bring about the destruction of communities, and bring depression to the whole district, run completely contrary to the principles of local government that are set out in section 10.