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Resource Management Update – July 2018

Home Insights Resource Management Update – July 2018

In this edition:

Regularised Regional Plans and Duplicate District Plans:

Draft National Planning Standards publicly notified

As foreshadowed in our April Resource Management Update, last month the Ministry for the Environment released the first set of draft National Planning Standards for public consultation. The first set of Standards primarily address plan architecture and mechanics by prescribing plan structure and mapping standards, providing guidance on zones and other spatial planning tools, and detailing standardised definitions and noise metrics.

The Standards on plan architecture and mechanics issues are straightforward and, in our view, have the potential to deliver on the Government's promised benefits of improving consistency and usability of planning documents throughout New Zealand. Councils, practitioners, organisations that operate in multiple districts, and town and country planning practice generally all stand to benefit.

Despite this, there are a number of issues with the draft Standards:

  • The draft Definitions Standard is likely to be most problematic. Not only are the 109 standardised definitions mandatory, but planning documents must not include any terms that are synonymous with a prescribed term. In some cases, the standardised definition may be a significant departure from the corresponding term in an operative planning document, which may have substantial flow on effects on the interpretation and application of plans.
  • The draft Area Specific Matters Standard requires local authorities to choose one or more zones from a list provided to use in their plans. While objectives, polices and rules are not prescribed, those provisions will need to fulfil the provided purpose statement for each zone. Resource management participants should ensure that they are happy with the proposed zones as well as the zone purpose statements.
  • The draft Spatial Planning Tools Standards for Regional and District Plans provide a list of spatial planning tools that councils must adopt. These include standardised naming, function and mapping requirements, overlays, freshwater management units, precincts and development areas. While these tools already exist in a number of plans, the Standards do not provide any clarification as to the hierarchy of these tools. How different parts of a plan interact has been the cause of litigation, even just earlier this year.

A key challenge with the Standards will be their implementation. Some plans will require substantial changes in response to the Standards. A wholesale re-write of just one plan can cause issues for councils and submitters – this will only be amplified by the requirement to change over one hundred different district and regional planning documents to adopt the standardised templates. Fortunately councils will be given time to implement the changes, ranging from 12 months for the Electronic Accessibility and Functionality Standard to five years for most of the other standards (with a two year extension for councils that have completed a plan review within three years of gazettal of the first set of planning standards).

Most of the directions in the first set of Standards are mandatory, meaning that councils are required to incorporate the standards into plan documents under section 58I of the RMA, without using the normal Schedule 1 public consultation process. While councils can make consequential amendments that are necessary to avoid duplication or conflict without using a public consultation process, any other changes must be made using the normal Schedule 1 process. Depending on how actively this process is managed by councils, this could result in a period of 'limbo' between the changes required under the Standards, and subsequent plan changes to address flow-on consequences.

MfE is running a series of roadshow sessions in regional centres. MfE has also called for written submissions, which close on Friday 17 August. MfE has requested that submissions focus on the workability of the standards, including answering 24 questions posed by MfE in a Consultation Document. There will be a further evaluation report and final policy decisions following the close of submissions, which may include workshops with submitters if required, but there is no provision for a hearing process. The Standards will be gazetted by 18 April 2019, at the latest.

All organisations interested in resource management matters should pay attention to the Standards. Involvement at this stage will ensure that there are no surprises when Standards are implemented and will avoid future costs of responding to flow-on consequences to business activities. Please get in touch with one of our experts if you wish to discuss how these standards are likely to affect your business.

The draft Standards, and supporting materials, can be found on the MfE website.

Daniel Minhinnick and Mike Doesburg

Divide and conquer? The ability for a consent authority to challenge its own decisions

In the recent decision of Auckland Council v Auckland Council [2018] NZEnvC 56, the Environment Court heard the jurisdictional issue of whether Auckland Council, through its Community Facilities department (Applicant), could appeal the decision of Auckland Council through its hearing commissioners (Respondent). This was a precursor decision, distinct to the upcoming appeal of the Respondent's decision to refuse to grant resource consent for works associated with a walkway on, and the protection of, the esplanade reserve at Orewa Beach.

The Court held that you cannot be your own adversary, and there is no real basis on which you can enforce any right or duty against yourself. The Court rejected the Applicant's argument that the Council could 'split' itself into two separate, unincorporated entities (eg by dividing itself into its decision-making and consent-seeking functions), given it already had legal personality. The Council had to be considered as one, whole, identifiable legal entity. However, the Court accepted that there was no express authority that a council, as applicant for a resource consent, could not appeal against its own decision as the consent authority.

Ultimately, rather than making a final ruling on the issue, the Court relied on the positions of the interested parties to conclude that there was a real controversy at hand which needed to be resolved.

The Court allowed the appeal on the Respondent's refusal to grant resource consent to proceed, leaving open the possibility that in other circumstances the jurisdictional issue may need to be decided (eg where there are no other parties to the appeal). As noted by the Court, circumstances such as these arise regularly throughout New Zealand, as local authorities have a broad range of functions, so while this question remains open, it may be answered definitively sooner rather than later.  

Allison Arthur-Young and Lauren Eaton

Building a new Ministry to build new homes

Hon. Phil Twyford recently announced that a new Housing and Urban Development Ministry will be established this year. The announcement follows earlier Ministerial statements that housing and urban development is a key priority for the Government.

The intention is to create a 'one-stop shop' for the Government to receive advice on housing issues, homelessness, rental property standards, and first home buyer support. While the Ministry is 'new', its functions will primarily be assumed from various existing agencies, including:

  • housing and urban policy functions, the KiwiBuild Unit, and the Community Housing Regulatory Authority from the Ministry of Business, Innovation and Employment;
  • policy for emergency, transitional and public housing from the Ministry of Social Development; and
  • monitoring of Housing New Zealand and Tāmaki Redevelopment Company from the Treasury.

The Ministry of Housing and Urban Development will be established from 1 August 2018, with operations officially starting on 1 October 2018. The Government appears to have an ambitious agenda for the new Ministry, its mandate being to "build much-needed affordable housing, and create modern and liveable cities ready for the future".

While the establishment of the Ministry is a step in the right direction, we anticipate that the Ministry's ability to deliver on this mandate will hinge on its ability to equip local authorities and private developers with the necessary tools that they need to deliver more houses on the ground.

If you would like to find out more about the Ministry, a copy of the full press release is available here.

Cameron Law and Lauren Eaton

Our Climate Your Say: Consultation on the Zero Carbon Bill

As promised, the Ministry for the Environment has recently released the consultation document on the Zero Carbon Bill. As indicated in our April update, the focus of the Zero Carbon Bill is to establish an independent Climate Change Commission, set a 2050 emissions target, and provide a statutory framework for how these two will interrelate.

The Ministry is seeking feedback on the following:

  • The 2050 target: whether there is an appetite to set an emissions reduction target in the legislation now, and if so, what that target looks like. Three options are proposed:
    • targeting net zero carbon dioxide only;
    • net zero long-lived gases (like carbon dioxide) while stabilising short-lived gases (like methane); or
    • targeting net zero emissions across all greenhouse gases.
  • Emissions Budgets: how should these budgets be structured? Like the UK equivalent, setting three "five year" budgets is proposed to ensure the 2050 target is met. Feedback is sought on whether there should be provision in legislation for each Government to have the ability to alter the third budget, and in what exceptional circumstances a Government could also alter the second budget. The consultation document also seeks comment on a series of considerations that the Government and Climate Change Commission should take into account when advising on and setting the budget.
  • Government Accountability: what should the Government's role be in providing plans for achieving the emissions budgets, and should this be prescribed within a certain timeframe?
  • Climate Change Commission: what should the scope and role of the Climate Change Commission be? The Government is proposing that the Commission's role include advising and monitoring New Zealand's progress towards the 2050 target, along with prescribing a range of essential expertise the chosen Commissioners must have. Importantly, the document questions whether the Commission should play a greater role in the New Zealand Emissions Trading Scheme; namely, if it should operate in an advisory capacity or have more decision-making capacity.
  • Strategy on adaptation: whether the Zero Carbon Bill should include adaptation is also being considered. If so, the Government is considering whether the functions they have proposed (ie a national climate change risk assessment and national adaption plan) are appropriate. Of note, feedback on whether there is appetite to set up a targeted reporting power to ensure organisations (such as Crown entities, SOE's, local and central government etc) share information on their exposure to climate change risks is also requested.

The options provided in the consultation document show a willingness to consider what 'pace' the Zero Carbon Bill should set for New Zealand's transition. The outcomes of this consultation will send a clear message to the Government as to their climate change mandate, and indicate whether their trajectory thus far has been over-ambitious, or is in fact a fair reflection of the pace most New Zealanders wish to set.

Submissions on the Zero Carbon Bill close at 5:00pm on 19 July 2018. The discussion document can be found on the MfE website here. Please contact one of our experts if you have any questions about the Zero Carbon Bill or if you would like any assistance with preparing a submission on the Bill.

Allison Arthur-Young and Georgia Cameron

Court approves marina, floating carpark and café on Waiheke Island

In the recent decision of SKP Incorporated & Ors v Auckland Council [2018] NZEnvC 081, the Environment Court rejected an appeal against Auckland Council's decision to grant resource consent to construct and operate a 186-berth marina, carpark, cafe and associated facilities at Kennedy Point Bay, Waiheke Island.

The application came in the wake of a proposal for a marina in Matiatia Bay, which was previously declined by the Court. Although they accepted the environmental effects in the present case were more confined than in the Matiatia decision, the appellants alleged that there would be more than minor adverse ecological, natural character and social effects caused by the present proposal.

The appellants argued that the proposal was not the kind of activity ordinarily envisaged for the coastal marine area and was out-of-keeping with community expectations for Waiheke Island. While the Court recognised that social effects could be valid concerns under the Resource Management Act 1991, the Court warned that evidence of such effects must be treated with caution. Ultimately, the Court was unsatisfied by the quality of the appellants' sociological evidence and noted that it would not be influenced by mere perceptions of risk that are not shown to be well founded.

Similarly, the Court was unpersuaded by the ecological evidence put before it by the appellants. The Court's findings in this regard serve as a general reminder of the need to ensure all evidence before decision-makers is of substantial assistance, focused and relevant. The decision is one of a growing number of cases where the Court has expressed concern at both the quality and quantity of evidence, especially expert evidence.

As a non-complying activity, one of the key issues in contention was whether the proposal passed the "gateway tests" under section 104D of the RMA. In finding that the application passed both of the gateway tests, the Court held that assessments under the effects gateway of s 104D(1)(a) must be undertaken on a "holistic basis, looking over the entire application and range of effects, not just individual effects." In respect of the second gateway under s 104D(1)(b), it commented that "it is only if there is an important set [of objectives and policies] to which the application is contrary, that the consent authority might conclude that the second gateway is not passed."

Given the location of the proposal (ie almost exclusively in the waters of Kennedy Bay) the Court went on to examine the consistency of the proposal with the New Zealand Coastal Policy Statement (NZCPS) and Auckland Council Regional Policy Statement (RPS). In particular, Objective 6 of the NZCPS directs that activities which do not have a "functional need" to be located in the coastal marine area generally should not be located there. This direction presented a significant hurdle for the Applicant's floating carpark and community building.

In deciding to uphold the decision to grant consent, the Court read-down the functional need test and found that Objective 6 did not amount to a complete prohibition. It also noted that the RPS cautiously enabled activities that could not practicably be located elsewhere and was prepared to grant consent to the community building and carpark on the basis of an "operational need, approaching a functional need" to be located in the coastal marine area.

The Court's decision may have flow-on effects for other proposals in the coastal marine area that may not meet a strict interpretation of the "functional need" test under the NZCPS. Whether it is enough to show that an activity could not practicably be located elsewhere is a matter we expect will be tested in future decisions.

Daniel Minhinnick and Simon Pilkinton

Auckland Transport's Regional Land Transport Plan receives the green light

Rapid population growth, a buoyant economy and increases in vehicle ownership have put immense pressure on Auckland's transport systems over past years. Recently, the Board of Auckland Transport signed off on a $16 billion Regional Land Transport Plan (RLTP) that aims to deliver a "safe, reliable and accessible transport system" better able to meet the demands of our fast developing city.

Sign off on the RLTP comes after the Board of Auckland Transport ordered a re-write of Auckland Transport's investment plans that it said did not adequately reflect the main concerns of Auckland Transport, Auckland Council and the Labour Government. The re-written RLTP aims to give effect to Auckland Council's responsibilities on the Auckland Transport Alignment Project (ATAP), a $28 billion programmes for transport investment agreed between the Government and Auckland Council. The RLTP sets out land transport objectives, priorities and measures for the next 10 years, setting aside $10 billion for capital investment to meet Auckland's commitments under the ATAP and another $6.5 billion for operating expenditure.

Overall, the RLTP provides for major improvements to be made in public transport, including rapid transit, walking and cycling, network initiatives to help address congestion, and support for greenfield and urban redevelopment. It also puts major emphasis on improving safety on Auckland’s road network. New projects in line to receive funding include Light Rail from the city to airport and northwest corridor (to be delivered by the New Zealand Transport Agency through the National Land Transport Fund) and eastern bus routes from Panmure to Botany. Though some significant cycling investments along major road corridors are provided for (including the SkyPath and its companion route, SeaPath, again to be delivered by the New Zealand Transport Agency), almost half the spending requested for cycling and walking was rejected in favour of projects to improve Auckland's road network.

For more information, a copy of the full RLTP is available here. The RLTP was subject to the finalisation of the Regional Fuel Tax, but the legislation enabling that tax was passed by Parliament and came into effect last week.  

Cameron Law and Simon Pilkinton

Inland Revenue releases guidance on tax treatment of resource consent costs

Inland Revenue has released a draft interpretation statement outlining its view of the income tax treatment of the cost of a resource consent. The draft statement contains a comprehensive outline of the deductibility of such costs, and runs to some 45 pages. The income tax treatment of the costs of obtaining a resource consent has been uncertain in some cases, and Inland Revenue's draft statement is therefore an important development for businesses that incur such costs. 

Inland Revenue's view is that, following the Supreme Court's decision in Trustpower, the costs of acquiring a resource consent will generally not be deductible when incurred (whether as feasibility expenditure or otherwise) but rather will generally be non-deductible capital expenditure, albeit with the possibility of depreciation deductions being available. There are exceptions to this general rule where the circumstances of the taxpayer, or relating to the asset, result in the cost of the consent being revenue expenditure (and therefore deductible). The draft statement gives the examples of land developers or dealers, for whom the proceeds of sale of land will be income, from which the cost of that land (which may include the cost of the consent) may be deducted.

To the extent it is capital expenditure, the cost of a resource consent may nevertheless be deductible under the depreciation rules over the life of the resource consent (or in some cases, over the life of the underlying asset to which it relates). In this regard, the draft statement distinguishes between two categories of consent, being: (1) environmental consents granted under sections 12-15 of the Resource Management Act 1991 (RMA) (with the exception of reclamation consents); and (2) land consents under sections 9 or 11 of the RMA (and reclamation consents).

The first category (environmental consents) are depreciable intangible property for tax purposes. This means that a taxpayer is able to claim depreciation deductions for the cost of the consent over its legal life (provided that it is connected to a business or other income-earning activity), and on the basis that the taxpayer has acquired a standalone asset.

The second category (land consents) will generally not be depreciable intangible property. Inland Revenue notes, however, that the cost of a land consent might in some cases be capitalised into the cost of another item of property. The tax treatment of the cost of the land consent is then determined by reference to the treatment of that property. For example, where the cost of the land consent is a component of the cost of another depreciable asset, the cost of the land consent will be depreciable as part of the cost base of that resulting asset. No depreciation deduction will arise where the resulting asset is an interest in land or a building with a life of more than fifty years.

For depreciation purposes, it is necessary to determine the items of expenditure that form part of the cost of an item of depreciable property. The draft statement recognises that the cost of a resource consent may comprise various expenditure components, and contains a comprehensive explanation of the principles relevant to determining the cost. 

The draft statement also addresses expenditure relating to a resource consent, but incurred after the consent has been granted (eg, the costs of complying with, or varying, the conditions of a consent). The Income Tax Act provides for expenditure incurred after an asset's initial acquisition to be included as an additional cost of the asset in some circumstances. Inland Revenue suggests that expenditure incurred on varying the conditions of a resource consent may be included as an additional cost. Expenditure on complying with the conditions of a consent, however, generally would not be included as an additional cost of the consent, but may be deductible on some other basis. 

Inland Revenue has called for submissions on the draft statement by 3 August 2018. We would be pleased to discuss the draft statement, and possible submission points, with affected parties.

Fred Ward and Brendan Brown

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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