Benefits outweigh $864 million cost of new RMA reform, which could include new taxes and revenue tools – officials | Daily News Byte

Reforms to the government’s Resource Management Act will have a one-off cost of $864 million over 10 years split mostly between central and local government, and an 11 percent cost increase for
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But the costs far outweigh the benefits, according to an analysis by the Environment Ministry, which also cited the possibility that the reforms could lead to new revenue-raising tools and an “environmental tax”, partly to cover the costs.

National and Act said this was a lot like tax evasion.

The Government announced that the Ministry of the Environment is not working on any proposal for an environmental tax.

Officials estimate the cost of establishment and ongoing reforms to be $3.891 billion over 30 years, but the monetized benefit is $10.039 billion. This figure excludes large non-monetary benefits such as environmental quality.

The problem is not so much the costs of the reforms in relation to the benefits, but the fact that the benefits fall on investors and builders, which will hopefully flow into cheaper infrastructure and housing, while the costs will be borne by councils and government.

Local government representatives, while interested in some of the reforms, are concerned that they will struggle to find ways to cover the costs – an example, they say, of the central government’s tendency to create regulations that local government must finance through rate setting.

Environment Minister David Parker, who is driving the reforms, said he thought some of the cost figures were higher than what was likely to be in practice.

“Council costs in [supplementary analysis report] it seems more than (what) we expect to be achieved in reality, given that we are reducing the number of RMA plans from 100 to 15 regional plans.”

Parker drew attention to an analysis of the expected savings of the new regime, which aimed to reduce the high costs of obtaining approvals for new infrastructure and housing – often seen as one of the drivers of poor infrastructure and housing affordability in New Zealand.

“The Infrastructure Commission found that consents for infrastructure projects cost $1.3 billion a year or 5.5 per cent of project costs. That’s above the extreme end of costs in the EU and Europe, which range from 0.1 to 5 percent.

“If we can get that 5.5 percent down to 4.5 percent, that alone would save about $250 million a year,” Parker said.

But it is not the price of the reforms that is disputed, but the manner in which the Government intends to pay for them.

The paper said that “the reform of the RMA will also lead to the introduction of new means of funding” – including environmental taxes, although these were only “under consideration”. National said this was an example of the Government stealing taxes into its work programme, the Government pointing to the fact that taxes have been targeted at the environment in the IRD since the Tax Task Force reported back in 2019.

New financing tools, but not new taxes

The Ministry of the Environment, they say, categorically does not work on environmental taxes.

An analysis of the RMA reforms is contained in the Supplemental Analysis Report – Version of the Regulatory Impact Statement.

They mentioned three possible new means of financing.

They included “allocation mechanisms” that would allow resources to be allocated using “auctions and tenders” where money would change hands. It is not clear whether this allocation mechanism would apply to the problematic issue of water rights, which the RMA reforms seek to address.

The second was “value-added fees” that were “still under consideration but could be used to recognize private benefits accrued from infrastructure investments in the community, such as mass rapid transit systems.”

It was the last possible means of financing that most aroused the interest of the opposition. The report states that the reforms could enable the introduction of an “environmental tax”, which is “under consideration”.

Officials have warned that the reforms could cost local councils more than the current resource management system, putting pressure on rates. However, the new revenue instruments available under the new regime could “provide another revenue stream to offset reliance on rates” for councils.

National’s finance spokeswoman Nicola Willis compared the “environmental tax” to Parker’s now-abandoned proposal to tax KiwiSaver benefits.

“First we had the KiwiSaver tax debacle and now it turns out Labor is also considering a new environmental tax.”

Willis said it was “another tax grab”.

“Instead of coming up with new ways to tax people, the Government should be focusing on reducing the huge cost of living burden that all New Zealanders face,” she said.

Parker’s office said MfE is not working on new taxes. The IRD considers the interaction of the tax system with the environment and how the system encourages or discourages behavior that leads to good environmental outcomes.

This paper considers when to use pricing instruments for environmental and resource issues and to ensure that the tax system is neutral in the sense that it is not biased towards emission-intensive parts of the economy.

This did not necessarily mean higher taxes. One example of this work was the decision to change the application of the fringe benefits tax to make it cheaper for workplaces to offer more environmentally friendly benefits to their employees.

Infrastructure Bill spokesman Simon Court said the revenue tools were “interesting proposals” and were “similar to some of the ideas the Bill has released this week” in its own RMA reform policy.

“The trick will be to make sure these policies fund faster development instead of being just another tax grab.”

“The law supports auctions and tenders to ensure that valuable resources are maximized,” he said.

Undo and replace

The government’s reforms to the RMA will eventually lead to the repeal of the RMA and its replacement by three pieces of legislation. The main part is the Bill on Natural and Built Environment and the Bill on Spatial Planning.

Essentially, the reforms make planning more predictable by creating nationally driven environmental standards and forward planning, merging more than 100 plans made under the current RMA into just 15.

The presentation of this planning aims to make the system cheaper for users, which will reduce the cost of building apartments and infrastructure – one of the key goals of the reform. But the analysis warned that cutting costs for “users”, mainly developers and people who need consent, would mean higher costs for central and local government.

The report states that the new advance planning regime will “help to direct more of the activity and costs towards the front end of the process (run by central and local government), reducing the number of activities that require consent and providing greater clarity on those activities that consent is required, which reduces efforts and costs”.

“The new RM system is expected to result in more effort (and cost) for central and local government in planning and monitoring (system performance, compliance and environment), lower initial costs for system users and higher cost recovery from users for compliance monitoring” , it is stated.

Costs for central and local government mainly come from the establishment of new planning boards and the establishment and enforcement of new environmental standards.

“Central government and local government costs would increase compared to the current system, by 112 percent and 11 percent respectively,” the report said.

“The largest cost savings in the new RM system are for system users – an estimated reduction of 19 percent or about $150 million annually.

“For central government, key new cost components include direct support to help iwi and hapu organizations participate in RM [resource management] processes, support through the model plan process and additional MfE staff to undertake central functions related to ongoing monitoring of environmental targets and constraints,” the report said.

For local government, the biggest cost would come from:

The paper says the new model has the “advantages” of being more suited to large infrastructure projects and housing, and likely means less litigation.

Local self-government costs

However, the reforms had “disadvantages” of “relatively high initial costs and higher ongoing costs” – however, these costs would be “offset” by reduced planning and consent costs.

said LGNZ Chief Executive Susan Freeman-Green Herald these costs have caused some concern.

“LGNZ recognizes the need for these reforms but has significant concerns about how they will be financed and funded. Transformational reform requires funding on the same scale,” she said.

“Our main concern is that councils will have less influence over the development of planning documents, but they will be expected to rein in the increase in operating costs that the new system brings with it.” “Without the Government providing enough funding directly to councils to see them through the transition, this will be yet another example of councils having to shoulder the burden of central government changes,” she said.

Freeman-Greene described the Treasury’s estimate of establishment costs as “eye-watering”, particularly as the council was already facing “rate increases to fund aging infrastructure and keep up with rising ongoing operating costs for day-to-day services”.

The government finances part of the implementation of the reforms, lifting part of the burden.

Budget 2022 included implementation funding to support local government and ivi of $147 million through 2026.

Parker’s office said work is underway to establish detailed funding streams for central government to help local government implement the new system. Councils that are early adopters of the system will be helped by central government investment.

Heritage

The report said the legislation would threaten the controversial issue of how much heritage value should be incorporated into the new regime.

The report said the new law doubled this. The current RMA lists “convenience value” as a category deserving of protection. The reforms were originally intended to relax this restriction by removing reference to the value of the benefit from the replacement account.

However, it found that “simply omitting any mention of amenity values ​​would not prevent decision-makers from considering them differently”.

Instead, the bill mentions these values, but only to clarify that they must be excluded from consideration.

The bill “explicitly” prevents “some types of effects from being considered in decision-making.” This approach would mirror the existing trade competition provisions of the RMA, which prevent decision-makers from considering the impact that new activities would have on competitors,” the report said.