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Regulatory impact statement: Resource Management Act Discount Regulations 2010
Agency Disclosure Statement

This Regulatory Impact Statement has been prepared by the Ministry for the Environment.  It provides an analysis of the preferred options for the development of discount regulations (the Regulations) required under new sections 360(1)(hj) and 36AA of the Resource Management Act 1991 (RMA). 

There are two key risks associated with the development of the Regulations:

• Significant time constraints apply as a recommendation on the Regulations must be made by the Minister to the Governor-General by 1 July 2010.
• Statistics and data have been identified from two key sources, the local authority bi-annual RMA Survey and additional data collected from a small number of local authorities. These sources are of only limited applicability.

There are a range of risks associated with the implementation of the Regulations:

• Additional costs will be imposed on local authorities by the Regulations if timeframes in the RMA are not met. These costs are likely to be passed on to either consent applicants (increases in fees) and/or be passed on to ratepayers (increased rates).
• The focus on timeliness within the Regulations may create perverse incentives at the expense of best practice (the quality of the decision making process).
• The capacity of local authorities to address the requirements of the Regulations. This is a particular issue for the Auckland region with the creation on the new Auckland Council.

There is a risk that additional costs may fall on businesses if local authorities pass on the costs associated with the Regulations to consent applicants in the form of increased fees.

The policy proposals contained in this paper will not impair private property rights, market competition, or the incentives on businesses to innovate and invest.

The policy proposals have been reviewed against, and are consistent with, the Fundamental Common Law Principles contained in the Legislation Advisory Committee Guidelines.

Note that the proposals were updated following consultation with the Minister – see section ‘Policy Process Update’

[signed by]
Martyn Pinckard, Director

Policy Process Update Since Regulatory Impact Statement Signed Off

Purpose

The purpose of this section is to record the outcome of discussions held with the Minister for the Environment on 15 March 2010 that account for differences between the signed-off Regulatory Impact Statement (RIS), and the policy and recommendations contained in the Cabinet paper to the Economic Growth and Infrastructure committee.

Background

Commencement date

The RIS proposed a delayed commencement date for the regulations of 1 November 2010 to address concerns about the ability of local authorities (particularly Auckland councils) to put in place administrative systems and procedures to cater for the discount policy.  The Minister for the Environment did not support a delayed commencement, meaning that commencement would occur 28 days after the Gazette notice, as is set out in the standard regulation making process.  However, to ensure local authorities still have three months notice to amend their systems and processes, or develop an alternative discount policy, the Minister seeks Cabinet approval for the Cabinet Paper containing details of the discount regulations to be made public in April 2010.  The Minister also proposes to write to all local authorities providing details of the discount regulations.  The Ministry for the Environment will also be preparing detailed guidance and working closely with local government.  This will provide a similar timeframe for implementation as the initially proposed delayed commencement.

Value of the Discount:

Three options for determining the value of the discount were proposed (paragraph 3.15 of the RIS).  The Minister for the Environment proposed a fourth option; 1 per cent per day up to 50 working days for notified and non-notified applications, capped at 50 per cent.  This option addresses the concerns of some local government respondents that an 80 per cent cap was too punitive, and still provides an incentive to local authorities to perform.  It is workable, being simple to understand and administer.  It is fair and equitable, and minimises administration costs.

Responsibility

Four circumstances in which a local authority was not responsible for timeframes not being met were set out in the RIS (paragraph 3.43).  The Minister for the Environment proposed just two exemptions:

• Where unforseen circumstances alter statutory timeframes (for example, a sole submitter withdrawing prior to a hearing, resulting in no hearing being needed and the timeframe for processing a consent consequently moving from 70 working days to 50 working days).
• Where delays are caused by an applicant’s non-payment of a fixed fee, given that section 88C does not allow the processing clock to be stopped in these circumstances.

The Minister considered that delays associated with late feedback from external agencies (including iwi) should not be exempted from a discount applying.  The Minister for the Environment considered that external agencies should work to accommodate statutory timeframes or run the risk that their comments will not be taken into account.  Local authorities are incentivised to improve performance, and so should other parties.  The Ministry will need to produce guidance to support both local authorities and external agencies.

With regard to delays resulting from the Department of Conservation appointing a commissioner to the hearing panel for restricted coastal activities, restricted coastal activities are generally notified such that the Department usually has ample warning that it will need to appoint a panel member.  A statutory timeframe could be imposed on the Department through amendment to section 117 in Phase II of the RMA Reforms (workstream RMIIG), to provide an incentive and onus on the Department of Conservation to provide information in a timely manner (no timeframe is provided in the RMA currently). 

With regard to delays where responsibility for not meeting timeframes is shared between the local authority and other parties, there is no need to have these delays listed, given that this situation is a direct result of the wording of the regulation making power in section 360(1)(hj) and can be addressed  through guidance.  The wording of this section is “when local authorities are responsible”.  Legal advice is that this means “wholly or totally responsible”. Therefore, it is not possible for the Regulations to provide a discount in circumstances where responsibility is shared between the local authority and other parties (e.g. the applicant).

Officials’ conclusion

Ministry for the Environment officials are of the view that the proposed changes meet all four objectives of the Regulations, in that they incentivise local authorities to perform, are fair and equitable, workable, and minimise administration costs.

[signed by]
Martyn Pinckard, Director

1.0   Status quo and problem definition

Background

1.1 The Resource Management Act 1991 (RMA) is the primary statute that governs the management of the use and development of New Zealand’s natural and physical resources.  Implementation of the RMA is largely devolved to local authorities (district, city and regional councils) who prepare and administer regional and/or district plans aimed at avoiding, remedying or mitigating effects on the environment while enabling use of resources.  Where the proposed use of a resource fails to meet the requirements of certain provisions in a plan, resource consent must be obtained from the relevant local authority.

Problem to be solved 

1.2 Statistics gathered by the Ministry for the Environment through the local authority bi-annual RMA Survey (the RMA Survey) show that local authorities’ performance in relation to processing resource consents within statutory timeframes has been steadily tracking downwards since 2001/2002.

1.3 The last RMA Survey (2007/2008) identified 51,960 resource consent applications were processed through to a decision and of these, 4.7 per cent were publicly notified, 1.9 per cent were limited notified and 93.4 per cent were non-notified.  In 2007/2008 only 69 per cent of resource consent applications were processed within the timeframes set by the RMA. Of this 69 per cent, 70 per cent of non-notified, 57 per cent of limited notified and 52 per cent of publicly notified consents were processed within the statutory timeframes. This was the lowest result for the past 10 years. In 2007/2008 only four local authorities processed 100 per cent of their resource consent applications within statutory timeframes, with an additional five achieving 99 per cent.

1.4 The RMA Survey contains limited statistics around consents once the timeframes in the Act are exceeded. To meet this gap additional data was collected from a small number of local authorities. The data was utilised to gain a general picture of late resource consent application processing trends and the cost implications of various discount options.

1.5 The results from analysis of these statistics and data should be considered within its limitations. These limitations include:

• The RMA Survey was last carried out in 2007/2008 therefore some of the data used for calculations is out of date.
• The RMA Survey (2007/2008) data collected was over a time period when the economy was buoyant before the recession when a very large number of consent applications were being processed.
• The average cost of non-notified and limited notified consents (from the RMA Survey) has been estimated, although in reality there is a very large range of costs for consents.
• The majority of the data used is from prior to Phase 1 of the RMA Reforms which decreased the number of circumstances under which timeframes can be extended, or put on hold, therefore the reforms are likely to effect the amount of consents that are processed within timeframes.
• The additional data was only collected from a small (nine) sample of local authorities.
• The data collected covers various timeframes.
• The data assumes that local authorities would be responsible for all late applications (which will not be the case in practice).

1.6 There are limited legislative options to address poor performance with respect to consent processing timeframes.  Section 25 of the RMA gives the Minister for the Environment the power to investigate and make recommendations; however this is only employed in the most serious cases of non-performance.  The only other current sanction for late consent processing is adverse publicity for local authorities.

Decisions already taken and legislative and regulatory powers available

1.7 The Resource Management (Simplifying and Streamlining) Amendment Act 2009 (RM Amendment Act), introduced new sections 360(1)(hj) and 36AA to the RMA relating to the development of discount regulations (the Regulations). Section 36AA states:

(2) The Minister must recommend to the Governor-General within 9 months of the commencement of section 32 of the Resource Management (Simplifying and Streamlining) Amendment Act 2009 that regulations be made under section 360(1)(hj) and the Minister must, before making the recommendation, consult with local authorities about the proposed regulations.

1.8 The RMA sets out that the Regulations make it mandatory for local authorities to provide a discount on administrative charges when the local authority is responsible for applications for resource consent or applications to change or cancel resource consent conditions not being processed within timeframes set in the RMA.

1.9 Local authorities must comply with the Regulations unless they adopt a discount policy of their own that is more generous than that provided for in the Regulations.  The Minister for the Environment is required to recommend to the Governor-General that Regulations be made by 1 July 2010.

1.10 Only a small number of local authorities currently operate some type of voluntary discount.  For example, Hamilton City Council provides a ‘Money-Back Guarantee’ for non-notified resource consents not issued within the statutory timeframe.  Other local authorities, such as Environment Bay of Plenty and Wellington Regional Council, provide discounts on a case-by-case basis.  Local authorities can continue with existing discounting approaches they have implemented, but only if they are more generous than that provided for in the new Regulations.

2.0   Objectives

2.1 There is a legislative mandate for the Regulations as outlined in sections 360(1)(hj) and 36AA of the RMA. While the RMA requires Regulations to be set for discounting administrative charges, the RMA does not specify how to calculate the discount and in what circumstances it will apply.  This is therefore the basis for undertaking an analysis of options.

2.2 The objective of the Regulations is to improve local authorities’ resource consent application processing timeframes, by building in a financial incentive for local authorities to process resource consents on time, and to provide a degree of compensation to the inconvenienced applicant where timeframes are not met. This objective needs to be met through Regulations that are consistent with the legislative mandate in paragraphs 1.7 and 1.8 above.

2.3 Therefore the proposed Regulations must:

• adequately incentivise local authorities to perform – the Regulations must give local authorities a financial incentive to process consents within timeframes in the RMA. This means the discount must be enough to incentivise performance and must give an on-going incentive to local authorities once the consent is late;
• be fair and equitable – the Regulations should not affect any type of local authority more than another and must treat applicants fairly;
• be workable – the Regulations must not be so complicated that they lead to confusion.  More workable Regulations will also lead to local authorities having a better ability to plan for the expense of likely discounts; and
• minimise administration costs – if the Regulations are too complex or confusing they could lead to large increases in administration costs for local authorities.

3.0     Regulatory impact analysis

Approach to developing the Regulations

3.1 In November 2009 the Ministry set up a panel of representatives (the discussion panel) from nine territorial authorities and regional councils¹, and Local Government New Zealand (LGNZ), to help develop the policy options.  Two meetings of this panel were held and the Discount Regulations: Issues and Options Paper (Issues and Options Paper) was developed.

3.2 Wider local government were given the opportunity to comment on the Issues and Options Paper.  Cabinet agreed that the Issues and Options Paper also be released for targeted consultation with selected stakeholders. Feedback was received from 45 local authorities, Local Government New Zealand (LGNZ) and 10 other targeted stakeholders including companies and associations/societies.

Options for the formulation of the Regulations

3.3 There are a number of options that need to be considered when forming the Regulations.  The options highlighted in the Issues and Options Paper included: 

• the method of calculating the discount;
• the value of the discount;
• how local authority ‘responsibility’ will be determined;
• how the timeframes will be determined.

Options for the method of calculating the discount

3.4 An appropriate method for calculating a discount needs to be identified which recognises the varying size and capabilities of local authorities, the varying complexity of application types, and still meets the objectives. 

3.5 Three options for the method for calculating the amount of discount on administrative charges were considered:

• fixed percentage discount;
• sliding scale percentage discount;
• formula discount.

3.6 Regardless of the method, a set dollar discount rate was not considered an option as it would not adjust automatically for inflation and would not be equitable given local authorities charge different rates.

Option1: Fixed percentage discount

3.7 A fixed percentage discount once statutory timeframes are exceeded is considered the most workable method for local authorities to administer and for resource consent applicants to understand.  It would also allow for costs to be readily estimated by local authorities and provided for in budgets (based on the previous year’s performance results).

3.8 However, such a discount would apply irrespective of the number of days over the statutory timeframe an application is processed, which is not a strong incentive for local authorities to continue to process consents in a timely manner once timeframes are exceeded.  Furthermore, the value of the fixed percentage applied could either be too punitive or too low (not providing enough incentive).  A fixed percentage figure would be unfair as local authorities charging low processing fees would be more affected by the discount than those charging higher processing fees. 

3.9 Overall a fixed discount would not meet the objectives of incentivising local authorities to perform or be fair and equitable.  It is however workable, and minimises administration costs.

Option 2: Formula percentage discount

3.10 Another option considered is a formula to calculate the rate of discount based on a number of variables (such as the number of days over the timeframe, total days allowable for processing, and proportionality of fault).  This approach could be the most fine tuned and the most fair and equitable by allowing some flexibility for local authorities based on their circumstances.  However the method would easily be the least workable due to difficulties that would occur around its development as there would be a large number of different factors that would need to be considered in developing a formula.  A formula would be difficult for local authorities to administer and for applicants to understand.  A complex formula discount may also lead to disputes over how the formula was applied.

3.11 Overall a formula discount would not meet the objectives of being workable or minimising administration costs, and may not be fair and equitable.  It does however incentivise local authorities to perform.

Option 3: Sliding scale percentage discount

3.12 A sliding scale percentage discount (up to a maximum discount amount) on a working day or weekly basis (five working days) continues to provide an incentive for local authorities to continue processing applications as quickly as possible after timeframes are exceeded.  Also, the greater the delay the greater the discount, which reflects the increasing financial severity of continued delays.  A sliding scale discount also reduces potential holding costs incurred by an applicant while waiting for resource consent and introduces certainty to both the local authority and the applicant on the expected level of discount.  This method is also relatively simple to understand and apply, and would allow costs to be estimated and provided for in local authority budgets (based on the previous year’s performance results).

3.13 Overall, the sliding scale option is the preferred option and is supported by the majority of those consulted who provided feedback, including both local authorities and targeted stakeholders.  This option also meets the objectives of being workable, fair and equitable, incentivising local authorities to perform and having the least administration costs.

Options for the value of discount

3.14 For the Regulations to be workable they need to specify the value or amount of the discount.  The value of the discount needs to provide a strong incentive for local authorities to meet statutory consent processing timeframes without significantly impacting on other resource consent applicants, or wider ratepayers.

3.15 Three options for determining the value of the discount were considered:

• 80 per cent cap at 5 per cent per day for the first week (up to a total of 25 per cent) followed by 5 per cent each subsequent week up to 60 working days (3 months) for notified and non notified applications;
• 80 per cent cap at 1 per cent per day up to 80 working days (4 months) for notified and non notified applications;
• 80 per cent cap at 1 per cent per day up to 80 working days (4 months) for notified applications and 80 per cent cap at 3 per cent per day for the first week (up to a total of 15 per cent) followed by 5 per cent per each subsequent week (for weeks 2 to 10) and 10 per cent in weeks 11 and 12 up to 60 working days (3 months) for non notified applications.

Option 1: 80 per cent cap at 5 per cent per day for the first week (up to a total of 25 per cent) followed by 5 per cent each subsequent week up to 60 working days (3 months) for notified and non notified applications

3.16 The option proposed in the Issues and Options Paper was a sliding scale percentage discount of five per cent per day for the first week (up to a total of 25 per cent), followed by an additional five per cent discount each week until the 80 per cent maximum discount is reached over a 60 working day (three month) timeframe for both non-notified and notified (including limited notified) applications for resource consent.

3.17 It was identified through the discussion panel that many non-notified applications that miss timeframes only do so by a few days and therefore the use of daily increments for the first five working days provides a strong incentive for local authorities not to narrowly miss timeframes.

3.18 However, in their responses to the Issues and Options paper, local authorities generally rejected the idea of a 25 per cent discount over the first week as being too onerous.  Local authorities believed that this requirement was particularly onerous for notified applications.  Many raised the need for a separate scale for notified and non-notified applications.  The Environmental Defence Society also considered there is a need for a separate scale for notified and non-notified applications. Conversely three companies who provided feedback wanted a greater discount in the first week of between 10 to 15 per cent per day to provide a stronger incentive to local authorities to process applications on time. 

3.19 The additional data gathered from local authorities identified that 50 per cent of notified (including limited notified) applications processed were over 60 days late.  Therefore putting a large amount of pressure on local authorities in the first week for notified applications is unlikely to lead to changes in practice as it is harder to ‘push’ to get a notified application completed within that first week.

3.20 Option 1 is unfair because it penalises notified applications in a large way.  These applications are much more likely to be over a week late than non-notified applications which are often one or two days late.  Therefore a penalty of 5% per day is unfair for notified applications as the front loading will overly penalise them.  This option is considered to be workable, but not as workable as option 2 (see below).  This is because although there is only one scale, it is a complex scale to work with which may lead to confusion for applicants and council staff.  Again this option is considered to minimise administration costs, but not as much as Option 2 (see below) which is less complex to understand and therefore administer.  Option 1 is however considered to incentivise local authorities to perform because of the large penalty in the first week.

3.21 As a result of the feedback received, a number of alternative scenarios were analysed and two further options were analysed in depth.  The two options were a lower daily percentage over an extended daily timeframe for both notified and non-notified applications and a lower daily percentage with different scales for notified and non-notified applications.

80 per cent cap

3.22 However the 80 per cent maximum discount is maintained in all three options.  The 80 per cent maximum discount is based on initial feedback from the discussion panel who indicated that 5 to 30 per cent of resource consent application processing costs were core administrative costs that should be borne by the applicant.  An 80 per cent cap provides a 20 per cent allowance for these costs which is in the region of that suggested, and still provides a maximum discount amount of 80 per cent which acts as a strong incentive for local authorities.  Approximately half of the local authorities who provided feedback considered an 80 per cent cap to be too generous to applicants and suggested a lower cap of between 40 and 60 per cent.  Three companies wanted the cap raised higher (two to 100 per cent and one to 120 per cent), whereas the other targeted stakeholders who provided feedback did not raise it as an issue.

3.23 The additional data gathered from local authorities identified that the 80 per cent cap was a fair reflection of core administrative costs. The 80 per cent cap is not proposed to be altered as it is considered necessary to make provision for local authorities to be able to recover core administrative costs and the 20 per cent estimate is considered sound. Therefore the 80 per cent cap is considered to meet the objectives of being workable while still incentivising local authorities to perform.

Option 2: 80 per cent cap at 1 per cent per day up to 80 working days (4 months) for notified and non notified applications

3.24 Option 2 proposes a 1 per cent discount per day over a four month or 80 working day timeframe at a maximum of 80 per cent, applicable to both non-notified and notified applications.

3.25 The data from local authorities identified that out of those notified (including limited notified) applications processed over the timeframes in the RMA approximately 50 per cent were over 60 days late. A daily 1 per cent increase will apply constant pressure to improve efficiency and encourage applications to be processed by the end of each day to avoid incurring an additional discount the next day, while recognising that the timeframes in the RMA can be difficult to meet, particularly for notified applications.

3.26 Furthermore, the approach recognises the concerns raised by local authorities that a 25 per cent discount in the first week could be too onerous for initial delays. Due to its simplicity, it is also considered to be a very workable option. However a 1 per cent discount over a 4 month timeframe is not a particularly strong incentive for non-notified applications and does not recognise that some targeted stakeholders considered the discount proposed in the Issues and Options paper to be too low.

3.27 Option 2 is considered to be fair. This is because although it treats non-notified and notified applications the same, it does not front end load the discount which would have a large effect on notified applications which are often more than a week late. This means this option reaches a compromise between treating the kinds of applications differently and over penalising notified applications. Instead of over penalising notified consents it is being more generous to non-notified applications and will therefore reduce costs to local authorities. This option is therefore workable and simple to administer. This option will meet the objective of adequately incentivising local authorities to perform as a penalty occurs each day which makes each day count, and encourages the issuing of decisions as soon as possible.

Option 3: 80 per cent cap at 1 per cent per day up to 80 working days (4 months) for notified applications and 80 per cent cap at 3 per cent per day for the first week (up to a total of 15 per cent) followed by 5 per cent per each subsequent week (for weeks 2 to 10) and 10 per cent in weeks 11 and 12 up to 60 working days (3 months) for non notified applications.

3.28 Option 3 proposes separate scales for notified and non-notified applications. Having separate scales for notified and non-notified consents is a less simple approach than that outlined in Options 1 and 2 but it does provide a more refined incentive for local authorities to process resource consent applications on time. It also recognises the concern of the Environmental Defence Society that if the Regulations do not distinguish between notified and non-notified consents, local authorities may feel additional pressure to not notify applications in order to ensure statutory timeframes are adhered to.

3.29 For notified applications, a 1 per cent discount per day over a 4 month or 80 working day timeframe at a maximum of 80 per cent is proposed. This is the same as that in Option 2.

3.30 For non-notified applications, a separate scale of 3 per cent discount per day for the first week (15 per cent total) followed by 5 per cent each for weeks 2 to 10, and 10 per cent for weeks 11 and 12, up to 60 working days (3 months) at a maximum of 80 per cent is proposed.

3.31 The non-notified scale option is a modified version of Option 1. The daily percentage increase for the first week of up to 15 per cent will continue to provide a strong daily incentive to meet timeframes within the first week, where feedback and data has shown that many non-notified applications are missing the timeframes by only a few days. The three per cent per day also takes into account the feedback received from local authorities that 5 per cent per day in the first week is too onerous (it is essentially a middle-ground option).

3.32 The subsequent weekly increment of 5 per cent for weeks 2 to 10 encourages local authorities to complete the processing at the end of each week. In weeks 11 and 12 the higher 10 per cent discount proposed recognises that feedback and data from local authorities has identified a very high proportion of late non-notified applications fall within this 60 day period and therefore the incentive to finalise these applications could usefully be greater at this point.

3.33 This option proposes a different scale for notified and non-notified applications. Each of these scales has been tailored to the kind of applications and how late these applications often are. This option is considered to meet the objective of being fair. However, this option would lead to a large cost for local authorities for non-notified applications which are late as the non-notified structure is front-end-loaded. This option is the least workable of all three considered as two different scales will need to be used. Using two scales will also lead to higher administration costs and may lead to confusion among applicants and council staff. This option is however, considered to incentivise local authorities to perform as each scale has been particularly developed for the kind of application considered and is aimed at when these applications generally go over time.

Costs of the value of the discount

3.34 Statistics and data have been identified from two key sources, the RMA Survey and additional data collected from a small number of local authorities, to assist in identifying the cost of the various options proposed for the value of the discount. Based on information received from RMA Survey (2007/2008), approximately nine local authorities will only be financially affected to a small extent, or not at all by the Regulations, as they are currently processing 99 to 100 per cent of resource consent applications within statutory timeframes.

3.35 The statistics and data showed that Option 2 (1 per cent per day over 16 weeks) would be likely to incur the least amount of cost to local authorities. Option 1 (5 per cent per day for the first week then 5 per cent per week thereafter up to week 12) was the most cost intensive option, while Option 3 (different scales for notified and non-notified applications) was the median of the three options considered. All of the options were estimated to cost between approximately 8 and 12 million dollars per year, across local authorities as a whole. Note the limitations of the data outline in paragraph 1.5 above.

Options to establish how local authority responsibility is determined

3.36 The Regulations will provide for discounts on administrative charges when local authorities are responsible for applications not being processed within statutory timeframes. It needs to be determined when a local authority is considered responsible for delays – either within the Regulations or outside the Regulations.

3.37 The options considered include:

• local authorities can be given the discretion to determine what ‘responsible’ means;
• the Regulation allows applicants and local authorities to discuss and agree responsibility;
• the Regulation defines responsibility;
• the Regulation defines some circumstances where the discount will not apply.

Option 1: Local authorities have the discretion to determine responsibility

3.38 This option provides local authorities with the discretion to determine who is responsible for delays incurred during the processing of the resource consent application. It could work well if it is clearly understood who is responsible for the delay, such as an applicant not providing information within the required timeframe. However, where there is uncertainty or disagreement about where responsibility lies, the applicant may feel uncomfortable with the local authority having the ultimate discretion to determine responsibility. Local authorities may also make incorrect determinations. This could result in disputes and additional delays while disputes are being resolved.

3.39 This option is not considered to meet the objective of being workable as there could be variation among local authorities as to how they determine responsibility. The option would also not meet the objectives of minimising administration costs as each local authority would have to make a decision on responsibility for each late application, and local authorities are likely to have to deal with more disputes which will add to costs. This option is not considered to meet the objective of being fair and equitable as it could be applied differently across the country. It may not incentivise local authorities to perform, depending on the criteria they apply to determine whether a discount applies.

Option 2: Applicants and local authorities agree on responsibility

3.40 This option would enable a consensus approach in determining responsibility for delays, enabling both parties to put their views forward. Like Option 1, this option could work well where it is clear who is responsible. However this approach also results in high potential for disputes and even more protracted delays at the end of the process. It is therefore considered that this option would not meet the objective of being workable. This approach would also lead to increased administration costs as an individual discussion would need to be had for each late application. It is difficult to know whether this option would meet the objective of being fair and equitable as on one hand each applicant may get the fairest outcome with regard to their application, but on the other local authorities may have different ways of reaching agreement. It would however incentivise local authorities to perform.

Option 3: Regulations define responsibility

3.41 Providing an explanation within the Regulations of what constitutes responsibility for delay (such as delays incurred as a result of requiring input from external agencies, and requests for further information and reports under section 92) would provide the most certainty to local authorities and applicants and would also help avoid potential disputes. This option was supported by most of those consulted, including both local authorities and targeted stakeholders. This option would incentivise local authorities to perform, would be fair and equitable, and would minimise administration costs.

3.42 However, given the large range of different circumstances in which responsibility might occur, and the timeframe within which the Regulation needs to be developed, it is not considered workable. Legal advice is that the Regulations cannot determine when responsibility might occur, as the Regulations only apply once responsibility has been established. Regulations can, however, set out when a discount may not apply. For this reason, Option 4 was investigated.

Option 4: Regulations determine when a discount does not apply

3.43 This option specifies through the Regulations the key circumstances when a discount will not apply. These are essentially circumstances in which a local authority is not responsible for timeframes not being met and include:

• Delays resulting from input from external agencies (e.g. New Zealand Transport Agency (NZTA), Historic Places Trust, iwi) including any delays resulting from a requirement to refer an application to Maritime New Zealand.
  
  There is no statutory requirement for consultation with any party in relation to resource consents. However, input is required from some parties in order to adequately assess effects. Applicants can obtain this input prior to lodgement, or local authorities can obtain their input during processing. However, neither applicants nor local authorities have control over the timeliness of any response. In order to meet statutory timeframes, there is a risk if the discount applies and external agencies (including iwi) are not prompt with a response, the local authority will continue processing an application without their input. This is not desirable, but neither is it fair for consent authorities to be penalised for delays caused by others.
• Delays resulting from the Department of Conservation appointing a commissioner to the hearing panel for restricted coastal activities.
• Delays resulting from an applicant’s non-payment of a fixed fee.
  
  Section 36(7) states that if an applicant does not pay a fixed fee, the local authority does not have to perform the function to which that fee relates, e.g. notifying a resource consent or issuing a resource consent. There is no corresponding ability to ‘stop’ the processing clock. Local authorities should not be penalised for not meeting timeframes when non-payment of a fee by the applicant is the cause.
• Delays where responsibility for not meeting timeframes to which the discount applies is shared between the local authority and the applicant.
  
  The wording of the Regulation making power in section 360(1)(hj) of the RMA states that the Regulations will apply when local authorities are responsible for matters not being processed within the timeframes in the Act. Legal advice is that this wording means “fully responsible” therefore it is not possible to provide through the Regulations for discounts where responsibility is shared.

3.44 Guidance can be developed to sit alongside the Regulations to assist local authorities in considering when and how they should apply the discount.

3.45 This option is considered to meet the objectives of being workable, and minimising administration costs as the Regulations will help to simplify decisions for local authorities. It is also considered to meet the objective of being fair and equitable as consents should be treated in a more consistent manner because of the direction in the Regulations. This option will incentivise local authorities to perform.

Options for identifying the timeframes after which a discount will apply

3.46 The Regulations need to determine how the timeframes within the RMA are to be calculated and provided for. The RMA includes a number of timeframes, however, they are often placed on individual parts of the consent process rather than the overall process. For example, the RMA does not explicitly state a total time for the processing of notified applications.

3.47 Therefore two clear options emerged for determining the way in which timeframes can be calculated:

• apply individual timeframes as they are specified within the RMA;
• add all of the individual timeframes in the RMA resource consent process together, resulting in a total nominal number of working days.

Option 1: Individual timeframes

3.48 This option would break the consenting process into its component parts and each individual part would be subject to a discount if the timeframe was exceeded. For example on a notified application, 10 working days for decisions on notification, 20 working days for serving submissions on the consent authority etc.

3.49 This option is considered inappropriate as not all local authority databases track individual timeframes. To upgrade local authority systems to track individual timeframes would result in significant costs to local authorities. It would also require invoices to be broken down into component parts and require local authorities to determine how much each part of the process costs and whether the same discount would apply to each stage of the process. Local authorities also commented that some of the individual timeframes in the process can be challenging to meet in themselves, whereas the overall timeframes are more achievable. Overall the option is considered fragmented, complicated, uncertain and time consuming and none of those parties consulted supported it.

3.50 This option is not considered to meet the objective of being workable as it would be confusing and difficult for the discount to be calculated and for applicants to understand. For the same reasons this option would lead to increased administration costs, therefore not meeting the objective of minimising administration costs. Local authorities also believe that this option would not meet the objective of being fair and equitable as they believe it would be unfair to penalise them for not meeting one timeframe if overall the consent is delivered within the statutory timeframe. Given the confusion and difficulty, this option is not considered to incentivise local authorities to perform.

Option 2: Sum of all timeframes

3.51 This option adds all of the individual timeframes in the resource consent process resulting in a total nominal number of working days for different consent types which are subject to discount if exceeded. For example, 20 working days for non-notified consents (without a hearing) and 70 working days for notified consents (where a hearing is held).

3.52 This option is considered the more workable for local authorities to administer and for applicants to understand than Option 1. This option was overwhelmingly supported by those consulted, local authorities and targeted stakeholders alike. Hearing dates and any timeframes altered by sections 37 or 37A should be excluded from the working day calculations in the Regulations. Guidance to address additional matters such as the definition of working day and determining what day is day one is also proposed so that the Regulations are consistently applied.

3.53 This option is considered to be workable as it is easy to understand, it would also meet the objective of minimising administration costs. This option is also considered to be fair and equitable on local authorities as it considers the timeframe as a whole and applicants are not generally disadvantaged if one timeframe is missed but the overall timeframe is met. This option would incentivise local authorities to perform in meeting overall timeframes.

Process to obtain a discount

3.54 One issue with the Regulations is whether they will automatically apply or whether the applicant will be required to apply for a discount. It is proposed that the Regulations are automatically applied by the local authority as this would be more efficient and streamlined. This option does however carry the risk that local authorities will make mistakes in their calculation of the discount. Therefore it is also recommended that measures be built into the Regulation to ensure fairness, such as a right of review.

3.55 It is considered that automatically applying the discount is more workable and fair than applicants having to apply. It would be unfair if some applicants did not receive the discount if they were unaware of the process because of their knowledge of the process in general. An automatic discount would also be easier to administer as a standard process could be developed which would minimise administration costs. Having an automatic discount incentivises local authorities more than if an applicant had to apply for the discount, as every application that goes over time (when the local authority is responsible for the delay) will have a discount.

‘ Replacement’ (section 124) consents

3.56 A number of responses to the Issues and Options Paper from regional councils sought that ‘replacement consents’ be excluded from application of the discount regulations on the basis that consent holders were not disadvantaged, being able to operate while the ‘replacement consent’ was processed.

3.57 ‘Replacement consents’ are consents to which section 124 applies. Section 124 of the RMA provides that a consent holder who has a consent which is due to expire can continue to operate their consent while their ‘replacement consent’ is decided, if:

• they apply for the new (replacement consent) at least 6 months before the original consent expires; or
• they apply for the new (replacement consent) between 3 and 6 months before the original consent expires, and the local authority agrees.

3.58 Some regional councils set common expiry dates for consents within a catchment, air shed or groundwater zone as a basis for improved integrated management. This means regional councils can be faced with a large number of new consent applications under section 124 needing to be processed at one time. Therefore it is proposed to exempt replacement consents under section 124 from the Regulation until the current consent has expired. At expiry of the existing consent, the discount should apply in the normal manner if consent timeframes have been exceeded.

3.59 If replacement consents are included in the Regulations it would provide a disincentive for regional councils to adopt good resource management practices, such as common expiry dates for consents. Therefore, including section 124 consents would not meet the objectives of the Regulations being workable and fair.

Sections 37 and 37A

3.60 The Issues and Options Paper also highlighted the fact that clarification may be required in the Regulations that specifically allows and accounts for the use of section 37 and 37A (powers and requirements for waivers and extension of time limits). Approximately a quarter of all local authorities who commented on the Issues and Options Paper specifically stated that the Regulations should not penalise local authorities for the use of section 37 and 37A. The Regulations will not apply to any timeframe which is altered through the use of section 37 or 37A.

Minimum billing

3.61 Many local authorities suggested that the Regulations should specify a minimum dollar amount under which local authorities are not required to apply a discount. Current practice in some local authorities, as specified in their fees and charges, is not to provide refunds on fees below a set amount. This amount varies between councils. It is questionable how local authorities are able to set this minimum refund amount. Therefore the Regulations should not specify a minimum amount under which no discount would apply.

4.0 Consultation

4.1 Section 36AA(2) of the RMA states that the Minister must consult with local authorities about the proposed discount regulations before making the recommendation to the Governor-General by 1 July 2010.

4.2 In November 2009 the Ministry set up a panel of nine territorial authorities and regional councils (the discussion panel) to help develop the Issues and Options Paper. The nine local government authorities represented a range of different size and type of local authorities, with varying discounting experience and a geographical spread. Local Government New Zealand (LGNZ) was also part of the discussion panel.

4.3 The Issues and Options Paper was sent out for consultation to the discussion panel and all local authorities between Monday 18 January and Friday 5 February 2010. A total of 43 local authorities, and LGNZ, provided feedback. Feedback was also received from two companies and the Resource Management Law Association.

4.4 Cabinet agreed that the paper then be released to selected stakeholders for comment between 15 February and 1 March 2010. Those particularly targeted for consultation during this second round consultation phase were professional bodies, practitioners, targeted industry and business groups, environmental and community groups, and iwi. However, the public in general also had an opportunity to comment as the paper was also made available on the Ministry website. Feedback was received from a further two local authorities, six companies, and from the Environmental Defence Society.

4.5 At the start of the consultation process a range of departments were also approached and asked to what degree they wanted to be involved in the development of the Regulations (consulted with, kept informed or no involvement). The following departments have been consulted about the contents of this paper: Te Puni Kokiri, Ministry of Agriculture and Forestry and Department of Internal Affairs. The following departments have been kept informed: Department of Conservation, Ministry of Justice, Treasury, Ministry of Fisheries, Department of Building and Housing, Ministry of Economic Development and the State Service Commission.

4.6 The key feedback received from 45 local authorities, plus LGNZ, and 10 other targeted stakeholders (including companies and associations / societies) is outlined in the table below.

5.0 Conclusions and recommendations

5.1 The table below summarises the discussion in section 3 above and shows how each of the options considered meets (or does not meet) the objectives of the Regulations.

Issue	Objective
	Incentivises LA’s to perform	Fair and Equitable	Workable	Minimises Administration Costs
Method of calculating discount
Option 1 Fixed percentage	X	X
Option 2 Formula percentage		?	X	X
Option 3 Sliding scale
Value of Discount
Option 1 5% per day for 1st week, the 5% per week until 60 working days		X
Option 2 1% per day up to 4 months late
Option 3 Different scales for notified and non-notified consents			X	X
Method for determining responsibility
Option 1 Local authority discretion	?	X	X	X
Option 2 Applicants and local authority agree		?	X	X
Option 3 Regulations determine			X
Option 4 Regulations set out where discount does not apply
Identifying timeframes
Option 1 Individual timeframes	X	X	X	X
Option 2 Sum of all timeframes

5.2 The following options are recommended within the Regulations:

1. A sliding scale percentage discount method is used.
2. The value of the discount is a sliding scale with a cap up to 80 per cent maximum discount at 1 per cent per day up to 80 working days (4 months) for notified and non-notified applications.
3. Certain circumstances will be identified within the Regulations where the local authority is not responsible for the delay and a discount will not apply, with associated guidance. Those circumstances include:
   • Delays resulting from input from external agencies (e.g. NZTA, Historic Places Trust, iwi) including any delays resulting from a requirement to refer an application to Maritime New Zealand.
   • Delays resulting from the Department of Conservation appointing a commissioner to the hearing panel for restricted coastal activities.
   • Delays resulting from an applicant’s non-payment of a fixed fee.
   • Delays where responsibility for not meeting timeframes to which the discount applies is shared between the local authority and the applicant.
4. Timeframes will be calculated on the sum of individual resource consent timeframes which explicitly exclude hearing dates and timeframes altered by sections 37 or 37A from the working day calculations, with associated guidance.
5. Mechanisms will be built into the Regulations to ensure fairness in the process for obtaining a discount with a possibility for a review step for applicants (for the reasons set out in the ‘Implementation’ section below).
6. A commencement date of 1 November 2010 (for the reasons set out in the ‘Implementation’ section below).

6.0 Implementation

6.1 A recommendation to the Governor-General that Regulations be made is required by the RMA by 1 July 2010. Cabinet will need to agree to the issuing of drafting instructions to Parliamentary Counsel Office so this prescribed timeline can be met.

Implementation Risks

6.2 There are a range of risks associated with the implementation of the discount regulation.

6.3 If timeframes in the RMA are not met, the Regulations will impose additional costs on local authorities. These costs are likely to be passed on to either consent applicants (increases in fees) and/or be passed on to ratepayers (increased rates) as local authorities attempt to cover costs. To minimise the impact on consent applicants and ratepayers the Ministry for the Environment will produce guidance to sit alongside the Regulations that will set out best practice for implementing the Regulations. The Regulations will also be monitored, evaluated and reviewed to ensure that the objective of the Regulations is met.

6.4 The timeframes within the RMA, which the Regulations relate to, have been identified as insufficient to provide for proper processing of resource consent applications by local authorities. Phase II of the RMA Reforms provides an opportunity to look again at the timeframes in the RMA and what could be done to ensure efficient and quality processing of resource consents.

6.5 The focus on timeliness within the Regulations may create perverse incentives at the expense of best practice (the quality of the decision making process). This may include an increased use of sections of the RMA (for example sections 37, 82 and 92) that provide additional time to process resource consents outside of the timeframes within the Act that relate to the Regulations. To minimise perverse incentives, the Ministry for the Environment will produce guidance to sit alongside the Regulations that will set out best practice for implementing the Regulations, this is on top of the guidance that is already provided through the Quality Planning website. Targeted assistance for local authorities struggling with processes and timeframes will continue to be available. The Regulations will also be monitored, evaluated and reviewed to ensure that ‘best practice’ is not being compromised.

6.6 There are risks around the capacity of local authorities to address the requirements of the Regulations. This includes local authorities not having enough time to make appropriate system and workflow changes, including procedures, delegations, staff training and staff numbers. In particular, resource consent tracking and financial database systems will need to be reviewed and possibly amended to effectively track and apply discounts where necessary. Maintaining high levels of staff to cope with peaks in consenting work loads can create inflationary pressure on rates and may not be fully utilised when consent workload is lower.

6.7 The local authorities of the Auckland region will be amalgamated into the new Auckland Council by October 2010. Data from the 2007/2008 RMA Survey shows that the eight current local authorities of the Auckland region process an estimated 27 per cent of New Zealand’s resource consents. Therefore, requiring the new Auckland Council to adhere to the discount regulations while preparing for and undergoing substantial transition is considered onerous and will add to their transitional costs. The Auckland local authorities ideally need sufficient time to align their processes with the requirements of the Regulations.

6.8 In addition, the consultation feedback noted that the majority of local authorities have already prepared their 2010-2011 budgets, including their fees and charges for council consideration under the Local Government Act 2002 (LGA). These budgets come into effect at the same time as the Regulations are recommended to the Governor-General. As local authorities are required to project the amount which may be payable to applicants (contingency liability fund), they will need time to make any required adjustments to their budgets through the consultation processes under the LGA.

6.9 To minimise the risks around the capacity of local authorities to address the requirements of the Regulations, a delayed commencement date of 1 November 2010 is proposed to allow all local authorities time to consider the Regulations and to adapt to implement them, or to develop their own discount policy if it is more generous than that provided by the Regulations. In the time before commencement Ministry staff will work with local authorities, particularly in Auckland, to support the development of systems and procedures for implementing the Regulations. Changing the commencement date of the Regulations (from the minimum of 28 days after approval from the Governor-General) would better meet the objective of the Regulations as it would minimise administration costs, be fairer to all local authorities involved and generally make the Regulations more workable.

Review procedure

6.10 It is proposed that the discount apply automatically if timeframes are exceeded and the applicant need not apply for a discount. There may be instances where the applicant considers that the local authority has not correctly applied the discount regulations or not applied them at all. To address this possibility, it is considered that mechanisms should be built into the Regulation to ensure fairness in the process for obtaining a discount. For example, there could be a right of review of whether a discount should be applied in circumstances where the local authority has calculated in the first instance that it does not apply.

Guidance material

6.11 Guidance material to accompany the Regulations will be produced to address administrative procedures, provide supporting information and address specific issues, including:

• how to deal with applications which are free of charge and will not qualify for a discount;
• how to determine local authority responsibility for late processing of applications;
• how to calculate working days;
• how to manage the interface between the discount regulations and the direct referral processes.

Applying the discount policy to proposals of national significance

6.12 The Minister intends to give further consideration to applying the discount policy to the processing of resource consent applications for proposals of national significance. The Minister will discuss with the Secretary for the Environment how a discount policy could be developed and applied to the Environmental Protection Authority (EPA).

Enforcement

6.13 It is anticipated that enforcement of the Regulations will be through existing mechanisms under sections 24A and 25 of the RMA (powers and residual powers of the Minister).

7.0 Monitoring, evaluation and review

7.1 The effectiveness and efficiency of the proposed Regulations will be monitored and evaluated through the RMA Survey which collects data on consent processing timeframes. The survey currently provides data on consent processing timeframes. The RMA Survey questions are able to be revised or added to, to specifically monitor and evaluate the effectiveness of the discount regulations.

7.2 In a more general sense, the practicality of the existing resource consent statutory timeframes under the RMA will be considered under Phase II of the RMA Reform. This could include looking to see if the feedback received on current timeframes in the RMA being inadequate, especially for notified applications, complex non-notified applications and when joint hearing are held, are justified.

Last updated: 27 April 2010