What's a capital improvement?

Councils apportion rates across their ratings base: the value of land and capital improvements in their district.

Newsroom reports that Gisborne District Council is considering particular types of Kiwifruit licences to be part of the assessed capital value. 

Zespri owns the rights to some proprietary cultivars: Sungold G3 is the one here in play. 

There had been little consultation with affected farmers, and although the council had prepared a report in 2020 and got the changes signed off by the valuer general, the information was buried on pages 116-119 of the chunky document. It wasn’t even mentioned in the introduction to that report.

Still the impact for growers was clear enough, when it came through.

The rates bill for Tietjen’s orchard went from $4,364 for the 2020-2021 cycle to $8,221 in 2021-2022.

Some other Gisborne kiwifruit growers saw their bills triple.

“Kiwifruit is going through a boom time, which is why I think the council was maybe targeting kiwifruit growers,” Tietjen told Newsroom. “We can’t say we can’t afford it, but it makes things tougher. And kiwifruit is a risky business.”

I could see this being part of the land rating if the licence were tied to the land. Like if Zespri had to do some complex site suitability evaluation that then followed the land title.  

But that doesn't seem to be how this works:

“The licence is personal to the grower, not fixed to the land. A lot of people use a separate legal entity which owns the licence, separate to the landowner,” he says.

If a grower sells their property, they sell the rootstock, the irrigation systems and the fencing, but the licence goes back to Zespri, which then issues a new licence to the new owner.

The Court sided with the growers, who didn't want to pay council rates on the Zespri licence. But: 

With the appeal due to be heard in the High Court later this year, Gisborne District Council didn’t want to comment to Newsroom. However, its statement confirms the action comes from the top – New Zealand’s Valuer-General, Neill Sullivan:

“The decision to appeal comes on the advice and support of the Valuer-General, who considers that the Land Valuation Tribunal’s decision is inconsistent with past case law decisions and the Rating Valuations Act 1998 requirement to value established vines as improvements. 

“Removal of the gold kiwifruit vine value due to the existence of a licence creates an inequitable outcome for ratepayers, unfairly reducing the rating valuation and rates burden for some property owners and increasing the rates burden for others.”

The Valuer-General will bear the full cost of the appeal, the council says, as he “considers it to be in the national public interest for the matter to be heard”. 

The Valuer-General will also be joining the proceeding as an interested party.

The licence to grow this Gold kiwifruit variety costs about half a million dollars.

I wonder if they're viewing the "give the licence back to Zespri who will issue a new one to the new owner" as a convenience. If, on selling a piece of land with an irrigation consent, I formally gave the irrigation consent back to Regional Council, who issued a new one to the new owner, and everyone knew that the consent just stayed with the land, then the value of the irrigation consent should be part of the land valuation. 

Fun stuff though.