Part 1: Introduction and conclusions
1.1
The Far North District Council (the Council) and the Mayor of the Council, Mr Wayne Brown, have been in dispute for some time about the rates and other charges owed by Mr Brown's Waahi Paraone Limited (the company). The rates and charges related to a subdivision developed by the company in Kerikeri. The issues involved in the dispute were legally and factually complex, and the two parties were unable to resolve them through normal processes or direct discussion. Mr Brown refused to pay some rates and charges for 2010/11 and 2011/12 until the matter was resolved.
1.2
In October 2011, Mr Brown and the Council each asked the Auditor-General to help resolve the matter. Mr Brown indicated that the company would pay any amount that we concluded was owed. Given the nature of the issues and the difficulty it was creating for both parties, we decided that it was appropriate to review the background to the dispute, form a view on whether the Council’s actions in setting and collecting these rates and other charges were reasonable, and determine the amount that the company owed.
1.3
To complete this report, we:
- obtained background information and documents from the Council;
- prepared a draft summary of the background to the dispute based on those documents and checked that summary with the Council (Part 2 of this report);
- sent the revised draft summary of the background and our draft analysis and comment
(Part 3 of this report) to Mr Brown for comment; - received written comments on the draft from Mr Brown and met with him to discuss them;
- asked the Council further questions and received additional information and documents;
- prepared a revised draft of this report and sent it to the Council and Mr Brown for comment;
- requested further information from both the Council and Mr Brown on the amounts paid as development contributions;
- prepared a further revised draft of this report and sent it to the Council and Mr Brown for final comment;
- received comments from both parties; and
- completed the report in the light of those comments.
1.4
We concluded that the rates payments that the Council had been seeking were properly due. At 20 May 2012, the company owed the Council $19,302.82 in unpaid rates, made up of sewerage rates and penalties. Mr Brown paid this amount on 26 May 2012, after being advised of our conclusion in an earlier draft of this report.
1.5
We also concluded that the other charge that the Council had asked to be paid in September 2011 was properly due. This charge was the balance of an agreed $150,000 contribution towards sewage reticulation costs that had not yet been paid. In late May, the figures provided by the Council suggested that the amount still owing was $135,833.09. Mr Brown did not agree with the amount; he estimated that the amount was closer to $55,000.
1.6
We agreed to carry out further work to check the calculations. Because Mr Brown was travelling overseas for some weeks, he left a cheque with the Council for $55,754.72 as an interim step while we completed a final calculation. The Council did not bank this cheque because it was concerned that to do so could be seen as accepting this amount as a final settlement of the dispute and so might jeopardise its legal position. In any event, the cheque could not be banked because Mr Brown had not signed it.
1.7
It took some time for us to complete these final calculations because neither party had particularly clear or comprehensive records. It was also complex because the legal status of some of the future obligations to pay an amount is not particularly clear.
1.8
We concluded that incomplete information meant that neither amount was correct. Our best estimate of the amount that the company owed, as at 1 July 2012, is $76,487,09. This is the balance of the $150,000 that was originally due as contributions.
1.9
We note that the Council has gone outside normal processes several times and made unusual agreements. These decisions were made in good faith to help find solutions for Mr Brown, but they left the Council in a more uncertain position when things went wrong. With hindsight, these decisions may not have been wise. The Council has also made a number of administrative and calculation mistakes, which have contributed to the uncertainty about whether it was charging the correct amounts.
1.10
Mr Brown has told us and the Council that he would like the Council to remit the penalties that accrued on the rates while we carried out our review. We accept that the complexity of the issues, competing priorities for us and the Council, and the problems we had in obtaining accurate information from the Council and Mr Brown meant that our review took much longer than anyone expected. There is an argument that it would be appropriate for the Council to consider remitting the penalties that accrued between October 2011 and May 2012.
1.11
However, it is also relevant that the Council has spent a considerable amount of staff time and money on this dispute – much more than the total penalties. The Council must also consider how it would treat any other ratepayer who withheld rates for nearly two years, given that the normal legal obligation in the Local Government (Rating) Act 2002 is to pay rates and then dispute them. Under the Act, penalties will generally accrue if a person does not pay rates while they are disputed.
1.12
In the end, Mr Brown is entitled to ask the Council to remit some or all of the penalties that accrued while the rates were not paid. The Council has to consider his request against the criteria in the relevant policies that set out the legal basis on which remissions can be given. Although it is doubtful whether this situation fits within any of the criteria in the Council’s policy statement on the remission of penalties, we note that the Council reserves a general discretion to remit rates and penalties in other situations.