Background information

On 17 February 2020, the Chief Executive applied on behalf of six councillors from Otago Regional Council (the Council) for exemptions and/ or declarations under the Local Authorities (Members’ Interests) Act 1968 (the Act) to enable them to participate in imminent decisions by the Council about freshwater management.

The applications sought broad exemptions or declarations for councillors to:

Access all papers and be involved in all discussions and decisions on the following planning instruments: Omnibus Plan Change, Water Permits Plan Change, Regional Policy Statement, Proposed Land and Water Regional Plan and all papers reporting on Water Activity and Waste Water Treatment Plant Compliance.

We sought further information about those applications from the Council and the councillors. We needed enough information to assess whether each councillor had a reasonable expectation of gain or loss of money as a result of each discussion or decision. The Council wasn’t in a position to provide that information for all of the discussions and decisions covered by the applications. As a result we agreed to focus on two Council meetings, on 11 and 25 March, where decisions are scheduled on the “Water Permit Plan Change” and the Omnibus Plan Change”. We sought information from the Chief Executive about those March decisions, and from councillors about their financial interests in those decisions.

On 26 February 2020, we met with a member of Council staff and lawyers acting on behalf of the Council. After that meeting, the Chief Executive withdrew applications for two of the councillors on the basis that, in the Council’s view, they did not have a financial interest in the two March decisions. On 27 February 2020, she re-submitted applications for exemptions and/ or declarations for the two March decisions for the four remaining councillors.

In deciding these applications, we have also considered the report to the Minister for the Environment by Professor Peter Skelton, Investigation of Freshwater Management and Allocation Functions at Otago Regional Council (October 2019).

March decisions about freshwater management

The Council is responsible for managing freshwater in Otago. There are two key overarching changes to its Water Plan that will be before the Council in the coming weeks:

  • 11 March 2020 – the Water Permit Plan Change (WPPC).
  • 25 March 2020 – the Omnibus Plan Change.

At these meetings, the Council will be voting on whether to notify each Plan Change under the Resource Management Act 1991 (the RMA).

The Water Permit Plan Change

Otago has a pre-RMA system of “deemed permits” as well as the usual resource consents for water. These deemed permits were held as a property right. Under the RMA, the deemed permits will expire on 1 October 2021. The WPPC will bridge the gap between the expiry of the deemed permits and a new Regional Policy Statement and Land and Water Plan for Otago. However, the WPPC relates to all permits that expire before 2025, not just deemed permits.

Council staff told us that the WPPC will require holders of the affected permits to apply for new permits that will last up to seven years. We were told that affected permit holders could reasonably expect the following financial effects as a result of the WPPC:

  • the cost of an application for a new permit;
  • a new, short-term permit based on actual use, rather than the “paper limit” on the previous permit; and
  • reduced “bankability” - banks may be less willing to lend money to a permit holder with a seven-year permit.

The Omnibus Plan Change

The Omnibus Plan Change will strengthen water quality provisions in the Water Plan. The focus of the Omnibus Plan Change is to introduce new rules for managing animal waste, particularly effluent. We were told that the Omnibus Plan Change will particularly affect dairy farmers. However, there are two rules that are relevant (in terms of financial effect) to non-dairy farmers:

  • From 2022, all dairy cattle and pigs must be excluded from waterways (that are continuously flowing and greater than 1m). Anyone who winter grazes cattle will also be affected. In order to exclude the stock from waterways, a farmer may be required to install fencing.
  • Any farmer who intensively winter grazes cattle – whether their own, or another person’s – will need a resource consent.

Legal grounds for an exemption or declaration

Section 6(1) of the Act prohibits a councillor from discussing or voting on a matter before the council in which the councillor has a financial interest, other than an interest in common with the public. However, in some circumstances the Act allows the Auditor-General to grant an exemption or declaration, which has the effect of suspending the prohibition on discussing and voting on the matter for the councillor concerned.

The Act does not define financial interest. The test we use is whether, if the matter were dealt with in a particular way, discussing or voting on that matter could reasonably give rise to an expectation of a gain or loss of money for the councillor concerned.
Under section 6(3)(f) of the Act, we may grant an exemption if the councillor’s financial interest is, in our opinion, so remote or insignificant that it cannot reasonably be regarded as likely to influence the councillor when voting or taking part in discussion on the matter.

Under section 6(4) of the Act, we can grant a declaration that the non-participation rule in section 6(1) will not apply if we are satisfied that:

  • the application of the rule would impede the transaction of business by the Council; or
  • it would be in the interests of the electors or inhabitants of the district of the Council, or the area under its jurisdiction, that the rule should not apply.

We note that the Auditor-General has a statutory role only in relation to financial interests under the Act. We have no role in relation to non-financial conflicts of interest, or predetermination. An exemption or declaration under the Act allowing participation despite a financial interest has no effect in relation to a non-financial interest or predetermination. We understand the Council is seeking legal advice on individual councillor’s non-financial conflicts of interest, and whether participation is prevented on the basis of that interest.