There are two options available to councils for setting consent application charges:
set fixed charges that are payable in advance for the entire consent processing activity; or
set fixed interim or preliminary deposit charges payable in advance with the balance of actual and reasonable costs being charged in arrears at the completion of the consent process.
It should be noted that fixed charges paid in advance under option 1 are not deposits. They are full and final total charges for the entire processing component of an application.
There are advantages and disadvantages with either option.
Setting fixed charges
Option 1 has cash flow advantages for the council as the charges are received at the start of the process. It is also easy to administer. It provides absolute certainty for the applicant as the Environment Court has determined that a council cannot set and receive a fixed fee payable in advance and then charge additional actual and reasonable costs at the end of the process (refer to Aviation Activities Ltd v Mackenzie DC C015/98).
A major disadvantage for the council in setting fixed charges is that actual costs can exceed the fixed charge and the difference will need to be met from general revenue. Consequently, it is very important that any fixed charge structure is based on a sound understanding of what actual consent processing costs are.
Option 1 also has potential equity problems. The fixed charges will ideally be based on average processing times for different categories of consent. Simple or well compiled applications will take less than the average time to process. Such applicants will effectively be subsidising applicants with more complex or less well compiled applications that involve extra time and cost.
Option 1 is also more likely to result in a complex system of charges as a council tries to cater for the wide range of conceivable consent applications and compliance monitoring regimes. This may result in a lower level of transparency as potential applicants could find it difficult to ascertain which category of fixed charge relates to their intended activity.
Another disadvantage of this approach is that the fixed charges will generally be large which may act as a disincentive to small scale applicants. This can be overcome by using a series of fixed charges payable say:
at the time of application lodging to cover the costs of determining sufficiency of the application and the AEE supplied
for the costs of notification once it has been determined whether there will be no notification, limited notification or full notification
for the preparation and holding of a hearing.
Setting deposit charges
Option 2 has a disadvantage for the council as the activity costs must initially be borne by the council prior to them being charged to the applicant. However, this disadvantage can be reduced, particularly for large or contentious applications, by issuing interim (say monthly) invoices for actual costs incurred to date. Councils can also ensure fixed interim deposit charges are set as close as possible to the actual likely costs of processing such applications. This also reduces the chances of a council having to invoice or refund applicants the balance of actual and reasonable costs, which in itself, also has the benefit of reducing council's administration costs.
Under option 2, the applicant does not know in advance what their costs will be. However, this can be overcome by councils providing applicants with written estimates for the likely costs of the consent process. The merits of this practice are recognised within the RMA as s36(6) requires councils to provide estimates of likely additional charges upon request.
Councils should go beyond that statutory obligation and advise applicants when costs are likely to exceed the initial deposit and let them know an estimate is available on request. They can even be asked if they wish to continue with the application in light of any likely increase in costs.
Estimates should be realistic and should not be inflated to provide a council with a ‘cushion'.
Estimates for complex, large or contentious applications should be provided irrespective as to whether a request for a cost estimate is requested.
Choosing an approach
Each council will need to decide for itself the most appropriate option for setting charges. When selecting the option, councils must have regard to s36AAA(2) which states 'the sole purpose of a charge is to recover the reasonable costs incurred by the local authority in respect of the activity to which the charge relates'. Option 2 can more easily comply with this statutory requirement and is consequently recommended as good practice.
If option 1 is used then it should be limited to situations where a council has a very clear appreciation of the costs of processing particular types of consents.
If option 1 is selected, councils should:
Record the actual costs of processing relevant categories of consents so the appropriateness of the fixed charges can be periodically reviewed.
If option 2 is selected, councils should:
Record actual staff time spent on specific consent activities so actual additional charges can be accurately determined. The time recording interval should be no more than 30 minutes, and ideally it should be 15 minutes and could usefully time recorded should be against the areas identified as being chargeable in this guidance.
Refund the balance of any initial application deposit fee if actual processing costs are less than the deposit.
Advise applicants in advance where it appears that actual processing costs will exceed the estimated costs.
It is possible to combine options 1 and 2. This would entail setting fixed charges for a clearly defined part of the consent process, such as the process up to the point of notification, or up to the point of the hearing. Any costs incurred by the council for the remainder of the process would then be covered by a further fixed initial deposit charge (such as a hearing deposit for example) together with actual and reasonable additional charges levied in arrears.
The use of such a complex approach would need to be very clearly set out in the council's Schedule of Charges so that applicants were not led to believe the first fixed charge covered the entire consent process.
Setting the level of deposit – consent applications
If a council opts to use a system of setting deposit charges (option 2 above), then it needs to decide the level at which the deposit will be set.
There are two approaches to this:
set the deposit at a nominal sum, usually somewhere in the range of $100 to $500 depending on whether or not the application will be publicly notified
set the deposit at an amount that is likely to be close to the total processing cost.
Option A is currently by far the most common approach.
Some councils give themselves the discretion of negotiating a deposit for large applications. This may not be legitimate unless the council's Schedule of Charges contains an appropriate scale of charges of variable deposits for large applications. The reason for this is that deposits must be fixed in accordance with s36.
The advantage to the council with option B is simply one of cash flow, as the applicant will be required to pay the likely cost of their entire application process in advance. It also reduces the exposure of the council to under recover eventual actual costs (and the burden of chasing 'bad debts' from people who don’t pay invoices levied at the end of a consent process. Recovery of actual costs for processing consents is particularly important in light of the Discount Regulations.
The costs of hearings are recoverable under s36(1).
To facilitate transparency, the costs of a hearing should be separately detailed in the annual plan schedule. Hearing costs may be based on whole or part day charges and should detail the costs per councillor or commissioner, the fact that attending staff will be charged for, and the rate at which relevant disbursements will be charged.
The details on hearing costs should outline any difference in costs between hearings heard and decided by councillors and hearings heard and decided by independent commissioners. This is important as applicants and/or submitter(s) may request applications to be heard and decided by independent commissioner(s) under s100A, and s36(aa) and 36(ab) allows charges to be fixed for these costs.
When sending out an invoice for the processing of a consent application, or for the compliance monitoring of a consent, a detailed and itemised invoice should be prepared. Simple one-line invoices with a total amount payable are not considered good practice.
The time of all staff involved with the consent activity should be accurately recorded and invoiced. The only exception to this would be the avoidance of charging twice for the same service. An example of this would be administration staff time which is already funded through annual administration charges, or councillor salaries which are being paid regardless of whether or not the councillor sits on a consent hearing.
When preparing invoices councils should:
List the staff member positions (e.g. planner, scientist, engineer) or external consultants used to process or monitor the consent, the hours incurred by each person, their charge-out rates, and resultant total costs per staff member or consultant.
List disbursements, together with their unit rates and the number of units incurred.
Separately itemise hearing costs, with councillor or commissioner costs being noted together with a list of disbursements as set out above.
Note rights of objection (s357B) and appeal (s358) on the invoice to additional charges under s36(5).
Note any remissions made at the time the invoice is generated. Examples might include staff time or hearing costs not charged due to wider community matters dominating the hearing.
Note whether a discount has been given on the application and if so how much the discount of additional fees is.
Itemise any fixed compliance monitoring costs payable in advance or include these on a separate invoice.
Invoicing for any additional fees and any discount should be done at the same time and as soon as possible after the notice of decision has been issued. The discount should be deducted from any additional fees at the time of invoicing, and a single notice sent to the applicant. Combining the two will reduce the likelihood of a refund being required.
Ideally the invoice should be prepared by the consent processing or monitoring officer, or a staff member from the consent administration team, using a standard template. This will ensure important subjective decisions, such as whether all actual hours incurred will be charged, can be properly made before the invoice is generated.
A senior manager should check and approve any large invoices before they are dispatched. Councils should have formal policy on such matters and staff delegations should reflect that policy.
If interim invoicing is used for large applications, then the invoices should be issued on a monthly basis. This is consistent with normal private sector business practice, it ensures large costs are not accumulated, and also provides the applicant with regular updates on the cost of their application process.
Withholding the consent
It has been the practice of some councils to withhold the issuing of a consent until such time as the applicant has paid their application charge in full. Under s36AAB(2), a council is able to stop processing a consent until a fixed fee is paid. This section only applies to fixed fees, such as a consent application fee or notification fee and does not apply where independent hearings commissioners having been requested by submitters or reviews required by a court order; nor does it apply to additional charges under s36(5) , such as the cost of additional time spent by officers to process a consent application. Therefore refusing to issue a consent until additional fees are paid is not contemplated by the RMA.
The Court has noted that the RMA does not contemplate councils withholding decisions on consent applications as a way to place pressure on applicants to pay fees.
Remissions and refunds
Section 36AAB (1) provides for a council to remit the whole or any part of a charge at its discretion.
Councils should develop formal policy or criteria used to guide decisions on remissions. The simple test for remissions should be where the applicant or consent holder did not solely occasion the work or directly benefit from it.
Examples might include:
where a hearing involved a large number of submitters pursuing a political agenda rather than focusing on the actual effects of the activity and this greatly lengthened the hearing time
where much of the cost of processing an application is caused by a vexatious or frivolous submitter
where the activity for which consent was sought involves a public facility that will be available for general community use
where processing staff had to change part way through an application which meant there was more council time spent overall familiarising themselves with the application.
In relation to refunds, the overriding principle to be followed is that if a council collects money to undertake a service for a consent holder (such as compliance monitoring) and that service is not actually undertaken, then the council has an obligation to refund the money and should do so.
Some councils have established a minimum level of refund such as $50 (refunds lower than that sum are not actioned). The reason for this is that the transaction costs of actioning smaller refunds may be higher than the refund itself. Consequently, this is considered to be a reasonable practice.
Councils should develop accounting systems that allow the need for refunds to be highlighted and indeed for them to actually occur.