SunGold/G3 Licenses – Investment or Taxable Land Improvement?

Arborists growing crops under exclusive licenses will closely watch a rating assessment case in the High Court in June.

In 2021, as part of the triennial reassessment of district ratings, Gisborne District Council (GDC) introduced the value of kiwifruit licenses (SunGold/G3) into the land improvements portion of the capital assessment (CV ) of a property.

The increase in CV, and therefore the increase in rates, has been significant for growers of this variety. In its communication on GDC’s long-term plan, the New Zealand Kiwifruit Growers Institute (NZKGI) provided some examples of increases seen by growers in the region:

NZKGI brought judicial review proceedings against GDC in the High Court challenging the inclusion of the G3 licenses for the purpose of fixing the rateable value of the land and therefore the rates. Two claims are advanced by NZKGI:

1. That the G3 licenses do not correspond to the value of the land as defined in the Rating Valuations Act 1998 (RVA). On this basis they are irrelevant to the assessment of the value of the land and the Board would have erred in adopting assessments which included the value of the licenses; and

2. There was a breach of natural justice because GDC’s policy was adopted based on a January 2021 statement by the Appraiser General that the value of G3 licenses should be included in appraisals of rating. It is alleged that the improper procedure was followed by the Council because the producers were not given the opportunity to be heard.

A Gisborne producer, the Bushmere Trust, has also filed an objection to its valuation with the Land Valuation Tribunal (Valuation Tribunal). Judicial review proceedings in the NZKGI High Court have been stayed, pending a decision by the Tribunal on the Bushmere Trust’s objection to its valuation.

The Bushmere Trust property is relatively modest in size, with approximately 3.11 hectares of orchard canopy, and includes planted G3s and rootstocks for future planting of red Zespri. But it has come to represent a ‘test case’ not only for the other 49 G3 licensed growers in the Gisborne district, but will likely also be watched closely by other G3 growers across Nova Scotia. Zeeland, including the Bay of Plenty. and Northland.

The ultimate issue before the Valuation Tribunal was whether the value of the G3 permit (as opposed to rootstock or other improvements) is an improvement of the land within the meaning of the definition of “improvements” in the Rating Valuations Act. , and can be evaluated accordingly.

The Valuation Tribunal recently rendered its decision and concluded that the G3 permits were not “an improvement or benefit to the land” (and therefore should not be included in the assessed value); the Assessment Tribunal concluding:

1. The licenses represent a “speculative investment” by the owner with the prospect of increasing income from the exploitation of the orchard;

2. License cannot be transferred with ownership and requires a new contract with Zespri; and

3. The license can, and in some cases has been, transferred and the cultivars removed from the rootstock. The rootstock is still available for use by other unlicensed or licensed kiwifruit species.

We understand that GDC, supported by the Valuer-General, has appealed the Valuation Tribunal’s decision to the High Court; and that the Valuer-General will join the proceedings as an interested party. A statement on the Council’s website indicates that the Assessor General considers the decision of the Assessment Tribunal to be, “inconsistent with previous court rulings and the requirement of the Rating Valuations Act of 1998 to assess established vines as improvements. Removing the value of the golden kiwi vine due to the existence of a license creates an inequitable outcome for ratepayers, unfairly reducing the burden of assessment and tariffs for some owners and increasing the burden on rates for others.

The High Court proceedings are currently due to be heard in early June.

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