Carterton models 1234% forestry rates rise as national cap looms

Carterton District Council’s preferred ratings option would lift annual rates on a $7.48 million rural forestry block from about $14,000 to $183,000 — a 1234% increase. A large $13.75 million dairy farm would rise from $24,000 to $72,000, or 198%.

Agri investment bank Lewis Tucker & Co has warned that forestry operations will close if councils load extreme differential and targeted rates onto the sector to offset the coalition Government’s rates-capping law. The firm has said some councils were examining forestry increases of the order of 1200%.

The Carterton numbers come from draft consultation material prepared after a Morrison Low Advisory assessment. That work found dairy, forestry and pastoral farming together accounted for more than 68% of the council’s non-weather-related, council-funded roading costs.

Those costs are now socialised across all ratepayers on capital value. The preferred option would introduce a targeted roading rate for the council share of NZTA-subsidised spend and reset differentials.

Residential and lifestyle properties would generally see cuts of around 13–15%. More than 4,800 properties, including over 3,100 households, would gain on average.

Mayor Steve Cretney said the proposal raised whether forestry would remain viable if firms paid roading costs through a targeted rate. Consultation advanced with support from all but one councillor.

Deputy Mayor Grace Ayling called the figures “defensible but unpalatable”. She said the council was “holding up a mirror to the forestry sector saying this is what it looks like if you are going to cover the cost of damage to the rural roads”.

Councillor Steve Laurence framed the status quo differently. He said “granny down the road has been subsidising international forestry companies for such a long time”.

Rates cap mechanics

On 25 August 2026 Local Government Minister Simon Watts confirmed legislation for an initial 2–4% annual rates target range. Councils must consider the band from 1 July 2027 when preparing long-term plans. Full force starts 1 July 2029.

Watts said median council rates rose 14.2% and 9.2% over the past two years. The cap covers general rates, targeted rates and uniform annual charges. Water services and non-rates fees and charges sit outside it.

Exemptions will be narrow. They cover exceptional events such as natural disasters beyond reasonable planning, or prudent financial management with a plan to return to the band. An independent regulator will monitor compliance and assess exemptions. The range will be reviewed every six years.

Lewis Tucker’s earlier experience explains the sector’s alarm. Wairoa District Council lifted rates on a Lewis Tucker-managed forestry block near Wairoa from $30,000 to $200,000 a year — about 570% — after land-use reclassification and revaluation.

Executive director Colin Jacobs said the lift equates to roughly $5 million extra over the life of the forest. “There’s been no reason given to us as to why a forestry company should pay such large differential rates, what costs are we causing that justifies that increased rate.”

The firm noted no harvest trucks for at least 25 years. It also said the differential applied only to post-31 December 1989 ETS-registered forests. In its submission Lewis Tucker warned: “A cap on rates increases will not prevent exorbitant rates increases for industries targeted by differentials.”

Wairoa chief executive Matt Lawson linked the rise to land-use change after the 2024 QV revaluation. He said most forestry wages, profits and opportunities leave the district while heavy logging trucks still hit rural roads.

Wairoa’s 2021–22 overhaul set a general-rate differential of 4 on larger plantation forests. The New Zealand Forest Owners Association’s judicial review failed. The Court of Appeal upheld the council in NZFOA Inc v Wairoa District Council [2023] NZCA 398. Courts accepted differentials need not be pure cost-benefit exercises.

Sector push-back and stakes

NZFOA chief executive Dr Elizabeth Heeg has pressed for a “soft cap” on differentials. On Carterton she said any substantially higher burden needs sound evidence of actual heavy-vehicle use and network benefit. That evidence must be transparent and robust.

Any substantially higher rating burden needs to be supported by sound evidence of actual road use, including the frequency and nature of heavy vehicle movements and how different land uses benefit from the roading network

She has previously said a differential lifting rates over 500% is not fair. She wants good taxation principles written into local-government law so differentials reflect actual community need rather than secondary regulation.

MPI data show forestry contributed $6.27 billion in export revenue in 2025, $3.5 billion to GDP (1.2%), and about 42,000 jobs. Planted production forest covers about 1.82 million hectares, mostly radiata pine. Long rotations of 25–30-plus years mean rates hit cash flow long before harvest or mature carbon returns.

Credit agencies have flagged the national cap. S&P Global Ratings has said a rates ceiling could be credit-negative for councils unless matched with spending restraint. Fitch has warned of higher downgrade risk from reduced revenue flexibility across the councils it rates.

LGNZ president Rehette Stoltz called capping a blunt tool when infrastructure cost inflation outruns CPI. Official modelling cited average household savings near $34 a year. Watts has confirmed that order of figure while stressing certainty over headline savings.

Design gap

The Local Government (Rating) Act still gives councils wide discretion on differentials and targeted rates. A hard band on the total take does not stop redistribution onto a narrower base. Carterton’s worked examples and Lewis Tucker’s warning show how that channel can open under fiscal pressure.

Residential ratepayers gain short-term relief. Forestry and dairy absorb multi-hundred-percent hits on immature or capital-intensive land. Investment certainty for ETS plantings and marginal-land conversion is the first casualty if such models spread.

Watch the Carterton consultation, hearings and final decision. Watch whether Watts and the new regulator add any discipline on differentials. Without that, headline rates discipline can still leave selected primary sectors facing punitive effective local tax rates.