NEW ZEALAND FOREST OWNERS ASSOCIATION INCORPORATED v WAIROA DISTRICT COUNCIL [2023] NZCA 398

NEW ZEALAND FOREST OWNERS ASSOCIATION INCORPORATED v WAIROA DISTRICT COUNCIL[2023] NZCA 398 [25 August 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA251/2022[2023] NZCA 398BETWEEN NEW ZEALAND FOREST OWNERSASSOCIATION INCORPORATEDAppellantAND WAIROA DISTRICT COUNCILRespondentHearing: 13 July 2023 (further submissions received 28 July 2023)Court: French, Miller and Katz JJCounsel: A S Butler KC and J P Bell-Connell for AppellantM B Lawson for RespondentJudgment: 25 August 2023 at 11.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal on a bandA basis with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)Table of ContentsIntroduction [1]The Decision [9]The Wairoa District [10]Rates generally [14]The former rating system [15]The 2015 forestry differential [17]The decision to revisit the rating system [18]Process [19]The Decision [27]The Revenue and Financial Policy and Long Term Plan [29]The legislation [31]The issues on appeal [47]The need for a "rational connection" between rates and the costs of servicesused [54]The absence of a rational connection in this case [77]Improper purpose: deterring forestry investment [82]Discrimination among forestry interests [95]Unreasonableness [102]Disposition [103]Introduction[1] On 12 January 2021 the Wairoa District Council decided, following a specialconsultation process, to adopt a new rating scheme. The Decision, as we will call it,shifted the rating burden among ratepayers, reducing rates for most residentialproperties and increasing them for farmers and commercial forest owners. It did soby adopting a new General Rate calculated on capital value, moving certain existingfixed charges to that Rate, and adopting rating differentials for five classes ofratepayers.[2] Under the new scheme the rating differential for ratepayers who own more than100 ha of plantation forest is 4, meaning that they will pay the General Rate at aproportion four times that paid by residential ratepayers per dollar of capital value.[3] The New Zealand Forest Owners Assoc (NZFOA) is an incorporated societywhich represents the interests of commercial plantation owners. We were told that inthis proceeding it represents nine owners who together own 51,839 ha of land in theWairoa District.[4] NZFOA sought judicial review, alleging that the Council acted unlawfully orunreasonably in several respects.1 The Council was said to have erred by acting forthe purpose of discouraging forestry as a land use in the District by taking into accountthe assumed wealth of forest owners, by overlooking the contribution forestry makesto environmental wellbeing and combatting climate change, by assuming incorrectlythat forestry "disbenefits" community wellbeing and by imposing a differential farhigher than any reasonably necessary to recover any additional roading costs causedby the forestry industry. The High Court was asked to quash the Decision and orderthe Council to reconsider it.[5] Grice J dismissed the application for review in a judgment delivered on28 April 2022.2 She followed this Court's well-known 1996 decision in WellingtonCity Council v Woolworths NZ Ltd (No 2),3 and distinguished its recent decision inC P Group v Auckland Council,4 which had been delivered on 10 November 2021. InC P Group this Court quashed a targeted rate aimed at certain accommodationproviders.5[6] NZFOA brought this appeal on 26 May 2022.[7] On 12 May 2023 the Supreme Court allowed Auckland Council's appeal inC P Group.6 The Supreme Court affirmed Woolworths and held generally thatrate-setting is an exercise in participatory democracy,7 that rating legislation affordslocal authorities a substantial measure of flexibility,8 that there need not be a closecorrelation between an activity and the rate set in respect of it,9 and that a localauthority which has followed proper process enjoys a margin of appreciation onjudicial review.101 The proceeding commenced on 30 June 2021, and an amended statement of claim was filed on23 December 2021.2 New Zealand Forestry Owners Assoc Inc v Wairoa District Council [2022] NZHC 761 [High Courtdecision].3 At [236] citing Kidd v Southland District Council [2019] NZHC 1947 at [13], affirming WellingtonCity Council v Woolworths New Zealand Ltd (No 2) [1996] 2 NZLR 537 (CA) at 552.4 C P Group Ltd v Auckland Council [2021] NZCA 587 [C P Group (CA)].5 At [142] and [145].6 Auckland Council v C P Group Ltd [2023] NZSC 53 [C P Group (SC)].7 At [28].8 At [31], [33], [62] and [64].9 At [62] and [65].10 At [90] and [96].[8] In argument before us NZFOA sought to recast its arguments below byreference to the Supreme Court decision in C P Group, contending that the Councildid not sufficiently engage with s 101(3) of the Local Government Act 2002 (theLGA). It contended that the Decision lacks a necessary rational connection betweenrates levied and Council costs caused by the industry's activity.The Decision[9] The process that the Council followed is not now controversial.11 We mayrecount it briefly.The Wairoa District[10] The Wairoa District spans an area of 4078.45 square kilometres and in the 2018census reported a population of 8367, making it one of New Zealand's most sparselypopulated districts. It is also one of the poorest, with a median household income of$42,700 (the national average is $96,001).12[11] Sheep and beef farming, the principal economic activity in the District, oncesustained service businesses in the town of Wairoa and the District's major employer,a meat processing plant which still employs about 700 people locally in the peakseason. The contribution made by this form of farming has long been in decline, andwith it the central business areas of the town.[12] The decline in the contribution made by farming has coincided with theconversion of many farms to commercial forest plantations. This has happened at adramatic pace; in 2019 alone, 17 per cent of rurally zoned land in the District wasconverted to forestry or sold to forestry companies. The change of use is said to besupported by government incentives and subsidies which have helped to double themarket value of farmland. It is said that forestry does not sustain local communitiesand businesses to anything like the same extent as farming. Further, major processing11 The evidence initially filed for NZFOA conveyed a contrary impression and Council witnessesresponded accordingly, but NZFOA did not advance claims founded on natural justice or failureto comply with statutory processes.12 Statistics New Zealand Average and median annual household gross, disposable, equivaliseddisposable, and equivalised disposable after-housing-costs income, by region (Year ended June2022). The median household income of the Wairoa District was provided by the Council.plants are located outside the District and planting gangs and other contractors to theindustry usually commute from Gisborne or Napier.[13] NZFOA disputes that forestry is a cause of the District's decline and arguesthat the industry benefits the District in various ways. Its representative,Keith Dolman, cited a report prepared for a forestry company, Pan Pac Forest ProductsLtd, which attributes the decline to over-reliance on the sheep and beef industry, whichhas been in decline for decades following the removal of agricultural subsidies,13 andhe contended that Wairoa's high unemployment rate is caused by complexsocioeconomic factors which the forestry industry cannot influence. He explained thatthe industry employs the equivalent of 218 full-time staff in Wairoa and would like toemploy more but jobs offered locally are not being filled. He portrays an optimisticfuture for the District based on emerging carbon markets and employmentopportunities associated with growing compliance obligations. We consider therelevance of cause and effect at [100] below. The short point made here is that theDistrict's traditional urban and rural rating base has come under increasing pressureand the rating system needed reform. That is uncontentious.Rates generally[14] Local authorities fund their activities primarily through rates and charges ofvarious kinds. For present purposes four are relevant:(a) general rates: these are fixed on property value, according to a "centsin the dollar" formula set annually by the local authority;(b) differential rates: a differential is applied to a general rate to increase orreduce the amount which ratepayers would otherwise pay based on, forexample, the value of their land or the use to which that land is put;(c) targeted rates: these are charges for groups who may benefit moredirectly than other ratepayers from a specific council activity; and13 Mark Cox and Hugh Dixon Economic and Social Profile of Wairoa District: Final report forPanPac (Business and Economic Research Ltd, June 2021).(d) uniform annual general charges: these are fixed charges applied toevery property, no matter the value of the property.14The former rating system[15] Gary Borg, the Council's finance manager, explained that the former systemcomprised a general rate based on land value, a roading rate based on land value, aservices rate and a recreation rate (both based on capital value), and a series of fixedcharges.[16] Fixed charges comprised more than 55 per cent of the total rating revenueunder the former system. This meant that rates for many low-income residentsexceeded a recognised affordability threshold (five per cent of median householdincome). It generated community concern that low-income residents were subsidisingothers. The system was also unduly complex.The 2015 forestry differential[17] Concern about use of low-volume rural roads by forestry trucks led the Councilto add a forestry differential to the roading rate in 2015. The differential was 1.54 forplantations of 100 ha or more. In 2017, the Road Controlling Authorities Forum (NZ)Inc, of which the Council is a member, developed guidelines for equitable funding forlow-volume roads.15 The Council engaged consultants to assess funding requirementswithin the District by reference to these guidelines. That led to the forestry roadingrate differential being increased to 5 in 2018, over vigorous opposition from industryrepresentatives. The theme of their arguments was that rates paid by the industryshould be based on the costs, principally roading, that forestry causes the Council toincur. The 2018 change resulted in significant rates increases for affected forestryowners.14 Fixed charges are paid in relation to "rating units" but for our purposes these can be consideredsynonymous with separately-owned properties: Rating Valuations Act 1998, s 5B(1).15 Road Controlling Authorities Forum (NZ) Inc Guidelines for equitable funding of pavementmaintenance for low volume roads (2017).The decision to revisit the rating system[18] In July 2020 the Council resolved, following community engagement, toreview the rating system. The Mayor, Craig Little, explained that the review was toconsider moving to rating based on capital value, with changes to targeted rates anddifferentials. Recognising that these were major changes, the Council decided itwould follow the special consultative process provided for in s 83 of the LGA. Itenvisaged that the decision would flow into amendments to its Revenue and FinancingPolicy and then to the 2021–2031 Long Term Plan, which had to be adopted by30 June 2021.Process[19] The Council then developed a Statement of Proposal, which followed meetingswith the community and interested parties, including forestry industry representatives.The Proposal explained that it sought to improve rates affordability by reducing ratesfor many residential and small commercial properties across the District andincreasing them for high-value and rural and forestry properties, in some cases by alarge amount. The objectives were that rates would be simple, affordable andappropriate. These would be achieved by moving away from fixed charges andreallocating the rates burden to balance community outcomes, benefits, the effects ofthe actions or inactions of people or groups, transparency and community wellbeing.It signalled that rates would not be based closely on costs caused by ratepayers, statingthat "rates are a tax and not an exchange of money for a service". It described capitalvalue as a wealth tax with a "stronger link to income than other available fundingtools".[20] The Proposal suggested a differential of 1 for rural properties, meaning theywould pay the same proportion of the general rate as residential properties per dollarof capital value. The differential proposed for forestry was 3.32. The rationale was:16Forestry 3.32As with the other sectors we started with model 1 with no differentials and no[Uniform Annual General Charge]. Under this model the 120 forestryproperties would pay $703,000 less than they are now. Forestry rating values16 Footnote omitted.are low as they have little improvements value and unlike horticulture theirtrees are not part of the valuation. This rule was set by Government.We spend a large part of our roading budget maintaining roads to a standardsuitable for the forestry industry to thrive. As this cost is caused by the sectorand as we did in 2018, we will charge this additional cost to the sector byadjusting the differential up. Forestry will pay the same share of the roadingcost as they pay now. Also, in the same way as commercial and rural sectorsforestry benefits from commercial tax benefits.There has been a lot of community discussion about the value of the forestrysector to the district. While exotic forestry has some environmental benefitson difficult erosion prone Wairoa land, most of the benefits of this industry isat a regional or national level rather [than] to Wairoa. It's our job to look afterthe best interests of our district.We acknowledge the Governments one billion tree programme and the variousreports outlining the benefits to New Zealand. For Wairoa many jobscommute into the district daily and we don't get the downstream benefits ofports and processing, Gisborne and Napier get.We also know that the growth of forestry is having negative impacts on thewellbeing of our community. Wairoa would lose over $517,502 from theeconomy every year from an extra 10% of forestry (not accounting for themultiplier effect of the money going around the community). Council iscurrently rating 74,229 ha of forestry.The forestry sector is expanding and has moved from marginal land only, toacquiring productive land. Forestry activities are a permitted activity underthe Government's National Environmental Standards for Plantation Forestry,which takes land use choice previously controlled in our District Plan out ofour hands. The One Billion Tree Fund and carbon credits subsidies areassisting the forestry sector to buy productive land. The industry does nothave constraints on ability to pay.Having considered these negative effects on the well-being of the district, andthe business benefits the sector gets from subsidies, non-valuation of the trees,the environmental standards and taxation, we have decided that it isappropriate to adjust the differential for forestry upwards.Overall, it is our view that forestry can afford this extra cost.[21] It will be seen that the change to capital value would reduce the share of ratespaid by the forestry sector, absent a differential. That is so because trees planted forforestry purposes are not improvements for valuation purposes and they are excludedfrom capital and land values.17 The rationale for the proposed differential of 3.32 wasthat the benefits of the industry were not flowing to the District, the industry hadnegative effects on community wellbeing and the industry could afford to pay.17 Rating Valuations Act 1998, ss 2 and 20(1).[22] The Proposal was discussed at the Council meeting of 3 November 2020. TheCouncil resolved to adopt it and follow the special consultative procedure set out ins 83 of the LGA.[23] The papers for the 3 November meeting included a report commissioned byBeef + Lamb New Zealand Ltd addressing the impact of large-scale afforestation onthe Wairoa District.18 It was prepared by a firm called BakerAg (NZ) Ltd. The reportconcluded that "carbon farming forestry" generated a higher net present value tolandowners than sheep and beef farming, while making a smaller and far less regularcontribution to the District. Sheep and beef farms had a direct local annual expenditureof $315,988, and generated an estimated 7.4 jobs, per 1000 ha.19 The correspondingfigures for forestry were $107,283 and 2.2 jobs.20 The latter figures excludedexpenditure and employment related to harvesting on the ground that this is notregular; they happen at the end of a 29-year cycle.[24] There followed a period of public consultation on the Proposal and publicsubmissions were heard at a Council meeting on 15 December. Forestry industryrepresentatives were among those heard. A Council summary of the submissionsrecords that they argued for forestry's "value add" to New Zealand and contended thateconomic benefits would be experienced in Wairoa "eventually". They argued for anapproach to rating based on the cost to the Council of the industry's use of roads.[25] On 22 December councillors adopted amendments to the Proposal. Relevantly,they reduced the proposed rural differential to 0.8 and increased the forestrydifferential to 4.21[26] These changes resulted in the general rates borne by the forestry sectorincreasing from $1,594,248 to $2,795,097, and those paid by rural sector increasingfrom $3,364,957 to $4,130,556. The new figures amount respectively to18 Ed Harrison and Hannah Bruce Socio-economic impacts of large-scale afforestation on ruralcommunities in the Wairoa District (BakerAg (NZ) Ltd, 1 August 2019).19 At 12.20 At 15–16.21 Compared to the original proposed differentials of 1.0 for rural and 3.32 for forestry.approximately 27 per cent and 39 per cent of the general rates burden respectively.22We are told that the total area of properties subject to the forestry and rural differentialsis 77,000 ha and 199,980 ha respectively.23 Expressed as a per-ha measure, therespective rates liabilities are:Sector Before the ratingdecisionFollowing therating decisionForestry $20.70/ha $36.30/haRural $16.82/ha $20.65/haThe Decision[27] The Decision was made at the Council meeting on 12 January 2021. Theagenda addressed the amendments made after consultation, explaining the increase inthe forestry differential was proposed because the existing differential "concentratedprimarily on the allocation of roading costs" and the Proposal sought "to attribute avalue to the relative disbenefit on other community well-beings." Mr Little explainedin evidence that:59. The statement of proposal for the rating review and the Long TermPlan was not a direct "user pays" approach where forestry or indeedany sector paid rates strictly on the basis of the benefit that theratepayer perceived they enjoyed. The decisions that Council wasrequired to make, of necessity, took into account the minimal benefitthat accrued to the community of Wairoa from forestry activities, thenegative impact that forestry had on employment within the districtand on the fabric of those communities and the impact of theallocation of liability for rates on the current and future social,economic and environmental and cultural well-being of thecommunity.[28] The Council adopted the Proposal and directed that further consideration wasto be given to an additional differential for high-value rural residential properties. TheChief Executive was instructed to develop the necessary technical policies to enable22 Long Term Plan 2021–2031 at 130. The total revenue raised from the general rate was stated tobe $10,399.601 (including GST) in 2021/2022.23 As at 2021.the new system to take effect on 1 July 2021, and to update the Revenue and FinancingPolicy for public consultation and inclusion in the Long Term Plan.The Revenue and Financial Policy and Long Term Plan[29] On 23 March 2021, the Council adopted amendments to the Revenue andFinancing Policy which retained the forestry differential but adjusted differentials forresidential rural properties. The decision to adopt the Policy followed another specialconsultation process.[30] Finally, and following a third special consultation process, on 30 June 2021 theCouncil adopted the Long Term Plan 2021–2031 and resolved to set rates for the nextfinancial year.The legislation[31] We mention the legislation at this point, to set the argument on appeal incontext. We take the opportunity to note amendments which affect this case butpost-dated the rating decision under review in C P Group.[32] The Supreme Court surveyed the statutory scheme in C P Group, beginningwith provisions of the LGA establishing that local authorities operate with ademocratic mandate and their role is to give effect to the purpose of local governmentstated in s 10. To that end they enjoy general powers of competence.24[33] In 2018, when the rating decision in issue in C P Group was made, s 10 of theLGA provided that the purpose of local government was:25(a) to enable democratic local decision-making and action by, and onbehalf of, communities; and(b) to meet the current and future needs of communities for good-qualitylocal infrastructure, local public services, and performance ofregulatory functions in a way that is most cost-effective forhouseholds and businesses.24 C P Group (SC), above n 6, at [25]–[34].25 Local Government Act 2002, s 10(1) as at 1 July 2017.[34] Section 10 was amended with effect from 14 May 2019 to replace s 10(1)(b),26which now reads:27(b) to promote the social, economic, environmental, and culturalwell-being of communities in the present and for the future.At the same time the legislature repealed s 11A, which had provided that a localauthority must have "particular regard" to the contribution that certain specified coreservices, including network infrastructure, make to their communities.28[35] The Supreme Court stated that s 10 envisaged local authorities will provideservices to their communities.29 The section no longer does so expressly followingthe 2019 amendments, nor does the legislation insist that priority be given to coreservices. The linkage between services and wellbeing in the LGA purpose provisionsis now a little less direct. We do not read much into this. The 2019 amendmentsmerely reverted to the original form of the legislation,30 suggesting a change ofemphasis rather than function. Local authorities continue to promote communitywellbeing by providing services,31 and service provision must be taken into accountwhen budgeting for operating revenue.32[36] The Supreme Court observed that a local authority must act in accordance withprinciples listed in s 14.33 That section has also been amended, to reflect the 2019amendments to s 10. It now provides:14 Principles relating to local authorities(1) In performing its role, a local authority must act in accordance withthe following principles:(a) a local authority should—(i) conduct its business in an open, transparent, anddemocratically accountable manner; and26 Local Government (Community Well-being) Amendment Act 2019, s 6(1).27 Local Government Act, s 10(1)(b).28 Local Government Act, s 11A as at 1 July 2017.29 C P Group (SC), above n 6, at [26].30 See for example, Local Government Act, s 10 as at 3 September 2007.31 Local Government Act, s 17A.32 Section 100.33 C P Group (SC), above n 6, at [28].(ii) give effect to its identified priorities and desiredoutcomes in an efficient and effective manner:(b) a local authority should make itself aware of, and should haveregard to, the views of all of its communities; and(c) when making a decision, a local authority should take accountof—(i) the diversity of the community, and the community'sinterests, within its district or region; and(ii) the interests of future as well as current communities;and(iii) the likely impact of any decision on each aspect ofwell-being referred to in section 10:(d) a local authority should provide opportunities for Māori tocontribute to its decision-making processes:(e) a local authority should actively seek to collaborate and co-operate with other local authorities and bodies to improve theeffectiveness and efficiency with which it achieves itsidentified priorities and desired outcomes; and(f) a local authority should undertake any commercialtransactions in accordance with sound business practices; and(fa) a local authority should periodically—(i) assess the expected returns to the authority frominvesting in, or undertaking, a commercial activity;and(ii) satisfy itself that the expected returns are likely tooutweigh the risks inherent in the investment oractivity; and(g) a local authority should ensure prudent stewardship and theefficient and effective use of its resources in the interests ofits district or region, including by planning effectively for thefuture management of its assets; and(h) in taking a sustainable development approach, a localauthority should take into account—(i) the social, economic, and cultural well-being ofpeople and communities; and(ii) the need to maintain and enhance the quality of theenvironment; and(iii) the reasonably foreseeable needs of futuregenerations.(2) If any of these principles, or any aspects of well-being referred toin section 10, are in conflict in any particular case, the local authorityshould resolve the conflict in accordance with the principle insubsection (1)(a)(i).[37] It remains the case, as the Supreme Court remarked, that s 14 emphasisesproper process and this is a thread running through the relevant provisions.34 Theseprovisions underpin a democratic model in which communities are to participate inimportant decisions.[38] Turning to funding, the Supreme Court noted that local authorities mustgenerally balance their budgets and s 101 establishes financial managementobligations.35 It too was amended in 2019.36 It now provides:101 Financial management(1) A local authority must manage its revenues, expenses, assets,liabilities, investments, and general financial dealings prudently andin a manner that promotes the current and future interests of thecommunity.(2) A local authority must make adequate and effective provision in itslong-term plan and in its annual plan (where applicable) to meet theexpenditure needs of the local authority identified in that long-termplan and annual plan.(3) The funding needs of the local authority must be met from thosesources that the local authority determines to be appropriate,following consideration of,—(a) in relation to each activity to be funded,—(i) the community outcomes to which the activityprimarily contributes; and(ii) the distribution of benefits between the community asa whole, any identifiable part of the community, andindividuals; and(iii) the period in or over which those benefits areexpected to occur; and(iv) the extent to which the actions or inaction ofparticular individuals or a group contribute to theneed to undertake the activity; and34 At [28].35 At [29].36 Local Government (Community Well-being) Amendment Act, s 8.(v) the costs and benefits, including consequences fortransparency and accountability, of funding theactivity distinctly from other activities; and(b) the overall impact of any allocation of liability for revenueneeds on the current and future social, economic,environmental, and cultural well-being of the community.Subsection (3)(b) formerly provided that the local authority must consider "the overallimpact of any allocation of liability for revenue needs on the community".37[39] We draw attention to several relevant features of s 101. First, it establishes ageneral obligation to manage revenues and expenses prudently and in a manner thatpromotes the present and future interests of the community, and it insists that the localauthority make adequate and effective provision to meet the expenditure needsidentified in its long-term plan and, to the extent applicable, in its annual plans.[40] Second, the section prescribes that the local authority must determine thesources from which its funding needs are to be met and it allows the authority to decidewhich sources are "appropriate". The local authority must consider a list of mattersbefore making that determination for any activity which is to be funded.[41] Third, the list of matters is divided into two parts. The first, s 101(3)(a),focuses on activities to be funded. The second requires that the local authority makean overall assessment of the impact of any allocation of liability for revenue needs onthe current and future social, economic, environmental and cultural wellbeing of thecommunity.[42] Fourth, the considerations in subs (3)(a) address outcomes, the distribution ofbenefits, the period over which the benefits will occur and the extent to which theactions or inactions of individuals or a group contribute to the need to undertake agiven activity. So the local authority must consider, relevantly, who benefits from theactivity and who contributed to the need to fund it. It may group activities for thispurpose but must consider the costs and benefits (including any consequences fortransparency and accountability) of doing so.37 Local Government Act, s 101(3)(b) as at 1 July 2017.[43] It is implicit in s 101 that Parliament envisaged local authorities would exercisesubstantial autonomy, deciding where community interests lie, what activities shouldbe undertaken to promote them, how activities will be classified and how expenditureneeds will be funded. The obligations are expressed in a very general way and localauthorities are to decide what funding sources are appropriate having regard to all theconsiderations listed in s 101(3), which include the community's social, economic,environmental and cultural wellbeing. These decisions are to be informed bycommunity preferences revealed through process obligations designed to ensure thecommunity is consulted beforehand and can hold decisionmakers accountableafterward, through the ballot box.[44] Rating powers are found in the Local Government (Rating) Act 2002, whichwe will call the Rating Act. In C P Group the Supreme Court noted that the Rating Actalso confers flexibility on local authorities and the corollary is that, like the LGA, italso emphasises community involvement and democratic accountability.38 Section 3provides:393 PurposeThe purpose of this Act is to—(a) promote the purpose of local government set out in the LocalGovernment Act 2002 by—(i) providing local authorities with flexible powers to set,assess, and collect rates to fund local governmentactivities:(ii) ensuring that rates are set in accordance withdecisions that are made in a transparent andconsultative manner:(iii) providing for processes and information to enableratepayers to identify and understand their liability forrates; and(b) facilitate the administration of rates in a manner that supportsthe principles set out in the Preamble to Te Ture WhenuaMaori Act 1993.38 C P Group (SC), above n 6, at [31].39 Subsection (b) was added with effect from 13 April 2021, after the Decision but before rates wereset under the new system: Local Government (Rating of Whenua Māori) Amendment Act 2021,s 4. It is not suggested that the amendment affects this appeal. The Council consulted Māorigroups and took their (generally supportive) views into account when adopting the new ratingsystem.[45] We observe that C P Group concerned s 16, which confers power to set targetedrates for activities specified by local authorities. Liability must be calculated byreference to factors specified in the legislation.40 This appeal concerns a general rate,which is provided for in s 13:13 General rate(1) A local authority may set a general rate for all rateable land within itsdistrict.(2) A general rate may be set—(a) at a uniform rate in the dollar of rateable value for all rateableland; or(b) at different rates in the dollar of rateable value for differentcategories of rateable land under section 14.(3) For the purposes of this section, the rateable value of the land—(a) must be—(i) the annual value of the land; or(ii) the capital value of the land; or(iii) the land value of the land; and(b) must be identified in the local authority's funding impactstatement as the value for setting a general rate.[46] It will be seen that s 13(2) authorises differentials in a general rate. Localauthorities may identify categories of rateable land which are liable to pay at differentrates in the dollar of rateable value. The categories must be defined in terms of one ormore of the matters specified in sch 2.41 These include the use to which the land isput, the activities permitted there, the provision or availability to the land of a localauthority service, the location of the land, and the land's annual, capital and landvalues.4240 Local Government (Rating) Act 2002, s 18 and sch 3.41 Section 14.42 Schedule 2.The issues on appeal[47] NZFOA advanced its appeal before us on five grounds. First, while forestry'scontribution towards roading maintenance costs is a relevant consideration capable ofsustaining a differential, no rational connection exists between the amount of the totalforestry differential and s 101(3)(a). On the contrary, forestry ratepayers are requiredto pay significantly more for non-roading activities which have no rational connectionto costs caused by forestry activities. The Council also made an error of fact whenfixing the differential, by carrying over from its 2018 calculations incorrect roadingcosts; it is said that in 2018 the Council had attributed 40 per cent of non-residentialroading costs to forestry when the correct figure was 30 per cent.[48] Second, s 101(3)(b) is not limited to benefits and costs associated with forestry,but community concern about forestry activity cannot justify a differential. Thatconcern is not related to the impact of allocation of revenue on the community, nordoes it allow the Council to circumvent subs (3)(a). To the extent the Council fixedthe differential for this reason, it acted for an improper purpose. Further, the size ofthe differential must remain reasonably related to amenities provided for, or thedemands of, the differing classes of property.[49] Third, the Council apparently took into account the fact that capital valuedefinition for forestry under the Rating Valuations Act 1998 does not include trees. Tothe extent it did so, the Council acted ultra vires.[50] Fourth, the Council failed to apply its approach to s 101(3) consistently oreven-handedly across different property types, with the result that the Decision wasunfair or exceeded the latitude provided to local authorities under the LGA.[51] Lastly, the Decision was unreasonable.[52] The Council responded that we were presented with a completely different casefrom that advanced in the High Court. Specifically, the claim that the decision did notcomply with subs 101(3) is new, and the Council is prejudiced because it did notexpressly address that claim in evidence. However, the Council also maintains thatthe record shows that the Statement of Proposal was framed in terms of s 101 and itsanalysis of the proposal complied with that provision.[53] We agree that the case has changed shape and allowances may be made for thatwhen assessing the evidence and the judgment under appeal, but we have dealt withNZFOA's argument on its merits. In our view the appeal turns on the legislation and,specifically, NZFOA's claim that a rating differential must bear a "rational connection"to costs caused by the relevant activity or benefits enjoyed by those engaging in it. Weaddress that issue first. We then examine NZFOA's claims that the forestry differentiallacked a rational connection, that the Council acted for the improper purpose ofdeterring commercial forestry and discriminated unfairly among forestry interests, andthat the differential was unreasonable.The need for a "rational connection" between rates and the costs of services used[54] NZFOA's argument is founded on its reading of the Supreme Court judgmentin C P Group. It contends that the Court provided a detailed analysis of how s 101(3)should be applied:(a) As a first step the local authority must consider the factors set out insubs (3)(a). It follows that before departing from the standarddifferential of 1 (that is, the proportion paid by residential ratepayers)the local authority must consider, for example, the extent to which aparticular rating group receives a benefit from, or contributes to the costof, an activity funded by the local authority.(b) As a second step, the local authority must consider under subs (3)(b)the overall impact of the allocation of liability on the community'swellbeing. This subsection allows for some smoothing or modificationof allocation under the first step, but the explicit focus is on theallocative impact of the rating liability; that is, of the effect of the "costof the allocation" on ratepayers.[55] It is said that the Supreme Court described s 101(3) as effectively capturingwhat older cases characterised as an underlying fiduciary duty owed by the localauthority to ratepayers, meaning a duty to establish a rational connection between anactivity and a ratepayer's contribution to costs of a service or enjoyment of benefitsfrom the service. The Court is said to have emphasised the centrality of the rationalconnection test by endorsing previous cases recognising the need for a nexus betweenquantum of rates and factors now particularised in subs 101(3).[56] We do not find this an accurate reading of C P Group.[57] In our view the principal conclusion reached by the Supreme Court about ratingpowers was that Woolworths remains good law under current legislation. In that case,commercial ratepayers challenged the Wellington City Council's decision to apply arating differential to commercial ratepayers when setting the general rate. Theycontended that the differential was not justified by reference to the value of servicesprovided to commercial ratepayers.43[58] The challenge failed. The Court approved a submission that "it is implicit inthe scheme of the legislation that a rating system in its diversity remains primarily ataxation system and not a system inherently based on the principle of user-pays".44 Itpointed out that the authority to adopt a differential for the general rate assumesentitlement to discriminate among types or groups of property according toconsiderations other than relative capital value.45[59] The Court observed that the legislation imposed significant processcomplications providing for public participation and accountability but did notexpressly circumscribe substantive decisions.46 Rather, elected representatives wereto exercise broad political judgement:47 The legislation proceeds on the premise that the wider substantivejudgements are made by the popularly elected representatives exercising abroad political assessment .43 Woolworths, above n 3, at 539.44 At 544.45 At 544.46 At 544.47 At 545.[60] Nor did the legislation require what the Court described as an elusive searchfor a direct relationship between services and benefits:48To confine the acceptable justification for the differentiation to thosedifferences as correspond or are reasonably related to enjoyment of the benefitof services provided by the territorial authority is to ignore the scheme of thelegislation and to disregard the breadth of the statutory powers. Thelegislation permits a territorial authority in making those choices whichimpact on the incidence of rates to make its own judgment as to what isappropriate and equitable. The breadth and generality of the empowering provisions applying toterritorial authorities and affecting the general rate and differential rating (incontrast with use charges and special purposes authorities), make it clear thatrating was not intended to be a calculation of benefits and allocation of theincidence of rates by reference to the outcome. The very complexity andinherent subjectivity of any benefit allocation for the specified outputs pointsaway from using relative benefit as a definitive criterion. [61] In C P Group the Supreme Court concluded that Woolworths has stood for over25 years, appears to be well understood and appears to have provided a sufficientstandard for local authorities.49[62] The Court did express caution about this Court's conclusion in Woolworthsthat, while local authorities must act within their statutory powers and observe thepurposes specified in the legislation, the scope for judicial review on reasonablenessgrounds was limited; the decision must be so "perverse", "absurd" or "outrageous"that Parliament would not have contemplated it being made by an elected council.50The Supreme Court did not find it necessary to debate levels of scrutiny in judicialreview,51 observing rather that the statutory scheme gives the decision-makerlatitude:52 these are complex decisions, often not amenable to right or wrong answers,requiring the resolution of factual issues, the weighing of competing interests,and competing policy considerations.48 At 545 and 552.49 C P Group (SC), above n 6, at [63] and [98].50 Woolworths, above n 3, at 552.51 C P Group (SC), above n 6, at [89].52 At [96].[63] This is to treat substantive deference in judicial review as less a matter ofjudicial policy than the natural consequence of the diversity and policy content ofconsiderations affecting rating decisions and the relevance of community preferences,which need not be evidence-based.53[64] These features of the legislation together confirm that the incidence of ageneral rate need not be settled by cost-benefit calculations. There is nothing to sustainNZFOA's contrary submission that subs (3)(b) is a mere smoothing device whichpermits only modest adjustments to a cost-benefit calculation under subs (3)(a).[65] As we have noted, C P Group itself concerned a targeted rate. AucklandCouncil had decided that the activities of a Council-owned economic developmententity benefitted accommodation providers and proposed a targeted rate to recover itscosts from them. This Court set the decision aside, reasoning that the Council did notadequately consider the benefit of the funded activity to targeted ratepayers, or thedistribution of benefits across the community, and had tried to secure an additionalsource of revenue from non-ratepayers (visitors to Auckland) which was beyond theproper scope of a rating mechanism.54[66] Allowing the Council's appeal, the Supreme Court rejected this Court's viewthat Woolworths could be distinguished on the ground that C P Group involved atargeted rate.55 The decision-making criteria under s 101(3) applied to both generaland targeted rates, and Woolworths had also involved a "target" group.56 The Courtaccepted that the distribution of benefits is a mandatory relevant consideration unders 101(3)(a)(ii).57 But the Council had considered it and the legislation permits a "broadbrush" approach.58 It followed there was no error of law.[67] That led more or less directly to the conclusion that the decision was notunreasonable either. This Court's contrary conclusion had rested on a purportedlyerroneous assumption that targeted accommodation providers could pass the cost to53 Auckland Council v Woolworths New Zealand Ltd [2021] NZCA 484 at [32].54 C P Group (CA), above n 4.55 C P Group (SC), above n 6, at [94]–[98].56 At [97].57 At [102].58 At [77].their customers and a failure to consider adequately the distribution of benefits.59 Infact, the Council had appreciated that some other ratepayers would also benefit fromthe promotional activity being funded.60 There were also practical reasons to targetaccommodation providers.61 A targeted rate may cause some apparent unfairness, butmore is needed to impeach it on unreasonableness grounds.62[68] Following C P Group there would seem to be little scope remaining for thedoctrine that a fiduciary duty which local authorities owe to ratepayers extends to thesetting of rates. This Court invoked the doctrine in its 1992 decision in MackenzieDistrict Council v Electricity Corp of New Zealand but soon retreated from it.63 InWoolworths the Court explained that Mackenzie District Council was a clear andextreme case of a local authority acting without regard to relevant considerations andheld that the doctrine does not open up a route for judicial intervention in discretionarylocal authority decision-making.64 In its 1997 decision in Waitakere City Council vLovelock the Court recognised that a fiduciary duty sat uneasily with rating decisions:notably, rates are levied on properties by reference to their characteristics, notratepayers.65 In C P Group the Supreme Court added that it is not generally necessaryto rely on the concept of a fiduciary duty when the distribution of benefits is now amandatory relevant consideration under rating legislation.66[69] This is not an extreme case. It is not in dispute that the Council did considerwho benefits from activities and whose actions cause it to incur the costs of thoseactivities. What remains is a challenge to the allocation of liability for funding amongratepayers. To invoke a fiduciary duty here, as NZFOA did somewhat obliquely inargument, would be to modify the statutory objective and criteria for that decision.59 At [106].60 At [109].61 At [110]–[111].62 At [116].63 Mackenzie District Council v Electricity Corp of New Zealand [1992] 3 NZLR 41 (CA) at 21. Thedecision in Mackenzie District Council was subsequently doubted in Woolworths, above n 3, andWaitakere City Council v Lovelock [1997] 2 NZLR 385 (CA). Richardson J wrote all threejudgments. See also C P Group (SC), above n 6, at [100]–[104] where the Supreme Court notesthat they "doubt the ongoing utility of the fiduciary duty concept, at least in relation to decision-making under s 101(3)(a)(ii)."64 Woolworths, above n 3, at 546.65 Lovelock, above n 63, at 396–397.66 C P Group (SC), above n 6, at [102].[70] NZFOA's appeal ultimately rests on the proposition that the forestry industrytakes only one service — roading — from the Council and is being asked to pay muchmore than the costs that its use of that service causes the Council. Mr Butler KC, forNZFOA, argued that following C P Group there must be a rational connection betweenthe benefits enjoyed by ratepayers targeted by a rating differential and the amount theyare asked to pay. He accepted that the differential need not be set on a "user pays"basis, but he invited us to find that the amount to be paid must bear a reasonablerelationship to costs of the service.[71] We do not accept this argument.[72] In its conclusions on reasonableness the Supreme Court in C P Group foundon the facts that there was a rational connection between rates and benefits.67 TheCourt did not define "rational connection". It may have been relying on a concessionby Auckland Council in argument that there must be a rational connection betweenbenefits and a targeted rate.68 Mr Butler conceded that C P Group was concerned withs 101(3)(a), not s 101(3)(b).[73] Rather, the Court held that there need not be a "close correlation" between anactivity and its benefits for the targeted group. It further rejected a submission thatthere must be some closer analysis of actual benefit.69 We have noted that inWoolworths this Court described the search for a direct relationship as elusive. Tolook for a rational connection, then, is not to require that rates paid by owners oftargeted properties bear some particular relationship to benefits they enjoy from aservice or the costs which their use of that service causes the local authority. It is torequire that the decision be justified by reference to considerations which must or maybe taken into account under rating legislation.[74] One such consideration is the use to which rateable land is put. That may beconsidered under s 14 and sch 2 of the Rating Act when defining categories of rateableland for the purpose of rating differentials. As noted above, other matters listed in67 At [121].68 At [81].69 At [62].sch 2 are the permissible activities in the area in which the land is situated, the area ofland within each rating unit, the provision or availability of a service, where the landis situated, and the annual, capital and land values of the land. NZFOA does notdispute that forestry land may form a category for this purpose.[75] In written submissions NZFOA argued that when setting differentials a localauthority must ignore the value of forestry trees, which as noted are not counted incapital value. It was said that it is ultra vires the legislation to take the value of treesinto account. In oral argument, Mr Butler did not emphasise this claim. It confrontsthe considerable difficulty that under the Rating Act capital value is only one matterwhich may be considered when categorising property for differential rating. Theactual use of land is a separate consideration, not tied to the benefits or cost of localauthority services supplied to the land. Use of rateable land would seem to be relevantin at least two senses to a local authority when selecting appropriate sources offunding. It will have an economic value to the land's owner which affects theircapacity to pay, by which we refer not to the owner's personal resources but theeconomic value of the use. And it may have downstream benefits70 or costs for thecommunity concerned, potentially affecting the rating base and the kinds and scale ofservices which the local authority can or must offer. For this reason, NZFOA's thirdground (ultra vires to take the value of trees into account) cannot succeed.[76] A final difficulty with the argument for NZFOA is that it offers no workablestandard against which a court might gauge a ratepayer's claim that a rate bears noreasonable relationship to the benefits or costs of a service. For the local authority,having considered the matters in s 101(3), what remains is a decision about appropriatefunding sources in which the objective is community wellbeing in its many forms, thecriteria are diverse and subjective, and no single source can be considered in isolation.It is difficult to see how a court could assess the cost-benefit relationship without beingdrawn into the merits of that decision.70 Mackenzie District Council, above n 63, at 47. The Court accepted that downstream benefits forthe community should be taken into account.The absence of a rational connection in this case[77] We turn to NZFOA's argument that there is no rational connection betweenroading costs and the forestry rating differential in this case.[78] We have just explained that as a matter of law there need not be a closeconnection between the two. It follows almost inevitably that this ground of appealmust fail. NZFOA does not contest the Council's services decisions or challenge itsrevenue requirement or deny that the rating base is in decline or dispute that rates wereunaffordable for many residents. These were all relevant considerations. They led theCouncil to rebalance funding sources to target the farming and forestry industries, bothof which were better able to absorb the cost. NZFOA admits that was a rationalresponse. The differential for the commercial forestry industry reflected the loss ofthe downstream contribution to the District's well-being formerly made by sheep andbeef farming. That too, as NZFOA accepts, was a relevant consideration.[79] It follows that the Decision cannot be impeached on the ground that theCouncil relied on an inaccurate estimate of costs caused by the forestry industry's useof low-volume roads. NZFOA points to two reports prepared by consultants, Opus,who were engaged by the Council, arguing an adjusted estimate of costs in the secondreport was overlooked. The argument rests on the proposition that there must be adirect relationship between costs caused and rates levied. It then assumes, contrary toC P Group, that the local authority must undertake a close analysis of the costs.[80] The argument also assumes that roading is the only Council service from whichthe forestry industry benefits. NZFOA says that it uses no other service, partly becausethe land has overseas owners who do not use facilities such as sports fields. TheCouncil has not sought to justify its decision by reference to other services in this case,but we should not be taken to adopt NZFOA's assumption that the only benefits thatcount are those that involve personal use of a Council facility or service. By way ofillustration, the Council might offer services that support the industry by contributingto the availability of a local workforce.[81] On the facts, the evidence does not appear to confront the alleged failure toconsider the adjusted estimate of costs in the second Opus report. However, theminutes from the 22 December 2020 extraordinary meeting affirms that the Councilheard and considered all submissions on the rating review.71Improper purpose: deterring forestry investment[82] Mr Butler emphasised this argument, seeking to hold the Council to what hedescribed as its illegitimate purpose of using rates to deter forestry investment in theDistrict.[83] We pause to put the argument in context. It finds a parallel in MackenzieDistrict Council, in which a local authority "mesmerised" by Electricorp's wealthseized on that firm's new liability for rates to demand that it pay some 78 per cent ofthe total rates yield. But whereas that local authority set the rate without reference toits funding needs, resulting in a massive surplus for the year, the Council in this casemerely reallocated liability among funding sources and NZFOA does not contest theneed for funding. So the argument focuses on redistribution of liability among fundingsources. Further, NZFOA does not dispute the Council's decision to reduce the burdenon residential ratepayers, meaning that other ratepayers must pick up the slack.Although we were given to understand that NZFOA is especially concerned about thesize of the forestry differential relevant to other Districts, any comparison would needto take account of the characteristics of the Wairoa District, which we noted at [10]–[13] above. No attempt was made to do that before us.[84] The argument that the Council set the rates differential to deter the commercialforestry industry accordingly focuses on the industry's treatment relative to thefarming sector, the only other significant funding source available. It raisesconsiderations of relative affordability and relative downstream benefits for theDistrict.[85] The farming sector includes farms with plantation forests. Most farm forestsdo not exceed 100 ha. We were told that is why the threshold for the forestry category71 The summary of the submissions references "the revised WSP report" relied on by industryrepresentatives.was originally set at that level in 2015. Under the new scheme farmers pay the ruraldifferential of 0.8, compared to the forestry differential of 4.[86] Returning to the argument, Mr Butler drew attention to language in the draftStatement of Proposal considered at the November meeting. It proposed a ratesincrease "to discourage the negative community wellbeing impacts" of the forestryindustry and lamented the Council's loss of control over land use in the District. Thelanguage was amended in the final version which the Council adopted; it stated thatthe increase was to "reflect" negative wellbeing.[87] We add that, as noted at [27] above, the papers for the January meetingexplained that the forestry differential sought to attribute a value to "the relativedisbenefit on other community well-beings". And in the Long Term Plan adopted inJune 2021 the Council discussed overall funding considerations and noted that it hadmade an adjustment under s 101(3)(b) to increase the overall allocation of costs to theforestry industry to cover all activities, rather than just incremental roading costs, andhad found that course of action "appropriate because of comparative negativecommunity wellbeing impacts on the Wairoa community".[88] Counsel also pointed to a letter which the Mayor wrote to other localauthorities in September 2021, proposing a new group to oppose the growth offorestry. Mr Little is the only farmer on the Council. He did not deny that these arehis views, but he pointed out that the Decision was that of the full Council, which wasinformed by diverse community views, and he denied that the Decision was intendedto deter forestry. Rather, it took into account, of necessity, the minimal benefit thataccrued to the Wairoa community from forestry activities and forestry's negative effecton local employment and the fabric of communities. By this he evidently meant lossof population and downstream employment in the District resulting from conversionof farmland to forestry and the out-of-District locations of the major log processingplants.[89] We did not understand Mr Butler to dispute that the loss of downstreambenefits from farming is a relevant consideration. It plainly is, if only because it affectsthe size and economic wellbeing of the rating base and the demand for Councilservices. As we have said, it is not in dispute that rates had become unaffordable formany residential ratepayers and rebalancing was necessary.[90] Grice J was not persuaded that the Council acted for the purpose of deterringforestry. She accepted Mr Little's evidence to that effect.72 He pointed out that thedecisions did not involve any empirical calculation of benefits accruing from Councilactivities. The inference is that such assessment would be needed to calculate a ratesliability sufficient to deter investment.[91] We agree with the Judge, for several reasons.[92] First, the argument about purpose rests in part on the proposition, which wehave already rejected, that forestry rates must bear a more or less direct relationship toroading costs. Mr Butler emphasised the difference between the Opus costs estimateof $900,261 and the total rates burden to be borne by the forestry sector in the 2021financial year, $2,795,097.[93] Second, when the Statement of Proposal is read as a whole, the Councilfocused on the District's decline and the unaffordability of rates for many residents.The "disbenefits" of forestry which the Council identified do not take the form of costspositively imposed on the community. They represent loss of downstream benefitsformerly provided by the farming sector which is being displaced. The Council'sfunding needs had not fallen. It might reasonably look to the forestry and farmingsectors to make up the difference. On the evidence, it did no more than that; theDecision reflected affordability, use of services, downstream benefits from farmingand forestry, and ability to pay.[94] Third, had rates been set to deter commercial forestry one would expect someattempt to calculate the amount needed to achieve that objective. The Council did notmake that attempt. Nor is there a reason to suppose the differential may deterinvestment in practice. We were told that the total rates liability is now $36.30 per haper annum. That is a large increase over the sum paid in 2015, when a differential wasfirst introduced, but the record is notable for the absence of evidence that it is72 High Court judgment, above n 2, at [184]–[186].unaffordable, or that it is economically inefficient, or even that the industry needs timeto adjust. There are general predictions to such effect, but our attention was drawn tonothing that substantiates them. Somewhat to the contrary, there is evidence thatforestry is a much higher-value use of rural land than sheep and beef farming. TheBakerAg report concluded that the net present value of forestry is twice that of thetypical Wairoa sheep and beef farm.73 If the Council sought to deter forestry, onewould also expect that it might seek to subsidise farming. There is no evidence ofthat. Somewhat to the contrary, Mr Borg explained that the Decision resulted in thefarming sector also paying an increased share of rates; its burden increased by$740,000 per annum.Discrimination among forestry interests[95] NZFOA argued that the Council viewed rural ratepayers through a verydifferent lens when it came to benefits from Council services. Rural ratepayers pay alower differential than residential ratepayers because they benefit less from servicessuch as sportsgrounds and libraries, but the forestry sector benefits even less,especially when the owners are based offshore, yet pays a much higher differentialthan residential ratepayers.[96] NZFOA also pointed to the 100 ha threshold, arguing that it is a tellingindicator of the Council's attitude toward large commercial forestry owners. Thethreshold means that only nine ratepayers will face the forestry differential. And thereis no justification for the relative treatment of small and medium-sized foresters. Ona per-ha basis smaller forests have the same impact on rural roads as the commercialsector.[97] We were given to understand, as explained above, that the threshold reflectsthe fact that forests smaller than 100 ha are usually farm forests, forming part of adiversified farming operation. The Council justified its approach to the ruraldifferential by reference to the downstream benefits of farming and also affordabilityconsiderations.73 Ed Harrison and Hannah Bruce, above n 18, at 17.[98] Rating powers expressly envisage that the relative incidence of rates will varywithin a rating district. As this Court held in Woolworths, the very concept ofdifferential rates involves casting a heavier burden than that justified solely by relativecapital values.74 The Council must consider benefits from its activities and the extentto which those activities were necessary because of the actions of the forestry sector.But having done so, it was required to make a substantive judgement about fundingsources based on a broad political assessment of the current and future needs of thecommunity.75[99] A degree of unfairness is to be expected at the margins of rating categories.Although the Supreme Court was addressing a targeted rate in C P Group, itsobservation that unreasonableness requires something more than simple unfairness asamong ratepayers who benefit from a service also holds good for a differential in ageneral rate.76 Practical administrative considerations may influence the localauthority's decision.[100] As in C P Group, there was a logic to the Council's approach here. It hadinformation, in the form of the BakerAg report, that forestry employs many fewer localworkers per 1000 ha and the industry's expenditure (excluding harvesting on forestmaturity) is a fraction of that of the farming sector. We mentioned the data at [23]above. The Council had heard what forestry industry representatives had to say aboutthat and the wider benefits of forestry for New Zealand. It recognised that affordabilitywas an issue for the farming sector. It nonetheless increased that sector's share of therates burden to relieve pressure on residential and commercial ratepayers, and toreflect capacity to pay.[101] These are forward-looking considerations whose relevance does not rely onarguments about whether the forestry industry is to blame for the state of the District'srating base. It may be, as NZFOA posits, that farming's decline is attributable to theremoval of farming subsidies in the 1980s and predates forestry's growth, but it mayalso be that the arrival of a higher-value use (also attributable in part to government74 Woolworths, above n 3, at 544, approved in C P Group (SC), above n 6, at [63].75 Woolworths, above n 3, at 545; and Local Government Act, ss 10 and 101.76 C P Group (SC), above n 6, at [116].policy settings) for marginal rural land has something to do with it. What matters forour purposes is that the cause of the Council's undoubted need for new funding sourcesis an issue on which there is room for differences of opinion and the exercise ofjudgement on the Council's part. We are not persuaded that the Council's decision todiscriminate among forestry interests was unfair, still less that it was so unfair as tojustify intervention on judicial review.Unreasonableness[102] NZFOA contended that the Decision bore the hallmarks of unreasonableness.It reiterated that while a local authority enjoys latitude in rate-setting, there must be arational connection between the Council's roading activity and the impact of thetargeted group's actions on that activity. It will be seen that this ground of appeal alsorested on the incorrect premise that there must be a direct relationship between costscaused by the forestry industry and the rates it is required to pay.Disposition[103] The appeal is dismissed.[104] NZFOA must pay the Council costs for a standard appeal on a band A basiswith usual disbursements.Solicitors:Dentons Kensington Swan, Wellington for AppellantLawson Robinson, Napier for Respondent