116 21 February 2017
23 January 2017
File: (17/36)
Report no: CPC2017/1/45
Environmental Health Fee Review for 2017/18 Financial Year
Purpose of Report
1. To advise Council on the options for the establishment of new fees
for environmental health services (food premises) as a consequence of the Food
Act 2014 that came into force on 1 March 2016.
|
Recommendations That the Committee recommends that Council: (i) adopts the statement of proposal to fix fees to recover the costs of the Council’s functions under the Food Act 2014; (ii) notes that the special consultative procedure will be used and directs officers to begin this process without delay; and (iii) appoints a subcommittee to hear submissions on the proposal, consider all the information and issues and then make recommendations to Council. |
Background
1. The Food Act 2014 (The Act) was passed into law in June 2014, replacing the Food Act 1981. A three year transition started on 1 March 2016.
2. The Act introduced a risk based regulatory regime that places a primary duty on the persons trading in food to ensure that the food sold is safe and suitable.
3. Purpose of the Act is to:
a. Restate and reform the law relating to how persons trade in food;
b. Achieve the safety and suitability of food for sale;
c. Maintain confidence in New Zealand’s food safety regime;
d. Provide for risk-based measures that:
i. Minimise and manage risks to public health;
ii. Protect and promote public health;
iii. Provide certainty for food businesses in relation to how the requirements of this Act will affect their activities;
iv. Require persons who trade in food to take responsibility for safety and suitability of that food.
Discussion
4. The Revenue and Financing Policy has been reviewed as part of the preparations for the Long Term Plan 2015-2025. This review has identified that the Environmental Health activities is not achieving 40% recovery from actual operating costs (36% recovered in the 2015/16 financial year). The fees and charges remain the same for the 2016/17 Financial Year.
5. Due to the changes in two key pieces of legislation (Food Act 2014 and Sale and Supply of Alcohol Act 2013), successful implementation of these Acts and the ongoing work that is to be carried out by councils across the country has increased dramatically.
6. This in turn has caused local authorities to review its resourcing to ensure the teams responsible for the implementation of these Acts are adequately resourced.
7. The proposed fee review will allow the Environmental Health team to recover actual costs and provide the required level of resourcing for the team to successfully implement the changes in legislation. Extra resourcing is expected to be brought on board to provide the team with adequate level of cover (subject to SLT approval).
8. The urgency in requesting this proposed fee increase now as opposed to during the Long Term Plan process later in the 2017 calendar year is due to the fact that all licenses (apart from alcohol) expire on 30 June. In order for licenses to take effect on 1 July, the Council is required to invoice commercial operators with the increased fee a month in advance.
Businesses Affected
9. As of January 2017, there are 638 registered food related businesses in Lower Hutt City that will be subject to either a Food Control Plan or National Programme risk bases measures (refer to Appendix 1 – ‘Explanatory Notes’ for reference). An estimated breakdown of the risk based measure that businesses fall into is as follows:
|
Risk Based Measure |
Number of Businesses |
|
Food Control Plan |
474 |
|
National Programme level 3 |
113 |
|
National Programme level 2 |
10 |
|
National Programme level 1 |
22 |
|
Exempt (businesses that do not fall under any of the risk-based measure categories and do not require registration i.e. accommodation providers, home based early childhood centres, club premises) |
19 |
|
Total number of businesses |
638 |
10. An additional number of premises may be required to register with the Council that were not previously required to register. The most significant sector of this market is the early childhood education centres (ECE’s). There are approximately 99 ECEs in Lower Hutt City (these are subject to National Programme Level 2).
Council to set fees under the Act
11. Territorial Authorities may, by resolution, fix fees to recover the direct and indirect costs of any of the following functions under the Act:
Registration:
This includes administrative work such as recording food premises details into multiple databases (at the Council and Ministry for Primary Industries), vetting applications to assess the scope of the business and all other supplementary information is accurate, requesting more information from applicants if required and issuing licenses and certificates (notices). There is a need to make this charge variable for some registrations as the Act allows for registration of a number of sites (multiple food businesses) under one application (and one food control plan); for example, a franchised company may to choose to register one plan with one application for 5 sites which may require more than two hours completing the necessary registration tasks for all sites.
Verification:
This includes verification of food premises, including preparation (booking appointments, preparing the report/checklist for the verification, checking resource and building consents as well as prior history), travel time, actual on site time to carry out the verification, completion of the verification report and updating of two recording systems. Travel time has been averaged across all premises and will be set at 30 minutes per verification. There will be the need to increase the charge for some verifications as some make take significantly longer than 3.5 hours to complete due to the size and scale of a premises. It is also estimated that up to 50% of businesses will require extra time on site to begin with. The time spent above the standard fixed verification charge will be charged on an hourly rate basis. As businesses become more familiar with the requirements of the Act, it is likely that the proportion of business requiring extra time will reduce.
Compliance and monitoring activity:
This will be charged on a per hour basis; however no charge will apply for investigation of complaints that do not result in an improvement notice being issued. This recognizes that the investigation of complaints is a public good, and unless justified by the issuing of an improvement notice, should not penalise the food operator. As part of compliance and monitoring activity, a site visit will be required for every new business to ensure the details provided by the applicant are confirmed, to ensure that the design, construction, and location of the food business would enable the business to produce food that is safe and suitable for human consumption.
Proposal to set fees
12. The Council is required under the LGA to adopt a Revenue and Financing Policy that provides details on the funding of operational and capital expenditure. During its development, analysis was undertaken with regards to the parts the community contributes towards paying of activities. Food businesses will transition over to the Act over a three year period as of 1 March 2016. During this transitional period, a portion of the businesses will be charged under the Act and the remaining that have not been transitioned will continue to be charged under the existing fees set pursuant to the Health Act 1956 and the Food Hygiene Regulations 1974.
13. The Council proposes the following fee structure to ensure the recovery of direct and indirect costs incurred by the Council in performing its functions. The proposed fees will come into effect on 1 July 2017 and will only apply to premises that register under the Act. Existing premises that have not transitioned will continue to pay the existing Council fees set pursuant to the Health Act 1956 and the Food Hygiene Regulations 1974
14. In setting the proposed fees in the fee structure contained in this paper, Council has taken into consideration the four principles under the Food Act (section 198(2)): equity, efficiency, justifiability and transparency:
Equity
‘Funding should come from the persons using or benefiting from the functions, power or service’
• It is considered equitable to recover the full costs of the Council’s functions under the Act from the direct beneficiaries. The beneficiaries are perceived to be the owners of food premises to which these functions apply. Users of food premises receive an indirect benefit from the functions performed by the Council under the Act. The proposed fee structure does not seek to charge operators for complaint investigations that do not result in the issuing of an improvement notice.
• This approach recognises that general complaint investigation has public benefits and should not be directly recovered from the food operator where a complaint is not justified.
Efficiency
‘Costs should be allocated and recovered so that maximum benefits are delivered at minimum cost.’
• The Council seeks to deliver its functions in the most efficient manner possible and to ensure this efficiency is reflected in the costs to users.
Justifiability
‘Costs should be collected only to meet actual and reasonable costs (including indirect costs).’
• The proposed fees have been determined based on the estimated time to process registration, verification, compliance and monitoring functions relating to food premises operating under the voluntary implementation programme introduced as part of the Food Act 1981. The hourly rate has been determined after analysis of direct costs; such as salary and operational associated costs.
Transparency
‘Costs should be identified and allocated to the tangible service provision for the recovery period in which the service is provided.’
Proposed fee structure (refer to Appendix 2 – ‘Current Fees and Charges 2016/17’)
15. Cost recovery under the Act is different than under previous legislation. All businesses will be required to pay an annual registration fee payable on the anniversary date of their initial registration. Set fees for both registration and verification will be set separately. An additional fee, calculated at an hourly rate will be charged for all additional visits for verification, or compliance and monitoring activities.
16. The Council has estimated the volumes of registration, verification, compliance and monitoring visits it currently carries out and what has been as of 1 March 2016 by reviewing its performance data from previous years in line with its current and proposed fee schedules.
17. The proposed hourly rate fee is in align with Ministry of Primary Industries, Auckland City Council and Wellington City Council, all of which are providing the same service and implementation of the Act. The hourly rate charge reflects the Council’s direct and indirect costs.
Table 1: Proposed fee schedule for administering the Food Act 2014
REGISTRATION ACTIVITIES
|
FUNCTION |
FEE (INCLUSIVE OF GST) |
TIMING OF PAYMENT |
|
|
REGISTRATION |
|
|
Application for registration of Food Control Plan (FCP) based on a template or model issued by MPI |
$310 (includes
two hours of processing of application) $155 per hour for every extra hour of registration activities |
$310 payable on
application |
|
Application for registration of a business subject to a national programme template |
$155 (includes
one hour of processing of application) $155 per hour for every extra hour of registration activities |
$155 payable on
application
|
|
Application for renewal of registration |
$155 (includes
one hour of processing of application) $155 per hour for every extra hour of registration activities |
$155 payable on
application Remainder payable on invoice |
|
Application for amendment to registration |
$155 (includes one hour for processing of application)
|
$155 payable on
application |
VERIFICATION ACTIVITIES
|
FUNCTION |
FEE (INCLUSIVE OF GST) |
TIMING OF PAYMENT |
|
|
VERIFICATION |
|
|
Verification of a food control plan based on a template or model issued by MPI |
$542.50
(includes three and half hours of verification activity)
|
Payable at
registration (if verification due within next 12 months) |
|
Verification of a food control plan based on a National Programme Three (NP3) template |
$387.50 (includes two and half hours of verification activity)
|
Payable at
registration (if verification due within next 12 months) |
|
Verification of a food control plan based on a National Programme Two or One (NP2 or NP1) template |
$310 (includes
two hours of verification activities) |
Payable at
registration (if verification due within next 12 months) |
COMPLIANCE ACTIVITIES
|
FUNCTION |
FEE (INCLUSIVE OF GST) |
TIMING OF PAYMENT |
|
|
COMPLIANCE |
|
|
Issue of improvement notice |
$155 per notice
(includes one hour of improvement notice activity) |
Payable on invoice |
|
Application for review of issue of improvement notice |
$155 per
application (includes one hour of review activity) |
$155 payable on
application |
|
All other Services for which a fee may be set under the Food Act |
$155 per hour |
Payable on invoice |
Further notes for consideration on Verification (Audit) Frequencies (refer to Appendix 1 – ‘Explanatory Notes’ for reference)
Options
18. Options Considered:
Option 1
Adopt the Statement of proposal to fix fees to recover the direct and indirect costs of the Council’s functions under the Food Act 2014. This is considered to be the most equitable option ensuring that funding for the Council’s functions under the Act are from users or beneficiaries of these functions and not from rates and other general funding sources. This also aligns with the Council’s Revenue and Financing policy.
This is the preferred option.
Option 2
Adopt an amended statement of fees to partially recover the direct and indirect costs of the Council’s functions under the Food Act 2014.
The option is not in accordance with the Councils revenue and financing policy. The option would mean the full cost of the Council’s functions under the Food Act 2014 would have to be recovered from rates or other funding sources.
This is not the preferred option.
Option 3
Adopt an amended statement of fees that charged all activity on an hourly rate basis with no upfront fixed fee
The option wouldn’t provide any certainty or estimate of the expected charges for the customer and would also have high administrative costs.
This is not the preferred option
Table 2: Advantages and disadvantages of three fee setting options
|
OPTIONS |
POSITIVES |
NEGATIVES |
|
OPTION ONE |
|
|
|
OPTION TWO |
|
|
|
OPTION THREE |
|
|
Consultation
19. Council may, by resolution, fix fees under section 205(1) of the Food Act. Before making such a resolution, Section 205(2) requires the Council to consult using the special consultative procedure under Section 83 of the Local Government Act 2002.
20. Section 83 of the LGA requires Council ensure the following is publicly available:
a. The statement of proposal;
b. A description of how the local authority will provide persons interested in the proposal with an opportunity to present their views to Council;
c. A statement of the period within which views on the proposal may be provided to Council (being not less than a month from the date the statement is issued).
The statement of proposal must also be made as widely available as reasonably practicable as a basis for consultation.
An opportunity must be given for persons to present their views to Council in a way that enables spoken interaction between the person and Council. The person must be given a reasonable opportunity to do so and must be informed about how and when he or she may take up that opportunity.
21. In this instance officers will undertake a direct mail out to each of the commercial businesses that will be affected by this proposed change. The letter will enclose the statement of proposal and explain the proposal and the reasons for the proposal, timeframes, information on how a submission can be made, and the opportunity for submitters to present their submission in person.
22. Advertisements will also be placed in newspapers and on the Council website, advising of the proposal, the reasons for the proposal, timeframes and information on how a submission can be made.
23. The statement of proposal will be publicly available at the Council admin building and Council libraries.
Legal
Considerations
24. The requirements of section 205 of the Food Act have largely been set out above. To reiterate, Council can only fix fees to recover direct and indirect costs related to registration, verification and compliance and monitoring activities (as explained in more detail above).
25. The fee fixed must not provide for the recovery of more than the reasonable cost incurred by Council in preforming the relevant function.
26. Council, when fixing the fee, must take into account the criteria in section 198(2) of the Food Act 2014. Those are the 4 criteria of equity, efficiency, justifiability and transparency, described in more detail above.
27. When fixing the fees a strict apportionment of the costs to be recovered for a particular function or service based on usage is not required.
28. A fee may be set at a level or in a way that is determined by calculations that involve an averaging of costs or potential costs and takes into account costs or potential costs (that are not directly to be provided to the person who pays the fee but which are an indirect or potential cost) arising from delivery of the service or class of service to a class of persons or all persons that use the service.
29. An increase in fees for any financial year must not come into effect other than at the commencement of that financial year. This can be overridden if an increased or new fees is consulted on and Council is satisfied that the persons, or their representatives, affected by the increase in fees or the new fees agree or substantially agree with the alteration or fixing.
30. Officers are not aware of any regulations which influence the way these fees can be set.
31. Section 205(2) of the Food Act requires the Council to consult using the special consultative procedure under Section 83 of the Local Government Act 2002.
32. A summary of the information contained in the statement of proposal is not considered necessary to enable public understanding of the proposal, which is clearly and concisely set out in the statement of proposal.
Financial Considerations
33. This is a fee increase proposal, so no funding is required. The public consultation process will be carried out by existing staff within the Environmental Health team and will be part of the team’s operating costs.
34. The increase in fees will enable the Environmental Health team to cost recover the actual time spent on food premises activities to a better extent and thus reduce the rates contribution component for the team’s operating costs.
35. Currently, the team is working on a 40:60 funding ratio, where 40 % is to be recovered through Environmental Health activities and 60% through rates funding.
36. The Environmental Health team at present is recovering 36% (a total income of $611,000.00 per annum – with the food premises activities being $244,092.00 based on the fee model for 2015/16 Financial Year). This figure is not expected to change for the 2016/17 Financial Year as the fees and charges remain unchanged.
37. The proposed fee review (for the 2017/18 Financial Year) will ensure the team’s total Environmental Health activities recovers 42% (with a projected income under the proposed fees for the Food Act 2014 to be $344,229.90 per annum on average over a five year period).
Other Considerations
38. In making this recommendation, officers have given careful consideration to the purpose of local government in section 10 of the Local Government Act 2002. Officers believe that this recommendation falls within the purpose of the local government in that it meets the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses. . It does this in a way that is cost-effective because it appropriately presents and anticipates future circumstances in order to provide good-quality customer service and performance that are efficient and effective.
|
No. |
Title |
Page |
|
1View |
Explanatory notes |
126 |
|
2View |
Current Fees and Charges 2016-2017 Financial Year |
135 |
|
3View |
Statement of Proposal |
140 |
Author: Raaj Govinda
Manager Environmental Inspections
Reviewed By: Bradley Cato
Solicitor
Reviewed By: Geoff Stuart
Divisional Manager, Regulatory Services
Approved By: Joycelyn Raffills
General Manager, Governance and Regulatory