Levy Calculation Options - Per Hectare

Background:

  • Proposed by a grower at the AGM.
  • Summerfruit NZ estimate to achieve the same level of income would need to be set at approximately $750 per hectare - $1.5m levy income / 2000 ha (estimated hectares based on last industry survey in 2014, as currently this data is not provided by growers or collected by Summerfruit NZ).
  • Would need to determine what the upper limit would be
  • Would still be adjusted/reviewed each AGM to set to the right level.
  • Asparagus currently only horticulture group using this method.

 

Summary of discussions:

  • Allows growers to better understand and know what they would be paying in levy each season. Currently a hidden cost as it is taken by collection agents in most cases. 
    • Other growers noted that the current levy is easy to calculate either:
      • Use your gross sales value x levy fee rate
      • Ask your collection agent/s for a summary of levy payments made on your behalf at the end of each season.

  • Aligns with some grower’s plant variety fees calculations. 
    • Although other growers noted their PVR fees are on a production basis so not an advantage for all growers.

  • Provides an easy calculation for grower’s budgets.
    • Others suggested growers should have a targeted sales figure each year (per crop) so use that x levy rate.

  • Provides Summerfruit NZ a stable income each year not being affected by climatic events, crop loses, market supply and demand issues.
    • Current system has been used for 24 years and has been able to  withstand financial losses and gains. Currently the organisation uses a 3-year average levy income figure to set each year’s budget. 
    • Reserves made in a good season are used to offset losses in a bad season and has created a buffer for seasonal fluctuations in income.

  • Provides the growers with a mechanism to cap the income of Summerfruit NZ to keep the organisation doing only the basic core functions.  From a selfish viewpoint, in a good year the money stays in the growers pocket.
    • Some questioned why growers in a growing industry wouldn’t want increased services from their industry organisation to reflect their changing needs, this will most likely need increased funding not less funding.
    • The industry review will establish what services the members want and any levy rate can be adjusted annually at an AGM to control this.

  • Overcomes levy collection difficulties with fruit stall sales.

  • Aligns with the current voting rights allocation under the constitution.
    • Others suggested that one of the elements of the upcoming industry review should be consideration of the constitution and the voting rights allocation method.  This could be changed in the constitution to be aligned to the current levy collection calculation (based on value) or be some other allocation method.

Disadvantages from a growers perspective:

  • Would be paid on non-producing land – if used tiers of fees to mitigate this then could end up with a very complex and subjective calculation. (i.e. bare land, exemption for non-producing trees – how long for each variety of each fruit type?)

  • Would be paid no matter whether you had crop losses due to weather events or other issues. Growers would need to set aside funds from a good year to cover future bad years.

  • Would require properties to be audited (most likely GPS’d regularly).  At least every 2 years.

  • Grower directly responsible for payment, not done by collection agents.

  • One large invoice received from Summerfruit NZ per year so one payment.  Not spread over time as it is now and would be a line item in the grower’s budget.

  • Would require growers to advise the organisation when trees (blocks) are removed or planted between audits.

  • Doesn’t reflect the success of your business.  Levy is just another tax, if you do well you can afford to pay, but if you do badly you won’t be able to pay.  In a bad year some growers may try to avoid paying the invoice. 

  • Summerfruit NZ may have to accept that a certain percentage may default. For Summerfruit NZ to achieve the necessary income, other growers would be paying more to offset the defaulters. Then is it fair and equitable?

  • Industry organisation would have access to a lot more data on an individual growers’ operations. 
    • Others asked why should it take a change in levy calculation method for growers to provide this information, should be willing to do it when asked anyway.

  • The cost of administering the collection by hectares would be high and need to be added onto the levy. Alternatively there would be less levy income available for industry good activities as this method will increase the administrative expenses. There will be costs for data collection, site auditing (for 230 growers every 2 years), accounting (invoicing and payment processing), debt collection and legal enforcement of the levy order.