VLGA
Rates and Revenue Raising
What’s the Answer?
Danny Wain
Hefty rates Shock
“They told me if I cannot pay the hefty
rate increase they will take me to court
and throw me out of my home”
•Changes to the Local Government Act
•Local Government Legislation Amendment
(Miscellaneous) Bill 2012
•To improve local governance outcomes
•Change the rules applying to Penalty Interest Rates
•Include greater controls over council use of differential
rates;
•Ministerial Guidelines
•Order in Council to disallow the use of a classification of land
where the use is inconsistent with the guidelines
•Changes to the Local Government Act
•VCAT for a review of the way a Council has
classified a person’s land for differential
•An opportunity to provide equity to farmers,
•The largest beneficiary of differential rates.
The Age
Aug 28 2012
Rating Equity
Rating Equity
There is a direct relationship between property holdings
and disadvantage;
 less wealthy people tend to own lower valued housing
stock
Property owners with higher valued assets generally
have a greater capacity to pay
Property taxes do not take into account individual debt
levels or income received by owners
PRINCIPLE: There is no connection between the amount of
rates paid and the level of council services received by
individuals.
Differential Rates
Different rates in the dollar for different categories
 For farm land, residential property or commercial/industrial
properties,
Each paying a higher or lower rate in the dollar.
To achieve greater equity or efficiency.
 No limit on the number or type of differential rates
highest differential rate can be no more than four times the
lowest differential rate.
Differential Rates
 Council needs to consider three equity principles.
 the benefit or user pays principle
 the capacity to pay principle
 the incentive or encouragement principle
 Another consideration is:
 delivering a simple and transparent system of rates and
charges.
 A simple rating system is more transparent
EGM Differential
S.161 of the Act, Council must specify:
•Objectives of the differential rate,
•Consistent with the equitable and efficient
carrying out of Council’s functions,
•Detailed information (specified in the Act) with
respect to the basis on which the differential rate is
imposed
•Reasons for imposing the differential rate; and
•Characteristics of the land which are the criteria
for declaring the differential rate.
EGM Differential
•Objectives based on use of additional funds
•Use the money to fund research on problem
gambling
•Imposition of the higher differential rate on
premises operating EGMs can then be justified on
the basis of the connection between problem
gambling and EGMs.
Local Government
Maintains $55 billion assets
Rates comprise 58 % of total funding
Rates contribute only 2.9 % of every dollar
raised in taxes nationally.
Council Revenue 2010/11
7%
9%
Rates
Fees & Charges & Other
Specific Purpose Grants
57%
27%
Gen.Purpose grants
Council Revenue 2004/5 v 2010/11
60
50
40
30
2004/5 %
2010/11 %
20
10
Rates
Fees & Charges & Other
Specific Purpose Grants
Gen.Purpose grants
More Pressure on Local Government
Revenue
VGC Grants Cut $13.6M
DB Payout $453M
Fire Services Levy 10-11%
EPA & Carbon Tax 3.7%
HACC Grant cuts 2%
More Pressure on Local Government
Revenue
Estimated Estimated Cost
Percentage Percentage
Cost State &
State &
Increase from
of Rate
Federal
Federal Taxes/
2011/12
Revenue
Taxes/ Levies
Levies
EPA Landfill Levy (State)
Carbon Tax Impact (Federal)
Metropolitan Fire Brigade Levy (State)
Total of (Major) levies
2011/12 $m
$1.8
$0.0
$2.4
$4.2
2012/13 $M
$2.0
$1.3
$2.5
$5.8
11.1%
4.3%
15.44%
2012/13 %
2.3%
1.4%
2.9%
6.6%
Other Rating Options
Municipal Charges
•The use of a municipal charge reduces the amount that needs
to be collected in the form of rates attached to the value of a
property.
Service Charge S162
• Collecting and disposing of refuse recycling and disposal.
Cultural Recreation Lands
Special Rates & Charges S163
Model Budgets – Rating Strategy
9. Rating Strategy
•Strategy development
•Current year rate increase
•Rating structure
•Rating Basis
•Level
•General revaluation of properties
Financial Reporting to Council
Sec 136 LGA- implement sound and prudent financial
management :
regard to economic circumstances
(b) pursue spending and rating policies that are consistent
with a reasonable degree of stability in the level of the rates
burden;
decisions and actions consider financial effects on future
generations
ensuring full, accurate and timely disclosure of financial
information
Quarterly the CEO must present to the Council a report on
Budget V Actual
Where does rates reporting fit in ?
Rates per Capita 2011/12
Based on Average Rates per Capita for 2011/12 - Source MAV
$900
$800
$762
$737
$700
$663
$600
$611
$618
Manningham
Greater
Dandenong
$676
$686
Bayside
State
Average
$573
$539
$515
$500
$453
$400
$300
$200
$100
$Monash
Whitehorse
Knox
Glen Eira
Kingston
Boroondara Stonnington
Rates Per Assessment 2012-2013
Based on Average Rates per Assessment for 2012/13 - Source MAV
$2,000
$1,873
$1,800
$1,702
$1,600
$1,548
$1,383
$1,400
$1,424
$1,574
$1,578
State average
Greater
Dandenong
$1,738
$1,453
$1,268
$1,200
$1,190
$1,000
$800
$600
$400
$200
$Monash
Whitehorse
Glen Eira
Knox
Stonnington
Kingston
Bayside
Manningham Boroondara