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 EquityRating 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 RatesDifferent 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 DifferentialS.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.

57%

27%

9%

7%

Council Revenue 2010/11

Rates

Fees & Charges & Other

Specific Purpose Grants

Gen.Purpose grants

Rates Fees & Charges & Other Specific Purpose Grants Gen.Purpose grants -

10

20

30

40

50

60

Council Revenue 2004/5 v 2010/11

2004/5 %

2010/11 %

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 Cost State &

Federal Taxes/ Levies

Estimated Cost State &

Federal Taxes/ Levies

Percentage Increase from

2011/12

Percentage of Rate

Revenue

2011/12 $m 2012/13 $M 2012/13 %EPA Landfill Levy (State) $1.8 $2.0 11.1% 2.3%

Carbon Tax Impact (Federal) $0.0 $1.3 1.4%Metropolitan Fire Brigade Levy (State) $2.4 $2.5 4.3% 2.9%

Total of (Major) levies $4.2 $5.8 15.44% 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 CouncilSec 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 ?

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$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$453

$515 $539

$573 $611 $618

$663 $676 $686

$737 $762

Rates per Capita 2011/12Based on Average Rates per Capita for 2011/12 - Source MAV

Rates Per Assessment 2011-2012Based on Average Rates per Assessment for 2011/12 - Source MAV

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$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$1,190 $1,268

$1,383 $1,424 $1,453

$1,548 $1,574 $1,578

$1,702 $1,738

$1,873

Rates Per Assessment 2012-2013Based on Average Rates per Assessment for 2012/13 - Source MAV

Rates per Assessment 2010/11