As this column is being written,
Newcastle Council is considering major rate increases that would
increase the average annual Newcastle residential rate by $400 by
2020.
However, no changes are proposed to the
council's rating structure, whereby the council's total rate income
is divided 50-50 between an ad valorem (or land value)
component, and a flat charge (or base rate) applied uniformly to
every residential property.
This means that the burden of paying
for the proposed increases will fall more heavily on the usually
poorer owners of lower-valued land, compared to what they would pay
under a rating structure with a higher relative land value component.
I've written before in this column about the socially inequitable impact of this rating structure. The
higher the base rate component, the greater the burden on owners of
relatively lower-valued land (note, it's your relative land
value compared to other residential properties in the same council
area that matters here, rather than its actual value).
Each general rate increase also
increases this social inequity.
Previous councils have produced
comparative tables showing the relative rate burden that would apply
to a range of residential property values under different rating
structure options (e.g., with a 40/60, 30/70 or 20/80 per cent base
rate/ad valorem split), but no such information has been provided
with the current documentation.
Despite claiming that it is trying to
achieve a balance between “the extent to which those who receive
the benefits of council’s services also pay for those services”,
and “the extent to which those who pay for council’s services
have the ability to pay for those services”, the council
administration is proposing to keep the highest legally allowable
base rate of 50%.
This isn't the only credibility problem
the current council faces in advocating a general rate increase.
Again, I've written before about such credibility problems when the administration was proposing to seek
approval from the NSW Independent Pricing and Regulatory Tribunal
(IPART) for a Special Rate Variation last year, and later when it reneged on its commitment to the Newcastle Art Gallery.
The special rate proposal never made it to IPART,
because it was rejected 6 votes to 7 by the elected council, in a
rare instance of a defection from the usual dominant McCloy/Liberal
council bloc.
However, the new proposed rate increase
will also require IPART approval, and the council faces similar
credibility issues: many of the expenditure commitments it made when
the IPART approved its 2012 Special Rate Variation were not
fulfilled, and much of the discussion surrounding the proposed rate
increases has been (and continues to be) conducted in meetings closed
to the public.
Little appears to have changed since
last year, with the administration proposing that the elected council
agree to the proposed rate increases even before they are exhibited
for the mandatory minimum 28 day period.
This is a pity, because, as I've
argued before, there is a strong case for increasing council rate
revenue, and the council should be working with the community to win
its confidence on such proposals.
According to the current documents, the
council budget (comprising its Draft 2014/15 Operational Plan and its
Draft 2013-2017 Long Term Delivery Plan) will be on public exhibition
from 7 May to 4 June 2014.
