Capítulo 1 Antecedentes
1.4 Acciones y dificultades en el estudio de sucesiones numéricas
This section considers Council’s rating strategy including strategy development and assumptions underlying the rating structure, including rate revenue increases.
9.1 STRATEGY DEVELOPMENT
In developing the Strategic Resource Plan (referred to in Section 8), rates revenue (including the municipal charge) was identified as an important source of revenue, accounting for 41% of the total revenue received by Council annually. Planning for future rate increases has therefore been an important component of the Strategic Resource Planning process and the Long Term Financial Planning process. The level of required rate revenue has been considered in this context, with reference to Council's other sources of income and the planned expenditure on services and works to be undertaken for Campaspe’s community.
However, it has also been necessary to balance the importance of rate revenue as a funding source with community sensitivity to increases. To ensure that deliberations about future rate increases have been made on an informed basis, Council reviewed its historical rate revenue increases as well as comparisons of average rate revenue per head of population were made between Council and other councils in the region.
The tables below show a comparison of this data.
Historical Rate Increases Comparison of Rates per Capita
* 8.00% base increase in 2012/13 implementation of waste infrastructure funding from rate revenue. This was offset to the ratepayer by the removal of the Waste Infrastructure Levy.
Council State Govt. ^ Total Year Campaspe Large Rural
Increase Ref Imposed Increase Shire $ Council $
1995/96 0.00% 1 (22.00%) (22.00%) 2005/06 524 601 1996/97 0.00% 0.00% 0.00% 2006/07 561 667 1997/98 3.00% 2 2.50% 5.50% 2007/08 602 721 1998/99 8.00% 0.00% 8.00% 2008/09 607 750 1999/00 6.75% 0.00% 6.75% 2009/10 651 792 2000/01 7.40% 0.00% 7.40% 2010/11 710 840 2001/02 3.00% 0.00% 3.00% 2011/12 764 897 2002/03 6.00% 0.00% 6.00% 2012/13 863 997 2003/04 4.40% 2 1.00% 5.40% 2013/14 919 1,057 2004/05 4.50% 0.00% 4.50% 2014/15 989 * 2005/06 3.80% 0.00% 3.80% 2015/16 1,039 *
2006/07 4.00% 0.00% 4.00% * Based on auditied financial statements therefore
2007/08 6.00% 0.00% 6.00% not published as yet
2008/09 6.00% 3 (4.60%) 1.40%
2009/10 6.00% 3 1.70% 7.70%
2010/11 7.00% 3 1.40% 8.40% Notes to State Government imposed rate increases: 2011/12 6.00% 3 1.25% 7.25% 1. Reduction following amalgamation
2012/13 8.00%* 3 0.40% 8.40% 2. Superannuation liability impact
2013/14 5.40% 3 0.60% 6.00% 3. Water unbundling impact
2014/15 6.00% 4 0.00% 6.00% 4. 0.5% rates revenue committed to funding asset renewal backlog 2015/16 5.00% 0.00% 5.00% ^ Excluding the impact of supplementary rates
Financial Year
9.2 CURRENT YEAR RATE REVENUE INCREASE
It is predicted that the 2015/16 operating position will be further impacted by cost shifting from other levels of government, eg. the announcement of rate capping commencing 2016/17, the ongoing impact of collecting the Fire Services Property Levy on behalf of the State Government, and reductions in funding from both the Federal and State governments. It will therefore be necessary to achieve future revenue growth while containing costs and achieving savings through the Financial Sustainability Review in order to achieve an almost breakeven operating position over the period as set out in the Strategic Resource Plan.
A 5.0% increase has been applied to rates in 2015/16. Council has assumed an additional $100,000 (0.3%) to be received via supplementary rates throughout the year. Supplementary rates are receivable when new rateable land or land improvements are identified throughout the year and are not raised at the time of generating annual rate notices. The purpose of the following charts is to assist ratepayers understand the components of Council’s rate increase as compared to last year’s budget.
The following chart details the incremental changes to Rates income.
The following table sets out future proposed rate increases and total rates to be raised, based on the forecast financial position of Council as at 30 June 2015.
The growth in rates revenue in future years is based on a conservative CPI figure of 2.3% plus $100,000 rate supplementary income. The actual rate increase for future years will be governed by the State government due to the introduction of rate capping.
30,873 1,522 32,395 100 32,495
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
2014/15 Bgt (incl MC)5% rate increase Rates from existing
ratepayers New rates 2015/16 Bgt
$m
Rate Revenue Supplementary Rate RateIncrease Revenue Revenue
Year % % $000's
2015/16 5.0% 0.3% 32,495
2016/17 2.3% 0.3% 33,343
2017/18 2.3% 0.3% 34,209
9.3 RATING STRUCTURE
Each year Council sets the amount of rates and charges revenue that the municipality requires for the coming financial year and structures the mix of rates and charges to best distribute the property tax burden across the different ratepayer groups. Council has a statutory obligations and a responsibility to ratepayers to apply a robust and strategic approach to the collection of revenue through rates and charges.
Council adopted its current rating strategy in 2012 that spells out the key issues and the rationale for applying rates in the way it does. Such a strategy helps the community understand Council’s decisions better.
It is important to note that the rating strategy is not about increasing the amount of Council’s rate revenue but about how the rate revenue is raised and the proportion paid by each ratepayer.
Council sets its rates and charges under a rating framework that is governed by the Local Government Act 1989 (the Act). The Act sets out the primary objectives of Council in setting rates and charges with these being to ensure:
the equitable imposition of rates and charges; and
transparency and accountability in Council decision making.
Council needs to have regard to the two main equity concepts used to guide the development of rating strategies:
Horizontal equity - ratepayers in similar situations should pay similar amounts.
Vertical equity - those who are better off should pay more than those worse off. In addition the imposition of rates and charges should be:
Simple so that it is easily understood by ratepayers.
Easy to administer.
Consistent with the major policy objectives of Council.
Designed to minimise any detrimental effect on the economy of the region.
The Act also states that Council must implement the principles of sound financial management, in particular:
Council is to pursue spending and rating policies that are consistent with a reasonable degree of stability in the level of the rates burden.
Council is to manage prudently the financial risks of changes in the structure of the rates and charges base. Council rates are a property tax that is based on the valuation of each property to determine the amount that ratepayers will be charged. The rates imposed on each individual property are calculated by multiplying the property’s valuation by the rate in the dollar declared by Council in its adopted budget.
Local Councils can also apply:
a municipal charge that cannot exceed more than 20% of the total rate revenue inclusive of a municipal charge;
service charges such as waste management and garbage charges; and
other special rates and charges as allowed under the Act.
A municipal charge may be used by a Council to redistribute the burden of rates as it is paid equally by all ratepayers. A municipal charge may be levied on each rateable property with the exception of farms where a single municipal charge is payable on multiple assessments operated as a single farm enterprise.
The Act exempts the application of rates to the following:
crown land (where exclusively for public or municipal purposes);
Council rates do not represent a direct user pays system and there is no connection between the amount of rates paid and the level of Council services received by ratepayers.
Having reviewed the various valuation bases for determining the property value component of rates, Council has determined to apply a Capital Improved Value (CIV) basis on the grounds that it provides the most equitable distribution of rates across the municipality.
The CIV of a property is determined by an external valuer and is the total market value of the land plus the value of improvements made to the property including buildings and landscaping. Most Victorian Councils use CIV as the basis of valuing property for rating purposes.
Properties are revalued every two years to maintain a fair distribution of the rates burden between property owners within a municipality with the next revaluation to occur in 2016. Any person who wishes to object to the valuation must lodge their objection with the Council within two months after the date the notice is given.
Differential rates are used by Council to help determine a fair contribution from each type of property, ie residential, commercial, industrial, and farm.
Council will continue to make distinction within the property value component of rates based on the purpose for which the property is used. Council’s rating strategy is to apply differential rates to try to realise a fair contribution from each type of property.
The rating classification and associated differentials utilised by Council are as follows:
General Land (100% of the general rate in the dollar);
Farm Land (90% of the general rate in the dollar);
Commercial Land (116% of the general rate in the dollar);
Industrial Land (116% of the general rate in the dollar); and
Cultural and Recreation (exempt from rates).
In addition Council will apply additional charges for garbage collection.
Accordingly, Council in the 2015/2016 Program Budget will continue a rating structure which is comprised of three key elements. These are:
A municipal charge
Property values, which reflect capacity to pay
User pays component to reflect usage of services provided by Council.
Striking a balance between these elements provides equity in the distribution of the rate burden across ratepayers. The manner by which Council determines the rates that each individual assessment will pay is by multiplying the property’s CIV by a rate in the dollar to come up with the amount of the rate levy. Council’s rating structure is based around the General Land Rate and each of the other rating categories becomes a derivative of the General Land rate. The structure comprises three differential rates (farm, commercial and industrial). The farm rate is set at 90% of the general rate, the commercial and industrial rates are set at 116% of the general rate. These rates are structured in accordance with the requirements of Section 161 ‘Differential Rates’ of the Act.
Council will exempt all cultural and recreational lands as falling within the definition of recreational lands in the Cultural and Recreational Lands Act 1963 from the payment of rates except where:
The land is subject to a grazing lease, in which case it will attract the general rate (or farm rate if applicable).
The land is used for housing gaming machines, in which case the portion of premises used for housing gaming machines shall attract the commercial rate, and the balance of the property shall be exempt from the payment of rates.
Council’s municipal charge for 2015/16 has been set at $200 per assessment.
The following table summarises the rates and charges for the 2015/16 year. A more detailed analysis of the rate revenue to be raised is contained in Appendix H - Statutory Disclosures (page 129).
Council’s Rating Strategy complies with the recently released Ministerial Guidelines.
9.4 GENERAL REVALUATION OF PROPERTIES
A revaluation of all properties within the municipality was carried out as at 1 January 2014 and applies from 1 July 2014 for the 2014/15 and 2015/16 years.
The following table summarises the valuation changes between the 2012 and 2014 general revaluations for residential properties by rating category.
Rate Type How applied 2014/15 2015/16
General land Cents in $ of CIV 0.45060 0.45968
Farm land Cents in $ of CIV 0.40554 0.41371
Commercial land Cents in $ of CIV 0.52270 0.53322
Industrial land Cents in $ of CIV 0.52270 0.53322
Cultural and recreation Cents in $ of CIV 0.00000 0.00000
Municipal $ per property $150.00 $200.00
Garbage charge 80 ltr $ per property $190.00 $197.00
Garbage charge 140 ltr $ per property $240.00 $248.50
Garbage charge 80 ltr (commercial) * $ per property $209.00 $216.70 Garbage charge 140 ltr (commercial) * $ per property $264.00 $273.35 Garbage charge 240 ltr (commercial) * $ per property $445.50 $461.00
Garden organics 240 ltr $ per property $48.00 $49.50
Recycling charge 240 ltr $ per property $53.00 $55.00
Recycling charge 360 ltr $ per property $53.00 $55.00
* Inclusive of GST for commercial properties in accordance with legislation
Valuation Valuation Change Change Rate Type $000's % General land 97,265,600 2.67% Farm land 77,656,100 5.17% Commercial land 30,834,000 5.66% Industrial land (2,468,000) (0.94%)
Cultural and recreation 575,000 3.65%