RATEPAYERS hit hardest by rate hikes are usually least able to absorb an increase, say councillors blazing a trail for reform.
City of Swan North ward Cr Kevin Bailey and Ellenbrook Crs David McDonnell, Patty Williams and Cate McCullough are calling for an overhaul of the rates system.
“We need to challenge the Local Government Minister (David Templeman) to review the process because the system is antiquated; we need to have a level playing field,” Cr Bailey said.
“Currently it’s usually the lowest socio-demographic group that are hit the hardest.”
Cr Bailey said many people were unaware the gross rental value (GVR) of their property determined the amount they paid.
“A common misconception is that rates are determined only by the value of a property and so people ask why their rates are going up when property prices are falling,” he said.
The new knowyourcouncil.com website explains how rates are calculated.
Cr Bailey said that while there had been rate reductions in the commercial sector in the City of Swan, gross rental values in some residential areas ‘had gone through the roof’.
“We will be moving a motion at the next council meeting calling for the City of Swan to start negotiations with the Minister for Local Government to have the current rating methodology reviewed, with a view to devising a more simplified and equitable system,” he said.
Councils begin the budget process in February with a workshop based on the previous year’s revenue versus the new financial year budget.
Cr Bailey said local governments were not permitted to show a deficit budget and so after adjustments, the only option was to raise funds and apply a rate increase.
“The amount of the deficit determines the rate increase to achieve the revenues to balance the budget; for example, a 2.5% increase in revenue,” he said.
“Some time in June, the Valuer Generals office sends the local governments the valuations for all GRV and UV (unimproved values) .
“If the average valuations have decreased across the local government, then this leads to a decrease in revenue on the previous year.
“Council sets a rate in the dollar of each rate classification to achieve the desired revenue increase over the previous year, in this case 2.5%.”
Cr Bailey said that because the council can only set one rate in the dollar to any rate class, a ratepayer whose valuation may increase against the average trend will receive an increase in their actual rate charged in excess of the advertised 2.5%.
Ratepayers whose valuations may have gone down slightly will still get a rate increase although less and properties with a large decrease in valuation may get a decrease in actual rates.
“So while councils advertise say a 2.5 % rate increase, the actual increases to individual properties vary significantly,” he said.
“This leads to considerable angst and confusion for ratepayers who see an increase advertised and then receive a higher increase in their rate notice due to the valuations.
“A far more equitable formula would be to apply the advertised rate to all rateable properties, so that ratepayers can calculate and budget for their rates with some certainty.”
The four councillors say applying the percentage increase to the rate in the dollar for each rate class would achieve that result.
WA saw the largest increase in council rates in Australia, with $2.1 billion paid to local councils in the 2015-16 financial year, according to The Property Council of Australia.
The Government is currently undertaking a review of the Local Government Act (1995) to modernise legislation governing local government rates.
“Reforms to rating laws will be considered during phase two of the Act review in 2018,” a Department of Local Government spokeswoman told the Advocate.