THE State Government’s acceptance of the recommendations of the Access Economics’ review of valuation and local government rating in Tasmania could result in significant rate increases for Brighton residents.
Access Economics has recommended an end to Brighton’s flat rate system and for all councils to be forced to adopt a system based on property values.This could have serious consequences for some ratepayers in Brighton, Tasmania’s fastest growing municipality. For example rates, based on assessed annual value (AAV) for a property in Hobart can be up to six times those of a similar property in Brighton.
In its report, Access Economics recognises that Tasmanian property growth has not been uniform and this has resulted in property prices volatility and associated problems with volatility in the rates.
Access Economics was asked to identify ways of addressing this volatility yet it has recommended a land tax first (most volatile) a capital tax second (second most volatile), an AAV method (third most volatile. However it has rejected a flat rate (least volatile). It claims that land values are a reflection of the use of council services making land value a good method for assessing rates. However in waterfront suburbs such as Old Beach, land values may triple from one side of the road to the other and some ratepayers would pay considerably more for the same services.
In a major deficiency, the report reviewed Councils that all apply the same rating methodology and did not review the two Tasmanian councils (Brighton and George Town) that had resolved the volatility issue by introducing a residential flat rate and ring fencing each commercial sector while still applying an AAV method to commercial properties.
If a land-only system is adopted, a massive rate shift will occur in commercial properties that will not reflect the “capacity to pay principle” For example a supermarket in Bridgewater on lower value land will pay exactly the same rates as block of land up the road of equivalent size and value.
The land or capital rating options are currently available to all Tasmanian councils yet no council has adopted these due to the cost shifts and associated valuation volatility.
In fact, the Access Economics recommendations reduce the rating options currently available to councils when there was a recognised need to increase the diversity options. It is generally accepted by all Tasmanian Councils that the review was not meant to limit the rating options available and take away what Brighton has successfully introduced.
Access Economics criticises flat rating around the principle of capacity to pay, yet Brighton actually has addressed this by applying a flat rate by suburb. Lower socio-economic suburbs have a lower rate. A deeper understanding of the Brighton model highlights that that the flat rate is actually a flat rate by suburb for residential properties only and a typical Housing Department house in Bridgewater actually pays less in general rates that an equivalent house in Ravenswood (Launceston) or Clarendon Vale (Clarence). Had Access Economics reviewed the Brighton model, then perhaps a different and fairer recommendation would have been made.
The report does recommend that the fixed portion for the general rate be increased from 20 percent to 50 percent. This is a positive step, however not one Tasmanian council even uses the 20 percent option.
Flat rate support
Brighton Council has adopted a long-term commitment to keeping rate increases at or below increases in the Consumer Price Index. Residents and businesses have shown massive support for Council’s commitment.
Council regularly receives positive comment from ratepayers for its rating system and unlike other Tasmanian councils, no complaints. This ratepayer support was reflected in the most obvious way at the last election which saw all sitting councillors returned.
Brighton Council has signalled it would be unable to maintain its commitment to keep rate rises at or below the increase in inflation if the State Government forces it to abandon flat rating. It is calling on the Government to reject the Access Economics recommendation.