Creating a Cost Control Culture Using Long-term Financial Strategy

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					          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 Equity
Rating Equity

   Ø 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
   Ø 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 Rates
ØDifferent rates in the dollar for different categories  
Ø For farm land, residential property or commercial/industrial 
properties, 
ØEach paying a higher or lower rate in the dollar.
ØTo achieve greater equity or efficiency.
Ø No limit on the number or type of differential rates
Øhighest differential rate can be no more than four times the 
lowest differential rate.
           Differential Rates
Ø Council needs to consider three equity principles. 
  Ø the benefit or user pays principle
  Ø the capacity to pay principle
  Ø the incentive or encouragement principle 

Ø Another consideration is:
  Ø delivering a simple and transparent system of rates and 
     charges. 
  Ø A simple rating system is more transparent 
        EGM Differential
S.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


ØMaintains $55 billion assets

ØRates comprise 58 % of total funding

ØRates contribute only 2.9 % of every dollar 
raised in taxes nationally.
             Council Revenue 2010/11
               7%


        9%




                                        Rates
                                        Fees & Charges & Other
                                        Specific Purpose Grants
                                        Gen.Purpose grants
                                  57%
 27%
               Council Revenue 2004/5 v 2010/11


 60




 50




 40




 30


                                                                 2004/5 %   2010/11 %


 20




 10




  -
      Rates   Fees & Charges & Other   Specific Purpose Grants                 Gen.Purpose grants
   More Pressure on Local Government 
                Revenue

ØVGC Grants Cut $13.6M

ØDB Payout $453M

ØFire Services Levy  10-11%

ØEPA & Carbon Tax 3.7%

ØHACC Grant cuts 2%
More Pressure on Local Government 
             Revenue
        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 Council
ØSec 136 LGA- implement sound and prudent  financial 
management :
   Øregard to economic circumstances
   Ø(b) pursue spending and rating policies that are consistent 
   with a reasonable degree of stability in the level of the rates 
   burden;
   Ødecisions and actions consider financial effects on future 
   generations
   Øensuring full, accurate and timely disclosure of financial 
   information

ØQuarterly the CEO must present to the Council a report on 
Budget V Actual
ØWhere does rates reporting fit in ?
                 Rates per Capita 2011/12 Based on Average Rates per Capita for
                                      2011/12 - Source MAV
$ 900



$ 800
                                                                                                                                 $ 762
                                                                                                                   $ 737

$ 700                                                                                   $ 676        $ 686
                                                                             $ 663

                                                      $ 611       $ 618
$ 600                                   $ 573
                               $ 539
                    $ 515
$ 500
         $ 453


$ 400



$ 300



$ 200



$ 100



  $ -
        Monash    Whitehorse   Knox    Glen Eira   Manningham    Greater    Kingston   Bayside                   Boroondara   Stonnington
                                                                                                 State Average
                                                                Dandenong
                    Rates Per Assessment 2012-2013 Based on Average Rates per
                               Assessment for 2012/13 - Source MAV
$ 2,000

                                                                                                                                     $ 1,873

$ 1,800
                                                                                                                        $ 1,738
                                                                                                            $ 1,702

$ 1,600                                                                            $ 1,574       $ 1,578
                                                                      $ 1,548

                                                         $ 1,453
                                             $ 1,424
$ 1,400                           $ 1,383

                      $ 1,268
          $ 1,190
$ 1,200



$ 1,000



 $ 800



 $ 600



 $ 400



 $ 200



    $ -
          Monash    Whitehorse   Glen Eira   Knox      Stonnington   Kingston   State average    Greater    Bayside   Manningham   Boroondara
                                                                                                Dandenong

				
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