Saturday, June 11, 2011

Absurdity of AAV for calculating Municipal Rates URGENT COMMUNICATION – Correspondence thread with an Alderman

From: TAS RATEPAYERS
Sent: Thursday, 9 June 2011 12:41 PM
To: Alderman Soward

Thank you for your initial reply. We look forward to receiving your considered reply soon.

When you say a 20% limit is effective, for whom is it such? Certainly not for the ratepayer upon whom you are imposing a 20% increase in rates for no additional service.
For every ratepayer that will pay in excess of 4% increase in rates, there is a ratepayer who pays less than 4%, no more than previously paid, and even less than previously paid. How is that effective?
If you mean it is more effective for Council, then yes, Council will hope that at 20% , it will receive a politically acceptable level of complaint and criticism. Those ratepayers will still be paying 16% more than any other ratepayer.

We are pleased to learn that you are spending time consulting with the community. We are, however, disappointed that you, particularly as a former President, have not found a single time to attend a Ratepayers Association meeting since the day you were elected. We appreciate that busy aldermen do find it difficult to find the time to do everything, but to not find a single evening after all these months, is disappointing.

We fully appreciate that the public are only going to be given the Statutory Budget figures, however that is certainly a step in the right direction for a change, and doesn’t prevent YOU from providing the detail. You have the detail, in fact a completely detailed budget, and there is nothing to prevent you from presenting whatever extra detail is necessary.

Please don’t criticise ratepayers, even pensioner ratepayers for not understanding the budget due to a lack of detail that you provide to them. Ratepayers are sometimes even more capable and qualified than Aldermen to understand the numbers in fact, and when I look around the Council Table, there are still a number of Aldermen who do not have the qualifications to sit on what is really the Board of the LARGEST BUSINESS IN LAUNCESTON.

Yes we also look forward to a large room full of ratepayers eager with questions, satisfied by detailed information you will provide, and able and willing to make constructive and practical suggestions on how Launceston’s budget may be restrained. This year you are taking ratepayers on a rollercoaster ride into deficit. Is that, under the present economic hardship, responsible ?

Regards, Tasmanian Ratepayers Association Inc.
_________________________
From: Aldman Soward
Sent: Thursday, 9 June 2011 11:07 AM
To: TAS RATEPAYERS

thanks for your prompt reply.. I will give you a more detailed answer a little later as I'm about to head out to an appointment.

Just wanted to clear up a couple of points.. 20 percent was selected as it appeared on the modelling provided to be the most effective- that is my view and others are free to disagree.

The other point I would like to clarify was my opposition to the public budget process- my entire remarks as recorded on our website at the council meeting would reveal why I voted the way I did and Alison who you ccd in on this email can verify what I said- in essence I said that I totally support public consultation and that it happens each and every day- I speak with loads of people who suggest things we can do as a council, programs that need support or trimming or making more efficient, parks that need developing, different things that need council support etc.

The reason I opposed it was NOT on the basis of secrecy or anything sinister but the simple premise that I believe a budget needs to be seen in its entirety- it is pointless to hold a meeting where people come along and say " We should increase the parks budget by $500,000 a year so our city is neater and tidier and our parks are better' or " We should have a nil rate increase" or " we shouldn't put any funding into Aurora Stadium " [ all things people have by the way brought to me as ideas and passed on] . These suggestions are made and submissions can be made BUT [and this is the but] the same people do not indicate how things would be funded or what services they would cut to make their submission happen. At the council meeting I spoke of my time as a director of MyState Financial where at our community consultation/ AGM people would come along and say they wanted higher deposit rates for their money and lower home loans- a position I'm sure you can see would make the institution go bankrupt in a day if we were offering 7 percent deposit rates and 4 percent home loans at that time.

When I spoke at the meeting on Monday and seconded the motion it was not done to be populist and in my remarks once again I recorded as Alison could attest I said I had reservations and that budgets had to be seen in their entirety- I have had pensioners for instance contact me last year about how many free entry's they got into the tip and wanted more- a fair point for many with gardens etc- I asked them how we would fund it and they either didn't know or suggested we take money out of the tiger bus or we dint have footy in Launceston- their view and opinion- fair enough- but not really showing an understanding of a whole budget approach.

I also said on Monday that I hope we fill large rooms with both sessions where people come along- my concern is that given we have a process that's ongoing where people contact their aldermen about certain programs or roadworks or projects of merit that need to be funded or trimmed that we wont get large numbers of people engaged at these sessions.I also hope that people who do attend and make creative suggestions understand and suggest ways they can be funded- as I said its easy to come to a meeting and suggest an idea like I outlined above but not be able to fund it or indicate how it would work..which is as I'm sure you would agree pointless- It is my view that consultation takes place each and every day and I regularly take ideas to council for support.

kind regards

Alderman Rob Soward
Launceston City Council
www.robsoward.com.au

"We swear by the Southern Cross to stand truly by each other and fight to defend our rights and liberties"
_________________________
From: TAS RATEPAYERS
To: Alderman Soward
Date: Thu, 9 Jun 2011 10:25:56 +1000

You seem to miss several fundamental points.
1. There is no present impediment to Launceston City Council using the land valuations for rating purposes.
2. There is no pre-requisite for using the AAV Valuation system for rating purposes.
3. There is no reason why Launceston City Council can’t increase the General Charge (and significantly say as much as 50% of the rate income for the city), so as to thereby reduce the General Rate component.
4. The proposed 20% cap on residential rate increases is purely an arbitrary figure. Why not 10% or 5% or even 4% across the board based on last year’s rate? That would create the least harm to ratepayers.
5. State Parliament has already debated the Georgetown/Brighton model just a few weeks back in May. I am surprised you and the other Launceston Aldermen are not kept informed on this. Shaun McElwaine’s opinion is JUST THAT, a legal opinion, not a judgement. Do you really believe that the Attorney General would continue to permit Georgetown, Brighton and to a lesser extent, Devonport, to continue to rate their ratepayers on a basis that has no legal standing ? There appears to be no impediment for Launceston to follow that existing model.

Regarding progress on this since you and other Aldermen have been elected, we find your excuses to be unacceptable and quite frankly pathetic. You have had plenty of time to make changes and achieve progress. You had plenty of time to properly research the issue before you made those promises to your electorate in the first place. All of what you continue to say to us now was already in circulation beforehand. You know all of this because you are also a Past President of the Ratepayers Association.

Attending a seminar is hardly the kind of action you promised.

Please don’t blame the legislators. They are finally acting on this because they are sick of recalcitrant councillors refusing to act within their present legislative framework. Read what they have been saying starting with the former Minister, Jim Cox.

Your direct comments on the points above would be appreciated.

As to you encouragement for attendance at the upcoming discussions concerning Launceston Rates and Budget, I find it remarkable that you OPPOSED this activity (apparently, in spite of this being a request of the Ratepayers Association during your term as President) but then, you SECONDED the motion when you realised it would pass, and undoubtedly would be popular politics.

In conclusion, let me assure you that waiting another year is not acceptable and will be too late for many people who are being crushed by unaffordable increases in the cost of living. If you do not know that fact, or are glibly unaware of its existence, then I would be pleased to assist with your education on that topic too.

Regards, Tasmanian Ratepayers Association.

_________________________

From: Aldman Soward
Sent: Thursday, 9 June 2011 9:49 AM
To: TAS RATEPAYERS

thank you for your email.. Is Leo Foley a guy who ran for parliament? His name sounds familiar.

I ran for election at the 2009 election promising rating reform. I am still committed to that promise. I seem to recall a large number of candidates promising to do the same at that election including most who were elected..

I do not disagree with the comments you have made around AAV and like you and many others I do not think it is the best system to generate rates.I have said that for a long while and am still of that belief.

To further increase my knowledge from our previous emails where we have discussed this I have attended a recent rating seminar conducted as part of the ongoing process. The seminar was very informative and there were a number of councils represented.The session was run by some people doing the review and people from LGAT and people from Local govt division DPAC.It explored the rating tools and the immediate changes to legislation to give councils more freedom in setting its rates.We were told that the legislative reforms would take place [ they hoped in early July] and that the review would be complete later in the year. I asked some public questions around this time frame as attendees at the meeting could attest to- the meeting was attended by Deputy Mayor Nott and myself and Alderman Dean was an apology.There may have been other apologies I was not aware of.I would think that if the legislative tools were passed in early July then it would be something council would explore for the 2012/13 process- clearly we need to set the rate before the legislation is presented.

There is also a school of thought that the models used by Devonport, George Town and Brighton are heavily flawed as we have discussed before- I have given the name of their lawyers- Curtis/ Abetz to our officers to seek clarification- as you know previous advice we have had from Shaun McElwaine has always said that the three schemes used by those councils are not valid.. Some of my aldermanic colleagues still hold Mr McElwaines advice as the absolute answer to this- from what I'm told this opinion was sought after the time the other councils went down their way of the different method and certainly before I came onto council.Id think[ and Im no layer] that it may be worth revisiting this advice in the context of the legislative changes ahead.

Im sure you understand the process of reforming an entrenched system is a long one and one that has to my mind been made more convoluted by the delays of the state legislators in this process.
Please be assured and reassure your members that my view on the AAV System not being the best way to calculate rates has not changed and I am committed to reforming the system for a fairer more just system

I also think that the measure of placing a 20 percent cap in place is not a bad thing- Im sorry to hear you do not think it is effective. I personally believe it is a good measure to try and minimise the huge increases in line with revalutions.I have attended several sessions where a range of projections were made around different options and I believe this one is a fair one in the short term as a way of minimising the huge increases as a result of valuations. In my humble view it is a short term measure.. Id like to think we can use the recommendations when the report is completed later this year combined with the newly legislated rating tools and work towards a better system.

thanks for your email and I look forward to seeign you at the upcoming budget sessions

kind regards, Alderman Rob Soward
www.robsoward.com.au

"We swear by the Southern Cross to stand truly by each other and fight to defend our rights and liberties"

______________________________

From: TAS RATEPAYERS
Sent: Thursday, 9 June 2011 12:41 PM
To: Mayor & Alderman
Cc: GM

Mayor and Aldermen,
Launceston City Council.
The Tasmanian Ratepayers Association Inc is indebted to Leo Foley for preparing this interesting piece. Launceston City Council is NOT obliged to use the AAV system in establishing its rates. The legislation clearly allows Launceston to select another of the alternative methods. It has long been recognized at Local and State Government levels that AAV should be abandoned as it is unjust and bears an inequitable basis for rating.
The State Government PROMISED Tasmanians that this system would be abandoned by LEGISLATION but this milestone has not yet been reached and the latest promise is by about November this year. This is extremely disappointing, given the hardship created the last time Launceston was previously revalued and now to be again repeated with the new valuation notices distributed a week or so ago.
Launceston could CHOOSE to use the Land Valuation figure to levy its rate, so why not ACT NOW ??
Launceston could also CHOOSE to limit or cap its rates for residential properties, so why not ACT NOW ??
Since 2006, there have been replacement Aldermen elected to Launceston City Council, all promising REFORM ON RATING, so why hasn’t this occurred ?
In 2011, there will be another election.
PLEASE, PLEASE now consider a different rating system. Don’t repeat the old system. Capping increases at 20% IS AN EXTRAORDINARY INSULT to ratepayers, as clearly that means many many ratepayers will pay less, pay no more, or pay less than the 4% increase expected across the board.
We look forward to receiving individual responses from each and every Alderman.

Yours sincerely,
Lionel Morrell
President
Tasmanian Ratepayers Association Inc.

Absurdity of Rating Improvements (AAV)
We descend from a long history of destructive property taxes!
Windows were taxed in the UK, so people boarded up their windows, making them ill!
France had its chimney tax, so people boarded them up too, smoking residents to death.
In the UK Midlands, a capital improvements tax led to the de-roofing of buildings. Absurd? Of course; but – should we laugh at our forebears? Are we any wiser?
Under Assessed Annual Value (AAV), anyone who erects a dwelling is penalized ! Then, the homeowner is penalized again whenever they improve their property. Add a room – up go the rates! Establish paths—up go the rates! Build a garage – up go the rates! AAV not only taxes chimneys and windows, it taxes the whole house!
Property value consists of two separate parts:
1. the land value itself; and
2. the value of the buildings and other improvements made by the owner. •
The AAV system fails to distinguish between the value of these separate parts. Rates are levied on the property as a whole – on land and all improvements.
Land gets its value from the efforts of the whole community, not any one individual. Under a principled system of rating, property owners would pay in proportion to the value given to their sites by the community (ie on land value), not according to the value of their own improvements.
Some of the inefficient consequences of AAV are:
AAV penalizes the industrious homeowner, thus discouraging improvements. Those who renovate find that they must pay higher rates for their efforts.
AAV is arbitrary and unjust. The system bears little relationship to services rendered by the local authority.
Under AAV, rates are borne disproportionately on developed properties, compared to vacant land. It costs nearly as much to maintain a road past a vacant property as it does to maintain that road past an improved one.
AAV encourages the holding of land for speculative purposes. There is a lesser levy payable for holding land idle, than for using it.
AAV rating is inequitable. Owners who build on their land are liable for a higher proportion of the income of the municipality than the owners of underdeveloped land, although the services offered to each by the council are identical.
AAV has no moral basis. Not only does it fail to distinguish between land and improvements, AAV is a nominal figure only. It is the rent which a property might return to the owner. Since most homeowners do not rent out their house, it has no true basis.
Land differs from every other form of property. It is nature’s free gift to all of us.
When a person builds a house, the house is their private property because they built it. It does not belong to the community, and the community has no right to the house or its value.
Do we, as a society, need more houses?
Yes! We need to house our young families. So, don’t penalize people for building them! Infill development should not be penalized by higher rates, but encouraged by the need to derive income from sites in order to cover the rates thereon.
When ratepayers know that the council will charge them rates only on the value of their sites and not on the value of their homes or other improvements, they respond by becoming improvement-minded. The building and construction industries are stimulated, and a higher level of activity is maintained.
The Local Government Act 1993, gives the option of using one of three rating systems to Tasmanian councils: S 90 (3) A general rate is to be based on one of the following categories of values of land: (a) the land value of the land; (b) the capital value of the land; (c) the assessed annual value of the land (including improvements). In Tasmania, all municipal councils opt to levy rates on the AAV method. By comparison, all municipal councils in NSW and Queensland levy rates on the ‘Land Value’ method. Most ratepayer polls around Australia have found a majority favour the ‘Land Value’ method.
Why should ratepayers be faced with the worst system? Insist on your rates being based on land values only!
Posted in Economics, Local government, Rates
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