Tasmanian Ratepayers’ Association Inc.
P.O. Box 2039,
NEWNHAM TAS 7248
P.O. Box 2039,
NEWNHAM TAS 7248
The General Manager,
Mr. R. Dobrzynski,
Launceston City Council
P.O. Box 396
LAUNCESTON TAS 7250
Dear Mr. Dobrzynski,
Re : Budget Submission - 2012, Launceston City Council
The Tasmanian Ratepayers Association again congratulates you as General Manager on implementing what the Association has formally called for, for some years, the invitation to Launceston residents to contribute to the debate on the development of the 2011-12 Annual Budget and striking of the rate.
The insistence that ratepayers make written submissions, however, places a burden on the very few that have the time and skill to write a submission. While an attempt at some community consultation on the matter of rates is welcome, the consultation is effectively too little, too late. The lack of unanimity from Aldermen as to if there should have been any consultation at all, reveals the consultation at that level, as a half-hearted attempt. The absence of a number of aldermen from the briefing sessions is also telling.
The „briefing sessions‟ held on 15 and 16 June were poorly promoted and poorly attended. This reflects very badly on LCC‟s ability to meaningfully engage with the community. Clearly, few ratepayers are able or willing to attend such briefing session on a cold winter's evening at the Town Hall. More information ought to have been disseminated beforehand, so ratepayers could
better understand why they should attend a session. Whilst council has provided a means for submissions to be made via the internet, many residents simply do not have this technology available to them.
A quarterly glossy 8-page newsletter Your Launceston news, posted to all Launceston households just days before the briefing sessions were scheduled, represents an expensive but lost opportunity, as it could have contained much of the information withheld until the briefing sessions. Remarkably this newsletter didn't even announce that briefing sessions would be conducted, or even allude to the process of consultation. It is not acceptable to argue that at the time of printing the details had not been agreed or were even known, because that will only draw attention to the fact that the promise to undertake this consultation was made in December 2010, and there had been many months since then to properly make arrangements. The printing deadline did manage however, to allow a front page article on the meaning and effect of Tasmanian Ratepayers Association Incorporated municipal revaluation, even though the new valuation notices were only just released and were being received in Launceston letterboxes in virtually thensame postal delivery.
For something as important as rates, the consultation should have started 12 months ago, after the last rate decision. This consultation MUST BE GENUINE, be real and persuasive. Last minute calls by aldermen to consider alternative methods for levying themrate, were just that, poorly thought out last minute calls. Promises by aldermen to present modelling based on a land valuation method, have failed to materialise in the public arena, and whilst done, you say is only for internal use by officers.
When the State Government appointed a steering committee to report to it on a Review of Government Valuation and Local Government Rating in 2010, the Association met firstly with several members of State Cabinet in Launcestonn and then especially with the Minister for Local Government, Hon. Bryan Green, prior to making a considered submission on the Access Economics report commissioned by the steering committee.
In our submission, we were pleased to congratulate the government on authorising this comprehensive report, which carries our Association's broad support. Whilst supporting the general thrust of the report, we argued for 50% of municipal charges to be made up of fixed charges for services. State Parliament has since amended legislation to allow councils to in fact raise the fixed general charge to that level, effective immediately. There is no doubt that ratepayers and the community generally who contribute to rates through leases and rentals, expect local government to be a basic service provider, and that those services ought to be charged where possible on a system that reflects the user-pays principle. Particularly, residential households should not be penalised with a charging system that reflects a 'wealth tax' for the cost of basic services.
Residential properties on AAV at 4% minimum of capital value rule after 2004 revaluation, were very badly affected by rate increases, and will continue to suffer these high cost penalties until the present systems are changed and returned to a rating cost akin to pre-2004 levels. These rate levels are not sustainable for such ratepayers, and whilst local government argue for its own income sustainability level, it is our very strongly-held view, that there is inadequate consideration given to ratepayer sustainability, and the ability to pay principle. It is not a question of a rate being struck on the basis of a ratepayer's wealth, as it is the income level of a ratepayer that enables payment to be made. Taxation by the Commonwealth Government is an
income tax, not a wealth tax .
We have observed with quite some interest, what you have stated openly at the public briefing sessions about municipal rating being a taxation system skewed at the ratepayers who are wealthy. Local government bodies in Tasmania do not have the power or authority to tax. Only State and Commonwealth Governments have the constitutional authority to tax. We are advised that:
This view is not one that our Association can even begin to assess within our meagre means, but we would be most interested to hear from Council as to what lawful powers it has to tax ratepayers in Launceston. Council must demonstrate more restraint with its budgets, so as to reduce rating requirements and to properly manage activities and budgets in a responsible manner to remain within budget provisions and to fully complete all works for which the budget was approved in the first place. Budget savings must be returned to reserves and offset interest expenses and to minimise subsequent rate charges.
In this particular year when governments are restraining expenditure, Launceston would be better advised to actually reduce its budget by 4% and pass this relief onto ratepayers.
Activities of Local Government must be restricted to more appropriate local government activities and not become to the benefit of a greater region, unless citizens from the region but outside the rateable area also contribute. If this cannot be by agreement with the neighbouring rating authority, then it must be on a user-pays system. Local Government must not continue along a course of becoming 'mini-government'.
Clearly the present use of AAV to assess municipal rates is inequitable and broadly unpopular, and must be abandoned. That is what the findings of the ACCESS Economics report commissioned by the State Government's Steering Committee essentially found and recommended to Parliament. Whilst the impact of a land only based valuation system has not been fully modelled against AAV in the Launceston rating system context, it would appear from
the investigation undertaken and presented by Access Economics, that this would be a fairer system for the second 50% of municipal charges to be directed to ratepayers. Our Association believes that if an increase in the General Charge were to be applied this year with the balance of the General Rate struck as a value based calculation, a satisfactory and equitable rating system for 2011-12 would exist.
Particulars of the TRA Inc Submission
Whilst we have read the Budget Objectives in 'dot' point form presented to the 'briefing sessions', it is difficult to understand the true thinking of Launceston City Council staff and aldermen in framing this budget. The PSE is document created by accountants and fails to give any indication of the thoughts and decision-making behind the budget.
What are the opinions of aldermen on budget items, what is the thinking behind these decisions? To the ratepayers, seeing the PSE on the last few days before the budget is set, there is little evidence of the scrutiny that should be applied to these decisions, scrutiny that should have involved substantial public consultation.
The budget is a business as usual document, a 4% increase which will have severe negative impacts on some and pleasant impacts on many more that will see their rates decrease in real terms or increase by less than 4%. This 'business as usual' approach neglects to take into account the economic situation faced by all Tasmanians and Launceston ratepayers in particular.
Launceston businesses will testify they are facing some of the hardest trading conditions they have faced for a long time. We have seen the decimation of the forest industry to less than 20% of what it was just a few years ago; a lot of those jobs and businesses were based in Launceston. Even a casual conversation with retailers in Launceston CBD will reveal that their revenues are severely squeezed and if they have been able to retain their revenues from last year the profit margins have been severely impacted. Launceston City Council competes with existing business by competing with gyms and is adding further pressure to that small business sector in Launceston which after all is part of the majority of economic activity in Launceston.
In Launceston alone there will be hundreds of public servants made redundant in the coming year. It is possible to write much more about this, but the facts are all well understood by most people in the community. Yet the best that LCC can do is increase rates by 4% average and guarantee that some ratepayers will 'only' have to pay a 20% increase in rates, while others get decreases.
The budget's solution to the bleeding at Launceston Aquatic is to increase expenditure by $355,00 to achieve additional revenue of $255,00, if the revenue is achieved, the only certainly is that the expenditure will be at least as much as forecast and most likely more.
Has council considered deferring expenditure, cutting costs, shedding 'services' or changing the nature of 'services', restructuring operations, finding alternative means of funding activities. These are the kind of decisions that families and businesses in Launceston are making every day, there would be very few if any that can afford to continue with business as usual and assume 4% increase in revenue.
It is consultation at this level that LCC needs to engage the community in. There are many areas of expenditure or 'services' for which there is little evidence the community understands their cost and indeed, wants or needs them.
Community Consultation
For the lay person, the Proposed Statutory Estimates (PSE) document is difficult to understand. There has been no attempt at simplifying and contextualising the message and making it more easily understood. For example most people understand the concept of wages and salaries, yet these words do not appear anywhere in the PSE instead such expenditure is presumably under “operations”.
Other information is difficult to understand and put into context. For example the table on page 6 is headed in bold text Proposed Operating Budget yet above in plain text it says the budget contains some initiatives, there is a series of budget items and numbers, no total is given, the total is just under $3 million.
What is the meaning of this? – in fact it is of very little substance and its only meaning is that LCC is trying to tell the reader that some of its expenditure may be things that appeal to the reader (or in an earlier draft – the aldermen), but if obfuscates the facts. The total operating budget is $83.5m, less $18.2m depreciation and less $5.7m that is passed through to Tas Fire Service leaves $71m, the table only explains 4% of this expenditure. Where does the rest of the money go? The hapless reader has to do a lot more accounting training and trawling to begin to understand.
Page 7 contains a similar type of table that explains less than $12 million of expenditure in a capital works budget of $44.2 million.
Wealth tax or rates?
Many ratepayers would contend that rates should be charge for the operation of council services and that this charge should be such that all citizens, irrespective of income would be happy to pay it. This is not the case in Launceston.
Over the years council staff have repeatedly referred to rates as a wealth tax, which by now it undoubtedly is, but it is only so because staff have set out to develop and administer a „wealth tax‟. Other councils in Tasmania have over the same time developed very different much more equitable and fair rating systems.
What has not been made clear to ratepayers is if this view of rates being a wealth tax is a view that is endorsed by the Aldermen. In a community with as low incomes as Launceston, the wealth tax is reaching unsustainable levels. The data is not readily available, but this submission contends that LCC is collecting ever higher revenues from a small number of residential ratepayers while the remaining residential ratepayers get minimal increases and indeed, decreases in their rates.
The emphasis on % changes in rates instead of net dollar changes in rates only reveals part of the reality being faced by ratepayers.
Request for information:
The Tasmanian Ratepayers Association requests:
Recommendation:
That each alderman unequivocally state if they agree that rates are a wealth tax and that they agree with the direction given by the council to its staff to administer a wealth tax.
Rates and expenditure
The reason rates are reaching unsustainable levels is expenditure above the level the community can reasonably support. While Launceston families are making do with less over the last few years, LCC has continued spending on luxuries and unessential projects, some of which have not met the revenue projections of council staff and aldermen. Thus the PSE states
“It can be seen with recent facility development (Aquatic Centre, Museum, the additional recurrent costs to operate these facilities is challenging the level of income available to finance other areas of Council Aurora Stadium) services”
This is an understatement as it conveniently ignores the failure of LCC staff and aldermen to properly scrutinise the projected budgets for the Aquaticn Centre - which were sold to the community as achievable and many in the community disputed - only to be attacked by LCC.
If staff and aldermen had done their job, the aquatic centre would have been designed to meet the limited market for such service and the limited discretionary spending budget in Launceston. It would not have been as grandiose a building as what was built, and it would have cost less to heat, but it would not cost the community as much as it is costing today.Instead, we have an inefficient and expensive white elephant and the gross inequity of people who cannot afford to heat their homes paying rates so that a few can swim in tropical conditions.
LCC should do what all other Launceston families have to do when costs rise, they make do with less. LCC should in a first instance get rid of initiatives that are „nice to have‟ and stick to what is essential. It could begin by cutting relatively minor expenditure that benefits only very narrow interest group such as tourism, events sponsorship, Northern Tasmania Development, Tiger bus. Cutting these would have a minor effect on total expenditure but would generally be well received in the community as at least an attempt to curtail expenditure.
Another approach would be to levy a rate on those who benefit - tourism operators to fund tourism expenditure, for example. It is equitable and the precedent has been set with City Prom, that those who benefit pay for these„services‟. It is with some concern to read in the press where Launceston City Council is casting its interest even further afield geographically, and becoming a party in the debate for funding Symons Plains race meetings, located in the Northern Midlands Municipality. Should there be any contemplation of ratepayer funds being used to promote, support or guarantee motor racing events, then a direct levy as has been done with Cityprom but towards tourism operators and the like who stand to benefit, is the only palatable course open.
Likewise it would be much more equitable that those that choose to use Launceston Aquatic pay the real cost of using the service, much as those to play golf pay the full cost of club fees, or those to play darts pay the full cost of their activity.
While the average rate in Launceston will not change by more than 4% from last year, the average is meaningless. It is lowest and highest residential rates where the distortion in contribution is greatest. The result is that there are a large number of properties that will pay less this year and a much smaller number of properties that pay several orders of magnitude more than the average.
The disparity between the lowest residential rate and the highest residential rate does not account for the disparity in income between these two extremes. It is after all from income that rates are paid, not „wealth‟. The large shift in the rate came about after the last revaluation. At this time many properties increased their rates by more than 100%, meaning that many properties decreased their payments.
The shift came about from an artifice that dictates that AAV can be more than 4% of the value of a property, but not less. While there can be an argument that those with a greater capacity to pay should do so, the current system is placing too large a burden on too small a section of the community. This burden does not compare well with other Australian cities.
For example in Launceston a home with a capital value of $975,000 is deemed to have an AAV of $39,000 and would pay a general rate of $2,828 , plus fixed charge of $120 and a fire levy of $718.
Compare the above with a home with capital value of $1,625,00 in the city of Boroondara in Melbourne that pays rates of $2,410. The Boroondara home is effectively paying about half the rate of the Launceston home.
Incomes in this part of Boroondara are substantially above the highest income in any Census Collection District (CCD) in Launceston. The easiest way to achieve greater equity in rates using the current AAV method would be by the introduction of a meaningful threshold for thenGeneral Charge, together with a revised General rate. Lifting the General Charge to a meaningful amount that reflects the minimum value of Council services to ratepayers would be good policy, $120 per property is clearly not a fair estimate of the minimum value of LCC services to any property in the municipality. If it means a rate increase for some ratepayers, it will place a greater onus on LCC to reduce expenditure to more closely match the ratepayers‟ capacity to pay.
Recommendation:
A greater degree of transparency on where ratepayers funds are spent would ensure a much greater engagement with the community. An easy and effective way to achieve this would be a more detailed rates notice that gave a breakdown of the contribution by the individual ratepayer to meaningfulnbudget items. This would be very easy to do with the technology available today and would have no appreciable additional cost to produce. In the information age, there is no need to continue to issue a rates notice using the same format as was used 30 years ago.
Recommendation:
Waste Management
Why isn't the $6.01 million for the waste management coming from the waste management service charge and other Waste Management fees? Page 8 clearly states that the Waste Centre is the only facility that does not require some funding from rates to operate. If this is true, the $6.01 million should not be coming from rates. If the operation runs at a profit, why aren't retained profits used to carry out the development. The marginal increase in waste management charges does not provide an adequate return on the investment.
The major works program slide in the presentation pack shows Waste Management needing additional $6 million in 2016 and $3 million in 2021. The minor rise in the waste management charge does not cover this expenditure.
York Park
AFL is a multi-million dollar business that makes substantial profits, but somehow in Launceston after all the years it has been operating, does not even manage to pay for the use of the stadium. The continued underwriting of losses at York Park from rates is usually justified by the alleged multiplier effects on businesses from AFL games. If there is such a benefit, let the losses be underwritten by a special rate on tourism businesses that allegedly benefit, not on residential ratepayers.
Tiger Bus
The Tiger Bus would seem to cost $280,000. There is no information to allow the community to understand if this represents value for money. Does LCC have statistics on the number of people that have used the bus in the last year, what is the effective cost per person per trip? The principal user of the service should be LCC itself by relocating 95% of its staff parking to Inveresk. The remaining 5% of staff that have a regular need to use vehicles at short notice during the day could use the existing staff carpark in Cimitiere/Cameron Streets, with the remainder of the space used to generate more parking revenue.
Launceston Aquatic
Launceston Aquatic is forecast to increase revenue by $255,000 yet increase operations expenditure by $355,000. This is a terrible outcome, most businesses operating in the real world will aim to increase revenue while maintaining costs or raising them by less than expenditure. In this instance, ratepayers would be better off if revenue did not increase and the expenditure not incurred.
Properties that do not pay rates
There are a number of properties that do not pay rates and should do so if they are to be considered as equals in the community. The first are the retirement villages that were exempted from rates last year in a cynical political move to pander to an easily identifiable and local group. The exemption to this group of retirees discriminates against all other ratepayers and other retirees living in their own homes. With Launceston's ageing population, this issue will only become worse and the decision to charge a fair rate for these currently exempt facilities should be made starting this year.
The University of Tasmania is another entity that does not pay any rates. A conservative estimate of capital value of the AMC and Utas campus alone would be in the order of $160 million, probably over $200 million, the lower estimate equates to $6.4 million in AAV and more than $450,000 in foregone general rate. The fire levy alone on this AAV would be in excess of $100,000, more than the additional fire levy revenue required this year.
Does the fire brigade not have to attend fires at UTAS?
Do Launceston ratepayers get a student fees exemption from UTAS?
It may well be that UTAS is exempted from rates by legislation, but if it is to be a full member of the community, it can choose to pay rates, or the legislation can be changed.
There are LCC owned properties that are used for commercial purposes where it is not clear that the rates are paid or in fact that commercial rents are paid. These commercial operations compete unfairly with legitimate businesses that pay rates and commercial rents. The proposed establishment of a commercial gym at Launceston Aquatic in direct competition with other gyms should not be allowed as presently proposed. It represents unfair competition in a well serviced market that is currently under considerable stress.
Combined Drainage Area
LCC could easily demonstrate greater transparency by separately charging a storm water rate, as done in Hobart. If LCC is not longer providing a service to those ratepayers within the combined drainage area, LCC should cease to charge those residents for this service.
The rebate from LCC would then allow those ratepayers to pay Ben Lomond Water for the service. Or conversely, LCC could collect this on Ben Lomond's behalf for a fee.
It was a basic platform by our Association from the time the government first proposed separate water and sewerage authorities, that stormwater be included within the new authority's jurisdiction. There can, in the future be no meaningful water conservation and recycling of water, unless the whole of the utility and resource is controlled by a single statutory authority.
Dame Marjorie Parker Creche - Air Conditioning
The budget has $60,000 of expenditure on air conditioning at this child care centre, is this necessary or is another 'nice to have', and if it is necessary, what is the payback on this investment, will the rent be increased, if so, by how much.
Childcare is already well supported by Federal Government schemes, there is no equity in providing additional subsidies to children at one child care centre over all the other centres in Launceston. The other child care centres pay rates and commercial rents, does this centre do this?
Trees
The PSE document has mention of a tree maintenance program on page 6 – $740,000, what is this for?, then on page 7 mentions street tree planting - $190,000, Page 38 mentions $60,000 for tree strategy implementation. The greening our city fact sheet refers to the two smaller sums but not to the maintenance program.
State Fire Levy
Again this year, the State Government has sought an increase in the fire levy from the municipality. Our Association does not accept that Launceston is compelled to charge the levy to ratepayers using the AAV system. Other councils use a different method and achieve a lower more equitable charge across their ratepayer base. It is ludicrous that residences in adjoining
municipalities pay less per tenement than Launceston but enjoy at least equality in fire protection services.
Conclusion
In conclusion, we remind Council, both officers and aldermen, that Many residents of Launceston are finding it tough to stretch their incomes to provide for the necessities of life. Impending cost increases for fuel and other energy utilities, along with constant increases in municipal rates, are causing significant hardship across the spectrum in the Launceston community, not just the traditionally-recognised social welfare recipients.
When the family budget cannot stretch enough, research shows that people often go without food (especially expensive fresh fruit and vegetables, electricity for periods of time, adequate heating, new clothing, insurance, social contact, entertainment, transport, holidays, medical and dental care, and stop taking prescribed medications). Low income households spend proportionally more of their income on the basics. Income, commonly does not necessarily relate to wealth held in residential assets. Nothing undermines social inclusion more than financial hardship.
We hope that this submission is given very careful consideration, and that when aldermen eventually congregate to make a decision of striking the Launceston rate, that they fully acquit the promises made to ratepayers and detail completely their individual reasoning and justifications for what they will determine.
Yours faithfully,
Lionel J. Morrell
President
Tasmanian Ratepayers Association Inc.
The insistence that ratepayers make written submissions, however, places a burden on the very few that have the time and skill to write a submission. While an attempt at some community consultation on the matter of rates is welcome, the consultation is effectively too little, too late. The lack of unanimity from Aldermen as to if there should have been any consultation at all, reveals the consultation at that level, as a half-hearted attempt. The absence of a number of aldermen from the briefing sessions is also telling.
The „briefing sessions‟ held on 15 and 16 June were poorly promoted and poorly attended. This reflects very badly on LCC‟s ability to meaningfully engage with the community. Clearly, few ratepayers are able or willing to attend such briefing session on a cold winter's evening at the Town Hall. More information ought to have been disseminated beforehand, so ratepayers could
better understand why they should attend a session. Whilst council has provided a means for submissions to be made via the internet, many residents simply do not have this technology available to them.
A quarterly glossy 8-page newsletter Your Launceston news, posted to all Launceston households just days before the briefing sessions were scheduled, represents an expensive but lost opportunity, as it could have contained much of the information withheld until the briefing sessions. Remarkably this newsletter didn't even announce that briefing sessions would be conducted, or even allude to the process of consultation. It is not acceptable to argue that at the time of printing the details had not been agreed or were even known, because that will only draw attention to the fact that the promise to undertake this consultation was made in December 2010, and there had been many months since then to properly make arrangements. The printing deadline did manage however, to allow a front page article on the meaning and effect of Tasmanian Ratepayers Association Incorporated municipal revaluation, even though the new valuation notices were only just released and were being received in Launceston letterboxes in virtually thensame postal delivery.
For something as important as rates, the consultation should have started 12 months ago, after the last rate decision. This consultation MUST BE GENUINE, be real and persuasive. Last minute calls by aldermen to consider alternative methods for levying themrate, were just that, poorly thought out last minute calls. Promises by aldermen to present modelling based on a land valuation method, have failed to materialise in the public arena, and whilst done, you say is only for internal use by officers.
When the State Government appointed a steering committee to report to it on a Review of Government Valuation and Local Government Rating in 2010, the Association met firstly with several members of State Cabinet in Launcestonn and then especially with the Minister for Local Government, Hon. Bryan Green, prior to making a considered submission on the Access Economics report commissioned by the steering committee.
In our submission, we were pleased to congratulate the government on authorising this comprehensive report, which carries our Association's broad support. Whilst supporting the general thrust of the report, we argued for 50% of municipal charges to be made up of fixed charges for services. State Parliament has since amended legislation to allow councils to in fact raise the fixed general charge to that level, effective immediately. There is no doubt that ratepayers and the community generally who contribute to rates through leases and rentals, expect local government to be a basic service provider, and that those services ought to be charged where possible on a system that reflects the user-pays principle. Particularly, residential households should not be penalised with a charging system that reflects a 'wealth tax' for the cost of basic services.
Residential properties on AAV at 4% minimum of capital value rule after 2004 revaluation, were very badly affected by rate increases, and will continue to suffer these high cost penalties until the present systems are changed and returned to a rating cost akin to pre-2004 levels. These rate levels are not sustainable for such ratepayers, and whilst local government argue for its own income sustainability level, it is our very strongly-held view, that there is inadequate consideration given to ratepayer sustainability, and the ability to pay principle. It is not a question of a rate being struck on the basis of a ratepayer's wealth, as it is the income level of a ratepayer that enables payment to be made. Taxation by the Commonwealth Government is an
income tax, not a wealth tax .
We have observed with quite some interest, what you have stated openly at the public briefing sessions about municipal rating being a taxation system skewed at the ratepayers who are wealthy. Local government bodies in Tasmania do not have the power or authority to tax. Only State and Commonwealth Governments have the constitutional authority to tax. We are advised that:
"The first and most fundamental thing one needs to know about the Constitution, is that governments can only do what the Constitution permits. A breach of the Constitution- through an attempt to wield powers that it does not grant or to exceed the limits of those that it does - cannot stand such an attempt is unconstitutional'. It is unlawful. Those who hold power in Australia - parliaments, governments, public officers, courts - can only use power as the Constitution permits."
This view is not one that our Association can even begin to assess within our meagre means, but we would be most interested to hear from Council as to what lawful powers it has to tax ratepayers in Launceston. Council must demonstrate more restraint with its budgets, so as to reduce rating requirements and to properly manage activities and budgets in a responsible manner to remain within budget provisions and to fully complete all works for which the budget was approved in the first place. Budget savings must be returned to reserves and offset interest expenses and to minimise subsequent rate charges.
In this particular year when governments are restraining expenditure, Launceston would be better advised to actually reduce its budget by 4% and pass this relief onto ratepayers.
Activities of Local Government must be restricted to more appropriate local government activities and not become to the benefit of a greater region, unless citizens from the region but outside the rateable area also contribute. If this cannot be by agreement with the neighbouring rating authority, then it must be on a user-pays system. Local Government must not continue along a course of becoming 'mini-government'.
Clearly the present use of AAV to assess municipal rates is inequitable and broadly unpopular, and must be abandoned. That is what the findings of the ACCESS Economics report commissioned by the State Government's Steering Committee essentially found and recommended to Parliament. Whilst the impact of a land only based valuation system has not been fully modelled against AAV in the Launceston rating system context, it would appear from
the investigation undertaken and presented by Access Economics, that this would be a fairer system for the second 50% of municipal charges to be directed to ratepayers. Our Association believes that if an increase in the General Charge were to be applied this year with the balance of the General Rate struck as a value based calculation, a satisfactory and equitable rating system for 2011-12 would exist.
Particulars of the TRA Inc Submission
Whilst we have read the Budget Objectives in 'dot' point form presented to the 'briefing sessions', it is difficult to understand the true thinking of Launceston City Council staff and aldermen in framing this budget. The PSE is document created by accountants and fails to give any indication of the thoughts and decision-making behind the budget.
What are the opinions of aldermen on budget items, what is the thinking behind these decisions? To the ratepayers, seeing the PSE on the last few days before the budget is set, there is little evidence of the scrutiny that should be applied to these decisions, scrutiny that should have involved substantial public consultation.
The budget is a business as usual document, a 4% increase which will have severe negative impacts on some and pleasant impacts on many more that will see their rates decrease in real terms or increase by less than 4%. This 'business as usual' approach neglects to take into account the economic situation faced by all Tasmanians and Launceston ratepayers in particular.
Launceston businesses will testify they are facing some of the hardest trading conditions they have faced for a long time. We have seen the decimation of the forest industry to less than 20% of what it was just a few years ago; a lot of those jobs and businesses were based in Launceston. Even a casual conversation with retailers in Launceston CBD will reveal that their revenues are severely squeezed and if they have been able to retain their revenues from last year the profit margins have been severely impacted. Launceston City Council competes with existing business by competing with gyms and is adding further pressure to that small business sector in Launceston which after all is part of the majority of economic activity in Launceston.
In Launceston alone there will be hundreds of public servants made redundant in the coming year. It is possible to write much more about this, but the facts are all well understood by most people in the community. Yet the best that LCC can do is increase rates by 4% average and guarantee that some ratepayers will 'only' have to pay a 20% increase in rates, while others get decreases.
The budget's solution to the bleeding at Launceston Aquatic is to increase expenditure by $355,00 to achieve additional revenue of $255,00, if the revenue is achieved, the only certainly is that the expenditure will be at least as much as forecast and most likely more.
Has council considered deferring expenditure, cutting costs, shedding 'services' or changing the nature of 'services', restructuring operations, finding alternative means of funding activities. These are the kind of decisions that families and businesses in Launceston are making every day, there would be very few if any that can afford to continue with business as usual and assume 4% increase in revenue.
It is consultation at this level that LCC needs to engage the community in. There are many areas of expenditure or 'services' for which there is little evidence the community understands their cost and indeed, wants or needs them.
Community Consultation
For the lay person, the Proposed Statutory Estimates (PSE) document is difficult to understand. There has been no attempt at simplifying and contextualising the message and making it more easily understood. For example most people understand the concept of wages and salaries, yet these words do not appear anywhere in the PSE instead such expenditure is presumably under “operations”.
Other information is difficult to understand and put into context. For example the table on page 6 is headed in bold text Proposed Operating Budget yet above in plain text it says the budget contains some initiatives, there is a series of budget items and numbers, no total is given, the total is just under $3 million.
What is the meaning of this? – in fact it is of very little substance and its only meaning is that LCC is trying to tell the reader that some of its expenditure may be things that appeal to the reader (or in an earlier draft – the aldermen), but if obfuscates the facts. The total operating budget is $83.5m, less $18.2m depreciation and less $5.7m that is passed through to Tas Fire Service leaves $71m, the table only explains 4% of this expenditure. Where does the rest of the money go? The hapless reader has to do a lot more accounting training and trawling to begin to understand.
Page 7 contains a similar type of table that explains less than $12 million of expenditure in a capital works budget of $44.2 million.
Wealth tax or rates?
Many ratepayers would contend that rates should be charge for the operation of council services and that this charge should be such that all citizens, irrespective of income would be happy to pay it. This is not the case in Launceston.
Over the years council staff have repeatedly referred to rates as a wealth tax, which by now it undoubtedly is, but it is only so because staff have set out to develop and administer a „wealth tax‟. Other councils in Tasmania have over the same time developed very different much more equitable and fair rating systems.
What has not been made clear to ratepayers is if this view of rates being a wealth tax is a view that is endorsed by the Aldermen. In a community with as low incomes as Launceston, the wealth tax is reaching unsustainable levels. The data is not readily available, but this submission contends that LCC is collecting ever higher revenues from a small number of residential ratepayers while the remaining residential ratepayers get minimal increases and indeed, decreases in their rates.
The emphasis on % changes in rates instead of net dollar changes in rates only reveals part of the reality being faced by ratepayers.
Request for information:
The Tasmanian Ratepayers Association requests:
- A frequency count of properties, by AAV in $300 increments of AAV. Broken down into residential and commercial.
- The same frequency breakdown above with the dollar contribution to total rate revenue. Broken down into residential and commercial
- The frequency count for the bands breakdown as per the chart in the
Recommendation:
That each alderman unequivocally state if they agree that rates are a wealth tax and that they agree with the direction given by the council to its staff to administer a wealth tax.
Rates and expenditure
The reason rates are reaching unsustainable levels is expenditure above the level the community can reasonably support. While Launceston families are making do with less over the last few years, LCC has continued spending on luxuries and unessential projects, some of which have not met the revenue projections of council staff and aldermen. Thus the PSE states
“It can be seen with recent facility development (Aquatic Centre, Museum, the additional recurrent costs to operate these facilities is challenging the level of income available to finance other areas of Council Aurora Stadium) services”
This is an understatement as it conveniently ignores the failure of LCC staff and aldermen to properly scrutinise the projected budgets for the Aquaticn Centre - which were sold to the community as achievable and many in the community disputed - only to be attacked by LCC.
If staff and aldermen had done their job, the aquatic centre would have been designed to meet the limited market for such service and the limited discretionary spending budget in Launceston. It would not have been as grandiose a building as what was built, and it would have cost less to heat, but it would not cost the community as much as it is costing today.Instead, we have an inefficient and expensive white elephant and the gross inequity of people who cannot afford to heat their homes paying rates so that a few can swim in tropical conditions.
LCC should do what all other Launceston families have to do when costs rise, they make do with less. LCC should in a first instance get rid of initiatives that are „nice to have‟ and stick to what is essential. It could begin by cutting relatively minor expenditure that benefits only very narrow interest group such as tourism, events sponsorship, Northern Tasmania Development, Tiger bus. Cutting these would have a minor effect on total expenditure but would generally be well received in the community as at least an attempt to curtail expenditure.
Another approach would be to levy a rate on those who benefit - tourism operators to fund tourism expenditure, for example. It is equitable and the precedent has been set with City Prom, that those who benefit pay for these„services‟. It is with some concern to read in the press where Launceston City Council is casting its interest even further afield geographically, and becoming a party in the debate for funding Symons Plains race meetings, located in the Northern Midlands Municipality. Should there be any contemplation of ratepayer funds being used to promote, support or guarantee motor racing events, then a direct levy as has been done with Cityprom but towards tourism operators and the like who stand to benefit, is the only palatable course open.
Likewise it would be much more equitable that those that choose to use Launceston Aquatic pay the real cost of using the service, much as those to play golf pay the full cost of club fees, or those to play darts pay the full cost of their activity.
While the average rate in Launceston will not change by more than 4% from last year, the average is meaningless. It is lowest and highest residential rates where the distortion in contribution is greatest. The result is that there are a large number of properties that will pay less this year and a much smaller number of properties that pay several orders of magnitude more than the average.
The disparity between the lowest residential rate and the highest residential rate does not account for the disparity in income between these two extremes. It is after all from income that rates are paid, not „wealth‟. The large shift in the rate came about after the last revaluation. At this time many properties increased their rates by more than 100%, meaning that many properties decreased their payments.
The shift came about from an artifice that dictates that AAV can be more than 4% of the value of a property, but not less. While there can be an argument that those with a greater capacity to pay should do so, the current system is placing too large a burden on too small a section of the community. This burden does not compare well with other Australian cities.
For example in Launceston a home with a capital value of $975,000 is deemed to have an AAV of $39,000 and would pay a general rate of $2,828 , plus fixed charge of $120 and a fire levy of $718.
Compare the above with a home with capital value of $1,625,00 in the city of Boroondara in Melbourne that pays rates of $2,410. The Boroondara home is effectively paying about half the rate of the Launceston home.
Incomes in this part of Boroondara are substantially above the highest income in any Census Collection District (CCD) in Launceston. The easiest way to achieve greater equity in rates using the current AAV method would be by the introduction of a meaningful threshold for thenGeneral Charge, together with a revised General rate. Lifting the General Charge to a meaningful amount that reflects the minimum value of Council services to ratepayers would be good policy, $120 per property is clearly not a fair estimate of the minimum value of LCC services to any property in the municipality. If it means a rate increase for some ratepayers, it will place a greater onus on LCC to reduce expenditure to more closely match the ratepayers‟ capacity to pay.
Recommendation:
- That LCC set the minimum general charge at $550 and the minimum fire levy at $150.
- That the maximum general rate paid by any one residential property b capped at no more than 4 times the minimum residential rate paid by any one residential property.
A greater degree of transparency on where ratepayers funds are spent would ensure a much greater engagement with the community. An easy and effective way to achieve this would be a more detailed rates notice that gave a breakdown of the contribution by the individual ratepayer to meaningfulnbudget items. This would be very easy to do with the technology available today and would have no appreciable additional cost to produce. In the information age, there is no need to continue to issue a rates notice using the same format as was used 30 years ago.
Recommendation:
- That the burden of supporting the Aquatic Centre and Aurora Stadium be equally shared by all ratepayers and that this item be individually itemised in rates notices.
- That the burden of supporting Inveresk, Carr Villa Cemetery be supported from the general rate but the ratepayer contribution to this item be individually itemised in rates notices.
- That the burden of supporting the QVMAG be supported by the general rate but the ratepayer contribution to this item be individually itemised in rates notices.
- That the ratepayer contribution to major works be funded from the general rate but the ratepayer contribution to this item be individually itemised in rates notices.
- That the burden of supporting the Launceston Travel and Visitor Centre be supported by special rate on tourism industry operators.
Waste Management
Why isn't the $6.01 million for the waste management coming from the waste management service charge and other Waste Management fees? Page 8 clearly states that the Waste Centre is the only facility that does not require some funding from rates to operate. If this is true, the $6.01 million should not be coming from rates. If the operation runs at a profit, why aren't retained profits used to carry out the development. The marginal increase in waste management charges does not provide an adequate return on the investment.
The major works program slide in the presentation pack shows Waste Management needing additional $6 million in 2016 and $3 million in 2021. The minor rise in the waste management charge does not cover this expenditure.
York Park
AFL is a multi-million dollar business that makes substantial profits, but somehow in Launceston after all the years it has been operating, does not even manage to pay for the use of the stadium. The continued underwriting of losses at York Park from rates is usually justified by the alleged multiplier effects on businesses from AFL games. If there is such a benefit, let the losses be underwritten by a special rate on tourism businesses that allegedly benefit, not on residential ratepayers.
Tiger Bus
The Tiger Bus would seem to cost $280,000. There is no information to allow the community to understand if this represents value for money. Does LCC have statistics on the number of people that have used the bus in the last year, what is the effective cost per person per trip? The principal user of the service should be LCC itself by relocating 95% of its staff parking to Inveresk. The remaining 5% of staff that have a regular need to use vehicles at short notice during the day could use the existing staff carpark in Cimitiere/Cameron Streets, with the remainder of the space used to generate more parking revenue.
Launceston Aquatic
Launceston Aquatic is forecast to increase revenue by $255,000 yet increase operations expenditure by $355,000. This is a terrible outcome, most businesses operating in the real world will aim to increase revenue while maintaining costs or raising them by less than expenditure. In this instance, ratepayers would be better off if revenue did not increase and the expenditure not incurred.
Properties that do not pay rates
There are a number of properties that do not pay rates and should do so if they are to be considered as equals in the community. The first are the retirement villages that were exempted from rates last year in a cynical political move to pander to an easily identifiable and local group. The exemption to this group of retirees discriminates against all other ratepayers and other retirees living in their own homes. With Launceston's ageing population, this issue will only become worse and the decision to charge a fair rate for these currently exempt facilities should be made starting this year.
The University of Tasmania is another entity that does not pay any rates. A conservative estimate of capital value of the AMC and Utas campus alone would be in the order of $160 million, probably over $200 million, the lower estimate equates to $6.4 million in AAV and more than $450,000 in foregone general rate. The fire levy alone on this AAV would be in excess of $100,000, more than the additional fire levy revenue required this year.
Does the fire brigade not have to attend fires at UTAS?
Do Launceston ratepayers get a student fees exemption from UTAS?
It may well be that UTAS is exempted from rates by legislation, but if it is to be a full member of the community, it can choose to pay rates, or the legislation can be changed.
There are LCC owned properties that are used for commercial purposes where it is not clear that the rates are paid or in fact that commercial rents are paid. These commercial operations compete unfairly with legitimate businesses that pay rates and commercial rents. The proposed establishment of a commercial gym at Launceston Aquatic in direct competition with other gyms should not be allowed as presently proposed. It represents unfair competition in a well serviced market that is currently under considerable stress.
Combined Drainage Area
LCC could easily demonstrate greater transparency by separately charging a storm water rate, as done in Hobart. If LCC is not longer providing a service to those ratepayers within the combined drainage area, LCC should cease to charge those residents for this service.
The rebate from LCC would then allow those ratepayers to pay Ben Lomond Water for the service. Or conversely, LCC could collect this on Ben Lomond's behalf for a fee.
It was a basic platform by our Association from the time the government first proposed separate water and sewerage authorities, that stormwater be included within the new authority's jurisdiction. There can, in the future be no meaningful water conservation and recycling of water, unless the whole of the utility and resource is controlled by a single statutory authority.
Dame Marjorie Parker Creche - Air Conditioning
The budget has $60,000 of expenditure on air conditioning at this child care centre, is this necessary or is another 'nice to have', and if it is necessary, what is the payback on this investment, will the rent be increased, if so, by how much.
Childcare is already well supported by Federal Government schemes, there is no equity in providing additional subsidies to children at one child care centre over all the other centres in Launceston. The other child care centres pay rates and commercial rents, does this centre do this?
Trees
The PSE document has mention of a tree maintenance program on page 6 – $740,000, what is this for?, then on page 7 mentions street tree planting - $190,000, Page 38 mentions $60,000 for tree strategy implementation. The greening our city fact sheet refers to the two smaller sums but not to the maintenance program.
State Fire Levy
Again this year, the State Government has sought an increase in the fire levy from the municipality. Our Association does not accept that Launceston is compelled to charge the levy to ratepayers using the AAV system. Other councils use a different method and achieve a lower more equitable charge across their ratepayer base. It is ludicrous that residences in adjoining
municipalities pay less per tenement than Launceston but enjoy at least equality in fire protection services.
Conclusion
In conclusion, we remind Council, both officers and aldermen, that Many residents of Launceston are finding it tough to stretch their incomes to provide for the necessities of life. Impending cost increases for fuel and other energy utilities, along with constant increases in municipal rates, are causing significant hardship across the spectrum in the Launceston community, not just the traditionally-recognised social welfare recipients.
When the family budget cannot stretch enough, research shows that people often go without food (especially expensive fresh fruit and vegetables, electricity for periods of time, adequate heating, new clothing, insurance, social contact, entertainment, transport, holidays, medical and dental care, and stop taking prescribed medications). Low income households spend proportionally more of their income on the basics. Income, commonly does not necessarily relate to wealth held in residential assets. Nothing undermines social inclusion more than financial hardship.
We hope that this submission is given very careful consideration, and that when aldermen eventually congregate to make a decision of striking the Launceston rate, that they fully acquit the promises made to ratepayers and detail completely their individual reasoning and justifications for what they will determine.
Yours faithfully,
Lionel J. Morrell
President
Tasmanian Ratepayers Association Inc.
Copy to Mayor and Aldermen.
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