Welcome to Monash Ratepayers Inc.

Quick Intro: MRI is a network advocacy organisation – we grow and use networks to do our advocacy work. We stand for (a) assuring good governance in Council affairs; (b) advocating for affordable rates and best value municipal services; (c) building capacity for our Monash community.

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Draft Budget Review: Community Presentation Highlights

Over 90 people attended the draft budget community presentation meeting on the 16 June 2015.

Not surprising the Mayor did not attend, and as usual Cr Lake loves control and chaired the meeting.

In addition to the summary of our submission Presenters’ issues concern:

  • Unaffordable rate rise above CPI for pensioners and low income residents/ratepayers
  • Community groups advocating for updates to council owned infrastructure amenities that they used. The largest group was the Waverley Gymnastics, who was appealing to Council to allocate $2 mio to update facilities
  • The high differential rate imposed on Highvale retirement village residents.

Surprisingly, Cr Lake allows a non-resident/ratepayer to present her case for seeking the $2 million for the Waverley Gymnastics. It appears Council is discretionary or discriminatory and sending mix messages about its compliance to local laws regarding the exclusion of non residents / ratepayers to speak/present during official meetings. That says a lot about the integrity and quality level of good governance exercise in Monash Council.

Wow, we even had some interactive Q&A – amazing? We asked Council what is its priority setting Bluffcriteria for deciding which community club and assets renewal areas to fund in next year’s budget. The “on the fly” answer from Cr Lake is that the criteria is based on some rankings of one or more strategic direction/s in the Council plan – good bluff/fluff.

Only two Councillors interacted in the Q&A, Cr Lake and Davies, the others said nothing – maybe financial literacy is a barrier?

Low expectationsAnyway, we follow up with a email correspondence to the Councilors forming the budget review committee, or something like that, and see what transpire from it. keep our expectations low so that any response can be a elated experience?

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Community Response to Council’s 2015/16 Budget Draft

The following response was submitted to Monash Council today :

2015-16 Budget Review Highlights

MRI’s review conclusion of the 2015/16 Budget raises concerns of transparency and accountability.

When Cr Lake said (in the last Council meeting) the sale of aged facilities are put into a Debt Management Reserve, which is now being used to wipe put Council’s $15 mil debt, he is technically correct, but he forgot to say that the future cost savings resulting from the sale has put Monash Council into a healthy financial position for many years to come.

This is evident through two financial indicators:

  • Working capital ratios are noted to be increasing above the target threshold of 150%, especially from 2016/17 onwards when rates revenue have been affected by annual rate caps. The above 150% margins represent over-gearing of slack.  What is this “slack” is for, is not disclosed in the draft budget.

 2015-16 Working Capital Indicators

  • Unrestricted cash build-ups for the next 4 years, growing by ~20% even when rates are capped.  Over stated unrestricted cash levels are indicating funding for future large capital works, which need to be declared in disclosure of commitments and for audit purposes (LGPRF Version 4, Page 6), hence availing clear and discrete public disclosure. There is no such information, or if it exists, it is definitely not explicitly disclosed.

 2015-16 Unrestricted Cash Indicators.png

We also noted that Council’s asset renewal ratio is under 100%, which means Monash is not spending to improve its existing infrastructure which is deteriorating faster than they are being replaced, but is putting money away under over geared working capital and unrestricted cash reserves.

Experienced budget planners know that these financial performance indicators often hide budget manipulation decisions or games. Hence it is not illogical that these indicators can potentially reveal:

  1. There is another Defined Superannuation Liability shortfall looming with the next 4 years. The question is why is the risk management of this staff superannuation portfolio has to become so discreet and implicit – Cr Lake, an MAV representative, needs to explain what is MAV doing to ensure and disclose improvements to making risk management of LG Defined Superannuation Portfolio more prudent and predictable and guarantee such as significant shortfalls are prevented and mitigated in the future.
  2. Risk provision for accumulating and growing capital costs of asset renewal, because Council is still struggling to renew its infrastructure assets which are deteriorating faster than they are being replaced. The question is why is Cr Lake had initiated and is continuing to push for investing in a “nice to have” but not mandatory new Glen Waverley community/library Hub which will cost ratepayers lots more in future acquisition and ongoing maintenance, when existing infrastructure are falling apart and not being replaced fast enough? Is Monash Council into building capital monuments to fulfil Councillors’ individual wish-lists? While there is no formal decision made to build this new infrastructure amenity, its project activities, like the one for selling the aged care facilities, would be pre orchestrated towards steering to future approval eventually.

During the Melbourne 2030 era, Monash Council was confirmed to be among the five to ten percent of cities with the worst performance in allocating open space for its community. Since then, Council has done nothing to increase public open space problem in the city when population has been growing and is expected to increase further with the implementation of Monash Housing Direction strategy.  In the last seven years, land purchased by Council was for drainage purposes. Why have Councillors NOT place a high priority on increasing green public open space when their planning decisions’ direction is to increase Monash population and move towards more higher density and compact living conditions?

Councillors have an obligation to its community to:

  1. Ensure, in the final budget report, open disclosures of what the over-geared working capital and unrestricted cash ratios would be possibly spend on;
    Transparency & Accountability
  2. Ensure Cr Lake, as an MAV representative and Director, as well as a Trustee Director of Vision Super, disclose the  risk exposure of Council’s Defined Superannuation Liability over next 4 years, and what risk management improvements have MAV undertaken since the last shortfall of over $12 million.
    Portfolio Risk Management
  1. Explain why is investment in new and larger capital, such as the Glen Waverley Community/Library Hub is considered a higher decision priority than renewing current assets that are deteriorating faster than they are being replaced?
    Priority Mgt
  1. Explain why they have not advocate to increase Monash’s green and public open space when they are strongly supporting for more compact and higher density living conditions in Monash?

Open Space Planning

Transparency, Accountability & PublicityWe anticipate seeing a Councillors driven address of these concerns of the 2015/16 Budget Draft. Their decision to accept the budget will also reflect their resolve to improving budget transparency and accountability, and reducing community engagement tokenism.

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Budget Games Anyone?

Hiding Your MoneyWe just completed reviewing the budget. Nothing new has changed. Transparency and accountability issues are still  Monash Council’s budget planning and decision making integrity weaknesses.

Budget GamesNot surprising, Council is putting large amounts of unrestricted cash away (like $32 million in next year’s budget and $39 million in 2018/19) for long term capital projects that have not been approved yet. It is common community knowledge  that the Glen Waverley Community Hub development (which many people believe is the very reason the 3 aged care facilities were sold) is the key driver of this large unrestricted cash reserve, which grows every year for the next 4 years. The community can expect another premeditated and biased decision making process to be played out as part of tokenistic community engagement to get this project approved and officiated its funding, now hiding through Unrestricted Cash & Working Capital Reserves.

Another thing we have taken note is the rush to spend all unused budgets, especially Councillors’ total discretionary funds. As the 2014/15 year is closing soon, it is important that Council spends any surplus cash as much as possible, to justify asking for more rates rise. Hence it is no wonder why the Mayor personally authorised the $37+K  free lunch for Greek Easter Free Lunchand now a Councillor suggesting to give $10K foreign aid/charity.Giving Money Away  In the May Council Meeting Agenda item 7.1 (page 1), Council officers are recommending close to $10,000 to be given away, which is a high amount compared to past practices.  It certainly appears there is money left over in the budget, especially Councillors’ discretionary budget total  and they know they must spend it all before 2014/16 closes, which explains their generous giving of money away without best value justification, hence compliance to LG Act.

In the last month’s Council meeting Cr Geoff Lake, speaking in suppCr Lake let the cat out of bagort of the budget noted that paying out the Council debt early was possible because of the sale of the residential aged care facilities. Ops the cat just slipped out of the bag. This contradicts with the official reason Council said, which was the operating the aged care facilities were financially unsustainable.

Another thing, we also discover, unrestricted cash constitutes between 19.62% to 21.7% of total revenue annually over the next 4 years, which means Monash Council has not just the capacity to cap rates, but to actually reduce rates, even during the last 2 years. So have ratepayers being lied to when the Mayor claims the 2015/16 budget draft provides a fairer rating system and gives ratepayers the lowest rates in Victoria? And if that is not enough to influence public opinion, try Cr Lake wanting to sweeten pensioners with a $50 rates discount, which works out to 96 cents a week or 14 cents a day, depending how dumb one assumes pensioners to be. Once again it is about our patronizing and groupthink Councillors doing for its community, not with its community.

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“Shaddap your face” bullying in Monash Council Meeting

Monash Council is never short of bullies, when it comes to addressing leadership behaviour. The last Council Meeting was certainly the place to witness firsthand tState Electionhe personal attacks fuelled by Cr Lake against Cr Davies. This incident is not the first, however the most intense when Mayor Klisaris reinforced support for Cr Lake by reprimanding Cr Davies and others who dare refute Cr Lake’s viewpoints in decision debates. Even Cr Pontikis, the most community centred Councillor, was asked to “behave”. It was all “shaddap you face”, Joe Dolce style,  to Cr Davies the whole night when he tried to present his views over several decision items. It got to the point the Mayor was asked to vacate his chairing role because he did not comply with meeting protocols, only to return to that role, because the Deputy Mayor was apprehensive to take over and proposed the motion to return the Mayor to continue chairing the meeting.

Behaviour issues concerning biased and undemocratic decision making also raised its ugly head. Cr Lake also blatantly stated that he strongly believe that Councillors should decide planning matters purely based on compliance to Monash Planning Scheme and not addressing the concerns or interests of the community affected by planning decisions. The proposed Monash Housing Strategy puts a blanket all approach in rezoning most of Monash suburbs to be general residential zone. If Cr Lake has its way, this would mean neighbourhoods classified as general residential zones would have to allow opportunistic developers to put as many units or high density dwellings in single land lots because they can show compliance to Monash Planning Scheme. When other Councillors refute his belief, they were quickly reprimanded as behaving inappropriately.

He went further to propose amending a supporting letter to the Andrews Government regarding the Clayton Railway cross and station development. His amendment motion plagiarised “good news” words from the State Government’s media release, while also disrespectfully criticized the previous Government, who are opposition to his political party. Other Councillors have to revise his amendment motion to be more diplomatic in tone, resulting in a decision that is politically driven first before community interests. Cr Lake’s blatant, inappropriate and egoistic behaviour continues to reveal that he has pre-made a decision a week earlier, which  supported Cr Drieberg’s motion to ask MAV advocate to the State Government to continue funding the School Focused Youth Service. This is not unbiased and natural justice based decision making conduct.

Tuesday Council meeting demonstrated the worst conduct performance of this Monash. Public attendees witness first hand a strong groupthink domination and the fostering of continuing bullying and autocratic leadership culture that discourages good governance conduct, transparency , democratic participation and unbiasedness in Council’s decision making. The “shaddap you face” song sums up the vibes of Tues Council Meeting on 31 March 2015.

Monash Ratepayers have lodged a formal complaint and the CEO is addressing the matter.

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MAV Poor Probity Standards and the Impact on Monash Council

A key and ongoing function of MRI advocacy work is checking oversight of good governance practice in all matters affecting Monash Council. During the last 18 months, MRI was approached by the public over concerns about the probity standard and integrity of the MAV/Ironbark procurement arrangement. We check the integrity of the information collected and compiled the evidence based report which we shared with a number of high authorities, including the Victoria Auditor General Office. We left the matter to their responsibility to deal with the matter and finally there is some results:MAV Poor Probity Standards

(On-Source: Herald Sun, 3 Mar 2015)

Finally, we have a positive outcome from our good governance oversight work, the VAGO report that highlights the need for major systematic improvements in the Local Government Victoria department and the LG Body Corporate, MAV.

The report highlighted that :

VAGO Report on LGV and MAVOne of the preferred suppliers in the MAV/Ironbark deal, Artcraft Urban Group (AUG) was sued for IP copyright infringement last year (Federal Court of Australia, 2014). In the September 2014 Council meeting, Councillors knew of the court case hearing but the majority votes were to support procuring through MAV/Ironbark. Cr Lake did not declare that he is a paid Board member of the MAV, represents MAV in its superanuation business as advisor to Vision Super and that his partner works for MAV (this information is public information anyway). He cast his vote to procure through MAV/Ironbank.

In the January 2015 Council meeting, in item 5.2 (Council Representation on Organisations/Committees) Cr Zographos questioned why there were no report about Council’s representative on the MAV. Cr Lake behaved personally defensive about the question asked and the discussion continued as another typical misconduct episode of “debating about the person” rather the matter on hand.

The community needs to understand what exactly is  the value add of Council’s MAV membership, which there is no accountability KPIs of benefits received at all. Cr Lake defensive response to not support public reporting Council’s representation on the MAV is not good enough for this community.  His demonstration of a lacking probity culture reflects exactly some of the MAV integrity and accountability issues that the VAGO identified.  It is time, the community expects public reports of KPI measures of MAV membership and a formal declaration of Cr Lake’s and other Councillors’ involvement in MAV and VLGA and other similar agencies.

 We hope some of our Councillors will pursue questioning the value of MAV membership, review all procurement arrangements with MAV to attest their value add benefits, if any; and ensure Cr Lake is excluded from any future MAV decision making matters due to his personal and official conflicts of interest  associated with MAV.

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More news in:

The full VAGO report is in http://www.audit.vic.gov.au/reports_and_publications/latest_reports/2014-15/20150226-support-for-local-gov.aspx

MAV’s response to that report – http://www.mav.asn.au/News/Pages/vago-performance-audit-report-26feb15.aspx

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Ongoing Poor Euvena Car-parking decisions

GW Car Parking PlanEuneva Ave car park was built using subscription money provided by Glen Waverley traders when they purchase their business licences. Reality sucks because customers of these subscribing businesses don’t park there because it’s in the wrong place for them.  The lead decision makers, Cr Lake and Klisaris, just can’t accept this reality, for reasons we don’t know or they are really lousy part-time car-park planning consultants.

In June 2013, the local papers reported that Monash Council is looking to traders and council staff to fill hundreds of vacant spaces at the $17.3 million white elephant Euneva car park, while shoppers and commuters battle for parking spaces in Kingsway and Bogong Ave (Waverley Leader, 6 June 2013)

In Aug 2014, the Euvena car park was less than 30% capacity and the Council decided to increase two levels of 176 car-parks to increase parking to five hours, while the parking limit for the remaining 177 spaces continued to be 3 hours. Cr Lake advocate against renting out of car parking spaces while acknowledging feedback from a community satisfaction survey revealed a need for more flexible parking in Glen Waverley (Waverley Leader, 13 Aug 2014)

Even more curious is that the recent 15 storey tower for Village Walk was granted an exemption from the required number of visitor spaces because, in part at least, there was spare capacity in the “nearby Euneva Avenue multi-storey car park”. Hmm, wonder what is the covet decision criterion?

In Feb 2015, Julia Rabar from Waverley leader reported the decisions made by Council to increase car parking hours in 2014 continues to fail attracting patrons. Patronage has declined further. The news article claimed “Cr Klisaris has also rejected a suggestion from the Glen Waverley Traders Association to scrap parking restrictions for the time being, saying the council was legally required to ensure customers had access to short-term parking…. Cr Klisaris said he would not bring forward a review scheduled for September.”

The Mayor said “We’re continuing to monitor usage and looking for ways to improve it, such as installing new signage,” and indicated that “two illuminated signs with a blue “P” would be installed to advertise the car park, with the cost to ratepayers yet to be determined.”

Glen Waverley Traders Association president Christo Christophidis supported current parking restrictions should be scrapped in the short term even if it meant commuters parking there (Waverley Leader, 19 Feb 2015)

No wonder car parking is in such a disarray, as it is last two years Cr Lake and Klisaris are directing Council officer experts how car-parks should be utilised. Why is this the case. It all links to the intending sale of central car-park that is anticipated just before or after the 2016 council election.

Is political self interest at play again in this Laklisaris city of ours?

Look at the facts:

  1. Euvena Car Park picture from Waverley Leader, 6 June 2013

    On 23 January (during school holiday season), the car park was just 27.5% used

  2. In May 2014, it was 29% being used and in December 2013, capacity was 28%.

Why are Councillors refusing to maximise returns from assets utilisation?

Do they not know they are breaching best value principles in their 2013, 2014 and perhaps 2015 decision making over Glen Waverley car-parking affairs and therefore not making decisions in the best interest of the community?

Dont Quit Your Day Job YetOne hopes these key decision making Councillors don’t give up their other day jobs, they do make terrible being car-park planning consultants.

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Lacking Good Governance in Monash Leadership

PK Misconduct

Related Article: http://www.heraldsun.com.au/leader/east/monash-mayor-paul-klisaris-cops-backlash-over-vote-labor-appeal-at-citizenship-ceremony/story-fngnvlxu-1227197046847

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Skeletons & haunting from the past – the greatest CIV con

Greed is GoodAn article was found on the Internet that confirmed that it were Cr Klisaris and Lake who strongly advocate to bring CIV valuation of rates and the question remains unanswered today did the Monash City Councillors in 2009 work for the ratepayers of Monash, or for someone else? Yes that means Cr Klisaris, Lake, Dimopoulos, Jieh-Yung, Drieberg and Perri who are still Councillors in 2015.

Skyrocketing rates, especially in highly sought areas and certain cohort’s push for high density developments in the Glen Waverley and Oakleigh Activity Centers and the Monash Housing Strategy are starting to make sense and answers this long standing question. Residents are certainly being fixed – ie they are gradually being forced out from their homes because of high rates, most appropriately to avail land, especially in highly sought areas, such as Glen Waverley, to developers and investors.

The truth behind the push for CIV was revealed by the Land Values Research Group in 2009, making much more sense today in 2015, with the rest of plans of appropriate convenience emerging left right and center. After all, critical decision making milestones must be made before the 2016 Local Government election………..

 

Land Values Research Group: Economics as if location mattersreporting on Friday, July 31, 2009 (Original source from http://blog.lvrg.org.au/2009/07/attention-monash-ratepayers-how-to.html):

Attention Monash ratepayers: How to calculate your bill under CIV

Gavin R. Putland congratulates the Waverley Leader and Oakleigh Monash Leader for cutting to the chase instead of burying the news — and finishes with a mea culpa.

Question: Monash City Council is proposing to change the rating system to “CIV” or “CIV with differentials”. For each system, how can I calculate what my rates bill would be this year (2009/10) if that system were in force?

Answer: Get out your rates notice for 2009/10 and look for the “Capital-Improved Value” (CIV) of your property. Multiply that value by 0.001771 (i.e. 0.1771%), and you get your rates bill for “simple” CIV (no differentials). How’s it compare with what you’re paying now? Under “CIV with differentials”, the factor by which you multiply the CIV depends on what sort of property you have. If it’s a residential property, e.g. your home, you multiply by 0.001605 (i.e. 0.1605%). If it’s a commercial or industrial property, you multiply by 0.002657 (i.e. 0.2657%). Notice that home owners pay more, and businesses pay less, under “simple” CIV than under CIV with differentials. Your local Leader newspaper (July 28, 2009, p.5) has some real-life examples.

Question: So commerce and industry will be campaigning fiercely to ensure that if the system is changed, it is changed to “simple” CIV. But how keen is the Council to change the system at all?

Answer: Mayor Paul Klisaris, in his re-election acceptance speech last December, said that he wanted to change to CIV. He was supported by former Mayor and current President of the Australian Local Government Association, Cr Geoff Lake. The Ordinary Meeting of Council on January 27 passed a motion saying in part:

It is recommended that Council:

  • Conducts a review of Council’s Rating Strategy to enable any agreed changes to the Rating System to occur in the 2010/11 financial year;
  • Notes the engagement of MacroPlan Australia Pty Ltd to assist in the conduct of the review…

The first point means that any change to CIV will take effect in a revaluation year, so that when some ratepayers complain about unexpectedly high bills, the Council will be able to blame changes in property values rather than the introduction of CIV. On the second point, note that MacroPlan Australia conducted the last Monash rating review, which reported as recently as 2004, and which — lo and behold — recommended CIV; but on that occasion the recommendation was defeated in the Council chamber. In support of the new review, the Council has published a brochure containing four numerical examples of how ratepayers would be affected by CIV, and suggesting that SV is overly generous to business owners and apartment owners at the expense of typical home owners. If you bear with me, I’ll explain why that brochure is highly misleading and tendentious.

Question: You mean the fix is in?

Answer: Yes.

Where the figures come from

Rates in Monash are presently levied on the Site Value (“SV”), which is the value of the ground and associated airspace, including any attached rights to build on that ground or into that airspace, but excluding actual buildings. The Capital-Improved Value (“CIV”) is the value of the whole property including buildings. If you’re a typical home owner, the SV is the value of your land alone, while the CIV is the value of your land plus your house.

According to the Declaration of Rates & Charges for 2009/10, the Council decided to levy a rate of 0.2828% (or 0.2828 “cents in the dollar”) on the SV. As the total assessed SV of all rateable property was $25,183,553,500, this would yield a total revenue of $71,219,089 from general rates.

According to the same document, the total assessed CIV of all rateable property was $40,165,851,500. Dividing the revenue by the total CIV, we find that the rate required to collect the same revenue under “simple” CIV rating is 0.001773, i.e. 0.1773%. The brochure gives 0.1771%.

Under “CIV with differentials”, the rate on commercial/industrial property is 150% of what it would be under “simple” CIV. So the very small discrepancy in the “simple” CIV rate has flow-on effects. But, taking 150% of the “simple” CIV rate given in the brochure, and rounding to four significant figures, we get 0.2657%, as in the brochure.

Multiplying this rate by the total CIV of commercial/industrial property gives the revenue from that class of property, which when subtracted from the total revenue gives the revenue to be raised from residential property, which when divided by the total CIV of residential property yields the required rate on residential property.

Unfortunately we can’t do that exercise, because the Declaration of Rates & Charges doesn’t break down the total CIV into residential and commercial/industrial components. But we can work backwards to discover the breakdown that has been used in the brochure. The residential rate for “CIV with differentials”, according to the brochure, is 0.1605%. Let the residential and commercial/industrial components of the total CIV be CIVR and CIVC, respectively. Then the total CIV is

CIVR + CIVC

and the total revenue from general rates is

0.001605×CIVR + 0.002657×CIVC .

Solving the two equations in the two unknowns, we get

CIVR = $33,746,747,279
CIVC =  $6,419,104,221

(give or take a few million dollars in each case).

For comparison, note that the 2008 Municipal Valuation gives the following aggregate values for rateable property in Monash:

                             SV ($)          CIV ($)

Residential             22,119,990,500   33,535,154,500
Commercial/industrial    3,055,716,000    6,180,305,500
                        --------------   --------------
Total                   25,175,706,500   39,715,460,000 .

My calculated CIVR and CIVC, and the SV for 2009/10, are slightly higher than the corresponding figures from the 2008 general valuation. This can be explained by supplementary valuations due to (e.g.) planning approvals and construction (the latter of which increases CIVs but not SVs).

Why the brochure is bunk

(a) Rubbery figures

The very small discrepancies in the CIV rates may furnish a convenient excuse to describe the CIV rates in the brochure as “estimates only”, although in fact there is no reason for the CIV rates (“Options 2 & 3”) to be any less accurate than the SV rate; both can be based on the valuations actually used in the 2009/10 budget. To make matters worse, the statement that

* Rate in dollar figures for Option 2 & 3 are estimates only

is immediately followed by

NB. Actual rates will change for 2010/11 due to the biannual revaluation of properties

— perhaps giving the impression that only Options 2 & 3 are subject to change under the new valuations, whereas in fact the SV rate (Option 1) is also subject to change.

But the real damage is done when the brochure offers a numerical example showing how CIV would affect the rates bills for a modest 3-bedroom house, a big new 4-bedroom house, a medical clinic, and a unit in a 4-storey block of 12 units. The four buildings are said to be built on four “identical” 800 sq.m. lots “in a street”. Crucially, the four lots are said to have the same site value. But therein lies the deception, because the value of a site depends on the permissions attached to it:

  • While either of the two houses could be built on an ordinary residential lot as a matter of course, the construction of a 12-unit complex requires permission. That permission attaches to the site and increase the site value, hence the rates payable under SV, even before anything is built. But the example expects us to believe that for a CIV of $250,000 per unit, the site value is only $29,500 per unit!
  • Likewise, one needs some sort of permission to build a clinic, and the permission adds to the site value. But the brochure makes no allowance for this.

The result is to understate the SVs for the clinic and the block of units, hence to understate their bills under SV rating. In reality, under SV rating, permission to build apartment blocks or business premises on certain sites would increase the shares of total revenue paid by the owners of those sites, hence reduce the shares paid by other site owners, including typical home owners.

By the way, the digitally-modified pictures that illustrate the four cases don’t show four lots in the same street. They show four different buildings on the same lot. That compounds the deception by making it seem obvious that the site value stays the same, when the truth is that changing the permissions attached to the same lot changes its site value.

(b) A selective view of “capacity to pay”

In the four-part example in the brochure, the only valid comparison is between the two houses: under CIV rating, if a modest house and an opulent house stand on similar-sized lots in the same street, the more opulent house pays more; but under SV rates they pay the same. That is the only justification for the subsequent bald statement that “Site Value does not reflect the property owner’s capacity to pay rates.” This conclusion is not validly supported by the medical clinic or the 12-unit complex, because the site values assumed in those cases are absurd. It also conveniently ignores the following facts:

  • Richer ratepayers tend to live in more expensive locations, which have more expensive sites but not necessarily more expensive buildings, so that their wealth is better targeted by SV than by CIV.
  • Because of these locational choices, richer ratepayers tend to have higher ratios of site values to building values than poorer ratepayers, and hence to pay a greater share of the burden under SV than under CIV.
  • More expensive buildings tend to be newer, and newer buildings tend to be more heavily encumbered with mortgages that offset the owners’ capacity to pay.
  • The biggest winners under CIV are those who have the highest ratios of site values to building values. These includes speculators and “land bankers” who own multiple vacant lots and therefore have high capacity to pay.

Very conveniently, the example in the brochure doesn’t include a vacant lot. If it did, on the same valuations, the owner of a vacant lot would pay the same as the owner of the 3-bedroom house under SV, but under CIV would pay 29% less. Under “simple” CIV, on the “rates in the dollar” given in the brochure, the owner of any vacant lot (of any value) would pay 37% less than under SV. And under “CIV with differentials”, the owner of a vacant residential lot would pay 43% less than under SV, while even the owner of a vacant commercial or industrial lot (“bombsite”) would pay 6% less than under SV.

The offending brochure is summarized in the article “Rates hotline ready to take your calls!” on p.3 of the July 21 edition of the Monash Bulletin. This article contains the same misleading four-part example as the brochure, but is worse for its brevity. At least the brochure eventually states the assumed rates in the dollar so that you can apply them to your current valuation — although delaying this information until after the fictitious example is a textbook case of burying the news (when the brochure is printed on two sides and folded, the critical information comes just before the end, as in the web version). The Monash Bulletin article doesn’t merely bury the news, but omits it altogether.

In contrast, the article “Rates shake-up” in the Waverley Leader and Oakleigh Monash Leader (July 28, 2009, p.5) puts the news at the top of the page, and follows up with factual examples instead of impossible fictitious examples.

Who is pushing for CIV?

If values of buildings are added to the local tax base while keeping total revenue constant, the surest outcome is that owners of vacant land will gain at the expense of everyone else, including home owners. The discrimination against home owners could be countered by a “differential” system with a higher rate on vacant land. But in fact the only differential being proposed in Monash would distinguish between residential properties and commercial/industrial properties, not between vacant land and built-up land. With or without the proposed differential, owners of vacant land would get a tax cut at the expense of building owners.

When CIV rating is in place, anyone who adds value to a building, e.g. by renovating or extending, or by replacing a single dwelling by a duplex or “sixpack”, is penalized with a higher rates bill. And when there is no differential on vacant land, anyone who builds on vacant land is penalized. If these disincentives are created in Monash, the growth in the supply of accommodation in Monash will be retarded, and the demand for housing on the urban fringe, by default, will be accelerated. The beneficiaries of that “default” demand will be land bankers whose holdings are outside Monash.

Thus the issue boils down to this: Do the Monash City Councillors work for the ratepayers of Monash, or for someone else?

Retraction

The original version of this article, posted on July 28, used total values from the 2008 Municipal Valuation instead of the 2009/10 Declaration of Rates & Charges. Although there was no new general valuation before the 2009/10 budget, the totals were increased by supplementary valuations. Consequently my calculated CIV rates were too high, by margins between 1.2 and 1.4 percent (not to be confused with percentage points!). This was unfair in the sense that it made the Council’s preferred options look slightly worse than they are. It was also too kind in the sense that bigger discrepancies might look like a more respectable excuse to describe the CIV rates in the brochure as “estimates only”. As supplementary valuations can affect both SVs and CIVs, the use of the term “estimates” only for CIV rates suggests that the reason for the discrepancies is something more nebulous than supplementary valuations. This may help to explain why I overlooked the likely role of supplementary valuations and preferred my own calculations to those in the brochure. And of course the brochure did not help its credibility by pretending that the four lots in the example would retain the same SV.

But, be it kind or unkind, and be it forced or unforced, a 1.4% error is still a 1.4% error, and I’m sorry.

I thank the Monash City Council representative who first brought the changed total values to my attention.

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Why are some ratepayers paying ridiculously higher and higher rates

In 2009, a wise ratepayer was ignored by Councillors who voted for the CIV approach in valuing your rates:

Original Source: http://blog.lvrg.org.au/2009/01/case-for-civ-rates-decoded.html

Logo Land Values Research Group: Economics as if location matters

Wednesday, January 28, 2009:

The case for CIV Rates — decoded!

 Why is the Monash City Council rushing inexorably towards Capital-Improved-Value rating? In this open letter to the incoming Councillors, dated December 17, Gavin R. Putland explains it far too clearly.

Dear Councillors,

The case for changing Monash City Council’s rating system from Site Value (SV) to Capital-Improved Value (CIV) is based on the following premises:

  1. The home owners who have received the biggest windfall gains in the values of their homes are the ones most in need of a tax cut.
  2. A home owner whose Rates bill increases by a few percent of the increase in the rental value is more deserving of relief than a renter whose rent bill increases by 100% of the increase in the rental value.
  3. The match between the Rates bill and “capacity to pay” is to be assessed solely by comparing adjacent properties — not by comparing working-class suburbs with elite suburbs, or heavily mortgaged homes with homes that are owned outright, or ordinary home owners with speculators owning numerous vacant lots.
  4. New job opportunities are not welcome in Monash.
  5. People who find jobs in Monash shouldn’t be able to afford to live there. Neither should your kids or your aging parents.
  6. Property owners should be penalized for using the right, and rewarded for wasting the right, to build higher-density housing.
  7. Ratepayers need the threat of Big Brother snooping around inside their houses to keep them compliant.

Let me explain the above principles in greater detail, so that you can better appreciate their wisdom.

1. The home owners who have received the biggest windfall gains in the values of their homes are the ones most in need of a tax cut.

As Cr Klisaris recently put it, “The current system produces financial distress amongst the losers” — the “losers” being those whose Rates bills have risen the most, because the values of their properties have risen the most. Their “financial distress” is a Rates bill that claws back a minuscule fraction of the latest unearned increase in their net worth — it’s terrible! Never mind that the market value of a site already accounts for tax implications, so that the rise in the Rates bill due to the rise in the site value still leaves the owner better off than if the site value had not risen. Such windfalls, however large, do not count; only reductions in windfalls count.

A “losing” home owner would be better off under CIV because, in the augmented rating base, the increasing site value would be diluted by the nearly constant value of the building(s).

Of course there are other ways to reduce these “losses”. For example, under the waiver power conferred by s.171 of the Local Government Act, the Council could make a local law whereby if the real increase in the Rates bill for an owner-occupied residential site exceeds a certain percentage, the excess will simply be waived. This is a more complete solution than CIV, which has no built-in limit on increases in individual bills. But we mustn’t let superior alternative solutions get in the way of a good predetermined agenda.

2. A home owner whose Rates bill increases by a few percent of the increase in the rental value is more deserving of relief than a renter whose rent bill increases by 100% of the increase in the rental value.

At a rental yield of 5% per annum, Monash’s rate of 0.2668% of the site value represents less than 6% of the site rental value. Hence, when a site value increases, the ratepayer typically incurs a Rates increase of less than 6% of the increase in the site rental value — less again if the total required revenue increases by a lower percentage than total site values. But a renter, by definition, can be slugged 100% of the increase in the site rental value when the lease is next renewed.

As already noted, CIV would moderate the Rates increases for those whose homes increase most in value. And by penalizing construction, it would exacerbate the shortage of rental accommodation, leaving renters worse off. That’s as it should be.

3. The match between the Rates bill and “capacity to pay” is to be assessed solely by comparing adjacent properties — not by comparing working-class suburbs with elite suburbs, or heavily mortgaged homes with homes that are owned outright, or ordinary home owners with speculators owning numerous vacant lots.

Under CIV rating, if an opulent house and a tumbledown shack stand on adjacent lots, the owner of the opulent house will pay more. That’s what counts.

Of course richer ratepayers tend to live in more expensive locations, which have more expensive sites but not necessarily more expensive buildings and are therefore better captured by SV than by CIV. But that doesn’t count.

In consequence of these locational choices, richer ratepayers tend to have higher ratios of site values to building values than poorer ratepayers, and hence to pay a greater share of the burden under SV than under CIV. That doesn’t count either.

More expensive buildings tend to be newer, and newer buildings tend to be more heavily encumbered with mortgages that offset the owners’ capacity to pay. That doesn’t count either.

The biggest winners under CIV are those who have the highest ratios of site values to building values. That means “land bankers” who own multiple vacant lots and therefore have high capacity to pay. So that doesn’t count either.

4. New job opportunities are not welcome in Monash.

Employers need commercial/industrial accommodation. Under CIV rating, property owners who add to the supply of such accommodation will inevitably add to their CIVs and therefore be hit with higher Rates bills. That should deter them from helping to create jobs. The deterrent will be even stronger if, as proposed, CIV is accompanied by differential rating that hits commercial/industrial property harder than residential property. Who needs jobs when Australia is following the rest of the world into recession?

Of course, the lack of growth in job opportunities will eventually make Monash a less desirable place to live, and this of itself will tend to curtail the growth in residential property values, to the detriment of residential ratepayers. But that doesn’t count — just as it doesn’t count that the people whose Rates bills increase most after each Municipal Valuation are the ones who get the biggest windfall gains in property values.

One possible fly in the ointment is that under differential rating, in order to avoid the impression of doing favours to land bankers, a vacant lot might be taxed more heavily than a lot with a house on it. But this won’t necessarily happen, especially in a built-up municipality like Monash. And if it happens, property owners who replace single houses with more capacious housing will still be penalized for competing with the land banks.

Of course most of these land banks are beyond the urban fringe and therefore outside Monash, which probably means that those who stand to gain most from the pro-CIV putsch neither live in Monash nor pay Rates in Monash. While this raises disturbing questions about the propriety of whoever is driving the process, it is a comforting precedent for the undersigned, who is also an outsider but does not share the land bankers’ pecuniary interest.

5. People who find jobs in Monash shouldn’t be able to afford to live there. Neither should your kids or your aging parents.

It’s bad enough if jobs are created in Monash, but even worse if the people who fill those jobs can afford to live nearby. Under CIV rating, property owners who add to the supply of homes to rent or buy, making it too easy to find accommodation in Monash, will add to their CIVs and be hit with higher Rates bills. That should deter them from providing housing. Better still, the lack of local housing for prospective workers will deter prospective employers from offering jobs. It’s a win-win.

And if new workers can’t afford accommodation in Monash, neither can your kids who are about to fly the nest, or your elderly parents who need to be near you so that you can look after them. Apparently that’s another win-win.

6. Property owners should be penalized for using the right, and rewarded for wasting the right, to build higher-density housing.

The mere permission to build higher-density housing on a site increases its value. It makes little difference whether that permission comes from an as-of-right zoning system, or from surviving an objection process. Under SV rating, getting that permission increases the Rates bill but using it does not. Under CIV, because the taxation of buildings allows a lower rate on the site, getting the permission causes a smaller increase in the bill, but using it causes a further increase. This further discourages those public nuisances who want to add to the supply of housing for the benefit of undesirables like employers, employees, children and parents.

7. Ratepayers need the threat of Big Brother snooping around inside their houses to keep them compliant.

Under CIV rating, the value of your house — not just the land — affects your Rates bill. Valuers don’t come inside your house to make the initial valuation. But they do come inside if you appeal. And under CIV, ratepayers are more likely to want to appeal, because there’s more to argue about. The need for an internal inspection will make them think twice about such insolence.

I hope that clarifies the issue for you. For further details, you might consult… [ see this paper instead].

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VAGO Integrity Guide

As Monash ratepayer advocates, we have the responsibility to monitor integrity in Monash Council and report incidents of maladministration, misconduct and corruption to the appropriate authorities.

Writing such incidents about Council matters and getting the desired results is an art-form, capability developed through a long enduring period of many trial and errors.

One approach is to understand and apply Council’s complaint system (which is fragmented and vague); the Local Government Inspectorate, the Victorian Ombudsman and the Independent Broad based Anti-corruption Commission (IBAC), and other parties in Victoria’s integrity system:

Reproduced from VAGO Guide, Safeguarding Integrity, Figure 2, Page 6

The Victorian Auditor General Office (VAGO) has released a guide to the integrity system in Victoria (called Safeguarding Integrity) which gives deeper insights into to recognise misconduct and corrupt conduct and know what to do about it. It is a guide worth reading, to enhance your complaint writing about any government agency, including local government.

One highlight is the definition of behaviours relating to maladministration, misconduct and corruption, summarized below:

Reproduced from VAGO Report, Safeguarding Integrity, Figure 4, Page 16

Use this VAGO Guide in addition to the complaint guidelines given by the party you are lodging the complaint to.

For a pdf copy of this post, click here.

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