Archive for category Rating Practice

Monash Ratepayers Press Release 12 June 2018:

12 Jun 2018

What do you know about the integrity of Monash Council?

Press Release.jpgMayor Klisaris said that the council is disappointed with the Essential Service Commission (ESC) counter offer of 2.57% average rate rise (instead of the 3.53% council has sought).

The Monash community is even more disappointed with the Mayor’s response that refutes the ESC’s assessment outcomes and generous offer. It is because Monash Council has the financial capacity to absorb the increase in recycling waste costs and still remain in healthy surplus positions.

Yes, the council has not only lied to the ESC, but also its own community.  Mayor Klisaris claimed that the council would deteriorate its financial position, notably reduced liquidity, if it doesn’t increase average rate to 3.57% rate next year.

BUT the mayor also conveniently forget to mention the ESC Decision and Deloitte reports, which reveal misleading and missing information provided by Monash Council in its higher cap rate application, that

  • The council’s 2018/19 financial forecasts projected healthy financial positions for the next 4 years, including having more than ample cash on hand capacity to absorb the annual $1.5 million shortfall in recycling costs.
  • Should the ESC reject the proposed 3.57% rate, Mayor Klisaris said that the council would impend to reduce
    • discretionary community projects;
    • assets renewal, however without disclosing a long term assets management plan and therefore has no evidence to support this second threat.

What makes Mayor Klisaris say all the misleading information and unfounded threats in his press release response to the ESC decision?

There are two types of people who become councillors. There are those who genuinely aim and achieve outcomes in the real interests of the Monash community and there are the “otherwise” people.  The ESC Decision and Deloitte reports concluded that the council’s higher cap rate application is likely to over-charge rate-payers in the longer term. When people read these 2 reports, most people would realise that this council had reactively and hastily made a biased decision to lock in a high cost recycling waste contract with Visy and without due process and public engagement. Council also failed to disclose that it has received funds from the State Government to address this problem, which is faced by all councils in Victoria. Council’s decision making has broken the transparency, accountability and citizen partition principles of good governance, also embedded in the Local Government Act. The rule of law does not appear to be relevant in Monash Council’s leadership.

Back to the opening question, what do you know about the integrity of Monash Council? Yes, our council simply wants to increase rates, to avail more cash on hand, to spend more on discretionary projects. After all, federal and state elections are looming, and most people know some of our councillors are running for these elections.  The good news for these councillors is that they can get the Monash ratepayers to foot their election campaigns via their discretionary programs.

One more thing – last year Mayor Lake tried to engage with the community to persuade ratepayers accept the introduction of a new waste charge, which is outside the constraints of the Local Government Minister’s rate capping policy. Ex-Mayor Lake failed. Monash is one of 7 remaining councils whose waste management costs are constrained by rate capping. By transferring waste management costs that are regulated by the Minister’s cap, to a new charge rate, Monash Council can increase its capacity to charge ratepayers and raise more discretionary money in the future.

Now Mayor Klisaris is campaigning to transform ex-Mayor Lake’s failure into his team Monash success, that he /council has no choice now, but to introduce a new waste charge and censure ESC for forcing the council to go against the will of the Monash community. A wicked problem strategy for manipulating decision making and public opinion – how would you feel about that?

 

Advertisements

Leave a comment

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].

, , ,

Leave a comment

Revenue rate set to rise over CPI

Breaking ALP promise in Rates Decision VotingThe Art of Betrayal

Predictably in last night’s Council meeting, groupthink Councillors voted for a 6% rise in rates, which means rates will go up significantly above CPI levels.  Cr Dimopolous sold out his community and ALP party when he voted to support the rate revenue rise of 6%. Looks like he is willing to break a potential ALP policy even before he gets elected – this is not a good deed of community trust for someone running in the coming state election. He is supposed to support an ALP election policy to cap Councils’  rates at CPI, and his decision did the opposite!

Confused 2The audience was confused and outraged by Councillors who did told the public spectators that their individual rates will be higher than 6% because of market valuation impacts on their properties’ capital improvement value.

The Mayor and Councillors failed to clearly explain why individual rates can go up (or lower) that 6 percentage, which says a lot about their knowledge of rates calculation.Instead they alarmed the audience by saying their individual rates will be higher than 6%. 24 out of the 25 community review submissions to the draft budget was rejected and with no explanation feedback. Sounds like another incident of poor communication and tokenistic community consultation, and another episode of making decision making not in the interest of the community – the worst performer in Council’s 2014 Performance Result:

2014 Poor Service Levels

The scary part is with lacking rates and budget literacy, they decide the budget and consequent rate pricing directions with no empathy or understanding of the impacts on the lives of every ratepayer and residents in Monash.

The Council’s webpage that explains how rates are calculated does not help either:

 How rates are calculated

So how is rate calculated:

The steps are:

  1. Council determines the cost of service delivery and work out rate revenues from various ratepayer groups, or which residential is a large funding source.
  2. They then calculate the RATE IN THE DOLLAR = Required Rate Revenue/No of Properties  –> this is the usual annual rate hike of 6% or more in Monash.
  3. Every two years, they re value the capital improvement values (CIVs) of every property in Monash
  4. They have predefined differential rates for residential, commercial and other property types. For example, for residential properties, this rate is 5%, for commercial it can be at least 5% or more as decided by Council.
  5. They calculate each property’s NET ANNUAL VALUE = Differential Rate * CIV
  6. The final payable rates for each ratepayer is calculated as RATE IN THE DOLLAR * Property’s NET ANNUAL VALUE.

 Calculate Rates

For more explanation, visit the City of Yarra’s How Rates are Calculated webpage.

Leave a comment

In the news – call to reducing rates

Waverley Leader 11 Feb 2014, Page 25

MRI News

MRI in the News

 

 

 

 

 

Leave a comment

MRI says NO to defiant Councillors challenging DR reform guidelines

The Herald Sun Leader reported today that Monash Councillors “vowed to take Ms Powell on if she decided to block the rate being applied at Tuesday’s council meeting.

At the meeting, Cr Drieberg said she was proud the council was taking a stand, but Oakleigh ward Cr Theo Zographos said he thought the council was making a “huge mistake” continuing to apply the rate.

Monash is believed to be the only council that has tried to continue with the rate for the next financial year…..click here to read more“.

NO

The State’s DR guidelines aim to reduce complexity and the inconsistent applications of differential rates across all Victorian Councils, which is the right thing to do.

In MRI’s Community Governance Report (3- April), they mentioned that they will NOT support some Councillors’ proposal to challenge the Minister over the Differential Rates (DR) reform guidelines that says DR applications will exclude Electronic Game Machines (EGM).  MRI sent an email to all Councillors to reconsider their stand on this foolish decision. One Councillor sent an abrupt and rude NO reply.

MRI re-emphasized Monash Ratepayers’ stand on this matter in response to the press article:

The Monash Ratepayers Inc (MRI) does not and will not support rebellious Councillors challenging the Minister regarding the exclusion of pokies machines differential rates (DR)  in the reforming DR guidelines.  The community views the legal challenge proposal is an unfounded and knee-jerk reaction to a state wide systematic DR reform that does not support a Monash Council’s legacy operational and administrative decision, which is also contributing to the fragmentation and inconsistency of DR applications in Victorian Councils.

 The decision to pursue this Ministry challenge was developed “on the fly” hours before and even during the last Council meeting. This means there has been NO proper legislative research and cost-benefit impact analysis, including impact on budget plans. Ratepayers will not fund such a reactive and unfounded endeavor that also reflects the bipartisan political conflicts and game being played by some Councillors regarding State and Federal decisions. Council is NOT the place for such bipartisan conflicts and debates.

 The loud & clear message to all our rebellious Councillors – MONASH RATEPAYERS WILL NOT SUPPORT YOU TO CHALLENGE THE MINISTER!!!”

The key reasons MRI does not support the defiant Councillors’ decision is they did not address the following important matters in their debates:

  • The costs of such legal challenge and whether these costs are out-of-budget expenditures;
  • The administration time and hence in-house costs of people in correcting the non-compliance in budget management systems should Council lose the legal case or when the State Government enforce mandatory compliance;
  • Details of other viable funding strategies and evaluation criteria to show best value selection of the first, second, etc preference of solution alternatives;
  • Well founded details of how the Monash EGM DR program fulfils the State DR Guidelines’ objectives;
  • Specifications of KPI measures to prove viable and tangible benefits would be delivered to our problem gambling community members.

They already collected ~$200,000 and spent on over charged consultancy fees that is significantly above market rates, to understand the local problems. If the ethical moral is for real, most of this money should benefit the troubled gamblers first, not to consultants for over charged research work (which excluded solutions development).

 

Leave a comment

Minister’s response to the VAGO performance audit report on Local Government rating practices

The full response to the VAGO rating practice report  is found in the State Government’s media release webpage.

The quote highlights that MRI strongly supports are:

“The Coalition Government has already identified the need for a more consistent approach to the development of rating strategies by local government. To that end the Government is in the process of revising guidance on rating practices and will link these to the forthcoming mandatory performance reporting framework to achieve that outcome.

“The policy development will help councils to develop a more strategic approach to the use of rates and provide the public with a better understanding of how their local council is performing.

“The Coalition Government has already moved on the issue of differential rates and is currently consulting the public on the development of Ministerial guidelines for the use of differential rates.

“Local Government Victoria will release an updated Rating Strategy Guide after the Ministerial guidelines for differential rates are finalised.

“The Victorian Auditor-General has produced an instructive document and I urge all local government councilors and CEOs to read the report and closely consider its recommendations,” Mrs Powell said.

MRI’s budget planning improvement expectations are aligned to this recommendation from the top lady in charge of Local Government.

Leave a comment