Differential Rates – Landlords may not have to pay!

Three years ago Scenic Rim Council introduced a new income source by charging extra rates on investment properties. For example an investment property valued at $310,000 attracts an additional rate of $307 per year compared to an owner occupied property.

This revenue making venture has been used by numerous Councils Queensland wide, and was deemed by the LGAQ as legal under the Act.

The Supreme Court in Mackay has recently handed down a ruling that differential rates is invalid (30 April 2014) in a case fought against the Mackay Regional Council.

In the words of Judge Duncan McMeekin, “To justify the categorisation the Council impermissibly took into account characteristics personal to the owners of the land and failed to restrict itself to characteristics of the subject land itself. It is simply a misuse of language to claim that the owner’s decision to reside on land, or not, is in some way a characteristic of the land.”

The LGAQ and Mackay Council are appealing the Supreme Court ruling. Further, the LGAQ has appealed to the Minister for Local Government David Crisafulli to provide legislative change so the Councils can finalise their budgets for the next financial year with certainity

The legality of this method of collecting rates however could still be in question. Some argue that a rental property is a commercial or investment property whilst others argue that the characteristic of the land is that it is used for residential purposes. Most people see rates as a direct link to their use of Council’s services and in practice this is true, but in the law the link is less direct.

In the law it is not defined by how much service is provided to a particular property but a means allowed to councils to raise revenues and apply them as they wish.   However as this court decision reveals, it should be regardless of whether a residential property is owner-occupied or tenanted.

The problem becomes clearer when a commercial property is considered. For example would it be valid to impose a differential and higher rate on two identical commercial properties with the same use where one was owner occupied and the other tenanted?

If the decision stands, the Councils using this revenue source may be required to repay monies collected in this manner. Potentially the SRRC could have an estimated shortfall of $1m in the budget this financial year which they will have to find elsewhere.

Although this decision may cause financial distress for these Councils it is considered that Councils and the LGAQ have an obligation to collect revenues in a legally acceptable manner. Until it is resolved would it be prudent for the SRRC to put monies collected in this manner aside?

Astrid Kennedy

IT Officer

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Delegates testify to amalgamation failure

Report from Joseph Monsour

JOSEPH’S SPEECH TO THE QLGRA INAUGURAL MEETING 13 July 2013 Toowoomba

The drive to form the Queensland Local Government Reform Alliance came from the experience of local groups working for de-amalgamation of shires within regional councils.

There was an expectation of change on the election of a new government.  The change was very limited.

The implementation process further restricted any corrections of the failed amalgamations of 2008.

Some of the groups s particularly the Stanthorpe and Monto group looked at the process and realised that each group working alone was not going to correct government policy.

Perhaps this came from intimate experience of how government policy was formulated and then how the policy was applied.

New governments seem to quickly take on the role of manipulating opinion rather than addressing real concerns.  In this case this is amplified by the Brisbane based media. They seem to quickly lose touch with the broad community. This contrasted sharply to the views represented at the recent forum at Stanthorpe.

What was realised was that in the face of government only a unified response would allow for a correction of the failed 2008 amalgamations.

I don’t need to give this group examples of the impact of bigger is better centralism that was forced on us.  You will all have examples of things like:

In Boonah if a dog is taken to the pound it must be picked up from Beaudesert – a 1 hour round trip. Not quite as bad as friend of mine in Weipa who had experience of bank centralism. He was issued with a replacement credit card and told he would have to pick it up from Cairns – a $1000 round trip by flight!

As I said I am not going into detail on the failure and costs to a community of a regional approach versus a local approach.  What is clear is that savings are few and far between.   For example one of the areas for regionalism was to overcome the difficulty remote councils had of getting experienced or skilled staff.  However the remote and regional council still face the same problems.  A former colleague of mine is now flying in and out to Central Regional Council.

How do we re-establish local government without a restrictive approach and a one size fits all?   When we set out the goals we have tried to reflect this. In contrast the State government set out very restrictive criteria with the aim of allowing only Noosa and Douglas to reform. It is true that the Minister allowed two others to go to referendum. I believe he did this with the expectation that the cost argument which he created would defeat the case. He was wrong and it showed that he does not understand the depth of feeling in the local communities and our need to have efficiently run and responsive local councils.

On Thursday night when we were preparing the final touches for organising this meeting – we met at 7pm using Skype over the internet – Australia was playing England for the Ashes.  Towards the end of the meeting Jack Muller from Monto revealed that Australia was 8 for 115.  At the end of the meeting we were 9 for 117.   You could forgive someone for writing Australia off.

It was not to be – they did not count on the cricketers toughing it out. In the end they staged a massive fight back and overcame the odds.  We face the same challenge and should not be daunted.

So we set out our own goals.  These are listed on the green handout.  The steering committee has made three recommendations into primary goals and two strategic goals.

The first primary goal is: To promote community acceptable natural Local Government boundaries that reflect locally held beliefs about community and identity, and provide local amenity and service;  

A local community generally has a good idea of what is local.  What defines a community is a sense of identity and local awareness- What is the business centre frequented. The sports team area, school district and hospital centre and land catchments and locations around a business centre and its geography.

We formulated the goal with the aim to allow community to have a proposal for reform to submit to a referendum based on natural boundaries and service delivery.  It is not a simple task but if properly considered by a boundaries commissioner after extensive consultation it should result in better local government.  To do otherwise by applying regionalism to seek economies of scale, as the amalgamation process of 2008 did just shifted costs back onto the community for little or no gain.   In fact tyranny of distance on the ground and in community awareness and increased bureaucracy has resulted in diseconomies of scale. Everywhere the debt burden is rising due to increased and ineffective administration.

As I said our goal is to achieve a community based response to local government reform.  For example Toowoomba and surrounds may result in a Toowoomba City Council and a Darling Downs Rural Council.  What area would make up a new Isis council? How the councils within North Burnett would be reconstituted. Would the best arrangement be the former Councils stand alone as in Redcliffe and Caboolture or would some former shires choose to be merged into local areas? Should we just go back to the former shire areas with shared services reducing cost overlaps? Should we apply differentials to different needs within a council area and have community sub councils.  The answers are not simple and the government given an opportunity shirked a response.

My personal views is that we should in most cases return back to the previous shires and begin again to look at reforms a process that was discontinued when amalgamation was forced.

Our purpose in this primary goal was to broaden a response in overcoming the problems of the forced amalgamations of 2008.  Central to the goal was for the change to be a community one not one imposed by force or by burdensome restrictions. It recognizes that one size does not fit all and the regionalism does not produce better local government particularly in non-metropolitan areas.

Underlying the goal and the recommendation of the steering committee to the QLGRA is the principle that change must be democratic and based on the will of the people by referendum.

 

The change must be democratic and based on the will of the people by referendum.

The second goal:    Recognition in the State Constitution of Local Government as a legal entity with a clearly articulated role in governing, such that it can only be changed after a majority vote in a properly constituted referendum;

The second goal reinforces the democratic principle by giving Councils state constitutional recognition and reducing the power of State government to repeat the changes it forced in 2008 without going to the people affected.

Third goalRetention and maintenance of reasonable levels of State and Federal Grants and Subsidies to support the necessary and important role of Local Government in providing and supporting rural and regional infrastructure serving not only local communities but also the state and the nation

This goal recognises the importance of funding from state and federal government to local government.

First it accepts that the infrastructure and service provided by local government are a state and national concern as well as a local responsibility but primarily it recognises  that revenue raising by state and federal government through taxation leaves little room for Council rates, fees and charges to satisfy the infrastructure spending need of the local community. For reasons of equity our political institutions favour government taxation to be raised across the country as a whole. This limits local governments.

It is an abuse of local government to expect that they can through rate revenue alone provide the necessary infrastructure to develop the local areas evenly after the other areas of government have taken the bulk of the taxation pie.

The remaining goals are defined as strategic.

The fourth goal: To promote the benefits of effective, community based ‘local’ government throughout the general public and as an area of learning and study in tertiary institutions;

 

This goal is fairly self-explanatory and is about community education and seeks to influence the education institutions provided by federal and state government to recognise and enhance the specialist skills needed by the employees of councils and to also enhance community awareness of local government.

The fifth goal: To share the commonality of our cause with all amalgamated shires and promote the sharing of strategy and resources to overcome barriers to de-amalgamation and boundary changes.

The final goal is also self-evident. Its purpose to advance a unifying framework to pressure state government policy to involve communities in genuine consultation and then referenda to re-establish efficient and effective local government. At the very least this requires referenda in the forced amalgamation areas and the best informed and community based approach to reform in local government area.

As I said earlier in reference to the cricket team if stand together confident of community support we will overcome the obstacles to change ahead of us.

Book Launch – Local Government Sustainability

A book just launched at the University of New England could not be any more timely or topical, with local councils facing infrastructure renewal backlogs that they cannot afford and many having recently been described as less than sustainable. The Federation Press published “Funding the Future – Financial Sustainability and Infrastructure Finance in Australian Local Government” was co-authored by Professor Brian Dollery, Dr Michael Kortt and Dr Bligh Grant, of the Centre for Local Government at UNE. Member for Northern Tablelands, Adam Marshall officially launched the new resource.

“This is a very important book,” Mr Marshall said. “It accurately and comprehensively encapsulates the plight of local government, nationally. It also looks at constructive ways to address the financial sustainability issues confronting our councils, as highlighted by the infrastructure backlog in NSW.”

“It’s great that the expertise for this book has come from regional universities because regional councils struggle with infrastructure cost burdens more starkly.”

Professor Brian Dollery said the book does not merely look at finance issues in councils. “We look at potential solutions. We assessed various proposals for dealing with endemic infrastructure backlogs and came up with our own proposal,” he said. “We present a case for a National Local Government Finance Authority. This authority would be guaranteed through Federal Government backing. It would be financed through the sale of bonds, loans from superannuation funds and the corporate sector. Interest on loans from this authority would be lower than bank financing. The cost burden of infrastructure renewal can be spread, cost-effectively, through time.”

 

http://blog.une.edu.au/news/2013/08/16/new-book-addresses-local-government-sustainability-crisis/