farmers-favoured-by-rates-revolutionThe owners of significant commercial sites like this one in Leongatha will be paying thousands of dollars more in rates under the proposed new rating strategy.

EVERYONE is either a winner or a loser under the South Gippsland Shire’s new rating strategy released last week.
Farmers are expected to get significant rate relief but retailers in Leongatha and Korumburra, as well as almost 1200 homeowners across the shire, will pay considerably more.
On top of that, the council is planning to slug the region’s biggest employer, Murray Goulburn, almost $30,000 more in rates at a time when the company is renegotiating its EBA with local staff.
And it could have been more if the council hadn’t decided to water down a recommendation from its rates review committee that commercial and industrial property be rated at 108 per cent of the general rate.
It’s all part of the fallout from a seismic shift in the shire’s rate burden, away from farmers and on to business and residential ratepayers, after the shire finally bowed to pressure from the powerful farming lobby.
VFF spokesperson, Meg Parkinson, has however injected a note of caution into such thinking, saying there could be no guarantee farmers would pay less until the new property revaluation results were in.
As comprehensive as the review of the shire’s rating structure is, the 19 recommendations contained in a 106-page document released last week, are not yet set in stone.
Council could opt to make changes when it considers the ‘Proposed Rating Strategy 2014-18’ at its next monthly meeting in Leongatha this Wednesday, April 16.
Or it could wait until after the formal exhibition process concludes on May 28, and respond then to any further objections or suggestions made by the community.

In a nutshell

The most significant of the recommendations contained in the rating review are as follows:
• That farming properties be rated at 70% of the general rate, down from 90% (phased in over two years).
• That the municipal charge (set at 20% of rate revenue) be phased out over two years (down to 10% or $181.70 in 2014/15).
• That commercial and industrial properties be rated at 105% of the general rate (starting at 102.5% in 2014/15, plus the municipal charge).
• That the owners of vacant land pay 200 per cent of the general rate, up from 150 per cent, (phased in over two years, including $181.70 municipal charge in the first year).
• That the definition of the ‘Farm’ rate category be revised, eliminating all properties where agricultural production is not the primary purpose; for example – hobby farms.
• That the shire retains Capital Improved Value (CIV) as the basis for rates.
• That cultural and recreational land be rated at 50% of the general rate, up from 40%
As dry as all this sounds, the changes could potentially have a big impact on people’s rates notices when they come out in August.
And once changed, the rate burden will forever fall on the various sectors in the same proportions.

Balancing act

The shire’s Director of Corporate Services, June Ernst, said reshaping the shire’s rating strategy was a delicate ‘balancing act’.
“The committee accepted that the municipal charge was a regressive tax that impacted lower value properties more than higher value properties and should be discontinued,” Ms Ernst said.
“It was seen as unfair the way it was and once removed, it will also make the rate notice easier to understand.
“The proposal is that it be phased out over two years.”
Ms Ernst said that once the issue of the municipal charge had been settled, the committee had to decide how to spread the impact of the change.
“The committee made an in-depth assessment at the Farm rate and decided that a change was warranted,” she said.
The council report explains:
“Farming is considered to be a key industry and it is appropriate to provide some incentive to encourage farmers by moderating the rate impact. Decreasing the differential rate from 90% to 70% provides some rate relief to farmers after taking into consideration the property wealth, capacity to pay and incentive principles. The Farms are one of the categories significantly impacted by the removal of the Municipal Charge. To modify the extent of this impact and provide an incentive to retain existing and new farm businesses, a decrease of 30% compared to the Residential rate is recommended.”
Ms Ernst said modelling was required to assess the impact of the shift in rate burden on the various rating classes; general (residential), commercial and industrial but it’s clear the council mixed in some political expediency with the science.
Ms Ernest drew attention to the claims made in the document’s graphs that the largest number of homeowners, with properties valued between $150,000 and $350,000, will see either a reduction or slight increase on their rates notices after the changes.
According to the shire’s modelling, it’s not until shire valuations of homes reaches $450,000 does the increase in rates exceed $100.
Those 15 individuals fortunate enough to have a residential property worth between $1m and $2m will pay upwards of an additional $601 in rates this year.

Farmers’ response

Victorian Farmers Federation spokesperson, Meg Parkinson, dismissed any notion of an ‘us’ and ‘them’ battle over the burden of rates.
“We’re not talking about others paying more. We’re focusing on our own situation and the fact that using Capital Improved Value as a basis of rating is unfair (to farmers).”
She said farmers needed a reasonable amount of land to be viable but were penalised for it.
“They don’t get a lot of value from paying their rates because they are often remote from the shire’s services.”
And as for welcoming the change from 90% to 70%, she said the jury was still out on the result.
“The impact of that will be hard to assess with a revaluation of property values going on at the same time. When those valuations come in it could go anywhere.
“You’ve also got the situation that the revenue raised from the municipal charge is going back into the pool so it’s all pretty misleading to say farmers will benefit until we actually see how it is going to affect individual properties.
“The shire would have to know what’s likely to happen with the property values and we’d like to see some actual cases of what the impact of the change in values and the rates differential is likely to be.”
She said the shire could expect further correspondence from the VFF, which incidentally has a goal of getting councils to introduce a 50 per cent differential.
Bass Coast doesn’t have a farm rate differential at all and would not say this week whether they were planning to introduce one at budget time in June.

Business response

The changes are also likely to interest commercial, industrial and vacant landowners.
Rates on commercial property, valued at $200,000 and above, will all increase, with rates on a typical shop in Leongatha going up by $250 or more a year.
Supermarket property owners could be paying more than $10,000 a year more.
Cr Don Hill said he argued for restraint in increasing the Commercial rate because some retail and business operators in the smaller towns were struggling.
“The average differential for Commercial across the state is 118 per cent but our commercial centres aren’t as strong as they are in Warragul, for example, where they have much bigger town populations.
“The 105 per cent we settled on would be less than that with the municipal charge taken into account,” he claimed, although modelling shows an increase for almost 400 Commercial ratepayers.
Industrial property owners will also shoulder more of the rate burden, now and in the future, but it’s the owners of vacant land who will see the biggest increases.
Ms Ernst said part of the reasoning behind bumping up vacant land rates was to encourage them to be developed, increasing economic activity.
Korumburra real estate agent, John O’Connor, said it would concern him particularly if rates on commercial property were increased.
“Under most commercial leases, the tenants pay the rates, not the owners of the property, and you’re talking about a sector that is very fragile at the moment. Even a small increase in rates may make a difference.”