The ACT Government was right not to follow the recommendations of last year’s rates inquiry. That inquiry proposed a new rating system. Up to 50 per cent of rates would be a flat service charge and the balance would be based on property values. Chief Minister Kate Carnell has rejected that model on the grounds that it would result in an increase in rates for people with lower-valued properties and a decrease for higher-valued properties.
However, her alternative is also unsatisfactory. The Government is to increase rates by the consumer price index of 3 per cent for the next two years, as it did last year. It means that individual ratepayers can look at last year’s bill and add 3 per cent. The trouble with this approach is that it delays the day when a more rational basis for rates is set, and the longer that is put off, the greater the disparities will be between the various parts of Canberra and the greater the adjustments to fix it.
If Canberra rates are to be based on property values, then it would be better to have regular adjustments. If the rates are to be assessed by some other means, it would be better to legislate that and start imposing the rates on that basis. There is no rationale in basing rates on the property values pertaining three or four years ago plus 9 or 12 per cent … other than it satisfies a pre-election political promise. The Government has promised further analysis of the rating system, but it should not wait too long.
There are some arguments in favour of having a small part of the rates comprise a set fee, because each dwelling has the same amount of garbage collection, for example. However, other services depend on property size. Street lighting and the maintenance of kerbing a guttering and the like are more costly in places where blocks are larger.
In Canberra, the arguments for rates based upon value remains strong. People who moved into the inner areas early on got their infrastructure cost heavily subsidised and those lower costs have been passed on to some extent to subsequent buyers. People buying in newer areas now are paying the full cost of infrastructure up front. It seems reasonable that people in the inner areas where values are generally higher should pay more rates, especially as the infrastrucutre in these areas requires more maintenance and renewal.
The question remains what portion of rates should be a flat fee and what should be property based. Further, what element of the property should be the basis of the rest of the rates: unimproved value, total value, size or frontage? It is likely that the larger a dwelling or block the more services it will consume. However, the practical consideration of administration costs, might prohibit the individual assessments required, irrespective of the fact it might produce a fairer result. Assessment of unimproved values is far easier.
The fact that the overall grab is to go up by the CPI of 3 per cent is reasonable. However, many individuals who property values have fallen or not gone up as high as in other areas will rightly feel aggrieved … especially those who are leasing properties in areas where rents have fallen as a result of falling property values. The Government cannot leave the rate base as it is for too long.