The ACT Opposition and cross-benchers have joined forces to put a 12-month sunset on the Carnell Government’s rates arrangements which has applied a uniform 3 per cent annual increase to rates. In the circumstances it was a justified tactic. The 3 per cent arrangement was based on unimproved property values as at January 1, 1994. To have continued much longer with rates based upon 1994 values would have been absurd. It was right to force the Government’s hand to come up with a better system.
The Government made a commitment before the 1995 election that rates would not go up for any individual by more than the CPI pending a major review. Since then, property values in Canberra have moved quite disparately. In some places they fell sharply; in others they rose. It meant that the Government could not possibly fulfil its commitment if it permitted rates to be based on new valuations. It either had to revolutionise the system or apply a fixed percentage increase to all existing rates. It rightly chose the latter, largely because the consultant’s review suggested a system that would have increased rates substantially in less affluent suburbs and lowered them in wealthy areas. But its correct choice at the time cannot go on indefinitely. It must revamp the way rates are set. In doing so, though, it must not go back to the ways of the Follett Government where erratic changes in property values resulted in erratic changes in rates. People in inner suburbs were faced with very large increases while elsewhere rates remained static or fell.
The essential questions remain the same. Should rates be based on unimproved property? Should the revenue from rates be quarantined into a municipal account for municipal-type functions only.
Unimproved values used to be a good base for rates because it used to roughly reflect people’s capacity to pay and was fairly cheap to administer. However, as the city changed a lot of people found the values of their properties rose sharply but their capacity to pay did not go up as quickly, if at all. This especially affected retired people in the inner areas. Meanwhile values fell in the outer areas, but people’s capacity to pay on average improved as young married couples progressed through their careers.
In more mature city not under-going the sudden fluctuation of values seen in Canberra in the past 10 years or so, the same problem does not arise.
Unfortunately for the Government, there is no easy solution.
It is easy for the Greens to call for an “”equitable, transparent and efficient” rating system, but the demands a conflicting. To get equity requires a sacrifice of efficiency. It might be more equitable to rate according to total land and building value, rather than unimproved value, because the total value more truly reflects capacity to pay. But it takes more time and money to assess each dwelling than to do broad-sweep unimproved-value valuations. It is easy for Independent Michael Moore to assert that the blanket 3 per cent increases disadvantage those whose property value has fallen. But does it. They are receiving exactly the same municipal services each year and their capacity to pay depends on their income, not on the fact that the property value of a dwelling they have no intention of selling has fallen. Capacity to pay is important. Even proponents of strict user-pays would have to recognise that it costs more to provide services to larger dwellings. However, if capacity to pay were all-important, then rates should be replaced with an income tax.
In some respects, the Opposition and cross-benchers, in striking down the existing stop-gap measure without suggesting other methods, will be in less of a position to quibble when the Government returns with new proposals.